Opinion
SCK 70009/2009.
Decided on August 13, 2009.
Barry R. Feerst, Associates, Attorneys for Claimant.
No Appearance by Defendant (on default).
Claimant, NY COMMERCIAL FINANCIAL CORP. (NY Commercial), commenced this action to recover on a dishonored negotiable instrument in the amount of $750.00, as the defendant CLINTON HOUSING DEVELOPMENT FUND CO. (Clinton), stopped payment on the check at issue.
On October 15, 2008, Clinton made a check in the amount of $750 to B.S. Construction, who received cash for the check from claimant. The defendant placed a stop payment order on the check giving rise to the instant action. Around February 23, 2009, the parties agreed to have their small claims matter decided by an arbitrator, who awarded claimant $388 with disbursements for a total judgment amount of $418.74.
Soon thereafter, claimant moved this court for an order to vacate the arbitrator's award pursuant to CPLR 7511, stating that the arbitrator made a mistake of law. Claimant argued that it was a holder in due course, entitling it to full payment on the check under UCC § 3-302, as opposed to a mere holder, which may or may not entitle it to full payment, under UCC § 3-301. Therefore, claimant argued that because the arbitrator found in its favor, the arbitrator could only award the full amount on the dishonored check. Thus, claimant concluded, the arbitrator was precluded as a matter of law from making the complained of "compromise" award on the dishonored check because it was a holder in due course.
When an application is being decided on default, the motion court must still review the papers to ensure that the movant established its prima facie burden ( see e.g. CPLR 3215)
"An arbitration award can be vacated by a court pursuant to CPLR 7511 (b) on only three narrow grounds: if it is clearly violative of a strong public policy, if it is totally or completely irrational, or if it manifestly exceeds a specific, enumerated limitation on the arbitrators' power" ( NFB Inv. Services Corp. v. Fitzgerald , 49 AD3d 747 , 748, [2d Dept 2008] [citations omitted]; see also Viscarra v. Durlik, 2007 NY Slip Op 50359(U) [App Term, 2d 11th Jud Dists]). "An award is irrational if there is no proof whatever to justify the award'" (NFB Inv. Services Corp. v. Fitzgerald, 49 AD3d at 748 [citations omitted]; Peterson v. Lieberman, 2008 NY Slip Op 51116(U) [App Term, 2d 11th Jud Dists]). However, "[e]ven if the arbitrators misapply substantive rules of law or make an error of fact, unless one of the three narrow grounds applies in the particular case, the award will not be vacated" ( NFB Inv. Services Corp. v. Fitzgerald, 49 AD3d at 748; Povia v. Furfero, 2007 NY Slip Op 50723(U) [App Term, 9th 10th Jud Dists]).
" An arbitrator is not bound by principles of substantive law or rules of evidence, and may do justice and apply his or her own sense of law and equity to the facts as he or she finds them to be" ( Erin Const. and Development Co., Inc. v. Meltzer, 58 AD3d 729, 730 [2d Dept 2009] [emphasis added]). Pursuant to the aforementioned standard, the arbitrator's award must be upheld even if the arbitrator knew that claimant was a holder in due course (UCC § 3-302) entitling it to full recovery on the dishonored check under UCC § 3-305 ( see e.g. Wien Malkin LLP v. Helmsley-Spear, Inc. , 6 NY3d 471 ).
Further, claimant's affidavit failed to present facts showing that it was a holder in due course, as opposed to, a mere holder (NY UCC §§ 3-301, 302). The arbitrator could have just as easily found that claimant was a mere holder subject to recovery under New York's UCC § 3-306, which would restrict claimant's recovery to that amount to which B.S. Construction was entitled, i.e. $388.
Accordingly, the arbitrator was well within the bounds enumerated in CPLR 7511(b) when it rendered the complained of "compromise" decision. Thus, claimant has failed to establish its prima facie burden for the relief it requested.
Based on the foregoing, it is hereby
ORDERED that Claimant's motion to vacate the arbitrator's award is DENIED.
This constitutes the Decision and Order of the Court. Dated:August 13, 2009