It is ordered that the motions numbered 8,9 and 10 on the motion calendar for February 16, 2010 are determined together as follows:

On May 27, 2009, plaintiffs purchased the real property known as 122-21 161st Place, Jamaica, New York, improved by a two-family dwelling, from defendants Herman Neufville and Yvonne Neufville, financed with a mortgage loan in the principal amount of $543,192.00, plus interest, obtained from defendant Premium. Plaintiffs allege that defendant Andrew Beadle was the real estate broker and mortgage broker who arranged the purchase from defendants Neufville and the mortgage loan from defendant Premium, a limited liability company operating under the trade name "Top Dot Mortgage." Defendant Wells Fargo allegedly holds the Premium mortgage and underlying note pursuant to an assignment. Plaintiffs also allege that defendant AGMB, a [*2]law firm, simultaneously represented them and defendants Beadle and Premium in connection with the purchase and loan transactions.

Plaintiffs commenced this action by filing a copy of the summons and complaint on June 24, 2009, alleging they were fraudulently induced into making the purchase and entering into the mortgage loan with Premium, based upon omissions made by defendants, acting in concert. Plaintiffs alleged that defendants wrongfully failed to disclose to them that the property was encumbered by two residential tenant leases, and charged them inflated closing costs. Plaintiffs also alleged that defendants, in violation of 18 USC § 1001, prepared and filed a HUD-1 settlement statement, falsely stating plaintiffs had paid $31,937.17 towards the purchase price, and failing to list a $25,000.00 cash payment by defendants to plaintiffs following the closing. In addition, plaintiffs alleged that defendant AGMB breached its fiduciary duty owing to them, by engaging in multiple client representation, without making plaintiffs aware of the resulting conflict of interest, or taking any measures to resolve the conflict. Plaintiffs also allege that defendant Premium "wrongfully" assigned the mortgage to defendant Wells Fargo. In the prayer for relief in the complaint, plaintiffs demanded a permanent injunction, "vacating the deed, note and mortgage" and an award of damages, including punitive damages, and costs and disbursements, including attorneys' fees.

Plaintiffs thereafter obtained the instant order to show cause dated July 8, 2009, seeking preliminarily to enjoin defendants from collecting any mortgage payments from plaintiffs pending further order of the court. Defendants Wells Fargo and AGMB oppose the motion by plaintiffs, and in lieu of serving an answer, each move to dismiss the complaint asserted against it. Defendant Premium opposes the motion by plaintiffs, and plaintiffs oppose the motions by defendants Wells Fargo and AGMB.

" On a motion to dismiss the complaint pursuant to CPLR 3211(a)(7) for failure to state a cause of action, the court must afford the pleading a liberal construction, accept all facts as alleged in the pleading to be true, accord the plaintiff the benefit of every possible inference, and determine only whether the facts as alleged fit within any cognizable legal theory" (Breytman v Olinville Realty, LLC, 54 AD3d 703, 703-704 [2008]; see Nonnon v City of New York, 9 NY3d 825, 827 [2007]; Leon v Martinez, 84 NY2d 83, 87 [1994]; Smith v Meridian Tech., Inc., 52 AD3d 685, 686 [2008]). On a motion to dismiss based upon documentary evidence [under CPLR 3211(a)(1)], dismissal is only warranted if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law' (Klein v Gutman, 12 AD3d 417, 418 [2004]; see CPLR 3211[a][1]; Goshen v Mutual Life Ins. Co. of NY, 98 NY2d 314, 326 [2002]; Ballas v Virgin Media, Inc., 60 AD3d 712, 713 [2009]; McMorrow v Dime Sav. Bank of Williamsburgh, 48 AD3d 646, 647 [2008])" (Moore v Liberty Power Corp., LLC, ___ AD3d ___, 2010 WL 1379904, 2010 NY App Div LEXIS 2878).

For a preliminary injunction, a movant must establish (1) a likelihood or probability of success on the merits, (2) irreparable harm in the absence of an injunction, and (3) a balance of the equities in favor of granting the injunction (see CPLR 6301; Doe v Axelrod, 73 NY2d 748, [*3]750 [1988]; W.T. Grant Co. v Srogi, 52 NY2d 496, 517 [1981]).

In support of their motion for a preliminary injunction, and in opposition to defendants' motions, plaintiffs offer, among other things, their own combined affidavit dated June 24, 2009, the affirmation of their counsel, the affidavits of plaintiff Berrocal dated August 4 and 28, 2009, and a copy of an unsigned contract of sale for the subject real property purportedly provided to them by defendant Beadle. They, however, have not provided a copy of any executed contract of sale, and do not state the amount of the property's purchase price. Furthermore, to the extent defendant Premium offers an executed copy of the same contract of sale, plaintiff Aurea E. Berrocal asserts that the signatures of plaintiffs which appear thereon are forgeries.

