Opinion
650724/2010.
Decided February 10, 2011.
The attorneys on the matter are Grant R. Cornehls, Esq of Herrick, Feinstein LLP (for the plaintiff) and Kevin J. Nash, Esq. of Goldberg Weprin Finkel Goldstein LLP (for the defendants).
Plaintiff Anglo Irish Bank Corporation Limited ("Plaintiff") moves for summary judgment in lieu of complaint pursuant to CPLR § 3213. Defendants Izzy Ashkenazy ("Ashkenazy") and Jonathan Agus ("Agus") (collectively "Defendants") oppose.
Defendants cross-move to dismiss the action pursuant to CPLR 3211. Plaintiff opposes.
BACKGROUND
This case arises from a loan by Plaintiff to non-party Achva Vahava, LLC ("Borrower") for $11,401,000.00 (the "Loan"). The terms of the Loan were memorialized in a promissory note dated May 15, 2007. Affidavit of Hugh McNally (the "McNally Aff."), Ex. B (the "Promissory Note"). The Promissory Note stated that principal and interest were due on May 15, 2010.
Plaintiff and Borrower also executed a mortgage and security agreement in connection with the Loan on May 15, 2007. McNally Aff. Ex, C (the "Mortgage").
Defendants, principals of Borrower, unconditionally guaranteed up to a maximum of 30% of the outstanding balance of the Loan by written guaranty, also dated May 15, 2007. McNally Aff., Ex. D (the "Guaranty"), ¶ 2. The Guaranty is not contingent on the validity or enforceability of Promissory Note or "the pursuit by [Plaintiff] of any remedies which [Plaintiff] has now or may hereafter have" under the Promissory Note. Id. Defendants, as guarantors, waived any right to notice or demand for payment from Plaintiff. Id. at ¶ 4.
Plaintiff gave Borrower notice of alleged defaults under the Mortgage on July 17, 2009 and alleged defaults under the Promissory Note and Mortgage on June 4, 2010.
McNally Aff., Exs. E, G. Plaintiff gave Defendants notice of Borrower's alleged defaults under the Promissory Note and Mortgage on June 4, 2010. McNally Aff., Ex. H. In its notice to Defendants, Plaintiff demanded immediate payment by Defendants of all sums owed it under the Guaranty. Id., p. 4.
Plaintiff alleges, and Defendants do not dispute, that Defendants have not fulfilled their obligations under the Guaranty. Plaintiff therefore moves for summary judgment in lieu of complaint for breach of the Guaranty.
Defendant cross-moves to dismiss.
ANALYSIS
1. Defendants' Cross-Motion to Dismiss
Pursuant to CPLR 3211, a party may move to dismiss causes of action or the complaint on the grounds that:
. . . (3) the party asserting the cause of action has not the legal capacity to sue; or (4) there is another action pending between the same parties for the same cause of action in a court of any state or the United States; the court need not dismiss upon this ground but may make asuch order as justice requires; or . . . (7) the pleading fails to state a cause of action."
Defendants cross-move to dismiss on several grounds. Defendants contend that Plaintiff lacks the legal capacity to sue and that both the existence of a prior proceeding in another jurisdiction and New York's "election of remedies" statute, RPAPL § 1301, warrant dismissal. For the reasons set forth below, Defendants' motion is denied.
a. Defendants Have Not Shown That Plaintiff Lacks Capacity to Maintain Suit
New York Banking Law § 200 (4) requires that foreign banking corporations obtain a license prior to conducting business in New York. Defendants contend that Plaintiff's suit is precluded by Banking Law § 200 because Plaintiff is "organized and licensed under the laws of Ireland with no contacts in New York and no authority to conduct formal banking business in New York." Defendants Memorandum of Law in Support of Cross-Motion to Dismiss and in Opposition to Summary Judgment ("Defendants' Memo"), p. 5. Defendants therefore imply that enforcing a guaranty is, for the purpose of the Banking Law, the transaction of business.
Defendants' argument is without merit. Banking Law § 200 explicitly states that "This section shall not be construed to prohibit foreign banking corporations from . . . (2) enforcing in this state obligations heretofore or hereafter acquired by it in the transaction of business outside of this state." See also Banking Law § 200-a ("In maintaining an action . . . in this state, a foreign banking corporation shall maintain such action . . . in like manner and subject to the same limitation as are applicable in the case of an action . . . maintained by a domestic banking organization"). The parties executed the Guaranty at issue in Florida. Defendants' Joint Affidavit in Support of Cross-Motion to Dismiss the Action and in Opposition to Motion for Summary Judgment in Lieu of Complaint ("Defendants' Aff."), ¶ 25. Plaintiff is therefore not prohibited from maintaining its action for lack of capacity to bring suit. b. The Florida Suit Does Not Require Dismissal of the Instant Case
Defendant next argues that the court should dismiss this action pursuant to CPLR 3211 (a) (4), which authorizes, but does not mandate, dismissal of an action "when there is another action pending between the same parties for the same cause of action in a court of any state or the United States." Defendants argue that action commenced against Plaintiff in Florida federal court prior to the instant action has substantially similar identity of issues and parties as this case. Defendants' Memo, pp. 9-10. Defendants thus contend that this action should be dismissed.
