| Golden Eagle Capital Corp. v Paramount Mgt. Corp. |
| 2011 NY Slip Op 07001 [88 AD3d 646] |
| October 4, 2011 |
| Appellate Division, Second Department |
| Golden Eagle Capital Corp., Respondent, v ParamountManagement Corp. et al., Defendants, and Chi Keung Lai et al.,Appellants. |
—[*1] Einig & Bush, LLP, New York, N.Y. (Dan M. Rice of counsel), for respondent.
In an action to foreclose a mortgage, the defendants Chi Keung Lai and Emigrant MortgageCompany, Inc., appeal from so much of an order of the Supreme Court, Queens County (Rios,J.), dated April 5, 2010, as granted those branches of the plaintiff's motion which were pursuantto CPLR 3211 (b) to strike their affirmative defenses based on equitable estoppel and thedoctrine of unclean hands, pursuant to CPLR 3211 (a) (7) to dismiss their first counterclaim torecover compensatory and punitive damages, in effect, for fraud, and their second counterclaimto recover damages for a violation of General Business Law § 349, and pursuant to CPLR603 to sever the cross claims asserted by them against the defendants Paramount ManagementCorp. and Daniel Lee.
Ordered that the order is modified, on the law, by deleting the provisions thereof grantingthose branches of the plaintiff's motion which were to dismiss the appellants' affirmativedefenses based on equitable estoppel and the doctrine of unclean hands, to dismiss the appellants'first counterclaim to recover compensatory and punitive damages, in effect, for fraud, and tosever the cross claims asserted by the appellants against the defendants Paramount ManagementCorp. and Daniel Lee, and substituting therefor provisions denying those branches of the motion;as so modified, the order is affirmed insofar as appealed from, with costs to the appellants.
This action to foreclose a mortgage involves the sale of residential condominium units toseveral purchasers. The defendant Chi Keung Lai entered into a contract dated March 3, 2008,[*2]to purchase a condominium apartment at the subject building.Prior to that time, the sponsor/seller, the defendant Paramount Management Corp. (hereinafterParamount), had filed a "Condominium Offering Plan" for this building with the AttorneyGeneral. On or about April 10, 2008, Paramount executed a note in favor of the plaintiff, GoldenEagle Capital Corporation (hereinafter Golden Eagle). That note, with a face value of$1,410,750, was secured by a mortgage on the subject building (hereinafter the Golden Eaglemortgage). On August 5, 2008, Paramount recorded the relevant condominium declaration withthe Office of the New York City Register in Queens County.
On August 29, 2008, Chi Keung Lai purchased the condominium apartment. On that samedate, Chi Keung Lai executed a note, secured by a mortgage on her condominium unit(hereinafter the Emigrant mortgage), in favor of the defendant Emigrant Mortgage Company, Inc.(hereinafter Emigrant). At that time, the Golden Eagle mortgage in connection with the buildinghad not yet been recorded; that mortgage was not recorded with the Office of the New York CityRegister until September 15, 2008. The Emigrant mortgage pertaining to Chi Keung Lai'scondominium unit was recorded with the Office of the New York City Register on September 25,2008.
Golden Eagle commenced this foreclosure action against, among others, Paramount andseveral individual owners of condominium units, including Chi Keung Lai. The complaint alsonamed, as defendants, several entities, including Emigrant, who claim to hold liens on the realproperty on which the building was erected and the building itself, as well as on variouscondominium units in the building. In their answer, Chi Keung Lai and Emigrant (hereinaftertogether the appellants) asserted affirmative defenses based on, inter alia, equitable estoppel andthe doctrine of unclean hands. The appellants also asserted, as an affirmative defense, thatGolden Eagle was not a bona fide encumbrancer of the property. In addition, the appellantsasserted counterclaims against Golden Eagle to recover damages for a violation of GeneralBusiness Law § 349 and to recover compensatory and punitive damages, in effect, forfraud. They also sought a judgment discharging the mortgage, as asserted against them. Theappellants further asserted cross claims against Paramount and David Lee, its president, amongother things, to recover damages, in effect, for fraud.
The Supreme Court properly granted that branch of Golden Eagle's motion which was todismiss the appellants' second counterclaim against it to recover damages based on a violation ofGeneral Business Law § 349, as the conduct alleged by the appellants does not have a"broad impact on consumers at large," and therefore, fails to state a cause of action (U.S. Bank N.A. v Pia, 73 AD3d752, 754 [2010], quoting New York Univ. v Continental Ins. Co., 87 NY2d 308, 320[1995]; see Biancone v Bossi, 24AD3d 582, 583 [2005]; United Knitwear Co. v North Sea Ins. Co., 203 AD2d 358,359-360 [1994]).
However, the Supreme Court erred in granting those branches of Golden Eagle's motionwhich were to dismiss the appellants' affirmative defenses that were based on the doctrines ofequitable estoppel and unclean hands. For purposes of those affirmative defenses, the answersufficiently alleged that the plaintiff engaged in concealment of material facts (see Forman v Guardian Life Ins. Co. ofAm., 76 AD3d 886, 889 [2010]; First Union Natl. Bank v Tecklenburg, 2 AD3d 575, 577 [2003];see generally Kopsidas v Krokos, 294 AD2d 406, 407 [2002]). In addition, the firstcounterclaim sufficiently stated a cause of action to recover compensatory and punitive damages,in effect, based on fraud (see Goldson vWalker, 65 AD3d 1084 [2009]).
Lastly, the Supreme Court erred in granting that branch of Golden Eagle's motion which wasto sever the appellants' cross claims against the defendants Paramount and Lee, as, inter [*3]alia, those cross claims, as pleaded, share common issues of lawand fact with the appellants' affirmative defenses and counterclaims against Golden Eagle (see Bentoria Holdings, Inc. v TravelersIndem. Co., 84 AD3d 1135 [2011]; Zawadzki v 903 E. 51st St., LLC, 80 AD3d 606, 608 [2011]; see also Quiroz v Beitia, 68 AD3d957, 960 [2009]). Prudenti, P.J., Rivera, Austin and Roman, JJ., concur.