Opinion
1012TSN2003.
Decided May 6, 2004.
Please note that the firm representing the plaintiff was Auditore Derr, by Maria Derr, and the firm representing the defendant was Arthur M. Laske, Esq.
BACKGROUND
In this action plaintiff-landlord Lisa Lafrieda (sometimes spelled "La Frieda") alleges that defendants David, Vincent, and Monica Terrano (the latter two being married to each other) are liable to her pursuant to various causes of action arising out of a lease of the ground floor garage at 620 Greenwich Street, New York, NY. The complaint alleges that Vincent and David Terrano entered into a written lease with plaintiff; that the term was from 3/15/01 to 3/14/03; that rent was $8,000 per month; that through June 2003 (after the lease expired) overdue rent amounted to $36,714.43; that in partial satisfaction thereof, Vincent Terrano gave plaintiff a check made out to her by Monica Terrano in the amount of $11,300; that communications with Monica Terrano's bank indicated that there were insufficient funds in the account to cover the check; that plaintiff never negotiated the check; that defendants caused $1,500 worth of physical damage to the garage; and that defendants owe unpaid water and sewer assessments of $1,500. Plaintiff verified the complaint, which asserts causes of action for breach of contract (rent, physical damage, assessments); unjust enrichment (use of the garage); fraud (tendering a check backed by "insufficient funds"); and tortious interference (with plaintiff's business).
All three defendants verified the answer, which admits that David Terrano entered into a written lease with the plaintiff for the subject property, for a term from 4/1/01 to 3/14/03. The answer does not deny that the tenants were obligated to pay $8,000 a month rent (Cplt ¶ 12); that Vincent tendered Monica Terrano's $11,300 check (Cplt ¶ 35); or that there were insufficient funds to cover the check, which plaintiff "could not deposit" (Cplt ¶ 36). Defendants' answer asserts as affirmative defenses, among other things, that plaintiff did not properly serve defendants with process, and that Vincent and Monica Terrano are improper parties.
INSTANT MOTION AND CROSS MOTION
Defendants now move, essentially, for summary judgment, on the ground that Vincent and Monica Terrano did not have any contractual relationship with plaintiff; that service of process was improper because the three affidavits of service (Moving Exhibit B) all indicate the same time for attempts at service, and, some days later, for service itself, even though Vincent and Monica Terrano live "a mile" away from David Terrano; and that the breach of contract cause of action fails because of the Statute of Frauds. In his Moving Affidavit, at ¶ 6, David Terrano states that he and a Robert Ellis "agreed to [plaintiff's] terms for the garage [rental]." Although he states that he and Ellis were officers of a "Looney Tunez Towing Corp.," he never expressly says that he agreed to the rental on behalf of the corporation, he does not produce a copy of the alleged written lease, and he does not provide any indicia of business being done in corporate form.
Plaintiff now cross-moves, essentially, for leave to amend the affidavits of service of process and for partial summary judgment against Monica Terrano. Plaintiff's counsel states, among other things, that "under applicable New York law . . . the payee of a check is entitled to full and prompt payment of such check"; and that the issuer of an uncovered check commits a fraud. Plaintiff's process server submits an affidavit stating that the fact that the three affidavits of service all indicate the same times for attempts at service, and for service itself, despite the distance between the two addresses, indicates a mere typographical error, and that while Vincent and Monica Terrano were served at the times indicated, David Terrano was served at a different time. A third affidavit indicates that the affiant drove the process server to the two addresses on the dates indicated.
Defendants did not serve reply papers. Thus, Monica has never claimed, in an affirmative defense to the complaint or in opposition to the instant cross motion for partial summary judgment against her, that she did not make out a facially valid check to plaintiff, or that she had sufficient funds on account to cover the check, or had any other reason to believe that it would be paid.
DISCUSSION Service of Process
This Court interprets the affidavits of the process server and his driver to mean that process was served on the three different defendants at the two different addresses, which are a mile or so away from each other, not simultaneously, which would be impossible, but at one address shortly after the other. Thus, the Court will invoke CPLR 2001 and "disregard" the error in the times indicated on the affidavit of service on David Terrano. Therefore, none of the defendants are entitled to dismissal or summary judgment because of improper service of process. (Although not dispositive on this issue, this Court notes in passing that all three defendants state that they received the summonses and complaints when they returned home from their respective summer vacations; thus, any technical error was not prejudicial in a practical sense).
Dismissed and Sustained Causes of Action in the Complaint
All three defendants are entitled to dismissal of the fourth cause of action, for "tortious interference," because the facts pled do not make out such a cause of action, which requires interference with a contract between plaintiff and a third party.
