Riverdale Osborne Towers Hous. Assoc. LLC v Commonwealth Land Titles Ins. Co NY Slip Op 33840(U) June 13, 2011 Sup Ct, New York County Docket

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1 Rverdale Osborne Towers Hous. Assoc. LLC v Commonwealth Land Ttles ns. Co NY Slp Op 33840(U) June 13, 2011 Sup Ct, New York County Docket Number: /10 Judge: Judth J. Gsche Cases posted wth a "30000" dentfer,.e., 2013 NY Slp Op 30001(U), are republshed from varous state and local government webstes. These nclude the New York State Unfed Court System's E-Courts Servce, and the Bronx County Clerk's offce. Ths opnon s uncorrected and not selected for offcal publcaton.

2 [* FLED: 1] NEW YORK COUNTY CLERK 06/14/2011 NDEX NO /2010 NYSCEF DOC. NO. 26 RECEVED NYSCEF: 06/14/2011 SUPREME COURT OF THE STATE OF NEW YORK - NEW YORK COUNTY PRESENT: HON. JUDTH J. GSCHE PART \ D,1.s:e._~ ndex Number: /2010 RVERDALE OSBORNE TOWERS VS. COMMONWEAL TH LAND TTLE SEQUENCE NUMBER : 001 DSMSS NDEX NO. MOTON DATE MOTON SEQ. NO. MOTON CAL. NO. \... JM moton to/lo Notce of Moton/ Order to Show Cause - Affdavts - Exhbts... CD PAPERS NUMBERED -"' -z 0 <( "' w a: C!1 wz (.) - t== ~ "' ::::>....., 0 0 L.... w c :c w... a: a: a: 0 ~ L. w a:... >... ::::> L.... (.) w D.. "' w a: "' w <( (.) "' -z 0 t== 0 ~ Answerng Affdavts - Exhbts ~ Replyng Affdavts Cross-Moton: D Yes ' No Upon the foregong papers, t s ordered that ths moton Dated: ~\l\e'_ \ \ Check one: moton (a) end croaa-motlon(s) decded n accordance wth the annexed decson/order of even date. 0 FNAL DSPOSTON D DO NOT POST 0 SUBMT ORDER/ JUDG. 0 Check f approprate: ~tceveo JUN llaot!on SLJpp NYs SUPREME c~rut OFFCE RT- CVL SCHE J.S.C. J.. c. NON-FNAL SPOSTON 0 REFERENCE SETTLE ORDER/ JUDG.

3 [* 2] Supreme Court of the State of New York County of New York: Part ~ x RVERDALE OSBORNE TOWERS HOUSNG 1 ASSOCATES LLC, Plantff, Decson/Order -aganst- COMMONWEAL TH LAND TTLES NSURANCE COMPANY and LBERTY TTLE AGENCY LLC, Defendants. ndex# Seq. No.: / x Rectaton, as requred by CPLR 2219(a)[ of the papers consdered n the revew of ths (these) moton(s): ::. PAPERS JUN l A 2011 NUMBERED Defs N/M, ER affrm., exhs... ~... 1 ~~ :~em~, ~~d~ttf~~: ~~~k~ff-d. e ~-t~---~!~~~~~r~~l'cc;>o-~~gf,~t ~ pp 0 Pltfs Opp Memo (sep. back) Defs SL affd Def's Further Supp w/ ER affrm, exhs Gsche, J. Upon the aforementoned papers! the decson and order of the court s as follows: Ths s a breach of contract and tr~ 1 ud acton arsng from allegatons, brought by ' plantff Rverdale Osborne Towers Hous~g Assocates, LLC. ("Rverdale" or "Plantff''), that a ttle nsurer, Lberty Ttle Agency LLC. ("Lberty"), msapproprated funds held n escrow. Plantff clams that defendant C~mmonwealth Land Ttles nsurance Company ("Commonwealth") s lable to t under a ~rncpal-agent relatonshp. Presently before the court s Commonwealth's moton, purjuant to CPLR 3211, to dsmss the complant aganst t based on the theores of actuj authorty, apparent authorty and neglgent - Pagb of 0 - ;

