Sheehy v. New Century Mortg. Corp.

• Decision Date: 19 February 2010
• Docket Number: No. 08-CV-377 (JFB)(MLO).,08-CV-377 (JFB)(MLO).
• Citation: Sheehy v. New Century Mortg. Corp., 690 F. Supp.2d 51 (E.D. N.Y. 2010)
• Parties: Danielle SHEEHY, Plaintiff, v. NEW CENTURY MORTGAGE CORP., et al., Defendants.
• Court: U.S. District Court — Eastern District of New York

690 F.Supp.2d 51

Danielle SHEEHY, Plaintiff, v.NEW CENTURY MORTGAGE CORP., et al., Defendants.

No. 08-CV-377 (JFB)(MLO).

United States District Court, E.D. New York.

February 19, 2010.

Mario DeRossi, Stern and DeRossi, LLP, Carle Place, NY, for Plaintiff.

A. Michael Furman and Bain R. Loucks, Furman Kornfield and Brennan, LLP, New York, NY, for Defendant Pecorale.

Noah Nunberg, L'Abbate, Balkan, Colavita and Contini, LLP, Garden City, NY, for Defendant Halpern.

MEMORANDUM AND ORDER

JOSEPH F. BIANCO, District Judge:

PlaintiffDanielle Sheehy(hereinafter "plaintiff" or "Sheehy") brings this action against defendantMeryl Halpern, Esq.(hereinafter "Halpern") and Ralph H. Pecorale, Esq.(hereinafter "Pecorale") for fraud, breach of fiduciary duty, and violations of the New York General Business Law § 349 for alleged deceptive acts and practices, in connection with the alleged purchase by Sheehy of real property at 111 Berkley Street, Valley Stream, New York, which was entered into upon the recommendation of her mother's boyfriend, Robert Adlerstein.

Plaintiff claims that, although she believed she was simply making a real estate investment, she was unwittingly used as a straw buyer so that her personal information and credit score could be used to obtain a fraudulent mortgage for a higher value than the property was worth.More specifically, in the summer of 2006, plaintiff, a California resident, was visiting family and friends on Long Island.During the visit, her mother's "long-term boyfriend,"Robert Adlerstein, told plaintiff that she should invest in residential real estate.Adlerstein promised to find a suitable investment property on Long Island, find a tenant for the property, renovate the property, sell it within six months, and split the profits with plaintiff.Adlerstein subsequently located the property in Valley Stream, and plaintiff purchased this property in October 2006.Plaintiff claims that her attorney at the closing, defendant Halpern—who was also Adlerstein's cousin—provided assurances that, among other things, Adlerstein was a co-mortgagor with plaintiff.Plaintiff also claims that, unbeknownst to her, several fraudulent documents were executed in connection with the sale and that, again without her knowledge, Adlerstein and his business partner received over $30,000 in payments following the sale.Defendant Pecorale, an attorney, represented the lender, New Century Mortgage, in this transaction.His office prepared two of the allegedly false documents, and Pecorale himself signed the checks through which Adlerstein and his partner received their payments.Months later, plaintiff claims to have discovered that Adlerstein was not on the mortgage.Plaintiff became unable to make the payments on her own, and the property eventually went into foreclosure.She then brought this action against Adlerstein, Halpern, Pecorale, and others involved in the home purchase, asserting a variety of common law and statutory claims.¹

Halpern and Pecorale have both moved for summary judgment on the claims asserted by plaintiff against them—common law fraud, breach of fiduciary duty, and violations of New York's consumer protection statute, N.Y. General Business Law § 349.For the reasons set forth below, the Court grants the motions in part and denies them in part.Specifically, the Court denies both defendants' motions on the fraud and breach of fiduciary duty claims.Construing the evidence most favorably to plaintiff, genuine issues of material fact exist as to whether Halpern made fraudulent statements to plaintiff and whether she, as plaintiff's attorney, breached her fiduciary duties to plaintiff.Genuine issues of material of fact also exist as to whether Pecorale aided and abetted Adlerstein's alleged fraud and breach of fiduciary duty.However, the Court grants defendants' motions on the § 349 claim because plaintiff has not produced any evidence to show that the alleged conduct was "consumer oriented."²

I.BACKGROUND

A.Factual Background

The following facts are taken from the parties' depositions, declarations, exhibits, and respective Local Rule 56.1 statements of facts.³Upon consideration of a motion for summary judgment, the Court construes the facts in the light most favorable to the non-moving party.SeeCapobianco v. City of N.Y.,422 F.3d 47, 50 n. 1(2d Cir.2005).Accordingly, with regard to defendants' motions for summary judgment, the Court shall construe the facts in favor of plaintiff.Moreover, unless otherwise noted, where a party's 56.1 statement is cited, that fact is undisputed or the opposing party has pointed to no evidence in the record to controvert it.

