| JP Morgan Chase Bank, N.A. v Hall |
| 2014 NY Slip Op 07475 [122 AD3d 576] |
| November 5, 2014 |
| Appellate Division, Second Department |
[*1]
| JP Morgan Chase Bank, N.A., Plaintiff, v DirkHall et al., Defendants, and Macia Drummond, Defendant/Third-PartyPlaintiff-Respondent-Appellant, et al., Defendant/Third-Party Plaintiff. Wells FargoHome Mortgage, Inc., et al., Third-Party Defendants-Respondents, and New York LandAbstract Corporation, Third-Party Defendant-Appellant-Respondent, et al., Third-PartyDefendants. |
Lewis Brisbois Bisgaard & Smith LLP, New York, N.Y. (Cristina R. Yannucciof counsel), for third-party defendant-appellant-respondent.
Seymour W. James, Jr., New York, N.Y. (Sumani V. Lanka of counsel),and Kasowitz Benson Torres & Friedman LLP, New York, N.Y. (Julie R. Fischerand Nicholas Savino of counsel), for defendant/third-partyplaintiff-respondent-appellant.
Hogan Lovells US LLP, New York, N.Y. (Courtney Colligan, DavidDunn, and Chava Brandriss of counsel), for third-party defendant-respondent WellsFargo Home Mortgage, Inc.
Barry D. Haberman, New City, N.Y., for third-party defendant-respondentResidential Home Funding Corp.
In an action to foreclose a mortgage, (1) the third-party defendant New York LandAbstract Corporation appeals from so much of an order of the Supreme Court, QueensCounty (Butler, J.), entered July 5, 2012, as denied those branches of its motion whichwere pursuant to CPLR 3211 (a) (7) to dismiss the third-party causes of action to recoverdamages for negligence and negligent misrepresentation insofar as asserted against it,and (2) the third-party plaintiff Macia Drummond cross-appeals from so much of thesame order as (a) granted those branches of the motion of the third-party defendant NewYork Land Abstract Corporation which were pursuant to CPLR 3016 (b) and CPLR3211 (a) (7) to dismiss the third-party causes of action alleging fraud, civil conspiracy todefraud, unconscionability, and violations of General Business Law § 349insofar as asserted against it, and (b) granted the separate motions of the third-partydefendants Wells Fargo Home Mortgage, Inc., and Residential Home FundingCorporation which were pursuant to CPLR 3016 (b) and CPLR 3211 (a) (7) to dismissthe third-party complaint insofar as asserted against them.
Ordered that the order is modified, on the law, by deleting the provisions thereofgranting those branches of the motion of the third-party defendant New York LandAbstract Corporation which were pursuant to CPLR 3016 (b) and CPLR 3211 (a) (7) todismiss the third-party causes of action alleging fraud and civil conspiracy to defraudinsofar as asserted against it, and substituting therefor provisions denying those branchesof the motion; as so modified, the order is affirmed insofar as appealed andcross-appealed from, with one bill of costs to the third-party [*2]defendants Residential Home Funding Corporation andWells Fargo Home Mortgage, Inc., payable by the third-party plaintiff MaciaDrummond.
In June 2009, the third-party plaintiff Macia Drummond (hereinafter Drummond)purchased a residential property in Cambria Heights from the defendant Amir Propertiesand Development, Inc. (hereinafter Amir). The purchase was financed with a mortgageloan obtained from the third-party defendant Residential Home Funding Corporation(hereinafter RHF). The mortgage was subsequently transferred to the third-partydefendant Wells Fargo Home Mortgage, Inc. (hereinafter Wells Fargo). According toDrummond, although she was assured at the closing that there were no liens burdeningthe property, there was, in fact, a prior mortgage held by the plaintiff, JP Morgan ChaseBank, N.A. (hereinafter Chase), which had never been satisfied.
