Opinion
2491/03.
Decided April 7, 2011.
Craig M. Notte, Esq., Borah, Goldstein, Altschuler, Hahins Goidel, New York, NY, Plaintiff — LFJ Realty Co.
Mark J. Moretti, Esq., Phillips Lytle, LLP, Rochester, MU, Defendant — NYCTL 1996-1 Trust.
Marjorie J. Peerce, Esq., Stillman, Friedman Shectman, P.C., New York, NY, Defendant — The Bank of New York Mellon.
Rodney M. Zerbe, Esq. Crowell Moring, LLP, New York, NY, Proposed Defendants — J.E.R. Revenue Services, LLC and J.E. Robert Company, Inc.
Upon the foregoing papers, plaintiff LFJ Realty Co. (LFJ Realty) moves, by order to show cause, for an order, pursuant to CPLR 1001(a) and 3025(b), granting it leave 1] to amend its Amended Complaint to add J.E. Robert Company Inc. (JE Robert) and JER Revenue Services LLC (JER Revenue) (collectively, JER Companies) as defendants, 2] to add a cause of action for negligent misrepresentation against the JER Companies, 3] to amend the Amended Complaint to allege vicarious liability claims against defendants Bank of New York (BNY) and NYCTL 1996-1 Trust (Trust) and 4] to increase the ad damnum clause from $50,000 to $1,500,000. By way of a separate motion (cross-motion), plaintiff seeks an order 5] pursuant to CPLR 3001 and 3025, declaring the foreclosure sale to be violative of its common-law right of redemption until the time of sale (and amending the complaint to add such a claim), 6] pursuant to CPLR 3001 and 3025, declaring null and void those portions of the payment plan agreement as reserved to the Trust the right to sell the premises, even if full payment was made prior to the sale, as in violation of its redemption rights (and amending the complaint to add such a claim), 7] pursuant to CPLR 3212, granting it partial summary judgment as against the BNY and the Trust based upon the Court of Appeals' decision in NYCTL 1999-1 Trust v 573 Jackson Ave. Realty Corp. ( 13 NY3d 573 ) and partial summary judgment with respect to liability on the first, second and fourth causes of action in its Second Amended Complaint, and 8] deeming service of the proposed Third Amended Complaint complete upon service of the Notice of Entry of this Court's decision and order granting it leave to amend.
BNY cross-moves for an order, pursuant to CPLR 3212, granting it summary judgment dismissing the complaint as against it. The Trust also moves for an order, pursuant to CPLR 3212, granting it summary judgment in its favor.
Plaintiff's motion, inter alia, for leave to amend the complaint to add the JER Companies as party defendants (motion sequence number 8) and BNY's motion for an order granting it summary judgment (motion sequence number 10), although marked submitted in December 2008, this marking was thereafter vacated during the parties protracted settlement negotiations. As of September 17, 2010, the parties determined that they could not agree to settle the action, and all the motions addressed here (including motion sequences number 8 and number 10) were orally argued and marked submitted on September 20, 2010.
For reasons discussed herein, the motions of LFJ Realty to amend its complaint are granted to the extent that LFJ Realty shall have leave to amend its complaint to plead that the defendants may be vicariously liable for the acts or omissions of JER Revenue, and have leave to increase the ad damnum clause to $1,500,000. LFJ Realty's motions are otherwise denied. The motion of the Trust and the cross-motion of BNY are granted to the extent that the second cause of action of the amended complaint and the claim for punitive damages are dismissed. Defendants' motion and cross-motion are otherwise denied.
FACTS
In this action, LFJ Realty alleges that defendants were negligent in failing to cancel the January 31, 2000 tax-lien foreclosure sale of its property located at 835 Remsen Avenue, Brooklyn, New York, (the subject premises), despite LFJ Realty's payment, prior to the time of the sale, of the full amount due.
The underlying action was captioned NYCTL 1996-1 Trust, and Bank of New York, as Collateral Agent and Custodian for the NYCTL 1996-1 Trust v LFJ Realty Corp., et al., Supreme Court, Kings County Index No. 44486/98.
The underlying facts are essentially undisputed. LFJ Realty owned the subject premises, and in the early 1990's it fell behind in paying New York City (City) property taxes and other charges against the premises. In 1996 the City sold the resulting tax liens to the Trust, whose trustee is BNY and whose servicer is proposed defendant JER Revenue. On or about August 14, 1996, LFJ Realty entered into a payment plan agreement with the Trust that required LFJ Realty to repay the tax-lien arrearage through monthly installments. The agreement indicated the grounds for default, and provided that LFJ Realty waived defenses to foreclosure. The payment plan agreement also provided that installment payments could be made by mail, wire, overnight mail or hand delivery. JER Revenue's separate instructions for overnight mail, wire and walk-in payments options provided that the walk-in payments should be made at BNY's Lockbox Department, located at 101 Barclay Street, New York, NY, and stated that the payments would be credited on the date of their receipt.
Proposed defendant JE Robert is the guarantor of JER Revenue's obligations under the servicing agreement entered into by the Trust, BNY, JER Revenue and JE Robert.
The agreement states, among other things, that the Trust is "represented" by its servicing company JER Revenue, and that JER Revenue "is acting as an independent contractor on behalf of the Trust under this Agreement."
Upon a determination that LFJ Realty had defaulted under the payment plan, NYCTL Trust and BNY, as collateral agent and custodian for the Trust, commenced a tax-lien foreclosure action against LFJ Realty. LFJ Realty failed to answer, and the court (Levine, J.), on August 23, 1999, granted an ex parte judgment of foreclosure and sale. Pursuant to this judgment of foreclosure, the referee noticed a public auction sale of the subject premises to take place on January 31, 2010.