1.The Proposed Real Estate Transaction

In the summer of 2006, plaintiff was living in California.While visiting her family on Long Island, her mother, Maria Sheehy, and her mother's then-boyfriend, Robert Adlerstein,⁴ suggested that plaintiff consider investing in real estate in New York.(Halpern 56.1¶¶ 1, 5, 8.)Adlerstein said he would locate a house in New York; the house would be purchased; Adlerstein would find a tenant to live in the house; he would also renovate and sell the house; and he would split the profits from the sale with plaintiff.(Id.¶¶ 8, 10, 14.)Adlerstein also said that if he could not find a tenant, he would pay the mortgage and carrying costs.(Seeid.¶ 13.)He further told plaintiff that he would supply the attorney, mortgage broker, and appraiser for the sale of the house.(Id.¶ 12.)Adlerstein said he had made money doing this in the past.(Id.¶ 9.)Plaintiff claims she believed this was a "risk-free investment" because she would not be required to put money down and because Adlerstein would be the "main mortgage" holder.On the other hand, defendant Halpern claims that plaintiff was to be the sole purchaser of the house and that Adlerstein was not going to be a co-mortgagor.(ComparePl. 56.1¶ 17(Halpern)withHalpern 56.1¶ 17andPl. 56.1 (Pecorale)¶ 33.)Adlerstein initially proposed the transaction to plaintiff while in the presence of plaintiff's two sisters and a family friend.(SeePl.Aff. ¶¶ 5-6.)One of plaintiff's sisters, her sister's boyfriend, and the friend also eventually purchased homes through Adlerstein.(SeePl.Dep. 240:19-244:6.)

Plaintiff returned to California and told her boyfriend, Josh Zaretsky, about Adlerstein's proposal.Thereafter, plaintiff told Adlerstein that she and Zaretsky were both interested in buying houses.(Pecorale 56.1¶ 10.)

2.The Purchase of 111 Berkley Street

For purposes of the pending motions, most of the relevant factual events occurred in October 2006 when plaintiff purchased a property in Valley Stream, New York.

In September 2006, Adlerstein had told plaintiff that he had found a home for purchase at 111 Berkley Street in Valley Stream.(Id.¶ 12.)In early October, Adlerstein told plaintiff that the closing on the Berkley Street property was scheduled for October 10, 2006.(Halpern 56.1¶ 24.)Adlerstein also found a property for Zaretsky to purchase, located in Hempstead, New York; the closing on that property was scheduled for October 6, 2006.(Seeid.)Together, plaintiff and Zaretsky flew from California to New York for the closings, and Adlerstein paid their airfare.(Id.¶ 25.)

a. The Zaretsky Closing

The closing on Zaretsky's property took place at defendant Halpern's office on October 6, 2006.Halpern represented the sellers.(HalpernDep. 12:2-4.)⁵

Plaintiff attended the closing.(Halpern 56.1¶ 26.)While there, plaintiff learned that Halpern would be her attorney at her own closing, which was scheduled for four days later.She also learned from Halpern that Halpern was Adlerstein's cousin.(Id.¶ 27.)Plaintiff did not see the Berkley Street property before October 10, and she was unaware of the purchase price of the house before that date.(Id.¶ 29;Pl.Dep. 108:10-13.)

b. The October 10, 2006 Meeting

On October 10, 2006, a meeting⁶ took place at Halpern's office.It is undisputed that plaintiff, Zaretsky, Adlerstein, and defendant Halpern were at the October 10 meeting.(Pl.Dep. 123:4-7.)The seller did not attend this meeting, nor did any representative of the seller.(Id. 123:11-19;Pl.Aff. ¶ 30.)

1.Documents Signed By Plaintiff

Plaintiff acknowledges that she was presented with a "very large stack of papers" at the meeting, that Halpern told her to sign the papers, and that she signed them.(Pl.Dep. 110:25-111:13.)It is undisputed that plaintiff signed, inter alia,

• a note in which she agreed to pay New Century Mortgage $105,000 in principal and interest at an annual rate of 10.80% and a mortgage securing the note;

• an adjustable rate balloon note in which she promised to pay New Century $420,000 in principal and interest at an initial yearly rate of 8.225% with an Adjustable Rate Rider and a mortgage on that note;

• a borrower's certification and authorization in which she certified that she had made no misrepresentations in signing the documents;

• an occupancy affidavit in which she represented that she would occupy the premises upon the close of escrow—even though she did not intend to occupy the premises;

• an income certification that significantly overstated her monthly income • a federal truth in lending disclosure statement.

(SeeHalpern 56.1¶¶ 34-38; 41-45; 47-48.)

Defendant Halpern contends that she explained each document and gave plaintiff an opportunity to ask questions about the documents.(SeeHalpern 56.1¶ 49.)Plaintiff disputes this, contending that Halpern and Adlerstein rushed her through the documents, telling her to "hurry up" because, among other things, plaintiff had to catch her return flight to California.(SeePl.Dep. 113:12-13; 113:21-22; 114:6-9;Pl. 56.1 (Halpern)¶¶ 49, 88;Pl. 56.1 (Pecorale)¶ 45;see alsoPl.Aff. ¶ 27.)

2.Representations Allegedly Made By Halpern

Plaintiff claims that Halpern made several false representations to her...