Opinion
7706/2007.
Decided April 22, 2010.
David B. Gelfarb Esq., Moss Kalish, PLLC, New York, NY, for Plaintiff.
Howard Sherman Esq., Ossining, NY, for Defendant Gordon.
I. BACKGROUND
Plaintiff sues to foreclose on 3317 Seymour Avenue, Bronx County, because David Golding, the premises' owner of record, has not made any payments on a purchase funds mortgage issued by First Franklin Mortgage Loan Trust, of which plaintiff is trustee. Sonya Gordon filed an answer and counterclaim before retaining an attorney, claiming that as the premises' resident she was the defendant named as John Doe. While she entitled her pleading a "third party complaint" as well, it interposes a claim only against plaintiff. See C.P.L.R. §§ 1007, 3011, 3019(a). Gordon owned the premises from October 2002 until December 2005 and claims as her defense to plaintiff's claim for foreclosure and as her counterclaim that, in December 2005, Golding obtained the deed to the premises, and First Franklin obtained the mortgage against the premises, through fraud.
In sum, Gordon attests that Mary Smith, a real estate broker, and Merit Equity, a mortgage broker with whom Smith shared an office and collaborated, advised using Golding as a straw buyer of the premises to refinance Gordon's mortgage when Gordon was the premises' owner. Gordon claims Smith misled Gordon that the transaction was merely a refinancing rather than a sale, and Smith and Merit Equity arranged the new mortgage with First Franklin, which knew or should have known of the fraud. Gordon further attests that, while part of the purchase price for the premises paid off her mortgage, she never received the balance or the deed transferred back to her. Golding never took possession of the premises, so Gordon has lived at the premises since the sale without payment for rent or for use and occupancy.
II. SUMMARY JUDGMENT
Plaintiff now moves for summary judgment dismissing defendant Gordon's defenses and counterclaim of fraud. C.P.L.R. §§ 3211(b), 3212(b). For the reasons explained below, the court denies plaintiff's motion.
Even in the context of a motion for summary judgment dismissing defenses, it is not defendant's initial burden to establish her defenses by admissible evidence, but plaintiff's burden to establish that they are legally inapplicable. Welsbach Elec. Corp. Mastec N. Am., Inc., 7 NY3d 624, 628, 632 (2006); Rosenzweig v. Givens , 62 AD3d 1 , 7 (1st Dep't), aff'd, 13 NY3d 774, 775-76 (2009); Roffe v. Weil, 161 AD2d 509, 510 (1st Dep't 1990). See Hauptner v. Laurel Dev., LLC , 65 AD3d 900 , 903 (1st Dep't 2009); 49-50 Assoc. v. Free-Tan Corp., 248 AD2d 128, 129 (1st Dep't 1998); Vita v. New York Waste Servs., LLC , 34 AD3d 559 (2d Dep't 2006); Santilli v. Allstate Ins. Co. , 19 AD3d 1031 , 1032 (4th Dep't 2005). To defeat a motion for summary judgment dismissing her defenses, defendant only need allege the factual elements of her defenses, whether in her verified answer or as supplemented by her affidavit or other admissible evidence. Rosenzweig v. Givens, 62 AD3d at 5-6, aff'd, 13 NY3d at 775-76; Willett v. Lincolnshire Mgt., 302 AD2d 271 (1st Dep't 2003); Bankers Trust Co. of Cal., N.A. v. Sciarpelletti , 28 AD3d 408 , 411-12 (2d Dep't 2006). See Welsbach Elec. Corp. Mastec N. Am., Inc., 7 NY3d at 628, 632; 49-50 Assoc. v. Free-Tan Corp., 248 AD2d at 129; Vita v. New York Waste Servs., LLC, 34 AD3d at 559-60.
III. DEFENDANT GORDON'S DEFENSES AND COUNTERCLAIM TO PLAINTIFF'S CLAIM OF FORECLOSURE
Plaintiff establishes the prima facie regularity of Gordon's sale of the premises and plaintiff's acquisition of its mortgage against the premises, by presenting admissible evidence of the contract of sale by Gordon, the payments she received, the mortgage, and Golding's failure to pay the mortgage. See Red Tulip, LLC v. Neiva , 44 AD3d 204 , 209 (1st Dep't 2007); Witelson v. Jamaica Estates Holding Corp. I , 40 AD3d 284 (1st Dep't 2007); Citidress II v. 207 Second Ave. Realty Corp. , 21 AD3d 774 , 776 (1st Dep't 2005). Defendant Gordon rebuts that prima facie claim, however, by raising factual questions whether Smith and Merit Equity acted as First Franklin's agents in obtaining ownership of the premises and the current mortgage lien against the premises through fraud or whether First Franklin at least had constructive notice of that fraud. NY Real Prop. Law (RPL) § 266; Rosenzweig v. Givens, 13 NY3d at 775; Citidress II v. 207 Second Ave. Realty Corp., 21 AD3d at 776.
