Richards v Cesare

[*1] Richards v Cesare 2009 NY Slip Op 52164(U) [25 Misc 3d 1217(A)] Decided on September 30, 2009 Supreme Court, New York County Madden, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on September 30, 2009
Supreme Court, New York County

Tanya Richards a/k/a TANJA RICHARDS and TERRENCE SMITH, Plaintiffs,

against

Lawrence Cesare a/k/a LARRY CESARE, CONCEPT REALTY & HOLDING CORP., ALLISON B. CRAIN, ALISON B. CRAIN, P.C., FIRST LINCOLN MORTGAGE CORP., JACKIE'S REALTY AND HOME DEVELOPMENT CORP., JACQUELINE SINGOTIKO, STEVEN SINGOTIKO, WASHINGTON MUTUAL BANK, and JOHN DOE, being a fictitious name of an individual, Defendants.



113943/08

Joan A. Madden, J.

Defendants Allison B. Crain and her law firm Allison B. Crain, P.C. (together "Crain") move for an order: (i) pursuant to CPLR 3211(a)(7) dismissing the First Amended Verified Complaint (the "complaint") for failure to allege any damages caused by them; or, in the alternative, (ii) pursuant to CPLR 3211(a)(7) and 3016(b) dismissing the Fifth, Seventh, Ninth and Tenth causes of action for failure to state a cause of action and failure to plead fraud with particularity.

According to the complaint, plaintiff Tanya Richards ("Richards") and her brother Terrence Smith ("Smith"), who are African-American, were the equitable and legal owners respectively of a three-story brownstone located at 216 West 137th Street in Harlem (the "Property"), which was their childhood home (id., p 2 and ¶ 12). Due to the failure of their tenants to make rental payments, Richards' serious illness, and the fact that one of the rental units in the Property became vacant, plaintiffs fell behind in their mortgage payments and faced foreclosure (id., ¶¶ 15, 18). At that point they became susceptible to a "foreclosure rescue scheme" which they describe as follows:

The scheme, which frequently targets minority and low-income homeowners, begins when a so-called foreclosure rescue "specialist" locates a susceptible homeowner who is behind in her mortgage payments and whose home may be in foreclosure, and makes promises to "save" her home, lower her monthly payments and repay her outstanding debt only to trick the homeowner [*2]into unwittingly signing away her deed to a third party, the "straw buyer." The foreclosure specialist then arranges for the straw buyer to re-mortgage the property at an amount that typically far exceeds the homeowner's original mortgage, keeping most of the cash proceeds for himself and his associates. Thus, the homeowner, for little or no consideration, is stripped of her deed, the equity in what was once her home, and is eventually evicted from the home itself

(id., pp 1-2). The "foreclosure rescue specialist" who allegedly victimized plaintiffs is defendant Steven Singotiko ("Singotiko") (id., p 2).

In late November 2006, on the eve of foreclosure, Singotiko left a flyer at the Property advertising his foreclosure prevention services, and followed up with two mailings (id., ¶¶ 19-20). In mid-December Richards met with Singotiko, who presented to her the following proposal to save the Property: he would find a "straw buyer" to refinance and pay off the mortgage; assist Richards in repairing her credit so that she could obtain full title to the Property from the straw buyer after one year; and, assist Richards in fixing up the Property to increase its rental value

(¶ 26). After Richards rejected Singotiko's initial proposal, he came up with a second one whereby he, Richards, and a straw buyer would enter into a "legally binding" Partnership and Equity Share Agreement (the "Agreement") that would allow Richards (along with Smith) to sell the Property to the straw buyer and thereafter live in and manage the Property until she repurchased it within a year from the sale (complaint, ¶¶ 32-33, 37). Richards accepted the Agreement (¶ 50).

As the foreclosure auction (which had been stayed several times) approached, Richards, at Singotiko's suggestion, added her name to Smith's deed for the Property and filed a bankruptcy petition to stay the auction (¶¶ 39, 41). Richards was then introduced to defendant Lawrence Cesare ("Cesare"), whom Singotiko had designated as the straw buyer of the Property (¶ 43). Prior to the closing Richards retained Crain, who was supplied by Singotiko, to represent her and Smith as the sellers (¶ 56). Crain allegedly facilitated the fraudulent foreclosure rescue scheme by, inter alia, failing to properly represent her clients (¶ 5). At the July 2007 closing, which "was conducted hurriedly and coercively by the defendants," Smith was told to sign various documents, the contents of which were not understood by Smith or Richards or explained to them (¶¶ 54, 57). At the end of the closing Cesare gave Richards a packet of documents

(¶ 58). Among the documents was a "Rider to Contract of Sale" (the "Rider") which contained a disclaimer of any prior representation to plaintiffs that they could repurchase the Property (¶ 59). The Rider along with the contract of sale and another document bore Smith's forged signature (¶¶ 60-61).

