HSBC Bank USA N.A. v Strong Steel Door Corp.

[*1] HSBC Bank USA N.A. v Strong Steel Door Corp. 2012 NY Slip Op 51218(U) Decided on June 27, 2012 Supreme Court, Kings County Demarest, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 June 27, 2012
Supreme Court, Kings County

HSBC Bank USA National Association, Plaintiff,

against

Strong Steel Door Corp., FENG QING WEI A/K/A FENG QUING WEI A/K/A DAVID WEI, INDIVIDUALLY, Defendants.



Yatin Realty LLC, STRONG STEEL DOOR CORP. And FENG QING WEI A/K/A DAVID WEI Plaintiffs, - against -

against

HSBC Bank USA National Association, Defendants.



22798/09



Attorney for HSB" target="_blank">Guerra v Astoria Generating Company, L.P., 8 AD3d 617 [2d Dept 2004]).

Moreover, as the Bank has vigorously argued, the LOC contains a merger clause which would preclude the use of parole evidence to modify or vary the express provisions of the written agreement (Kim v Frank H Truck Corp., 81 AD3d 586 [2d Dept 2011]). However, by its very nature, proof of fraud in the inducement of the contract itself necessarily requires parole evidence extraneous to the terms of the written contract.

The elements of fraudulent inducement are a knowingly false representation, intended to deceive, which is justifiably relied upon, causing injury(Channel Master Corp v Aluminum Limited Sales, Inc., 4 NY2d 403, 407 [1958]; Gaidon v Guardian Like Ins. Co., 94 NY2d 330, 348 [1999]). "A party alleging fraud in the inducement bears the burden of proving the elements thereof by clear and convincing evidence'"(State of New York v Industrial Site Services, Inc., 52 AD3d 1153, 1157 [3d Dept, 2008], quoting Callahan v Miller, 194 AD2d 904, 905 [3d Dept 1993], quoting Chopp v Welbourne & Purdy Agency, 135 AD2d 958, 959 [3d Dept 1987]). Strong has failed to sustain this burden.

The credible evidence is that Lee and Siu did not affirmatively represent to Wei that the LOC would definitely be converted to a permanent loan and did not induce Wei, as principal of Strong and Yatin, to take the LOC as an alternative to the already-lapsed Yatin construction loan commitment on the promise that the LOC would be subsequently merged into a "restructured" Yatin construction loan. Even if such a possibility was suggested, there is no reasonable basis for Wei's reliance upon such conversations in light of the language of the written documents he signed and given his representation by counsel, who failed to contact the Bank regarding such "restructuring" until the commitment was on the verge of expiration, and failed to even respond to the Bank's urgent pleas to set a closing date because of the imminent expiration of the commitment. It is clear from the evidence that Wei and Strong got exactly what they bargained for in executing the LOC loan agreement and, only after they found their financial circumstances had changed, was there any attempt to obtain the benefit of the proposed Yatin loan commitment, a year and a half after in had expired. The Court finds no fraud in the inducement of the LOC and dismisses the seventh cause of action in the Strong complaint as unproved.

Attorney's Fees

Both the BRLOC and the LOC provide for recovery of attorney's fees to the Bank and the Strong Defendants do not dispute their liability, but do contest the amount demanded. At trial, [*10]the Bank presented the testimony of its attorney, Stan Goldberg, Esq., who testified that the fees charged were based on a "blended" hourly rate of $275. Based upon a package of computer printouts and invoices for services rendered from December 20, 2008, when counsel was retained on this case, through April 3 or 4, 2012, the Bank sought $178,370.09, inclusive of $17,691.19 in disbursements. The precise cumulative number of attorney hours billed was not calculated, although the daily logs do indicate the time of each attorney and the purpose. With its Post-Trial Memorandum of Law, the Bank submitted the affirmation of lead trial counsel, Linda Gates, Esq., seeking a supplemental award of fees for the period April 3 through April 24 in the sum of an additional $59,989.03, annexing a computerized printout of billing charges for this case, inclusive of disbursements for daily trial transcripts. The total demanded by the Bank as compensation for reasonable attorney's fees is $238,359.12.

