| Aries Fin., LLC v 12005 142nd St., LLC |
| 2015 NY Slip Op 03115 [127 AD3d 900] |
| April 15, 2015 |
| Appellate Division, Second Department |
[*1]
| Aries Financial, LLC, Respondent, v 12005142nd Street, LLC, et al., Appellants, et al., Defendants. |
Hersh Jakubowitz, Flushing, N.Y. (David Jakubowitz of counsel), forappellants.
DeSocio & Fuccio, P.C., Oyster Bay, N.Y. (James B. Fuccio of counsel), forrespondent.
In an action to foreclose a mortgage, the defendants 12005 142nd Street, LLC,Alexander Tobin, and Cynthia Tobin appeal, as limited by their brief, from so much of anorder of the Supreme Court, Queens County (Rios, J.), dated July 2, 2012, as deniedthose branches of their motion which were for summary judgment on their first, second,third, and fifth counterclaims, and for a hearing on the proper amount of punitivedamages.
Ordered that the order is modified, on the law, (1) by deleting the provision thereofdenying that branch of the appellants' motion which was for summary judgment on thefirst counterclaim, and substituting therefor a provision granting that branch of themotion, and (2) by adding thereto a provision, upon searching the record, awarding theplaintiff summary judgment dismissing the fifth counterclaim; as so modified, the orderis affirmed insofar as appealed from, without costs or disbursements, and the matter isremitted to the Supreme Court, Queens County, for a determination of the damages towhich the appellants are entitled under Banking Law § 6-l and, thereafter,for the entry of a judgment, inter alia, declaring that the subject loan is void.
On April 27, 2007, the defendants Alexander Tobin and Cynthia Tobin (hereinaftertogether the Tobins) transferred title to their residential property located at 120-05 142ndStreet in Queens to the defendant 12005 142nd Street, LLC (hereinafter the LLC, andtogether with the Tobins, the defendants), a limited liability company organized by anattorney for the plaintiff, Aries Financial, LLC (hereinafter Aries). The same day,Alexander Tobin, as the LLC's managing member, executed a note for a loan from Ariesin the principal sum of $243,000 at an adjustable annual interest rate of up to 16%. At theclosing, portions of the loan were allocated to paying off the Tobins' prior mortgage andto covering various fees and costs. In addition, the sum of $36,450 was placed in escrowto cover the first 12 monthly payments. A check for the remaining loan balance of$26,457 was issued to Cynthia Tobin. In June 2008, after the money in the escrowaccount was exhausted, the Tobins failed to make the mortgage payments.
In November 2008, Aries commenced this action to foreclose the mortgage, allegingthat the LLC defaulted on the mortgage. In their answer, the defendants asserted variousaffirmative defenses and counterclaims. In their first counterclaim, the defendants soughtdamages and declaratory relief for violations of Banking Law § 6-l. Thesecond, third, and fifth counterclaims [*2]alleged,respectively, fraud, violations of General Business Law § 349, andviolations of Real Property Law § 265-a. After issue was joined, thedefendants moved, among other things, for summary judgment on their first, second,third, and fifth counterclaims. In support of their motion, the defendants submitted, interalia, Aries's business plan, which stated that its loans were "made only to LimitedLiability Companies whose owners have transferred their homes to the company." Arieswas aware that lenders making loans to "sub-prime borrowers" can "become entangled invarious state and federal laws designed to combat 'Predatory Lending.' " Thus,Aries's loans were "carefully structured to avoid the potential penalties that thewell-intended protective laws would levy."
The defendants established their prima facie entitlement to judgment as a matter oflaw on their first counterclaim, which was to recover damages and for declaratory relieffor violations of Banking Law § 6-l, which imposes limitations andprohibits certain "practices for high-cost home loans" (Banking Law § 6-l[2]). The defendants established, prima facie, that the subject loan was a "high-cost homeloan" (Banking Law § 6-l [1] [d]; see Banking Law§ 6-l [1] [f] [i]-[iii]; [g] [ii]; LaSalle Bank, N.A., II v Shearon, 23 Misc 3d 959, 967-968[Sup Ct, Richmond County 2009]; see also 15 USC § 1605 [a] [3];12 CFR 226.4 [c] [7]). Contrary to the plaintiff's contention, under the circumstances ofthis case, Banking Law § 6-l applies to the Aries loan, even though it wasmade to a limited liability company, and not to "a natural person" (Banking Law§ 6-l [1] [e] [ii]). The provisions of Banking Law § 6-l apply"to any person who in bad faith attempts to avoid the application of this section by anysubterfuge" (Banking Law § 6-l [3]). Here, the defendants made a primafacie showing that a representative of Aries attempted, in bad faith, to avoid theapplication of the statute by "subterfuge," and that, thus, the statute applied to the Ariesloan (Banking Law § 6-l [3]). Moreover, the defendants' submissionsdemonstrated, prima facie, that Aries violated the provisions of Banking Law§ 6-l (2) by consolidating the first 12 payments and having them "paid inadvance from the loan proceeds provided to the [defendants]" (Banking Law§ 6-l [2] [e]); engaging in "loan flipping" (Banking Law § 6-l[2] [i]); making the loan "without due regard to repayment ability" (Banking Law§ 6-l [2] [k]); failing to provide required notices (see Banking Law§ 6-l [2] [e]; [2-a] [a]); and financing points and fees, as defined in BankingLaw § 6-l (1) (f), "in an amount that exceeds three percent of the principalamount of the loan" (Banking Law § 6-l [2] [m]).
