### FTF Lending, LLC v Mavrides, Moyal, Packman & Sadkin, LLP 2024 NY Slip Op 33115(U) September 6, 2024 Supreme Court, New York County Docket Number: Index No. 153620/2020 Judge: Margaret A. Chan Cases posted with a "30000" identifier, i.e., 2013 NY Slip

Op 30001(U), are republished from various New York State and local government sources, including the New

York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication.INDEX NO. 153620/2020 NYSCEF DOC. NO. 155 RECEIVED NYSCEF: 09/06/2024

1 of 10 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART49M
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FTF LENDING, LLC, Plaintiff,

- V - MAVRIDES, MOYAL, PACK.MAN & SADKIN, LLP and MATTHEWWEINBERGER, Defendants.
----------------------X

MA VRIDES, MOYAL, PACKMAN & SADKIN, LLP and MATTHEW WEINBERGER Third-Party Plaintiffs,-againstROBERT THONY LAW, PLLC and ROBERT THONY, Third-Party Defendants. --------------------X
HON. MARGARET A. CHAN: INDEX NO. 153620/2020

MOTION DATE 03/18/2024

MOTION SEQ. NO. 006



### DECISION+ ORDER ON MOTION

Third-Party IndexNo. 595619/2020

The following e-filed documents, listed by NYSCEF document number (MS006) 103, 104, 105, 106, 107,108,109,110,111,112,113,114,115,116,117,118,119,120,121,122,123,124,125,126,127, 128, 129, 130, 131, 132, 133, 134,135,136, 137,138,139, 140, 141, 142, 143, 144, 145,146,147, 148, 149, 150, 151, 152, 153, 154 were read on this motion to/for JUDGMENT

- SUMMARY

PlaintiffFTF Lending, LLC (FTF) brings this action against defendants Mavrides, Moyal, Packman 

### & Sadkin, LLP (MMPS) and Matthew Weinberger (Weinberger together with MMPS, defendants), asserting a claim for legal malpractice arising out ofdefendants' representation ofFTF in a loan transaction (the Loan Transaction) (NYSCEF# 1)

. 1 Before the court are (1) FTF's motion, pursuant CPLR 3212, for summaryjudgment onits legal malpractice claim, and (2) defendants' cross motion for summaryjudgment dismissing FTF's claim (NYSCEF#s 103, 130- 131). For the following .reasons, both motions are denied.

1 On October 23, 2023, this action was consolidated with a related action, captioned FTFLending, LLCv. 2330DutchBroa.dwa.yLLCeta.1, Index No. 655765/2019 (NYSCEF # 102).

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2 of 10 Background The following facts are drawn from the parties' Rule 19-a statements and the accompanying affidavits and exhibits submittedin connection with the parties' motions. They are undisputed unless otherwise noted. 

### The Loan Transaction andPost·ClosingDiscovervof Fraud FTF is a real estate and financial services company that provides short-term capital to real estate developers andinvestors who purchase andrenovate residentialproperties (NYSCEF # 126

- Pltf 19-a 

### iJ 1; NYSCEF

### # 133

- Defts 19-a 

### iJ 86; NYSCEF

### # 104

- Rodak affi] 3; NYSCEF # 136-Draudt tr 9:22-10:5). As explainedby FTF's SeniorVice President ofOperations, Christopher Draudt, FTF considers itselfa "hard money lender" and "lend[s] money based on the hard asset, or collateralreal estate" securing a given loan (Draudt tr 9:21-10:9; 

### seealsoDefts 19-a 

### ,i,i 63, 80). On May 26, 2018, FTF and Dwayne A. Samuels executed a term sheet outlining the terms ofa loanby FTF to Samuels's company, 2330 Dutch Broadway, LLC (2330 Dutch, and together with Samuels, Borrowers) (Pltf 19-a ,i 2; NYSCEF # 145 -Term Sheet at 1). The Term Sheet contemplated a $375,000 loan (the Loan) in connection with a first· mortgage financing for a property located at 2330 Dutch Broadway, Elmont, NY 11003 (the Property) (Pltf 19-a ,i 2; Rodak aff ,i,i 4-5; NYSCEF # 145 Term Sheet at 1). According to FTF's ChiefExecutive Officer, Matthew Rodak, FTF's financing was contingent on (1) Samuels transferring title to the Property to 233 Dutch, (2) the securing ofa title insurance policy, (3) a closing protectionletter, and (4) a first-mortgage lien on the Property (Pltf 19-a 