4 [* 3] supervson. Rverdale opposes the moton to dsmss. Lberty has not answered the ' complant nor does t take any poston on.~hs moton. :1 Facts and Arguments Presented : Commonwealth s engaged n the blsness of nsurng ttle to real estate. was a Commonwealth agent pursuant to a January 7, 2001 agreement. agreement provded that: "PRNCPAL [Commonweal~h] apponts AGENT [Lberty] t agent solely for the purpose of ssung, on PRNCPAL'S forms, ttle nsurance commtments, polces and endorsements on real estate located n the State of New York." " Lberty That The agency agreement also specfcally Jrovded, under the capton "Addtonal Terms ;1 and Condtons" that: "Notwthstandng any provson heren, AGENT'S [Lberty's] authorty under ths Agreement s expressly lmted to the ssuance of ttle nsurance commtments, polces and endorsements and the collectons of Premums as set forth heren. Wthout lmtaton AGENT s not authorzed and shall not purport to:... ' d) Engage n any busness n the name of PRNCPAL except as specfcally authorzed heren;... f) Receve n the name of ~RNCPAL any funds, ncludng escrow and settlement funds;... ) ssue any commtment,! polcy or endorsement whch nsures aganst or over any:j matter by reason of an escrow depost, ndemnty agreement, letter of credt, or bond." Rverdale engaged Commonwealth, throubh ts agent Lberty, to provde ttle nsurance for real property located n the Brbwnsvlle neghborhood of Brooklyn and Commonwealth ssued a polcy thereto. n the polcy, Lberty was dentfed as - Page 2 of 0 -

5 [* 4] Commonwealth's "authorzed offcer or ag~nt" on several sgnature lnes for Lberty. On that bass, plantff alleges that at all tmes ~fter ssuance of the polcy, t acted under the reasonable belef that Lberty was authorzed to act for Commonwealth n all matters relevant to the acquston of clear ttle to the Property ncludng post-closng transactons. The plantff further alleges :that at the closng of the Property purchase, Lberty appeared as Commonwealth's ag 1 ent and partcpated n collectng documents for flng and receved the proceeds of buldng loans and equty to allow t to dsburse funds pursuant to a schedule. However, the plantff does not allege that Lberty or. Commonwealth faled to dstrbute thosj moneys properly or acted n an mproper manner wth respect to that agreement. The plantff further alleges that at the closng, Lberty also executed two recept and depost agreements n whch t agrejd to dsburse mones to pay off certan lens and encumbrances on the Property. cdmmonwealth clams that t s not a party to those agreements because Lberty s not dentfed as Commonwealth's agent. n both of them ts sgnature lne reads onlyl "Lberty Ttle Agency, LLC." The word "Commonwealth" appears only on the front page of each, ~here that word s handwrtten nto an underlned space nea) the top left hand porton of each form besde ' the word "underwrter." Plantff does not allege that Lberty or Commonwealth breached those agreements or otherwse dd anyth~g mproper wth respect to them. The plantff alleges that n addtjn to the foregong undsputed agreements, Lberty executed an agreement wth the plantff to hold an addtonal $1,324, n escrow ("Escrow Fund") for the payment bf certan dsputed lens on the Property and for accounts payable that may have otherwse resulted n lens on the Property. - Page 3 of 0 -

6 [* 5] Commonwealth clams that the only partes to the agreement dentfed by that :1 document are Lberty and the Plantff. : Furthermore, Commonwealth clams that nowhere s Lberty dentfed or lsted as 1 Commonwealth's agent. ts sgnature lne reads: "Lberty Ttle Agency" wth no ndjaton or qualfcaton that t s only actng as agent for Commonwealth or anyone else. t s n connecton wth that Escrow Fund alone that plantff alleges Lberty, and through t, ; ~ Commonwealth, commtted wrongdong. Plantff clams that Lberty dstrbutld mones from the foregong separate funds to pay off the relevant lens and debts aganst the property. Plantff alleges that Lberty dd so n ts capacty and n conjuncton wth ts role as Commonwealth's agent. Plantff further argues that Lberty was nvested or cloaked wth apparent authorty to act as Commonwealth's agent, as t s customar}t n real estate closngs for the ttle nsurer to take escrow deposts. However, Plantff:1 alleges that Lberty purportedly faled to pay out, or even return, $115,300 of the mo;hes deposted n the Escrow Fund, ceased takng phone calls, and ultmately went out of busness. After Lberty went out of busnjss, plantff contacted Commonwealth and requested that t return the $115,300 that Lberty had not dsbursed or returned. A Commonwealth offcer explaned, n correspondence to plantff, that although Lberty ;.was not Commonwealth's agent for the 1 1 performance of escrow and other servces ncdental to a pendng real estate transabton, Commonwealth dd recognze plantff's. clam to coverage of four encumbrances on the Property that were not excepted from the plantff's Commonwealth ttle nsuranbe polcy, totalng $11,526.64, and offered to pay those amounts, but dsclamed all other clams. -Pag'e4of 10- : : ;

