"to hire . . . any attorney." N.Y.G.O.L. § 5-1502A(11). The attorney-in-fact is also authorized "to receive . . . any money . . . to which the principal is, or may become . . . entitled." N.Y.G.O.L. § 5-1502A(6). General principles of agency law also support the power of an agent to accept payment on behalf of a principal. See Restatement (Second) of Agency § 62.
Assuming the truth of the facts alleged in the Complaint, it appears that Heine has not stated a valid cause of action against Newman Tannenbaum for legal malpractice. Newman Tannenbaum has demonstrated that it acted in reasonable reliance on the power of attorney in dealing directly with Ashley, and Heine has not contested the conclusion that Ashley was acting as Heine's alter ego. It thus appears to the Court that Newman Tannenbaum had a right to rely on the power of attorney and make payments directly to Ashley, because Ashley had been appointed by Heine as his representative, and was himself bound to turn over the proceeds of the sale to Heine. See Lalor v. Duff, 28 A.D.2d 66, 281 N.Y.S.2d 614, 617 (3d Dept. 1967) ("It is presumed that title to a principal's property in the possession of his agent remains in his principal.").
Heine's response to Newman Tannenbaum's claim of reasonable reliance on the power of attorney first asserts that Ashley's instructions to Newman Tannenbaum concerning the payee on the checks derogated from the terms of the contract of sale and from the custom of the trade, which both required that the checks be drawn to the order of Heine personally, or Ashley as attorney-in-fact for Heine. Heine thus argues that it was not reasonable for Newman Tannenbaum to agree to instructions from Ashley that were contrary to the express terms of the contract, and that Newman Tannenbaum assumed a responsibility to inquire whether departures from the contract were within the scope of Ashley's actual authority.
Given that Ashley was serving as Heine's alter ego pursuant to the power of attorney, the Court views Heine's claim that Ashley was not empowered to accept payment under the contract of sale with skepticism. Moreover, Heine's arguments suffer from a more fundamental defect. The contract of sale is not attached to the Complaint, and is not incorporated into the Complaint by reference. Thus, the Court cannot consider the contract of sale on this motion to dismiss. See Kramer, supra, 937 F.2d at 773. Similarly, Heine does not allege in the Complaint that Newman Tannenbaum's actions were contrary to customary procedures at real estate closings. Therefore, because "it is axiomatic that the Complaint cannot be amended by the briefs in opposition to a motion to dismiss," O'Brien, supra, 719 F. Supp. at 229, the Court may not consider Heine's arguments relating to the proper conduct of a real estate closing.
Plaintiff's Response also contends that there was self-dealing between Ashley and Newman Tannenbaum, and that Newman Tannenbaum breached its duty of loyalty. See Plaintiff's Response, at 20-22. Again, however, there are no allegations in the Complaint to support these claims, and they will not be considered on this motion to dismiss. The Court thus finds that the facts alleged in the Complaint do not serve as the basis for a claim against Newman Tannenbaum, and the fifth cause of action therefore must be dismissed.
Before concluding, the Court takes this opportunity to reject a number of other arguments raised by Newman Tannenbaum in support of its motion to dismiss. First, the Court rejects Newman Tannenbaum's argument that Heine cannot prove "but-for" causation. See Sacco v. Burke, 764 F. Supp. 918, 920-921 (S.D.N.Y. 1991) (but-for causation required as element of legal malpractice action). The fact that Heine never received the check issued to his order at the closing does not support an inference, as a matter of law, that allowing the remaining checks to be issued to Ashley did not injure Heine. The Court also rejects Newman Tannenbaum's characterization of the choice of payees as the "selection of one among several reasonable courses of action" for which a malpractice action will not lie. Rosner v. Paley, 65 N.Y.2d 736, 492 N.Y.S.2d 13, 14, 481 N.E.2d 553 (1985). Rosner concerns an attorney's choice of legal strategy, and is simply inapposite to the case at bar.
Finally, the Court rejects Newman Tannenbaum's claim that Heine is barred from bringing the instant suit by laches, estoppel or ratification. Newman Tannenbaum has not raised any claim that it was prejudiced by Heine's alleged delay, thus precluding reliance on the defenses of laches and estoppel. See, e.g., Hoelzer v. City of Stamford, 933 F.2d 1131, 1137 (2d Cir. 1991) (showing of prejudice required to support laches defense). Moreover, Heine has not taken any affirmative action that might support an inference that he ratified Ashley's instructions concerning the issuance of the checks. See, e.g., Ambrose Mar-Elia Co. v. Dinstein, 151 A.D.2d 416, 543 N.Y.S.2d 658, 660 (1st Dept.), appeal denied, 74 N.Y.2d 615, 549 N.Y.S.2d 960, 549 N.E.2d 151 (1989). The defenses of laches, estoppel and ratification therefore must be rejected.
D. Leave to Replead
Under Fed. R. Civ. P. 15(a), leave to amend a Complaint "shall be freely given when justice so requires." Rule 15(a) has been interpreted liberally, and the granting of a motion to dismiss is almost always accompanied by leave to replead. See Ronzani v. Sanofi S.A., 899 F.2d 195, 198 (2d Cir. 1990); Richardson Greenshields Sec., Inc. v. Lau, 825 F.2d 647, 653 n.6 (2d Cir. 1987); Luce v. Edelstein, 802 F.2d 49, 56 (2d Cir. 1986). The Court therefore grants Heine leave to amend his Complaint.
For the foregoing reasons, the motions to dismiss are granted in part, denied in part. The first two causes of action are dismissed to the extent that they rely on the contentions that Heine had an attorney-client relationship with Colton Hartnick with respect to Ashley's deals, and that these deals were within the scope of the federal securities laws. The third, fourth and fifth causes of action are hereby dismissed. Heine is hereby ordered to serve and file an amended Complaint within 21 days.
Dated: March 9, 1992
New York, New York
Peter K. Leisure