### ,i 10; Rodak aff ,i,i 6·7). Consequently, as part ofthe Term Sheet, Samuels "acknowledge[d] that [FTF] mustperform [its] 'Due Diligence' before a closing [could] occur" on the Loan (Term Sheet at 3-4; 

### seealsoDefts 19-a 

### ,i 86; NYSCEF # 143

- Packman aff

## ,r,r 8-9). Samuels also authorized FTF to "obtain a Consumer Credit Report and/or a Background Report" (Term Sheet at 6). On or about May 30, 2018, although there was no formal engagement agreem,ent, FTF retained MMPS to represent FTFin connection with the closing ofthe Loan 

### (see Pltf 19-a

## ,i,r 3-4; Rodak aff

### ,r,i 8-9; Packman aff

## ,r 5; NYSCEF # 105 at 1-2). That same day, FTF's Loan Coordinator, Laurie Ferrante, explained to Samuels's counsel, Robert Thony, thatFTF was the lender working with Samuels on the financing ofhis investment real estate transaction," and she further introducedWeinberger, an associate practicingin MMPS's real estate practice group, as FTF's legal counsel 

### (see Pltf 19-a 

## ,r 15; Rodak aff

### ,r,r 10-11; NYSCEF # 105 at FTF00218·219). Also copied on this emailwas MMPS employee

·Alexandrea Lapka, who confirmed thatMMPS would be "representing [FTF] in the above referenced transaction" and circulatedMMPS's "opening checklist ofitems neededprior to closing" 

### (see Pltf 19-a

## ,r 11; Rodak aff

### ,r 11; NYSCEF # 105 at 1·2). The checklist was preparedby MMPS and contained a list ofseven "LegalRelated OutstandingItems" to complete prior to closing, including various "Title Related Matters" (Pltf 19-a

## ,r 12·13; NYSCEF # 105 at 3; NYSCEF # 113- Packman tr 51:14-15). Scott Packman, a member ofMMPS, testified that "Lapka and potentially 

## 0 Weinberger" were responsible for "ensuringthat each of [the checklist's] outstandingitems [were] satisfied prior to the closing" (Packman tr 51:16-52:6; 

### seealsoPltf 19-a

## ,r 14).

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3 of 10 Packman further testified that Lapka, who was a law clerk pending admission, (1) "handled the closing," (2) "drafted the loan documents," including the promissory note, mortgage, and guarantee, and (3) "performed 

### Ddue diligence," including "reviewing the title report" (Packman tr 14:3-4, 37:3-20, 42:7-43:6, 57:13-16). Packman also statedthat Lapka would have, in general, been supervised by various attorneys atMMPS, including Weinberger and himself (see id tr 33:7-19, 34:21-35:3). Weinberger largely confirmed the same, although he notedhis role in the LoanTransaction "was limitedin some way to only answering questions" (see NYSCEF # 112- Weinberger tr 20:12-21:2, 37:3-24). OnJune 8, 2018, Samuels provided to Thony a copy ofan unmarked title report allegedly preparedbyFidelity NationalTitle Insurance Company (Fidelity) (see Pltf 19-a ,r 24, Defts 19·a

## ,r 44; Rodak aff

## ,r 19; Packman aff,r,r 14-15; NYSCEF # 147; NYSCEF # 107). Two days later, on June 10, 2018, Thony circulated to Lapka a copy ofa purported markedup title report and closing protectionletter (Pltf 19·a 

## ,r 25; Defts 19·a ,r 45; Rodak aff

### ,r20; Packman aff,r 14; NYSCEF

### # 146; NYSCEF

### # 108). Both the unmarked title report and marked·up title report (together, the Title Reports) contained a recorded deed evidencing Samuels's purported transfer ofthe Property to 2330 Dutch (Pltf 19·a

## ,r 26; Defts 19-a 

## ,r 46; NYSCEF # 107 at FTF000599·600; NYSCEF # 108 at FTF000619-620). By June 12, 2018, the Loan closed atMMPS's New York City Office, and 2330 Dutch executed a promissory note in an amount of$375,000 (Pltf 19·a

## ,r 27; Rodak aff

## ,r 22; NYSCEF # 109). Samuels, in turn, executed a personal guarantee ofthe promissory note (Defts 19·a

## ,r 61; NYSCEF # 137 at FTF000675·682; see alsoRodak aff

## ,r 23). FTF then disbursed a total of$340,000 to 2330 Dutch, which represented approximately 60% ofthe value ofthe Property (seeDefts 19-a 

