Riverdale Osborne Towers Hous. Assoc. LLC v Commonwealth Land Titles Ins. Co.

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Riverdale Osborne Towers Hous. Assoc. LLC v Commonwealth Land Titles Ins. Co. 2011 NY Slip Op 33840(U) June 13, 2011 Sup Ct, New York County Docket Number: 651377/10 Judge: Judith J. Gische Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various state and local government websites. These include the New York State Unified Court System's E-Courts Service, and the Bronx County Clerk's office. This opinion is uncorrected and not selected for official publication. [*FILED: NEW YORK COUNTY CLERK 06/14/2011 1] INDEX NO. 651377/2010 NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 06/14/2011 SUPREME COURT OF THE STATE OF NEW YORK - NEW YORK COUNTY PRESENT: HON. JUDITH J. GISCHE ________ PART ,1.s:e._~ \ D Index Number: 651377/2010 INDEX NO. RIVERDALE OSBORNE TOWERS MOTION DATE VS. COMMONWEAL TH LAND TITLE MOTION SEQ. NO. SEQUENCE NUMBER : 001 CDI MOTION CAL. NO. DISMISS \. . ___________________JM ¢ motion to/lo ¢ PAPERS NUMBERED Notice of Motion/ Order to Show Cause - Affidavits - Exhibits ... "' - Answering Affidavits - "' w a: Cross-Motion: z 0 <( C!1 wz (.) t== Exhibits ------------~ Replying A f f i d a v i t s - - - - - - - - - - - - - - - - - D Yes '¢ No ~tCEIVEO Upon the foregoing papers, it is ordered that this motion ~ JUN 1 4 2011 "' ..... ::::> ..... .., 0 llAOT!ON SLJpp NYs SUPREME c~RUT OFFICE RT- CIVIL 0 LI. .... w c :c w .... a: a: a: 0 motion (a) end croaa-motlon(s) decided In accordance with the annexed decision/order of even date. ~ LI. w a: > ..... ..... ::::> LI. .... (.) w D.. w "' a: "' w "' <( ~\l\E'_ \ 3 z Dated: t== Check one: (.) I @\ \ SCHE J.S.C. 0 0 ~ 0 Check if appropriate: 0 NON-FINAL FINAL DISPOSITION D DO NOT POST SUBMIT ORDER/ JUDG. 0 J. .c. ISPOSITION 0 REFERENCE SETTLE ORDER/ JUDG. [* 2] Supreme Court of the State of New York County of New York: Part 10 --------------------------------------------------------~-------------x RIVERDALE OSBORNE TOWERS HOUSING ASSOCIATES LLC, 1 Plaintiff, -against- Decision/Order Index# 651377/10 Seq. No.: 001 I I I COMMONWEALTH LAND TITLES INSURANCE COMPANY and LIBERTY TITLE AGENCY LLC, I I Defendants. I ----------------------------------------------------------------------x Recitation, as required by CPLR §2219(a)[I of the papers considered in the review of this : (these) motion(s): I. PAPERS JUN l A 2011 NUMBERED Defs N/M, ER affirm., exhs .....................................................~ .......................................................1 ~~·:~em~, i~~d~ttf~~:· ~~~k~ff-id·.···e·~-ti~---~!~~~~~R~~li'cc;>oii-~~gf,~t·····································~ pp I I 0 ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ Pltfs Opp Memo (sep. back) ....................... .1.. ................................................................................4 Defs SL affid ....................................................1..................................................................................5 Def's Further Supp w/ ER affirm, exhs ...... .1.. ................................................................................ 6 I Gische, J. I Upon the aforementioned papers! the decision and order of the court is as follows: This is a breach of contract and tr~i1 ud action arising from allegations, brought by I' plaintiff Riverdale Osborne Towers Housi~g Associates, LLC. ("Riverdale" or "Plaintiff''), that a title insurer, Liberty Title Agency LLC. ("Liberty"), misappropriated funds held in I escrow. Plaintiff claims that defendant C~mmonwealth ("Commonwealth") is liable to it under a Land Titles Insurance Company ~rincipal-agent relationship. Presently before the court is Commonwealth's motion, purJuant to CPLR 3211, to dismiss the complaint against it based on the theories of actuJI authority, apparent authority and negligent I - Pagb I of I 0 ;I [* 3] supervision. Riverdale opposes the motion to dismiss. Liberty has not answered the I' complaint nor does it take any position on .~his motion. :1 Facts and Arguments Presented :i Commonwealth is engaged in the blsiness of insuring title to real estate. Liberty I was a Commonwealth agent pursuant I to a January 7, 2001 agreement. That I I agreement provided that: I "PRINCIPAL [Commonweal~h] appoints AGENT [Liberty] it agent solely for the purpose of issuing, on PRINCIPAL'S forms, title insurance commitments, policies and endorsements on real estate located in the State of New York." " The agency agreement also specifically Jrovided, under the caption "Additional Terms ;1 and Conditions" that: "Notwithstanding any provision herein, AGENT'S [Liberty's] authority under this Agreement is expressly limited to the issuance of title insurance commitments, polices and endorsements and the collections of Premiums as set forth herein. Without