Gfre, Inc. v. U.S. Bank, N.A.

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Docket Number

2014-01120

Attorney(S)

Gabor & Marotta, LLC, Staten Island, N.Y. (Richard M. Gabor of counsel), for appellant. Hinshaw & Culbertson LLP, New York, N.Y. (Benjamin Noren and Schuyler Kraus of counsel), for respondent.

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Smart Summary

Factual and Procedural Background

The defendant U.S. Bank, N.A. obtained a judgment of foreclosure and sale in an action to foreclose a mortgage. The winning bidder at the public auction assigned the bid to the plaintiff, who received a referee's deed after paying $246,000. Subsequently, the judgment of foreclosure and sale was vacated because U.S. Bank failed to properly serve process on one of the parties to the foreclosure action. U.S. Bank refunded the full purchase price to the plaintiff. The plaintiff then commenced this action against U.S. Bank and others, asserting causes of action including unjust enrichment and fraud. U.S. Bank moved to dismiss these causes of action pursuant to CPLR 3211(a)(7), and the Supreme Court granted the motion to dismiss those claims as asserted against U.S. Bank.

Legal Issues Presented

Whether the causes of action alleging unjust enrichment against U.S. Bank should be dismissed pursuant to CPLR 3211(a)(7).
Whether the causes of action alleging fraud against U.S. Bank should be dismissed pursuant to CPLR 3211(a)(7).

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Nonnon v. City of New York, 9 N.Y.3d 825	Standard for motion to dismiss pursuant to CPLR 3211(a)(7): accept plaintiff's facts as true and determine if any cognizable legal theory is stated.	Used to frame the standard of review for dismissal motions in this case.
Leon v. Martinez, 84 N.Y.2d 83	Supporting authority for CPLR 3211(a)(7) dismissal standard.	Confirmed the applicable standard for motion to dismiss.
Mobarak v. Mowad, 117 A.D.3d 998	Elements of unjust enrichment: defendant's enrichment, at plaintiff's expense, and inequity in retention.	Guided the court’s analysis of whether unjust enrichment was sufficiently alleged.
Paramount Film Distrib. Corp. v. State of New York, 30 N.Y.2d 415	Essential inquiry in unjust enrichment actions is whether retention is against equity and good conscience.	Supported the court’s equity-based analysis of the unjust enrichment claim.
Sperry v. Crompton Corp., 8 N.Y.3d 204	Reinforces the equitable principle in unjust enrichment claims.	Further supported the court’s reasoning on unjust enrichment.
Lebovits v. Bassman, 120 A.D.3d 1198	Requirement that enrichment must be at plaintiff’s expense for unjust enrichment claim.	Applied to conclude plaintiff failed to allege enrichment at its expense.
Dee v. Rakower, 112 A.D.3d 204	Similar requirement for unjust enrichment claims.	Supported dismissal of unjust enrichment claim.
Clifford R. Gray, Inc. v. LeChase Constr. Servs., LLC, 31 A.D.3d 983	Legal standards for unjust enrichment and restitution.	Referenced in assessing the sufficiency of plaintiff’s allegations.
Restatement of Restitution § 157, Comment b	Legal commentary on unjust enrichment elements.	Guided the court’s legal interpretation of unjust enrichment claims.
Introna v. Huntington Learning Ctrs., Inc., 78 A.D.3d 896	Elements of fraud: material misrepresentation, knowledge of falsity, intent, reliance, and damages.	Outlined the pleading requirements for fraud claims applied by the court.
Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553	Supporting authority on elements of fraud.	Reinforced the court’s standard for fraud pleadings.
Cohen v. Houseconnect Realty Corp., 289 A.D.2d 277	Requirement for detailed factual allegations in fraud claims under CPLR 3016(b).	Used to assess sufficiency of fraud allegations in the amended complaint.
JP Morgan Chase Bank, N.A. v. Hall, 122 A.D.3d 576	Pleading standards for fraud claims.	Applied to determine that plaintiff’s fraud claim was conclusory and insufficient.
House of Spices [India], Inc. v. SMJ Servs., Inc., 103 A.D.3d 848	Further authority on fraud pleading requirements.	Supported dismissal of fraud claim for failure to plead facts with particularity.
Goel v. Ramachandran, 111 A.D.3d 783	Requirement of reasonable inference of fraud knowledge or participation.	Applied to conclude plaintiff failed to allege U.S. Bank’s knowledge or participation in fraud.
High Tides, LLC v. DeMichele, 88 A.D.3d 954	Similar standard for allegations of fraud knowledge.	Supported dismissal of fraud claim for lack of sufficient factual basis.
Parochial Bus Sys. v. Board of Educ. of City of N.Y., 60 N.Y.2d 539	Alternative grounds for affirmance.	Referenced as a procedural basis for affirming without reaching other contentions.
Fuchs v. Itzkowitz, 120 A.D.3d 682	Alternative grounds for affirmance.	Referenced similarly for procedural context.

