Leak v RBI Assoc., Ltd  2020 NY Slip Op 50072(U) Decided on January 14, 2020 Supreme Court, Kings County Fisher, J. is the story of cupidity, stupidity and criminality.  The attorneys, however, are not held liable.

“In this action plaintiff Ernest Leak alleges causes of action primarily premised on negligence arising out of defendants’ actions regarding a loan fraudulently obtained by nonparty Salvatore Lauria in plaintiff’s name. According to plaintiff’s deposition testimony and the amended verified complaint, plaintiff, who was the owner of neighboring houses located at 212 and 214 Skillman Street in Brooklyn, contacted defendant Consumer Management Services, Inc., (Consumer) in the fall of 2010 about obtaining a reverse mortgage, but, upon learning how a reverse mortgage worked, decided he did not wish to obtain such a mortgage. Plaintiff alleged that, based on information obtained from Consumer, Lauria, who worked as a cold caller in an office operated by defendant RBI Associates, LTD, (RBI),^[FN1] a mortgage broker, appeared at plaintiff’s property and tried to interest plaintiff in obtaining a reverse mortgage. Plaintiff, however, declined to proceed with a reverse mortgage, but, after meeting Lauria several times, expressed an interest in refinancing the mortgage encumbering 212 Skillman Street. Believing that Lauria would assist him in such a refinancing, plaintiff gave Lauria his driver’s license and Social Security card.

Rather than applying for a loan refinancing the mortgage on 212 Skillman Street, Lauria, through RBI, proceeded to use plaintiff’s information to apply for a reverse mortgage loan from nonparty Live Well Financial, Inc., (Live Well) that would encumber 214 Skillman Street. Plaintiff specifically denied giving Lauria permission to apply for a reverse mortgage loan, and added that he had no interest in obtaining any loan with respect to 214 Skillman Street, which had no encumbrances on it other than liens relating to unpaid taxes and unpaid parking tickets. Live Well ultimately approved the reverse mortgage loan, and defendant Rhodora Pacis, who processed loans for RBI, and who handled the processing of the reverse mortgage loan at issue with Live Well, arranged for Grover & Fensterstock to act as Live Well’s attorney and settlement agent for the loan closing.

The closing was scheduled for January 24, 2011, at RBI’s offices, but was set at a time David Fensterstock, one of Grover & Fensterstock’s partners, could not be present. Fensterstock, who asserted that he did not always attend closings for reverse mortgages because no funds are to be disbursed at closings for such loans, arranged for Rhodora Pacis, who was a notary, to witness the signatures at the closing. Plaintiff denied being present at the closing, but someone appeared at the closing with Lauria, and presented an original driver’s license and an original Social Security card in plaintiff’s name to Pacis and signed the reverse mortgage and note using plaintiff’s name.^[FN2] Based on the testimony of plaintiff, Pacis, and Fensterstock, Fensterstock had no actual contact with plaintiff, whether by telephone or personal contact. Although Pacis, at her deposition, was never specifically asked if she knew about Lauria’s scheme, the entire tenor of Pacis’ testimony makes clear that she did not know about Lauria’s scheme, and was unaware that the person purporting to be Ernest Leak, with whom she spoke with by telephone during the loan application process and at the closing, was not the plaintiff.

Among other things, the loan closing instructions provided to Fensterstock by Live Well required that “[s]ettlement proceeds may not be wired to the borrower if the borrower’s bank account includes the name of any individuals who are not borrowers. In these situations, the proceeds must be mailed in the form of a check.” In his deposition testimony, Fensterstock asserted that, at or around the time of the closing, Pacis or another RBI employee provided him with a void check from Amalgamated in the name of “No Leak Plumbing.” Given the closing instructions, Fensterstock informed Pacis or another RBI employee, that the borrower was required to provide a void check that was solely in his name. Fensterstock thereafter received an Amalgamated check from Pacis, or the other RBI employee, that had no account name on it along with a letter purportedly signed by Ralph Scherillo, an Amalgamated assistant vice-president, indicating that Ernest Leak had a personal account with Amalgamated and was an [*2]authorized signatory on the account. Upon receiving this check and letter, Fensterstock asserted that he called Amalgamated and spoke with Ralph Scherillo, who told him that Ernest Leak was the sole signatory on the account. Based on these representations, Fensterstock, after paying the closing fees and costs paying off the liens relating to the parking tickets and unpaid taxes, wired the remainder of the loan proceeds into the account that purportedly belonged to Ernest Leak. Lauria, however, was also a signatory on the account, and he ended up transferring the loan proceeds out of the account for his own use.”