limitation AGENT is not authorized and shall not purport to: . . . ' d) Engage in any business in the name of PRINCIPAL except as specifically authorized herein; ... f) Receive in the name of ~RINCIPAL any funds, including escrow and settlement funds; ... i I) Issue any commitment, !I policy or endorsement which insures against or over anY:J matter by reason of an escrow deposit, indemnity agreement, letter of credit, or bond." I I i Riverdale engaged Commonwealth, throubh its agent Liberty, to provide title insurance for real property located in the Brbwnsville Commonwealth issued a policy thereto. neighborhood of Brooklyn and In the policy, Liberty was identified as - Page 2 of I 0 - [* 4] I ag~nt" on several signature lines for Liberty. On I that basis, plaintiff alleges that at all times ~fter issuance of the policy, it acted under the Commonwealth's "authorized officer or I reasonable belief that Liberty was authorized to act for Commonwealth in all matters I relevant to the acquisition of clear title to the Property including post-closing I transactions. The plaintiff further alleges :that at the closing of the Property purchase, 1 Liberty appeared as Commonwealth's ag ent and participated in collecting documents I I for filing and received the proceeds of building loans and equity to allow it to disburse funds pursuant to a schedule. However, I the plaintiff does not allege that Liberty or . Commonwealth failed to distribute thosJ moneys properly or acted in an improper I manner with respect to that agreement. i I I I The plaintiff further alleges that at the closing, Liberty also executed two receipt and deposit agreements in which it agreJd to disburse monies to pay off certain liens I and encumbrances on the Property. cdmmonwealth claims that it is not a party to I I those agreements because Liberty is not identified as Commonwealth's agent. In both I of them its signature line reads onlyl "Liberty Title Agency, LLC." "Commonwealth" appears only on the I front page of each, ~here The word that word is handwritten into an underlined space nea) the top left hand portion of each form beside I I ' the word "underwriter." Plaintiff does not allege that Liberty or Commonwealth breached those agreements or otherwise did anythi~g improper with respect to them. The plaintiff alleges that in additiJn to the foregoing undisputed agreements, I I Liberty executed an agreement with the plaintiff to hold an additional $1,324, 198.88 in escrow ("Escrow Fund") for the payment bf certain disputed liens on the Property and I I for accounts payable that may have otherwise resulted in liens on the Property. I I I - Page 3 of I 0 - I [* 5] I i Commonwealth claims that the only parties to the agreement identified by that :1 document are Liberty and the Plaintiff. :i Furthermore, Commonwealth claims that 1 Its signature line nowhere is Liberty identified or listed as Commonwealth's agent. reads: "Liberty Title Agency" with no indiJation or qualification that it is only acting as agent for Commonwealth or anyone else. It is in connection with that Escrow Fund alone that plaintiff alleges Liberty, and through it, Commonwealth, committed ;~ wrongdoing. Plaintiff claims that Liberty distributld monies from the foregoing separate funds I I to pay off the relevant liens and debts against the property. Plaintiff alleges that Liberty I I did so in its capacity and in conjunction with its role as Commonwealth's agent. Plaintiff I further argues that Liberty was invested or cloaked with apparent authority to act as Commonwealth's agent, as it is customar}t in real estate closings for the title insurer to take escrow deposits. However, Plaintiff:1 alleges that· Liberty purportedly failed to pay out, or even return, $115,300 of the mo;hies deposited in the Escrow Fund, ceased I I I taking phone calls, and ultimately went out of business. After Liberty went out of businJss, plaintiff contacted Commonwealth and requested that it return the $115,300 that Liberty had not disbursed or returned. A Commonwealth officer explained, in correspondence to plaintiff, that although Liberty ;I i 1 .was not Commonwealth's agent for the performance of escrow and other services 1 incidental to a pending real estate transabtion, Commonwealth did recognize plaintiff's . I claim to coverage of four encumbrances Ion the Property that were not excepted from the plaintiff's Commonwealth title insuranbe policy, totaling $11,526.64, and offered to pay those amounts, but disclaimed all other claims. -Pag'e4of 10:I :I ;i [* 6] I I As a consequence of the foredoing, plaintiff asserts four claims against Commonwealth. In the first claim, the plJi.ntiff alleges that Commonwealth is liable for I Liberty's alleged wrongful detention of $115,300 from the Escrow Fund because Liberty . I acted as Commonwealth's agent, with actual authority to do so, in connection