Claimant, Patricia Dell'Olio commenced this small claims action against the defendant, Law Office of Charles S. Spinardi, P.C., alleging that the defendant failed to provide legal services as agreed. A trial was held on January 20, 2011. Both sides appeared without counsel, although defendant is an attorney admitted to practice in New York.

Claimant testified that she entered into a written retainer agreement with the defendant which she signed on June 12, 2010. The retainer agreement admitted into evidence is addressed to "Fred Feliciano and Patricia Dell'olio" [sic] but is signed only by Patricia Dell'Olio. Claimant retained the defendant to provide legal assistance in regard to the foreclosure proceeding commenced against the premises 64 Greenway Drive, Staten Island, New York. She stated that she contacted the defendant after having received an unsolicited letter from him in regard to the Greenway Drive foreclosure and having seen numerous advertisements and stories in the Staten Island Advance about the defendant. The retainer agreement required the claimant to pay a legal fee of $3,800.00 in five monthly increments of $760.00 on the 15th of each month commencing June 15, 2010. Claimant did so by delivering to defendant at the time of the signing of the retainer agreement five post-dated checks. Defendant processed the first three payments without objection from the claimant. In August 2010, being dissatisfied with the defendant's services, claimant terminated his representation and issued stop-payment orders in regard to the checks payable on September 15 and October 15, 2010. Claimant is seeking the refund of the $2,280.00 she advanced. Defendant has submitted time sheets reflecting the services rendered in the amount of $1,987.50 and asserts that based on them, the total refund is only $292.50.

The written agreement prepared by defendant on his letterhead recites:

This Agreement explains the legal fee charged by this office. You should expect to [*2]pay a reasonable fee for legal services and you are entitled to know how the fee will be determined and when it is to be paid. Your agreement to pay the fee constitutes an integral part of the attorney-client relationship, as much as the attorney's obligation to perform legal services....

2. SOLUTION: "Solution" as used in this Agreement is defined as the act, method or process of problem solving, the answer to a problem, explanation, clarification. Attorney will attempt to prevent the loss of the Client's real estate through foreclosure, by several methods. For example, where applicable, a Solution, may be achieved by an informal or formal forbearance, special forbearance, partial claim, rate modification, a change from an adjustable rate loan to a fixed rate loan, any work-out agreement, lowering of the monthly payment, recasting, refunding, pre-foreclosure sale, compromise sale, deed-in-lieu of foreclosure, hard money loan or any other program as may be available. Attorney cannot guarantee Client will be offered any specific Solution by the lender.[ It should be noted none of these terms are defined in the retainer]

3. CHARGES: Client shall pay to Attorney $3,800.00 as compensation for services performed in connection with client's delinquent mortgage. Client understands this fee is not being applied to past due mortgage loan or debts. Client understands and agrees that the fee is earned in full at the point when the Attorney recommends a "Solution" to the client, regardless of the outcome.

Client understands and agrees that the attorney fee set forth herein DOES NOT include the filing of pleadings relating to a mortgage foreclosure defense or a Bankruptcy Petition. Those services must be separately agreed upon and are subject to additional fees...If Mediation or any other court appearances are required in connection with the modification process, the first attorney appearance is included in this fee. For any subsequent attorney appearances, there will be additional fees of $300.00 for each attorney appearance.

In the event that representation is terminated before a solution is recommended, thefee for services rendered will be charged at $300.00 an hour for attorney time and $150.00 an hour for legal assistant time....

10. COMMENCEMENT OF REPRESENTATION: Attorney's representation of client [not capitalized in original] shall begin after Attorney receives payment of the initial retainer as specified in this Agreement. Unless Client makes other arrangements with Attorney, failure to make a timely payment is grounds for Attorney to withdraw from the case. In the event the attorney-client relationship is terminated, for whatever reason, Client shall pay all accrued legal fees and costs immediately.

The facts of this case are similar in many respects those in Timofeyev v Palant & Shapiro, 2010 WL 4904685, 2010 NY Slip Op 20484 (2010). The court will not recite here the detailed analysis presented in that case. In Timofeyev the court made the finding that if the client seeks that attorney's legal advice in regard to a mortgage foreclosure or modification of an existing mortgage, a written retainer is required under the Rules of [*3]Professional Conduct (Rule 5.7). The facts of this case indicate that the claimant sought advice from the defendant because he was an attorney. Therefore, a written retainer was required.

