Plaintiff HSBC Bank USA (Bank) brought suit against Strong Steel Door Corp (Strong), and its principal, Feng Qing Wei a/k/ David Wei (Wei), (Strong Defendants), to recover sums due upon a $300,000 Business Revolving Line of Credit initiated on May 2, 2005 (BRLOC) and [*2]upon a separate Line of Credit initiated on January 10, 2007, in the principal amount of $500,000 (LOC), upon which Strong defaulted. Wei guaranteed repayment of both lines of credit. Subsequent to the Bank's commencement of suit, Strong and Wei, together with Yatin Realty LLC, which owned vacant real property sought to be improved, and is also wholly owned by Wei (Yatin), brought suit against the Bank claiming that the Bank had breached its contract to provide financing to Yatin for the construction and development of Yatin's vacant property on Sutter Avenue, Powell Street and Junius Street in Brooklyn. The two cases were joined for trial which commenced on March 1, 2012, and concluded on April 24, 2012.

At the conclusion of the evidence, and following summations, the Court made rulings from the bench granting dismissal of the Strong Defendants' first, second, third, fifth and sixth affirmative defenses and granting judgment to plaintiff HSBC against both defendants on its first cause of action for breach of the BRLOC in the sum of $275,193.22, based upon the stipulation of the parties as to the balance due, together with interest at 3% from December 29, 2008 to September 30, 2010 and at the rate of 7.75% from October 1, 2010 to entry of judgment. HSBC was awarded reasonable attorney's fees in conformity with the terms of the contract, but the assessment of such fees was reserved pending the determination of claims relating to the LOC. Plaintiff's remaining causes of action relating to the BRLOC were dismissed as moot. The Court reserved decision on HSBC's fourth cause of action for sums alleged to be due upon the LOC, and upon defendants' related fourth and seventh affirmative defenses alleging that HSBC had deliberately caused defendants to default by wrongfully sweeping all funds from their accounts on the day prior to the due date of the interest payments which were to be routinely deducted from those accounts. With respect to Yatin and Strong's action against HSBC, seeking specific performance and damages relating to the Bank's alleged failure to close upon a commitment to provide construction funding, the Court dismissed the third, fourth, fifth, sixth and eighth causes of action as not supported by the evidence, finding that Yatin had permitted the funding commitment to lapse, though it had been granted extensions, and had been apprised of the imminent expiration of the commitment, but failed to close. The Court reserved decision upon the first cause of action, seeking recovery of fees paid to the Bank in consideration of the processing of its application, and upon the second and seventh causes of action, alleging that Strong had been fraudulently induced to accept the $500,000 LOC upon the understanding that such loan would be later converted to a permanent loan, as part of the construction financing sought by Yatin, upon more favorable terms, and seeking specific performance as to that understanding. The parties were afforded the opportunity to submit post-trial briefs on the limited issues to be determined.

The Bank processed the accepted Proposal and, by letter dated April 26, 2006, informed Yatin (c/o Strong Steel Door Corp.) that the Bank had approved the loans as described in the earlier Proposal and, upon execution of a copy of the letter and payment of $30,250 (a $28,750 commitment fee and $1,500 against bank closing costs), the Bank would proceed. Although the letter ("the commitment") stated that it must be executed by May 11, 2006, Wei signed the letter on June 8, 2006, and did not forward the additional fees until June 9, 2006, explaining that he had delayed in order to obtain the modification to the $2.3 million construction-only loan that was never forthcoming. Nonetheless, the Bank proceeded and, after extending the original expiration date of June 26, ultimately advised Wei that a closing must be held by October 19, [*4]2006, or the commitment would expire.^[FN1] As the Court ruled at the close of the evidence, Yatin, though represented by counsel and fully advised of the urgency of acting, permitted the commitment to lapse. Thus, although Yatin and Strong argue that the conditional promise contained in the commitment that, "[d]uring the Land Loan and Construction Loan term and provided Borrower and the Guarantors are not in default under this Loan or under any other obligations to the Bank, Borrower shall have the option to convert the Land Loan and Construction Loan into a Permanent Loan in the amount of $2,300,000.00 for a ten (10) year term upon (i) completion of the Project and issuance of a certificate of occupancy", should permit the conversion of the LOC to a permanent mortgage loan, no such loans were made because Yatin permitted the commitment to lapse.^[FN2]It is noted that the conversion available under the terms of the commitment requires completion of the Project and issuance of a certificate of occupancy, of which there is no evidence.^[FN3]

