Loan Trust, LLC v. Appraisal Source Inc.

2024 NY Slip Op 34517(U)

• Court: New York Supreme Court, New York County
• Decided: December 20, 2024
• Docket: Index No. 653529/2023
• Status: Unpublished

Opinion

Loan Trust, LLC v Appraisal Source Inc. 2024 NY Slip Op 34517(U) December 20, 2024 Supreme Court, New York County Docket Number: Index No. 653529/2023 Judge: Suzanne J. Adams 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 I York State Unified Court System's eCourts Service. I This opinion is uncorrected and not selected for official publication. INDEX NO. 653529/2023 NYSCEF DOC. NO. 143 RECEIVED NYSCEF: 12/23/2024

SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. SUZANNE J. ADAMS PART 39M Justice ------------------------------ -----------------· -----------------X INDEX NO. 653529/2023 LOAN TRUST, LLC, MOTION DATE N/A Plaintiff, MOTION SEQ. NO. 004 005 - V-

APPRAISAL SOURCE INC., ELIAZER KLEIN, individually, and FASTAPP INC., DECISION + ORDER ON MOTION Defendants. ----------------------------------------------------------------X The following e-filed documents, listed by NYSCEF document number (Motion 004) 56, 57, 58, 59, 60, 61,62,63,64, 65, 66, 67,68,69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82,83,84,85, 86, 87, 88, 89, 98, 99, 100, 101, 102, 103, 104, 105, 106, 107, 108, 109, 110, 111, 112, 113, 114, 115, 116, 134, 137, 138, 139, 140, 141 were read on this motion to/for DISMISS

The following e-filed documents, listed by NYSCEF document number (Motion 005) 90, 91, 92, 93, 117, 118, 119, 120, 121, 122, 123, 124, 125, 126, 127, 128, 129, 130, 131, 132, 133, 135 were read on this motion to/for DISMISSAL I i

Upon the foregoing documents, it is ordered that the motions of defendants Appraisal

Source Inc. (ASI) and Eliazer Klein (Klein) (together, the Appraisers) (motion sequence no. 004)

and FastApp, Inc. (FastApp) (motion sequence no. 005) to dismiss the second amended verified

complaint (the SAC) under CPLR 3211 (a) (1), (5) and (7) is denied. Plaintiff Loan Trust, LLC, a

Delaware limited liability company, is an asset-based mortgage (ABM) investor in the business of

making ABM loans (NY St Cts Elec Filing [NYSCEF] Doc No. 54, SAC 11 1, 12 and 19).

Nonparty Icon Realty Capital, LLC (Icon) is an ABM broker/lender (id, 1 8). Nonparty

Sharestates Investments, LLC (Sharestates) is an ABM lender that underwrites, services and funds

ABM loans (id, 11 10-11 ). Plaintiff is "a Sharestates-related entity that ... funds and buys ABM

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loans underwritten and funded by Sharestates from ABM lenders like Icon" (id., ,-i 12). ABM loans

are secured by real property and are underwritten using real property valuations or appraisals,

which are intended to ensure that a mortgagee is adequately secured in the event a mortgagor

defaults (id., ,-i 19).

FastApp is an appraisal management company (AMC) (id., ,-i,-i 4 and 13). AMCs, like

FastApp, assist banks and lending institutions with the appraisal process by locating, vetting and

retaining appraisers and reviewing the appraisals to ensure they meet the Uniform Standards of

Professional Appraisal Practice (USPAP) and appraisal standards (id., ,-i,-i 16 and 34). Klein is an

appraiser certified by the State of New York and is an officer of ASI (id., ,-i,-i 2-3, 33 and 58).

On July 25, 2019, nonparty Wolk Family Properties 251W89 LLC (WFP) applied to

Sharestates for a refinance loan of $1.4 7 million, with the property located at 251 West 89th Steet,

Unit 6E, New York, New York (the Property) serving as collateral 1 (id., ,-r,-r 21-22). Plaintiff agreed

to pursue the transaction and structured it as a loan consolidation (id., ,-r 22). Plaintiff retained

Sharestates to underwrite the purchase (id., ,-r 23). Sharestates, as plaintiffs agent, hired FastApp

to obtain an appraisal of the Property, and Klein performed the appraisal (the Appraisal) (id., ,-r,-r

26-27, 39, 42 and 61; NYSCEF Doc No. 102, Giusto affirmation, exhibit 4). The Appraisal, which

identified Sharestates as the lender/client, valued the Property at $1.75 million (NYSCEF ])oc No.