Prior to the sale, JER Revenue issued a payoff quote to LFJ Realty that stated that the full amount due on the tax lien was $76,518.52. On the morning of Friday, January 28, 2000, Fred
Clemenza, the son of LFJ Realty partner Mary Clemenza, hand delivered a check in the amount of $76,518.52 to BNY's lockbox. BNY processed the check and uploaded it to its online computer system by 3:41 P.M. on January 28, 2000. JER Revenue, however, did not discover that the payment had been made until the morning of the next business day, Monday, January 31, 2000. At some time on the morning of January 31, 2000, April Garitta, JER Revenue's account manager, sent a fax to Shapiro and DiCaro, LLP, (Shapiro DiCaro), the attorneys representing the Trust and BNY in the foreclosure action, informing them that the auction sale should be cancelled because the lien had been paid in full. By the time the fax was read by an employee of Shapiro DiCaro, and an employee attempted to contact the referee to cancel the sale, the sale had already taken place.
Counsel for LFJ Realty represents that a copy of the payment delivery options, which included the walk-in payment option at BNY's lockbox, was attached to the payoff quote letter sent to plaintiff. While defendants do not directly address this issue, they concede that a walk-in payment at the lockbox was an appropriate means of making the payment.
At his deposition, BNY's witness testified that JER Revenue would have been able to access this report online as of 3:41 P.M. on January 28, 2000. However, in an affidavit sworn to on April 13, 2000, April Garitta, JER Revenue's account manager, asserted that JER Revenue did not receive the report evidencing the receipt of funds until the next business day, Monday January 31, 2000.
Thereafter, the Trust and BNY moved to vacate the sale. In support of this motion, they submitted an affidavit from April Garitta, JER Revenue's account manager, who, after essentially conceding the above noted facts, stated that the auction sale should be deemed void because LFJ Realty had paid the tax lien in full before the sale. Garitta added that "the fact that [JER Revenue's] bookkeeping procedures prevented us from canceling the sale in a timely manner is not the fault of the taxpayer. The taxpayer did what they were required to do by redeeming in full prior to the sale. They should not suffer any consequences for a bookkeeping procedure over which they had no control or knowledge." The court (Levine, J.), denied the motion to vacate the sale in a July 7, 2000 order, and thereafter adhered to its decision upon reargument.
Shari Barak, of counsel to Shapiro DiCaro, the attorneys for NYCTL-Trust and BNY in the foreclosure action, repeated these assertions in her April 26, 2000 affirmation submitted in support of the motion to vacate the sale.
Upon LFJ Realty's subsequent motion to vacate the sale, however, the court (Levine, J.), in an April 22, 2002 order, vacated the judgment of foreclosure, declared the sale null and void and directed the referee to return the purchase price. On appeal, the Appellate Division reversed this April 22, 2002 order, denied LJF Realty's motion, and reinstated the judgment of foreclosure and sale, finding that LFJ Realty was precluded from invalidating the sale and that LFJ Realty's right of redemption had expired because it had "failed to make a payment into court and to make a motion to stay the sale of the property as required by RPAPL 1341(2)" ( NYCTL 1996-1 Trust v LFJ Realty Corp., 307 AD2d 957, 958-959, abrogated by NYCTL 1999-1 Trust v 573 Jackson Avenue Realty Corp. , 13 NY3d 573 ). While this appeal was pending, LFJ Realty commenced the instant action, contending that the Trust and BNY were negligent in failing to cancel the sale in light of the January 28, 2000 payment and claiming damages not less than $50,000.
In July 2004, defendants moved for summary judgment, maintaining that they acted reasonably in attempting to cancel the sale and that it was LFJ Realty's own negligence in failing to inform them of the payment that led to the sale. Defendants also claimed that the action was barred by res judicata or collateral estoppel in light of the Appellate Division's decision in the foreclosure action ( NYCTL 1996-1 Trust, 307 AD2d at 958-959). The court (Levine, J.), denied this motion in an order dated October 29, 2004, and the Appellate Division affirmed the denial, stating that the doctrines of collateral estoppel and res judicata did not apply because the issue of the defendants' negligence was not before the court in the foreclosure action ( LFJ Realty Co. v Bank of New York , 29 AD3d 747 ).
While the above noted appeal was pending, LFJ Realty made its own motion for summary judgment with respect to liability, contending that defendants had admitted their negligence in the affirmation of Shari Barak and affidavit of April Garitta submitted in support of the Trust and BNY's motion to vacate the sale in the foreclosure action. The court (Levine, J.), in its June 28, 2005 order, denied LFJ Realty's motion, finding that issues of fact existed because LFJ Realty had failed to follow the redemption procedures of RPAPL 1341(2).
Following these decisions on the prior summary judgment motions, the parties completed discovery, which included the depositions of John Feola, manager of BNY's lockbox department, Fred Clemenza, and April Garitta. Settlement negotiations having failed, the parties' respective motions are now before the court.
SUMMARY JUDGMENT MOTIONS
Initially, portions of the parties' motions and cross-motion for summary judgment must be denied (with a limited exception discussed below) because of orders denying prior summary judgment motions. "Parties will not be permitted to make successive fragmentary attacks upon a cause of action but must assert all available grounds when moving for summary judgment . . . The denial of the original motion for summary judgment establishe[s] the law of the case and require[s] denial of the subsequent motion" ( Levitz v Robbins Music Corp., 17 AD2d 801; see also Ferguson v Shu Ham Lam , 74 AD3d 870 , 872). While the rule against successive motions is not absolute, and will be overcome by showing of newly discovered evidence or other sufficient cause ( see Ferguson, 74 AD3d at 872; Lapadula v Sang Shing Kwok, 304 AD2d 798, 798), the parties here have failed to present any grounds for reconsideration. Although considerable discovery has taken place since the prior motions were determined, no new dispositive fact, discovered in that process, has been identified. Indeed, even if the Trust and BNY could be deemed to have presented new information on their current motions, all of the relevant witnesses and evidence relied upon by them were available to them and in their control, and thus should have been presented at the time of their prior motions.
