| Southwell v Middleton |
| 2009 NY Slip Op 08001 [67 AD3d 666] |
| November 4, 2009 |
| Appellate Division, Second Department |
| Leroy Southwell, Appellant-Respondent, v ReginaldMiddleton et al., Respondents-Appellants, and Washington Mutual Bank, F.A., Now Known asJPMorgan Chase Bank, N.A., Respondent. |
—[*1] Marcus Attorneys, Brooklyn, N.Y. (Andrew Weltchek of counsel), forrespondents-appellants. Satterlee, Stephens, Burke & Burke, New York, N.Y. (James J. Coster, Alun W. Griffiths,and Michael H. Gibson of counsel), for respondent.
In an action, inter alia, for a judgment declaring a certain deed to be a mortgage pursuant toReal Property Law § 320 and to recover damages for fraud, the plaintiff appeals, as limitedby his notice of appeal and brief, from so much of an order of the Supreme Court, Kings County(Knipel, J.), dated November 16, 2007, as denied those branches of his motion which were forleave to amend the complaint to reassert and amend causes of action seeking rescission of thedeed and a certain contract based upon usury and unconscionablity, amend the fourth cause ofaction to recover damages for fraud, and add a cause of action for reformation of the contract,and granted that branch of the cross motion of the defendants Reginald Middleton and LeffertsPlace, LLC, which was for summary judgment dismissing the fourth cause of action to recoverdamages for fraud, the defendants Reginald Middleton and Lefferts Place, LLC, cross-appealfrom so much of the same order as denied that branch of their cross motion which was forsummary judgment, in effect, declaring that the deed is not a mortgage, and the defendantEmigrant Savings Bank separately cross-appeals from the same order.
Ordered that the cross appeal by the defendant Emigrant Savings Bank is dismissed, withoutcosts or disbursements, for failure to perfect the same in accordance with the rules of this Court(see 22 NYCRR 670.8 [e]); and it is further,
Ordered that the order is affirmed insofar as appealed from by the plaintiff andcross-appealed from by the defendants Reginald Middleton and Lefferts Place, LLC, withoutcosts or disbursements.
For several years, the plaintiff lived in a multi-family dwelling (hereinafter the premises)located in Brooklyn. In 2002 the plaintiff's mother, who owned the premises, gifted the premisesto the [*2]plaintiff. The plaintiff then obtained a loan from thenonparty Countrywide Home Loans, Inc. (hereinafter Countrywide), in the amount of $339,500,secured by a mortgage on the premises. A few months later, the plaintiff defaulted on thatmortgage loan.
On December 2, 2003 the plaintiff, facing foreclosure, entered into an "Equity PurchaseAgreement" (hereinafter the agreement) with the defendant Reginald Middleton. In relevant part,the agreement provided that for consideration of $100, the plaintiff would convey title to thepremises to Middleton, who would satisfy Countrywide's mortgage loan. The agreement furtherprovided that Middleton would lease the premises to the plaintiff for a four-month term, and thatat the end of that term, the plaintiff would have an option to purchase the premises for $440,000.That option "includ[ed]" what was characterized as an "equity pay down feature" or "30 yearlease to own agreement," providing that if the plaintiff failed to exercise his option at the end ofthe four-month lease term, Middleton would, for a 30-year term, lease the premises to theplaintiff, who would have the right to purchase the premises during the 30-year lease term.
On February 27, 2004 the plaintiff executed a deed conveying title to the premises toMiddleton. Middleton then obtained a loan that would be assigned to the defendant EmigrantSavings Bank, secured by a mortgage on the premises. He used the proceeds of that loan tosatisfy Countrywide's mortgage loan. He also conveyed title to the premises to the defendantLefferts Place, LLC (hereinafter Lefferts Place), of which he was the managing member. LeffertsPlace then obtained a loan from the defendant Washington Mutual Bank, F.A., now known asJPMorgan Chase Bank, N.A., secured by a mortgage on the premises.
At the conclusion of the four-month lease term, the plaintiff, unable to obtain a loan tofinance his purchase of the premises, failed to exercise his option to purchase the premises.Middleton then notified the plaintiff that his option had "expired" and thus, was of no "force" or"effect." Middleton later served upon the plaintiff a lease termination notice, directing theplaintiff to vacate the premises.
In the instant action, the plaintiff, alleging that the deed to Middleton actually was amortgage because it was executed as security for a debt he owed to Middleton, sought, inter alia,a judgment declaring that deed to be a mortgage pursuant to Real Property Law § 320(see Basile v Erhal Holding Corp., 148 AD2d 484, 485 [1989]; see also RealProperty Law § 320). The plaintiff also sought rescission of the agreement as well as thedeed to Middleton, based upon usury and unconscionability. Finally, the plaintiff asserted causesof action to recover damages for unjust enrichment and fraud.