Thereafter, Singotiko, notwithstanding prior representations he made to Richards to induce her to enter the Agreement, refused to help Richards obtain financing so that she could repurchase the Property (¶ 70). Cesare then relieved Richards of her duties as the manager of the Property in furtherance of his and Singotiko's plan to deprive Richards of her legal and equitable ownership interest in the Property (¶¶ 72-73). Richards contacted Crain, who supplied her with a federally mandated HUD-1 Settlement Statement prepared by non-party Gosman Law, P.C., which reflected that plaintiffs never saw any of the money generated by their sale of the Property to Cesare except for $20,000 they received at the closing (¶¶ 74-77). Thereafter, Cesare [*3]informed Richards that he intended to sell the Property to a third party (¶ 78).[FN1]

In support of the first branch of her motion Crain argues that the causes of action asserted against her should be dismissed because the complaint fails to allege that her conduct caused plaintiffs to suffer damages. According to Crain, "[p]laintiffs have not alleged that they would have received more money from the public auction sale of the Property than they will receive from the sale of the Property [and] [a]t the very least, Plaintiffs' action is premature until the Property is sold and the proceeds are distributed" (Crain's supporting memorandum of law, p 7).

This argument is unavailing. Plaintiffs are not required to crystallize their damages claim at this time. All they are required to do is set forth allegations from which damages can be reasonably inferred (see Daukas v Shearson, Hammill & Co., 26 AD2d 526 [1st Dept 1966]). The complaint at bar alleges, inter alia, that plaintiffs, who were "represented" by attorney Crain at the closing, were presented with documents which were not explained to them and which were a significant factor in their loss of the Property. The allegations of the complaint are to be liberally construed, accepted as true, and given the benefit of every possible inference (see AG Capital Funding Partners, L.P. v State Bank and Trust Company, 5 NY3d 582, 591 [2005]). Here, damages can readily be inferred. This action is in its initial stages and discovery, which is likely to furnish the specifics sought by Crain, has yet to take place.

In the alternative branch of her motion Crain seeks dismissal of the Fifth, Seventh, Ninth, and Tenth causes of action against her and her law firm for failure to state a cause of action (CPLR 3211[a][7]) and failure to plead fraud with particularity (CPLR 3016[b]).

Plaintiffs conceded at oral argument that the Fifth cause of action alleges that defendants, including Crain, violated the Racketeer Influenced and Corrupt Practices Act ("RICO"), fails to state a claim as to Crain. Accordingly, the Fifth cause of action is dismissed against Crain.

The Seventh cause of action, which is asserted against all defendants except Washington Mutual, alleges that defendants violated section 349 of the General Business Law by engaging in acts and practices that were misleading, unfair, deceptive, and contrary to public policy and generally recognized standards of business. The offending acts and practices specified in the complaint include: misrepresenting to plaintiffs that they would ultimately retain ownership of the Property; misrepresenting to plaintiffs the nature of the documents they were forced to sign; misrepresenting the likelihood of plaintiffs' prospects of paying back the refinanced mortgage loan; falsely advertizing "foreclosure rescue" and credit repair services; furnishing plaintiffs with a "potted plant" attorney of mixed loyalty for the purpose of depriving plaintiffs of independent professional advice; and, conducting the closing in a rushed and pressured manner without disclosing required documents and information to plaintiffs (complaint, ¶¶ 140-141). Crain [*4]argues that this cause of action should be dismissed for failure to state a cause of action because plaintiffs fail to allege conduct by Crain that is consumer oriented or that Crain engaged in deceptive acts or practices that had a broad impact on consumers at large.

The court finds that the Seventh cause of action fails to allege a viable claim against Crain. General Business Law § 349 declares as unlawful "[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state" (see GBL § 349[a]). Section 349 is directed at wrongs against the consuming public (see Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, N.A., 85 NY2d 20, 24 [1995]). "To assert a viable claim under General Business Law § 349(a), a plaintiff must plead that (1) the challenged conduct was consumer-oriented, (2) the conduct or statement was materially misleading, and (3) damages" (Lum v New Century Mortgage Corp., 19 AD3d 558, 559 [2d Dept 2005], lv den 6 NY3d 706 [2005]).

For conduct to be consumer-oriented it must be demonstrated that it had "a broader impact on consumers at large" (see Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, N.A., 85 NY2d at 26; Sheth v New York Life Ins. Co., 273 AD2d 72, 73 [1st Dept 2000]). Thus, "[p]rivate contract disputes unique to the parties do not fall within the ambit of the statute" Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, N.A., 85 NY2d at 26. Here, it cannot be said that the alleged conduct by Crain in her role as an attorney for plaintiffs in permitting plaintiffs to proceed with an allegedly fraudulent transaction unique to the parties and in failing to provide them with impartial advice in connection with that transaction was consumer-oriented. Accordingly, the Seventh cause of action must be dismissed.

The Ninth cause of action, labeled "Civil Conspiracy to Commit Fraud," which is asserted against all defendants except Washington Mutual, alleges that defendants knowingly and willfully participated in a scheme to induce plaintiffs to enter into the equitable mortgage/deed transfer transaction and to re-mortgage their Property at the July 2007 closing by committing overt acts and making misrepresentations and/or by failing to provide material information (see complaint, ¶¶ 159-160).