David Terrano is not entitled to summary judgment on the first two causes of action because defendants' answer and, albeit somewhat more ambiguously, David Terrano's affidavit admits that he entered into a written lease with plaintiff. This admission estops any Statute of Frauds defense, because the Statute was passed, as law students know, to prevent fraud, not to allow contracts to be breached with impunity. Furthermore, David waived any Statute of Frauds defense by not including it in his answer or a pre-answer motion. CPLR 3211(a)(5), (e). David Terrano is entitled to dismissal of the third cause of action as against him, as plaintiff has not produced any evidence to support it.
Monica Terrano is entitled to summary judgment dismissing the first and second causes of action as against her, as she was not obligated to pay rent, and she was not unjustly enriched. However, she is liable under the third cause of action, which is labeled as a "fraud' cause of action. She is not liable for "fraud," because plaintiff did not rely on the validity of the check; indeed, plaintiff called Monica's bank and ascertained that the check would not be paid if presented. However, she is liable on a claim sounding in contract ( infra). A pleading may state only facts, and need not label, or may even mislabel, separate causes of action. Siegel, NY Prac §§ 208-209, at 328-29 (3d ed).
Vincent Terrano is entitled to summary judgment on all causes of action, as there is no admissible evidence that would make him liable to plaintiff. "[A] party opposing [a summary judgment] motion . . . must produce evidentiary proof in admissible form sufficient to require a trial of material questions of fact on which the opposing claim rests. '[M]ere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient' for this purpose." Gilbert Frank Corp. v. Federal Ins. Co., 70 NY2d 966, 967 (1988) (citations omitted).
Summary Judgment
Plaintiff is entitled to summary judgment against Monica Terrano on the third cause of action in the amount of $11,300, with interest from April 22, 2003 (the date of the check). The instrument at issue is a valid check. Uniform Commercial Code ("UCC") § 3-104(1), (2)(b). "Unless specifically denied in the pleadings, each signature on an instrument is admitted." UCC § 3-307(1). The holder of an instrument may "enforce payment." UCC § 3-301. Similarly, "[w]hen signatures are admitted or established, production of the instrument entitles a holder to recover on it unless the defendant establishes a defense." UCC § 3-307(2).
The heart of the issue here is whether plaintiff is a "holder in due course," which UCC § 3-302 defines as follows:
(1) A holder in due course is a holder who takes the instrument
(a) for value; and
(b) in good faith; and
(c) without notice that it is overdue or has been dishonored or of any defense against or claim to it on the part of any person.
(2) A payee may be a holder in due course.
Plaintiff took for value, because she took "the instrument in payment of or as a security for an antecedent claim against any person whether or not the claim [was] due." UCC § 3-303(b). See also, UCC § 3-408 ("no consideration is necessary for an instrument or obligation thereon given in payment of or as security for an antecedent obligation of any kind").
Finally, plaintiff need not have presented the check for payment, because UCC § 3-511 provides, in part, as follows:
(2) Presentment . . . is entirely excused when
(b) [the party to be charged] has no reason to expect or right to require that the instrument be accepted or paid.
Here, Monica Terrano has admitted that she did not have sufficient funds in her account to cover the subject check. Therefore, she could not expect, and she did not have a right to require, that the check be paid. Thus, presentment was excused. As stated in Helman v. Dixon, 71 Misc 2d 1057, 1059 (Civ Ct, Queens Co. 1972), "when one delivers a check bearing the date of delivery, the recipient has the right to expect that the maker has sufficient funds with the drawee bank at that time to cover the amount of that check (see Penal Law, § 190.05), unless there is an agreement to the contrary ( People v. Olans, 264 N.Y. 420)." Neither Monica nor Vincent Terrano has alleged any such agreement.
The result dictated by the foregoing UCC provisions comports with this Court's view of public policy and basic fairness. Monica Terrano does not deny that she signed a check made out to plaintiff, who took the check as partial satisfaction of or security for another person's existing obligation ( i.e., her brother-in-law David's obligation to pay rent). In commercial contexts, obligees should be allowed to rely on what are, in effect, signed, written promises to pay, embodied in negotiable instruments. Consideration, even were it necessary (see above), is inherent in the situation: the obligee's forbearance, for a time (however short), in taking action against the primary obligor. As between the maker and the taker of the check, any loss caused by the primary obligor's failure to pay the underlying obligation should fall on the maker, who could have protected herself by the simple expedient of not issuing the check, and who should not be allowed to, in effect, take it back.