74, Proscia affirmation, exhibit Q at 2-3). -An "Appraiser's Certification" signed by Klein reads,

in pertinent part, that "I performed this appraisal in accordance with the requirements of the

Uniform Standards of Professional Appraisal Practice that were adopted and promulgated by the

Appraisal Standards Board of The Appraisal Foundation and that were in place at the time this

1 At that time, WFP had encumbered the Property with three mmigages (NYSCEF Doc Nos. 65-67, Proscia affirmation, exhibits H-J), with one of the mortgagees, nonparties Gauntlet Funding, LLC and PS Funding, Inc., having commenced an action seeking to foreclose on their mortgage (the Gauntlet/PSF Mortgage) (NYSCEF Doc No. 68, Proscia affirmation, exhibit K). 653529/2023 LOAN TRUST, LLC vs. APPRAISAL SOURCE INC. ET AL Page 2 of 14 Motion No. 004 005

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appraisal report was prepared" (id. at7). Sharestates, relying on the Appraisal, approved plaintiffs

purchase of a $1.26 million loan (the Loan) based on a 72% loan-to-value ratio and funded the

purchase on plaintiffs behalf2 (NYSCEF Doc No. 54~ ,, 28-29).

On August 12, 2019, WFP executed a consolidation, extension and modification agreement

consolidating the two notes and mortgages held by Icon3 (NYSCEF Doc No. 71, Proscia

affirmation, exhibit Nat 1). WFP signed a consolidated note (the Note) for $1.26 million and a

consolidation mortgage (the Mortgage) in Icon's favor (id at 8 and 11). Icon then executed a

corporate assignment of the Note and Mortgage to plaintiff (NYSCEF Doc No. 73, Proscia

affirmation, exhibit P).

After WFP failed to make payments on the Note, plaintiff accelerated the balance due and

later commenced an action to foreclose on the Mortgage captioned Loan Trust, LLC v Wolk Family

Properties 251W89 LLC, et al., Sup Ct, NY County, index No. 850025/2020 (NYSCEF Doc No.

54, ,, 46-47; NYSCEF Doc No. 75, Proscia affirmation, exhibit R). The court (Kahn, J.) granted

plaintiff a judgment of foreclosure and sale and appointed a referee to sell the Property (NYSCEF

Doc No. 78, Proscia affirmation, exhibit U). Plaintiff successfully bid for the Property at the

foreclosure sale and assigned its $1.45 million bid to nonparty HOF I REO 5, Inc. (HOF)

(NYSCEF Doc No. 79, Proscia affirmation, exhibit V). The referee's report stated that the amount

due on the Note and Mortgage was $1,876,938, leaving a deficiency of $426,938 (id.). By deed

dated March 16, 2022, the referee conveyed title to the Property to HOF (NYSCEF Doc No. 80,

Proscia affirmation, exhibit W).

2 The loan term sheet dated August 6, 2019, though, lists an 80% loan-to-value ratio (NYSCEF Doc No. 99, G.iusto affirmation, exhibit 1 at 2). 3 Icon was the assignee of the Gauntlet/PSF Mortgage as of August 5, 2019, and on August 12, 2019, Icon separately extended a loan in the principal sum of$460,000 to WDF, which was secured by a gap mortgage on the Property (NYSCEF Doc No. 70, Proscia: affirmation, exhibit M). 653529/2023 LOAN TRUST, LLC vs. APPRAISAL SOURCE INC. ET AL Page 3 of 14 Motion No. 004 005

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Plaintiff commenced this action on July 21, 2023 (NYSCEF Doc No. 1). The SAC pleads

professional malpractice as a first cause of action. As alternative causes of action, the SAC pleads

breach of contract (second cause of action) and vicarious liability against Fastapp, only (third cause

of action). The SAC alleges that FastApp by its agent, Appraisers, performed the Appraisal for

Sharestates, plaintiffs- agent (NYSCEF Doc No. 54, ,r,r 27, 39 and 42). USPAP Ethics Rules

require real estate appraisers to be non-corporate entities and mandate that individual appraisers