Court's Reasoning and Analysis

The court applied the CPLR 3211(a)(7) standard, accepting the plaintiff’s factual allegations as true and determining whether they fit within any cognizable legal theory. Regarding unjust enrichment, the court identified the three required elements: defendant's enrichment, enrichment at plaintiff's expense, and that retention would be inequitable. The plaintiff alleged only that U.S. Bank collected bank fees and interest, but failed to allege that U.S. Bank was enriched at the plaintiff’s expense. Thus, the court concluded the unjust enrichment claim was legally insufficient and properly dismissed it.

For the fraud claim, the court outlined the elements: material misrepresentation, knowledge of falsity, intent to induce reliance, justifiable reliance, and damages, all of which must be pleaded with particularity under CPLR 3016(b). The amended complaint contained only conclusory allegations about U.S. Bank's knowledge of improper service in the foreclosure action and failed to allege facts supporting a reasonable inference of fraud or participation by U.S. Bank. Consequently, the court found the fraud claim insufficiently pleaded and properly dismissed it.

Because the court found the dismissal of these claims appropriate, it did not consider U.S. Bank’s alternative grounds for affirmance.

Holding and Implications

The court affirmed the Supreme Court’s order dated August 12, 2013, insofar as it dismissed the causes of action alleging unjust enrichment and fraud against U.S. Bank, with costs.

This decision results in the dismissal of the plaintiff’s claims for unjust enrichment and fraud against U.S. Bank. The opinion does not establish new precedent but applies existing legal standards to the facts presented, underscoring the necessity of adequately pleading each element of such claims to survive a motion to dismiss.

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GFRE, INC., appellant, v. U.S. BANK, N.A., respondent, et al., defendant.

Gabor & Marotta, LLC, Staten Island, N.Y. (Richard M. Gabor of counsel), for appellant.

Hinshaw & Culbertson LLP, New York, N.Y. (Benjamin Noren and Schuyler Kraus of counsel), for respondent.

RUTH C. BALKIN, J.P., LEONARD B. AUSTIN, ROBERT J. MILLER, and JOSEPH J. MALTESE, JJ.

Opinion

In an action, inter alia, to recover damages for unjust enrichment and fraudulent misrepresentation, the plaintiff appeals, as limited by its brief, from so much of an order of the Supreme Court, Richmond County (Troia, J.), dated August 12, 2013, as granted those branches of the motion of the defendant U.S. Bank, N.A., which were pursuant to CPLR 3211(a)(7) to dismiss the causes of action alleging unjust enrichment and fraud insofar as asserted against it.

ORDERED that the order is affirmed insofar as appealed from, with costs.

The defendant U.S. Bank, N.A. (hereinafter U.S. Bank), obtained a judgment of foreclosure and sale in an action to foreclose

a mortgage. The person who submitted the winning bid at a public auction of the premises assigned the bid to the plaintiff, who received a referee's deed after tendering the purchase price of $246,000. However, the judgment of foreclosure and sale was later vacated, after it was determined that U.S. Bank had failed to properly serve process upon one of the parties to the foreclosure action ( see U.S. Bank, N.A. v. Bernhardt, 88 A.D.3d 871, 872, 931 N.Y.S.2d 266 ). It is undisputed that U.S. Bank refunded to the plaintiff the total amount of the purchase price.

The plaintiff commenced this action against, among others, U.S. Bank, asserting, among other things, causes of action to recover damages for unjust enrichment and fraud. U.S. Bank

moved, inter alia, pursuant to CPLR 3211(a)(7) to dismiss the causes of action alleging unjust enrichment and fraud insofar as asserted against it. The Supreme Court, among other things, granted those branches of U.S. Bank's motion.

In considering a motion to dismiss pursuant to CPLR 3211(a)(7), the court must “accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory” (Nonnon v. City of New York, 9 N.Y.3d 825, 827, 842 N.Y.S.2d 756, 874 N.E.2d 720 [internal quotation marks omitted]; see Leon v. Martinez, 84 N.Y.2d 83, 87–88, 614 N.Y.S.2d 972, 638 N.E.2d 511 ).