Gordon pleads the elements of fraud with sufficient particularity, C.P.L.R. § 3016(b); Sargiss v. Magarelli , 12 NY3d 527 , 530-31 (2009); Pludeman v. Northern Leasing Systems, Inc. , 10 NY3d 486 , 491-92 (2008), because she supports her claim that Smith and Merit Equity acted as First Franklin's agent with her verified pleading and affidavit attesting as follows. Smith and Merit Equity approached Gordon, advised using David Golding as a straw buyer, and secured the new mortgage on First Franklin's behalf. Golding was uninvolved in the transactions, other than his brief appearance at the closing, and never visited the premises. Smith misled Gordon that she was merely refinancing rather than selling her home. See Rosenzweig v. Givens, 13 NY3d at 775. These fraudulent representations and other actions injured Gordon by causing her to lose title to her house and now to face foreclosure of her residence, without even receiving the balance of the sale price after her prior mortgage was paid. Eurycleia Partners, LP v. Seward Kissel, LLP , 12 NY3d 553 , 559 (2009); Ross v. Louise Wise Services, Inc. , 8 NY3d 478 , 488 (2007); Ventur Group, LLC v. Finnerty , 68 AD3d 638 (1st Dep't 2009).
Plaintiff does not dispute Smith's capacity as a professional real estate broker, Merit Equity's capacity as a professional mortgage broker, or Gordon's description of herself as semi-literate. Based on Smith's and Merit Equity's expertise and sophistication relative to Gordon, a fact finder reasonably could infer Smith's and Merit Equity's knowledge that their representations were false and Gordon's justifiable reliance on those representations. Sargiss v. Magarelli, 12 NY3d at 531; Pludeman v. Northern Leasing Systems, Inc., 10 NY3d at 492-93. See Rosenzweig v. Givens, 62 AD3d at 5-6, aff'd, 13 NY3d at 775; Valassis Communications, Inc. v. Weimer, 304 AD2d 448, 449 (1st Dep't 2003). Gordon also attests that, based on Smith's and Merit Equity's assurances that she did not need an attorney, she lacked legal representation at the closing. See Rosenzweig v. Givens, 13 NY3d at 776; Ventur Group, LLC v. Finnerty, 68 AD3d at 638.
While the above evidence may establish claims only against Smith and Merit Equity, the further evidence that they approached Gordon and arranged a mortgage for First Franklin raises factual questions whether Smith and Merit Equity acted as First Franklin's agents and, if so, plaintiff's actions also invalidated Gordon's transfer to Golding, the borrower and mortgagor, and the mortgage to plaintiff. Ordinarily a real estate broker or mortgage broker is not the lender's agent, but here Gordon attests that First Franklin accepted the borrower Golding whom Smith and Merit Equity recruited for the bank.
Moreover, even if Gordon failed to raise a factual question of First Franklin's involvement in the fraud through the brokers as its agents, Gordon still raises a factual question whether First Franklin had constructive knowledge of the fraud. If First Franklin, upon a reasonably diligent inquiry, would have discovered any facts that would have caused a reasonably prudent lender or mortgagee to question the transaction, First Franklin is charged with notice of those facts, which may be fatal to a claim that the bank obtained the mortgage in good faith. RPL § 266; Maiorano v. Garson , 65 AD3d 1300 , 1302-1303 (2d Dep't 2009); Booth v. Ameriquest Mortgage Co. , 63 AD3d 769 (2d Dep't 2009); Skiff-Murray v. Murray , 17 AD3d 807 , 809-810 (3d Dep't 2005); Miner v. Edwards, 221 AD2d 934 (4th Dep't 1995). See Rosenzweig v. Givens, 13 NY3d at 776; Majer v. Schmidt, 169 AD2d 501, 503-504 (1st Dep't 1991).
Plaintiff does not dispute Golding's conspicuous noninvolvement in the transactions and absence from the premises or Gordon's lack of independent representation at the closing. Gordon also raises questions regarding the premises' inflated valuation and a lack of accounting for the balance of the sale price. If she remarked at such irregularities, they also may be facts that would have led a reasonably prudent lender or mortgagee in First Franklin's circumstances to question whether the sale and attendant mortgage were undermined by fraud. Given her relative unsophistication, her lack of independent representation, and the other circumstances, without further development of the record and closer scrutiny of the transactions, summary judgment is premature. See Rosenzweig v. Givens, 62 AD3d at 6, aff'd, 13 NY3d at 775.
IV. CONCLUSION
For the foregoing reasons, defendant Gordon's defenses and counterclaim, alleging fraudulent representations and other actions by plaintiff and its agents and its constructive knowledge of a fraudulent sale and mortgage to the buyer, survive summary judgment. Therefore the court denies plaintiff's motion for summary judgment dismissing Gordon's defenses and counterclaim. C.P.L.R. §§ 3211(b), 3212(b).