"comply with USP AP when obligated by law or regulation, or by agreement with the client or

intended users. In addition to these requirements, an individual should comply any time that

individual represents that he or she is performing the service as an appraiser" (id., ,r,r 35-36

[internal quotation marks and emphasis removed]). The SAC alleges the Appraisal failed to

conform to USP AP because the Appraisers inflated the Property's value by failing to account for

the presence of a rent-controlled tenant in the unit (id., ,r,r 50-51 and 60). Defendants had valued

the Property at $1.75 million, but plaintiff's expert valued the Property at $870,000 (id., ,r 49). All

defendants now move to dismiss the SAC.

On a CPLR 3211 motion to dismiss, the court must "accept[ ] the facts· as alleged in the

complaint as true, accord plaintifft ] the benefit of every possible favorable inference, and

determine only whether the facts as alleged fit within any cognizable legal theory" (Leon v

Martinez, 84 NY2d 83, 87-88 [1994]). Dismissal under CPLR 3211 (a) (1) is appropriate where

the documentary evidence utterly refutes the plaintiff's claims and conclusively establishes a

defense as a matter of law (id. at 88).

' '

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I. The Appraisers' Motion (motion sequence no. 004)

A. Legal Capacity to Sue

A foreign limited liability company's failure to obtain a certificate of authority as required

by Limited Liability Company Law§ 808 (a) prior to commencing an action is not fatal where it

later secures a certificate (Basile v Mulholland, 73 AD3d 597, 597 [1st Dept 2010]), as has been

argued. Plaintiff has since acquired the certificate (NYSCEF Doc No. 137-139, 8/28/2024 letter).

B. Standing to Sue

Standing requires a party to establish an "injury in fact, that is, an actual stake in the matter

to be adjudicated" (Lucker v Bayside Cemetery, 114 AD3d 162, 169 [1st Dept 2013], lv denied24

NY3d 901 [2014]). The Appraisers challenge standing on three grounds. Each is unpersuasive.

First, the Appraisers contend that Icon is the real party in interest based on the allegations

in the first amended verified complaint (F AC) asserting that Sharestates was Icon's agent. The

Appraisers submit that plaintiff cannot retract those admissions by tailoring the allegations in the

SAC to plead that Sharestates is plaintiffs agent A statement in a verified complaint is a formal

judicial admission (Kuriyan v Schreiber, 209 AD3d 406,406 [1st Dept 2022], lv denied 39 NY3d

911 [2023]), and is conclusive of the fact admitted (GJF Constr., Inc., v Sirius Am. Ins. Co., 89

AD3d 622, 624 [1st Dept 2011]). By contrast, "[a]n 'informal judicial admission is a declaration

made by a party in the course of any judicial proceeding (whether in the same or another case)

inconsistent with the position [the party] now assumes"' (People v Brown, 98 NY2d 226, 232 n 2

[2002] [citation omitted]). An informal judicial admission "is not conclusive but 'is merely

evidence of the fact or facts admitted"' (Baje Realty Corp. v Cutler, 32 AD3d 307, 310 [1st Dept

2006] [citation omitted]). Where, as here, a plaintiff amends its pleading, "the prior complaint

remains admissible as an informal judicial admission, the circumstances of which may be

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explained at trial" (Bogoni v Friedlander, 197 AD2d 281, 293 [1st Dept 1994]). Therefore, the

FAC' s allegations do not conclusively resolve the issue of standing in the Appraisers' favor.

Second, the Appraisers maintain that the corporate assignment does not contain any

language assigning Icon's claims in contract or tort to plaintiff (see generally State of Cal. Pub.

Employees' Retirement Sys. v Shearman & Sterling, 95 NY2d 427, 435-436 [2000]). In viewing

the allegations in the light most favorable to plaintiff, plaintiff is pursuing direct claims and is not

proceeding as Icon's assignee. The SAC identifies Sharestates as plaintiffs agent and pleads that

Sharestates retained defendants (NYSCEF Doc No. 54, ,r,r 39 and 42). Fastapp presented

Sharestates with the Appraisal, and Sharestates allegedly relied on the Appraisal to underwrite,

approve, and fund plaintiffs Loan purchase (id., ,r,r 23-24 and 40-41 ). The SAC does not allege

that the Appraisal was performed at Icon's direction or that Icon utilized the Appraisal.

