Fried v Tucker

[*1] Fried v Tucker 2008 NY Slip Op 52656(U) [22 Misc 3d 1122(A)] Decided on November 12, 2008 Supreme Court, Kings County Rivera, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 November 12, 2008
Supreme Court, Kings County

Aron Fried, Plaintiff,

against

Philip Tucker and Edith Tucker, et al., Defendants.



9043/08



Plantiff:

Kenneth Glassman

475 Park Ave South Suite 700

New York, NY 11016

212-213-2510

Defendant:

Mohammed Billah

85 Worth Street, 5th floor

New York, NY 10013

212-966-0535

Francois A. Rivera, J.

Upon the foregoing papers, plaintiff Aron Fried (Fried) moves: (1) pursuant to CPLR 3212, for an order granting summary judgment against defendants Philip and Edith Tucker (the Tuckers); (2) pursuant to CPLR 3211(b), for an order dismissing said defendants' affirmative defenses; and (3) setting this matter down for an inquest on the question of damages.

BACKGROUND AND CONTENTIONS

The Tuckers are fee owners of a small lot in Brooklyn, located at 3737 Cypress Avenue, Brooklyn, New York 11224, which bears tax map designation Block 6971, Lot 58. It was formerly improved by a three-family house, which was in a condition of deterioration. As represented by Edith Tucker, they removed all occupants from the dwelling and began looking for a building contractor to perform renovations. As a result of their search, they [*2]learned about NYC Development & Consulting, LLC (NYC Development), and met with its general manager, Sal Giarrizzo (Giarrizzo). In response to the Tucker's inquiries regarding financing the renovations, Giarrizzo, in turn, referred them to plaintiff, who was NYC Development's mortgage consultant.

Prior to negotiating a mortgage, the Tuckers were involved in a court proceeding commenced by the New York City Department of Buildings (NYCDOB) to have the dwelling declared an "unsafe building". The Tuckers were not represented by counsel. In an effort to deal with that proceeding, the Tuckers consulted with Heywood Blaufeux, an architect referred to them by NYC Development, who prepared plans for shoring up the house for which he purportedly obtained approval from the NYCDOB.[FN1] However, the building was subsequently demolished as unsafe, allegedly because it was not adequately shored up.

Because of their low credit rating, the Tuckers were experiencing difficulty in procuring construction financing. They allege that Giarrizzo and Fried represented to them that (1) if they took out a mortgage with a term of one-year and an interest rate of 14%, NYC Development would start construction on a new building and construct a "shell" that would provide the basic structure for a house, and (2) Giarrizzo and Fried would "repair" the Tucker's credit rating so that upon expiration of the 1-year mortgage, they would be able to obtain conventional financing.[FN2]Additionally, they assert that Fried repeatedly promised that no payments on interest for the "loan" would be required until the shell had been constructed.

Thereafter, on October 3, 2006, the Tuckers executed and delivered to Fried, as mortgagee, a certain note (the note) in the amount of $300,000.00, the terms of which further provided that said note was

". . . to be paid with Interest only payments on the amount outstanding thereon

to be computed from the date hereof, at the rate of 14% per centum per

annum, and to be paid on the 3rd day of November 2006, next ensuing and

monthly thereafter for a period of 12 monthly payments. Monthly payments

shall be interest only in the amount of $3,500.00. Total outstanding principal

balance and any outstanding interest shall be due on October 2, 2007. All

interest is deferred until October 2, 2007."

***[*3]

This note is secured by a mortgage made by the maker to the payee of

even date herewith, on property situate in the County of Kings and State

of New York.[FN3]

The Tuckers allege that plaintiff and Giarrizzo told them that it would not be necessary for them to retain an attorney, and claim that they relied on this representation to their detriment. They further aver that NYC Development was acting in conjunction with plaintiff, and although it never commenced construction on the new building, utilized their property, without permission, to advertise that they provide complete financing.

Finally, the Tuckers claim that although the mortgage provided that the funds therefrom would be put into escrow, they never saw any proceeds, never received a closing statement, have never received an accounting, and have never been advised as to the amount they paid in points and other fees. They charge that plaintiff and his "colleagues" planned a scheme to divest them of title to the property without paying reasonable compensation.

THE PARTIES' PLEADINGS

In his verified complaint, plaintiff alleges that defendants failed to satisfy the balance due on the note, and have failed to maintain the premises in good repair.