[*5]The $500,000 LOC

The LOC, entered on January 7, 2007, is a demand revolving credit note that Wei and Strong claim was accepted by Strong as an alternative to the $500,000 Land Loan upon Siu and Lee's representations that this sum could be used for initial construction costs and would later be supplemented with construction funding. Wei testified that Henry Lee told him, notwithstanding the representation in the application, prepared by Henry Lee and executed by Wei on October 31, 2006, that the purpose of the LOC was "working capital", the $500,000 could be applied to construction and that, at the conclusion of the project, the $1.8 million construction funding would be combined with the $500,000 LOC in a $2.3 million "housing loan". Mr. Wei's testimony is substantially corroborated by the testimony of Henry Lee.^[FN4] The evidence, both documentary and verbal, establishes that the LOC was presented to Strong and Wei, by the agents of HSBC, in the expectation that the funds would be used by Yatin for the construction of its building. At the time Wei took the LOC on Strong's behalf, the entire BRLOC, $300,000, was available to Strong ^[FN5], which did not need the additional funding for working capital. Wei testified that both the BRLOC and the LOC funds were actually used for the construction.

An internal Bank document, dated June 30, 2008, assessing Yatin and Strong's eligibility for a further loan, in addition to indicating a deteriorating financial condition and the failure to clean up the LOC since its inception in 2007 (although Wei did make a cash payment, on July 17, 2008, of $100,000 against principal, which was applied to the LOC balance, and continued to make timely interest payments which the Bank accepted), and the failure to supply financial statements, specifically noted that Wei had threatened the Bank with a "malicious" and meritless lawsuit, demanding the return of the fees paid in processing the Yatin loan application that he had failed to close (Joint Exhibit 50). Strong argues that the demand for payment in December 2008 was motivated by the Bank's bad faith desire for retribution for these threats and for Wei's refusal to acknowledge the lapse of the construction financing commitment to Yatin, however, the Court finds more than sufficient evidence to support the Bank's concerns regarding Strong's financial health so as to defeat Strong's claim of bad faith.

It is noted that, irrespective of the particular events of default that gave rise to the Bank's decision to demand payment in full of the balance of the LOC, the LOC provides, in bolded capital letters immediately above the borrower's signature:

"THE BORROWER AND EACH ENDORSER AND GUARANTOR ACKNOWLEDGE THAT THIS NOTE IS A DEMAND NOTE AND THE RIGHT OF THE BANK TO DEMAND PAYMENT OF THIS NOTE IN WHOLE OR IN PART AT ANY TIME SHALL BE ABSOLUTE, UNCONDITIONAL AND IN THE SOLE DISCRETION OF [*7]THE BANK. THE INCLUSION OF EVENTS OF DEFAULT AND COVENANTS IN ANY LOAN DOCUMENTS BETWEEN THE BANK AND THE BORROWER OR ANY ENDORSER OR GUARANTOR OR OTHER PARTY DELIVERED IN CONNECTION WITH THIS NOTE OR OTHERWISE SHALL NOT IN ANY WAY LIMIT THE DEMAND NATURE OF THIS NOTE AND THE BANK MAY MAKE DEMAND FOR PAYMENT AT ANY TIME FOR ANY OR NO REASON, WHETHER OR NOT AN EVENT OF DEFAULT HAS OCCURRED UNDER ANY SUCH LOAN DOCUMENTS."

Thus, whether or not Strong had defaulted upon the LOC, is irrelevant, since the Bank had a right to demand payment in full at any time.

Strong insists that the inadequate notice of December 29, 2008, is fatal to the Bank's claim to recover the funds advanced under the LOC. In fact, at the close of trial, this Court ruled that the December 29 notice was ineffective as a notice of default with respect to the LOC. However, the February 9 notice was clearly sufficient in demanding full payment of the balance due on that loan. The fact that the sum stated to be due is slightly higher than the sum stipulated at trial does not defeat the effectiveness of the demand for payment. Thus, the Court finds that the Bank made a proper demand for full payment of the entire balance of the LOC effective February 9, 2009, though Strong was not in default of interest payments due at that time.