Middleton and Lefferts Place subsequently moved, among other things, pursuant to CPLR3211 (a) (7) to dismiss the complaint. By order dated July 17, 2006, the Supreme Court, interalia, granted those branches of Middleton's and Lefferts Place's motion which were to dismissthe second and fifth causes of action seeking rescission of the agreement and the deed toMiddleton based upon usury and unconscionablity, respectively, and the third cause of action torecover damages for unjust enrichment.
Upon the completion of discovery, the plaintiff moved for leave to amend the complaint to,among other things, reassert and amend the causes of action seeking rescission of the agreementand the deed to Middleton based upon usury and unconscionablity, amend the fourth cause ofaction to recover damages for fraud, and add a cause of action for reformation of the agreement.Middleton and Lefferts Place opposed the motion and, moreover, cross-moved for summaryjudgment, in effect, declaring that the deed is not a mortgage and dismissing the remainingcauses of action.
The Supreme Court properly denied that branch of Middleton's and Lefferts Place's crossmotion which was for summary judgment, in effect, declaring that the deed to Middleton was nota mortgage. To establish their entitlement to summary judgment, Middleton and Lefferts Placewere required to demonstrate, prima facie, that the deed was not meant as security for a debtowed by the plaintiff (see Henley vForeclosure Sales, Inc., 39 AD3d 470 [2007]). However, Middleton and Lefferts Placefailed to meet their burden. In this regard, they submitted the complaint, to which the agreementwas appended. Certain terms of the agreement, particularly the one providing for the "equity paydown feature," anticipated the continuation of the lease agreement for 30 years and, as such,raise a triable issue of fact as to whether the [*3]deed was meantas security for a debt owed by the plaintiff (id. at 471).
The Supreme Court properly granted that branch of Middleton's and Lefferts Place's crossmotion which was for summary judgment dismissing the fourth cause of action to recoverdamages for fraud. In response to Middleton's and Lefferts Place's prima facie showing of theirentitlement to judgment as a matter of law dismissing this cause of action, the plaintiff onlysubmitted evidence tending to show that Middleton misrepresented an intent to perform hisobligations under the agreement. This did not raise a triable issue of fact, as a claim of fraudcannot be solely based upon "a mere misrepresentation of an intention to perform under [a]contract" (Ross v DeLorenzo, 28AD3d 631, 636 [2006]).
The Supreme Court also properly refused to grant the plaintiff leave to amend the complaintin certain respects. Leave to amend a complaint is to be freely granted, provided that theproposed amendment does not prejudice or surprise the defendant, is not patently devoid ofmerit, and is not palpably insufficient (see Lucido v Mancuso, 49 AD3d 220, 229 [2008]). Here, however,the insufficiency and lack of merit of the plaintiff's proposed amendments are clear and free fromdoubt (see Scofield v DeGroodt, 54AD3d 1017, 1018 [2008]). Although the plaintiff sought leave to reassert and amend thecause of action seeking rescission of the agreement and the deed to Middleton based upon usury,it is clear from the record that the plaintiff cannot establish that, when considering thetransaction between him and Middleton in its totality, and judging that transaction by its realcharacter (see Ujueta v Euro-QuestCorp., 29 AD3d 895, 896 [2006]), the transaction involved a usurious loan. In addition,although the plaintiff sought leave to reassert and amend the cause of action seeking rescissionof the agreement and the deed to Middleton based upon unconscionablity, it is clear from therecord that the plaintiff cannot establish that he had an "absence of meaningful choice" at thetime he entered into the agreement and that the agreement's terms were "unreasonably favorableto" Middleton (Gillman v Chase Manhattan Bank, 73 NY2d 1, 10 [1988]). Furthermore,although the plaintiff sought leave to amend the fourth cause of action to recover damages forfraud, the new allegations, if true, would not support such a cause of action because they wouldonly establish that Middleton "entered into a contract while lacking the intent to perform it"(New York Univ. v Continental Ins. Co., 87 NY2d 308, 318 [1995]). Finally, althoughthe plaintiff sought leave to add a cause of action for reformation of the agreement, it is clearfrom the record that he cannot establish that the agreement failed to conform to an actualagreement between him and Middleton due to mutual mistake or unilateral mistake coupled withfraud (see Janowitz Bros. Venture v 25-30 120th St. Queens Corp., 75 AD2d 203, 214[1980]).
Given the limited scope of the plaintiff's notice of appeal, the issue of whether the SupremeCourt erred in denying the plaintiff's separate motion to disqualify a particular law firm fromrepresenting Middleton and Lefferts Place is not properly before this Court (see CPLR5515 [1]; Royal v Brooklyn Union Gas Co., 122 AD2d 132, 133 [1986]). Likewise, inlight of the limited scope of Middleton's and Lefferts Place's notice of appeal, the issue ofwhether the Supreme Court properly granted that branch of the plaintiff's motion which was forleave to amend the first cause of action for a judgment declaring the deed to be a mortgagepursuant to Real Property Law § 320 is not properly before this Court. Skelos, J.P.,Covello, Leventhal and Roman, JJ., concur.