7 [* 6] As a consequence of the foredong, plantff asserts four clams aganst Commonwealth. n the frst clam, the plj.ntff alleges that Commonwealth s lable for Lberty's alleged wrongful detenton of $115,300 from the Escrow Fund because Lberty. acted as Commonwealth's agent, wth actual authorty to do so, n connecton wth ts handlng of the Escrow Fund. n the seco~d clam, plantff alleges that Commonwealth never notfed plantff that any of Lberty's servces were outsde the scope of ts agency for Commonwealth and, therefore, Lberty had apparent authorty to act as Commonwealth's agent n regard to the Ecrow Fund. n ts thrd clam, plantff asserts that Commonwealth s lable for LbertJ.s defalcaton because Lberty's actons n ' becomng escrow agent for the Escrow Fuhd were wthn the scope of Lberty's authorty for Commonwealth and furthered CommJnwealth's busness. Plantff's fourth clam s based on allegatons that Commonwealth breached ts alleged duty to supervse ts purported agent (Lberty) n ts handlng of/the Escrow Fund. Commonwealth argues that t s enttled to dsmssal, pursuant to CPLR 3211, as plantff does not allege facts whch supjort ts allegatons that Lberty was actng as Commonwealth's agent n collectng plantff's escrow depost. Commonwealth submts ts contract wth Lberty, whch, whle ajthorzng Lberty to act as Commonwealth's agent wth respect to sellng ttle nsu~ance, expressly states that Lberty s not authorzed to "[receve n the name of [Co~monwealth] any funds ncludng escrow and settlement funds." Commonwealth arguej that plantff has not plead facts whch show that Commonwealth s lable on a theol of apparent authorty, as plantff has not alleged that Commonwealth communcatld anythng to plantff as to ts nvolvement n the escrow arrangement. - Page 5 of 0 -.f

8 [* 7] Dscusson n the context of a moton to dsjss pursuant to CPLR 3211, the court must afford the challenged pleadngs a lberal donstructon, take the allegatons as true, and - provde the pleader wth the beneft of evjry possble nference (Goshen v. Mutual Lfe ns. Co. of N.Y., 98 N.Y.2d 314, 326 [2002]; Leon v. Martnez, 84 N.Y.2d 83 [1994]; Morone v. Morone. 50 N.Y.2d 481 [1980]; Beatte v. Brown & Wood, 243 A.D.2d 395 [1st Dept. 1997]). n decdng Commonwealth's moton to dsmss, the court must consder whether, acceptng all Plantffs facts, that they support the clams asserted (Rovello v. Orofno Realty Co., 40 N.Y.2d 633, 634 [1976]) and whether they ft wthn any cognzable legal theory (Goldman J. Metropoltan Lfe 'ns. Co., 5 N.Y.3d 561 [2005]). Where the party whose pleadhgs are beng challenged submts affdavts and/or other evdentary materals n oppdston to the moton, they may be consdered to remedy any defects n the pleadng (Leon v. Martnez, 84 N.Y.2d 83, 88 [1994]). ; Thus, n order to preval on a CPLR 3211 lmoton, the documentary evdence submtted "must be such that t resolves all the factja1 ssues as a matter of law and conclusvely and defntvely dsposes of the plantff'~ clam." (Fernandez v. Cgna Property and - Casualty nsurance Company, 188 AJD.2d 700, 702 [1992]; Vandermnden v. Vandermnden, 226 A.D.2d 1037 [1996]; Bronxvlle Knolls. nc. v. Webster Town Center Partnershp, 221 A.D.2d 248. [1995]) Applyng these legal prncpals to the facts of ths case, the court's decson s as follows:! Actual Authorty An agent acts wth actual authorty when, at the tme of takng acton that has legal consequences for the prncpal, the lgent reasonably beleves, n accordance wth - Pag'e 6 of 0 -

9 [* 8] the prncpal's manfestatons to the agent. that the prncpal wshes the agent so to act. Restatement (Thrd) Of Agency 2.01 (2q06). A person manfests assent or ntenton : through wrtten or spoken words or other conduct. kt at See also Ojen v. Leber, 304 A.D.2d 484, 759 NYS2d ~53 (1 51 Dept. 2003) (prncpal's objectve manfestaton, expressed to the agent, of consent to the agency s requred.) Therefore : :: "an agent's power to bnd hs prncpal '!s co-extensve wth the prncpal's grant of authorty." Ford v. Unty Hosptal, 32 N.Yl2d 464, 472 (1973). t follows that where an agent's authorty s spelled out n a wrtten agency agreement delneatng the scope of ' ' " the agency, the terms of the agreement wll determne that ssue. See Standard. Fundng Corp. v. Lewtt, 89 N.Y.2d 546 (1997) (court looks to terms of agency agreement to determned agency's scope). Further, "one who deals wth an agent does,, :1 so at hs perl, and must make the necessary effort to dscover the actual scope of authorty." Ford v. Unty Hosptal, 32 N.Y.2d at 472. Pursuant to the agency agreement: between Lberty and Commonwealth, Lberty s Commonwealth's agent "solely for thl purpose of ssung, on [Commonwealth's] forms, ttle nsurance commtment, polcjs and endorsements on real estate... " That agreement expressly lmts Lberty's autlhorty to those matters delneated under the., ' headng "Addtonal Terms and Condtons'." That latter secton states that Lberty "s not 1 authorzed and shall not purport to... (d) [e]ngage n any busness n the name of!1 [Commonwealth] except as expressly authorzed heren" or (f) [r]eceve n the name of [Commonwealth] any funds, ncludng e~crow and settlement funds." Based on the foregong, the plantff has not pleaded facts suffcent to support a cause of acton aganst Commonwealth based upon cl~ms - Page 7 of 0 - that Lberty acted as Commonwealth's