### ,r 65; NYSCEF # 106 at 2; see alsoDraudt tr 41:6• 12). Thereafter, on August 31, 2018, Thony provided a copy ofa purportedly recorded mortgage (Defts 19-a 

## ,r 47). Borrowers ultimatelyfailed to make any payments that were due under the Loan's terms and, as a result, defaulted on the Loan (seePltf 19-a 

## ,r 28; Defts 19·a

### ,r 60; Rodak aff 

### ,r 23). Anticipating a potential foreclosure action, on June 30, 2019, FTF conducted a title search through StewartTitle (Rodak aff

## ,r 24; NYSCEF # 110). Based on that search, FTF determined that the Title Reports were fraudulent (Pltf 19·a

## ,r 31; Defts 19-a

## ,r 48; Rodak aff,r 24; NYSCEF # 110). Specifically, FTF learned that, contraryto Borrowers' representations, (1) the Property was encumberedby numerous liens andjudgments and was the subject ofa pending foreclosure action in Nassau County; (2) Samuels had never transferred the Property to 2330 Dutch; (3) the "recorded" mortgage was neverrecorded with the Nassau County Clerk's Office; and (4) Borrowers never secured title insurance from Fidelity (see Pltf 19-a 

## ,r 25; Defts 19·a

### ,r,r 49·52; NYSCEF # 110 at FTF000419·432). FTF's decision to lend to 2330 Dutch was premised on the securityit thought ithad in the Property (Pltf 19·a

## ,r 39; Rodak aff

## ,r 18; NYSCEF # 115-Kuclo tr 110:13-112:5). HadFTFknown that 2330 Dutch was not the owner ofthe Property or that FTF would not have a first-priority mortgage on the Property after the closing, itwould not have issued the Loan (Rodak aff

## ,r 28). Such an interest, as Packmantestified, would have given FTF the ability to foreclose on the Property upon Borrowers' default (Packman tr 49:4-9)_ But instead, given Borrowers' fraud, FTF was left without any securityfor the Loan (see Pltf 19· a 

## ,r 41).

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4 of 10 

### The PurportedIssues with the TitleReports A review ofTitle Reports reveals that there were numerous errors establishing their fraudulent nature ahead ofthe Loan's closing 

### (see Pltf 19-a 

## ,r 35; Defts 19·a

## ,r 48). According to FTF's expert, Anita Delshad, the deed includedin the Title Reports contained the following discrepancies: (a) the "Endorsement Cover Page" included three inconsistent recording "page" numbers; (b) the Deed was given three legally distinct names (i.e., Deed, Indenture, and Quit Claim Deed); (c) the deed, iflegitimate, would have been a "Quit Claim Deed" indicating that Samuels had transferred all ofhis rights, title, and interestin the Property, without any warranties, to 2330 Dutch, yet it did not include the required quit claim language; (d) the deed did not include reference to a prior deed; and (e) the deed was to be "returned by mail to The Law Center" rather than 2330 Dutch's attorney's offices (NYSCEF # 117 Delshad aff

## ,r,r 16, 24 & exhs B & C; Pltf 19-a

## ,r 36). Delshadfurther observed additional anomalies with the LoanTransaction, namely that no one from Fidelity was involved in the Loan Transaction or attended the closing (Delshad aff

## ,r,r 18·20). Instead, Thony apparently acted as title closer by representing himselfas an agent attorney for Fidelity (id 

## ,r 22). In Delshad's opinion, given the importance of title reports inreal estate transactions, defendants should have identified the discrepancies in the Title Reports after a judicious review 

### (see Delshad aff

## ,r,r 12, 14, 17, 24). She further opines that defendants should have been in communicationwith Fidelity and should not have allowed Thony to act as title closer or otherwise have trusted him to record the mortgage or deliver the loan policy 

### (see id 

## ,r,r 18·19, 21·26). Separately, Delshad avers, defendants failed to adequately supervise Lapka, who was managing the LoanTransaction 

### (see id 

## ,r,r 28·33). Packman retorts that the informationprovided to MMPS gave the appearance ofan ordinaryreal estate closing transaction, and thus, there was no reason to suspect anything fraudulent (Packman aff

## ,r 16). 2 Nevertheless, Weinberger testified that Lapka, inher review ofthe title report, "shouldhave noticed" the discrepancies in the Title Reports (Weinberger tr 76:5• 11). 