Shortly after the closing, Chase, the holder of the pre-existing mortgage, commencedthe instant action against, among others, Amir, and Drummond as a "Jane Doe" residingat the property. Drummond filed a third-party complaint against, among others, herattorney, Amir's attorney, RHF, Wells Fargo, and New York Land Abstract Corporation(hereinafter New York Land), the title abstract company, which had issued a title reportat the request of Amir's attorney. She alleged that she was the victim of an "abhorrentpredatory lending scheme" in a "fraudulent purchase and finance transaction" andasserted causes of action sounding in, inter alia, fraud, negligence, negligentmisrepresentation, and unconscionability.
RHF, Wells Fargo, and New York Land all moved, separately, to dismiss thethird-party complaint insofar as asserted against them for failure to state a cause of actionand for lack of specificity in stating a cause of action based upon fraud. The SupremeCourt granted the motions of RHF and Wells Fargo to dismiss all third-party causes ofaction insofar as asserted against them. The Supreme Court also granted those branchesof New York Land's motion which were to dismiss the third-party causes of actionalleging fraud, civil conspiracy to defraud, unconscionability, and violations of GeneralBusiness Law § 349 insofar as asserted against it. The Supreme Court alsodenied a request by Drummond, apparently made in a footnote in her memorandum oflaw, for leave to replead. New York Land appeals, and Drummond cross-appeals.
New York Land contends that the Supreme Court should have granted thosebranches of its motion which were to dismiss the causes of action sounding in negligenceand negligent misrepresentation insofar as asserted against it, because there were noallegations in the third-party complaint of privity upon which to premise a claim of dutyowed to Drummond. We reject this argument. Although there was no contract betweenDrummond and New York Land, affording the pleadings a liberal construction andaccepting all facts alleged as true (see Leon v Martinez, 84 NY2d 83, 87 [1994];Breytman v Olinville Realty,LLC, 54 AD3d 703, 703-704 [2008]), the third-party complaint supportsDrummond's contention that the relationship between these two parties was so close as toapproach privity (see Ossining Union Free School Dist. v Anderson LaRoccaAnderson, 73 NY2d 417, 424 [1989]; Credit Alliance Corp. v Arthur Andersen& Co., 65 NY2d 536, 551 [1985]; Reliance Ins. Co. v Morris Assoc.,200 AD2d 728, 729 [1994]; Kidd v Havens, 171 AD2d 336, 339 [1991]). Indeed,the pleading alleges that New York Land was aware that the abstract and title report thatit prepared were to be used for the specific purpose of facilitating a sale or mortgage ofthe property, that New York Land knew that Drummond was a member of a definableclass who would rely on the certification in furtherance of that purpose, and that therewas conduct between New York Land and Drummond evincing New York Land'sunderstanding of Drummond's reliance (see Reliance Ins. Co. v Morris Assoc.,200 AD2d at 729; Kidd v Havens, 171 AD2d at 339). Accordingly, the SupremeCourt properly denied those branches of New York Land's motion which were todismiss, for failure to state a cause of action, the third-party causes of action allegingnegligence and negligent misrepresentation insofar as asserted against it.
While the third-party complaint states causes of action sounding in negligence andnegligent misrepresentation against New York Land, the Supreme Court, contrary to thecontentions raised by Drummond in her cross-appeal, properly granted those branches ofRHF's and Wells Fargo's motions which were to dismiss those causes of action insofar asasserted against them. The third-party complaint failed to allege the existence of a specialor privity-like relationship imposing a duty on these third-party defendants, as lender andassignee respectively, to verify that the mortgage secured by the subject property was avalid first lien (see Greenberg,Trager & Herbst, LLP v HSBC Bank USA, 17 NY3d 565, 578 [2011];Mosbacher v JP Morgan Chase Bank, N.A., 109 AD3d [*3]525, 526 [2013]; Dobroshi v Bank of Am., N.A., 65 AD3d 882, 884 [2009];see also Harris v Adejumo,36 AD3d 855 [2007]; Burger v Singh, 28 AD3d 695 [2006]; Tenenbaum v Gibbs, 27 AD3d722 [2006]). In the absence of such a duty, the complaint did not state a cause ofaction against RHF or Wells Fargo sounding in negligence or negligentmisrepresentation (see Mosbacher v JP Morgan Chase Bank, N.A., 109 AD3d at526; Harris v Adejumo, 36AD3d 855 [2007]).