10 [* 9] agent n connecton wth the Escrow F~nd arrangement. Although an agreement between Commonwealth and Lberty dd ndeed exst, the agency agreement establshes that Lberty w~s not authlzed to act as Commonwealth's agent. Furthermore, Lberty's actual authorty extended only to the extent that the agency agreement allowed. gran~d. Apparent Authorty Thus the moton to dsmss actons one and three aganst s! "[T]he words or conduct of a putatve agent are nsuffcent to create apparent authorty" (M Entertanment. nc. v. Leydlr, 71 AD3d 517, 520 [1st Dept 201 O], ctng Ford v. Unversty Hosp., 32 NY2d 464, f 73 [1973]). The Court of Appeals, n Ford, made clear that apparent authorty only a~ses through msrepresentatons made by the 1 prncpal to a thrd party: "The mere creaton of an agency for some purpose does not automatcally nvest the ageht wth apparent authorty to bnd the prncpal wthout lmtato 1 n. An agent's power to bnd hs prncpal s coextensve wth the prncpal's grant of authorty. One who deals wth an age~t does so at hs perl, and must make the necessary effort to dscover the actual scope of authorty. Upon falure to properly determne the scope of authorty, and n the face oflthe agent's msrepresentatons, apparent authorty s not automatcally avalable to the njured thrd party to bnd the prncpal. Rather, the exstence of apparent authorty depends upon a factual showng that the thrd party reled upon 1 the msrepresentatons of the agent because of some m$1eadng conduct on the part of the prncpal - not the agent]" (Ford, 32 NY2d at [nternal quotaton marks and ctaton omtted]; DeGluomn v. Commonwealth, ndex No /10 [S.1 Ct. N.Y. Co.]). Here Plantff does not allege that Commonwealth made any msrepr~sentatons to t, only that Commonwealth's - Page 8 of 0 -

11 [* 10] purported agent, Lberty, dd. There are 1 ho facts that Plantff or Commonwealth were ever n drect contact or that Commonwealth made any representatons to Plantff about Lberty beng ts agent. Based on the foregong, the plantff has faled to allege facts by!., whch t could recover under a theory of 1 apparent authorty, thus the second cause of acton aganst Commonwealth s dsmsseb. Neglgent Supervson of an Agent t has been stated by the Court of Appeals that a prncpal s not lable for a loss caused to another by reason of decetf~ conduct of an agent unless the decetful conduct was authorzed or apparently! authorzed. Bowers v. Merchants Mutual nsurance Co., 248 A.D.2d 1005 (1998{ See Eng v. Schenza, 21 Msc.3d.111(A) (2005) (ttle nsurance company not lable for neglgent supervson of ttle agent where agent's acts were not wthn scope of ts ~gency). Thus, the fourth cause of acton, for Commonwealth's alleged neglgent supervson of Lberty wth respect to the Escrow Fund, s dsmssed because plantff has 1 lfaled to establsh that Lberty was actng as Commonwealth's agent wth respect to th~ dsputed escrow account. Concluson n accordance wth the foregong, t s hereby: Ordered that Commonwealth Land Ttles nsurance Company's moton to dsmss the complant aganst t s grante~ and the complant s dsmssed n ts entrety as aganst Commonwealth Land Ttl~s nsurance Company, wth costs and dsbursements to sad defendant as taxed. by the Clerk of the Court; and t s further to enter judgment accordngly n favor of Commonwealth Land Ttles nsurance Company; and t s further Ordered that the clerk s drecte~ :j - Page 9 of 0 - '

12 [* 11] Ordered that the acton s sevjred and contnued aganst the remanng defendant (Lberty Ttle Agency, LLC); and t s further : Ordered that counsel for defendant Commonwealth Land Ttles nsurance Company shall serve a copy of ths orde wth notce of entry wthn (20) days of entry on plantff and defendant Lberty Ttle Agency, LLC; and t s further. Ordered that any requested relef not otherwse expressly granted heren s deemed dened; and t s further Ordered that ths consttutes the decson and order of the court. ;j Dated: New York, NY June 13, 2011 So Ordered: Hon. Judth sche, J.S.C. - Page o of o -!