### Scope of Responsibilitiesin Connection with theLoan Transaction The parties disagree as to whose responsibility it was to assess the validity ofthe information contained in the Title Reports. In support ofFTF's position, Rodak affirms that FTF understood and expected thatMMPS, in representing FTF in connection with the Loan's closing, would draft and review all documents necessary to effectuate the closing and ensure (by, among other things, ;reviewing the Title Reports) that 2330 Dutch owned the Property and that FTF was secured by a first·priority mortgage onthe Property (Rodak aff 

## ,r,r 14·16, 21). This understanding was corroboratedbyFTF employee Peter Kuclo, who testified that his "understanding [was] thatMMPS was engaged or hired to represent FTF as a lenderin the closing of' the Loan, "to ensure [FTF] had a securedfirst lienposition," and to "review allofthe documents related to the loan transaction" (Kuclo tr 24:13-23, 125:3•126=18). MMPS's engagement encompassed "the title work and the review oftitle,"

2 Packman also ascribes blame to Thony, who did not "make any attempt to assure or identify the accuracy or authenticity ofany ofthe documents" that were provided to MMPS (Defts 19·a

### ,r,r 72·73; Packman aff,i 16; seealsoThony tr 32:5-36:12, 42:4-14).

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5 of 10 which Kuclo described as "[t]he most important piece" ofMMPS's representation 

### (see id at 31=17·22, 33:8-14). Ferrante similarly understood MMPS's role in the Loan Transaction was to**"protect □**  FTF's interest," "ensure that FTF had a first lienposition," and provide "color or detail if

... any 

## D documents did not meet [MMPS's] standards and 

## D requirements for FTF" 

### (seeNYSCEF # 116- Ferrante tr 60:15-63:18). FTF also points to the depositions ofPackman and Weinberger in support ofits position. Packman, for example, testified that he understood MMPS's legal duty was to "properlyproduce enforceable, recordable, and useful loan documents, to review the title report

... and to make sure that all documents to record a first-mortgage lien against the subjectproperty were handed to a title company for recording" 

### (see Packman tr 39:14-23, 86:12·18). Weinberger similarly testified that FTF typically sentMMPS deals in which FTF sought to acquire a "first-priorityinterest" mortgage 

### (see Weinberger tr 22:13-21, 40:2-15). Conversely, defendants maintain thatMMPS had no duty to investigate, detect, eliminate, or rectify fraudulent activity for FTF 

### (see Defts 19-a 11 14, 16, 54; Packman aff 1111·12). Instead, defendants aver, any information gathering about Borrowers, as well as any corresponding review ofpublic records and reports, would have been performed by FTF 

### (seeDefts 19·a

## 11 54, 56[!]; 

### seealsoNYSCEF # 149-Rodak Reply aff 116·10; Kuclo tr 32:4-24). Defendants, in turn, point to various information that they claim were available to FTF regarding Samuels's financial history, his checkered criminalhistory, andpotential liens on the Property 

### (see Defts 19·a 11 55-56, 87-88). For its part, FTF does not dispute that, prior to closing, itidentified certain details regarding Samuels through a Trans Union credit report and background check, including (i) the existence ofa prior lien on the Property with a notice ofpendency dated as ofApril 27, 2017, and a recording date ofApril 21, 2017, (ii) Samuels's credit score of536 out of800, and (iii) various delinquent accounts and foreclosures (seeDefts 19-a 

## 1156[A], [D]-[E], 57; Rodak Reply

## aff116·10). FTF does, however, dispute that it knew ofSamuels's criminalhistoryprior the Loan's closing given the lack ofany disclosure in either Samuels's creditreport orbackground check (Rodak Reply aff

## 11 4·5, 9·10; NYSCEF # 151). In further support oftheir position, defendants offer the expert report ofJohn J. Hughes, Jr., Esq. (Hughes) (NYSCEF # 135

- Hughes Report). Hughes opines that MMPS's duties with regard to its review ofthe title report were limited to "verify[ing] the lender's name, loan amount, property address, borrower's name, dates, exceptions, violations, check[ing] that tax searches do not show violations, and 

### D confirm[ing] that the title is what is seen in the transaction to be recorded" 

### (see id 11 22-26, 28·29). These duties notably included "produc[ing] enforceable, recordable and useful loan documents" and "reviewhng] the title report, to make sure that all documents to record a first-mortgage lien against the subjectproperty were handed to a title company for recording'' and had "no blemishes such as violations orjudgments" 

