Eng v Sichenzia
Annotate this CaseDecided on December 6, 2005
Supreme Court, Putnam County
Hanie Eng, HANIE ENG INDIVIDUAL RETIREMENT ACCOUNT, and BBC ENTERPRISES, LLC, Plaintiffs,
against
Michael Sichenzia, LISA SICHENZIA, PATRICK COTTRELL, CATHERINE N. COUGHLIN, TERENCE M. COUGHLIN, BETTY GRAHN, MODUTEK, INC., PJC EQUITIES, INC., MAIN STREET HOLDINGS USA, LTD., ARTESIAN ABSTRACT, INC., And OLD REPUBLIC NATIONAL TITLE INSURANCE COMPANY, Defendants.
818/2001
Andrew P. O'Rourke, J.
Defendant Old Republic National Title Insurance Company moves for summary
judgment or in the alternative dismissal of the complaint which Defendant alleges fails to state a
cause of action.
Defendant alleges the complaint arises out of certain loan transactions between the Plaintiffs and the Defendants Michael Sichenzia, Lisa Sichenzia, Patrick Cottrell and the various entities controlled by them. The Plaintiffs lent money to the Defendants and took back mortgages as security. From time to time certain properties were released and other properties substituted therefore.
All of these loans were considered "high risk" with interest rates between 15% to 19% and points were requested. Despite this situation the Plaintiffs never obtained written appraisals pertaining to many of the subject premises."
Plaintiffs seek to recover damages from Old Republic regarding certain title insurance policies issued by Old Republic through its agent Artesian Abstract on the theories of negligence, fraud and breach of fiduciary duty.
The complaint seeks relief against Old Republic solely on the theory of vicarious liability. Old Republic alleges the Plaintiffs entered into these loan transactions in violation of Section 590 [*2]et seq of the New York State Banking Law. The Banking Law requires that you engage in the business of making loans of more than 5 loans a year you must be licensed and registered.
Old Republic refers to the deposition of Hanie Eng who stated the loans were referred to her by a mortgage broker Vickie Phillips. Ms Eng never engaged counsel to prepare the loan documents, does not know if any of the documents were prepared by counsel and never attended any closings. After the loans were made Plaintiffs never inquired if the borrowers paid taxes on the properties. Plaintiffs never exercised any due diligence with reference to the loans.
Old Republic alleges the loan with reference to 81 Carsen Avenue made on Nov. 25, 1997 for $44,000 as referred to in the causes of action 1-5 must be dismissed.
Defendant Lisa Sichenzia borrowed $44,000 from Mid-Ohio Securities Corp. F/B/O Hanie Eng and Trust. The loan was payable on Dec.1, 1998. Defendant was to pay interest only at the rate of 15% for the period Jan.1, 1998 through May 31, 1998. Thereafter the rate was 19% until December 1, 1998. However Defendant only received $40,000 of the $44,000 borrowed, $4,000 was retained by Plaintiffs as points. Plaintiffs charged Defendant Lisa Sichenzia 26.34% interest which is both civilly and criminally usurious, thus making the loan void and unenforceable. The fact that the mortgage was not filed timely is not pertinent and these causes of action must be dismissed.
Old Republic states title insurance insures the condition of the title to the property at a single precise point in time, any "risks identifiable at the time the policy is issued and the loss and costs that may arise as a result of the loss against which you are insured." Title insurance is not prospective and will not afford coverage for matters and action which occur subsequent to its issuance.
Old Republic states title insurance does not insure payment of the obligation and "excludes from coverage defects, liens, encumbrances, adverse claims or other matters resulting in no loss or damage to the insured claimant'."
The policy only provides indemnification for any diminution in the value of the property sustained as a result of defects in title insured by the policy. There must be actual monetary loss or damages.
Because Plaintiff failed to protect her mortgage interest in the property, by not seeing to and if necessary paying the outstanding taxes, Plaintiff forfeited all rights under the title insurance policy.
The 9th, 10th and 11th causes of action refer to premises 54 Benkard Avenue. On March 10, 1998 Eng and Defendants Michael and Lisa Sichenzia agreed to execute a Consolidation, Modification and Spreader Agreement and Partial Release so that the mortgage on 54 Benkard Avenue, Newburg, NY would be substituted for the mortgage held by Eng encumbering 81 Carsen Avenue as security for the loan made by Eng.
Lisa Sichenzia had already conveyed out title to 81 Carsen Avenue on February 10, 1998 so that issuing the mortgage on 54 Benkard Ave. in effect benefitted the Plaintiff. Plaintiff further alleges Lisa never signed the Consolidation, Modification Agreements. Old Republic argues if this is the case then Eng never had a mortgage on 54 Benkard Avenue.