Defendants are not parties in the Florida action. Defendants' Aff., Ex. A (Florida Complaint). Furthermore, although the two actions are related, they are not the same. In the instant case, Plaintiff seeks to enforce the Guaranty made by Defendants. The Plaintiffs in the Florida action, Borrower Achva Vahava, LLC and Congregation Ohev Shalom, Inc., are not parties to this action, and seek relief related to the Promissory Note and Mortgage, not the Guaranty. Plaintiff in this action, the defendant in the Florida federal case, counterclaims to foreclose on the Mortgage. Neither the Florida claims nor counterclaim address the Guaranty here at issue.
Because Defendants have not shown that the Florida action involves the same parties and causes of action, CPLR 3211 (a) (4) does not warrant dismissal of this action.
c. RPAPL § 1301 is Not Dispositive
Defendants next argue that New York's "election of remedies" statute precludes the instant action. Defendants assert that, pursuant to Real Property Actions and Proceedings Law (RPAPL) § 1301, "New York does not permit maintenance of both a foreclosure action in equity and a suit at law to recover the same mortgage indebtedness." Defendant's Memo, p. 10. RPAPL § 1301 states, in pertinent part, that "while a foreclosure action is pending or after final judgment for the plaintiff therein, no other action shall be commenced or maintained to recover any part of the mortgage debt, without leave of the court in which the former action was brought."
However, RPAPL § 1301 "does not apply where . . . the property securing the loan is located outside of New York State." Wells Fargo Bank Minnesota, N.A. v. Cohn , 4 AD3d 189, 189 (1st Dep't 2004). Plaintiff's Florida counterclaim seeks to foreclose upon property in Florida, and, thus, RPAPL § 1301 does not provide a basis for dismissal of this action.
Defendants' cross-motion to dismiss is denied.
2. Plaintiff's Motion for Summary Judgment in Lieu of Complaint
Plaintiff seeks summary judgment in lieu of complaint on its claim of breach of guaranty.
Pursuant to CPLR § 3213, "[w]hen an action is based upon an instrument for the payment of money only . . . the plaintiff may serve with the summons a notice of motion for summary judgment and the supporting papers in lieu of a complaint."
"The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact. Failure to make such a prima facie showing requires a denial of the motion." Alvarez v. Prospect Hosp., 68 NY2d 320, 324 (1986). Upon making such a showing, the burden of proof shifts to the party opposing the motion to "produce evidentiary proof in admissible form sufficient to require a trial of material questions of fact on which he rests his claim" or an acceptable reason for his failure to do so. Zuckerman v. City of New York, 49 NY2d 557, 562 (1980).
A guaranty creates an obligation to answer for the debt of another. Midland Steel Warehouse Corp. v. Godinger Silver Art Ltd., 276 AD2d 341, 343 (1st Dep't 2000). In order to prevail on a claim for breach of written guaranty, the Plaintiff must show "an absolute and unconditional guaranty, the underlying debt, and the guarantor's failure to perform under the guaranty." City of New York v. Clarose Cinema Corp., 256 AD2d 69, 71 (1st Dep't 1998). Guarantors are secondarily liable, and thus the principal debtor must default on his or her obligation before a breach of guaranty can occur. Brewster Transit Mix Corp v. McLean, 169 AD2d 1036, 1037 (3d Dep't 1991).
Plaintiff has made its prima facie showing. Plaintiff submits to the court the Guaranty, Promissory Note and Mortgage and an affidavit from Hugh McNally, one of Plaintiff's senior vice-presidents. The Promissory Note and Mortgage evidence the underlying loan. In his affidavit, McNally details the Borrower's alleged default under the loan, and Defendants' alleged failure to comply with Plaintiff's demand for immediate payment under the Guaranty. McNally Aff., ¶¶ 16-24. McNally includes with his affidavit notices of default sent to Borrower on July 17, 2009 and June 4, 2010. McNally's statements are undisputed by Defendants. His statements, and the notices of default sent to Borrower, establish the underlying debt and the default thereon. McNally Aff., ¶¶ 19-22, Exs. E, G.
The written, signed Guaranty, McNally's undisputed testimony and a June 4, 2010 notice of Borrower's default and demand for immediate payment from Plaintiff to Defendants establish Defendants' obligation under the Guaranty. McNally Aff., ¶¶ 19-21, Ex. H. The Guaranty is absolute and unconditional. Guaranty, ¶ 3.