with its handling of the Escrow Fund. In the seco~d claim, plaintiff alleges that Commonwealth I never notified plaintiff that any of Liberty's services were outside the scope of its agency for Commonwealth and, therefore, I Liberty had apparent authority to act as Commonwealth's agent in regard to the Eicrow Fund. In its third claim, plaintiff asserts that Commonwealth is liable for LibertJ.s defalcation because Liberty's actions in ' becoming escrow agent for the Escrow Fuhd were within the scope of Liberty's authority for Commonwealth and furthered CommJnwealth's business. Plaintiff's fourth claim is I based on allegations that Commonwealth breached its alleged duty to supervise its purported agent (Liberty) in its handling of/the Escrow Fund. Commonwealth argues that it is entitled to dismissal, pursuant to CPLR 3211, as I I plaintiff does not allege facts which supJort its allegations that Liberty was acting as I Commonwealth's agent in collecting plaintiff's escrow deposit. Commonwealth submits its contract with Liberty, which, while aJthorizing Liberty to act as Commonwealth's I agent with respect to selling title authorized to "[receive in the name of insu~ance, expressly states that Liberty is not [Co~monwealth] any funds including escrow and settlement funds." Commonwealth argueJ that plaintiff has not plead facts which show that Commonwealth is liable on a theol of apparent authority, as plaintiff has not alleged that Commonwealth communicatld anything to plaintiff as to its involvement in I the escrow arrangement. I I - Page 5 of I I .f I0 - [* 7] Discussion In the context of a motion to disjiss pursuant to CPLR 3211, the court must afford the challenged pleadings a liberal donstruction, take the allegations as true, and I - provide the pleader with the benefit of evJry possible inference (Goshen v. Mutual Life I Ins. Co. of N.Y., 98 N.Y.2d 314, 326 [2002]; Leon v. Martinez, 84 N.Y.2d 83 [1994]; I Morone v. Morone. 50 N.Y.2d 481 [1980]; Beattie v. Brown & Wood, 243 A.D.2d 395 I I [1st Dept. 1997]). In deciding Commonwealth's motion to dismiss, the court must consider whether, accepting all Plaintiffs Ifacts, that they support the claims asserted I I (Rovello v. Orofino Realty Co., 40 N.Y.2d 633, 634 [1976]) and whether they fit within any cognizable legal theory (Goldman [2005]). J. Metropolitan Life 'Ins. Co., 5 N.Y.3d 561 Where the party whose pleadihgs are being challenged submits affidavits I and/or other evidentiary materials in oppdsition to the motion, they may be considered I I to remedy any defects in the pleading (Leon v. Martinez, 84 N.Y.2d 83, 88 [1994]). ; Thus, in order to prevail on a CPLR 3211 lmotion, the documentary evidence submitted "must be such that it resolves all the factJa1 issues as a matter of law and conclusively I and definitively disposes of the - plaintiff'~ claim." (Fernandez v. Cigna Property and I Casualty Insurance Company, 188 AJD.2d 700, 702 [1992]; Vanderminden v. I I Vanderminden, 226 A.D.2d 1037 [1996]; Bronxville Knolls. Inc. v. Webster Town Center I Partnership, 221 A.D.2d 248. [1995]) I Applying these legal principals to the facts of this case, the court's decision is as follows: I ! Actual Authority i An agent acts with actual authority when, at the time of taking action that has legal consequences for the principal, the lgent reasonably believes, in accordance with I I - Pag'e 6 of I 0 I I [* 8] I the principal's manifestations to the agent.I that the principal wishes the agent so to act. Restatement (Third) Of Agency §2.01 (2q06). A person manifests assent or intention :i through written or spoken words or other conduct. ~53 Lieber, 304 A.D.2d 484, 759 NYS2d kt at §1.03. See also Ojeni v. (1 51 Dept. 2003) (principal's objective I manifestation, expressed to the agent, of consent to the agency is required.) Therefore I: :: "an agent's power to bind his principal '!is co-extensive with the principal's grant of I I authority." Ford v. Unity Hospital, 32 N.Yl2d 464, 472 (1973). It follows that where an agent's authority is spelled out in a written agency agreement delineating the scope of ·' ' " the agency, the terms of the agreement will determine that issue. . I See Standard Funding Corp. v. Lewitt, 89 N.Y.2d 546 (1997) (court looks to terms of agency agreement to determined agency's scope). Further, "one who deals with an agent does ,, :1 so at his peril, and must make the necessary effort to discover the actual scope of I I authority." Ford v. Unity Hospital, 32 N.Y.2d at 472. Pursuant to the agency agreement:I between Liberty and Commonwealth, Liberty is Commonwealth's agent "solely for thl purpose of issuing, on [Commonwealth's] I forms, title insurance commitment, policiJs and endorsements on real estate ... " That I agreement expressly limits Liberty's autlhority to those matters delineated under the ., 'I heading "Additional Terms