Plaintiffs state in their affidavit dated June 24, 2009 that defendant Beadle "convinced" them they did not need an independent attorney, but rather could rely upon AGMB, the attorneys for Premium/Top Dot. Plaintiffs also state they met, for the first time, the attorney "assigned" to them at the closing, and her name was "Miranda Sookra Esq." They further state that Beadle and Premium were also represented by AGMD.

Plaintiffs admit they signed a promissory note and mortgage in the principal amount of $543,192.00, plus interest, and received the deed. They deny having paid any down payment, or having paid the sellers the sum of $31,937.17, and claim to have received $25,000.00 in cash from defendant Beadle following the closing. They also claim that defendants assured them at the closing that the tenants in possession of the property would be vacating it, but thereafter learned the tenants had leases for the premises from defendant Yvonne Neufville, and did not intend to vacate the property. Plaintiffs further claim that defendants did not disclose the existence of the leases, and that the rental income from the tenants is insufficient to pay the monthly mortgage installment amount. They additionally claim that $22,557.16 in inflated costs were charged to them, and were added to and became part of the mortgage principal.

According to plaintiff Berrocal, after the closing, "Miranda" gave them a folder of documents labeled "Abrams Garfinkel Margolis Bergson LLP," with the surname "Sookra" handwritten on the folder jacket. Plaintiff Berrocal states that at that point Miranda informed them she worked at an office called "Malik & Associates." Plaintiffs assert they never retained Malik & Associates for any purpose, or gave any money to Miranda or Malik & Associates for any purpose. They also assert that they "believe" Miranda was employed as a per diem employee of AGMB and that both defendant AGMB and Top Dot have the same street address, i.e., 125 Jericho Turnpike, Jericho, New York, as their office address.

Defendant AGMB asserts that the complaint fails to state a cause of action against it. It contends that it represented defendant Premium in connection with the mortgage loan transaction, and did not represent plaintiffs in relation to the purchase of the property or the mortgage loan transaction. According to defendant AGMB, it owed no duty to disclose information to plaintiffs, and in fact, did not provide any legal advice to plaintiffs. In addition, defendant AGMB asserts that to the extent someone named "Miranda" is alleged by plaintiffs to [*4]have made misrepresentations to them, it did not employ her, and is not vicariously liable for any misrepresentations made by her. It also asserts that it is not vicariously liable for alleged misrepresentations made by defendant Beadle. In support of its motion, it offers, among other things, the affidavits of Debbie Raynor, Esq., an associate with defendant AGMB, Neil Garfinkel, Esq., a partner of AGMB and copies of an attendance sheet, an escrow check dated May 27, 2009 from defendant AGMB in the amount of $1500.00 made payable to Malik & Associates, P.C., an email dated May 6, 2009 to Ms. Raynor, and a check disbursement list executed by plaintiffs.

Ms. Raynor states that she appeared at the closing on behalf of AGMB as counsel for defendant Premium. She also states that a woman named "Miranda," who identified herself as representing Malik & Associates, also attended the closing. According to Ms. Raynor, three weeks before the closing, she had received an email from John Viteritti, a sales director for Top Dot, indicating plaintiffs were represented by "Malik & Associates." Ms. Raynor states that all persons attending the closing were asked to sign a closing attendance sheet, and that the name "Miranda" appears below the name "Malik & Assoc." under the heading "Borrower(s) Attorney" (sic). She also states that at the time of the closing, Malik & Associates, P.C. was issued a check in the sum of $1,500.00 out of the mortgage proceeds as its fee for representing plaintiffs. Ms. Raynor further states that during the closing she provided no advice or guidance to plaintiffs.

Mr. Garfinkel states that AGMB never employed anyone by the name "Miranda Sookra."

Defendant Wells Fargo also asserts the complaint fails to state a cause of action against it based upon fraudulent inducement insofar as it is the assignee of the Premium mortgage and underlying note, and plaintiffs make no claim that Wells Fargo had any relationship to plaintiffs at the time of the purchase of the property and making of the mortgage loan. Defendant Wells Fargo also contends that the complaint fails to state a cause of action against it for an alleged violation of General Business Law § 349.

Defendants Premium asserts that defendant Beadle has never been an employee of defendant Premium, and that to the extent Beadle made any false misrepresentations to plaintiffs in relation to the mortgage loan, it is not liable for such misrepresentations. Defendant Premium also asserts that plaintiffs tendered a down payment, by means of an official Citibank check dated May 21, 2009, six days prior to the closing, made payable to "GEORGE ALDERDICE AS ATTORNEY," in the amount of $32,000.00, and that the check indicates that the name of the remitter was "A. Elena Berrocal." It further asserts that the complaint fails to state a cause of action based upon an alleged violation of General Business Law § 349. Defendant Premium offers the affidavits of Kolman Brown, a vice president for Top Dot, and Rachel Brechner, the director of human resources for Top Dot, to show defendant Beadle was not an employee, or a vendor or independent contractor used by Top Dot.

