Frawley v Dawson

[*1] Frawley v Dawson 2011 NY Slip Op 52470(U) Decided on November 30, 2011 Supreme Court, Nassau County Winslow, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 30, 2011
Supreme Court, Nassau County

Dorothy Frawley and Michael Frawley, Plaintiffs,

against

Peter J. Dawson, LISA DAWSON, BMG ADVISORY SERVICES, LTD., BRASH MANAGEMENT GROUP, INC., ETHAN THOMAS CO., INC., TAXX PLUS SERVICES, LTD., BRUCE BAKER, GRANITE SECURITIES, LLC, GREENPOINT MORTGAGE FUNDING, INC., DISCOUNT FUNDING ASSOCIATES, CULLEN and DYKMAN, LLP, GMAC MORTGAGE CORPORATION, as an assignee of HOMECOMINGS FINANCIAL NETWORK, INC., HOMECOMINGS FINANCIAL NETWORK, INC., OASIS MORTGAGE. INC., FIRST NATIONAL BANK OF LONG ISLAND, ALFRED ARENA, NATIONWIDE LIFE INSURANCE COMPANY, and ABC CORP. "1 through 10", Defendants.



6697/07

F. Dana Winslow, J.

The following papers having been read on the motion (numbered 1-5):

Notice of Motion..................................................................................1

Affirmation in Opposition..................................................................2

Reply Affirmation................................................................................3

Memorandum of Law..........................................................................4

Affirmation in Support of Plaintiffs' Motion....................................5

Motion pursuant to CPLR §3025[b] by the plaintiffs Dorothy and Michael Frawley for leave to amend their complaint by, inter alia, adding a new cause of action as against codefendant Greenpoint Savings Bank grounded upon a negligence theory of recovery.

By summons and verified complaint dated March, 2007, the plaintiffs Dorothy and Michael Frawley commenced the within action against, inter alia, Peter J. Dawson, their former investment advisor and/or financial planner who was arrested in December of [*2]2006 and later pleaded guilty to stealing over $7 million which his clients had entrusted to him.

The complaint also names as defendants, various lenders, brokers and others who were involved in the loans which were made to Frawleys — including codefendant Greenpoint Mortgage Funding, Inc ["Greenpoint"], which made a $367,000.00 no income verification, "commercial" loan to Michael Frawley.

Insofar as relevant, the complaint interposes two causes of action as against Greenpoint, i.e., the 12th and 13th causes of action, alleging respectively, negligence and unconscionability. Specifically, these claims are predicated, on respectively: (1) the theory that Greenpoint was negligent because its closing attorney allegedly transferred the loan proceeds directly to a Dawson-controlled entity without the Frawleys' consent and authorization (Cmplt., ¶¶ 84-89); and (2) the further claim that the Greenpoint loan was "oppressive, unconscionable and/or against [Greenpoint's] "own mortgage loan criteria" (Cmplt., ¶ 91).

Significantly, the plaintiffs' complaint contains another factually different, negligence-based cause of action (sixth) which has been interposed against various other defendants — including another Frawley lender, codefendant Homecomings Financial Network, Inc ["Homecomings"]. The sixth cause of action is based on the theory, inter alia, that the foregoing lender was "reckless, and negligent and careless in the manner in which * * * [it] provided services to the plaintiffs * * *"(Cmplt.,¶¶ 56-58 [6th cause of action], ¶ 80). The fourth cause of action alleges, inter alia, that Homecomings (and others) allegedly arranged for mortgage financing "for individuals who would not otherwise qualify for same" (Cmplt., 47[B]). Both the fourth and sixth causes of action, however, excluded Greenpoint as a defendant on the claims made.

By order dated May 20, 2011, this Court granted Greenpoint's motion to dismiss the complaint insofar as interposed against it ["Greenpoint"](see, Frawley v. Dawson, ___Misc.3d ___, 2011 WL 2586369 [Supreme Court, Nassau County 2011]), i.e., it dismissed the 12th and 13th causes of action. The Court did, however, sustain — at least pending further discovery — the negligence-based sixth cause of action as against Homecomings, as well as other similarly pleaded claims in the related, Hennessy action (Frawley v. Dawson, supra, 2011 WL 2586369, at 8-9 see also, Hennessy, v. Dawson, et., al.).