Last, the Appraisers contend that plaintiff has not sustained actual damages because its

failure to pursue a deficiency judgment precludes it from maintaining this action. Under RPAPL

1371 (3), a mortgagee_ forfeits its right to recover a deficiency and the mortgage debt is deemed

fully satisfied unless the mortgagee moves for a deficiency judgment. RPAPL 1371, however, is

inapplicable. Plaintiff does not seek to recover a deficiency in the debt but seeks damages for

malpractice related to the allegedly faulty Appraisal (see Corley v Miller, 133 AD2d 732, 735 [2d

Dept 1987]). To the extent the Appraisers contend that plaintiff cannot have sustained damages

because it assigned its foreclosure bid to HOF, plaintiff responds that it placed its bid with HOF,

a related real estate owned entity, in an interrelated company transfer for no consideration and will

reduce its damages once HOF sells the Property (NYSCEF Doc No. 134, plaintiffs mem of law

at 21). Liberally construing the allegations in plaintiffs favor, plaintiff has adequately alleged that

it sustained actual damages.

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C. Whether the Action is Time-Barred

The Appraisers assert that plaintiffs claims accrued on August 12, 2019, when it purchased

the Loan, and submit that a three-year statute of limitations applies which, after accounting for the

tolls imposed by numerous Executive Orders in response to the COVID-19 pandemic, expired on

March 27, 2023. Plaintiff commenced this action on July 21, 2023. The Appraisers repeat their

contention that Icon has not assigned any tort or contract claims to plaintiff and argue that Icon is

not a signatory to any tolling agreement.

A party moving to dismiss an action as time-barred under CPLR 3211 (a) (5) bears the

burden of demonstrating that the time in which to sue has expired (MTGLQ Invs., LP v Wozencraft,

172 AD3d 644, 644-645 [1st Dept 2019], lv dismissed 34 NY3d 1010 [2019]). The Appraisers

have failed to carry their burden in this case. As explained above, plaintiff is not pursuing claims

as Icon's assignee. -Moreover, the SAC alleges that the parties executed a written agreement

extending plaintiffs time to bring this action through July 21, 2023 (NYSCEF Doc No. 54,, 6).

The Appraisers have not challenged the validity of that agreement (see e.g. Spada v Aspen Univ.,

Inc., 202 AD3d 494, 494-495 [1st Dept 2022]).

D. Whether the Professional Malpractice Claim is Duplicative of the Contract Claim

The Appraisers posit that the malpractice claim should be dismissed as duplicative of the

breach of contract claim because both arise out of the same facts and seek the same damages.

It is well settled that a contract claim is not a tort unless the plaintiff identifies a violation

of a legal duty independent of the contract (IKB Intl., S.A. v Wells Fargo Bank, NA., 40 NY3d

277, 290 [2023]; see also Pilewski v Solymosy, 266 AD2d 83, 84 [1st Dept 1999]). That said,

"professionals ... may be subject to tort liability for failure to exercise reasonable care, irrespective

of their contractual duties" (Sommer v Federal Signal Corp., 79 NY2d 540, 551 [1992]). A cause

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of action for professional malpractice requires the plaintiff to plead that the defendant departed

from accepted standards of practice and that this departure was a proximate cause of the plaintiffs

injury (Talon Air Servs. LLC v CMA Design Studio, P.C., 86 AD3d 511,515 [1st Dept 2011]).

The SAC alleg~s that the Appraisers owed plaintiff a duty of care to provide an appraisal

to ensure that the Loan was properly secured in the event of a default, and that the Appraisers

breached this duty when they failed to comply with USP AP standards, thereby causing the Loan

to be undersecured (NYSCEF Doc No. 54, ,, 72-75). Plaintiff and Sharestates allegedly relied on

the Appraisal to determine whether to move forward with the transaction, and that but for the

Appraisers' actions, neither Sharestates nor plaintiff would have approved or funded the Loan (id.,

,, 76-79). The SAC alleges that plaintiff sustained actual damages when WFP defaulted (id., ,

80). These allegations sufficiently plead a cognizable claim for professional malpractice (see Pope

Invs. II LLC v Belmont Partners, LLC, 205 AD3d 559,560 [1st Dept 2022]) that is independent of

any contract claim. Furthermore, plaintiff may plead alternative theories (see CPLR 3014; EBC L

Inc. v Goldman Sachs & Co., 7 AD3d 418,420 [1st Dept 2004], affd 5 NY3d 11 [2005]).