In their verified answer dated May 30, 2008, plaintiffs, in addition to denying the allegations set forth by plaintiff in the verified complaint, interposed twelve affirmative defenses (lack of standing; failure to state cause of action; lack of proper service; statute of limitations; failure to conform to requirements of Uniform Commercial Code, the Banking Law and the General Obligations Law; failure to comply with conditions precedent; waiver; post-acceptance default; estoppel; failure to join a necessary party, namely, NYC Development & Consulting LLC; want or failure of consideration; and refusal to permit defendant to obtain legal counsel and undue influence) and three counterclaims (usury; disgorge excessive interest; and unconscionability).[FN4]

FRIED'S MOTION

The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law tendering sufficient evidence to demonstrate the absence of any material issues of fact (Alvarez v Prospect Hosp., 68 NY2d 320, 324). Once this showing has been made, the burden shifts to the party opposing the motion to lay bare its proof and present evidentiary facts sufficient to raise a genuine triable issue of fact (see Zuckerman v City of New York, 49 NY2d 557[1980]; Friends of Animals v Associated Fur Mfrs., 46 NY2d 1065 [1979]). Mere conclusory assertions, devoid of evidentiary facts, are insufficient for this purpose, as is reliance upon surmise, conjecture, or speculation (see Smith v Johnson Prods., 95 AD2d 675 [1983]). [*4]

"It is settled that in moving for summary judgment in an action to foreclose a mortgage, a plaintiff establishes its case as a matter of law through the production of the mortgage, the unpaid note, and evidence of default . . . When a plaintiff does so, it is incumbent upon the defendant to assert any defenses which could properly raise a viable question of fact as to his default" (Village Bank v Wild Oaks Holding, 196 AD2d 812, 812 [1993]). Plaintiff has satisfied said requirements, thus establishing, prima facie, his entitlement to relief and shifting the burden to defendants, who expressly do not dispute Fried's allegation that the principal on the note was not repaid.

In opposition to the motion, defendants contend that their first, fifth, sixth, seventh, eighth, ninth, tenth, eleventh and twelfth affirmative defenses raise triable issues of fact , and that their counterclaims also act as affirmative defenses to the causes of action alleged in the complaint.[FN5]

In reply to defendants' allegations and legal position, Fried denies having made any promises regarding credit repair or terms for a mortgage, and points out that their inability to obtain permanent financing, for whatever reason, is not a defense to the present action.

In addition, Fried disputes the Tucker's contention that he led them to believe that they did not need an attorney. He both (1) denies ever having told them they did not need a lawyer, and (2) points to letters dated September 3, 2006, prepared by his attorney and signed by each defendant, which contained language stating that "I do not intend to employ the services of an attorney on my behalf, although you have advised me that retaining an attorney is strongly recommended", but which was stricken with a hand-written note reading "Omit" and another which reads "omitted because borrowers showed doc to their attorney." Fried alleges that these letters were prepared for the September 3, 2006 closing, but that after reading and signing the letters, Edith Tucker requested that everything be placed "in escrow" so that she could consult with an attorney. Fried agreed to a two-day extension, and, on September 5, 2006, the Tuckers returned stating that they had consulted with an attorney and wished to proceed. He alleges that it was Edith Tucker herself who struck the language contained in the letters and wrote the work "omit" on each.

Fried further alleges, in reply, that Mrs. Tucker stated that she was aware that the term of the loan was for one year, and that upon its expiration she would be required to obtain alternate financing. He further avers that their signatures on the appropriate documents demonstrates that the Tuckers approved of the disbursement of the $300,000. He denies that he was responsible for the requirement that monies be paid to satisfy various title charges, including unpaid taxes and other liens on the property,[FN6] or the payment of $164,395.59 to NYC Development. A balance of $105,000 was held in escrow by Fried's attorney until the Tucker's plans were approved, construction commenced, and the notice of pendency vacated. Upon this event, from the $105,000, an additional $35,000 was paid, purportedly at Ms. Tucker's request, to NYC Development, leaving a [*5]balance in escrow of $78,000.00. Fried states that he will not release this until this court issues an order permitting him to do so, whereupon he will give a credit to defendants.

Finally, plaintiff seeks an award of attorneys' fees.

DISCUSSION

Defendants' affirmative defenses

Defendants' first affirmative defense (lack of standing), predicated on the contention that the mortgage is an invalid instrument which fails to conform with § 6-I of New York's Banking Law, as well of their vaguely-worded fifth affirmative defense alleging lack of compliance with certain statutes, must be dismissed.

