Opinion
710703/17
06-26-2018
MELROSE CREDIT UNION, Plaintiff, v. Gauthier ULYSSE, Defendant.
The following numbered papers read on this motion by plaintiff for summary judgment in its favor as to liability granting a money judgment on its first cause of action and an Order of replevin on its fourth cause of action; and cross-motion by defendant to dismiss the complaint pursuant to CPLR 3211(a)(3) lack of standing and to dismiss the replevin cause of action pursuant to CPLR 3211(a)(7).
PAPERS/E–FILE NUMBERED
Notice of Motion–Affidavits–Exhibits 9–22
Notice of Cross–Motion Affidavits–Exhibits. 25–33
Replying Affidavits 34–36
Upon the foregoing papers it is ordered that this motion and cross-motion are determined as follows.
This is an action sounding in breach of contract, account stated, unjust enrichment, and replevin. Plaintiff alleges that on May 29, 2014 the defendant, borrower, executed and delivered a fixed rate Balloon Note in the original principal amount of $495,000.00 with an interest rate of 4%. Defendant also executed a security agreement in favor of plaintiff, which included New York Taxi Medallion numbers 2E95 to secure repayment of the amount due under the note. Plaintiff further alleges that defendant defaulted under the terms of the note by failing to pay the full amount due on May 29, 2017, the maturity date of the Note, that the plaintiff has notified the defendant of the default, by letter dated June 21, 2017 demanded the full amount due and that defendant has failed to repay the outstanding principal or accrued interest due in the amount of $456,649.91 plus interest at the rate set forth in the note from June 28, 2017.
As a result of the alleged default, plaintiff commenced the instant action asserting causes of action for, inter alia, breach of contract and replevin and now moves for summary judgment on these claims. Defendant cross-moves to dismiss plaintiff's complaint pursuant to CPLR 3211 (a)(3) plaintiff's lack of standing and CPLR 3211 (a)(7) failure to state a cause of action for replevin.
In general, "[o]n a defendant's motion pursuant to CPLR 3211(a)(3) to dismiss the complaint based upon the plaintiff's alleged lack of standing, the burden is on the moving defendant to establish, prima facie, the plaintiff's lack of standing as a matter of law" ( U.S. Bank N.A. v. Guy , 125 AD3d 845, 847 [2015] ; see HSBC Mtge. Corp. [USA] v. MacPherson , 89 AD3d 1061, 1062 [2011] ).
In support of this branch of his motion the defendant contends that plaintiff lacks standing to commence the instant action since it has been placed in a conservatorship and no longer has legal capacity to bring the instant suit on its own behalf. In opposition, plaintiff argues that the 12 USC § 1787 (b)(2)(B) & (C), more commonly known as the Federal Credit Union Act (FCUA), does not vitiate its right to commence this action or to litigate its rights under its contract with defendant. The record contains, among other things, copies of the pleadings, the affidavit of non-party Gary Luvera (Luvera), an agent for the National Credit Union Administration (NCUA).
A "conservator" is defined as "[a] guardian, protector, or preserver" (Black's Law Dictionary [10th ed 2014] ). Generally, a conservator is appointed to discharge an entity's responsibilities to "protect those who are incompetent to adequately conduct their personal and business affairs" ( Matter of Scrivani's Estate , 116 Misc 2d 204, 206 [New York Sup Ct 1982] ). Pursuant to the provisions of 12 USC §§ 1751 and 1752a (a), the National Credit Union Administration Board (NCUA), an independent agency formed within the executive branch of the government, which oversees and regulates credit unions and operates credit union insurance and stabilization funds, is permitted to step into the role of conservator and/or liquidating agent of a failed or failing credit union.
12 USCA § 1787 (b)(1) and (b)(2) (A) and (B) set forth the powers and duties of the NCUA as follows:
"(1) Rulemaking authority of Board. The Board may prescribe such regulations as the Board determines to be appropriate regarding the conduct of the Board as conservator or liquidating agent. (2) General powers. (A) Successor to credit union. The Board shall, as conservator or liquidating agent, and by operation of law, succeed to—(I) all rights, titles, powers, and privileges of the credit union, and of any member, account holder, officer, or director of such credit union with respect to the credit union and the assets of the credit union; and (ii) title to the books, records, and assets of any previous conservator or other legal custodian of such credit union. (B) Operate the credit union. The Board may, as conservator or liquidating agent—(I) take over the assets of and operate the credit union with all the powers of the members or shareholders, the directors, and the officers of the credit union and shall be authorized to conduct all business of the credit union; (ii) collect all obligations and money due the credit union; (iii) perform all functions of the credit union in the name of the credit union which is consistent with the appointment as conservator or liquidating agent; and (iv) preserve and conserve the assets and property of such credit union."
