Opinion
No. 501473/12.
2013-05-1
CAPITAL BANK, N.A., Plaintiff, v. 4021 18 AVE LLC, Amichai Liani, and Shimon Liani, Defendants.
Sankel, Skurman & McCartin, LLP, New York, for Plaintiff. Goldberg & Rimberg, PLLC, New York, for Defendant.
Sankel, Skurman & McCartin, LLP, New York, for Plaintiff. Goldberg & Rimberg, PLLC, New York, for Defendant.
DAVID SCHMIDT, J.
The following papers numbered 1 to 5 read herein:
+-----------------------------------------------------------------------------+ ¦Papers ¦Numbered ¦ +------------------------------------------------------------------+----------¦ ¦Notice of Motion/Order to Show Cause/Petition/Cross Motion and ¦1–2 ¦ ¦Affidavits (Affirmations) Annexed ¦ ¦ +------------------------------------------------------------------+----------¦ ¦Opposing Affidavits (Affirmations) ¦3–4 ¦ +------------------------------------------------------------------+----------¦ ¦Reply Affidavits (Affirmations) ¦5 ¦ +------------------------------------------------------------------+----------¦ ¦Affidavit (Affirmation) ¦ ¦ +------------------------------------------------------------------+----------¦ ¦Other Papers ¦ ¦ +-----------------------------------------------------------------------------+
Upon the foregoing papers, Capital Bank, N.A. (plaintiff) moves for summary judgment in lieu of bringing a complaint, pursuant to CPLR 3213, in this action to recover a debt under an instrument for payment of money.
Background
Defendant Amichai Liani executed, on behalf of defendant 4021 18 Ave LLC (4021 18 Ave), a May 6, 2008 note, with a May 15, 2009 maturity date, promising to repay Public Savings Bank (PSB) $250,000 plus interest at a variable rate (the Note). The Note stated that “[b]orrower will pay this loan in full immediately upon Lender's demand,” and set out a late charge of the greater of 10% of the scheduled payment or $100. It provided that in the event of default the interest rate would increase by five percentage points. It further stated that “[u]pon default, Lender may, after giving such notices as required by applicable law, declare the entire unpaid principal balance under this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount.” 4021 18 Ave also mortgaged its real property located at 4021 18th Avenue in Brooklyn as additional security. The Note stipulated that 4021 18 Ave would bear liability for any reasonable attorney's fees and legal expenses incurred by the lender's attempts to collect the debt. In addition, the Note stated that it would be governed by “federal law applicable to the lender” and otherwise by the laws of Pennsylvania.
Amichai Liani and Shimon Liani (collectively, the Liani Defendants) each executed a guaranty for the Note (the Guaranties) on May 6, 2008. The Guaranties made each of the Liani Defendants liable for 100% of 4021 18 Ave's debt, and stated that “THIS GUARANTY SHALL BE OPEN AND CONTINUOUS UNTIL THE INDEBTEDNESS IS PAID IN FULL AND THE LENDER DECLARES THAT THE LINE OF CREDIT IS FULLY SATISFIED, PERFORMED AND TERMINATED.” A subsequent paragraph reiterated that the Guaranties would not terminate except “upon (A) termination in writing by Borrower and Lender of the line of credit, (B) payment of the Indebtedness in full in legal tender, and (C) payment in full in legal tender of all of Guarantor's other obligations under this Guaranty.” Each Guaranty also contained a section of waivers, which stated, in part, “Except as prohibited by applicable law, Guarantor waives any right to require Lender ... (B) to make any presentment, protest, demand, or notice of any kind, including notice of any nonpayment of the Indebtedness ..., or notice of any action or nonaction on the part of the Borrower.” Both Guaranties also stated that they were governed by federal laws concerning the lender and otherwise by the laws of Pennsylvania.
The Liani Defendants, both on behalf of 4021 18 Ave and as guarantors, executed a loan modification agreement (the Modification) on May 15, 2009 that extended the maturity date to May 15, 2010. The Modification stated that the Note's terms were otherwise preserved. The Liani Defendants, again in both their representative and personal guarantor capacities, executed a loan extension agreement (the Extension) on March 30, 2011.
The Extension moved the Note's maturity date to March 30, 2016 and changed the variable interest rate to a 7.5% fixed rate,
The Extension states that the Note's maturity date had been previously extended to October 31, 2010. The parties have submitted no evidence of such an extension, but plaintiff alleges it was created orally. Similar ambiguity exists regarding what occurred between October 31, 2010 and the March 30, 2011 Extension, but this ambiguity does not affect the controversy herein.
and 4021 18 Ave correspondingly paid down the principal by $25,000. This agreement also included a clause that stated, “Except as provided herein the terms and conditions of the Note, all [sic] other Loan Documents remain unchanged and in full force and effect.”
