Opinion
601380/2017
02-13-2018
PEOPLE'S UNITED BANK, N.A., Plaintiff, v. BIG HOUSE BAR & GRILL, INC., ind/dba Elijah Churchill's Public House, Douglas Jaffe, Defendants.
Atty for Plaintiff,Jeffrey B. Hulse, Esq., 295 North Country Road, Sound Beach, NY 11789 Atty for Defendant, Eric M. Jaffe, Esq., 755 New York Avenue, Ste. 410, Huntington, NY 11743
Atty for Plaintiff,Jeffrey B. Hulse, Esq., 295 North Country Road, Sound Beach, NY 11789
Atty for Defendant, Eric M. Jaffe, Esq., 755 New York Avenue, Ste. 410, Huntington, NY 11743
C. Stephen Hackeling, J.
Upon the following numbered 1–16
Plaintiff's Notice of Motion for summary judgment 1–9
Memorandum of Law in Support of Motion N/A
Defendant's Affirmation and Affidavit in Opposition 10–14
Plaintiff's Reply 15–16
The plaintiff moves seeking entry of Summary Judgment upon its complaint seeking to recover $22,265.36, involving two business credit line loans, together with contractual attorneys fees.
Paragraph # 4 of the plaintiff's complaint asserts that the defendant borrower "defaulted (on its loan obligations) by failing to make payment when due on or about September 30, 2016", (see Exhibit B in plaintiff's Notice of Motion for Summary Judgment). However, the plaintiff admits in paragraph # 5 of its Reply Affirmation that "this is not a case where a default occurred" ... rather this loan matured and (as such) was allegedly fully due and payable. See also plaintiff's December 7, 2016 demand letter. The defendant defends this action asserting the simple defense that it was not in default of its loan obligations on September 30, 2016, and that the loan had not matured as the plaintiff renewed same. See Exhibit A of defendant's Opposition. The plaintiff does not contest the fact that there was no monetary default prior to serving its December 7, 2016 default notice or that the plaintiff unilaterally charged the defendant $250.00 on September 30, 2016 as a loan renewal fee.
A review of parties "Business Loan Agreement" dated September 30, 2013 (hereafter "BLA") states as follows:
This Business Loan Agreement dated September 30, 2016, is made and executed between BIG HOUSE BAR & GRILL, INC. DBA ELIJAH CHURCHILL'S PUBLIC HOUSE ("Borrower") and PEOPLE'S UNITED BANK ("Lender") on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans or other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement. Borrower understands and agrees that: (A) in granting, renewing, or extending any loan, Lender is relying upon Borrower's representations, warranties, and agreements as set forth in this Agreement; (B) the granting, renewing, or extending of any loan by Lender at all times shall be subject to Lender's sole judgment and discretion; and (C) all such loans shall be and remain subject to the terms and conditions of this Agreement.
TERM: This Agreement shall be effective as of September 30, 2013, and shall continue in full force and effect until such time as all of Borrower's loans in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorneys' fees, and other fees and charges, or until such time as the parties may agree in writing to terminate this Agreement. Emphasis Added.
As an ancillary document, the defendant also signed a "Promising Note" dated September 30, 2013 which stated "Payment : Borrower will pay this loan immediately, upon lender demanding same," together with a "Business Overdraft Agreement" which provided:
TERM: The term of the Borrowers Credit Line will begin as of the date of this Agreement ...and continue until termination of the Borrowers Credit Line Account.
DISCUSSION
Historically it was a fundamental legal tenet (the "theory of pleadings") that to receive judgment, the plaintiff must prove the allegations made in its complaint, and only those. Barnes v. Quigley , 59 NY 265 (NY 1874). This legal doctrine was changed with the enactment of New York CPLR Secs. 3212 (c), 3013, 3025 (c) and 3026 which allowed for liberal amendment of pleadings before trial and the conforming of the pleadings to the proof presented after trial. Siegel, NY Prac. See 209 (5th Ed.), citing to Lane v. Mercury Record Corp. , 21 AD2d 602 (NY AD 1st Dept. 1964) aff'd. 18 NY2d 889 (NY 1966) ; See also John Foley, Executor v. D'Agostino , 21 AD2d 60 (NY AD 1st Dept. 1964). Under the new doctrine "Pleadings" (complaint) need only give notice of the facts intended to be proven and the material elements of the action." McGinnis v. Bankers Life Co. , 39 AD2d 393 (NY AD2d 1972). However, the existence of "prejudice to the defendant" still authorizes dismissal of the pleading. See Scholastic Inc. v. Pace Plumbing Corp. , 129 AD3d 75 (NY AD 1st Dept. 2015).