In opposition to the defendants' prima facie showing, Aries failed to raise a triableissue of fact as to whether Banking Law § 6-l was applicable, or whether itviolated the statutory provisions. Accordingly, the Supreme Court should have grantedthat branch of the defendants' motion which was for summary judgment declaring thatthe subject loan is void (see Banking Law § 6-l [9], [10]) and on theissue of liability on so much of the complaint as alleged violations of Banking Law§ 6-l.
The defendants failed to establish, prima facie, that Aries committed fraud, as allegedin their second counterclaim. Contrary to the defendants' contention, Aries's attorney didnot have a duty to disclose his understanding of the legal ramifications of making theloan to the LLC (see Matter ofSheng v State of N.Y. Div. of Human Rights, 93 AD3d 851, 852 [2012]).Moreover, "promises about the future . . . constitute fraud only if they weremade with a present intent not to fulfill them" (Rimawi v Atkins, 42 AD3d 799, 800 [2007]; see Sabo vDelman, 3 NY2d 155, 160 [1957]; Neckles Bldrs., Inc. v Turner, 117 AD3d 923, 925 [2014]).Here, the defendants' submissions failed to eliminate all triable issues of fact as towhether Aries's representative told them at the closing that Aries would refinance theloan in one year at terms that were more favorable to them, even though Aries neverintended to refinance the loan, or whether a representation concerning refinancing wasinstead made by the defendants' mortgage broker. Since the defendants failed to establishtheir prima facie entitlement to judgment as a matter of law, the Supreme Court properlydenied that branch of the defendants' motion which was for summary judgment on itssecond counterclaim, without regard to the sufficiency of Aries's opposition papers(see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]).
In order to establish a prima facie violation of General Business Law§ 349, the defendants had to "demonstrate that [Aries] is engag[ed] inconsumer-oriented conduct which is deceptive or misleading in a material way, and thatthe [defendants were] injured because of it" (Ladino v Bank of Am., 52 AD3d 571, 574 [2008]; seeOswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20,25 [1995]; Corsello v VerizonN.Y., Inc., 77 AD3d 344, 365 [2010], mod 18 NY3d 777 [2012]).Contrary to Aries's contention, the defendants made the threshold showing that thechallenged conduct was consumer-oriented (see Oswego Laborers' Local 214 PensionFund v Marine Midland Bank, 85 NY2d at 25-27). However, the defendants failed tomake a prima facie showing that a deceptive act or practice occurred, since theirsubmissions failed to eliminate all triable issues of fact as to whether Aries'srepresentative made a materially misleading statement as to whether Aries wouldrefinance the loan in one year (see generally Oswego Laborers' Local 214 PensionFund v Marine Midland Bank, 85 NY2d at 26; cf. Patterson v Somerset Invs. Corp., 96 AD3d 817, 817[2012]; Beneficial HomeownerServ. Corp. v Williams, 113 AD3d 713, 714-715 [2014]). Accordingly, theSupreme Court properly denied that branch of the defendants' motion which was forsummary judgment on their third counterclaim, without regard to the sufficiency ofAries's opposition papers.
The provisions of the Home Equity Theft Prevention Act (Real Property Law§ 265-a) are not applicable here (see Real Property Law§ 265-a [1], [2] [c], [e]; see also Washington Mut. Bank v Sholomov, 20 Misc 3d773, 777-778 [Sup Ct, Nassau County 2008]). Thus, the Supreme Court properlydenied that branch of the defendants' motion which was for summary judgment on thefifth counterclaim. In light of the foregoing determination, and upon our authority tosearch the record and award summary judgment to a nonmoving party with respect to anissue that was the subject of the motion before the Supreme Court (see CPLR3212 [b]; Homecomings Fin.,LLC v Guldi, 108 AD3d 506, 509 [2013]), we award Aries summary judgmentdismissing the fifth cause of action, which alleged violations of Real Property Law§ 265-a.
The parties' remaining contentions are without merit.
Since the defendants' counterclaims, in part, sought declaratory relief, the mattermust be remitted to the Supreme Court, Queens County, for a determination of thedamages to which the defendants are entitled under Banking Law § 6-l and,thereafter, for the entry of a judgment, inter alia, declaring that the subject loan is void(see Lanza v Wagner, 11 NY2d 317, 334 [1962]; Ling's Props., LLC v Bode, 94AD3d 951, 953 [2012]). Balkin, J.P., Hall, Roman and Cohen, JJ., concur.