Artesian received $30,000 to satisfy the non-existent 54 Benkard Avenue Mortgage. This money would then have been applied to the Carsen Avenue mortgage which was usurious and unenforceable. [*3]
Old Republic never issued a title report, insurance or even a commitment with reference to the non-existent mortgage at 54 Benkard Avenue through Artesian or any other entity. Artesian did not act as Old Republics's agent when accepting the $30,000 to pay off a non-existent debt, note or mortgage. The $30,000, belonging to Lisa not Eng, was part of the mortgage proceeds advanced by the Eric Goldfine Retirement Plan (SERPT) to Lisa for which a mortgage and note were signed.
Lisa Sichenzia executed mortgages to Eng encumbering premises 33 City Terrace and 35 City Terrace, in Newburg on June 26, 1998.
The two mortgages executed on June 26, 1998 were each in the sum of $27,500 payable on January 1, 1999 at 19% interest. Additionally Lisa executed a promissory note to the mortgage for $11,000 at 19% interest. This note was to cover the $5,500 paid as points for each mortgage. Artesian sent a check from its escrow account to Eng in the sum of $11,000 on behalf of Lisa Sichenzia. Old Republic never issued commitments nor mortgage title insurance policies to Eng regarding the City Terrace properties.
On Jan. 15, 1999, Lisa Sichenzia satisfied both mortgages to Eng thus making Eng whole without any loss. Old Republic further alleges the two City Terrace mortgages were both usurious , the interest rate came to 39% per annum.
Plaintiff further claims Old Republic failed to record a mortgage on premises 67 Hasbrouck Street, Newburg. Main Street Holdings USA LTD executed a note and mortgage to Eng for 67 Hasbrouck Street on August 19, 1998. Main Street obtained title to the property at a foreclosure sale and it is alleged the deed was never recorded.
The mortgage was for $58,300 payable on Aug. 1, 1999 at 19% interest per annum. Eng testified the Hasbrouck mortgages was to substitute for the two City terrace mortgages. However, the City Terrace mortgages were not executed until January 15, 1999. So that from Aug. 19, 1998 until Jan. 15, 1999 Eng held the two mortgages on the City Terrace properties for $55,000; the mortgage of the Hasbrouck property for $58,300 for a total of $113,300 against which she only advanced $55,000. Eng further stated the Hasbrouck mortgage should have been $55,000 the additional $3,300 was a "substitution fee."
If you add the $11,000 paid in points, plus the $3,300 substitution fee plus the 19% interest the interest rate is 43.9% in total violation of § 190.42 of the Penal Law. Further Eng testified she received $25,000 against the City Terrace mortgages. But nevertheless the complaint seeks the $55,000 plus $58,300 for the sum of $113,300 when only $55,000 was advanced and $25,000 of that was paid.
Since the Hasbrouck mortgage was void and unenforceable on its face as usurious, Old Republic had no obligation to issue a mortgage insurance policy and never did. Therefore Plaintiff's attempt to collect under a mortgage title insurance policy had no merit and she had no loss.
Furthermore even after discovering that the mortgage had not been recorded, Plaintiff made no effort to record the document herself.
On May 6, 2004 the subject property was conveyed to the City of Newburg for failure to pay real estate taxes.
On December 1, 1997 Lisa executed a mortgage for 116 William Street, Newburg, NY Mid -Ohio F/B/O Eng in the sum of $27,500 only $25,000 was advanced. The remaining $2,500 [*4]was for points paid to Eng. The mortgage called for the payment of interest only form Dec. 1, 1997 through May 1, 1998 at 15% in monthly installments of $343.75. Commencing June1, 1998 through December 1, 1998 the interest was 19% at $435.32 a month. On Dec. 1, 1999 the principal balance was due. The combined interest rates and points come to 26% which is usurious under the Banking and Penal Laws.
Plaintiff sues Old Republic and Artesian for the $27,500 when it was admitted by Plaintiff that she received the entire $25,000 principal amount of this usurious loan. If Artesian collected the remaining $2,500, it did so not as an agent of Old Republic.
A claim is made against Old Republic for $4,150 with reference to the Consolidation, Extension and Modification (CEM) Agreement made by Lisa substituting a mortgage lien on premises 506-508 Main Street, Poughkeepsie for the mortgage held by Eng on 116 William Street. No claim is made that Old Republic issued either a mortgage insurance commitment or a title policy for this transaction.
Thus any actions taken by Artesian Abstract or Catherine Coughlin were not done as agent for Old republic.
Plaintiff claims Old Republic owes her $1,650 as the fee for the consent to substitute the mortgage. This never was never advanced by Eng.
Plaintiff claims she is owed an additional $2,700 which in light of the fact that the William Street mortgage is usurious is not applicable.
Plaintiff further claims that Catherine Coughlin improperly notarized a satisfaction of mortgage. Old Republic states Catherine Coughlin was never an agent of Old Republic. Old Republic's agency relationship was with Artesian Abstract, Inc. not personally with Catherine Coughlin. Additionally, falsely notarizing instruments would not be within the scope of agency for which Old Republic could be held liable.