Under the terms of both the BRLOC and the LOC, the Bank's sweep of funds in Strong's accounts was authorized, without prior notice, whenever a payment was required to be made. Of course, it is the Strong Defendants' contention that no payment would have been due to the Bank, so as to warrant the sweep, if the sweep had not occurred. However, the acceleration and demand for payment in full was based, according to the notice of December 29, 2008 and the testimony of Morrigia, not on the failure to make the interest payments due on February 5, 2009, but upon Strong's failure to provide financial statements, provide access to the assets which provided collateral for the loans and to annually "clean up" the loan balance as required under the terms of both the BRLOC and the LOC, which Strong and Wei had been repeatedly solicited to do and had failed to address. As there is no evidence to contradict these allegations of default, they are deemed to be established. Although the December 29 notice was ineffective as to the LOC, that notice was effective with respect to the balance due under the BRLOC, so that the sweep of funds on February 4, 2009, was not premature in that payment of the BRLOC balance was already past due.

Whereas, pursuant to the terms of the written LOC agreement, HSBC was entitled to demand payment in full at any time for no reason, HSBC has established its entitlement to judgment on its fourth cause of action for breach of the LOC contract in the stipulated sum of $399, 750.77. Strong's affirmative defenses four and seven, claiming that the Bank's bad faith in sweeping its accounts, thereby causing its default upon the interest payments due, requires that the Bank be equitably estopped from recovering upon the LOC, are dismissed.

Strong argues, in support of its seventh cause of action, that the Bank fraudulently induced it to accept the $500,000 LOC by promising to convert the LOC balance into a permanent ten-year loan under the Yatin commitment, and, in its second cause of action, seeks specific performance converting the LOC balance to a permanent ten-year mortgage. However, Yatin and Wei willfully failed to close upon the construction commitment, though duly cautioned of its imminent expiration, and there is no contract to support Strong's demand that the LOC be [*8]converted into a long-term loan ^[FN8]. A condition precedent to any claim either Strong or Yatin might have had to conversion of the LOC was the closing of the construction loan offered to Yatin by the Bank. The evidence clearly establishes that the Bank fully performed upon its obligations to Yatin by processing its application for the loan and was willing, indeed, eager, to close, even after the commitment had , by its terms, expired. Yatin, however, did not perform and would not be entitled to recover non-refundable fees paid in obtaining the Bank's commitment.

However, in light of the language in the March 24 Proposal, indicating that any unused portion of the $11,500 deposit would be returned, and the Bank's failure to provide evidence of the actual costs of processing the initial Yatin loan application, Yatin is granted judgment on its first cause of action to recover the fees paid in consideration of the initial processing of its loan application in the amount of $11,500, plus the $800 Yatin paid to the Bank for the 2008 "survey" performed by HiRise Engineering after the commitment had expired and when no new application was pending. The commitment fee of $28,750 required by the Acceptance of the Proposal dated April 26, 2006, was non-refundable, and, under the terms of the accepted Proposal, were deemed "earned". The bills in evidence for inspections, appraisals, and other investigations corroborate that it was "earned". Accordingly, upon its first cause of action seeking the return of funds paid to the Bank for processing the Yatin loan application, plaintiff Yatin is awarded judgment for $12,300, with interest from April 7, 2008. A written contract must be enforced in accordance with its unambiguous terms (Greenfield v Philles Records, Inc., 98 NY2d 562, 569 [2002]).

Strong's second cause of action, seeking specific performance under the terms of the Yatin commitment, to the extent of the balance remaining on the LOC, is also dismissed as no enforceable contract supports such cause of action.