The Extension specifies a blatantly usurious rate of “7.5% per diem,” but the parties agree that the intent was 7.5% per annum.
The Federal Deposit Insurance Corporation placed PSB into receivership on August 18, 2011 and shortly thereafter assigned all its loans to plaintiff. 4021 18 Ave, according to plaintiff, missed the September 15, 2011 payment due under the Note and related documents and has thereafter paid no amounts due.
The Ensuing Litigation
Plaintiff, pursuant to CPLR 3213, filed a summons and summary judgment motion in lieu of complaint on June 8, 2012. Copies of the Note, Modification and Extension accompanied the motion, and plaintiff alleges that those documents constitute an instrument obligating 4021 18 Ave to repay plaintiff. That obligation, contends plaintiff, totals $204,143.19 in principal, plus 7.5% interest for the period between August 16 and September 24, 2011 and 12.5% interest for the period between September 25, 2011 and any judgment entered in plaintiff's favor, as well as $5006.13 in late fees. Similarly, plaintiff claims that the Liani Defendants are personally liable as guarantors of 4021 18 Ave's debt.
Plaintiff supports its position with the affidavit of its vice president, Jo‘Ann Washington (Washington). She outlines the facts as recounted herein and alleges that 4021 18 Ave, as promisor, and the Liani Defendants, as guarantors, (collectively, defendants) defaulted under the terms of the loan documents and Guaranties, which makes them jointly liable for the unpaid principal, interest and late fees, as well as plaintiff's legal and attorney's fees.
Defendants argue in opposition that the motion must be denied on both procedural and substantive grounds. They first characterize Washington's affidavit as incompetent evidence because it was signed and notarized in Maryland and lacks a certificate of compliance as required by CPLR 2309. They also argue that plaintiff did not submit sufficient evidence to prima facie show that 4021 18 Ave defaulted under the Note and other documents. In addition, defendants allege that plaintiff failed to introduce any loan modification that extended the maturity date to October 2010 and failed to introduce the mortgage, which defendants include with their opposition.
Defendants contend that the Guaranties are unenforceable in a CPLR 3213 proceeding because they oblige the Liani Defendants to perform and discharge all of 4021 18 Ave's obligations under the Note and “Related Documents.” The Liani Defendants argue that this clause obligates them to perform 4021 18 Ave's duties under the mortgage, a result that would exceed the scope of a mere monetary obligation. They also argue that the Guaranties fail to render a specified amount due as plaintiff allegedly never demanded that the Liani Defendants pay 4021 18 Ave's debt. The Guaranties are unenforceable in any case, assert defendants, as the Extension discharged the original loan under the Note and created a new loan, which terminated the Liani Defendants' individual liability. Defendants additionally assert that they and plaintiff created a modified payment schedule at the beginning of 2012, which would alter their obligations under the loan documents.
Plaintiff replies that the Extension created no new loan and urges that the Extension explicitly referenced and incorporated the Note's terms. The Extension bears a new loan number in addition to the old number, states Washington, because PSB changed its records system and not because PSB considered the Extension a new debt. Washington also asserts that the Liani Defendants explicitly signed the Extension as guarantors and bear liability for all 4021 18 Ave's debts, pursuant to the Guaranties, until such debts have been fully repaid. Plaintiff need not have demanded the Liani Defendants pay before commencing this action, asserts Washington, because the Liani Defendants explicitly waived that right in the Guaranties' terms. Washington discounts the purported modified payment schedule defendants cite as a document that the parties created, but never adopted, during settlement negotiations.
Discussion
(1)
CPLR 3213 permits commencing an action “based upon an instrument for the payment of money only” with a summons and summary judgment motion in lieu of a complaint. “[A] document comes within CPLR 3213 if a prima facie case would be made out by the instrument and a failure to make the payments called for by its terms' “ (Weissman v. Sinorm Deli, 88 N.Y.2d 437, 444 [1996], quoting Interman Indus. Prods. v. R.S.M. Electron Power, 37 N.Y.2d 151, 155 [1975];Lawrence v. Kennedy, 95 AD3d 955, 957 [2012] ).