At trial, the Strong Defendants' attorney, Ahmed Massoud, Esq., cross-examined Mr. Goldberg and effectively established that at least two of the motions for which the Bank sought reimbursement had not been filed. In addition, no deduction was made from the sum demanded for the cost of copying exhibits for trial, for the fifty percent contribution paid by Strong/Yatin. Mr. Massoud did not, of course, have the opportunity to cross-examine the Bank's attorneys with respect to their supplemental claim, although, upon inspection, the Court finds a number of inappropriate charges, specifically, for motions denominated motions in limine, which were actually summary judgment motions seeking the dismissal of aspects of the Strong Defendants' complaint that should have been timely made, pursuant to the preliminary conference directive, in May of 2011. An Order to Show Cause untimely presented on February 7, 2012, seeking similar summary judgment, was declined by this Court. Thus, some adjustment is to be made in the Bank's claim. At least 35 hours are charged for work that was unnecessary or inappropriate given the Court's prior rulings. In addition, $610.85 must be deducted from disbursements for contributions by the Strong Defendants to preparation of trial exhibits. Although Mr. Goldberg incorrectly stated that his client's payment of the fees was "not relevant to the total billing in the case"(Transcript at 170) (see generally, F. H. Krear & Co. v Nineteen Named Trustees, 810 F2d 1250, 1263 [2d Cir 1987], suggesting that contractual fee shifting provisions should not permit the inflation or padding of fees that would not be charged to the client absent the contractual provision; see also, Matter of Rahmey v Blum. 95 AD2d 294, 300 [2d Dept 1983]: "Hours that are not properly billed to one's client also are not properly billed to one's adversary"), there was no objection raised to this contention and the invoices indicate payments made through February 29, 2012, leaving a balance of $47,794.14. The supplemental request to April 24, 2012, does not indicate any payments made but represents, prospectively, that "HSBC will be billed" in accordance therewith.

The assessment of reasonable attorney's fees is a function of the court. Factors to be considered are the difficulty of issues, the skill required to litigate, the attorneys' experience, ability and reputation, the time and labor expended and the customary fees charged for the same services. (See F. H. Krear & Co. v Nineteen Named Trustees, 810 F2d at1263 ; Matter of Rahmey v Blum, 95 AD2d at 300-306). The assessment begins with the lodestar computation of the reasonable hourly rate times the number of hours determined to have been reasonably expended. Although generally the losing party will be required to pay whatever has been expended by the prevailing party in litigating the matter (Krear at 1263), hours spent on [*11]unsuccessful or unnecessary litigation should be excluded(see Rahmey at 304).

HSBC's counsel's "blended" hourly rate is well within the standard of fees regularly charged for the services performed and, although no representations have been made as to the skill or experience of the particular attorneys who worked on this case, the Court observed able performances by those who appeared in Court. The case itself is fairly routine in that it involved the collection of a business debt upon funds loaned. Thus, the Court finds the Bank's hourly rate to be completely reasonable and generally supported by the necessary logs and invoices, except as to services found to be duplicative or unnecessary, although some difficulty in measuring the reasonableness of time charges and the propriety of services claimed to have been provided results from the redaction of the description of the services rendered. However, the Bank's total recovery upon the BRLOC and the LOC, less the fees awarded to Yatin, is in excess of $660,000, without interest. The sum demanded in attorney's fees is, therefore, well within the one-third of recovery deemed to be "reasonable"(see Krear at 1264). Accordingly, upon HSBC's submission of proof that all of the fees billed by its counsel have, in fact, been paid, the Bank is awarded $228,123.27, without interest, as reasonable attorney's fees for the successful prosecution of its action.

CONCLUSION

Plaintiff HSBC is awarded judgment upon its fourth cause of action for $399,750.77. Defendants' affirmative defenses are dismissed. HSBC's remaining causes of action are dismissed as moot.

Plaintiff Yatin is awarded judgment in the sum of $12,300, with interest from April 7, 2008, upon its first cause of action.

HSBC is awarded attorney's fees in the sum of $228,123.27, without interest , upon submission of proof that this sum was paid to its counsel.

This constitutes the decision and order of the court.

ENTER,

J. S. C. Footnotes

Footnote 1:A string of internal e-mails (Exhibit H4) reflects the concerns of Wong, Lee and Siu that the loan be closed or re-approval would be necessary. Siu's e-mail to Wong on October 5, 2006, states: "The deal is not closed yet and we keep pushing the principal by calling him and his attorney every other day. Moreover, we also ask Natalie [the Bank's attorney] to push the borrower's attorney every week but in vain." Natalie Heaslip testified based upon the e-mail correspondence that she had spoken with Yatin's attorney on October 5, 2006, advising of the October 19 expiration date and proposing a closing on October 13, 16 or 17, to which she received no reply. Yatin's attorney was not called as a witness. Ms. Heaslip subsequently requested the restructuring of the loan at Yatin's counsel's request, but Wong testified this could not be done. However, Heaslip had prepared separate closing documents for the $500,000 Land Loan and the $1.8 million Construction Loan which, it was agreed by Wong, would have permitted a closing on the $1.8 million in construction financing independent of the Land Loan.