A review of the retainer agreement discloses that the services proposed to be rendered are not legal in nature. As pointed out in Timofeyev negotiation and modification of mortgage and similar services are not legal services, they are services a mortgage broker performs and as such a person providing those functions must be licensed pursuant to Banking Law Article 12-D. The expertise of an attorney is necessary at a closing or for the reviewing of mortgage commitment documents where the legal implications of the terms of the loan need to be explained, but negotiation of the terms of a standard home mortgage is not legal services. The documents are on forms dictated by a governmental agency and are uniform so as to assist the sale of the debt in the secondary mortgage market. Does anyone really think that an attorney representing a borrower could negotiate a change in the terms of a preprinted note and mortgage? And that such a request would receive the answer "If you don't like it, don't close." Negotiation of the amount borrowed, the interest rate and the length of the loan does not require an attorney- a fact recognized by New York in its licensing of mortgage bankers and brokers. A description of the services rendered by the defendant discloses that they are not legal in nature. Obtaining documentation as to a clients income and expenses with supporting documentation does not require a law degree. Defendant was not in the business of providing mortgage modification assistance incidental to the practice of law which would constitute an exception to the licensing requirement. He was engaging in the mortgage modification business as a vocation and needs to be licensed in that regard. There is no indication that this defendant has such a license as it is not disclosed any where in the retainer.

There are several problems with the terms of the retainer. First, paragraph 10 states that the attorney's representation commences after the attorney "receives payment of the initial retainer," yet nothing in the agreement specifies what constitutes the "initial retainer." Paragraph 3 sets $3,800.00 as "compensation for services" and that the fee is earned when the defendant recommends a "Solution." The agreement provided for the $3,800.00 to be paid in five monthly installments by post-dated checks. Does this mean that when the first of the five checks cleared, the initial retainer provision of the agreement had been met so that the defendant was going to commence providing services? The answer to this is not set forth in the agreement. Based on the fact that the defendant commenced keeping time-records in regard to claimant on June 4, 2010 prior to the execution of the retainer statement and receipt of any monies, the court must question exactly when did the claimant become entitled to receive legal services and when did the attorney-client relationship begin.

Second, it is difficult to understand what legal services it is contemplated the defendant will be rendering to the claimant. The agreement specifically excludes from the scope of the retainer "the filing of pleadings relating to a mortgage foreclosure defense or a [*4]Bankruptcy Petition." These legal services require a separate retainer subject to the charging of additional attorney fees. In spite of not being retained to defend the mortgage foreclosure, although that is the specific reason the claimant contacted the defendant, the defendant submitted an "affirmation of actual engagement" to the Supreme Court, Richmond County indicating he represented the defendants, "Patricia Del Olio a/k/a/ Feliciano and Fred Del Olio"[sic] in the litigation commenced by Richmond County Savings Bank (Index No. 131651/09) against them for foreclosure of their mortgage. In the affirmation defendant sought and was granted an adjournment of claimant's case from June15, 2010. In that affirmation, defendant Spinardi lists other dates he will be available. Apparently defendant agreed to represent the claimant in the foreclosure solely for the purpose of making court appearances to negotiate a modification of the mortgage and not to assert any defenses to the foreclosure. The retainer provides that each additional court appearance is to be billed at $300.00. If there is no intention on the part of the defendant to assert any legal defenses to the foreclosure absent a different retainer agreement, then what services is defendant providing by going to court other than obtaining an adjournment? Further, by sending to the court the request for the adjournment, defendant made a representation to the judge that he had in fact "just been retained to represent" the claimant to protect her interests in the foreclosure action, a position contrary to the specific recitations of the retainer agreement. Whom is the defendant misleading, the claimant-client or the court? There is nothing in the record to establish whether the defendant filed a formal notice of appearance with the court, although a check of the County Clerk records on-line does not reveal that the defendant ever filed a notice of appearance. If he did not, then what is the effect of the affirmation of actual engagement with its statement that he was representing the claimant-client? By so doing, an argument can be made that the defendant was now in the case as legal counsel to the claimant-client and can now only be relieved as counsel by application to the court on notice to the client and to plaintiff.

