Legal Malpractice

Trusts and Releases in Legal Malpractice

By (Andrew Lavoott Bluestone)

Once, the Corning glass works were a behemoth in upstate New York.  World class, cutting edge [no pun], and hugely successful, ownership of Corning stock was both a good investment and an emblem of upstate NY industriousness.  This case, Matter of Hsbc Bank U.S.A. v Jesse T. Littleton, 2010 NY Slip Op 01099 ; Decided on February 11, 2010 ; Appellate Division, Fourth Department demonstrates both the economic downturn in NY as well as the principal of trusts and releases.
Beneficiaries of a trust took a big hit in the value of Corning stock held in the trust.  The Corning stock comprised 80% of the corpus, and when its value went down, it hurt.  We pick up from the 4th Department opinion:

"The accounting revealed significant declines in the value of Corning stock, which constituted more than 80% of the trust corpus. Petitioners signed their respective releases, which provided that HSBC was forever absolved of all liability for the handling of trust assets.

More than three years later, petitioners commenced this proceeding seeking to set aside the releases, and Surrogate's Court granted the motions of HSBC and respondent law firm to dismiss the petition. We affirm.

According to petitioners, HSBC and respondent law firm committed fraud by failing to disclose the possible legal effect of the accounting and the execution of the releases. Contrary to petitioners' contention, however, the petition fails to state a cause of action for fraud or constructive fraud against either HSBC or respondent law firm because it fails to make a "factually supported allegation" of misrepresentation (Pope v Saget, 29 AD3d 437, 441, lv denied 8 NY3d 803; see Simmons v Washing Equip. Tech., 51 AD3d 1390, 1391-1392). We further conclude that the Surrogate properly determined that the breach of fiduciary claim against respondent law firm was, in essence, a claim for legal malpractice and thus was barred by the three-year statute of limitations (see CPLR 214 [6]; Harris v Kahn, Hoffman, Nonenmacher & Hochman, LLP, 59 AD3d 390). Even assuming, arguendo, that the petition states a separate claim for breach of fiduciary duty against respondent law firm, we conclude that such claim arises from the same facts as those from which the legal malpractice claim arises, and thus the Surrogate properly dismissed that claim as duplicative of the legal malpractice claim (see TVGA Eng'g, Surveying, P.C. v Gallick [appeal No. 2], 45 AD3d 1252, 1256).

Finally, we conclude that the Surrogate properly dismissed the breach of fiduciary duty claim against HSBC. HSBC fulfilled its fiduciary duty by providing petitioners with a full accounting of the trust, and petitioners failed to object to the accounting and executed releases waiving their rights against HSBC (see Matter of Hunter, 4 NY3d 260, 270-271; Matter of Schoenewerg, 277 NY 424, 427-428). "

Full post as published by New York Attorney Malpractice Blog on February 17, 2010 (boomark / email).