Opinion
No. 0500639/2011.
2011-12-2
Gallant FUNDING, L.P., Plaintiff, v. Carl Tocci and Paul TOCCI, Defendants.
Leo L. Esses, Esq., Cohen Tauber Spievack & Wagner, PC, New York, NY, for Plaintiff. Anne Marie Bowler, Esq., Gabay–Rafiy & Bowler LLO, New York, NY, for Defendants.
Leo L. Esses, Esq., Cohen Tauber Spievack & Wagner, PC, New York, NY, for Plaintiff. Anne Marie Bowler, Esq., Gabay–Rafiy & Bowler LLO, New York, NY, for Defendants.
CAROLYN E. DEMAREST, J.
Gallant Funding, LP (“plaintiff”) moves for Summary Judgment in Lieu of Complaint pursuant to CPLR 3213, seeking the entry of judgment against Carl and Paul Tocci (“defendants”) based upon an instrument for the payment of money only. Plaintiff contends that defendants are in default of a mortgage guaranty agreement and seeks to recover the total outstanding balance of the loan obligation including interest and fees, as well as attorney's fees. Defendants move by cross motion for either dismissal of the action for lack of jurisdiction because of improper service of process or, alternatively, denial of the 3213 motion on the basis that it is not premised on an instrument for the payment of money only.
Background
On July 11, 2008, defendants entered into a Guaranty of Payment and Performance (“Guaranty”) with plaintiff in order to induce plaintiff to loan $2,200,000 to 251 Front Street Realty, Inc.(“Borrower”), a corporation owned by defendants. The underlying mortgage loan obligated Borrower to make monthly payments of principal and interest and to reimburse plaintiff for “all reasonable out-of-pocket costs, charges and counsel fees incurred” in collecting the debt, stating that “the same shall be added to the principal sum secured hereby as a further charge and lien upon the Premises and shall bear interest at the rate provided for in the note.” In the Guaranty, defendants agreed to be held jointly and severally liable for the prompt payment of “all present or future obligations or liabilities of any and all kinds” of Borrower to plaintiff. Payment of the mortgage was originally due August 1, 2009, but the maturity date was extended first to November 1, 2010 by the August 10, 2010 e-mail from plaintiff to defendants, and then to May 1, 2011 by the Modification of Note and Mortgage and Security Agreement executed by plaintiff, defendants, and Borrower. Neither Borrower nor defendants satisfied the loan obligation, and on June 14, 2011, plaintiff sent defendants a notice of default and a payoff statement, totaling the unpaid principal, interest, and fees at $2,193,474.18, noting that $1,176.95 per diem default interest would be charged after June 14, 2011. Although defendants' counsel suggests that plaintiff did not provide a means for accounting of the payments received from the defendants, the defendants did not submit any affidavit by a person with knowledge to contest any of the allegations in plaintiff's motion.
At issue here is the interpretation of two sections of the Guaranty pertaining to jurisdiction and service of process. Section XVI. Governing Law states:
This Guaranty shall be governed by, and construed in accordance with, the laws of the State of New York. In the event that the Lender brings any action hereunder in any court of record of New York or the Federal Government, the Guarantor consents to and confers personal jurisdiction over the Guarantor by the courts of the state of New York and agrees that service of process may be made upon the Guarantor by mailing a copy of said process to the Guarantor; and in any action hereunder the Guarantor waives the right to demand trial by jury.
Section XVIII. Service of Process states:
Guarantor hereby appoint [sic] Nicholas T. Donovan, Esq., who has an office located at Donovan & Giannuzzi, LLP, 261 Madison Avenue, 22nd Floor, New York, New York 10016, as Guarantor's agent for service of process for any matters relating to this Guaranty and the Loan Documents. Guarantor covenants that revocation of such appointment shall not be effective unless Guarantor provides Lender with at least thirty (30) days prior written notice and Guarantor simultaneously appoints a substitute agent for service of process, which substitute agent shall be an attorney at law of the State of New York maintaining an office in the state of New York.
On August 15, 2011, the summons, notice of motion for summary judgment in lieu of complaint, and supporting papers were served by hand delivery to Nicholas T. Donavan, Esq., defendants' agent for service of process as designated in the Guaranty supra. On August 22, 2011, the amended summons with notice, amended notice of motion for summary judgment in lieu of complaint, and supporting papers were served by certified mail, again to Donovan. On August 22, 2011, Leo L. Esses, attorney for the plaintiff, served the same papers on Anne Marie Bowler, who identified herself as the attorney for defendants to plaintiff's attorney, by e-mail and through the U.S. Postal Service. According to the amended summons, the motion was to be before the court on September 21, 2011, but it was administratively adjourned by the Court until September 28, 2011. Defendants filed their cross motion and supporting documents on September 21, 2011.Plaintiff filed its opposition to the cross motion and reply memorandum of law further in support of the motion for summary judgment in lieu of complaint on September 27, 2011. Defendants filed their affirmation in reply to the plaintiff's opposition on September 27, 2011. Both plaintiff and defendants appeared in court on September 28, 2011 in support of their respective motions.