E. Plaintiff's Reliance on the Appraisal

The Appraisers submit that plaintiffs reliance on the Appraisal is not a viable basis for any

claim because its purchase ofthe Loan and its decision to bid for the Property do not qualify as a

"mortgage finance transaction." The Appraisal, however, does not define the phrase "mortgage

refinance transaction," and the Appraisers have not supplied an alternative or industry-accepted

definition. In any event, the simultaneous actions taken to effectuate plaintiffs purchase appear

to be part of a mortgage refinance transaction of the two existing Icon loans. The loan term sheet

identified plaintiff as the lender and WFP's principal as the borrower and stated that the purpose

of the Loan was "[t]o provide bridge financing" (NYSCEF Doc No. 99 at 1). The terms in the

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Note and the term sheet with respect to the principal, interest rate, and length of the Loan are also

identical (id; NYSCEF Doc No. 106, Giusto affirmation, exhibit 8 at 1). As for plaintiffs bid at

the foreclosure sale, the SAC does not allege that plaintiff relied on the Appraisal for that purpose.

The Appraisers next contend that plaintiffs failure to conduct due diligence is an

intervening, superseding cause. A defendant is absolved from liability "'when ... [an intervening]

act is of such an extraordinary nature or so attenuates defendant's negligence from the ultimate

injury that responsibility for the injury may not be reasonably attributed to the defendant"' (46th

St. Leaseholder LLC v Hercules Corp., 208 AD3d 1083, 1084 [1st Dept 2022] [citation omitted]).

For a plaintiff to be deemed the superseding cause, "a defendant must show that the plaintiff

engaged in reckless, unforeseeable or extraordinary conduct, i.e. that the plaintiff recognized the

danger and chose to disregard it" (Powers v 31 E 31 LLC, 123 AD3d 421, 423 [1st Dept 2014]).

Whether a plaintiffs conduct is the superseding cause is ordinarily a jury question (Broderick v

Edgwater Park Owners Coop., Inc., 180 AD3d 527, 528 [1st Dept 2020]). Here, the SAC pleads

that plaintiffs agent, Sharestates, retained defendants for the express purpose of evaluating the

Property and relied on the Appraisal in underwriting the Loan (NYSCEF Doc No. 54, ,, 23-26,

28). The term sheet states that plaintiff would collect a due diligence fee from WFP to pay for an

· appraisal and third-party reports, including an "[a]cceptable (to Lender) third party broker's price

opinion (BPO) and/or appraisal, ordered by Lender" (NYSCEF Doc No. 99 at 3). Therefore, it

cannot be _said, at this stage, that plaintiffs conduct constitutes a superseding cause.

F. Whether Plaintiff's Sustained Actual Damages on the Breach of Contract Claim

The Appraisers contend that the breach of contract claim must be dismissed because the

damages plaintiff seeks were not within the contemplation of the parties at the time of the contract

(see Kenford Co. v County of Erie, 73 NY2d 312,319 [1989] [damages that do not flow naturally

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or directly from a breach of contract must have been within the parties' contemplation prior to

entering into the contract]). The damages plaintiff seeks, however, would restore it to the position

it would have occupied but for the alleged breach (see FDIC v Hoyle, 2012 WL 4049808, *9, 2012

US Dist LEXIS 130957, *29-30 [ED NY, Aug. 2, 2012, No. 10-CV-4245 (JG) (VVP)], report and

recommendation adopted 2012 WL 4049950, 2012 US Dist LEXIS 130956 [ED NY, Sept. 13,

2012, No. 10-CV-4245 (JG) (VVP)] [calculating damages on a contract claim based on a faulty

appraisal as the difference between the principal amount on the loan and the price at which the

property was sold in foreclosure]). Thus, the motion insofar as it seeks to dismiss the breach of

contract claim based on plaintiffs lack of actual damages is denied.