The plaintiff's complaint asserts the existence of a default in making payments. The plaintiff now substitutes an alternative theory i.e., "loan became mature" in its Summary Judgment Affirmations and Affidavits. This substitution is impermissible as it is inherently prejudicial to the defendant to do so at the summary judgment stage of this proceeding, in lieu of plaintiff exercising its right to amend its complaint. Normally, the Court would allow the plaintiff to cure this prejudice by denying the instant application and directing an amendment of the complaint. However, a review of the record presented reveals that said relief is not warranted.
The Court notes that one of the three loan documents relied upon by the plaintiff is a "DEMAND NOTE." However, the plaintiff's complaint and summary judgment papers do not assert that they accelerated this note. Instead it relies upon the assertion that the Note "Matured of its own Terms". See plaintiff's affidavits, affirmations and December 7, 2016 demand letter.
Interestingly; the parties BLA does "NOT " state a term or codify that the loan is a "Demand Note". Rather it provides that absent a default, with written notice thereof, the contract "effective September 30, 2013, shall continue in full force and effect until such time as the parties may agree in writing to terminate this Agreement ." In the case at bar, it is conceded that there was no monetary default on December 7, 2016. Absent the demonstration of some other event of default, this loan requires the defendants written consent to terminate same.
The Court is not going to address both parties arguments that they had a mutual understanding that the loan renewed annually upon the payment of $250.00 renewal fee, which was effected unilaterally by the plaintiff via a deduction from defendant's checking account. The parties Business Loan Agreement contains an "integrated writings merger" clause which prohibits the Court from considering any side agreements unless they are in writing and signed by both parties. See Marine Midland Bank v. Thurlow , 53 NY2d 381 (NY1981) ; Enenberg v. Shaeffer , 137 AD3d 1197 (NYAD 2nd Dept. 2016). Even if said issue was considered, it is uncontested that the plaintiff did in fact take its $250.00 renewal fee, which is presumptive of renewing the loan.
It is also tangentially asserted that the defendant defaulted in providing banking documentation. The proof presented does not establish that a default occurred by virtue of a failure to provide financial backup documents. The Agreement required written notice of default and the December 7, 2016 default letter gave notice only that "the loan has matured" and does not assert any other kind of default nor does it assert that this a "demand note." Even if it did, the demand would be in conflict with BLA provisions that requires mutual consent to terminate. Any ambiguity between these documents must be construed against the drafter of these documents (the Bank) and in the defendant's favor. Moran v. Standard Oil Co of New York , 211 NY 187 (NY 1914 J. Cardozo) ; Wing v. Wing , 112 AD2d 932 (NYAD 2d Dept. 1985) ; Zafenba v. Interface Flooring Co. ; 195 AD2d 471 (NYAD 2nd Dept. 1993). Accordingly, the Court is compelled to adopt the BLA terms as determinative.
Having given the plaintiff the benefit of all doubts, including allowing consideration of the alternative theory of whether it has proven that the BLA has matured of its own terms, the Court is compelled to deny the plaintiff's application for summary judgment pursuant to New York CPLR Sec. 3212 (a). The provisions of Sec 3212 (b) allow the Court to reciprocally grant the defendant summary judgment if the proof presented establishes "that any other party other than the moving party is entitled to summary judgment." Here it is undisputed that the defendant was not in monetary default as alleged in the plaintiff's Notice of Default and Accerlation. Accordingly, the Court awards summary judgment to the defendant dismissing the bank's complaint without prejudice together with the costs of this action.
As the statue of limitations has not run, the plaintiff may well be able to establish grounds of default after December 7, 2016.
Settled judgment on ten days notice .