The Supreme Court properly granted that branch of U.S. Bank's motion which was pursuant to CPLR 3211(a)(7) to dismiss the cause of action alleging unjust enrichment. The elements of a cause of action to recover for unjust enrichment are “(1) the defendant was enriched, (2) at the plaintiff's expense, and (3) that it is against equity and good conscience to permit the defendant to retain what is sought to be recovered” (Mobarak v. Mowad, 117 A.D.3d 998, 1001, 986 N.Y.S.2d 539 ). “The essential inquiry in any action for unjust enrichment or restitution is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered” (Paramount Film Distrib. Corp. v. State of New York, 30 N.Y.2d 415, 421, 334 N.Y.S.2d 388, 285 N.E.2d 695 ; see Sperry v. Crompton Corp., 8 N.Y.3d 204, 215, 831 N.Y.S.2d 760, 863 N.E.2d 1012 ).

Here, the plaintiff merely alleged in the amended complaint that U.S. Bank was “unjustly enriched in that it collected bank fees and interest.” Even accepting these allegations in the amended complaint as true, the amended complaint failed, as a matter of law, to sufficiently allege that U.S. Bank was enriched at the plaintiff's expense (see Lebovits v. Bassman, 120 A.D.3d 1198, 1199–1200, 992 N.Y.S.2d 316 ; Dee v. Rakower, 112 A.D.3d 204, 214, 976 N.Y.S.2d 470 ; Clifford R. Gray, Inc. v. LeChase Constr. Servs., LLC, 31 A.D.3d 983, 988, 819 N.Y.S.2d 182 ; see generally Restatement of Restitution § 157, Comment b ). Since the amended complaint failed to state a cause of action alleging unjust enrichment against U.S. Bank, the Supreme Court properly granted that branch of U.S. Bank's motion which was pursuant to CPLR 3211(a)(7) to dismiss that cause of action insofar as asserted against it.

The Supreme Court also properly granted that branch of U.S. Bank's motion which was pursuant to CPLR 3211(a)(7) to dismiss the cause of action alleging fraud insofar as asserted against it. “The elements of a cause of action sounding in fraud are a material misrepresentation of an existing fact, made with

knowledge of the falsity, an intent to induce

reliance thereon, justifiable reliance upon the misrepresentation, and damages” ( Introna v. Huntington Learning Ctrs., Inc., 78 A.D.3d 896, 898, 911 N.Y.S.2d 442 ; see Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 559, 883 N.Y.S.2d 147, 910 N.E.2d 976 ). All of the elements of a fraud claim “must be supported by factual allegations containing the details constituting the wrong” in order to satisfy the pleading requirements of CPLR 3016(b) ( Cohen v. Houseconnect Realty Corp., 289 A.D.2d 277, 278, 734 N.Y.S.2d 205 ; see JP Morgan Chase Bank, N.A. v. Hall, 122 A.D.3d 576, 579, 996 N.Y.S.2d 309 ; House of Spices [India], Inc. v. SMJ Servs., Inc., 103 A.D.3d 848, 850, 960 N.Y.S.2d 443 ).

Here, the amended complaint consisted of conclusory allegations regarding U.S. Bank's knowledge that it had commenced and prosecuted the underlying foreclosure action without properly effecting service on all of the necessary parties. Furthermore, the facts alleged in the amended complaint do not give rise to a reasonable inference that U.S. Bank had knowledge of, or participated in, the alleged fraud (see Goel v. Ramachandran, 111 A.D.3d 783, 793, 975 N.Y.S.2d 428 ; High Tides, LLC v. DeMichele, 88 A.D.3d 954, 959, 931 N.Y.S.2d 377 ). Since the amended complaint failed to state a cause of action alleging fraud against U.S. Bank, the Supreme Court properly granted that branch of U.S. Bank's motion which was pursuant to CPLR 3211(a)(7) to dismiss that cause of action insofar as asserted against it.

In light of our determination, we need not reach U.S. Bank's remaining contentions, which were raised, in effect, as alternative grounds for affirmance (see Parochial Bus Sys. v. Board of Educ. of City of N.Y., 60 N.Y.2d 539, 545, 470 N.Y.S.2d 564, 458 N.E.2d 1241 ; Matter of Fuchs v. Itzkowitz, 120 A.D.3d 682, 683, 991 N.Y.S.2d 324 ).