G. Whether the SAC Pleads a Breach ofa Duty

It is the Appraisers' contention that the SAC fails to plead any specifics concerning "rent .

control," and as such, it fails to plead that the Appraisers breached an actual duty. The Appraisers,

however, have not cited arty caselaw for the proposition that plaintiff must plead those facts with

specificity, especially when the SAC gives adequate notice of the transactions at issue and the

material elements of each cause of action (see CPLR 3013). The release executed on July 1, 1986

by nonparty TCF National Properties, Inc. also fails to conclusively establish a defense as a matter

of law since the release states only that TCF National Properties, Inc. had relinquished its right,

title and interest in a "Collateral Assignment of Lease and Rents made by Aaron Ziegleman and

William K. Langfan" (NYSCEF Doc No. 60, Proscia affirmation, exhibit C), not that the Property

itself is not subject to rent control.

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II. FastApp's Motion to Dismiss (motion sequence no. 005)

At the outset, FastApp predicates its motion, in part, on the same arguments raised by the

Appraisers, but, as the Appraisers' motion has been denied, that part ofFastApp's motion seeking

to dismiss the SAC on those same grounds is also denied ..

FastApp also argues that it cannot be held vicariously liable to plaintiff because the

Appraisers were independent contractors over which it had no control. The vicarious liability

doctrine "rests fo part on the theory that - because of an opportunity for control of the wrongdoer,

or simply as a matter of public policy loss distribution - certain relationships may give rise to a

duty of care, the breach of which can indeed be viewed as the defendant's own fault" (Feliberty v

Damon, 72 NY2d 112, 118 [1988]). A party who hires an independent contractor is usually not

liable for the contractor's negligent acts (Kleeman v Rheingold, 81 NY2d 270,273 [1993]). '"The

primary justification forthis rule is that one who employs an independent contractor has no right

to control the manner in which the work is to be done and, thus, the risk of loss is more sensibly

placed on the contractor"' (Linder v United Metro Energy Servs. Corp•, 193 AD3d 513, 513 [1st

Dept 2021] [citation omitted]). The recognized exceptions to this general rule are: (1) the employer

was negligent in selecting, instructing or supervising the independent contractor; (2) the

independent co_ntractor was hired to perform inherently dangerous work; and, (3) the employer has

a specific nondelegable duty (Kleeman, 81 NY3d at 274). Whether a party is an independent

contractor is ordinarily a question for the jury to resolve (Brown v Window King LLC, 224 AD3d

533, 534 [1st Dept 2024]).

Plaintiff, in opposition; does not address whether the second and third exceptions

articulated in Kleeman apply. Instead, it focuses on the first exception to the general rule.

Preliminarily, the SAC does not allege that FastApp negligently hired or selected the Appraisers.

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The SAC asserts that Klein is a duly certified appraiser (NYSCEF Doc No. 54, ,r 33), and there is

no allegation in the SAC that FastApp "either knew, or in the exercise of reasonable care might

have ascertained, that the contractor was not properly qualified to undertake the work" (Maristany

v Patient Support Servs., Inc., 264 AD2d 302,303 [1st Dept 1999]).

As to the first exception, control over the means and methods of the contractor's work is

critical, since "'incidental control over the results produced without further indicia of control over

the means employed to achieve the results will not constitute substantial evidence of an employer-

employee relationship'" (Anikushina v Moodie, 58 AD3d 501, 504 [1st Dept 2009], Iv dismissed

12 NY3d 905 [2009] [citation omitted]; Leeds v D.B.D. Servs., 309 AD2d 666,667 [1st Dept 2003]

[general supervisory authority insufficient to impose vicarious liability]).

In this instance, FastApp relies on a master vendor agreement (the MVA) signed by Klein

on October 24, 2018, which reads, in part:

"15. Independent Contractor. Appraiser will act solely as an independent contractor in the performance of its services under this Agreement, and nothing contained or implied herein shall at any time be construed to create a relationship of employer and employee, partnership, principal and agent, or joint venture partner between Appraiser, FastApp AMC or any client ofFastApp AMC" (NYSCEF Doc No. 92, Salvo affirmation, exhibit B at 3-4).