12 USCA § 1787 (b)(2) (C) and (D) further provide the following:
"(C) Functions of credit union's officers, directors, and shareholders. The Board may, by regulation or order, provide for the exercise of any function by any member or stockholder, director, or officer of any credit union for which the Board has been appointed conservator or liquidating agent. (D) Powers as conservator. The Board may, as conservator, take such action as may be—(I) necessary to put the credit union in a sound and solvent condition; and (ii) appropriate to carry on the business of the credit union and preserve and conserve the assets and property of the credit union."
It is undisputed that plaintiff was placed in conservatorship on or about February 10, 2017, and that at the time of the commencement of this action the NCUA was not liquidating plaintiff. Pursuant to the above provisions, it is true that as conservator of plaintiff, the NCUA assumes all rights and privileges of plaintiff, including the ability to bring suit for pending claims ( 12 USC § 1787 [b][2] [A] and [B]; see Natl. Credit Union Admin. Bd. v. Morgan Stanley & Co., Inc. , Fed Sec L Rep P 97794 [SDNY Jan. 22, 2014] ). However, 12 USC§ 1787 (b)(2) (B), (C) and (D), merely provide that the NCUA may, as conservator, take over the credit union's assets, collect all obligations and money due, perform all functions of the credit union, and may take such action as may be necessary to put the credit union in a sound and solvent condition. There is no requirement set forth in the FCUA that the NCUA must take such action. Nor is there any requirement set forth in the FCUA which provides that plaintiff must cease and desist all operations. A careful reading of the provisions of the FCUA does, however, demonstrate that, acting in its role as conservator, the NCUA may permit certain actions of its conservatee as a part of its oversight.
In this matter, as an employee of the NCUA, Luvera has stated in his affidavit that the NCUA, as conservator, has authorized plaintiff to bring the instant action in its own name, that the NCUA has retained outside counsel to serve as plaintiff's counsel and to assist plaintiff in collecting monies due and owing on under performing loans, such as has been alleged in the instant matter. In light of the above, defendant has failed to satisfy their burden of establishing, prima facie, that plaintiff lacks the requisite standing to bring this action as a matter of law ( CPLR 3211 [a][3]; see MLB Sub I, LLC v. Bains , 148 AD3d 881, 882 [2017] ).
The defendant also cross-moves to dismiss plaintiff's fourth cause of action seeking replevin of the Taxi Medallion No. 2E95 with rate card, arguing that the complaint fails to state a cause of action for replevin and that plaintiff has failed to allege that demand was made upon defendants for possession of the collateral.
"On a motion to dismiss pursuant to CPLR 3211(a)(7), the complaint is to be afforded a liberal construction, the facts alleged are presumed to be true, the plaintiff is afforded the benefit of every favorable inference, and the court is to determine only whether the facts as alleged fit within any cognizable legal theory" ( Gorbatov v. Tsirelman , 155 AD3d 836 [2017] ; CPLR 3026 ; see Leon v. Martinez , 84 NY2d 83, 87–88 [1994] ; Feldman v. Finkelstein & Partners, LLP , 76 AD3d 703, 704 [2010] ).
"To state a cause of action for replevin, a plaintiff must allege that he or she owns specified property, or is lawfully entitled to possess it, and that the defendant has unlawfully withheld the property from the plaintiff" ( Khoury v. Khoury , 78 AD3d 903, 904 [2010] ). "[A] substantive element of a cause of action for replevin is that the plaintiff demand the return of the subject property and the one in possession thereof refuses to return it" ( Matter of Vogel , 19 Misc 3d 853, 857 [2008] ; see Solomon R. Guggenheim Found. v. Lubell , 77 NY2d 311, 319 [1991] ; McGough v. Leslie , 65 AD3d 895, 896 [2009] ).
The plaintiff's complaint does not sufficiently allege that it demanded the return of the collateral from defendant. Thus, defendant is entitled to the dismissal of this cause of action.
Accordingly, the branch of defendant's motion to dismiss plaintiff's cause of action sounding in replevin is granted and the plaintiff's motion for summary judgment on its claim for replevin is denied as moot.
The remainder of defendant's motion is denied.
To demonstrate its entitlement summary judgment on its claim for breach of contract of a promissory note, a plaintiff must establish the existence of the instrument and the defendant's failure to make payment pursuant to its terms (see Ahern v. Miloslau , 128 AD3d 992 [2015] ; Imperial Capital Bank v. 11–13–15 Old Fulton D, LLC , 88 AD3d 652 [2011] ).