Drummond correctly contends, however, that the Supreme Court should have deniedthat branch of New York Land's motion which was to dismiss the third-party fraud causeof action insofar as asserted against it. "The elements of a cause of action sounding infraud are a material misrepresentation of an existing fact, made with knowledge of thefalsity, an intent to induce reliance thereon, justifiable reliance upon themisrepresentation, and damages" (Introna v Huntington Learning Ctrs., Inc., 78 AD3d 896,898 [2010]; see EurycleiaPartners, LP v Seward & Kissel, LLP, 12 NY3d 553, 559 [2009]; House of Spices [India], Inc. vSMJ Servs., Inc., 103 AD3d 848, 850 [2013]). "All of the elements of a fraudclaim 'must be supported by factual allegations containing the details constituting thewrong' in order to satisfy the pleading requirements of CPLR 3016 (b)" (House ofSpices [India], Inc. v SMJ Servs., Inc., 103 AD3d at 850, quoting Cohen vHouseconnect Realty Corp., 289 AD2d 277, 278 [2001]). In certain circumstances,however, it may be "almost impossible to state in detail the circumstances constituting afraud where those circumstances are peculiarly within the knowledge of [an adverse]party" (Jered Contr. Corp. v New York City Tr. Auth., 22 NY2d 187, 194[1968]). "Under such circumstances, the heightened pleading requirements of CPLR3016 (b) may be met when the material facts alleged in the complaint, in light of thesurrounding circumstances, 'are sufficient to permit a reasonable inference of the allegedconduct' including the adverse party's knowledge of, or participation in, the fraudulentscheme" (High Tides, LLC vDeMichele, 88 AD3d 954, 957 [2011], quoting Pludeman v Northern Leasing Sys.,Inc., 10 NY3d 486, 492 [2008]; see Eurycleia Partners, LP v Seward & Kissel, LLP, 12NY3d 553, 559 [2009]; Daly v Kochanowicz, 67 AD3d 78, 90-91 [2009]). Here,accepting all facts alleged as true (see Leon v Martinez, 84 NY2d at 87), thethird-party complaint contains sufficient allegations of fact from which it can be inferredthat New York Land was aware of the alleged fraudulent scheme and intended to aid inthe commission thereof (seeSargiss v Magarelli, 12 NY3d 527, 531 [2009]; House of Spices [India], Inc.v SMJ Servs., Inc., 103 AD3d at 850; see generally First Keystone Consultants, Inc. v DDR Constr.Servs., 74 AD3d 1135 [2010]). Accordingly, the Supreme Court should havedenied that branch of New York Land's motion which was to dismiss the third-partyfraud cause of action insofar as asserted against it.
Similarly, the Supreme Court should have denied that branch of New York Land'smotion which was to dismiss the third-party cause of action alleging civil conspiracy todefraud insofar as asserted against it. "Although New York does not recognize civilconspiracy to commit a tort . . . as an independent cause of action, a plaintiffmay plead the existence of a conspiracy in order to connect the actions of the individualdefendants with an actionable, underlying tort and establish that those actions were partof a common scheme" (Levin vKitsis, 82 AD3d 1051, 1052 [2011] [internal quotation marks and citationsomitted]). Again, affording the third-party complaint a liberal construction, Drummondalleged sufficient facts from which it may be inferred that New York Land knowinglyparticipated, with certain other third-party defendants, in the alleged fraudulent scheme(see id. at 1052; cf. High Tides, LLC v DeMichele, 88 AD3d at 960).
However, the Supreme Court properly granted those branches of RHF's and WellsFargo's separate motions which were to dismiss the third-party causes of action allegingfraud and conspiracy to defraud insofar as asserted against them. Considering their statusas lender and assignee, respectively, it cannot be inferred that RHF or Wells Fargo wasaware of the alleged fraudulent scheme and agreed to "cooperate" by issuing a loan andallowing the funds issued to be distributed to, among others, the other third-partydefendants (see generally Goel vRamachandran, 111 AD3d 783, 793 [2013]; High Tides, LLC vDeMichele, 88 AD3d at 960). Notably, such an inference is inconsistent withallegations that the mortgage loan issued by RHF and subsequently assigned to WellsFargo was essentially unsecured due to the preexisting Chase mortgage, of whichDrummond was unaware.