By Wei's own admission, the LOC funds were drawn and used, apparently for construction. To permit Strong to defeat the Bank's right to recover on its contract would unjustly enrich Strong. Wei claims that he was fraudulently induced to take the LOC funding by HSBC's agents, Lee and Siu, contending that he did not understand the documents he signed. But it is not disputed that Lee spoke to Wei in the Mandarin dialect and was present with Siu, who did not speak Chinese, to translate. Both Lee and Siu testified that they had explained the Yatin loan commitment to Wei and did not represent that the commitment would be restructured [*9]or suggest to Wei that he should not close on the Yatin loan before closing on the LOC. It is also noted that, during trial, although Wei testified through an interpreter, he frequently responded to questions in English. Moreover, Mr. Wei is a very successful businessman, operating a multi-million-dollar business with contracts in the public-sector, including the New York City Board of Education, Parks Department and Economic Development Corporation, all of which require public bidding and extensive documentation. The LOC is a business line of credit; all of the loans at issue here are business loans, made for business purposes. A sophisticated businessman, like Mr. Wei, who had legal counsel representing him, both with respect to the Yatin construction loan and, subsequent to the expiration of that commitment, in continuing negotiations with the Bank, is presumed to understand a contract he executes and "is conclusively bound to its terms absent a valid excuse for having failed to read it" or have it read to him (Guerra v Astoria Generating Company, L.P., 8 AD3d 617 [2d Dept 2004]).

Moreover, as the Bank has vigorously argued, the LOC contains a merger clause which would preclude the use of parole evidence to modify or vary the express provisions of the written agreement (Kim v Frank H Truck Corp., 81 AD3d 586 [2d Dept 2011]). However, by its very nature, proof of fraud in the inducement of the contract itself necessarily requires parole evidence extraneous to the terms of the written contract.

The elements of fraudulent inducement are a knowingly false representation, intended to deceive, which is justifiably relied upon, causing injury(Channel Master Corp v Aluminum Limited Sales, Inc., 4 NY2d 403, 407 [1958]; Gaidon v Guardian Like Ins. Co., 94 NY2d 330, 348 [1999]). "A party alleging fraud in the inducement bears the burden of proving the elements thereof by clear and convincing evidence'"(State of New York v Industrial Site Services, Inc., 52 AD3d 1153, 1157 [3d Dept, 2008], quoting Callahan v Miller, 194 AD2d 904, 905 [3d Dept 1993], quoting Chopp v Welbourne & Purdy Agency, 135 AD2d 958, 959 [3d Dept 1987]). Strong has failed to sustain this burden.

The credible evidence is that Lee and Siu did not affirmatively represent to Wei that the LOC would definitely be converted to a permanent loan and did not induce Wei, as principal of Strong and Yatin, to take the LOC as an alternative to the already-lapsed Yatin construction loan commitment on the promise that the LOC would be subsequently merged into a "restructured" Yatin construction loan. Even if such a possibility was suggested, there is no reasonable basis for Wei's reliance upon such conversations in light of the language of the written documents he signed and given his representation by counsel, who failed to contact the Bank regarding such "restructuring" until the commitment was on the verge of expiration, and failed to even respond to the Bank's urgent pleas to set a closing date because of the imminent expiration of the commitment. It is clear from the evidence that Wei and Strong got exactly what they bargained for in executing the LOC loan agreement and, only after they found their financial circumstances had changed, was there any attempt to obtain the benefit of the proposed Yatin loan commitment, a year and a half after in had expired. The Court finds no fraud in the inducement of the LOC and dismisses the seventh cause of action in the Strong complaint as unproved.

Attorney's Fees

Both the BRLOC and the LOC provide for recovery of attorney's fees to the Bank and the Strong Defendants do not dispute their liability, but do contest the amount demanded. At trial, [*10]the Bank presented the testimony of its attorney, Stan Goldberg, Esq., who testified that the fees charged were based on a "blended" hourly rate of $275. Based upon a package of computer printouts and invoices for services rendered from December 20, 2008, when counsel was retained on this case, through April 3 or 4, 2012, the Bank sought $178,370.09, inclusive of $17,691.19 in disbursements. The precise cumulative number of attorney hours billed was not calculated, although the daily logs do indicate the time of each attorney and the purpose. With its Post-Trial Memorandum of Law, the Bank submitted the affirmation of lead trial counsel, Linda Gates, Esq., seeking a supplemental award of fees for the period April 3 through April 24 in the sum of an additional $59,989.03, annexing a computerized printout of billing charges for this case, inclusive of disbursements for daily trial transcripts. The total demanded by the Bank as compensation for reasonable attorney's fees is $238,359.12.

