For over two years, defendant Grand Pacific Finance Corp. (Grand Pacific) has sought to collect from the Bobker family a judgment exceeding 12 million dollars. In this action, plaintiff Joe Bobker alleges that the judgment was procured illicitly. All defendants move pursuant to CPLR 3212 for an order dismissing the complaint and for sanctions. Plaintiff opposes.

The operating agreements permit any member or affiliate of any member to transact business with other persons or entities or to engage in competing business ventures, with the same rights as non-members. However, members and affiliates are prohibited from acquiring an interest in the Hale Avenue properties, "whether as owner, lessee, developer, manager, mortgagee or otherwise," without the consent of Hale Club or the Bobker Family Trust. (NYSCEF 6, 7).

On August 16, 2006, Grand Pacific loaned $5,362,500 to the Hale LLCs, secured by a mortgage on the Hale Avenue properties and also guaranteed by plaintiff, who additionally guaranteed Grand Pacific a loan of $1,637,500 to Hale Club. The note for the $1,637,500 loan provides that its holder may sell participation in its rights thereunder. (NYSCEF 53, 54).

On or about October 24, 2006 Sterling loaned another $1,000,000 to the Hale LLCs, secured by another mortgage on the Hale Avenue properties and guaranteed by plaintiff's sons.

On December 28, 2007, following plaintiff's and Hale Club's default on the $1,637,500 loan, 366 Madison and Grand Pacific entered into a mortgage participation agreement whereby 366 Madison purchased, for $1,637,400, a junior participating interest in Grand Pacific's rights in the loan. Pursuant to the agreement, Grand Pacific retains possession of all original loan documents andall administrative and servicing rights including, inter alia, sole discretion in determining whether and how to exercise its rights in the event of default. (NYSCEF 55, 57).

On January 15, 2008, to protect its interest in the Hale Avenue properties, Grand Pacific purchased both of the Sterling loans. (NYSCEF 57). In or about February 2009, Grand Pacific retained defendant law firm Herrick Feinstein LLP (Herrick) to enforce its rights under the four loans. (NYSCEF 52). On or about April 16, 2009, it commenced an action against the Hale LLCs and the Bokbers in Supreme Court, New York County, to collect sums due under the $5,500,000 loan, the $1,637,500 loan, and the $100,000 loan (Grand Pacific Corp. v Hale, LLC, et al., Index No 601164/09; NYSCEF 58). The following day, it commenced an action in Westchester County to foreclose on the mortgage securing the $5,362,500 loan. (Grand Pacific Finance Corp. v 97-111 Hale, LLC, et al., Index No. 008084/09; NYSCEF 59).

On or about November 2009, 366 Madison retained defendant law firm Schwartz, Lichtenberg, LLP (Schwartz Lichtenberg) and defendant Barry Lichtenberg to defend against [*2]cross-claims asserted by the Hale LLCs and the Bobkers in the New York County action. (NYSCEF 75).

By decision and order dated June 7, 2010, the justice previously presiding in this part granted summary judgment in favor of Grand Pacific. By decision and order dated September 17, 2010, the justice presiding in the Westchester action denied Grand Pacific's motion for summary judgment, and the parties subsequently engaged in extensive discovery there. On or about October 8, 2010, Grand Pacific repurchased 366 Madison's participation interest in the $1,637,500 loan for $1,637,400. (NYSCEF 56).

On or about March 15, 2011, the justice in the New York County action confirmed a special referee's findings as to the amounts due under the three loans, and on or about May 20, judgment was entered. (NYSCEF 62, 63).

On or about September 7, 2011, during the course of discovery in the Westchester action, Grand Pacific produced to plaintiff the participation and repurchase agreements. (NYSCEF 57).