The Tenth cause of action, labeled "Aiding and Abetting Fraud" asserted against specified defendants including Crain and her law firm, alleges in pertinent part that Crain knowingly and willfully aided, abetted, and participated in the fraudulent foreclosure scheme by failing to provide disinterested advice to plaintiffs and by failing to require the other defendants to make legally required disclosures to her clients (¶¶ 165, 168).

The Thirteenth cause of action, which is asserted against Crain and her law firm, alleges that Crain acted negligently, and breached the fiduciary duty she owed to plaintiffs, by permitting plaintiffs to proceed with a blatantly fraudulent transaction, failing to ascertain information from them about their underlying interests, failing to provide her clients with impartial legal advice, sending a fraudulent HUD-1 statement to Richards after the closing, failing to account for all the funds exchanged at the closing, failing to disclose her legal fees to plaintiffs (although the complaint alleges that she never billed them for her services)[FN2], and failing to account for two checks made out to her at the closing in the amounts of $80,000 and $45,000 (¶¶ 181-184). [*5]

Crain argues the Ninth and Tenth causes of action should be dismissed because they are duplicative of the Thirteenth cause of action, for breach of fiduciary duty and legal malpractice, and based on the same alleged facts. Crain also argues that the Ninth and Tenth causes of action should be dismissed since they fail to plead fraud with particularity.

Addressing the latter argument first, the court finds that the Ninth and Tenth causes of action are insufficient to state viable claims against Crain. To plead a viable cause of action for fraud, a plaintiff must allege that defendants made a misrepresentation of a material existing fact or a material omission of fact, which was false and known to be false by the defendants when made, for the purpose of inducing plaintiff's reliance, justifiable reliance on the alleged misrepresentation or omission by the plaintiff, and injury (Lama Holding Company v Smith Barney Inc., 88 NY2d 413, 421 [1996]). "A claim rooted in fraud must be pleaded with the requisite particularity under CPLR 3016 (b)"(Euryclei Partners, L.P. v. Seward & Kissel, L.P., 12 NY3d 553, 559 [2009]) . CPLR 3016 (b) requires that claims for fraud set forth "the circumstances constituting the wrong...in detail." Thus, "[a]lthough there is certainly no requirement of unassailable proof at the pleading stage, the complaint must allege basic facts to establish the elements of the cause of action" (Euryclei Partners, L.P. v. Seward & Kissel, L.P., 12 NY3d at 559).

Here, the complaint fails to contain any factual allegations asserting that Crain made any fraudulent misrepresentations to plaintiffs. Moreover, to state a claim for conspiracy to commit fraud there must be allegations of fact from which it can be inferred that Crain entered into an agreement or understanding with the other defendants (against which particular acts of fraud were alleged) to cooperate in any fraudulent scheme (Abrahami v UPC Construction Co., Inc., 176 AD2d 180 [1st Dept 1991]). Here, the complaint is devoid of such allegations and thus the Ninth cause of action is insufficient to state a claim.

In addition, as pleaded, the Ninth and Tenth causes of action are redundant of the Thirteenth Cause of Action for legal malpractice and breach of fiduciary duty and should be dismissed on this ground as well. (see Carl v Cohen, 55 AD3d 478, 478-479 [1st Dept 2008][dismissing fraud claim as duplicative of a legal malpractice claim because "it was not based on an allegation of independent, intentionally tortious' conduct and failed to allege separate and distinct' damages [citations omitted])."

That being said, however, the dismissal of the Ninth and Tenth causes of action is without prejudice to plaintiffs seeking to replead these claims based on more specific allegations, that provide a basis for a fraud claim not redundant of the Thirteenth cause of action.

Accordingly, the motion is granted to the extent of dismissing the Fifth, Seventh, Ninth and Tenth causes of action against Crain.

In view of the above, it is

ORDERED that the Fifth, Seventh, Ninth and Tenth causes of action are hereby dismissed with respect to defendants Allison B. Crain and Allison B. Crain, P.C.; and it is further

ORDERED that the dismissal of the Ninth and Tenth causes of action is without prejudice to plaintiffs seeking leave to replead with respect to these causes of action; and it is further

ORDERED that in all other respects the motion is denied; and it is further.

ORDERED that defendants Allison B. Crain and Allison B. Crain, P.C. directed to file an [*6]answer to the first amended complaint within 20 days of the date of this decision and order a copy of which is being mailed by my chambers to counsel for the parties; and it is further

ORDERED that a preliminary conference shall be held in Part 11, room 351, 60 Centre Street on October 29, 2009 at 9:30 am, and any previously scheduled conference is adjourned to this date.

DATED: September 30, 2009

_________________________

J.S.C. Footnotes

Footnote 1:The above is a summary of the alleged facts, which are explicitly set forth under the heading "Statement of Facts" in paragraphs 12-78 of the 37-page complaint and are otherwise liberally interspersed throughout the complaint along with related allegations of fraud, conspiracy to commit fraud, conversion, breach of contract, and violation of numerous federal and state laws which serve as the bases of plaintiffs' 16 causes of action. In paraphrasing the complaint, the court has minimized (or omitted) specific references to those defendants who are marginally relevant or not relevant to Crain's motion.

Footnote 2:Crain may have received her fees at closing from the proceeds of the sale.