Closing Lawyers Get Dragged Into NY Deceptive Practices Act Suit Brought By Waitress Stuck With Unaffordable $629K Loan; Judge Refuses To Dismiss Case

In Brooklyn, New York, the New York Law Journal reports:

• A Brooklyn judge has allowed an action to go forward against two attorneys and others who are accused of facilitating a $629,000 mortgage for a waitress who earned less than $25,000 a year. Plaintiff Portia Joseph alleged Brooklyn attorney Adrian A. Ellis, who represented her in connection with the purchase of a house in [Brooklyn], and Rockland County, N.Y., attorney Joseph Kunstlinger, who appeared on behalf of mortgagor Bank of America, encouraged and directed her to execute fraudulent loan documents.

• Faced with a substantial lien and potential foreclosure, Joseph and her mother, Angil Jones, filed claims against Ellis and Kunstlinger, as well as Bank of America, real estate broker Ora Tvilli and Tvilli's company OTN Enterprise, among others. In a decision last week, Supreme Court Justice David I. Schmidt denied in part motions to dismiss by several of the defendants, including the bank's attorney, Kunstlinger.(1)

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• Reached for comment, Kunstlinger, the principal of the Joseph Kunstlinger Law Firm in Spring Valley, N.Y., said he and Bank of America were among the victims, not the perpetrators, of the alleged fraud. "Our position is that the fraud was pulled on us, not them. It seems pretty funny that we [could be] liable for the fraud they committed," Kunstlinger said, referring to his various co-defendants. "We have almost nothing to do with anything other than the fact that the documents get signed correctly. If there is a trial, we will be completely exonerated."

• Ellis, who represented the plaintiffs at the closing, said his responsibility was to manage the legal issues, not the financial ones. "I never inquire into my client's income," said Ellis, who has not yet responded to a malpractice complaint against him. "If someone is buying a house for $700,000 there's an assumption they can afford the property." Ellis added, "Generally speaking, I don't know how many attorneys ask their clients how much they earn, then do a financial analysis of whether or not they can afford the property."

For more, see Suit Proceeds Against Attorneys Accused of Facilitating Mortgage 'Doomed to Failure'.

For the ruling, see Jones v. OTN Enterprise, 31990/08.

(1) According to Justice Schmidt, "Deception and misrepresentation in home buying, appraising and financing services adversely effect the public at large insofar as the acts inevitably lead to mortgage loans which are doomed to failure and which adversely effect the housing market. Practices such as those alleged by plaintiffs herein are particularly troubling as they are calculated to take advantage of lower income potential first time home buyers who are unfamiliar with the process and are more apt to rely on defendants' sophistication."