Plaintiff's motion for an Order pursuant to CPLR § 3212 granting summary judgment as a matter of law on the grounds that 1) the Defendant was not a valid corporation, therefore, the deed transfer at issue is null and void, and 2) the deed conveyance at issue was fraudulently induced is denied.

Plaintiff's Complaint is amended as per Order of the Court to add GBA Enterprises, Inc., Alvin Merrifield and Kathleen Bradshaw as Defendants to this action for the reasons set forth below.

Plaintiff's motion for an Order disqualifying Ms. Kathleen Bradshaw as counsel for the Defendants is granted.^[FN1]

Factual Background

The facts of this matter lead to two reasonable inferences: That Plaintiff was subjected either to a "rescue scam" to which he is gallantly trying to extricate himself, or, he sold his condominium to avoid foreclosure.

Mr. Diallo purchased his home, a condominium unit, in December 1994. He claims that he encountered economic difficulties in 2001, which led him to a Mr. Alvin Merrified, who Mr. Diallo alleges told him that he would be able to help him refinance his mortgage, and save him from losing his condominium in foreclosure. Mr. Merrifield then placed him in contact with an attorney, a Kathleen Bradshaw, who Mr. Diallo contends duped him into signing a document that he thought was a refinancing agreement and which was actually a deed purportedly conveying ownership of his condominium to a Grand Bay Associates Enterprises, Inc. ("Conveyance").

Mr. Diallo believed that the document he signed required: 1) Mr. Merrifield to pay off his $22,000 mortgage; 2) Mr. Diallo to pay approximately $7,000 in maintenance arrears; and 3) Mr. Diallo to make $700 monthly payments to Mr. Merrifield, $350 of which was to be applied to the condominium's monthly maintenance fee. He further believed that this arrangement would last four to six months, during which time Mr. Merrifield would obtain refinancing on his behalf.

Mr. Merrifield paid off the $22,000 mortgage and Mr. Diallo paid the $7,000 in maintenance arrears. Mr. Diallo maintains, however, that Mr. Merrifield failed to obtain the agreed upon refinancing. Mr. Diallo states that regardless of this failure, he continued to pay Mr. Merrifield the agreed upon $700 monthly installment, which from 2001 to 2004 added up to $20,844.23.

In 2003, Mr. Diallo discovered that the condominium's management instituted a foreclosure [*2]action against Grand Bay Associates Enterprises, Inc. for failure to pay maintenance charges, which led Mr. Diallo to surmise that Mr. Merrifield was not applying the agreed upon $350 to the unit's maintenance. This prompted Mr. Diallo to cease making the $700 monthly payment to Mr. Merrifield, which resulted in an entity named GBA Enterprises, Inc. instituting proceedings to evict him and his family from the unit. It was at this time that Mr. Diallo discovered that Ms. Kathleen Bradshaw—the attorney referred to him by Mr. Merrifield—was representing GBA Enterprises, Inc. in this eviction action as "owner" of the unit.

Ms. Bradshaw and Mr. Merrifield gave another version of events via their Affirmations in Support of an Order to Show Cause to vacate a default judgment, which are annexed to Plaintiff's current application. Ms. Bradshaw admits in her Affirmation that she may have to be a witness in these matters, thus, her clients may need to "find a separate attorney." (Bradshaw Aff. dtd Jan. 16, 2006 at ¶ 5.) She further indicates that she may need to testify because Mr. Diallo "seems to have an erroneous recollection of events in this matter." (Id.)

Mr. Merrifield avers in his Affirmation that he is the rightful owner of Mr. Diallo's condominium because he purchased the unit from him, as such, the aforementioned $700 monthly payments were for rent. (Merrifield Aff. dtd Jan. 10, 2006 at ¶ 5.) He further claims that he is trying to evict Mr. Diallo from the unit based on him owing "in excess of two year's rent arrears." (Id. at ¶ 13.) He contends that Mr. Diallo was given opportunities to re-purchase the unit, but was unable to obtain financing. (Id. at ¶ 8.)

Nonetheless, Mr. Diallo instituted this lawsuit against Grand Bay Associates Enterprises, Inc. for a declaratory judgment whereby he is seeking a judgment of ownership of the condominium in fee simple absolute, or in the alternative to void the deed conveyance based on fraudulent inducement.

Deed Theft

Simply stated, the Court interprets Mr. Diallo's suit as alleging that he was a victim of a "rescue scam" or "foreclosure rescue" or "deed theft," which is [*3]

"when homeowners are solicited with an offer of private, nonqualifying, short-term financing that will pay off the delinquent debt and allow them to stay in their home while they repair [their] credit. As part of the agreement, the homeowners are convinced by the "investor" that to finalize the short-term financing, they will need to convey [title] of the property to the investor as collateral. Once the fraudster obtains title, he sells the property at fair market value, pays off the debt, and skims the equity.