The plaintiffs now move for leave to amend their complaint, primarily by adding a new, negligence-based cause of action, which now expressly includes Greenpoint as a defendant (P. A. Cmplt., ¶¶ 65-66)(CPLR §3025[b]). The newly framed cause of action — which tracks language contained in the Court's May, 2011 order — alleges in relevant part, that Greenpoint owed an independent tort duty to the plaintiffs arising out of the loan transaction, i.e., a "duty to exercise due care in among other things, collecting, processing and adequately verifying loan information and underwriting criteria * * *" (P.A. Cmplt., ¶¶ 66-67 see also, Frawley v. Dawson, supra, 2011 WL 2586369, at 8-9). [*3]

In support of their application, plaintiffs' counsel has advised that the original complaint (framed by predecessor counsel),"inexplicably failed to include a general negligence claim as against Greenpoint" (Zamansky Aff., ¶ 18). Counsel further asserts, however, that the original pleading supplies adequate notice of the negligence-derived "transactions, occurrences, or series of transactions or occurrences, to be proved pursuant to the amended pleading" — particularly since similar claims were sustained in both this case and the related "Dawson" cases (Zamansky Aff., ¶¶ 17-18)(CPLR §203[f]).

In opposing the motion, the Greenpoint contends that any newly interposed negligence claim is time-barred. Counsel argues that since the subject loan was made and complete no later that September, 2006 — well over three years prior to the current application for leave to amend, and that the three year limitations period has long since expired (CPLR §214[4]; Tenenbaum v Gibbs, 27 AD3d 722, 723).

Moreover, according to defense counsel, the original complaint does not provide notice to Greenpoint — as opposed to the other named defendants — that Greenpoint might be subject to a negligence-based claim in the form contained in the proposed, amended pleading (see, CPLR 203[f]).

"As a general rule, leave to amend a pleading pursuant to CPLR §3025(b) should be freely granted in the absence of prejudice or surprise resulting from the delay in seeking leave, unless the proposed amendment is palpably insufficient or patently devoid of merit" (Sabatino v. 425 Oser Ave., LLC, 87 AD3d 1127, 1129; Kruger v EMFT, LLC, 87 AD3d 717, 718-719; Ferrandino & Son, Inc. v. Wheaton Builders, Inc., LLC, 82 AD3d 1035, 1037; Lucido v. Mancuso, 49 AD3d 220, 232). The decision whether to grant a motion to amend rests in the sound discretion of the trial Court (Ferrandino & Son, Inc. v. Wheaton Builders, Inc., LLC, supra, 82 AD3d 1035, 1037).

Here, Greenpoint has prima facie demonstrated that the acts and omissions underlying the newly proposed negligence theory occurred no later than September of 2006, when the disputed loan closed (CPLR §214[4]; Tenenbaum v Gibbs, supra, 27 AD3d 722, 723). Accordingly, since the loan closed over three years prior to the noticing of the plaintiffs' motion, Greenpoint has established in the first instance, that any proposed negligence claim would be time-barred (e.g., Tenenbaum v Gibbs, supra, 27 AD3d 722, 723).

Nevertheless, "[u]nder the relation back doctrine, an otherwise untimely claim in an amended pleading will be deemed interposed at the time of the original pleading unless the original pleading does not give notice of the transactions, occurrences, or series of transactions or occurrences, to be proved pursuant to the amended pleading'" (CPLR §203[f]; Lawyers' Fund For Client Protection of State of New York v. JP Morgan Chase Bank, N.A., 80 AD3d 1129, 1130; August Bohl Contr. Co., Inc. v. L.A. Swyer Co., Inc., 74 AD3d 1649, 1650-1651; Rodriguez v. Paramount Development Associates, LLC, 67 AD3d 767, 768; Tyz v. Integrity Real Estate & Dev., Inc., 43 AD3d 1038).

Once a defendant carries the initial burden of establishing prima facie that the time [*4]in which to sue has expired (Swift v. New York Med. Coll., 25 AD3d 686, 687; Gravel v. Cicola, 297 AD2d 620; Savarese v. Shatz, 273 AD2d 219, 220), the burden then shifts to the establish "that the case falls within an exception to the Statute of Limitations" (Savarese v. Shatz, 273 AD2d 219, 220) — here, "to establish the applicability of the [relation back] doctrine" (Nani v. Gould, 39 AD3d 508, 509; Monir v. Khandakar, 30 AD3d 487, 488).

With these principles in mind, and tempered by the applicable, discretionary standard of liberality, the Court agrees that the plaintiffs have sustained any applicable burden relative to the relation back doctrine and that they should be permitted to amend their complaint so as to add the proposed negligence cause of action as against Greenpoint.