"The state Banking Law provides for uniform regulation of the residential mortgage lending process.' (Banking L. § 589). The Banking Law contains detailed licensing and registration provisions for mortgage lenders, penalties for certain prohibited mortgage-related practices, and a requirement that lending institutions provide mortgage loans only in conformity with the [applicable provisions of the Banking Law]' (Banking L. § 6-I)" (Mayor of City of New York v Council of City of New York, 4 Misc 3d 151, 150-160 [2004]). Defendants' argument that "whether [the mortgage] complies with [§ 6-I of the Banking Law] is in part dependent upon whether it is a "high cost" loan defined in that statute, is purely speculative and is insufficient to defeat plaintiff's prima facie showing of entitlement to relief (Green Point Sav. Bank v Spivey, 253 AD2d 410 [1998]). Similarly, their conclusory opposition to that branch of plaintiff's motion seeking dismissal of their fifth affirmative defense, alleging that "[t]here also appears to be a clear non-conformance with § 6-I falls short of that which is required (see Credit Based Asset Servicing and Securitization LLC v Castelli, 275 AD2d 542, 544-545 [2000]).

Defendants sixth cause of action must be dismissed, as they offer no evidentiary support for their allegation that plaintiff failed to comply with unspecified conditions precedent or that the loan was usurious (see Charter One Bank, FSB v Leone, 45 AD3d 958 [2007]; Chiarelli v Kotsifos, 5 AD3d 345 [2001]).

Defendants' seventh cause of action alleges that plaintiff waived any default by advising defendants that they would be given an adequate period within which to obtain a construction loan and pay the amounts due. Echoing an argument raised by defendants in opposition to said cause of action, defendants' eighth affirmative defense alleges that plaintiff's claim is barred because some payments were made after the default, and that the terms of the mortgage are internally contradictory. Defendants' opposition to plaintiff's motion for summary judgment dismissing both causes of action is unavailing. In lieu of supporting their opposition to plaintiff's motion with competent evidence to show that such representations were in fact made or specifically setting forth the dates, defendants provide a rambling account suggesting that the mortgage became a construction loan, and that plaintiff accepted a late payment. No issue of fact regarding a purported waiver has been raised (see D'Ull v 1872 Monroe Ave. Housing Development Fund Corp.,172 AD2d 181, 182 [1991]; see also Charter One Bank, FSB v Leone, 45 AD3d 958 [2002] ["Lastly, defendant has offered no competent evidence to establish that she made timely payments of principal and interest subsequent to the date of default or that plaintiff mismanaged her escrow account. . . . Self-serving and conclusory allegations do not raise issues of fact."]); [*6]Redmond v Hughes, 151 App Div 99 [1912]). Moreover, any evidence of partial payment may be presented at a hearing before a referee (Chiarelli, 5 AD3d at 345).

Defendants' ninth affirmative defense alleges that plaintiff is estopped from enforcing the subject mortgage, based upon breach of an alleged promise that a conventional loan would be available after plaintiff repaired Edith Tucker's credit and when the construction company who introduced plaintiff to the Tuckers would construct a shell.

"It is well settled that "a mortgagor is bound by the terms of his contract as made and cannot be relieved from his default, if one exists, in the absence of waiver by the mortgagee, or estoppel, or bad faith, fraud, oppressive or unconscionable conduct on the latter's part" (Dimacopoulos v Consort Development Corp.,166 AD2d 631 [1990], quoting Nassau Trust Co. v Montrose Concrete Prods. Corp., 56 NY2d 175, 183 [1982] [emphasis provided]). To apply the doctrine of promissory estoppel, the proponent must demonstrate: (1) a clear and unambiguous promise; (2) reasonable and foreseeable reliance by the party to whom the promise is made; and (3) an injury sustained in reliance on the promise (see NGR, LLC v General Elec. Co., 24 AD3d 425 [2005]). Estoppel requires detriment to the party claiming to have been misled (see Nassau Trust Co., 56 NY2d at 184).