Plaintiff alleges, and Defendants do not dispute, that Defendants have not fulfilled their obligations under the Guaranty. McNally's testimony confirms Plaintiff's allegations. McNally Aff., ¶ 22; see also Anglo Irish Bank Corporation LTD v. Ashkenazy, 28 Misc 3d 1222(A), *1-4 (Sup Ct NY County 2010]; Anglo Irish Bank Corporation LTD v. Ashkenazy, Sup Ct, NY County, September 13, 2010, Yates, J., index No. 103550/2010.
Plaintiff commenced two other actions by summary judgment in lieu of complaint for breach of guaranty in New York County Supreme Court against Defendants (Index No. 103006/2010) and defendant Ashkenazy (Index No. 103550/2010). In each of the two actions and the instant action, the respective guaranty relates to a different underlying loan. Plaintiff's motion for summary judgment in lieu of complaint was granted and in each of the other two actions.
Defendants' liability is therefore established and Plaintiff has established a prima facie case for summary judgment in lieu of complaint.
Defendants oppose Plaintiff's motion on two grounds. First, Defendants contend that the McNally Affidavit is inadmissable because "it was executed in Boston without Proper Acknowledgements" in violation of CPLR § 2309. Defendants' Memo, p. 13. Second, Defendants allege that material issues of fact preclude summary judgment.
a. The McNally Affidavit is not Defective
CPLR § 2309 (c) states that:
An oath or affirmation taken without the state shall be treated as if taken within the state if it is accompanied by such certificate . . . as would be required to entitle a deed [RPAPL] acknowledged without the state to be recorded within the state if such deed had been acknowledged before the officer who administered the oath or affirmation.
Real Property Law § 311 (5) clarifies that no further authentication is necessary for acknowledgments made without the state if a deed is acknowledged before any officer designated in Real Property Law § 299. Pursuant to Real Property § 299, where an acknowledgment is made before a notary public, no further authentication is necessary.
The McNally Affidavit was acknowledged before Matthew Nash, a notary public in the state of Massachusetts. Neither the CPLR nor the Real Property Law require any further authentication. Defendants' first argument thus must fail.
b. Defendants Have Not Demonstrated Genuine Issues of Fact
Defendants next contend that, because Borrower brought suit against Plaintiff in Florida, "it would be improper to grant any relief on the guarantee [sic] and complete fact finding is necessary in light of the affirmative claims" in that litigation. Defendants' Memo, p. 12.
Defendants' argument is without merit. Defendants neither tender evidentiary proof of a material issue of fact nor provide an acceptable explanation for their failure to do so. Zuckerman, 49 NY2d at 562. Furthermore, Defendants contest neither the validity of the Guaranty and loan documents nor Plaintiff's allegations of default under each. Lastly, Defendants have waived any defenses arising from the pendency of the Florida action by agreeing to "pay all sums due to [Plaintiff under the Guaranty] without regard to any counterclaim, setoff, deduction, or defense of any kind which any party obligated under the Loan Documents may have or assert." Guaranty, ¶ 3.
Accordingly, it is
ORDERED that Defendants' cross-motion to dismiss the action is DENIED; and it is further
ORDERED that Plaintiff's motion for summary judgment in lieu of complaint is GRANTED; and it is further
ORDERED that this matter is hereby referred to the Special Referee Clerk (Room 119 M, 646-386-3028 or spref@courts.state.ny.us) for placement at the earliest possible date upon the calendar of the Special Referees Part (Part SRP), which, in accordance with the Rules of that Part (which are posted on the website of this Court at www.nycourts.gov/supctmanh at the "References" link under "Courthouse Procedures"), shall assign this matter to an available Special Referee to hear and report as specified above; and it is further
ORDERED that counsel shall immediately consult one another and counsel for plaintiff shall, within 15 days from the date of this Order, submit to the Special Referee Clerk by fax (212-401-9186) or e-mail an Information Sheet (which can be accessed at the "References" link on the court's website) containing all the information called for therein and that, as soon as practical thereafter, the Special Referee Clerk shall advise counsel for the parties of the date fixed for the appearance of the matter upon the calendar of the Special Referees Part; and it is further
ORDERED that the parties shall appear for the reference hearing, including with all witnesses and evidence they seek to present, and shall be ready to proceed, on the date first fixed by the Special Referee Clerk subject only to any adjournment that may be authorized by the Special Referees Part in accordance with the Rules of that Part; and it is further
ORDERED that any motion to confirm or disaffirm the Report of the Special Referee shall be made within the time and in the manner specified in CPLR 4403 and Section 202.44 of the Uniform Rules for the Trial Courts; and it is further
ORDERED that, unless otherwise directed by this Court in any Order that may be issued together with this Order of Reference to Hear and Report, the issues presented in any motion identified in the first paragraph hereof shall be held in abeyance pending submission of the Report of the Special Referee and the determination of this court thereon.