Although the original complaint did not name Greenpoint as a party to the sixth, negligence cause of action, the thirteenth cause of action expressly alleges that the subject loan was made in violation of Greenpoint's "own mortgage loan criteria" (Cmplt., ¶¶ 91-92). This contention — while contained in the previously dismissed "unconscionability" cause of action — plainly notifies Greenpoint that a claim or claims were being made and/or based upon, the manner in which the loan was underwritten, i.e., that the loan was made in violation of its own loan making or mortgage "criteria" (Cmplt., ¶ 91), The phrase "mortgage criteria," moreover, is a broad one within the context of the subject proceeding, and can be construed as encompassing, the manner in which Greenpoint originated the loan and analyzed the plaintiffs' qualifications to receive it.

In any event, the plaintiffs' opposing submissions filed in connection with the recently decided motion to dismiss, clearly advanced the assertion and legal theory that Greenpoint was negligent and/or breached an independent tort duty in making the subject loan and/or in performing its pre-loan, underwriting analysis, i.e., that it made a grossly unsuitable loan when measured against the Frawley's ability to pay — irrespective of the "no document" nature of the loan (see, e.g., Zamansky Aff., in Opp [dated Oct. 23, 2007], ¶¶ 21-29 see, ¶¶ 32-35 cf., ¶ 8).

The Court notes in this respect that at page 10 of the plaintiffs' original, October 2007, memorandum in opposition, there is a bolded, capitalized argument heading entitled, "THE FRAWLEYS HAVE SUBSTANTIAL EVIDENCE THAT GREENPOINT IS LIABLE FOR NEGLIGENCE," under which counsel advanced essentially the same theories contained in the proposed amended pleading (see, Pltffs'Brief in Opp; Argument Heading "D", at 10; 10-12 see also, Pltffs' Brief at Brief at 8: ["Greenpoint failed to exercise its own underwriting diligence in approving" its loan]; Pltffs' Brief at 9: ["Greenpoint failed to undertake" proper verification "of the Frawleys' loan application"]; [Greenpoint approved an "ill-advised and unsuitable balloon payment' mortgage" that was inappropriate]; Greenpoint "reckless[ly]" processed the loan by improperly relying on its alleged broker instead of performing independent review of the plaintiffs' assets and qualifications]). [*5]

Significantly, most of these submissions — including those filed by Greenpoint — were exchanged in 2007 — well prior to the expiration of the applicable limitations period in 2009 (Tyz v. Integrity Real Estate & Dev., Inc., supra, 43 AD3d 1038). The record therefore support the inference then, that as early as 2007, Greenpoint possessed actual knowledge that the plaintiffs intended to assert the currently proposed, negligence-type tort theories as against them (see, Rodriguez v. Paramount Development Associates, LLC, supra, 67 AD3d 767, 768; Tyz v. Integrity Real Estate & Dev., Inc., supra, 43 AD3d 1038). Under these circumstances, the Court agrees that the notice component of the relation back doctrine has been satisfied, i.e., the proposed amended pleading therefore relates back to the originally complaint for the purposes of defeating any claim predicated upon the three-year statute of limitations (Rodriguez v. Paramount Development Associates, LLC, supra; Tyz v. Integrity Real Estate & Dev., Inc., supra, 43 AD3d 1038; CPLR §203[f]).

Moreover, Greenpoint — an original party to the action (Sabatino v. 425 Oser Ave., LLC, 87 AD3d 1127; Rodriguez v. Paramount Development Associates, LLC, supra, 67 AD3d 767) — has not established that it would be prejudiced by virtue of the amendment (Sabatino v. 425 Oser Ave., LLC, 87 AD3d 1127; Jablonski v Jakaitis, 85 AD3d 969, 970-971; Thomsen v. Suffolk County Police Dept., 50 AD3d 1015, 1018).

Lastly, the record adequately demonstrates that the proposed amendment is not palpably lacking in merit (Jablonski v Jakaitis, supra; Young v Estate of Young, 84 AD3d 1359, 1360 see, Frawley v. Dawson, supra, 2011 WL 2586369, at 8-9).

The Court has considered the Greenpoint's remaining contentions and concludes that they are insufficient to preclude the Court from exercising its broad discretion in favor of granting the plaintiffs' motion to amend.

Accordingly, it is,

ORDERED, that the motion pursuant to CPLR §3025[b] by the plaintiffs Dorothy and Michael Frawley for leave to amend their complaint by, inter alia, adding anew cause of action as against codefendant Greenpoint Savings Bank grounded upon a negligence theory of recovery, is granted.

This constitutes the Order of the Court.

Dated: November 30, 2011

_________________________________

J.S.C.