At trial, the Strong Defendants' attorney, Ahmed Massoud, Esq., cross-examined Mr. Goldberg and effectively established that at least two of the motions for which the Bank sought reimbursement had not been filed. In addition, no deduction was made from the sum demanded for the cost of copying exhibits for trial, for the fifty percent contribution paid by Strong/Yatin. Mr. Massoud did not, of course, have the opportunity to cross-examine the Bank's attorneys with respect to their supplemental claim, although, upon inspection, the Court finds a number of inappropriate charges, specifically, for motions denominated motions in limine, which were actually summary judgment motions seeking the dismissal of aspects of the Strong Defendants' complaint that should have been timely made, pursuant to the preliminary conference directive, in May of 2011. An Order to Show Cause untimely presented on February 7, 2012, seeking similar summary judgment, was declined by this Court. Thus, some adjustment is to be made in the Bank's claim. At least 35 hours are charged for work that was unnecessary or inappropriate given the Court's prior rulings. In addition, $610.85 must be deducted from disbursements for contributions by the Strong Defendants to preparation of trial exhibits. Although Mr. Goldberg incorrectly stated that his client's payment of the fees was "not relevant to the total billing in the case"(Transcript at 170) (see generally, F. H. Krear & Co. v Nineteen Named Trustees, 810 F2d 1250, 1263 [2d Cir 1987], suggesting that contractual fee shifting provisions should not permit the inflation or padding of fees that would not be charged to the client absent the contractual provision; see also, Matter of Rahmey v Blum. 95 AD2d 294, 300 [2d Dept 1983]: "Hours that are not properly billed to one's client also are not properly billed to one's adversary"), there was no objection raised to this contention and the invoices indicate payments made through February 29, 2012, leaving a balance of $47,794.14. The supplemental request to April 24, 2012, does not indicate any payments made but represents, prospectively, that "HSBC will be billed" in accordance therewith.

The assessment of reasonable attorney's fees is a function of the court. Factors to be considered are the difficulty of issues, the skill required to litigate, the attorneys' experience, ability and reputation, the time and labor expended and the customary fees charged for the same services. (See F. H. Krear & Co. v Nineteen Named Trustees, 810 F2d at1263 ; Matter of Rahmey v Blum, 95 AD2d at 300-306). The assessment begins with the lodestar computation of the reasonable hourly rate times the number of hours determined to have been reasonably expended. Although generally the losing party will be required to pay whatever has been expended by the prevailing party in litigating the matter (Krear at 1263), hours spent on [*11]unsuccessful or unnecessary litigation should be excluded(see Rahmey at 304).

HSBC's counsel's "blended" hourly rate is well within the standard of fees regularly charged for the services performed and, although no representations have been made as to the skill or experience of the particular attorneys who worked on this case, the Court observed able performances by those who appeared in Court. The case itself is fairly routine in that it involved the collection of a business debt upon funds loaned. Thus, the Court finds the Bank's hourly rate to be completely reasonable and generally supported by the necessary logs and invoices, except as to services found to be duplicative or unnecessary, although some difficulty in measuring the reasonableness of time charges and the propriety of services claimed to have been provided results from the redaction of the description of the services rendered. However, the Bank's total recovery upon the BRLOC and the LOC, less the fees awarded to Yatin, is in excess of $660,000, without interest. The sum demanded in attorney's fees is, therefore, well within the one-third of recovery deemed to be "reasonable"(see Krear at 1264). Accordingly, upon HSBC's submission of proof that all of the fees billed by its counsel have, in fact, been paid, the Bank is awarded $228,123.27, without interest, as reasonable attorney's fees for the successful prosecution of its action.

Plaintiff Yatin is awarded judgment in the sum of $12,300, with interest from April 7, 2008, upon its first cause of action.

HSBC is awarded attorney's fees in the sum of $228,123.27, without interest , upon submission of proof that this sum was paid to its counsel.

This constitutes the decision and order of the court.

ENTER,

J. S. C.