Plaintiff alleges that defendant guarantors are in default of their loan obligations and that it is entitled to payment of the unpaid principal plus interest, fees, and attorneys fees pursuant to the Mortgage and Guaranty agreements. In his affidavit, David Orbach (a member of Knight Funding Management, LLC, the General Partner of plaintiff Gallant Funding, LP) states that as of August 12, 2011 defendants owe an outstanding balance of $2,262,914.23. Plaintiff moves for summary judgment in lieu of complaint based on the premise that this is a straightforward dispute based on an instrument for the payment of money only. Plaintiff maintains that the court has jurisdiction over defendants because of the provisions of the Guaranty quoted supra and the service of process by certified mail on Donovan, the designated agent of defendants for that purpose. Defendants allege that they were not properly served in accordance with the CPLR and that they were short-served with the notice of motion for summary judgment in lieu of complaint, and thus the court has no jurisdiction. In addition, they allege that the instrument in question is not for the payment of money only, and that the plaintiff does not provide a detailed calculation for the amount stated as owed in Orbach's affidavit, such that the motion for summary judgment in lieu of complaint cannot be granted.
Analysis
The threshold issue here is whether the Court has jurisdiction to hear this dispute, specifically whether the service by Certified Mail on Donovan and the terms of the Guaranty were sufficient to establish personal jurisdiction over the defendants. Personal jurisdiction consists of two main components: first, service of process which fulfills due process requirements of notice and the opportunity to be heard; and second, the power of the court to issue binding judgment in the dispute. ( See Brooklyn Fed. Sav. Bank v. W. Assoc., LLC, 29 Misc.3d 1237(A), 5 [Sup Ct, Kings County 2010]; Keane v. Kamin, 94 N.Y.2d 263, 265 [1999].) Parties have a well-settled right to contractually consent to personal jurisdiction and waive strict compliance with statutory service requirements. ( See Alfred E. Mann Living Trust v ETIRC Aviation S.A.R.L., 78 AD3d 137 [1st Dept 2010]; Gilbert v. Burnstine, 255 N.Y. 348, 355 [1935] ). However, the Court must keep in mind the fundamental principle of personal jurisdiction: to provide “notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” (Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314 [1950];see also McCann v. Scaduto, 71 N.Y.2d 164 [1987];Raschel v. Rish, 69 N.Y.2d 694 [1986] ).
Here, defendants consented to the jurisdiction of the courts of New York pursuant to Section XVI of the Guaranty and named Donovan as their agent for service of process, to be executed by mail pursuant to Section XVIII of the Guaranty. Plaintiff did indeed serve the defendants pursuant to the terms of the Guaranty on August 22, 2011. Defendants claim that the service was improper and the court lacks jurisdiction because it was not in accordance with the CPLR, specifically provision 312–a which requires that service by mail be accompanied by two copies of an acknowledgment form, a return envelope with postage, and two copies of the pleadings for each defendant. This argument is unavailing as the Guaranty requires none of these things. Furthermore, it is clear that both prongs of the personal jurisdiction analysis have been satisfied here. First, defendants received notice of the pendency of the action in the manner agreed to in the Guaranty, they have been able to file opposition to the motion and their own cross-motion, and they have had the opportunity to be heard in court. Second, in the Guaranty they expressly conferred and consented to the personal jurisdiction of this Court, granting it the authority to rule on this matter.
Defendants argue that the provisions at issue here are different from effective contract terms which waive all challenges to the court's jurisdiction. In Alfred E. Mann Living Trust v. Etirc Aviation S.A.R.L (78 AD3d 137 [1st Dept 2010] ) the defendant signed a loan guaranty agreement expressly consenting to the exclusive jurisdiction of New York, waiving any objections to personal jurisdiction, and waiving any right to formal service of process, instead providing for notice by e-mail. The court found that these waivers were effective, and that they rendered “inapplicable the statutes that normally direct and limit the acceptable means of serving process on a defendant.” ( Id. at140). In Brooklyn Fed. Sav. Bank v. W. Assoc., LLC (29 Misc.3d 1237(A), 5 [Sup Ct, Kings County 2010] ), the defendants signed a loan guaranty agreement with similar provisions consenting to personal jurisdiction in New York and waiving any challenges to jurisdiction, but providing that service of process be in accordance with state law. Defendants argued that proper service was not effected upon the defendant corporation and that all defendants were short-served, but this Court found that since they had all contractually consented to jurisdiction in New York and waived such objections, they could not prevail on these challenges “absent lack of notice or other due process violation” which were not present. ( Id. at 7). The fact that the Guaranty at issue here does not contain the specific waiver of challenges to personal jurisdiction present in the aforementioned two cases is immaterial.