An instrument fails to qualify under CPLR 3213 if outside proof (aside from proof of nonpayment) is necessary to show the payment obligation it creates (Weissman, 88 N.Y.2d at 444;Lawrence, 95 AD3d at 957). Thus, “summary judgment in lieu of complaint ... is appropriate where ... the full extent of the debtor's obligation can be gleaned from the face of the note alone” (Gallagher v. Kazmierczuk, 245 A.D.2d 418, 418 [1997] ), but not where the note is “inextricably intertwined with certain contractual obligations” (Cohen v. Marvlee, Inc., 208 A.D.2d 792, 792 [1994] );cf. Juste v. Niewdach, 26 AD3d 416, 417 [2006] [“additional provisions in the guaranty referring to the defendant's assumption of the tenant's obligations in the lease did not constitute a bar to CPLR 3213 relief, because these provisions did not require additional performance as a condition precedent to repayment, or otherwise alter the defendant's promise of payment”] ).
CPLR 3213 generally permits recovery of loan debts secured by mortgages ( see Edith Bolte Kutz Trust v. Atlantic Coast Constr., LLC, 32 AD3d 377, 377–78 [2006];Staten Is. Sav. Bank v. Bayview Assoc., 251 A.D.2d 320, 320–21 [1998];Gregorio v. Gregorio, 234 A.D.2d 512, 512–13 [1996] ), and it also allows enforcing guaranties where the proof shows the underlying debt due ( see Weissman, 88 N.Y.2d at 444;Goodyear Tire & Rubber Co. v. Azzaretto, 103 AD3d 880, 881 [2013];Estate of Agnes M. Broche v. Tai, 98 AD3d 601, 601 [2012] ).
Here, the Liani Defendants assert that the Guaranties may not be enforced in a CPLR 3213 proceeding as the Guaranties require that the Liani Defendants perform “all [4021 18 Ave's] obligations under the Note and Related Documents,” which they contend includes non-financial obligations under the mortgage. The Guaranties, however, clearly also oblige the Liani Defendants to unconditionally ensure “full and punctual payment of Guarantor's Share of the Indebtedness of Borrower to Lender,” which share is subsequently set at 100%. No term in the Guaranties in any way qualifies the Liani Defendants' duties to guarantee payment, and thus they suffice as instruments in a CPLR 3213 proceeding.
(2)
A CPLR 3213 movant “prevails if, upon all the papers and proof submitted, the cause of action shall be established sufficiently to warrant the court as a matter of law in directing judgment for the plaintiff” (Banco Popular N. Am. v. Victory Taxi Mgt., 1 NY3d 381, 383 [2004] [internal quotation marks and alterations omitted] ). Failure to make such a showing requires denial of a summary judgment motion regardless of the sufficiency of any opposition (Vega v. Restani Constr. Corp., 18 NY3d 499, 503 [2012] ). The opposing party overcomes the movant's showing only by introducing “evidentiary proof in admissible form sufficient to require a trial of material questions” (Zuckerman v. City of New York, 49 N.Y.2d 557, 562 [1980];see also Banco Popular, 1 NY3d at 383). “[M]ere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient” to defeat a summary judgment motion (Zuckerman, 49 N.Y.2d at 562). “The court's function on a motion for summary judgment is to determine whether material factual issues exist, not to resolve such issues” (Ruiz v. Griffin, 71 AD3d 1112, 1115 [2010] [internal citation and quotation marks omitted] ).
A plaintiff in a promissory note CPLR 3213 proceeding makes a prima facie showing “by submitting proof of the defendant's execution of the note and the defendant's default in making payments pursuant to the note” (Cutter Bayview Cleaners, Inc. v. Spotless Shirts, Inc., 57 AD3d 708, 709 [2008];see also Sound Shore Med. Ctr. of Westchester v. Maloney, 96 AD3d 823, 823–24 [2012];Agai v. Diontech Consulting, Inc., 64 AD3d 622, 623 [2009] ). Thus, introducing a copy of the subject instrument as well as an affidavit of nonpayment sufficiently makes a prima facie case ( see Poah One Acquisition Holdings V Ltd. v. Armenta, 96 AD3d 560, 560 [2012];Council Commerce Corp. v. Paschalides, 92 A.D.2d 579, 579 [1983].CPLR 2309(c), in conjunction with Real Property Law § 299–a, requires that a certificate of compliance with applicable law accompanies an oath taken in another state. Failure to include such a certificate, however, is not a fatal defect and may be corrected nunc pro tunc ( see U.S. Bank N.A. v. Dellarmo, 94 AD3d 746, 748 [2012];Moccia v. Carrier Car Rental, Inc., 40 AD3d 504, 504–05 [2007];Smith v. Allstate Ins. Co., 38 AD3d 522, 523 [2007] ).