Another exception to this general rule barring successive summary judgment motions allows a court, in the interest of justice, to consider pure questions of law ( see Carreras v Weinreb , 33 AD3d 953 , 954; Justus Recycling Corp. v A.F.C. Enterprises, Inc., 290 AD2d 279, 280). LFJ Realty's second cause of action which alleges that plaintiff's conduct in failing to cancel the foreclosure sale was reckless, wanton and willful and requests for punitive damages raises questions of law. Because the pleadings, as augmented by the record, demonstrate, as a matter of law, that the defendants' conduct in failing to cancel the sale was, at most, negligent, the second cause of action and the request for punitive damages are not supported ( see Ross v Louise Wise Services, Inc. , 8 NY3d 478 , 789; Reads Co., LLC v Katz , 72 AD3d 1054 , 1056-1057) and defendants are entitled to summary judgment dismissal of these claims. With respect to all other issues raised, even when considered on their merits, as discussed below, summary judgment must be denied.
DEFENDANTS' MOTION AND CROSS-MOTION
BNY's initial argument in support of its cross-motion for summary judgment is that it did not owe a duty to plaintiff because it had no contractual relationship with plaintiff. The Trust makes a somewhat similar argument in support of its motion, asserting that LFJ Realty's relation with the Trust was governed solely by the payment plan agreement and that the Trust, therefore, owed plaintiff no independent tort duty. Next, the Trust and BNY maintain that in the payment plan agreement LFJ Realty waived any right to redeem the property. Finally, both defendants assert that any failure to redeem was the fault of the loan servicer, JER Revenue, an independent contractor, and that they may not be held vicariously liable for the failures of JER Revenue.
Addressing BNY's argument relating to duty first, BNY ignores the role it is deemed to have assumed as trustee of the Trust. Namely, BNY is responsible for the actions of the trust, in its individual, or at least representative, capacity ( see Kirchner v Muller, 280 NY 23, 28 [1939] [negligence action relating to property owned by the trust proceeds against trustee individually]; Sisler v Security Pacific Business Credit, Inc., 201 AD2d 216, 220 [where clear from context that contract made by trustee on behalf of trust, action proceeds against trustee in a representative capacity]), and, thus, is the real party in interest with respect to the Trust ( see Henning v Rando Mach. Corp., 207 AD2d 106, 110; CPLR 1004; see also LaSalle Bank National Assoc. v Nomura Asset Capital Corp., 180 FSupp2d 465, 470-471 [SDNY 2001]). Since BNY stands in the shoes of the Trust, individually or representatively, it is liable for the conduct of the Trust and is a party to any contract made on behalf of the trust ( see Sisler, 201 AD2d at 220).
Any defect with respect to the description of BNY's capacity in the caption (which indicates BNY is being sued individually and as collateral agent for the trust) in not naming BNY in its representative capacity as trustee (if indeed it is an error) is not a grounds for dismissal as such an error continued . . . can be corrected by amendment at any time ( see Kirchner, 280 NY at 30-31; Nappi v Nappi, 181 AD2d 1067, 1068 [1992]; Manfrida v City of New Rochelle, 63 AD2d 710, 711 [1978]; Martin v Talcott, 1 AD2d 679 [1955]; 3 Carmody-Wait 2d § 19:19).
Both the Trust, and BNY in its role as trustee, further owed a duty to allow LFJ Realty to exercise its right to redeem the property up to the time of the foreclosure sale upon payment of the full amount due ( see NYCTL 1999-1 Trust v 573 Jackson Ave. Realty Corp. , 13 NY3d 573 , 579; Sloane v Gape, 216 AD2d 285, 285-286). Although the common-law right of redemption first arose in the context of mortgage foreclosure actions, case-law, in the face of the applicable New York City Administrative Code provisions governing tax-lien foreclosure in the City of New York, has held that the right of redemption applies to tax-lien foreclosure actions ( see Weiss v Stone, 129 NYS2d 525, 526-527 [Sup Ct, Kings County 1954]; Administrative Code of the City of New York § 11-332 [person with legal interest in property affected by lien may satisfy lien at anytime before sale], § 11-335 [foreclosure of tax lien governed by rules of law applicable to mortgage foreclosure actions]; see also NYCTL 1999-1 Trust, 13 NY2d at 579; NYCTL 1996-1 Trust v Moore , 51 AD3d 885, 886).
The rationale behind the right of redemption is that a tax lien or mortgage merely serves as security to insure payment of a debt, and that by commencing a foreclosure action, the holder of a tax-lien or mortgage seeks a sale of the property only to satisfy that debt. As redemption satisfies the debt, there is no reason to hold a foreclosure sale once redemption occurs ( see generally Bergman, New York Mortgage Foreclosures § 4.07). Accordingly, the right to redeem is inseparably connected with the lien and may not be waived or abandoned ( see Hammerstein v Henry Mt. Corp. , 11 AD3d 836 , 838; Basile v Erhal Holding Corp., 148 AD2d 484, 485-486; see also Mooney v Byrne, 163 NY 86, 92 [1900]), and once the debt has been satisfied, the holder of the lien can no longer state a cause of action for foreclosure ( see Brown v Brown, 192 AD2d 689, 689-690; Long Island City Sav. Loan Ass'n. v Gottlieb, 90 AD2d 766, modified on other grounds 58 NY2d 931; see also Cassara v Wynn , 55 AD3d 1356, 1356).