In this instance, the fraudulent inducement cause of action in the complaint against [*5]defendants Wells Fargo and AGMB is based, in part, upon plaintiffs' claim that defendants AGMB, Beadle, Premium, Herman Neufville and Yvonne Neufville failed to disclose to plaintiffs the existence of tenant leases encumbering the property. Although defendant Wells Fargo is not alleged to have itself perpetrated the fraud, it admittedly is the assignee of the Premium mortgage and underlying note. It is well settled that an assignee of a mortgage takes it subject to the equities attending the original transaction, and consequently, an assignee takes the mortgage subject to the mortgagor's action for fraud, even where the assignee is a bona fide purchaser for value (see Lapis Enterprises. Inc. v International Blimpie Corp., 84 AD2d 286 [1981]). Nevertheless, the essential elements of a cause of action sounding in fraud are 1) a misrepresentation or a material omission of fact which was false and known to be false by the defendant, 2) made for the purpose of inducing the other party to reply upon it, 3) justifiable reliance of the other party on the misrepresentation or material omission, and 4) injury (see Colasacco v Robert E. Lawrence Real Estate, 68 AD3d 706 [2009]; Orlando v Kukielka, 40 AD3d 829, 831 [2007]). When the cause of action alleging fraud is predicated on acts of concealment, the plaintiff must also allege that the defendant had a duty to disclose the disputed information (see Spencer v Green, 42 AD3d 521 [2007]). Furthermore, CPLR 3016(b) provides, in relevant part, that "[w]here a cause of action or defense is based upon misrepresentation, fraud, mistake . . . the circumstances constituting the wrong shall be stated in detail."

Because plaintiffs admittedly knew the tenants were in possession of the property prior to the closing of the purchase and the loan, plaintiffs were obligated to perform minimum due diligence in investigating whether the tenants had leases or other possessory rights which could survive the closing (see Williamson v Brown, 15 NY 354, 362 [1857]; Vitale v Pinto, 118 AD2d 774 [1986]). Thus, plaintiffs' alleged reliance upon the silence of defendants AGMB, Beadle, Premium, Herman Neufville and Yvonne Neufville concerning the existence of leases encumbering the property must be considered unreasonable as a matter of law (see Orlando v Kukielka, 40 AD3d 829, 831 [2007]).

To the extent plaintiffs now allege an oral assurance was made to them at the closing by defendants that the tenants would vacate the premises after the closing, such allegation lacks sufficient detail so as to form a foundation for a claim of fraudulent inducement (CPLR 3016). Furthermore, as a matter of law, plaintiffs cannot be considered to have justifiably relied upon such oral assurance as an inducement to purchase the property. This conclusion is particularly true where plaintiffs admit they did not receive keys to the property at the closing. Plaintiffs, moreover, make no claim that they relied upon any written representations concerning the existence or nonexistence of leases, or the vacatur or surrender of the premises by the tenants, including any representations in the unsigned or signed copies of the contract of sale presented herein.

Plaintiffs allege the HUD-1 statement falsely states they paid $31,937.17 in cash to the sellers towards the purchase, when they did not. They, however, do not deny they executed the HUD-1 statement underneath the preprinted statement that: [*6]

"I have carefully reviewed the HUD-1 Settlement Statement and to the best of my knowledge and belief, it is a true and accurate statement of all receipts and disbursements made on my account or by me in this transaction. I further certify that I have received a copy of the HUD-1 Settlement Statement."

Plaintiffs make no claim that they asked for the HUD-1 statement to be corrected to omit the reference to the payment of $31,937.17 in cash to the sellers, or list the alleged disbursement of $25,000.00 in cash to them. In addition, plaintiffs have failed to allege a basis for their claim that it was "wrongful" for any of defendants to have given them $25,000.00 in cash following the closing. Although at least one court has criticized the concept of sellers' concessions when the amount financed exceeds the true purchase price (see Homes-R-Us of NY, Inc. v Cunningham, 21 Misc 3d 1110[A] [2007]), plaintiffs do not make any allegation that the purported $25,000 cash payment played a factor in setting the purchase price or in the sellers making concessions as part of any fraudulent scheme by defendants.

Furthermore, plaintiffs have failed to allege the manner in which the purported inaccuracies in the HUD-1 statement caused injury to them, or may serve to provide a basis for a claim for damages or rescission of the deed, mortgage and note. Although plaintiffs allege the violation of 18 USC § 1001, such federal statute imposes criminal liability for making false statements to federal investigators and federal agencies. There is no private right of action under section 1001 (see Ng v HSBC Mortg. Corp. 2010 WL 889256, [ED NY 2010]; Williams v McCausland, 791 F Supp 992 [SD NY 1992]).