The MVA constitutes documentary evidence for purposes of CPLR 3211 (a) (1) (see 150

Broadway NY. Assocs., L.P. v Bodner, 14 AD3d 1, 5 [1st Dept 2004]). Although the MVA

expressly labels Klein an independent contractor, merely labeling a party "an 'independent

contractor' is not dispositive of the issue of control, but is a factor to be weighed with others"

(Carlson v American Intl. Group, Inc., 30 NY3d 288, 301 [2017]). Thus, the MVA does not

conclusively establish a defense to plaintiffs claims as a matter oflaw.

FastApp also contends that 15 USC § 1639e (b) and Executive Law§ 160-mmmm bar it

from exercising any control over the Appraisers. Both statutes concern appraisal independence

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and prohibit entities, like AM Cs, from engaging in specific acts as detailed in the statutes (see 15

USC § 1639e [b]; Executive Law § 160-mmmm [1-11]). The statutes also set forth certain

exceptions that allow entities, like AMCs, to ask an appraiser to consider additional information,

provide further detail of the appraiser's conclusion, and to correct errors in the appraiser's report

(15 USC § 1639e [c]; Executive Law § 160-mmmm). In viewing the allegations in their most

favorable light and in according plaintiff every possible favorable inference, it cannot be

determined from the pleadings alone whether FastApp's actions with respect to the subject

Appraisal extended b~yond mere incidental control. To be sure, the SAC does not allege that

FastApp improperly influenced the Appraisal in violation of the above statutes. Rather, the SAC

alleges that FastApp has a "role in overseeing the appraisal process and reviewing the appraisal"

(NYSCEF Doc No. 54, ,r 26),and that FastApp "defectively oversaw Appraisers' performance of

the Appraisal" (id., ,r 94). The SAC further alleges that FastApp "locate[s], vet[s] and retain[s]

appraisers ... and review[s] each appraisal/valuation to ensure it meets USPAP and Appraisal

Standards" (id., ,r 16). These allegations are sufficient to plead that FastApp may have exercised

some element of control over the means and methods of the Appraisers' work (see D.S. v Positive

Behavior Support Consulting & Psychological Resources, P. C., 197 AD3d 518, 520-521 [2d Dept

2021]; cf McHale v Metropolitan Life Ins. Co., 165 AD3d 914,917 [2d Dept 2018]).

The SAC also pleads a breach of the "Appraisal Contract" as an alternative cause of action

(NYSCEF Doc No. 54, ,r,r 99-105). A cause of action for breach of contract requires a valid

contract, the plaintiff's performance, the defendant's breach and damages (Noto v Planck, LLC,

228 AD3d 516,516 [1st Dept 2024]). Here, FastApp failed to raise specific arguments in its initial

papers on this claim other than to assert that it cannot be held vicariously liable for the Appraisers'

actions. Instead, FastApp, in reply, maintains that plaintiff conceded in its opposition that it never

653529/2023 LOAN TRUST, LLC vs. APPRAISAL SOURCE INC. ET AL Page 13 of 14 Motion No. 004 005

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had a master service agreement with FastApp and that plaintiff ignored language on FastApp's

website describing it as a middleman. These arguments, though, do not address whether the SAC

fails to state a cause of action under CPLR 3211 (a) (7). Sharestates's appraisal request form also

includes the phrase"[e]ach and every appraisal must contain certifications and U.S.P .A.P language

indicating compliance" (NYSCEF Doc No. 121, Giusto affirmation, exhibit 4 at 3). Whether this

provision formed part of the Appraisal Contract and its meaning cannot be determined on a pre-

answer motion to dismiss.

Accordingly, it is hereby

ORDERED that the motion brought by defendants Appraisal Source Inc. and Eliazer Klein

to dismiss the second amended complaint (motion sequence no. 004) is denied; and it is further

ORDERED that the motion brought by defendant FastApp, Inc. to dismiss the second

amended complaint (motion sequence no. 005) is denied; and it is further

ORDERED that defendants Appraisal Source Inc., Eliazer Klein and FastApp, Inc. shall

each serve and file an answer to the second amended complaint within 30 days after service of this

order with written notice of entry.

This constitutes the decision and order of the court,

12/20/2024 DATE SUZANNE J. ADAMS, J.S.C.

~ CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION

GRANTED 0 DENIED GRANTED IN PART □ OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER

CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT □ REFERENCE

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