Third, it is unclear as to what exactly is the defendant representing he will accomplish for the claimant. Paragraph two of the retainer is labeled "Solution" yet it only generally states what the defendant intends to do. It contains a dictionary definition of the word "solution" followed by a list of possible actions which could be undertaken on claimant's behalf. Although the defendant asserts elsewhere in the retainer that he is not being hired to defend the foreclosure action, this paragraph states: "Attorney will attempt to prevent the loss of the Client's real estate through foreclosure by several methods." This statement is then followed by a list of possible scenarios to resolve a delinquent mortgage, none of which on their face require legal expertise. It concludes: "Attorney cannot guarantee Client will be offered any specific Solution by the lender." Is not the defendant's function to propose a settlement to the lender which the lender has to accept or reject and not vice versa? Why does the claimant need the defendant if it is the lender who is going to make an offer of a "Solution?"

Fourth, the retainer agreement does not offer the claimant-client fee arbitration as required by Court Rule §1215.1 and the Rules of the Chief Administrative Judge, Part 137. [*5]Although the defendant did not perform legal services and was in fact offering non-legal services, he advertised as an attorney and entered into an agreement in which he was offering his expertise as a lawyer for the solution of claimant's mortgage foreclosure problems. As such, he was mandated to offer fee arbitration as part of the retainer agreement.

A review of defendant's billing records reveals that there are charges totaling $225.00 incurred beginning on June 4, 2010 approximately a week prior to the claimant executing a retainer totaling $225.00. The complete billing record discloses that of all the charges, three hours worth was performed by the defendant and billed at $300.00 an hour, while 7.25 hours of work was done by a "legal assistant" at the $150.00 an hour rate. There was no charge for the initial consultation with defendant on June 11, 2010. All of the services are billed in quarter-hour intervals. The retainer agreement does not disclose that quarter-hour intervals would be the minimum billing time. It is not credible that each of these tasks would take at a minimum fifteen minutes. Claimant should have disclosed this in the retainer as the minimum time period billed. An analysis of a description of the services leads to the conclusion that little if any legal work was done on behalf of the claimant. The services appear to have mostly consisted of gathering documentation from the claimant, reviewing it and then packaging it to the lender. All of these services more closely resemble what a mortgage broker does and is not legal work.

The above being said, it is difficult to conclude that the defendant did not do exactly what he agreed to do -which was to charge an hourly fee for his services and for that of a legal assistant for essentially non-legal work at a rate that is at the "high end" for attorneys in Richmond County. The fact that the claimant became dissatisfied with the defendant's services, may have been able to negotiate her own modification with the lender and obtained the assistance of the Richmond County Bar Association through its Volunteer Lawyer Program does not necessarily mean that the defendant did not do what he agreed to do in the retainer. You can have your oil changed at the dealer, or by your local mechanic, or do it yourself. The results will not be appreciably different but the cost will vary substantially.

Judgment for claimant. Defendant was performing non-legal services in regard to the modification of claimant's mortgage, it was not incidental to the rendering of legal services, it was the principal function for which he was retained. As such, he was required to be licensed by the Banking Department as a mortgage banker or mortgage broker. The failure to be properly licensed requires the defendant to refund the fees the claimant paid to him. Claimant reasonably believed she would receive legal services in regard to stopping the foreclosure of her mortgage, the retainer did not require the defendant to do that.

Judgment for claimant in the amount of $2,280.00 with interest from the date of judgment, costs and disbursements. [*6]

Exhibits, if any, will be available at the office of the clerk of the court thirty days after receipt of a copy of this decision.

The foregoing constitutes the decision and order of the court.

Dated: February 8, 2011
Staten Island, NY
HON. PHILIP S. STRANIERE
Judge, Civil Court

ASN byon

Note: For several months the defendant has been featured in the Staten Island Advance on the front page of the Real Estate Section above the fold in what appears to be a half page story commenting on defendant's success in assisting homeowners facing foreclosure and other related problems. The article has all of the appearance of a news story when it in actuality is an advertisement. Nothing in the article indicates that it is an advertisement. The only indication that the feature is not a news story is a statement in small print in the upper left-hand corner of the front-page of the section that the "editorial content" of the section is prepared by the "advertising" department. The court question whether this is sufficient disclosure to be in compliance with the new Rules of Professional Conduct in regard to attorney advertising.