The Trust, however, argues that once the parties entered into the payment plan agreement, LFJ Realty's relationship with the Trust was governed exclusively by the contractual rights and duties of the payment plan agreement. The right to redeem is a common-law right developed in equity, but is also deemed an incident of the mortgage contract between a mortgagee and mortgagor ( see Hammerstein, 11 AD3d at 838). When, as here, the parties' relationship initially is formed by contract, but there is a claim that the contract was negligently performed, the claim(s) "fall in the [difficult] borderland between tort and contract" ( see Sommer v Federal Signal Corp., 79 NY2d 540, 550-551). The policy laden determination as to whether LFJ Realty has a cause of action in tort as well as contract need not be made at this juncture because (as discussed below) even if the plaintiff's claim is solely in contract, as the Trust asserts, the defendants are not entitled to summary judgment.
By parity of reasoning, the right of redemption would be deemed an incident of the payment plan agreement.
Further, New York law provides some form of a remedy for a plaintiff whose right of redemption has been violated by a lien holder/mortgagee. New York courts have recognized the existence of an equitable cause of action allowing a mortgagor to recover the value of the land less the amount due on a promissary note where a mortgagee has wrongfully cut off a mortgagor's right to redeem land ( see Mooney, 163 NY at 98; Sloane, 216 AD2d at 285-286; Doty v Norton, 133 App Div 106, 108; see also Reich v Cochran, 213 NY 416, 424 [1915]; Meehan v Forrester, 52 NY 277, 280-281 [1873]). In other jurisdictions, courts have held that allowing a foreclosure sale to proceed despite a tender of payment or redemption, or where there has been a significant defect in the foreclosure process, the mortgagor has a remedy against the mortgagee in the form of an action for "wrongful foreclosure" ( see Graupner v Select Portfolio Servicing, 2009 WL 428578 at 5 [Cal App 2d Dist 2009]; Munger v Moore, 11 Cal App 3d 1, 7 [Cal App 3d Dist 1970]; Cassidy v Owen, 533 A2d 253 [DC 1986]; Garrett v Crawford, 57 SE 792, 794 [Ga. 1907]; Rogers v Barnes, 47 NE 602, 603-604 [Mass. 1897]; National Mortgage Co. v Williams, 357 So2d 934, 936-937 [Miss 1978]; see also National Life Ins. Co. v Silverman, 1971 WL 224349, at 1 [DC Cir 1971] [upon reconsideration en banc]; Dugan v Manchester Federal Sav. Loan Ass'n, 23 A2d 873, 876 [NH 1942]; cf. Liu v Bank of America, 2010 WL 1702537 [EDNY 2010] [no wrongful foreclosure where no attempt to redeem before foreclosure sale]). Other jurisdictions have held mortgages subject to a tort duty of reasonable care in exercising the right to foreclose ( see Johnson v Citimortgage, Inc., 351 FSupp2d 1368, 1379 [ND Ga 2004]; Catalan v RBC Mortgage Co., 2008 WL 2741159, at 4 [ND Ill 2008]; Harper v Interstate Brewery Co., 120 P2d 757, 762-764 [Or. 1942]).
In Mooney and Doty, each plaintiff had given the defendants a fee simple deed to be held as security with respect to a promissary note and defendants thereafter sold the properties without instituting foreclosure proceedings ( Mooney, 163 NY at 91; Doty, 133 App Div at 108). As a conveyance to be held as a security is deemed a mortgage as a matter of law, the courts held that, although defendants' sales to innocent third-parties made actual redemption of the land impossible, the sales did not cut off plaintiffs' right of redemption as against the defendants, who were deemed to hold the value of the land in their hands ( Mooney, 163 NY at 91; Doty, 133 App Div at 108).
Of note, the court in Graupner found that a tort duty rather contractual right was at stake because the duty arose out of California's statutory right of redemption ( see Graupner, 2009 WL 428578, at 5; see also Bank of America N.A. v La Jolla Group II, 129 Cal App 4th 706, 712 [Cal App 4th Dist 2005]).
The Trust and BNY assert that LFJ Realty's action is barred by the payment plan agreement in that by the agreement LFJ Realty gave up the right of redemption (payment plan agreement § 6). To the extent that a party may give up the right of redemption in a separate agreement that is made after the creation of a lien ( see Odell v Montross, 68 NY 499, 504 [1877]; Verity v Metropolis Land Co., 248 App Div 748, affd 274 NY 624; Goodell v Silver Creek Nat. Bank, 48 NYS2d 572, 577-578 [Sup Ct, Chautauqua County 1944], affd 268 App Div 1020; cf. Hammerstein, 11 AD3d at 838), such a transaction will be carefully scrutinized — as to intent, fraud, unconscionability and adequacy of consideration — as with any agreement to waive a known right ( see Odell, 68 NY at 504; see also Gilbert Frank Corp. v Federal Ins. Co., 70 NY2d 966, 968 [waiver will not lightly be presumed]; Ring v Printmaking Workshop, Inc. , 70 AD3d 480 , 480-481). Such an agreement must manifest a clear and unambiguous intention to transfer an interest in the land with the formalities of a contract to sell real property for adequate consideration ( see Odell, 68 NY at 506).
However, here, there is no language in the payment plan agreement which expressly addresses the right to redeem. The waiver of defense provision does not waive or bar the right of redemption because it does not clearly state an intention to transfer an interest in land as is required of a contract to sell real property ( see Odell, 68 NY at 506-507; Simmonds v Marshall, 292 AD2d 592, 592-593; see also General Obligations Law § 5-703). Moreover, while the right to redeem may be deemed a defense, it is also an equitable right that, as noted above, allows a defaulting taxpayer to satisfy the obligation for which the tax lien serves as security, thereby avoiding a foreclosure sale ( see generally Bergman, New York Mortgage Foreclosures § 4.07). Thus, as the right of redemption is more than a defense, the provision's waiver of defense language fails to convey a clear intention to relinquish the right to redeem ( see Odell, 68 NY at 506-507; see also Gilbert Frank Corp., 70 NY2d at 968; Ring, 70 AD3d at 480-481).