Here, Tucker's affidavit setting forth the basis for this affirmative defense, is challenged only by Fried's bald and self-serving denial. Thus, by (1) alleging both Fried's unkept promise to repair her credit rating and facilitate obtaining another mortgage after the term of the mortgage for which she had applied expired, and (2) stating that they had considered one potential mortgagee suggested by NYC Development (Top Dot), but rejected them based, in part, on Fried's promise, defendants raises an issue of fact in opposition to plaintiff's motion for summary judgment dismissing the ninth affirmative defense (see Nassau Trust Co., 56 NY2d at 175 [triable issues of fact found to exist on questions whether mortgagee's vice-president orally assured guarantor that, notwithstanding contrary written conditions contained in his earlier extension letter, mortgagor had up to one year to conclude unforced sale of mortgaged property, whether mortgagor acted in justified reliance upon that assurance to its detriment, and whether in consequence of mortgagee's withdrawal of its assurance without notice, mortgagor lost opportunity to conclude negotiated sale at price more favorable than could be obtained in foreclosure, precluding summary judgment]; Fleet Bank v Pine Knoll Corp., 290 AD2d 792, 797 [2002] ["Here, Edwards has averred that, as a result of plaintiff's failure to fulfill its alleged oral agreement to finance phase II of the project, she incurred debt in excess of $100,000, depleted her son's college savings account, lost her residence in the Town of Queensbury, Warren County, to foreclosure, was required to sell her car to support the debt incurred and, in the end, was left with only a portion of her original business venture, i.e., the rental of the resort cottages. In our view, such averments are sufficient to raise a question of fact as to whether defendants have sustained an unconscionable injury"]).

RPAPL 1311 requires a plaintiff in a mortgage foreclosure action to join , as a party defendant, any person "whose interest is claimed to be the subject and subordinate to the plaintiff's lien." Under the statute, these necessary parties include "[e]very person having an estate or interest in possession. . . in the property as tenant in fee" as well as all junior lienholders (RPAPL 1311[1]). Defendants fail to controvert plaintiff's representation that a prior judgment and lien search revealed no entry for NYC Development. Accordingly, they [*7]fail to raise an issue of fact sufficient to defeat plaintiff' motion for summary judgment on their tenth affirmative defense.

Summary judgment must be granted as to defendants' eleventh and twelfth affirmative defenses. In opposition to the eleventh affirmative defense lack of consideration plaintiff acknowledges that a certain sum was held in escrow pending defendants' commencement of the construction project, for which defendants will receive a credit upon an award of damages. In opposition, defendants, raising a conclusory argument that plaintiff breached its own contract with defendants, fail to raise an issue of fact as to their failure to satisfy their obligations under pursuant to the terms of the mortgage and note. Their opposition to that branch of plaintiff' s motion to dismiss their twelfth affirmative defense that plaintiff unduly influenced defendants by not permitting them to obtain legal counsel is undermined by the unrefuted documentary evidence which demonstrates that they submitted the mortgage documents to an attorney for review and, following approval, voluntarily waived the right to be represented by counsel at the closing.

Since, as determined, an issue of fact has been raised, plaintiff's motion for an order granting summary judgment is denied.

Attorney's fees

Attorneys' fees and disbursements are incidents of litigation which the prevailing party may not collect from the loser unless such an award is authorized by agreement between the parties, by statute, or by court rule (Siamos v 36-02 35th Ave. Development, LLC, 54 AD3d 842 [2008]). Although recovery of attorneys fees is thus available to plaintiff pursuant to the terms of the mortgage (see RAD Ventures v Artukmac, 31 AD3d 412, 414 [2006]; Levine v Infidelity, Inc., 2 AD3d 691 [2003]), plaintiff's motion for same is premature, and denied. Said fees may be awarded, subject to the court's discretion, in the event of, and upon the submission of, an appropriate judgment (see HSBC Mortg. Corp. (USA) v Packu, 2008 NY Slip Op 30503(U) [2008]).

The foregoing constitutes the decision and order of the court.

E N T E R,

J. S. C. Footnotes

Footnote 1:According to Edith Tucker, the approval letter from the NYCDOB stated that the plans had been approved only on the certification of the architect.

Footnote 2:Edith Tucker alleges that no such repair was ever undertaken, and they were, and remain, unable to obtain conventional financing at a favorable rate of interest.

Footnote 3:Although the affirmation of Kenneth J. Glassman, Esq. alleges that this action is brought to foreclose two mortgages executed by defendants, plaintiff's verified complaint only refers to one, which is annexed to plaintiff's moving papers.

Footnote 4:Plaintiff's motion does not address defendants' counterclaims.

Footnote 5:Defendants expressly abandon any challenges to plaintiff's motion to dismiss their second, third and fourth affirmative defenses.

Footnote 6:Fried states that the mortgage tax was $6,120.00 and the unpaid real estate taxes were $7264.00.