Ragunandan v Donado   2015 NY Slip Op 31957(U)  October 23, 2015  Supreme Court, Queens County  Docket Number: 12332 2012  Judge: David Elliot,  is a case which caused us some head-scratching.  Plaintiff was able to purchase a large number of real properties in Queens and rent them out.  How did she cooperate in letting it all come crashing down?  What could have caused her to sell properties, fail to ensure that the mortgage was paid, and then eventually give it all away to a (soon to be) convicted fraud?  On another note, how could one of the attorneys get out of the case on a failure to take a default within a year?

“Plaintiff seeks to recover from Lozada, the attorney who represented her at a real estate closing, because the proceeds of the sale were ultimately stolen by a nonparty. Plaintiff alleges that Lozada failed to properly advise her against putting the proceeds of the sale into an account where it was ultimately stolen. Lozada moves to dismiss the complaint on the ground that plaintiff cannot show that she suffered actual damages as a direct result of his alleged action or inaction. Plaintiff opposes the motion, and cross-moves for summary judgment in her favor.”

“In or about 2009, plaintiff owned and rented out multiple properties in Queens, New York. In July 2009, plaintiff began experiencing financial difficulties as a result of her tenants having failed to pay rent and having caused property damage. Around that time, plaintiff spoke to Imran Badoolah, a person who she had known for several years, about her financial woes. Badoolah told plaintiff that he was in the real estate business. Plaintiff, in turn, informed Badoolah that she was thinking of selling her properties to pay off the outstanding mortgage on her residence. Plaintiff told Badoolah that she wanted the balance of any sale proceeds from the sale of the properties to be put towards her daughters’ education. Plaintiff further informed Badoolah that three of her relatives – Chandika Persaud, Indranie Saphi, and Aari Arif Saphie – were potential purchasers for the property at issue herein. Badoolah offered to help plaintiff sell the property and to handle her financial difficulties. Plaintiff agreed. Specifically, plaintiff felt that Badoolah would be able to relieve her of the “headache” of selling the property since she had known Badoolah for years and he had never given her any reason to doubt his intentions. According to plaintiff, Badoolah arranged to have the subject property sold to her relatives. Plaintiff stated that she never discussed her financial difficulties with her relatives and never informed them of her plans with the sales proceeds. Plaintiff testified that her relatives did not meet Badoolah until the date of the closing.”

“At some point during the closing, Lozada was told that the sale proceeds would be wired into his escrow account. While Lozada had never done this himself, he had seen sellers’ attorneys in other transactions receive sale proceeds into their escrow accounts. Lozada was then told that he was to disburse the sale proceeds to two entities: AMG3, LLC and Maryann Smith, LLC. Lozada discussed the disbursement arrangement with plaintiff and, after doing so, he drafted disbursement instructions which explicitly outlined the disbursement arrangement. Pursuant to the disbursement instructions, Lozada wasto receive a wire into his escrow account of $442,390.00. He was to disburse $70,000.00 to AMG3, LLC, and the remaining balance was to be disbursed to Maryann Smith, LLC. Plaintiff reviewed the disbursement instructions and signed them. Plaintiff did not inform Lozada as to what she planned to do with the sale proceeds. However, she verbally and in writing authorized the disbursement instructions that were discussed and agreed to at the closing. The sale proceeds were wired into Lozada’s escrow account. Once Lozada confirmed that the wire was effective, Lozada issued two checks from his IOLTA account, one for $70,000.00 to AMG3, LLC, and another for $372,390.00 to Maryann Smith, LLC (the disbursement checks). Plaintiff testified that, sometime after the closing, she contacted Badoolah, who acknowledged stealing the sale proceeds. He explained that he needed to pay certain individuals and would eventually return the sale proceeds. However, to date, he has not done so. After realizing that Badoolah had stolen the sale proceeds without satisfying the mortgage on her residence, plaintiff’s attorney in this action, Ira Cooper, contacted Lozada. Cooper was informed by Lozada that Lozada had disbursed the sale proceeds in accordance with the written disbursement instructions which plaintiff signed at the closing. Lozada also faxed to Cooper a copy of the disbursement document along with copies of the issued checks.

Plaintiff further testified that she owned other properties which she used as rental properties and for her own personal use. She acknowledged that the transaction at issue in this action was not her first real estate transaction and plaintiff states that she trusted Badoolah to take care of her financial difficulties. Plaintiff also signed over deeds to various other properties to third parties, at Badoolah’s direction, allegedly to help plaintiff deal with her financial difficulties.”

“Lozada claims that it is also relevant to note that Badoolah was indicted on charges of defrauding various lending institutions by obtaining mortgages on properties through fraudulent means, including falsifying mortgage loan applications and other documents (United States of America v Imran Ismile Badoolah, Case No. 1:12-cr-00774-KAM (EDNY) (the criminal action). Plaintiff assisted the FBI in its investigation of Badoolah in the federal criminal action. Badoolah has since pleaded guilty to the first count of the indictment, and was sentenced.”

“On this point, Badoolah’s misappropriation of the sale proceeds precludes liability as against Lozada. Courts have routinely rejected that a defendant’s negligence was a direct and proximate cause of a plaintiff’s loss when another party committed a misappropriation and or defalcation that directly caused the alleged loss (see e.g. Liberman v Worden, 268 AD2d 337 [1st Dept 2000] [finding that a subsequent misappropriation of properly deposited funds was the proximate cause of a decedent’s loss]; Geotel, Inc. v Wallace, 162 AD2d 166 [1st Dept 1990] [any loss was a result of the manipulation of accounts by a third nonparty over which the defendant exercised no control]; Nat’l Market Share, Inc. v Sterling Natl Bank, 392 F3d 520 [2d Cir 2004] [an intervening defalcation by a non-party broke the causal link between the defendant’s breach and the complained-of damages and was an integral part of the proximate cause analysis]).”

“Accordingly, Lozada’s motion for an order granting him summary judgment dismissing the complaint is granted. Plaintiff’s cross motion for summary judgment in her favor is denied. The complaint against Lozada is dismissed.”