### (see id 

## 11 22, 28). Hughes separately opines that FTF "failed to meet the standards ofan ordinary prudentlender" by disregarding its own underwriting requirements inthe due diligence process

# (id,, 13-18 

### & Ex. U). Those requirements included "declin[ing] to offer funding" to a borrower that did not meet certain "qualifications" such as having a "clean criminalbackground" and "a clear credit report with no major delinquencies, bankruptcies, foreclosures or other negative indicators" 

### (see id. at Ex. U).

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### ProceduralHistory On October 2, 2019, FTF commenced an action before the New York State Supreme Court, New York County, against Borrowers and Thony alleging various causes ofaction related to the alleged misrepresentations made during the LoanTransaction 

### (see FTF Lending, LLCv2330

### Dutch BroadwayLLCetal., Index No. 655765/2019

- the First Action). Then, on May 29, 2020, FTF commenced this action againstMMPS and Weinberger in relation to its representation ofFTF in the Loan Transaction 

### (see NYSCEF# 1 the SecondAction). MMPS subsequentlyfiled a third-party complaint againstThony and his firm seeking contribution and indemnification ifFTF recovered damages against MMPS (NYSCEF# 9). On September 20, 2020, FTF obtained a defaultjudgment against Borrowers inthe FirstAction 

### (seeNYSCEF # 102). On November 30, 2021, after the Note ofIssue was filed in the FirstAction, the court denied FTF's motion for summaryjudgment against Thony (id.). Meanwhile, in the SecondAction, defendants moved to dismiss the complaint, while Thony and his firm moved to dismiss the third-party complaint 

### (see NYSCEF#s 14, 19). On May 4, 2021, the court denied in part and grantedin partboth motions, dismissing FTF's claims for breach ofcontract, negligence, and disgorgement/restitution, and dismissing defendants' third-party claims for common law indemnification (NYSCEF #s 41·42). The FirstDepartment affirmed this decision onMay 3, 2022 (NYSCEF # 76). On October 23, 2023, the First and Second Actions were consolidated under the SecondAction's index number, and on October 31, 2023, FTF filed a Note ofIssue inthe Second Action (NYSCEF#s 101-102). FTF then moved for summaryjudgment onDecember 28, 2023, and defendants cross moved onJanuary 16, 2024 (NYSCEF#s 103, 130). 

### Discussion A party moving for summaryjudgment must make a prima facie showing thatitis entitledtojudgment as a matter oflaw 

### (seeAlvarez vProspectHosp., 68 NY2d 320, 324 [1986]). Once that showing is made, the burden shifts to the party opposing the motion to produce evidentiaryproof, in admissible form, sufficient to establish the existence of materialissues offact which require a trial ofthe action 

### (seeZuckerman v Cityof New York, 49 NY2d 557, 562 [1980]). On a motion for summaryjudgment, facts must be viewed in the light most favorable to the non·moving party 

### (see Vega v

### RestaniConstr. Corp, 18 NY3d 499, 503 [2012]). In its motion, FTF argues thatitestablishedits entitlementto summaryjudgment on.its legal malpractice claim (NYSCEF # 127 -MOL at 8·20; NYSCEF# 153 -Reply at 2· 13). FTF first contends that MMPS had a duty to ensure that FTF was secured by a first· lien mortgage in the LoanTransaction, including by reviewing the Title Reports 

### (see MOL at 8-10; Reply at 2·5). MMPS, in turn, breached that duty by failing to notice fraudulent nature ofthe deed in the Title Reports and, as a result, that 2330 Dutch did not own the Property (MOL at 10·17; Reply at 2·6). FTF next contends that defendants' negligence is the proximate cause ofits damages because it would not have agreed to the Loan ifit was aware that 2330 Dutch was not the owner ofthe Property 

### (seeMOL at 17·20; Reply at 6·8). FTF continues thatit only extendedthe Loanbecause itbelieved itwould have a security interest in the Property, which defendants admittedlyfailed to ensure 

### (see id).

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7 of 10 Defendants oppose FTF's motion and cross move for summaryjudgment dismissing FTF's legal malpractice claim. In support, defendants primarily aver that they had no duty to investigate Samuels or detect anyfraud during the Loan Transaction (NYSCEF # 132 Opp at 9-12). Rather, defendants assert, any due diligence ofBorrowers should have been performedby FTF, and, at any rate, FTF fails to present any admissible evidence indicating that defendants had reason to believe there was potentialfraud to investigate 

### (see id at 11- 12). Defendants next contend thatFTF failed to establish proximate causation because (1) FTF's damages arise from Borrowers' failure to repay the Loanrather than any purported failure to identify fraud, and (2) FTFbore the responsibility ofreviewing the Title Reports and, as part ofits business decision to extendthe Loan, it ultimately approved the Loan with prior knowledge ofissues with Borrowers and the Property (id at 12-16). 

