Opinion
41418/07
12-02-2011
Howard W. Tomlinson, Plaintiff, v. Cherry Ann Degannes, et. al., Defendants.
Plaintiff Attorney: Cone & Kilbourn. Defendant Attorney: Sills, Cumis & Gross.
Plaintiff Attorney: Cone & Kilbourn.
Defendant Attorney: Sills, Cumis & Gross.
David I. Schmidt, J.
The following papers numbered 1 to 9 read herein:
Papers Numbered
Notice of Motion/Order to Show Cause/
Petition/Cross Motion and
Affidavits (Affirmations) Annexed1 - 36 - 7
Opposing Affidavits4 - 58
Reply Affidavits (Affirmations)9
Affidavit (Affirmation)
Other Papers4 Memoranda of Law
Upon the foregoing papers, defendant/ third - party defendant, Daniel Chan, Esq. (Chan), moves for an order, pursuant to CPLR 3212, granting him summary judgment and dismissing the complaints of both the plaintiff, Howard W. Tomlinson (Tomlinson), and third - party plaintiff, BNC Mortgage, Inc. (BNC), with prejudice. Tomlinson cross - moves for an order, pursuant to CPLR 3025 [b], for leave to file an amended complaint should the court grant Chan's motion for summary judgment.
Background
The instant action stems from a closing for the sale of certain real property located at 694 Crown Street, Brooklyn, New York that occurred on or about November 7, 2006. With regard to the parties herein, Tomlinson was the seller and Chan was the settlement agent representing BNC, the lender. The sale and closing concluded and subsequent thereto, on or about October 29, 2007, Tomlinson commenced the instant action for recision of the contract of sale and damages resulting from what Tomlinson claims was a "mortgage rescue scheme." On or about March 26, 2008, BNC moved to intervene as a direct defendant with respect to count five of Tomlinson's complaint (originally only asserted as against Cherry Ann Degannes [Degannes]) and dismissing the remainder of the complaint as against BNC. By short form order dated June 5, 2008, BNC was permitted to intervene and by decision dated June 19, 2008, the motion to dismiss was denied. Subsequent to the denial, BNC brought a third-party action against Chan, as its settlement agent, alleging causes of action for professional negligence, breach of fiduciary duty and conversion. After BNC's commencement of its third - party action, Tomlinson successfully impleaded Chan as a direct defendant alleging in his opposition that at the time of commencement, Tomlinson had "incomplete information" or he would have added Chan then.
Chan now moves the court for summary judgment, dismissing both the plaintiff's complaint and BNC's third - party complaint with prejudice. In support of his first branch, Chan alleges that his only participation in this matter was as settlement agent for the lender, BNC. Chan claims he had no part in preparing either the sale and lease-back agreement or the mortgage agreement and that he had never met the seller or purchaser prior to arriving for the closing. Chan further contends that any issues that Tomlinson has with respect to any alleged mortgage rescue scheme is best dealt with the parties to the transaction, of which he is not.
In opposition to Chan's motion, Tomlinson alleges, among other things, that there are several irregularities in how the funds were disbursed at the closing. Further, Tomlinson contends that Chan is complicit in the alleged mortgage rescue scheme, stating "it is also now obvious that defendant Chan conspired with other defendants to produce this false "contract of sale" for the purpose of defrauding me of my home and money."
The inclusion of such allegations are necessary to explain the parties' positions, relative to the instant motion and the veracity of which are not implied, nor to be assumed.
In his reply, Chan proffers that there were no irregularities in the disbursements of the loan proceeds because "simple arithmetic" and the HUD -1 statement verify that the loan proceeds have been accounted for. Chan further claims that, by virtue of Tomlinson's signature on the disbursement sheet, he not only knew who was paid at the closing and how much each was paid, but also that Chan paid each at Tomlinson's direction. Chan contends that the plaintiff has offered no evidence to support any of his allegations, only bald accusations meant to place the defendant in the worst possible light.
According to the Real Estate Settlement Procedures Act, "[t]he settlement agent shall use the HUD-1 settlement statement in every settlement involving a federally related mortgage loan in which there is a borrower and a seller" (or HUD-1A for refinance agreements where no seller exists). " In general, [t]he settlement agent shall state the actual charges paid by the borrower and seller on the HUD-1, or by the borrower on the HUD-1A. The settlement agent must separately itemize each third party charge paid by the borrower and seller" (RESPA Reg. X, 24 CFR § 3500.8).
In support of his branch seeking summary judgment as against BNC, Chan alleges that BNC's claims are unsupported by the record and that third - party plaintiffs have failed to properly plead their causes of action. BNC has submitted no opposition to the instant motion. As Chan states, "this litigation with respect to BNC was stayed on January 21, 2009, in light of BNC filing for bankruptcy on January 9, 2009.