Contrary to Drummond's contentions, the factual allegations set forth in thethird-party complaint fail to set forth a viable cause of action to recover damages fromRHF or New York Land for violations of General Business Law § 349.General Business Law § 349 is a broad consumer protection statute, whichdeclares "[d]eceptive acts or practices in the conduct of any business, trade or commerce"to be unlawful (General Business Law § 349 [a]; see North State [*4]Autobahn, Inc. v Progressive Ins. Group Co., 102AD3d 5 [2012]; Flax vLincoln Natl. Life Ins. Co., 54 AD3d 992 [2008]). A party claiming the benefitof General Business Law § 349 must, as a threshold matter," 'charge conduct that is consumer oriented' " (North State Autobahn,Inc. v Progressive Ins. Group Co., 102 AD3d at 11-12, quoting New York Univ.v Continental Ins. Co., 87 NY2d 308, 320 [1995]). "The single shot transaction,which is tailored to meet the purchaser's wishes and requirements, does not, withoutmore, constitute consumer-oriented conduct for the purposes of this statute" (NorthState Autobahn, Inc. v Progressive Ins. Group Co., 102 AD3d at 12 [internalquotation marks omitted]). Rather, the defendant's acts or practices "must have a broadimpact on consumers at large" (New York Univ. v Continental Ins. Co., 87 NY2dat 320). Here, Drummond's General Business Law § 349 cause of action ispredicated upon allegations that the third-party defendants fraudulently induced her topurchase the subject property and finance it with a mortgage loan from RHF. As the
Supreme Court properly concluded, these factual allegations do not amount toconduct that has an impact on the public at large and, as such, do not state a cause ofaction for violation of General Business Law § 349 (see Flax v Lincoln Natl. Life Ins.Co., 54 AD3d 992 [2008]; Brooks v Key Trust Co. N.A., 26 AD3d 628 [2006]).
The Supreme Court also properly granted those branches of RHF's and Wells Fargo'sseparate motions which were to dismiss the causes of action seeking affirmative relieffrom them based on the doctrine of unconscionability, as that doctrine is to be used" 'as a shield, not a sword, and may not be used as a basis for affirmativerecovery' " (FortuneLimousine Serv., Inc. v Nextel Communications, 35 AD3d 350, 354 [2006],quoting Super Glue Corp. v Avis Rent A Car Sys., 132 AD2d 604, 606[1987]).
Finally, the Supreme Court did not improvidently exercise its discretion in denyingDrummond's request for leave to amend the third-party complaint. While leave to amenda pleading is freely given absent prejudice or surprise resulting directly from the delay(see Eighth Ave. Garage Corp. vH.K.L. Realty Corp., 60 AD3d 404, 405 [2009]), leave to amend "may not begranted upon mere request, without appropriate substantiation" (Brennan v City ofNew York, 99 AD2d 445, 446 [1984]). Here, the request for leave to amend wasapparently advanced in a footnote on the final page of Drummond's memorandum of law,and there is no indication, even in a conclusory fashion, as to what the new pleadingswould be. Skelos, J.P., Dickerson, Maltese and LaSalle, JJ., concur.
Motion by Wells Fargo Home Mortgage, Inc., to dismiss a cross appeal from anorder of the Supreme Court, Queens County, dated June 26, 2012, insofar as takenagainst it on the ground that the cross appeal has been rendered academic insofar as takenagainst it. By decision and order on motion dated December 13, 2013, the motion washeld in abeyance and referred to the panel of Justices hearing the appeal fordetermination upon the argument or submission thereof.
Upon the papers filed in support of the motion and the papers filed in oppositionthereto, and upon the argument of the appeal and cross appeal, it is
[*5] Ordered that the motion is denied. Skelos, J.P.,Dickerson, Maltese and LaSalle, JJ., concur.