### In an action for legal malpractice, a plaintiffmust establish "(l) that the attorney was negligent; (2) that such negligence was a proximate cause ofplaintiff's losses; and (3) proofofactual damages" 

### (GlobalBus. Inst. vRivkinRadlerLLP, 101 AD3d 651, 651 [1st Dept 2012], quoting 

### Brooks vLewin, 21 AD3d 731, 734 [1st Dept 2005]). Conversely, a defendant seekingto dismiss a legal malpractice claim on summaryjudgmenthas the "burden to demonstrate that the plaintiffwould be unable to prove one ofthe essential elements ofHts] claim" 

### (Aur vManhattan GreenpointLtd, 132 AD3d 595, 595-596 [1st Dept 2015]). To satisfy the first element, a plaintiffmust establish that the attorney's conduct "fellbelow the ordinary and reasonable skill and knowledge commonly possessedby a member ofthe profession" 

### (Bernstein v Oppenheim & 

### Co., 160 AD2d 428, 430 [1st Dept 1990]). As for the second element, proximate causation, a plaintiffmust establish that "'but for' the attorney's negligence," it would not have sustained damages 

### (NomuraAsset Capital Corp. v Cadwalader, Wickersham & 

### TaftLLP, 26 NY3d 40, 49-50 [2015]; 

### Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman &

### Dicker, 56 AD3d 1, 10 [1st Dept 2008] [plaintiffmust establish that "'but for' the attorney's negligence' the plaintiffwould have prevailedin the matter or would have avoided damages"]). And for the third element, a plaintiffmust demonstrate that it "sustained some ascertainable damages" 

### (seeRusso v Feder, Kaszovitz, Isaacson, Weber, Skala &

### Bass, LLP, 301 AD2d 63, 67 [1st Dept 2002]). Here, FTF has established the first element ofits legal malpractice claim. At the outset, FTF has marshalled sufficient evident establishingthat FTF had a duty to properly review the title report as part ofits representation ofFTF inthe Loan Transaction. For example, FTF's employees had understood and expected that MMPS would (1) draft and review all documents necessary to effectuate the Loan's closing, including the Title Reports, (2) ensure that 2330 Dutch owned the Property, and (3) ensure that FTF was securedby a first-priority mortgage on the Property 

### (see Rodak

## aff,r,r 14-16, 21; Kuclo tr 24:13-23, 31:17-22, 33:8-14, 125:3-126:18; Ferrante tr so:15-52:12). Packman and Weinberger,s

3 Defendants contend that Weinberger's deposition testimony cannot be used againstMMPS because there is no evidence that he was authorized to speak on MMPS's behalf (see Opp at 18·19). This objection is without merit. Weinberger was, at all relevant times, an associate ofMMPS performing legal services onbehalfofMMPS as part ofthe Loan Transaction (see Packman aff

### ,r 17; NYSCEF # 118

### ,r 4; NYSCEF # 119 

### ,r 1). Furthermore, not only is Weinberger a named defendant, but atthe time ofhis deposition, Weinberger was a partner atMMPS and thus an agent ofthe firm (see

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8 of 10 effectively corroboratedFTF's understandingby testifying that the responsibility oflender's counsel was to "properly produce enforceable, recordable, and useful loan documents" and "to review the title report" (seePackman tr 39:14-23, 42:7-43:6, 57:13·16, 86:12-18; Weinberger tr 22=13·21, 40:2•15). FTF has further demonstrated that defendants breached that duty through their negligent conduct. As the record makes clear, the Title Reports were riddled with indicia of fraud-a fact that was only discovered by FTF after the Loan's closing 

### (seePltf 19-a 

## 11 25, 31; Defts 19-a 

## 11 48·52; Rodak aff ,i,i 24-25). According to FTF's expert, these discrepancies, as well as other anomalies with the Loan Transactionin general, should have, at minimum, caused defendants to have suspicion as to veracity ofthe documents thathad been provided Borrowers and, in turn, triggered additional review, particularly given the importance ofthe title report in a typical real estate transaction 