The plaintiff established, prima facie its entitlement to summary judgment on its breach of contract claim submitting a copy of the Balloon Note with Additional Covenants to Promissory Note and Security Agreement [hereinafter Additional Covenants] dated 5/29/2014 and the affidavit of Andrew Bastone the plaintiff's Chief Credit Officer asserting that the defendant/borrower's failed to make the final balloon payment of the entire outstanding principal and interest due on May 29, 2017 the maturity date of the note (see ( Lugli v. Johnston , 78 AD3d 1133, 1135 [2010] ; Gullery v. Imburgio , 74 AD3d 1022 [2010] ).
Thus, the burden shifts to the defendant to demonstrate "the existence of a triable issue of fact as to a bona fide defense to the action, such as waiver, estoppel, bad faith, fraud, or oppressive or unconscionable conduct on the part of the plaintiff".
In opposition defendant submitted his affidavit wherein he does not deny that he failed to repay the debt and, instead, asserts promissory estoppel in defense of the claim.
Defendant asserts that he has been dealing with the plaintiff for over 25 years during which time he has had various loans from the plaintiff, referred to as "medallion loans". Upon maturity, the loans were always renewed or renegotiated with the medallion serving as the only security for the loan and he was always told by "various representatives" of the plaintiff that the loan would be renewed and secured by a security interest in the medallions. Defendant further asserts that upon the maturity of the instant note, the plaintiff has refused to renew the loan unless defendant pledged his home as additional security. Defendant maintains that he would not have entered into the loan if he had known that plaintiff would require a lien on his home to renew the loan.
The plaintiff has no obligation to forebear from enforcing its remedies or to modify the terms of the loan (see Graf v. Hope Bldg. Corp. , 254 NY 1, 4–5 [1930] ; Wells Fargo Bank, N.A. v. Meyers , 108 AD3d 9, 21–22 [2013] ) thus, a failure to modify or refinance the existing loan does not give rise to an estoppel defense nor constitute bad faith or unconscionable conduct (see Graf v. Hope Bldg. Corp. , supra; Wells Fargo Bank, N.A. v. Meyers , supra).
Notwithstanding, the defendant has failed to demonstrate the elements of promissory estoppel.
To apply the doctrine of promissory estoppel, defendant must establish (1) a clear and unambiguous promise; (2) reasonable and foreseeable reliance on that promise; and (3) an unconscionable injury (see NGR, LLC v. General Elec. Co. , 24 AD3d 425 [2005] ; Swerdloff v. Mobil Oil Corp. , 74 AD2d 258, 261–264 [1980], lv denied 50 NY2d 803, 913 [1980] ).
An estoppel is based on the word or deed of one party upon which another party rightfully relies and, in reliance, changes his position to his injury (see Nassau Tr. Co. v. Montrose Concrete Products Corp. , 56 NY2d 175, 184 [1982], Triple Cities Constr. Co. v. Maryland Cas. Co. , 4 NY2d 443, 448 [1958] ). It is imposed by law in the interest of fairness to prevent the enforcement of rights which would work fraud or injustice upon the person against whom enforcement is sought and who, in justifiable reliance upon the opposing party's words or conduct, has been misled into acting upon the belief that such enforcement would not be sought (see Nassau Tr. Co. v. Montrose Concrete Products Corp. , supra at 184 [1982] citing White v. La Due & Fitch , 303 NY 122, 128 [1951] ). Promissory estoppel is available only where a party reasonably relies on an oral representation and it would be unconscionable to deny enforcement of the oral agreement (see Steele v. Delverde S.R.L. , 242 AD2d 414, 415 [1997] ).
The note which is the subject of this action expressly provides that the lender is under no obligation to refinance the loan. The defendant could not have reasonably relied on the alleged oral promises in light of the disclaimer language contained in the note.
The defendant's claim of promises to the effect that the loan would always be secured solely by the medallion is also contradicted by the terms of the loan. The Additional Covenants provide that the plaintiff can request reports and other information regarding the defendant's business, assets and liabilities and that "... if at any time the loan balance shall exceed 80% of the collateral value the Borrower shall then provide additional collateral to secure the loan..." Thus demonstrating that additional security, even during the life of the loan, was within the contemplation of the parties.
The defendant has also failed to demonstrate that the demand for additional security to renew the loan constitutes "unconscionable injury" when taking into consideration the impact of the rise of UBER, LIFT and other like entities on the taxi industry and the value of the NYC Taxi Medallion. The defendant has failed to submit any evidence as to the present value of his medallion to demonstrate that the demand for additional security is unreasonable or unwarranted (see Melwani v. Jain , 281 AD2d 276, 277 [2001] ).
Accordingly, the plaintiff's motion for summary judgment on its first cause of action for breach of contract is granted.