On or about March 18, 2013, plaintiff commenced the instant action against Grand Pacific and Grand Pacific's Senior Vice President Robert Heinemann, 366 Madison and 366 Madison's officer Michael Lin, Schwartz Lichtenberg, Barry Lichtenberg, Herrick, Herrick partners Scott Tross and Paul Schafhauser, Herrick associate Janice Godberg, and Herrick associate Rachel Engelstein. (NYSCEF 1).

In his first cause of action, plaintiff alleges that attorney defendants fraudulently misrepresented that Grand Pacific was the holder of the note and that no payments were made on the loan, notwithstanding their knowledge that 366 Madison, the true holder and real economic party in interest had paid off nearly all of it in December 2007. These misrepresentations, plaintiff alleges, deprived him of an opportunity to present a full and legitimate defense to Grand Pacific's actions. In the second cause of action, plaintiff alleges that the attorney defendants were grossly negligent for failing to ascertain Grand Pacific's connection with 366 Madison, even though the information was readily available. In the third cause of action, plaintiff alleges that the attorney defendants' conduct was collusive and deceitful, in violation of Judiciary Law

§ 487. The fourth cause of action sets forth a claim of fraud against Grand Pacific, Heinemann, and 366 Madison for making false statements to the court about the loan and for allowing their attorneys to do the same. In the fifth cause of action against these same defendants for breach of contract, plaintiff alleges that 366 Madison, through its nominee, UAF, was a member of the Hale LLCs, and that its participation in the loan, and defendants' failure to recognize this participation as a capital contribution, breached the Hale LLC agreements. (NYSCEF 1).

By affidavit dated April 12, 2013, Heinemann admits that he did not disclose the existence of the participation agreement to Herrick, denies any nefarious motive in failing to do so, and alleges that once Herrick learned of its existence, Grand Pacific repurchased the participation interest. (NYSCEF 52). By affidavit of the same date, Lin also admits having failed to disclose the agreement when he retained Schwartz Lichtenberg, and maintains that because 366 Madison had no interest in Grand Pacific's loans, it had no reason to seek their enforcement. It moreover denies any involvement with Grand Pacific in procuring the New York County judgment against plaintiff. (NYSCEF 75). By affirmation of the same date, Tross states that he personally requested and received the relevant loan documents before the actions. While he [*3]would have preferred being advised by Grand Pacific of 366 Madison's participation, he maintains that it would not have altered his legal strategy. (NYSCEF 57).

On June 6, 2013, plaintiff stipulated to discontinue his action as against Engelstein, Goldberg, Schwartz Lichtenberg, and Lichtenberg with the understanding that his affirmation and exhibits in support of a withdrawn order to show cause would constitute his opposition to defendants' motion to dismiss. (NYSCEF 117).

A party seeking summary judgment must demonstrate, prima facie,that it is entitled to judgment as a matter of law, by presenting sufficient evidence to negate any material issues of fact. (Forrest v Jewish Guild for the Blind, 3 NY3d 295, 314 [2004]; Winegrad v New York Univ. Med. Ctr.,64 NY2d 851, 853 [1985]). If the movant meets this burden, the opponent must offer admissible evidence to demonstrate the existence of factual issues that require a trial. (Zuckerman v City of New York,49 NY2d 557, 562 [1980]). If the movant does not meet this burden, the motion must be denied, regardless of the sufficiency of the opposition. (Winegrad,64 NY2d at 853). A defendant moving for summary judgment must negate, prima facie, an essential element of the plaintiff's cause of action. (Rosabella v Metro. Trans. Auth., 23 AD3d 365, 366 [2d Dept 2005]).

To establish, prima facie, a cause of action for fraud, a plaintiff must allege a material misrepresentation of fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance, and damages. (Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 559 [2009]). There is no fraud arising from statements that are, in fact, true. (Gomez-Jimenez v New York Law School, 103 AD3d 13, 18 [1st Dept 2012] lv denied, 20 NY3d 1093 [2013]).