Thus Old Republic alleges the complaint is totally devoid of any merit or claim against Old Republic and should thus be dismissed.
In opposition Plaintiff alleges there is no violation to the Banking Law since the loans herein were not made to an individual but to corporations. Furthermore, Plaintiff alleges Old Republic never raised the issue of usury in its affirmative defenses but raised it for the First time in its motion. Plaintiff alleges Old Republic is not liable under the mortgage or the note it is not in privity with the mortgagor Lisa Sichenzia and cannot therefore claim usury on any note or mortgage.
Additionally Defendant Lisa Sichenzia's answer was stricken and Michael Sichenzia admitted he had no defenses to the claims, thus as a matter of law, the issue of usury has been determined.
Plaintiff alleges as to the property at 33-35 City Terrace. The loan was for just 6 months and not a year. Plaintiff attempts a calculation to show that the 19% interest was not usurious, however, the interest is calculated from June 26, 2998 not July 26, 1998: Plaintiff calculates the amount of the mortgage separate from the $11,000 note for "points" and states interest is below 16%.
As to the 116 William Street property, Plaintiff states the first 6 months of interest was at 15% and the second 6 month interest was at 19% both actually calculate at 8.44% interest and was not usurious. [*5]
Plaintiff alleges Old Republic owes Plaintiff for her loss because Old Republic through its agent Artesian issued a mortgage Policy stating the Hanie Eng had a first mortgage on 81 Carsen when it fact Lisa sold the property before the mortgage was recorded. Additionally, Eng did not have a mortgage for 54 Benkard because Lisa never executed the CEM. Thus Old Republic is obligated to Eng for her loss.
The mortgage for 54 Benkard to SERPT was recorded against the wrong party by Artesian. On March 10, 1998 Artesian received $30,000 to pay off the 54 Benkard CEM.
Artesian never gave the money to Eng and the money was never accounted for.
Plaintiff alleges Old Republic had a policy that all escrow money, except property or school taxes, were to be sent to the Financial Department of Old Republic in the Albany office. The escrow was to be sent with the original escrow agreement, form W-9 and a check made payable to Old Republic.
Plaintiff alleges Old Republic never required agent Artesian Abstract to follow the procedure and so Old Republic is responsible for the $30,000.
An affidavit is submitted by Hanie Eng who states she never prepared any of the notes, was told of the deals, by Vicki Phillips of Homstead and agreed to the deals as explained. It is her belief all mortgages were prepared by either Frank DeEsso or Catherine Coughlin.
Annexed to Plaintiff's opposition is a statement /agreement between Michael Sichenzia and among others, the Plaintiff herein, which sets forth that Catherine Coughlin and Artesian Abstract, Inc. "Knowingly falsified documents, knowingly withheld documents for recording, intentionally failed to obtain documents to hinder the Goldfine Entities and the Eng Entities from obtaining valid first mortgages, knowingly certified title insurance policies containing false information and possibly misappropriated escrow money."
The illegal acts performed by Catherine Coughlin and Artesian Abstract were not within the scope of her agency. The claim for negligent hiring and supervision as to Old Republic was denied. Unless Plaintiff can prove complicity of Old Republic with Catherine Coughlin and Artesian Abstract, she has no claim against Old Republic.
Old Republic's obligations to Plaintiff is determined strictly by the policies issued and/or the unexpired commitments.
After a review of all documents presented the Court grants Defendant Old Republic's motion to dismiss as to it the 9th, 10th and 11th causes of action. Neither Old Republic or Artesian ever issued a commitment or title policy for 54 Benkhard Avenue.
The 13th cause of action as to Old Republic is dismissed with reference to the City Terrace properties. The mortgages were satisfied and upon satisfaction the commitment issued terminated.
The 15 through 21 causes of action relating to Hasbrouck Street are dismissed. No mortgage title policy was ever issued and thus there is no policy upon which payment can be made.
The 24-27th causes of action relating to 116 William Street are dismissed. Plaintiff admitted receiving $25,000 in payment of the loan. The remaining $2,500 went to Artesian with no consent or knowledge of Old Republic.
As to the 28th cause of action regarding 506-508 Main Street Old Republic never issued a commitment or title policy of insurance. This cause of action is dismissed. [*6]
The causes of action 29-32 are dismissed as to Old Republic. Catherine N. Coughlin was not Old Republic's agent. What ever fraudulent act she individually committed is not attributable to Old Republic. Any fraudulent act committed by Artesian Abstract, Old Republic's limited agent, were not authorized or within the scope of its agency with Old Republic.
This constitutes the order of the Court.
____________________________
Andrew P. O'Rourke
Justice of the Supreme Court
Dated: December 6, 2005
Carmel, NY
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