The instant case is essentially "on all fours" with Kane v. Kroll, 196 Wis 2d 389, 538 NW2d 605 (Wis App 1995). There, the court held that the plaintiff-payee could enforce a check written by a defendant-maker to satisfy the pre-existing obligation of the maker's son.
Gerald was indebted to Kane as a result of a pre-existing debt incurred when Gerald purchased some cows. Gerald arranged with his mother, Grace, to satisfy this obligation with the promise that he would repay her with the proceeds from a load of hay he expected to sell in the immediate future. In accordance with that agreement, Grace issued a personal check for $6,100 to Kane in satisfaction of Gerald's debt. The next day, Gerald informed Grace that he would be unable to repay her because the party who had planned to buy the load of hay had cancelled the order. Grace immediately stopped payment of the check. When Kane subsequently presented the check, the bank refused to pay because of the stop payment order.
196 Wis 2d at 392; 538 NW2d at 606-07. On these facts, Kane was entitled to collect from Grace.
Grace argues that Kane was on notice that she had no pre-existing obligation to pay her son's debt and that this constitutes knowledge of a defense. We disagree. Section 403.303(2), Stats., clearly allows a holder in due course to accept payment from one person for payment of the debt of another. Additionally, the fact that Grace, like any drawer, had the power to stop payment on the check does not constitute a defense that would prevent Kane from being a holder in due course. If it did, no holder would be a holder in due course because any drawer has the power to issue a stop payment order.
196 Wis 2d at 396; 538 NW2d at 608. See also, United Catholic Parish Schools of Beaver Dam Educ. Assn. v. Card Services Ctr., 248 Wis 2d 463, 636 NW 2d 206 (Wis App 2001) (relying throughout on Kane); cf. UCC § 3-403(2)(a) ("An authorized representative who signs his own name to an instrument is personally obligated if the instrument neither names the person represented nor shows that the representative signed in a representative capacity); Arde Apparel, Inc. v. Matisse, Ltd., 240 AD2d 328, 329 (1st Dept 1997) ("one who signs a negotiable instrument without indicating that his or her signature is made in an agency capacity will ordinarily be personally obligated upon the instrument").
Thus, as a matter of law, policy, and precedent, plaintiff is entitled to summary judgment against Monica Terrano in the amount of $11,300, plus interest from April 22, 2003.
Summary
A summary of all the foregoing results is as follows:
DISPOSITIONS DAVID MONICA VINCENT
first cause of action continues dismissed dismissed
second cause of action continues dismissed dismissed
third cause of action dismissed summary jdt. $ 11,300 dismissed
fourth cause of action dismissed dismissed dismissed
Counterclaim
Plaintiff is entitled to summary judgment, pursuant to CPLR 3212(b) (summary judgment "searches the record" without necessity of a cross motion), dismissing defendants' sole counterclaim, for abuse of process. Such a cause of action requires "use of the process in a perverted manner to obtain a collateral objective." Curiano v. Suozzi, 63 NY2d 115, 116 (1984). There is no evidence here of a "perverted manner" or a "collateral objective."
Request for Sanctions
Finally, plaintiff's oral request for sanctions against defendants for failing to appear for a settlement conference on 3/26/04 that this Court directed in a "Preliminary Order" of 3/4/04 (originally scheduled for 3/19/04 and rescheduled, on consent, for 3/26/04) is, in the Court's discretion, denied.
CONCLUSION
Thus, defendant's motion is granted only to the extent that the fourth cause of action is dismissed as against all defendants; all causes of action are dismissed as against Vincent Terrano; the first and second causes of action are dismissed as against Monica Terrano; and the third cause of action is dismissed as against David Terrano.
Plaintiff's cross motion is denied as unnecessary to the extent that it seeks to amend the affidavits of service; and is granted to the extent that it seeks summary judgment against Monica Terrano in the amount of $11,300, and is otherwise denied.
The clerk is hereby directed to enter judgment dismissing defendants' counterclaim and dismissing the fourth cause of action of the complaint as against all defendants; dismissing all causes of action as against defendant Vincent Terrano; dismissing the first and second cause of action as against defendant Monica Terrano; dismissing the third cause of action as against David Terrano; and in favor of plaintiff and against defendant Monica Terrano only on the third cause of action in the amount of $11,300, plus interest from April 22, 2003, plus statutory costs and disbursements. The clerk shall sever the first two causes of action as against defendant David Terrano, and the case may proceed on those two causes of action against said defendant only.