This provision states: "WAIVER OF DEFENSES. The taxpayer hereby waives any and all defenses, counterclaims and setoffs, whether known or unknown, including but not limited to contesting the amount owed, to any current or future foreclosure action on the Tax Lien. [LFJ Realty] shall not defend or oppose any current or future foreclosure action on the Tax Lien" (payment plan agreement § 6).
This finding that nothing in the language of the payment plan agreement waives LFJ Realty's right to redeem renders moot LFJ Realty's request for a judgment declaring null and void portions of the payment plan agreement reserving the Trust's right to sell the premises at a foreclosure sale despite full payment prior to the sale.
Defendants also submit that LFJ Realty lost its right to redeem because the payment plan agreement pertains to delinquencies covering multiple tax years (payment plan agreement § 4[b]) and because LFJ Realty was concededly in default on tax obligations for other years. Section 4(b) of the agreement, however, merely provides that delinquencies for other tax years constitute a default under the payment plan and that such a default provides grounds for accelerating and requiring immediate payment of the entirety of the taxes due under the lien. Defendants do not point to any language in the agreement which suggests that delinquencies for an additional year or years could be added to that charged on the tax-lien certificate owned by the Trust. Moreover, nothing in the judgement of foreclosure, which states that LFJ Realty owes $62,378.60 as of April 15, 1999 — plus interest, attorney's fees and costs — suggests that the ultimate payoff figure given to LFJ Realty, and satisfied by it, was insufficient to redeem the property.
Even if LFJ Realty did not waive its right to redeem, defendants argue, it relinquished any right to assert a claim against the Trust under the provision of the payment plan agreement waiving counterclaims, setoffs and defenses (payment plan agreement § 6). However, this bar on counterclaims, setoffs and defenses does not operate to bar this separate action, as the waiver of counterclaims, setoffs and defenses is intended to expedite the foreclosure proceeding, rather than to bar LFJ Realty from obtaining a remedy in a separate action ( see SCP (Bermuda), Inc. v Bermudatel, LTD., 242 AD2d 429, 430; Titleserv, Inc. v Zenobio, 210 AD2d 310, 311; Amazon Mgt. Corp. v Paff, 166 Misc 438 [App Term, 2d Dept 1938]). Moreover, the payment plan agreement does not contain unmistakable language demonstrating an intent by the defendants to limit liability for their own conduct ( see Florence v Merchants Central Alarm Co., Inc. 51 NY2d 793, 795; Swift v Ki Young Choe, 242 AD2d 188, 193-194; Cruz v Commonwealth Land Title Ins. Co., 157 AD2d 333, 337).
In any event, defendants assert, they did not violate any duty of care owed to plaintiff (BNY because it fulfilled its contractual obligations with respect to crediting LFJ Realty's payment to the lockbox and the Trust because it performed no acts itself) and they may not be held vicariously liable for the conduct of JER Revenue. Defendants argue that LFJ Realty should be precluded from alleging unpleaded theories of liability based on vicarious liability and principles of agency, due to its delay in raising these theories. However, while LFJ Realty waited several years after commencement of the action to raise these claims, no note of issue has been filed and trial of the action is not imminent. More importantly, defendants have failed to allege, or prove, any specific prejudice arising from LFJ Realty's delay. Indeed, it is hard to imagine that defendants could suffer any real prejudice, since LFJ Realty simply alleges new theories of liability based on facts that have been known to the parties since the commencement of the action ( see Barraza v Sambade, 212 AD2d 655, 656-657). In the absence of prejudice, LFJ Realty's delay is not a sufficient reason to deny the amendment or preclude its consideration in opposition to defendants' motion and cross-motion for summary judgment ( see Jacobson v McNeil Consumer Specialty Pharmaceuticals , 68 AD3d 652 , 655; St. Paul Fire Marine Ins. Co. v Town of Hempstead, 291 AD2d 488, 489; Barraza, 212 AD2d at 656-657; Smith v Industrial Leasing Corp., 124 AD2d 413, 414-415; CPLR 3025[b]).
BNY's only allegation of prejudice is contained in footnote 8 of its November 26, 2008 memorandum of law in further support of its cross-motion for summary judgment, in which BNY stated: "[p]laintiff's failure to provide notice to BNY of its vicarious liability theory of liability has severely prejudiced BNY in myriad ways, most importantly that a number of depositions have taken place, document discovery has occurred, and interrogatories have been served and answered without this theory as part of the case." It is hard to imagine, however, that the amendment would necessitate any additional discovery since the parties have obtained a non-party deposition of JER Revenue and relevant documents from it.
Defendants next argue that they may not be held vicariously liable for JER Revenue's acts because JER is an independent contractor and not an agent under the terms of the August 1, 1999 servicing agreement. The agreement amongst the Trust, BNY and JER Revenue grants broad powers to JER Revenue to service and administer the tax liens owned by the Trust (servicing agreement § 2.01[a]), includes a general direction to recover the largest amount possible with respect to each tax lien, and directs the trustee to execute powers of attorney and other documents necessary for JER Revenue to carry out its functions (servicing agreement § 2.01[b]). Included is JER Revenue's right and/or duty to collect payments, with the provision that they be processed through the Trust's lockbox (servicing agreement §§ 7.01, 7.02), and to commence foreclosure actions and bid upon property sold at foreclosure auctions (servicing agreement § 9.01[a], [b]). The agreement gives specific instructions with respect to JER Revenue's record keeping obligations (servicing agreement § 2.01[c]), how JER Revenue is to collect payments relating to the tax liens (servicing agreement §§ 7.01, 7.02), JER Revenue's obligations with respect to payment plans (servicing agreement § 7.03), JER Revenue's staffing (servicing agreement § 2.02[d]), and integration of computer systems among JER Revenue, BNY and the Trust (servicing agreement § 2.02[g]). Notably, the servicing agreement also provides, in relevant part, that "All of the Servicer's Tax Lien Files and all funds collected or held by the Servicer for the benefit of the Trustee (BNY) in respect to any Tax Liens, whether from collection of payments from Property Owners or from Liquidation Proceeds or Insurance Proceeds, shall be held by the Servicer for and on behalf of the of the Trustee, and shall be and remain the sole and exclusive property of the Trustee" (servicing agreement § 15.03). In arguing that it may not be held liable for JER Revenue's acts, defendants point to the servicing agreement provision which states that JER Revenue provides its services as an "independent contractor" and not as an agent of the Trust or BNY (servicing agreement § 15.02).