A participation agreement is not a loan. Rather, it constitutes an arrangement by which a third party furnishes capital to the lender, who in turn, extends additional credit to the borrower. (In re AutoStyle Plastics, Inc., 269 F3d 726, 736 [6th Cir 2001]). While the third party "participates" in the loan, it acquires no title to it, and has no contractual privity with the borrower. (In re Okura & Co. (Am.), Inc., 249 BR 596, 608 [Bankr SDNY 2000]). Consequently, the sole recourse in the event of default for the third party participant lies against the lender. (Hibernia Nat'l Bank v. FDIC, 733 F2d 1403, 1407 [10th Cir 1984]; In re Enron Corp. Sec., Derivative & ERISA Litig., 279 FRD 395, 406 [SD Tex 2011]). Participation agreements are attractive to lenders for the additional opportunities they provide for diversification of investments and the extension of additional credit to borrowers while retaining control of the loan. They are also attractive to the third-party participant, who may contract to obtain priority over the lender's security interest without the administrative burdens of servicing and enforcing the loans. (See generally Okura, 249 BR at 607-08).

Here, the participation agreement between Grand Pacific and 366 Madison neither transfers nor assigns title to the loan. 366 Madison only participated in the loan, and the parties agree that Grand Pacific retains possession of all of the original loan documents and servicing rights. It thus holds title to the loan. (See UCC § 1-201 [defining holder as one "in possession of a document of title or an instrument . . . payable . . . to bearer"]) (UCC § 1-201). Consequently, Grand Pacific has the exclusive right to enforce plaintiff's obligations under the $1,637,500 loan, and plaintiff offers no authority for the proposition that 366 Madison's $1,637,400 interest [*4]constitutes payment of the underlying note, and thereby a reduction of plaintiff's debt to $100. Grand Pacific was thus entitled to sue plaintiff on his default, and its representation that it was holder of the note is consistent with both the original loan, which authorized the sale of participation interests, and the purchase agreement, which authorized Grand Pacific alone to enforce the loan. Consequently, there was no misrepresentation.

Negligence arises from a duty, a breach thereof, and an injury proximately caused thereby. (Kenney v City of New York, 30 AD3d 261,262 [1st Dept 2006]). Absent a duty, there is no liability (Palsgraf v Long Is. R. Co., 248 NY 339, 342 [1928]), and whether a duty exists constitutes a legal question (Eiseman v State, 70 NY2d 175, 187 [1987]). Attorneys, in discharging their professional responsibilities, owe a duty of care to those with whom they are in contractual privity, namely their clients. (Natl. Westminster Bank USA v Weksel, 124 AD2d 144, 146-47 [1st Dept 1987]). They do not, and as a matter of public policy, could not, owe such a duty to litigants whose interests are adverse to their own client. (See Art Capital Group, LLC v Neuhaus, 70 AD3d 605, 606 [1st Dept 2010]; Westiminster Bank, 124 AD2d at 146-47).

Here, attorney defendants owed no duty to uncover the existence of the participation agreement or disclose it to plaintiff, absent fraud. (See supra II.B.; Pecile v Titan Capital Group, LLC, 96 AD3d 543, 544 [1st Dept 2012] lv denied, 20 NY3d 856 [2013] [attorneys not liable to third-parties "in the absence of fraud, collusion, malice or bad faith"]; Art Capital Group, 70 AD3d at 607 [relationship between plaintiff and attorney must "be one of contract or the bond between them so close as to be the functional equivalent of contractual privity"]).

To the extent that plaintiff's cause of action is premised on gross negligence, that claim also fails. (See E. Meadow Driving School, Inc. v Bell Atl. Yellow Pages Co., 273 AD2d 270, 271 [2d Dept 2000][existence of duty required in order to state claim for gross negligence]).