### (seeDelshad aff 

## 11 12, 14, 17, 16, 18·24 

### & exhs B 

### & C). Yet neither defendants nor their legal staff · identified or flagged any issues with the Title Report to FTF prior to the Loan's closing 

### (see e.g., Packman aff

## 1 16). This failure to identifyissues in the Title Report was seemingly accentuatedby defendants' lack ofsupervision over Lapka inher management ofthe Loan Transaction. Indeed, as Weinberger testified, she "should have noticed" the discrepancies in the Title Reports 

### (seeWeinberger tr 76:5-11). All told, these facts, considered intheir totality, provide a sufficient basis to conclude that defendants' representation ofFTF fell below the ordinary and reasonable skill andknowledge commonly possessed by members of the profession 

### (see Benitez v UnitedHomes of N. Y., 

### LLC, 142 AD3d 867, 867 [1st Dept 2016] [plaintiffmade a prima facie showing ofnegligence where defendant "fail[ed] to advise that the subjectproperty lacked a certificate ofoccupancy, fail[ed] to advise ofthe risk offunding the loan under these circumstances, and faiHed] to confirm thatplaintiff' met a condition ofthe loanD. In opposition, defendants fail to demonstrate the existence ofmaterialissues offact on the issue ofnegligence orthatFTFcannot otherwise meet this element ofits claim. Defendants' primary contentionis that it had no duty to investigate, detect, eliminate, or rectify fraudulent activity or to otherwise be a guarantor ofany particular result for FTF 

### (seeDefts 19-a ,i114, 16, 30, 54; Packman aff 1,i 11-12). Defendants' self-serving attempt to narrow the scope oftheir duties are, however, belied by essentially unrefuted testimony in the record establishingthat defendants were, in fact, responsible for ensuring FTF's first-priority interestin the Property by, among other things, reviewing the title report 

### (see Kuclo tr 24=13·23, 125:3-126=18; Packman tr 39:14-23, 86:12-18). The opinions set forth in the Hughes Report regarding defendants' purported duties do not alter this conclusion. In fact, the Hughes Report seemingly corroborates the above conclusions by opining, based on his review ofthe record, that defendants had an obligation to "produce enforceable, recordable and useful loan documents" and "to review the title report" 

### (seeHughes Report

,, 22, 28). Turning to the issue ofproximate causation, FTF has made prima facie showing that defendants' negligence was the "butfor" cause ofFTF's damages. As various FTF employees have affirmed and/or testified, FTF's decision 

### to lend to Borrowers hinged on the securityit felt ithad in extendingthe Loan (see Pltf 19-a ,i 39; Rodak aff

## 11 18, 28; Kuclo tr 110: 13- Weinberger tr 12:12-15). It was therefore appropriate for FTF to rely on Weinberger's deposition testimony in support ofits motion (see CPLR 3 l 12[aJ).

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### [* 8]INDEX NO. 153620/2020 NYSCEF DOC. NO. 155 RECEIVED NYSCEF: 09/06/2024

9 of 10 112:5; 

### seealsoPackman tr 49:4-13). However, because the Loan Transaction did not, in fact, result in FTF obtaining a first-priority interest the Property, FTF was left without security for the Loan (Pltf 19-a 

### ,r,r 25, 41; Defts 19-a

## ir,r 49·52; Rodak aff

### ,r 25; Packman tr 49:10-13). This was, ofcourse, the precise securityinterest that bothparties understood that defendants were working to secure through their review and approval ofthe Loan Transaction's documents 

### (seeRodak

### aff,r,r 14·16, 21; Ferrante tr 60:15-62:12; Packman tr 39:14-23, 86:12-18). Yet, despite the obvious errors in the Title Reports, defendants' review failed to uncover any issues with the Title Reports or otherwise resultin reasonable assurances that FTF would be protectedinthe event ofa default following the Loan's closing 

### (see Delshad aff

## ,rir 12·27; Packman aff

## ,r 16). A trier offact, when presented with this evidence, could reasonably conclude that "but for" defendants' failure to identify and advise on these issues, FTF would have avoided entering into the Loan or otherwise haven takenremedial steps to protectitselfin extending the Loan. Nevertheless, summaryjudgmentinFTF's favor is not warranted. 4 The record undoubtedly supports a conclusion that defendants had a duty to properly review the Title Reports and ensure FTF's securityinterestin the Property. Butthere is also evidence in the record that FTF had its own due diligence obligations as part ofthe Loan Transaction 