Section 15.02 of the servicing agreement provides, " Independent Contractor. The Servicer undertakes to service the Tax Liens and to otherwise perform and carry out the duties, responsibilities and obligations to be performed and carried out by it under this Servicing Agreement as an independent contractor, and the Servicer shall not be deemed, nor shall the Servicer represent or hold itself out as, an agent or representative of the Issuer or the Trustee."
"Under the doctrine of respondeat superior a principal is liable for the negligent acts committed by its agent within the scope of the agency" ( Fils-Aime v Ryder TRS, Inc. , 40 AD3d 917 , 917-918; see also Maurillo v Park Slope U-Haul, 194 AD2d 142, 146). Generally, "a principal-agent relationship may be established by evidence of the consent of one person to allow another to act on his or her behalf and subject to his or her control and consent by the other to so act" ( see Fils-Aime v Ryder TRS, Inc., 40 AD3d at 917; see also 5015 Art Financing Partners, LLC, v Christie's Inc. , 58 AD3d 469 , 471). Importantly, the servicing agreement's designation of JER Revenue as an independent contractor does not preclude a finding that it acted as defendants' agent, as the terms "independent contractor" and "agent" are not mutually exclusive ( see Anchor Savings Bank v Zenith Mortgage Co., 634 F2d 704, 706 [C.A.NY 1980]; see also Time Warner City Cable v Adelphi Univ. , 27 AD3d 551, 553; Kenny v Fuller Co., 87 AD2d 183, 191, lv denied 58 NY2d 603; Ackert v Ausman, 29 Misc 2d 962, 967, affd 20 AD2d 850; Columbia Broadcasting System, Inc. v Stokely-Van Camp, Inc., 522 F2d 369, 375-376 [2d Cir. 1975]; Southeast Ariz. Med. Ctr. v Arizona Health Care Cost Containment Sys. Admin., 188 Ariz 276, 282, 935 P2d 854, 860).
Notwithstanding language of the servicing agreement expressly denying that JER Revenue is BNY's agent or representative, it is evident that the intent of the agreement is that JER Revenue act on behalf of BNY in collecting payments and prosecuting foreclosure actions with respect to the tax liens. Indeed, it is generally held that authority to accept payment on behalf of another creates an agency relationship ( see General Motors Acceptance Corp. v Finnegan, 156 Misc 2d 253, 254-255 [Sup Ct, Orange County 1992] see also Hedman v Security Title Guaranty Co., 245 AD 224, 226-227; Nattymac Capital LLC v Pesek, 784 NW2d 156, 161 [SD 2010]). The servicing agreement also provides that BNY execute appropriate powers of attorney — which documents, by definition, create an agency ( see Rice v Novello , 25 AD3d 992 , 993; Zaubler v Picone, 100 AD2d 620, 621) — for JER Revenue to carry out its functions. BNY would have had to execute such a power of attorney in order for JER Revenue to prosecute the underlying foreclosure action on behalf of the Trust ( see HSBC Bank, USA, N.A. v Betts , 67 AD3d 735 ; Zaubler, 100 AD2d at 621; General Obligations Law § 5-1502H). Moreover, in the payment plan agreement JER Revenue identifies itself as the "representative" of the Trust, a term which also is synonymous with agent ( see Kenny, 87 AD2d at 191).
Accordingly, there are at least factual issues as to whether JER Revenue acted as agent for the Trust with regard to the tax liens. This conclusion is supported by case law addressing mortgage loan servicers (entities that perform the same function as JER Revenue with respect to mortgages), wherein courts have either found such entities to be agents of the banks as a matter of law or held that factual issues were raised regarding the existence of an agency relationship ( see Anchor Savings Bank v Zenith Mortg. Co., 634 F2d 704, 706 [2d Cir 1980]; Dupuis v Federal Home Loan Mortg. Corp., 879 F Supp 139, 143-145 [D Maine 1995]; In re Dendy, 396 BR 171, 177 [Bankr DSC 2008]; Bank of Oklahoma, N.A. v Briscoe, 911 P.2d 311, 317-318 [Okl Ct App 1995]; Nattymac Capital LLC, 784 NW2d at 161). Upon establishing agency, defendants may be held liable for the acts of JER Revenue in contract ( see News American Mktg., Inc. v Lepage Bakeries, Inc. , 16 AD3d 146 , 147-148; Durante Bros. Constr. Corp. v St. John's Cemetery, 285 AD2d 578, 579-580, lv denied 97 NY2d 611), or tort ( Bostany v Trump Org. LLC, 73 AD3d 479, 480).
