Court Opinion

ID: 9873716
Source: CourtListenerOpinion
Date Created: 2023-09-26 21:44:52.345001+00
Date Added: 2024-06-11T07:46:40.397226
License: Public Domain

Billion, J.P.,
dissents, and votes to affirm the order insofar as appealed from, with the following memorandum: The underlying facts of this case are not in dispute. In May 2004, the plaintiff Theresa Nicke (hereinafter the injured plaintiff) allegedly was injured in an automobile accident. In August 2004, she and her husband, Fred C. Nicke, filed for Chapter 13 bankruptcy protection (1978 Bankruptcy Code [11 USC] ch 13). The plaintiffs did not list their personal injury claim as a bankruptcy asset. In May 2005, the defendant Schwartzapfel Partners, PC., also known as Schwartzapfel Lawyers, PC. (hereinafter the law firm), on behalf of the injured plaintiff, commenced the first of two personal injury actions relating to the 2004 automobile accident. In an order dated February 8, 2008, the Supreme Court, Suffolk County, directed the *1173dismissal of the complaint on the ground that the plaintiffs lacked the legal capacity to sue, because the bankruptcy trustee was the only individual vested with title to the plaintiffs’ claims. The injured plaintiff did not appeal from the order.
After the dismissal, the law firm commenced a second personal injury action on May 13, 2008, this time naming the bankruptcy trustee as the plaintiff. Although the plaintiffs were discharged from bankruptcy on January 22, 2010, the bankruptcy case was not actually closed by final decree until July 11, 2011. The second personal injury action continued in the name of the trustee, proceeded to trial in May 2011, and resulted in a $300,000 verdict, which was then settled for $500,000 pursuant to a “high-low” agreement that had been entered into by the parties. During the trial, the defendant Michael Shapiro, a physician, testified on behalf of the bankruptcy trustee.
In September 2013, the plaintiffs commenced this action, inter alia, to recover damages for legal malpractice and fraud against the law firm and Steven Schwartzapfel (hereinafter together the Schwartzapfel defendants) and Shapiro as to the alleged fraud and related claims committed in connection with the trial of the personal injury action. The plaintiffs claim that Shapiro and the Schwartzapfel defendants (hereinafter collectively the defendants) altered a medical report to make it appear that the injured plaintiff’s injuries were more serious than they actually were. The alteration, which was brought out during cross-examination, allegedly reduced the value of the verdict as a result of Shapiro’s lack of credibility. The Schwartzapfel defendants moved pursuant to CPLR 3211 (a) (1), (3), and (5), and upon the doctrine of judicial estoppel, to dismiss the complaint insofar as asserted against them. Shapiro separately moved to dismiss the complaint insofar as asserted against him on the same grounds. In an order entered March 27, 2014, the Supreme Court granted those branches of the defendants’ separate motions which were pursuant to CPLR 3211 (a) (3) to dismiss the complaint insofar as asserted against each of them. The court held that the plaintiffs lacked capacity to commence the legal malpractice and fraud action, as they were not the named plaintiffs in the second personal injury action. The court cited as authority Martinez v Desai (273 AD2d 447 [2000]), Schepmoes v Hilles (122 AD2d 35 [1986]), Ervolino v Scappatura (162 AD2d 654 [1990]), Quiros v Polow (135 AD2d 697 [1987]), and 11 USC § 554 (d). The plaintiffs appeal.
Initially, the Supreme Court, in its order dated February 8, 2008, directing the dismissal of the plaintiffs’ first personal *1174injury action, inartfully did so on the basis of lack of “capacity” rather than on the related basis of lack of “standing.” Despite their differences, standing and lack of capacity have been described as difficult to distinguish and as “twins” (Siegel, NY Prac § 136 [5th ed 2011]; see Siegel, NY Prac § 261). Both concepts fall within the scope of CPLR 3211 (a) (3), on which the dismissal was based (cf. Landau, P.C. v LaRossa, Mitchell & Ross, 11 NY3d 8 [2008]; David D. Siegel, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR C3211:13 [2011]). The plaintiffs neither moved for leave to reargue nor appealed from the February 8, 2008, order. Thus, the propriety of that order is not before this Court (see Hausmann v United States Life Ins., 128 AD3d 545 [2015]; Fusco v Kraumlap Realty Corp., 1 AD3d 189, 193 [2003]). Indeed, the plaintiffs accepted the February 8, 2008, order when the second action was commenced, not by them, but by the bankruptcy trustee. Therefore, since the alleged legal malpractice and fraud occurred during the second action, only the bankruptcy trustee, and not the plaintiffs, has standing to pursue the claims that arose out of that trial. There was no attorney-client relationship or contractual privity between the plaintiffs and the Schwartzapfel defendants in that action (see Estate of Schneider v Finmann, 15 NY3d 306, 308-309 [2010]; Prudential Ins. Co. of Am. v Dewey, Ballantine, Bushhy, Palmer & Wood, 80 NY2d 377, 382 [1992]; Zinnanti v 513 Woodward Ave. Realty, LLC, 105 AD3d 736, 737 [2013]). Moreover, it is telling that factually, the plaintiffs’ bankruptcy case was not “closed” by the Bankruptcy Court’s final decree until July 2011, suggesting that it was kept “open” through the May 2011 trial to permit the trustee’s continued prosecution of that civil action.
The majority places considerable importance upon the fact that the plaintiffs, as Chapter 13 debtors, as distinct from other chapter debtors, possess, in effect, a “near privity” exception to maintain their legal malpractice, fraud, and related claims in their own names, citing, inter alia, Baer v Broder (86 AD2d 881 [1982]). However, this argument was not raised by the plaintiffs before the Supreme Court and is therefore not properly before this Court. In any event, it does not provide a basis for departing from the prior determination of the Supreme Court in its February 8, 2008, order, which led the bankruptcy trustee to commence a new personal injury action in the plaintiffs’ place and stead. The plaintiffs, as Chapter 13 debtors, relinquished their claims to the control of the bankruptcy trustee and lost their standing to sue on their own (see Martinez v Desai, 273 AD2d at 447-448). Thus, the *1175bankruptcy trustee is solely vested with standing to pursue any legal malpractice or fraud claims arising out of that action, rendering the Supreme Court’s dismissal of the plaintiffs’ complaint correct (see In re Summit Metals, Inc., 477 BR 484, 501-502 [Bankr D Del 2012] [holding that only the trustee may sue counsel of the trustee]; In re Continental Coin Corp., 380 BR 1, 16 [Bankr CD Cal 2007] [same]).
The plaintiffs’ remaining contentions are without merit.
Accordingly, dismissal of the complaint was appropriate.