and Conditions'." That latter section states that Liberty "is not 1 I authorized and shall not purport to ... (d) [e]ngage in any business in the name of !1 [Commonwealth] except as expressly authorized herein" or (f) [r]eceive in the name of I [Commonwealth] any funds, including e~crow I and settlement funds." Based on the foregoing, the plaintiff has not pleaded facts sufficient to support a cause of action against Commonwealth based upon cl~ims that Liberty acted as Commonwealth's I I - Page 7 of I 0 I [* 9] i I agent in connection with the Escrow F~nd I arrangement. Although an agreement I between Commonwealth and Liberty did indeed exist, the agency agreement establishes that Liberty w~s not authLized to act as Commonwealth's agent. I i Furthermore, Liberty's actual authority extended only to the extent that the agency I agreement allowed. I Thus the motion to dismiss actions one and three against is I ! I gran~d. I I Apparent Authority "[T]he words or conduct of a putative agent are insufficient to create apparent authority" (M Entertainment. Inc. v. Leydilr, 71 AD3d 517, 520 [1st Dept 201 O], citing I I Ford v. University Hosp., 32 NY2d 464, 73 [1973]). The Court of Appeals, in Ford, f made clear that apparent authority only a~ises through misrepresentations made by the 1 · I I principal to a third party: "The mere creation of an agency for some purpose does not automatically invest the ageht with apparent authority to bind 1 the principal without limitatio n. An agent's power to bind his principal is coextensive with the principal's grant of authority. One who deals with an age~t does so at his peril, and must make the necessary effort to discover the actual scope of authority. Upon failure to properly determine the scope of authority, and in the face oflthe agent's misrepresentations, apparent authority is not automatically available to the injured third party to bind the principal. Rather, the existence of apparent authority depends upon a factual showing that 1 the third party relied upon the misrepresentations of the agent because of some mi$1eading conduct· on the part of the principal - not the agent]" I (Ford, 32 NY2d at 472-3 [internal quotation marks and citation omitted]; DeGliuomini v. Commonwealth, Index No. 105810/10 that Commonwealth made any [S.1 Ct. N.Y. Co.]). Here Plaintiff does not allege misrepr~sentations I I I - Page 8 of I 0 - I to it, only that Commonwealth's [* 10] 1 purported agent, Liberty, did. There are ho facts that Plaintiff or Commonwealth were I I ever in direct contact or that Commonwealth made any representations to Plaintiff about Liberty being its agent. Based on the foregoing, the plaintiff has failed to allege facts by !i ., 1 which it could recover under a theory ofIapparent authority, thus the second cause of action against Commonwealth is dismisseb. Negligent Supervision of an Agent It has been stated by the Court of Appeals that a principal is not liable for a loss I caused to another by reason of deceitf~I conduct of an agent unless the deceitful Ii conduct was authorized or apparently! authorized. Bowers v. Merchants Mutual Insurance Co., 248 A.D.2d 1005 (1998{ See Eng v. Sichenza, 21 Misc.3d.111(A) (2005) (title insurance company not liable for negligent supervision of title agent where I agent's acts were not within scope of its ~gency). Thus, the fourth cause of action, for I Commonwealth's alleged negligent supervision of Liberty with respect to the Escrow I 1 Fund, is dismissed because plaintiff has lfailed to establish that Liberty was acting as I Commonwealth's agent with respect to th~ disputed escrow account. Conclusion I In accordance with the foregoing, it is hereby: I I Ordered that Commonwealth Land Titles Insurance Company's motion to dismiss the complaint against it is ·I grante~ and the complaint is dismissed in its entirety I as against Commonwealth Land Titl~s Insurance Company, with costs and disbursements to said defendant as taxed. by the Clerk of the Court; and it is further Ordered that the clerk is directe~ to enter judgment accordingly in favor of I Commonwealth Land Titles Insurance Company; and it is further :j - Page 9 of I 0 ' [* 11] Ordered that the action is sevJred and continued against the remaining I defendant (Liberty Title Agency, LLC); and it is further :i Ordered that counsel for defendant Commonwealth Land Titles Insurance Company shall serve a copy of this ordeii with notice of entry within (20) days of entry on plaintiff and defendant Liberty Title Agency, LLC; and it is further .I i Ordered that any requested relief not otherwise expressly granted herein is deemed denied; and it is further Ordered that this constitutes the decision and order of the court. ;j Dated: New York, NY So Ordered: June 13, 2011 Hon. Judith I - Page Io of Io ! ische, J.S.C.

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