Despite the differences in the contractual language, the Court finds that the Guaranty provisions sufficiently establish that the defendants consented to the personal jurisdiction of the courts of New York and authorized Donovan to receive service of process on their behalf by mail. Moreover, the original summons and motion were actually served by hand delivery to Donovan, so there can be no question that defendants received proper notice. The original service of August 15, 2011 was effective to confer personal jurisdiction over defendants. Plaintiff reserved an “amended” motion in compliance with the provisions of the guaranty by mail on August 22, 2011 to Donovan, with a courtesy copy to defendants' current counsel. There can be no practical objection that their due process rights have been violated since defendants had the opportunity to retain counsel, appear before the court, and file opposition to the motion, a cross motion, and an affirmation in reply to the plaintiff's opposition to the cross-motion. It is clear that defendants had actual notice of the motion and ample opportunity to be heard, and thus cannot maintain that the improper service was a fatal defect. ( See Brooklyn, at 6).
Defendants argue that even if service was proper, plaintiff short-served the amended 3213 motion on August 22, 2011, 30 days before the appearance date on September 21, 2011. They claim that since they are required to submit opposition 7 days in advance of the appearance date, they effectively only had 23 days notice. Pursuant to CPLR 3213, the minimum notice time 3213 motions must provide before the appearance date is set by CPLR 320(a) at 20 days. CPLR 2103(b)(2) states that when papers are served by mail on an attorney, “5 days shall be added to the prescribed period.” (CPLR 2103[b][2] ). Thus, defendants were entitled to 25 days notice of the appearance date. Since they were afforded 30 days notice in advance of the appearance date on September 21, 2011, they were served in a timely manner. Defendants' objection to the notice time is further discredited by the fact that they received an extra 7 days to prepare for the appearance because of the administrative adjournment to September 28, 2011.
In any event, “[t]imely service of motion papers is intended to provide the adversary with adequate notice of the relief sought and a reasonable opportunity to prepare a response.” (Plaza 400 Owners Corp. v. Resnicoff, 168 Misc.2d 837, 839 [1996] ). Where short service does not cause a default, “the issue is not the lateness of the service, but whether it caused the respondent substantial prejudice.” ( Id. at 839). In the absence of substantial prejudice or evidence of deliberate wrongdoing which would implicate “significant ethical and constitutional issues,” requiring the parties to resubmit motions would be unfairly burdensome and needlessly delay resolution of the dispute. ( Id. at 840). Here, defendants had adequate time to make multiple submissions to the Court and appear. Since there is no evidence of substantial prejudice or deliberate wrongdoing on the part of the plaintiff, any short service would not be a fatal defect. Defendants cite two cases in which motions pursuant to 3213 were dismissed for short service. However, those cases are inapposite as the respondents in those actions were not given adequate time to respond and had defaulted. ( See Goldstein v. Saltzman, 13 Misc.3d 1023 [2006];Mashantucket Gaming Enter. v. Ping Lin, 31 Misc.3d 1218(A) [2011] ).
Since motions for summary judgment in lieu of complaint are meant to expedite presumptively meritorious claims in a simple and direct manner, courts “should further this legislative intent without setting up hypertechnical barriers” to that end. (Flushing Nat. Bank v. Brightside Mfg. Inc., 59 Misc.2d 108 [Sup Ct, Queens County 1969] ). Here, since defendants were not prejudiced by the short service and had adequate time to respond, their arguments to the contrary are unavailing.
CPLR 3213 allows plaintiff to seek summary judgment in lieu of a complaint when the “action is based upon an instrument for the payment of money only.” (CPLR 3213). Summary judgment is appropriate “if, upon all the papers and proof submitted, the cause of action or defense shall be established sufficiently to warrant the court as a matter of law in directing judgment” and should be denied if “any party shall show facts sufficient to require a trial of any issue of fact.” (CPLR 3212[b] ). Here, plaintiff has demonstrated prima facie that defendants are in default of an instrument for the payment of money only. Plaintiff has provided the original Mortgage, Guaranty, and extension agreements. Plaintiff annexed the notice of default and payoff statement dated June 14, 2011, indicating total unpaid principal balance, default interest, and maturity transaction fee totaling $2,193,474.18, with a per diem charge of $1,176.95 accruing beginning June 15, 2011. According to Orbach's affidavit, the total amount owed under the note as of August 12, 2011 was $2,262,914.23, having accrued 59 days of per diem charges.
In order to defeat a motion for summary judgment, a defendant must raise a triable question of material fact; “mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient.” (Zuckerman v. City of New York, 49 N.Y.2d 557, 562 [1980] ). A “bare affirmation” of an attorney without any personal knowledge of the matter is “without evidentiary value and thus unavailing.” ( Id. at 563). Defendants do not raise any issues of material fact, or contest that they entered into the Guaranty with plaintiff and defaulted on their obligations. Defendants point to the words “Guaranty of Payment and Performance” to imply that there is performance required other than payment, although they do not point to any specific action that defendants are meant to perform. Defendants also claim that parties seeking a 3213 motion typically submit an accounting, although the cases cited do not support such a claim. Finally, defendants offer no support for any of their assertions other than an affirmation from their attorney. These claims are unsubstantiated and unavailing. ( See Zuckerman ).
Conclusion
Accordingly, plaintiff's motion for summary judgment in lieu of complaint pursuant to CPLR 3213 is granted. Plaintiff is to settle an order on notice, consistent with this decision, within 30 days, including proof of attorney's fees.
This constitutes the decision, order, and judgment of the court.