### (seeTerm Sheet at 3-4; Defts 19·a

## ,r 86; Packman aff

## ,r,r 8·9). 

### It was through this diligence that FTF seemingly obtainedthe credit reports and background checks identifying certain details about Samuels's checkeredfinancial history andpotential liens/foreclosure actions on the Property 

### (see Defts 19-a 

### ,r,r 56[A], [D]-[E], 57; Rodak Reply aff

### ,r,r 6·10). Yet, despite being on notice ofthese issues-which seemingly conflicted with its own underwriting requirements for approving borrowers 

### (seeHughes Report Ex. U)-FTF nevertheless approved the Loan. Presented with this evidence and testimony, a trier offact could determine that, notwithstanding defendants' negligent conduct, the proximate cause of FTF's losses following Borrowers' default was its own deficient diligence efforts 

### (cf Garten v Shearman 

### &Sterling

### LLP, 102 AD3d 436, 437 [1st Dept 2013] [affirming dismissal of complaint on summaryjudgment where defendant established that plaintiffs losses were causedby a borrower's "poor financial condition" and plaintiffs "misjudgment ofrisk," rather than defendant's failure to prepare and procure documents necessaryto provide plaintiffwith a first-priority securityinterest]). As a result, although a close call, defendants profferedjust enough evidence in admissible form 

### to create a material issue of fact as to proximate causation. 

### In sum, although FTF has established defendants' negligence, material issues offact on the issue ofproximate causation preclude summaryjudgment. Accordingly, both motions are denied. As to defendants' remaining bases for dismissing FTF's claims (Defts' Opp at 3·9, 19· 23), defendants' contentions are without merit and are dismissed. 

### First, defendants' argument thatplaintiffs claims are time-barred ignores that the three-year statute of limitationperiod begins to run when the alleged malpractice occurs 

### (see Shumsky v Eisenstein, 96 NY2d 164, 166 [2001]). Here, the alleged malpractice action accrued on June 12, 2018, i.e., the Loan's closing date, and thus FTF had to file its action by no laterthan June 12, 2021 (Defts 19-a 

### ,r 27). This action was commenced on May 29, 2020. 

### Second, defendants contend that FTF's claim againstWeinberger must be dismissed under the

4 And there is likewise no basis to grantdefendants' cross motion for summaryjudgment.

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### [* 9]INDEX NO. 153620/2020 NYSCEF DOC. NO. 155 RECEIVED NYSCEF: 09/06/2024

10 of 10 principle ofrespondeat superior. The record, however, is clear that Weinberger was the supervising attorney for the Loan Transaction (NYSCEF # 114 Lapka tr 54:25-55:2; Packmantr 33:7-19, 34:21-35:3). Furthermore, as FTF notes, its claim is not premised on a theory vicarious liability, and, regardless this court has already determined that Weinberger can be subject to personalliability to the extent he acted negligentlywhile representing FTF 

### (seeNYSCEF#s 41, 70; 

### seealsoFTFLending, LLC v

### Mavrides, Moya], Packman 

### &Sadkin, LLP, 205 AD3d 414, 415 [1st Dept 2022] [holding thatplaintiffs could maintain malpractice claim against Weinberger and that dismissal was not warranted under "the common-law doctrine ofrespondeat superior"]). 

### Finally, defendants aver that FTF failed to mitigate damages. This issue, however, presents a question offact regarding damages that should not be resolved until the issue liabilityis resolved. Qmclueion For the foregoing reasons, itis hereby ORDERED that plaintiff's motion for summaryjudgment and defendants' cross motion for summaryjudgment are both denied; and it is further ORDERED that this case is referred to the Alternative Dispute Resolution Program and the parties are to contact the ADR office at adr·ljd@nycourts.gov, with notice to this courtby letter, within twenty days ofthe date ofthis order; and it is further ORDERED that defendants shall serve a copy ofthis order with notice ofentry upon plaintiffand the Clerk ofthe Court within ten days ofthe date ofthis order. This constitutes the Decision and Order ofthe court.

09/06/2024 DATE

CHECK ONE:

APPLICATION: CHECK IF APPROPRIATE:

# ~ CASE DISPOSED GRANTED 

# 0 DENIED SETTLE ORDER INCLUDES TRANSFER/REASSIGN NON-FINAL DISPOSITION GRANTED IN PART SUBMIT ORDER FIDUCIARY APPOINTMENT

153620/2020 FTF LENDING, LLCvs. MAVRIDES, MOYAL, PACKMAN & SADKIN LLP Motion No. 006

### □ OTHER 

# 0 REFERENCE

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