Wells, Mortgage Fraud: A Scourge of the 21st Century?, 79 CPA Journal 6 [2009]. "Although homeowners are told they will be able to buy their homes back at a later date, this never happens, and they are often evicted instead. These schemes never work to the benefit of homeowners, and they typically involve major fraud and deception." Dangers of Lending and Foreclosure Scams, The Weekly Gleaner, vol 1626, at 12, May 3, 2006. Therefore, based on this alleged fraud, Mr. Diallo wants this Court to void the Conveyance, or in the alternative, disqualify Ms. Bradshaw from representing the Defendants.

Without setting out the long and tortured history of this matter, the Court has deduced four facts pertinent to Mr. Diallo's application. First, there are two business entities involved in this matter: 1) Grand Bay Associates Enterprises, Inc., to which Mr. Diallo either knowingly or unwittingly conveyed ownership of his condominium to and is now seeking summary judgment against and 2) GBA Enterprises, Inc., which interposed an Answer in response to Mr. Diallo's suit and is trying to evict Mr. Diallo from the condominium. Second, Mr. Merrifield is the President of both GBA Enterprises, Inc. and Grand Bay Associates Enterprises, Inc. Third, Grand Bay Associates Enterprises, Inc. and GBA Enterprises, Inc. are one and the same entity. Fourth, Ms. Bradshaw has represented all of the above at some point in this saga: Mr. Diallo when the Conveyance was supposedly executed, and Mr. Merrifield, and his Grand Bay Associates Enterprises, Inc. and GBA Enterprises, Inc., in the eviction proceedings.

Amending the Complaint

To simplify matters, the Court is sua sponte amending Mr. Diallo's Complaint to include GBA Enterprises, Inc., Grand Bay Associates Enterprises, Inc., Mr. Alvin Merrifield and Ms. Kathleen Bradshaw as Defendants. See In re Denton, 6 AD3d 531, 532 (holding that "[p]ursuant to CPLR § 3025(c), pleadings may be conformed to the proof at any time upon such terms as may be just") (emphasis added); see also Studebaker-Worthington Leasing Corp. v. Match, Inc., 21 Misc 3d 1133A, (finding that "the court may, sua sponte, relieve the plaintiff of its failure to [*4]amend its pleading by deeming the complaint amended to conform to the evidence presented on the motion and cross-motion for summary judgment, in the absence of a showing of prejudice to the defendants").

None of the Defendants may claim prejudice or surprise given that: 1) many of Mr. Diallo's allegations are aimed at Mr. Merrifield (See S & C at ¶¶ 10-12, 14; 2) Ms. Bradshaw is alleged to be Mr. Merrifield's co-conspirator (id. at ¶¶ 11 & 12); 3) the Answer interposed in response to the current suit names Mr. Merrifield as a Defendant; 4) Grand Bay Associates Enterprises, Inc. is named on the disputed Conveyance; 5) GBA Enterprises, Inc. is seeking to evict Mr. Diallo based on said Conveyance; and 6) there is evidence that Mr. Merrifield is President of both entities. Thus, the Court finds that it serves the interest of justice to include all of these individuals and entities as Defendants in this matter.

Non-Existent Corporation

Mr. Diallo presents evidence that neither GBA Enterprises, Inc. nor Grand Bay Associates Enterprises, Inc. were ever registered as valid corporations—either when the Conveyance was executed or at the present time. Therefore, the Court finds that neither entity could obtain any rights or benefits pursuant to the Conveyance. See, e.g., Farrell v. Housekeeper, 298 AD2d 488, 489 (holding that "a nonexistent entity, . . . [can] not " 'acquire rights by contract or otherwise, incur debts or other liabilities either in contract or tort, sue or be sued'") (citations omitted); Zarzycki v. Lan Metal Prods. Corp., 62 AD3d 788, 789; 183 Holding Corp. v. 183 Lorraine St. Assocs., 251 AD2d 386-87. This maxim does not operate, however, to void the Conveyance.

When individuals purporting to act on behalf of a non-existent principal enter into a contract with a third party, the contract does not for that reason alone become void or voidable at the whim of the third party. Rather, under well-settled principles of agency law, the contract generally remains valid and enforceable as between the third party and the individuals who executed the contract on behalf of the non-existent principal. As a general rule, "[l]iability is based on the rule that one who assumes to act as agent for a nonexistent principal is himself [or herself] liable on the contract in the absence of an agreement to the contrary and on the theory of a breach of an implied warranty of authority

Metro Kitchenworks Sales, LLC v. Continental Cabinets, LLC,31 AD3d 722, 723. [*5]

The Conveyance annexed to Mr. Diallo's application bears only his signature. As such, the Court is unaware of who executed the instrument on behalf of Grand Bay Associates Enterprises, Inc., although it presumes that it is Mr. Alvin Merrifield—the self-professed President of GBA Enterprises, Inc. Regardless of whoever signed the Conveyance on behalf of Grand Bay Associates Enterprises, Inc., that person is the individual bound by the Conveyance.

Fraudulent inducement

"The elements of a cause of action for fraud require a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages." Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 NY3d 553, 559.

Critical to a fraud claim is that a complaint allege the basic facts to establish the elements of the cause of action. Although under CPLR 3016(b) the complaint must sufficiently detail the allegedly fraudulent conduct, that requirement should not be confused with unassailable proof of fraud. Necessarily, then, CPLR 3016(b) may be met when the facts are sufficient to permit a reasonable inference of the alleged conduct.