Assuming, arguendo, an agency relationship with JER Revenue, the defendants' proof fails to demonstrate that they and/or JER Revenue exercised reasonable care in crediting the payment and in attempting to stop the auction sale as a matter of law. Without proof demonstrating the absence of their own fault and that of JER Revenue, defendants allegations regarding LFJ Realty's negligence (which allegations include LFJ Realty's waiting until the last business day before the auction sale to tender payment and LFJ Realty's own failure to make any attempt to contact the referee) are insufficient to demonstrate that LFJ Realty's own actions are the sole proximate cause of the auction sale proceeding ( see Navarro v City of New York , 75 AD3d 590 , 592). Finally, the defendants' assertion that the parties' conduct must be viewed in light of the case law in existence prior to the decision by the Court of Appeals in NYCTL 1999-1 Trust v 573 Jackson Ave. Realty Corp. ( 13 NY3d at 578-579) is unpersuasive. Prior case law held that a foreclosure sale could be stayed only upon payment into the court of the amount due and obtaining a court order staying the sale pursuant to RPAPL 1341 ( see NYCTL 1996-1 Trust v LFJ Realty Corp., 307 AD2d at 957; Green Point Sav. Bank v Oppenheim, 237 AD2d 409, 410, lv denied 90 NY2d 806, abrogated by 573 Jackson Avenue Realty Corp., supra). Thus, argues defendants, it would have been reasonable, given the state of the existing law, for plaintiff to have complied with RPAPL 1341. However, in 573 Jackson Avenue Realty Corp. the Court of Appeals concluded that prior rulings on the issue had resulted from a misreading of RPAPL 1341, and that RPAPL 1341's procedural requirement "by its plain terms is limited to partial foreclosures" ( 13 NY3d at 578; see also Ramirez v Mansions Catering, Inc. , 74 AD3d 490, 492 [a judicial decision construing the words of a statute does not constitute the creation of a new legal principle]).
Among this list of failures, defendants assert that LFJ Realty had an obligation to commence an action directly against the purchaser at the auction sale to regain possession of the property. Case law,however, shows that LFJ Realty had no such obligation to proceed against an innocent purchaser ( see Mooney, 163 NY at 95; National Life Ins. Co., 1971 WL 224349).
With respect to defendants' claim that in the payment plan agreement LFJ Realty waived its right to a jury trial, as no jury demand has been served (CPLR 4102[a]) a determination of whether the payment plan agreement bars LFJ Realty from requesting a jury trial is premature.
LFJ REALTY'S SUMMARY JUDGMENT MOTION
LFJ Realty, initially, requests partial summary judgment with respect to liability based on the Court of Appeals decision in NYCTL 1999-1 Trust v 573 Jackson Ave. Realty Corp. ( 13 NY3d at 578). In 573 Jackson Ave. Realty Corp. the Court held that RPAPL 1341 applied to partial foreclosures and not to property owners exercising their common-law right to redeem ( id. at 578-579). While the decision in 573 Jackson Ave. Realty Corp. provides a ground for finding that defendants owed LFJ Realty a legal duty, it does not support a finding under the circumstances of this case that the defendants violated this duty, as a matter of law. Here, once again, there is evidence that plaintiff only tendered the redemption amount on the last business day before the auction sale, and that, at the time of tender, did not inform anyone that it had made a payment intended to constitute a full redemption ( see Seaman v Bellmore Fire Dist. 59 AD3d 515 , 516; see also Morales v County of Suffolk, ___ AD3d ___, 2011 WL 1206147 [2nd Dept. 2011]). For this reason, LFJ Realty is also not entitled to a declaration that its right to redeem was violated. Factual issues also preclude granting summary judgment with respect to liability on the first, second and fourth causes of action of the Second Amended Complaint.
Contrary to LFJ Realty's contention, the decision in 573 Jackson Ave. Realty Corp., while it obviously has binding precedential authority, has no collateral estoppel effect in this action since it did not involve the same parties or the same issues ( see Ryan v New York Tel. Co., 62 NY2d 494, 500-501 [1984]). In addition, the doctrine of judicial estoppel is inapplicable to defendants since they obtained no benefit from the position argued in the prior proceeding ( see Rosario v Montalvo Son Auto Repair Center, Ltd. , 76 AD3d 963 , 964 [2010]; Kalikow 78/79 Co. v State of New York, 174 AD2d 7, 11 [1992], appeal dismissed 79 NY2d 1040 [1992]).
LFJ REALTY'S MOTIONS TO AMEND THE COMPLAINT
LFJ Realty seeks to amend the complaint to add JER Revenue as a party defendant to this action. It is undisputed that as against JER Revenue the six year statute of limitations for negligent misrepresentations ( see Espie v Murphy , 35 AD3d 346, 348; CPLR 213) and breach of contract (CPLR 213) and the three year statute of limitations for negligence in causing damage to property ( see Roslyn Union Free School Dist. v Barkan , 71 AD3d 660 , 661, lv granted 15 NY3d 702; Ferman v Chase Manhattan Bank, 1999 WL 1568298 [Sup Ct, New York County 1999]; CPLR 214) have run. At issue here is whether LFJ Realty's claims against JER Revenue can be deemed to relate back to its timely summons and complaint filed against the Trust and BNY ( Buran v Coupal, 87 NY2d 173, 177; Thomsen v Suffolk County Police Dept. , 50 AD3d 1015 , 1018; CPLR 203[f]).
Under the relation-back doctrine, a plaintiff bears the burden of establishing that "(1) both claims arose out of the same conduct, transaction or occurrence, (2) the new party is united in interest with the original defendant, and by reason of that relationship can be charged with such notice of the institution of the action that the new party will not be prejudiced in maintaining its defense on the merits by the delayed, otherwise stale, commencement, and (3) the new party knew or should have known that, but for a mistake by the plaintiff as to the identity of the proper parties, the action would have been brought against that party as well" ( Austin v Interfaith Medical Center, 264 AD2d 702, 703; see also Buran, 87 NY2d at 178-181; Quiroz v Beitia , 68 AD3d 957 ). Here, there is no dispute that the first element is satisfied and, in light of the factual issues raised with respect to JER Revenue's agency, there are grounds for finding that JER Revenue is united in interest with defendants ( see De Sanna v Rockefeller Center, Inc. , 9 AD3d 596 , 599; Austin, 264 AD2d at 704; L L Plumbing Heating v DePalo, 253 AD2d 517, 518). Nevertheless, LFJ Realty has not demonstrated that the failure to name JER Revenue was due to a mistake in identifying the proper parties ( see Holster v Ross , 45 AD3d 640 , 642; Goldberg v Boatmax://, Inc. , 41 AD3d 255 , 256; Contos v Mahoney , 36 AD3d 646 , 648).