An attorney who is "guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party . . . forfeits to the party injured treble damages." (Judiciary Law § 487). The statute, of ancient origin, is "not a codification of a common-law cause of action for fraud" but a quasi-criminal statute intended to ensure good faith throughout the judicial process. (Amalfitano v Rosenberg, 12 NY3d 8, 14 [2009]). "Deceit" is defined as "intentionally giving a false impression" or "a false statement of fact made . . . knowingly or recklessly . . . with the intent that someone else will act upon it," and "collusion" is defined as "an agreement to defraud another or to do or obtain something forbidden by law." (Black's Law Dictionary [9th ed 2009]).

To prevail on a cause of action premised on a violation of Judiciary Law § 487, a plaintiff must establish that the defendant had engaged in "a chronic and extreme pattern of legal delinquency" (Kodsi v Gee, 100 AD3d 437, 439 [1st Dept 2012]), or "intentional egregious misconduct" (O'Callaghan v Sifre, 537 F Supp 2d 594, 596 [EDNY 2008]). It is a violation of Judiciary Law § 487 for an attorney to withhold crucial information knowingly from a tribunal. (Guardian Life Ins. Co. of Am. v Handel, 190 AD2d 57, 61 [1st Dept 1993]).

Here, defendant attorneys' failure to disclose the participation agreement does not give a false impression of anything, as the agreement does not alter plaintiff's obligations to Grand Pacific. (See supra, II.A.). Consequently, plaintiff's claim that timely disclosure of the [*5]participation agreement would have altered his defense to the action or any rulings or recommendations by the prior justice, the special referee, or the Appellate Division, is baseless and, in any event, conclusory. (See International IRB-Brasil Resseguros S.A. v Portobello Intern. Ltd., 84 AD3d 637 [1st Dept 2011] [plaintiff establishes prima facie entitlement to summary judgment with evidence that it issued note and that defendant failed to make payments]; Kaminsky v Herrick, Feinstein LLP, 59 AD3d 1, 13 [1st Dept 2008] [no violation of Judiciary Law § 487 when plaintiff failed to establish how defendants' wrong resulted in damages]; Jaroslawicz v Cohen, 12 AD3d 160, 161 [1st Dept 2004][same]; Lazich v Vittoria & Parker, 189 AD2d 753, 754 [2d Dept 1993] [alleged misconduct was well within bounds of adversarial proceeding]; cf Schindler v Issler & Schrage, P.C., 262 AD2d 226, 229 [1st Dept 1999] [violation when defendant attorneys failed to inform court that Arizona probate court had restricted withdrawals from joint account that attorneys sought to have declared sole property of client; immaterial that court did not question attorneys about existence of prior probate proceedings]).

The elements of a breach of contract claim are: 1) the existence of a contract between the plaintiff and the defendant, 2) the plaintiff's performance under the contract, 3) the defendant's breach of the contract, and 4) damages. (Harris v Seward Park Hous. Corp., 79 AD3d 425, 426

[1st Dept 2010]).

Here, as defendants did not sign the Hale LLC agreements, they cannot be held liable for breaching them. (See Adams v Boston Properties Ltd. Partnership, 41 AD3d 112 [1st Dept 2007] [breach of contract claims dismissed when defendant was not signatory]; Pevensey Press, Ltd. v Prentice-Hall, Inc., 161 AD2d 500, 501 [1st Dept 1990] [no liability when defendant not party to agreement]).

I decline to impose sanctions.

Accordingly, it is hereby

ORDERED, that defendants Herrick Feinstein LLP, Scott T. Tross, Esq., Paul H. Schafhauser, Esq., Grand Pacific Finance Corp., Robert W. Heinemann, 366 Madison, Inc., and Michael Chih Chang Lin a/k/a Michael Lin's cross-motion for summary judgment is granted and the complaint is dismissed with costs and disbursements to defendants as taxed by the Clerk upon the submission of an appropriate bill of costs; it is further

ORDERED, that defendants' motion for sanctions against plaintiff is denied; and it is further

ORDERED, that the Clerk is directed to enter judgment accordingly.

ENTER:

Barbara Jaffe, JSC [*6]

DATED:November 6, 2013

New York, New York