Discussion
Chan's Motion for Summary Judgment as against Tomlinson
The proponent of a motion for summary judgment must demonstrate entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact (see Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]; Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395, 404 [1957]). Once such a showing is made, the burden shifts and the party opposing the motion must tender evidentiary proof, in admissible form, sufficient to establish the existence of a material issue of fact which would require a trial or tender an acceptable excuse for his or her failure to do so (see Greenberg v Coronet Prop. Co., 167 AD2d 291 [1990]; see Zuckerman 49 NY2d at 557). If the existence of an issue of fact is even arguable, summary judgment must be denied (see Museums at Stony Brook v Vil. of Patchogue Fire Dept., 146 AD2d 572 [1989]). Also, the party opposing a motion for summary judgment is entitled to every favorable inference that may be drawn from the pleadings, affidavits and competing contentions of the parties (see Nicklas v Tedlen Realty Corp., 305 AD2d 385 [2003]; see also Akseizer v Kramer, 265 AD2d 356 [1999]; Henderson v City of New York, 178 AD2d 129, 130 [1991]; McLaughlin v Thaima Realty Corp., 161 AD2d 383, 384 [1990]; Gibson v American Export Isbrandtsen Lines, 125 AD2d 65, 74 [1987]; Strychalski v Mekus, 54 AD2d 1068, 1069 [1976]).
In his pleadings, plaintiff alleged, among other things, that there were irregularities regarding the disbursement of monies at the closing of the underlying real estate transaction. To be entitled to judgment as a matter of law, it was then incumbent on Chan, as the movant, to set forth evidentiary facts to show no material question of fact exists to warrant a trial, effectively removing any questions regarding the aforementioned disbursements; anything less requires denial of the motion (see Coley v Michelin Tire Corp., 99 AD2d 795, 796 [1984]). A review of the handwritten disbursement sheet (plaintiff's opposition memorandum, Exhibit "7") does indeed show disbursements made that are unaccounted for within the HUD-1 statement (plaintiff's opposition memorandum, Exhibit "6") executed by Chan at the closing. For example, there is a handwritten notation showing a $93,000 disbursement to co-defendant and "straw buyer" Degannes, however, such disbursement does not appear in the HUD-1 nor does an explanation appear within the moving papers. Similarly, there are monetary disbursements to other parties, including Roger Francis for $4,000, Mel Harris, Esq for $9,061.29, Christopher Hall (3 checks approximating $21,000), and a Trader's Discount Center for $9,000, none of which are listed within the HUD-1 nor are explained within the moving papers. Chan alleges that such disbursements were authorized by Tomlinson, as evidenced by his signature on the disbursement sheet. While Tomlinson may have signed the disbursement sheet, such action does not constitute evidence sufficient to satisfy Chan's prima facie burden on this motion by eliminating all material issues of fact surrounding the disbursements (see Alvarez, 68 NY2d at 324).
"Straw buyer" references the fact that, as it appears from the papers, Degannes was purchasing the premises and "leasing" it back to Tomlinson solely because Tomlinson's credit rating prevented him from refinancing his mortgage on his own. In exchange for her participation, Degannes was to earn $8,000.
Because of the handwriting on the document, errors by the court regarding the amounts involved or in the spelling of the parties' names are to be considered de minimus as it is the disbursements themselves that the court seeks to have explained.
The proriety of these disbursements is not the issue before the court and, accordingly, this court makes no finding that said disbursements were or were not proper. The only issue addressed is the lack of any explanation for said disbursements within the HUD-1 or the moving papers.
Absent such explanation, a question of fact exists as to the nature and purpose of the as yet unexplained disbursements which precludes summary judgment (Id.). Since the defendant has failed to meet his initialburden of demonstrating entitlement to judgment as a matter of law, that burden never shifted to plaintiff to establish the existence of a material issue of fact which would require a trial (see Greenberg, 167 AD2d at 291). Accordingly, the branch of defendant's motion seeking summary judgment as against Tomlinson is denied without regard to the sufficiency of the plaintiff's opposition papers (see Winegrad, 64 NY2d at 853; Hughes v Cai, 31 AD3d 385-386 [2006]; Hanna v Alverado, 16 AD3d 624 [2005]).
Chan's Motion for Summary Judgment as against BNC
11 USC § 362 (a) states, in relevant part: "§ 362. Automatic Stay
(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302 and 303 of this title operates as a stay, applicable to all entities, of:
(1) the commencement or continuation, including the issuance or employment or process, of a judicial, administrative, or other proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of a case under this title."
According to the record in this matter, on January 9, 2009, BNC Mortgage LLC, formerly BNC Mortgage, Inc., commenced an action under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the Southern District of New York. On, January 26, 2009 and again on August 4, 2011, counsel for BNC filed a Notice of Bankruptcy Filing with the Kings County Clerk's office. There is no indication in the record before the court that BNC's bankruptcy has been discharged, nor that the automatic stay imposed by the bankruptcy filing has been lifted. As a result, that branch of Chan's motion requesting summary judgment as against BNC is dismissed without prejudice to renewal at such time as BNC emerges from bankruptcy or said stay has been lifted.
Tomlinson's Cross Motion to Amend the Complaint Pursuant to CPLR 3025b
By virtue of the court's denial of Chan's motion for summary judgment, plaintiff's motion for leave to amend the complaint is rendered moot and need not be addressed.
Conclusion
To recapitulate, that branch of Chan's motion for summary judgment as against Tomlinson is denied. The branch seeking summary judgment as against BNC is denied without prejudice to renewal at such time as BNC emerges from bankruptcy or the automatic stay has been lifted. Plaintiff's cross motion to amend the complaint has been rendered moot.
The Court, having considered the parties' remaining contentions, finds them unavailing. The foregoing constitutes the decision and order of the court.
ENTER,
J. S. C.