“With respect to the portion of Grover & Fensterstock’s motion addressed to the amended complaint, Grover & Fensterstock alleges that it did not owe a duty to plaintiff under the circumstances of this case. Grover & Fensterstock, which was acting as Live Well’s attorney, did not owe plaintiff a duty in that role, since, “[i]n New York, a third party, without privity, cannot maintain a claim against an attorney in professional negligence, ‘absent fraud, collusion, malicious acts or other special circumstances'” (Estate of Schneider v Finmann, 15 NY3d 306, 308-309 [2010], quoting Estate of Spivey v Pulley, 138 AD2d 563, 564 [2d Dept 1988]; Breen v Law Off. of Bruce A. Barket, P.C., 52 AD3d 635, 636 [2d Dept 2008]). As there is no evidence suggesting that Grover & Fensterstock was aware of or part of Lauria’s fraudulent scheme, none of the exceptions to the privity requirement are applicable here (see Mauro v Countrywide Home Loans, Inc., 116 AD3d 930, 933 [2d Dept 2014]; Chemical Bank v Bowers, 228 AD2d 407, 408 [2d Dept 1996]; see also Hinnant v Carrington Mtge. Servs., LLC, 172 AD3d 827, 829 [2d Dept 2019]). Moreover, in view of the general rule that a lender, absent a special relationship with a borrower, does not owe a duty to verify the identity of an imposter who obtains a loan in a plaintiff’s name (see Landino v Bank of Am., 52 AD3d 571, 574-575 [2d Dept 2008]; Beckford v Northeastern Mtge. Inv. Corp., 262 AD2d 436, 436 [2d Dept 1999]; Polzer v TRW, Inc., 256 AD2d 248, 248 [1st Dept 1998]; Banque Nationale de Paris v 1567 Broadway Ownership Assocs., 214 AD2d 359, 360 [1st Dept 1995]; see also Sullivan v MERS, Inc., 139 AD3d 419, 420 [1st Dept 2016]; Burger v Singh, 28 AD3d 695, 697-698 [2d Dept 2006]), there is no basis for imposing such a duty on Grover & Fensterstock based on its acting as Live Well’s attorney (Chemical Bank v Bowers, 228 AD2d at 408).

Grover & Fensterstock, however, also acted as the settlement agent for Live Well. With respect to the disbursement of loan proceeds placed in its hands, a settlement agent acts as an escrow agent (see Mauro, 116 AD3d at 933; Cash v Titan Fin. Servs., Inc., 58 AD3d 785, 789 [2d Dept 2009]). “An escrow agent . . . becomes a trustee of anyone with a beneficial interest in the trust with the duty not to deliver the escrow to anyone except upon strict compliance with the conditions imposed. Thus, an escrow agent can be held liable for . . . breach of fiduciary duty as escrowee” (Takayama v Schaefer, 240 AD2d 21, 25 [1998] [internal quotation marks and [*4]citations omitted]).^{[FN4] “}

“Without any connection to plaintiff, Grover & Fensterstock had no special relationship with plaintiff that would impose a duty on it to exercise due care with respect to protecting plaintiff from an imposter. Indeed, it would be anomalous to find that Grover & Fensterstock owed such a duty in the face of the above noted case law finding that a lender itself owes no such duty under like circumstances (Iglesias, 206 Md App at 660, 51 A3d at 72; see Landino, 52 AD3d at 574-575; Beckford, 262 AD2d at 436; Polzer, 256 AD2d at 248; Banque Nationale de [*5]Paris, 214 AD2d at 360; see also Sullivan, 139 AD3d at 420; Burger, 28 AD3d at 697-698).^[FN6] As Grover & Fensterstock has submitted evidentiary proof showing that it did not owe a duty to plaintiff arising out of plaintiff being the beneficiary of the funds being disbursed or owe a duty to plaintiff based on a special relationship, Grover & Fensterstock has demonstrated its prima facie entitlement to dismissal of any claim based on negligence or the violation of a fiduciary duty arising out of its role as settlement agent (see M.E.W.N., Inc., 78 AD2d at 637; Iglesias, 206 Md App at 659-660, 51 A3d at 71-72; see also Saul v Cahan, 153 AD3d 947, 949 [2d Dept 2017]; Palmetto Partners, L.P. v AJW Qualified Partners, LLC, 83 AD3d 804, 807 [2d Dept 2011])”