Defendants first assert that plaintiff's summary judgment motion in lieu of complaint lacks any evidence in admissible form as Washington's affidavit, signed and notarized in Maryland, includes no certificate of compliance. Plaintiff's reply, however, contains a resubmitted Washington affidavit with a certificate of compliance, which allows that affidavit's consideration. Defendants also argue that Washington's affidavit insufficiently establishes that defendants defaulted under the loan. Washington avers, however, that, based on her personal knowledge and plaintiff's records, defendants failed to make payments due September 15, 2011 and thereafter. Furthermore, plaintiff, in reply, provides account records demonstrating nonpayment. Plaintiff's submissions succeed in making a prima facie showing that defendants have defaulted, and defendants do not even assert that they made payments.
(3)
“A guarantee may be the proper subject of a motion for summary judgment in lieu of complaint whether or not it recites a sum certain” (Manufacturers Hanover Trust Co. v. Green, 95 A.D.2d 737, 737 [1983];see also European Am. Bank v. Competition Motors, 182 A.D.2d 67, 71 [1992] ), though it must sufficiently identify the underlying debt or debtor (Staten Is. Sav. Bank v. Tri–State Power Wash, 284 A.D.2d 527, 527–28 [2001];European Am. Bank, 182 A.D.2d at 71). A plaintiff seeking to enforce a guaranty in a CPLR 3213 proceeding must also show that payment had become due under the guaranty (Goodyear Tire & Rubber Co., 103 AD3d at 881;Estate of Agnes M. Broche, 98 AD3d at 601). A plaintiff need not, however, give default notice to a guarantor who has waived that right (Poah One, 96 AD3d at 560;Chiu v. 1–9 Bond St. Realty, Inc., 79 AD3d 416, 416 [2010] ). An “open and continuing” guaranty leaves the guarantor liable for any subsequent debts incurred by the principal obligor (Orix Credit Alliance v. N.Y. Bell Bagel, 222 A.D.2d 566, 566–67 [1995] ).
“[A] contract is to be construed in accordance with the parties' intent, which is generally discerned from the four corners of the document itself” (MHR Capital Partners LP v. Presstek, Inc., 12 NY3d 640, 645 [2009];West Vernon Petroleum Corp. v. Singer Holding Corp., 103 AD3d 627, 629 [2013] ). Pennsylvania law appears to take a similar stance on contractual interpretation ( see Meeting House Lane, Ltd. v. Melso, 427 Pa Super 118, 126 [1993] [“[i]n determining the intent of parties to a written agreement, the court looks to what they have clearly expressed, for the law does not assume that the language of the contract was chosen carelessly”] ).
Here, the Liani Defendants argue that the Guaranties may not be enforced against them because the Extension effectively terminated the debt they had guaranteed and because plaintiff never demanded payment from them. The Extension's language, however, cannot be read as terminating one loan and originating another. The Extension states that the “Note and other Loan Documents” are modified to the extent that the “[m]aturity date of this Note is now March 15, 2016,” (emphasis added) and further that “[e]xcept as provided herein the terms and conditions of the Note, all [sic] other Loan Documents remain unchanged and in full force and effect.” This clearly establishes an extension of the existing loan.
The Guaranties' language, in any event, explicitly makes the Liani Defendants liable for any of 4021 18 Ave's debts to plaintiff until “(A) termination in writing by Borrower and Lender of the line of credit, (B) payment of the Indebtedness in full in legal tender, and (C) payment in full in legal tender of all of Guarantor's other obligations under this Guaranty” (emphasis added). The Liani Defendants thus remain liable for 4021 18 Ave's loan as governed by the Extension regardless of whether it is the same loan as created by the Note.
The Liani Defendants, by signing the Guaranties, also explicitly waived any right to require notice or demand regarding 4021 18 Ave's nonpayment of its debt, “[e]xcept as prohibited by applicable law.” The court does not know, nor have defendants shown, any federal or Pennsylvania law that mandates notifying a guarantor whose principal obligor has defaulted. Plaintiff has, in any case, submitted copies of notice letters purportedly sent to the Liani Defendants.
Hence, plaintiff makes a prima facie showing that the Liani Defendants are liable as guarantors for 4021 18 Ave's debts to plaintiff, and defendants fail to raise any triable factual issues. Accordingly, it is
ORDERED that plaintiff's summary judgment motion in lieu of complaint is granted in its entirety.
This constitutes the decision and order of the court.