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Former Milwaukee attorney sued for role in Fla. real estate deal (UPDATE)

By: Jack Zemlicka, [email protected]//April 11, 2012//

Former Milwaukee attorney sued for role in Fla. real estate deal (UPDATE)

By: Jack Zemlicka, [email protected]//April 11, 2012//

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A Slinger couple and a former Milwaukee attorney are preparing to battle it out in court over a six-figure real estate deal gone sour.

Lance and Laura Stockhausen filed suit Feb. 3 in Ozaukee County against Michael Blumenfeld for negligence, breach of contract and theft for his alleged role in the 2007 purchase of an estimated $860,000 condominium complex in Placida, Fla., which the owners intended to flip for a profit.

Blumenfeld’s attorney, Catherine LaFleur, of LaFleur Law Office SC, Milwaukee, filed counterclaims Monday to include deceit, fraud and unjust enrichment.

The case is now pending in Milwaukee County Circuit Court after LaFleur’s change of venue motion was granted March 29.

Blumenfeld, who lives in Milwaukee, said he stopped practicing law in 2003 and the State Bar of Wisconsin’s website lists him as administratively suspended for non-payment of dues and failure to maintain his trust account certification.

According to the case complaint, Blumenfeld had a more than decade-long business relationship with the plantiffs where he provided legal services for them, including corporate and estate planning advice. The Florida deal stemmed from a 2006 meeting between Blumenfeld and the plantiffs, the complaint states, where they discussed the couple’s general finances and estate, and possible investments, including real estate.

Despite the suit’s claims, LaFleur said Blumenfeld never provided any legal advice in the transaction and that the suit has no merit.

“He did not provide legal advice in any way shape or form and he was never retained to do so,” LaFleur said. “The plaintiffs took whatever benefits they wanted out of this deal and when it didn’t sell and they got tired of it, they decided to sue.”

The complaint states that, in exchange for providing legal advice and brokering the deal, Blumenfeld received a one-third stake in the condominium property, as well as in the holding company he established to manage the investment.

But Blumenfeld said he never had an ownership stake in either the property or the holding company.

While he established Stock Blue Properties LLC to manage the property, Blumenfeld said the Stockhausen’s maintained sole ownership of the condo.

“They had me create an LLC that they never intended to use,” Blumenfeld said. “I got screwed because they held ownership and all the leases in their own name and it never went to the entity.”

After the plaintiffs secured an $860,000 loan from Waterstone Mortgage Corp. in Pewaukee, where Blumenfeld worked at the time, he set up Stock Blue to hold the property, according to the complaint.

The Stockhausens’ attorney, Doug Rose, of Rose & de Jong SC, Milwaukee, said Blumenfeld invested no money and provided minimal legal services, which didn’t justify any benefits received from his stake in the property.

“In hindsight, our position is the amount of legal work he did was significantly small to justify the one-third ownership,” Rose said. “Simply setting up a limited liability company is not a significant amount of legal work.”

According to the complaint, Blumenfeld also failed to disclose the legal and financial risks associated with the investment and his lack of personal financial investment in the property was “unwise, improper and selfish.”

The real estate market bottomed out shortly after the 2007 purchase and, Rose said, Blumenfeld failed to pay an unspecified share of operating and holding costs for the property, which is still on the market.

“The appraised value is significantly down;” he said, “hundreds of thousands less.”

Blumenfeld said the Stockhausens purchased the property with no intention to sell and the couple took advantage of his experience as an attorney and real estate mortgage broker to purchase the condo. He said he currently co-owns Texas-based real estate company CBS Capitol Ventures.

According to the counterclaims, Blumenfeld seeks return of $43,551 he paid to the plaintiffs despite not holding any stake in the property.

The counterclaims also allege that Blumenfeld advised the plaintiffs to lower their asking price and that the condo had received offers to purchase, which the Stockhausens refused to accept.

“They took me for a ride with their desires,” he said. “They’ve had a lot of chances to sell it and it wouldn’t have been a problem.”

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