Likewise plaintiffs have failed to allege sufficient acts to predicate a cause of action for fraud against defendants AGMB and Wells Fargo to satisfy CPLR 3016 based upon "inflated" closing costs. Although there are various statutes and regulations which govern the making of certain types of loans and loan disclosures, and the charging of settlement costs (see e.g. Banking Law § 6-l; Federal Truth in Lending Act [15 USC § 1601 et seq.] [TILA]; the Home Ownership and Equity Protection Act of 1994 [15 USC § 1639] [an amendment to TILA]; the TILA implementing regulations, [found in Federal Reserve Board Regulation Z (Regulation Z) at 12 CFR 226]; the Real Estate Settlement Procedures Act [RESPA], [12 USC § 2601 et seq.]; RESPA's corresponding regulation at 24 CFR § 3500.1 et seq. [Regulation X]), plaintiffs make no claim that such statutes and regulations were violated, and moreover, have not alleged the manner in which the closing or settlement costs were "inflated." To the extent plaintiffs assert that the loan origination fee, loan discount fee and mortgage insurance premium were incorporated into the principal amount of the mortgage loan, plaintiffs fail to allege such incorporation is illegal or in violation of any statute. Nor do plaintiffs allege that defendant Premium provided them with a good faith estimate of settlement services in advance of the closing, and deliberately underestimated settlement costs to induce them to obtain a loan from it, rather than from a competing lender (cf. Dobroshi v Bank of America, N.A., 65 AD3d 882 [2009]).

In addition, to the extent plaintiffs allege defendant Premium "wrongfully" assigned its [*7]interest in the mortgage to defendant Wells Fargo, plaintiffs have failed to allege the manner in which the assignment was "wrongful." Thus, the allegation, without more, does not state a claim against defendant Wells Fargo.

To the extent plaintiffs allege that defendants AGMB and Wells Fargo violated General Business Law § 349, that section prohibits deceptive business practices and acts. The elements of a claim based upon a violation of section 349 are: (1) a deceptive consumer-oriented act or practice which is misleading in a material respect, and (2) injury resulting from such act (see Stutman v Chemical Bank, 95 NY2d 24, 29 [2000]; Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 25 [1995]; Andre Strishak & Associates, P.C. v Hewlett Packard Co., 300 AD2d 608 [2002]). An act is deceptive if it is likely to mislead a reasonable consumer acting reasonably under the circumstances (see Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 26, supra ). The act need not constitute common-law fraud to be actionable (see Stutman v Chemical Bank, 95 NY2d 24, 29, supra ). The gravaman of plaintiffs' complaint is that defendants fraudulently induced them to purchase the property and finance it with a loan from defendant Premium. Such claim does not amount to conduct which affects the consuming public at large, but rather, is outside the ambit of the statute (see Brooks v Key Trust Co. Nat. Assn., 26 AD3d 628 [2006]; cf. Popular Financial Services, LLC v Williams, 50 AD3d 660 [2008]; Delta Funding Corp. v Murdaugh, 6 AD3d 571 [2004]).

To the extent plaintiffs allege defendant AGMB breached a fiduciary duty owing to them by engaging in multiple client representation of them and Beadle and Premium, which posed a conflict of interest, plaintiffs have failed to offer a factual basis for their claim that they had an attorney-client relationship with defendant AGMB. That defendants AGMB and Premium both maintain offices at the same building at 125 Jericho Turnpike, Jericho, New York is an insufficient basis upon which to allege that "Miranda" was an attorney employed by defendant AGMB. Moreover, to the extent plaintiffs allege they did not "give" Malik & Associates any funds, the check disbursement list, executed by plaintiffs, indicates they authorized and directed the disbursement of $1,500.00 from the mortgage proceeds to "Malik & Associate, P.C.," among other disbursements.^[FN1] In any event, plaintiffs make no claim against defendant AGMB based upon breach of fiduciary duty as the settlement agent with respect to the transaction (cf. Cash v Titan Financial Services, Inc., 58 AD3d 785 [2009]). In the absence of any fiduciary duty owing to plaintiffs as an attorney or a settlement agent, defendant AGMB owed no duty of disclosure or care relative to the purchase and loan (see Velazquez v Decaudin, 49 AD3d 712 [2008]).

Under such circumstances, the motions by defendants Wells Fargo and AGMB to dismiss the complaint asserted against them are granted. [*8]

With respect to the motion by plaintiffs for a preliminary injunction, plaintiffs allege that defendant Wells Fargo is the holder of the subject mortgage and note, and makes no claim that any other defendant has sought to recover mortgage payments from them. In view of the dismissal of the complaint asserted against defendant Wells Fargo, the motion by plaintiffs for a preliminary injunction is denied.

Dated: April 23, 2010

J.S.C.