Footnote 2:Joint Exhibit 38A is a series of e-mails reflecting Yatin's counsel's advice to Bank counsel Natalie Heaslip that Yatin was unwilling to close because it did not need the $500,000 Land Loan to be disbursed at closing, but would like one construction loan in the amount of $2,300,000, with the ability to withdraw funds as needed, which request was communicated to Francis Wong, the Bank's underwriter, on October 13, 2006. Wong advised Heaslip, Siu and Lee that Yatin could "simply close on the Construction LOC and allow the commitment of the $500,000 Land Loan to lapse". No testimony was presented from Yatin's attorney to contradict this advice and, presumably, Wei was also so advised. On October 24, 2006, Wong advised Siu and Lee that the "deal officially expired on 10/19/06", and, in response to Lee's advice that he was "working with Strong Steel Door to collect all the necessary [sic] to apply for a 500k increase for their line of credit" and would close on the $1.8 million construction loan when that "was resolved", Wong responded that when those documents had been obtained "the entire deal needs to be re-approved". The undisputed evidence is that Yatin and Wei never re-applied for the construction funding and never agreed to set a closing date for the earlier commitment.

Footnote 3:The HiRise Engineering report prepared for the Bank indicates that, as of March 17, 2008, the project was approximately 67% complete and was estimated to cost $532,280 more than projected in July 2006. The report recommended that an advance of $2,536,880 would be appropriate to fund the finished project, which did "not match[ ] the borrower's request for payment" (Joint Exhibit 41).

Footnote 4:The testimony of Henry Lee is conflicted and, at times, contradictory. He frequently was unable to clearly recall his interaction with Wei, possibly because, after the events at issue herein, Mr. Lee left HSBC and began working at Signature Bank where Wei is now his customer.

Footnote 5:Henry Lee testified that the reason that the full $300,000 BRLOC was available in October, 2006, is that the line of credit had been "cleaned up" of prior advances, that is, the entire balance had been paid down to zero, as is expressly required to be done annually under the terms of the LOC (Transcript at 367; Exhibit 3 at paragraph 1.5).

Footnote 6:There is voluminous evidence in the record that the Bank continued to entertain Yatin's request for construction funding long after expiration of the original commitment, requesting updates and ordering reports by an independent engineering firm, for which Yatin paid. After an extended delay, during which no communication was received from Yatin or its attorney regarding a closing date, by letter dated April 7, 2008, Yatin demanded that the Bank close upon the $2.3 million commitment. In response, the Bank advised Yatin and Wei that, not having received any communication from them or their attorney regarding the closing since August, 2006 [this is an inaccurate representation as there were communications between counsel in October 2006], and since the commitment had expired, Yatin would have to submit updated financial information. As a condition to further discussions regarding a new loan commitment, Yatin was required to acknowledge the expiration of the April 26, 2006 commitment. Yatin refused. Yatin and Wei subsequently engaged their current attorney, Ahmed A. Massoud, Esq., in negotiations with the Bank. No new loan application was ever submitted by Yatin.

Footnote 7:Under the terms of the LOC, Borrower was required to pay down to zero any outstanding balance and maintain the zero balance for 30 days before continuing to draw upon the line of credit. Strong insists that this provision had not been previously enforced in the two years the LOC had been in effect and Moriggia acknowledged that it is not frequently enforced. However, the LOC expressly provided that "[n]o delay or omission on the part of the Bank in exercising any right hereunder shall operate as a waiver of such right".

Footnote 8:The Strong defendants can point to no documentary evidence that they were promised a "restructuring" of the Yatin commitment to incorporate the LOC prior to the expiration of the Yatin commitment or the execution of the LOC. Both Lee and Siu testified that Wei represented that the LOC was meant to provide "working capital" for Strong. Siu specifically stated that Wei had explained that he needed the additional funds for a government project he was bidding on, unrelated to the Yatin construction. When Wei contacted the Bank in April 2008, demanding that the expired commitment be closed, the Bank began a good-faith reassessment of Yatin and Strong's eligibility for a new loan. In that context, requests were made for up-dated financial information and inspections of the construction. Yatin was required to reimburse the Bank $800 for the cost of a survey of the construction performed at the Bank's request in 2008 by HiRise Engineering, but Yatin never submitted a new application or the necessary documentation to support a new loan, insisting that the 2006 commitment should be honored.