Pludeman v. Northern Leasing Sys., Inc.,10 NY3d 486, 492.

"A motion for summary judgment may only be granted where there exists no material and triable issue of fact. On such a motion the court's role is limited to one of issue-finding, not issue determining. Thus, it is improper to resolve questions of credibility on a summary judgment motion, unless it clearly appears that the issues are not genuine but feigned. On such a motion the opponent is entitled to all favorable inferences." Con Ed. v. Jet Asphalt Corp., 132 AD2d 296.

Although the Court finds that the allegations of Mr. Diallo's complaint are sufficient to permit a reasonable inference of an alleged fraud, the Court finds that there are triable issues of fact as to whether Defendants engaged in the conduct alleged. Although Mr. Diallo alleges that, "Mr. Merrifield conspired with Ms. Bradshaw to fraudulently induce [him] into deeding the unit to Mr. Merrifield" (S & C at ¶ 12), there is also evidence that Mr. Diallo may have sold his unit [*6]to the Defendants to avoid foreclosure. See Hicks v. Montefiore Med. Ctr., 266 AD2d 14, 15 (holding that "factual discrepancies in plaintiff's own evidence" create triable issues of fact); see also Calabrese v. Childs, 149 AD2d 557, 558 (holding that "questions of credibility [are] not proper on a summary judgment motion unless it clearly appears that the issues are not genuine, but feigned"). Thus, Plaintiff's motion regarding his claims of fraudulent inducement is denied.

Disqualification

A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.

22 N.Y.C.R.R. § 1200.9(a).

Attorneys owe fiduciary duties of both confidentiality and loyalty to their clients. The Code of Professional Responsibility thus imposes a continuing obligation on attorneys to protect their clients' confidences and secrets. Even after representation has concluded, a lawyer may not reveal information confided by a former client, or use such information to the disadvantage of the former client or the advantage of a third party. An attorney, moreover, must avoid not only the fact, but even the appearance, of representing conflicting interests

Tekni-Plex, Inc. v. Meyner & Landis, 89 NY2d 123, 130. (citations omitted).

A lawyer shall not act as advocate before a tribunal in a matter in which the lawyer is likely to be a witness on a significant issue of fact unless: (1) the testimony relates solely to an uncontested issue; (2) the testimony relates solely to the nature and value of legal services rendered in the matter; (3) disqualification of the lawyer would work substantial hardship on the client; (4) the testimony will relate solely to a matter of formality, and there is no reason to believe that substantial evidence will be offered in opposition to the testimony; or (5) the testimony is authorized by the tribunal.

22 N.Y.C.R.R. § 1200.29(a)(1)-(5). "A party's entitlement to be represented in ongoing litigation by counsel of his or her own choosing is a valued right which should not be abridged absent a clear showing—on which the party seeking disqualification carries the burden—that counsel's removal is warranted." Goldstein v. Held, 52 AD3d 471-72.

The Court finds that Ms. Bradshaw should be disqualified as Defendants' counsel in all matters emanating from any litigation regarding the Conveyance, Defendants named herein and Mr. Diallo. First, Mr. Diallo implicates Ms. Bradshaw as Mr. Merrifield's co-conspirator in his Complaint. (See S & C at ¶¶ 11 & 12.) Thus, she will most likely be called as a witness on this "significant issue of fact," inter alia, whether there was an intention to defraud Mr. Diallo out of his condominium.

Next, Ms. Bradshaw indicated that she is contemplating testifying adversely to Mr. Diallo's interests regarding the Conveyance. The same instrument Ms. Bradshaw was supposedly representing Mr. Diallo's rights in regards to, and the same instrument her current clients are using to evict Mr. Diallo from his home. In the least, these circumstances speak to a breach of Ms. Bradshaw's duty of confidentiality and loyalty to Mr. Diallo—her former client—and at worst evince a plot to defraud.

Therefore, it is ORDERED, that the amended caption shall read as follows:

SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF BRONX

IBRAHIM DIALLO,

Plaintiff,Index No. 15044/04

-against- [*7]

GRAND BAY ASSOCIATES ENTERPRISES, INC., GBA

ENTERPRISES, INC., ALVIN MERRIFIELD and

KATHLEEN BRADSHAW,

____________________________________Defendants.

It is further ORDERED that within thirty (30) days of this Decision/Order, Plaintiff shall:

serve the Amended Summons and Complaint upon all Defendants; and

2) serve a copy of this Order with notice of entry upon all Defendants and upon the Trial Support Clerk in room 217.

The Clerk is directed to amend the caption accordingly.

The foregoing shall constitute the decision and order of this Court.

Dated: _2/16/2010_________J.S.C.

APPEARANCES:

CALMAN GREENBERG

Attorney for Plaintiff

314 West 231st Street

Bronx, New York 10463

KATHLEEN BRADSHAW, ESQ.

Attorney for Defendants

3114 East Tremont Avenue

Bronx, New York 10461