It is undisputed that since 1996 LFJ Realty was aware of JER Revenue's involvement. JER Revenue entered into the payment plan agreement with LFJ Realty on behalf of the Trust, JER Revenue provided monthly statements to LFJ Realty, JER Revenue provided LFJ Realty with the payment delivery option sheet with the heading "JER Revenue Services, LLC," and JER Revenue gave LFJ Realty the payoff quote in January 2000. More importantly, LFJ Realty, prior to the commencement of this action, knew of the April 13, 2000 affidavit by JER Revenue's account manager April Garitta, in which she admitted that JER Revenue's bookkeeping procedures prevented it from timely cancelling the auction sale. Indeed, LFJ Realty quotes from this affidavit in its December 2002 brief submitted to the Appellate Division on appeal in the underlying foreclosure action ( see 2002 WL 32377776).
Thus, LFJ Realty has not established that there was a mistake under the third element of the three-part, relation-back test. While the Court of Appeals held in Buran that there is no need to show that the mistake at issue was excusable, it did not eliminate the mistake requirement from the test ( see Buran, 87 NY2d at 179-181). Indeed, it stated that "[w]hen a plaintiff intentionally decides not to assert a claim against a party known to be potentially liable, there has been no mistake and the plaintiff should not be given a second opportunity to assert that claim after the limitations period has expired" ( id. at 181). Moreover, under circumstances similar to those here, the Appellate Division has consistently held that, where a plaintiff knows of the existence of a potential defendant at the onset of an action, there has been no mistake as to the identity of the correct defendant ( see Bryant v South Nassau Communities Hosp. , 59 AD3d 655 , 656-657; Cardamone v Ricotta , 47 AD3d 659 , 660-661; Holster, 45 AD3d at 642; Goldberg, 41 AD2d at 256; Nani v Gould , 39 AD3d 508 , 510; Contos, 36 AD3d at 647-648; Monir v Khandakar , 30 AD3d 487 , 489; Lamb v Prime Computer, Inc., 158 AD2d 798, 800). Because the conduct of JER Revenue was known to plaintiff prior to commencement of the action, JER Revenue "could reasonably have concluded that plaintiff's failure to sue them within the applicable periods of limitations meant that there was no intent to sue them at all and that the matter had been concluded as far as they were concerned" ( Cardomone, 47 AD3d at 661; Goldberg, 41 AD2d at 256; Nani, 39 AD3d at 510; Lamb, 158 AD2d at 800; Tedodorescu v Resnick Binder, ___ Misc 3d ___, 908 NYS2d 547, 551 [Sup Ct, Kings County 2010]). LFJ Realty's motion to add JER Revenue as a party, therefore, must be denied.
The motion must likewise be denied to the extent that LFJ Realty seeks to add a claim for negligent misrepresentation as against BNY and the Trust. Any claim for negligent misrepresentation would be duplicative of a breach of contract cause of action ( see River Glen Assocs., Ltd. v Merrill Lynch Credit Corp., 295 AD2d 274, 275), and it does not appear that LFJ Realty could demonstrate that it had a special relationship with defendants ( id.). In any event, the alleged misrepresentations "were, at most, promises of future intent rather than misrepresentations of existing fact and are not actionable" ( DaCosta v Trade-Winds Environmental Restoration, Inc. , 61 AD3d 627 , 628; see also Capricorn Invs. III, L.P., v CoolBrands Intl., Inc. , 66 AD3d 409, 409-410; Transit Mgt., LLC v Watson Indus., Inc. , 23 AD3d 1152 , 1155; Margrove, Inc. v Lincoln First Bank of Rochester, 54 AD2d 1105, 1106, appeal dismissed 40 NY2d 1092).
For reasons discussed, NYCTL 1999-1 Trust v 573 Jackson Ave. Realty Corp. ( supra), does not provide a basis for a cause of action declaring that the defendants' violated LFJ Realty's common-law right of redemption. In addition, the finding that the payment plan agreement did not limit or alter plaintiff's right to redeem renders moot plaintiff's request for a declaration that provisions of the payment plan agreement are null and void.
On the other hand, LFJ Realty has demonstrated grounds warranting leave to amend its complaint to increase the ad damnum clause. Leave to amend a pleading to increase an ad damnum clause should be freely granted unless palpably insufficient or patently devoid of merit or where the delay in seeking the amendment would cause prejudice or surprise ( see Commissioners of State Ins. Fund v Service Unlimited, USA, Inc. , 50 AD3d 1085). Defendants cannot be deemed to be prejudiced by any delay by LFJ Realty because LFJ Realty first moved to amend in October 2004. At that time, the court (Levine, J.), in its October 29, 2004 order, stated that it would not address the motion to increase the ad damnum clause, and that the motion "is withdrawn without prejudice to be renewed before the trial court." Here, LFJ Realty has shown a basis for increasing its demand in light of the certified appraisal report attached to its motion papers ( see Matter of Eckerd Corp. v Semon , 35 AD3d 931 , 933; Champlain Natl. Bank v Brignola, 249 AD2d 656, 657), and the defendants have not raised any specific objections to this report.
Finally, for the reasons discussed herein, LFJ Realty is granted leave to amend its complaint to allege that the defendants may be held liable for the acts or commissions of JER Revenue.
This constitutes the decision and order of the court.