Opinion
06-3583.
Decided February 5, 2007.
PHILLIPS LYTLE LLP, By: Steven E. Laprade, Esq., Richard J. Evans, Jr., Esq., Attorneys for Plaintiff, Rochester, NY.
MELVIN MELVIN, PLLC, By: Kenneth J. Bobrycki, Esq., Attorneys for Defendants Collamer Road LLC; Collamer Management, LLC; Sportscenter 481, LLC, and Paul J. Curtin, Jr., Syracuse, NY.
D. Christian Fischer, Esq., Attorney for Defendants Hardy 481 Group, LLC and, David J. Hardy, Syracuse, NY.
In this action commenced by Plaintiff on June 5, 2006, relating to Defendants' alleged default in their obligations related to a Promissory Note dated March 28, 2001, in the original amount of $136,000.00, and guaranties, in favor of Alliance Bank, Plaintiff, by Notice of Motion dated September 1, 2006, seeks an Order pursuant to CPLR § 3212 granting summary judgment in favor of Plaintiff on the Promissory Note and personal guaranties executed by Defendants Curtin and Hardy, relating to an equipment loan (hereafter referred to as "loan") pertaining to the subject property (hereafter referred to as "Sportcenter 481"). Sportcenter 481 consists of a 75,000 sq. ft. building located at the intersection of Interstate 481 and Collamer Road, Town of DeWitt, and is mainly used as an indoor sports facility for thousands of young adults and children.
Plaintiff also seeks summary judgment on a commercial guaranty by Sportcenter 481 and a commercial guaranty by Hardy 481 Group executed on March 28, 2001, in favor of Alliance Bank
By Notice of Cross-Motion dated October 20, 2006, Defendants move for an Order pursuant to CPLR § 3124, compelling Plaintiff to provide responses to Defendants' collective discovery demands, or precluding Plaintiff from offering into evidence any of the items requested in Defendants' collective discovery demands. The Court heard oral argument of the parties on November 27, 2006.
On March 28, 2001, Defendants executed a Promissory Note and Commercial Security Agreement in favor of Alliance Bank. Thereafter, Defendants executed a Modified Promissory Note on November 23, 2001, and Plaintiff alleges that Alliance Bank subsequently assigned its security interest in the collateral to Plaintiff by filing a UCC-1 assignment with the New York Secretary of State on December 28, 2005.
Plaintiff contends that the commercial and personal guaranties executed by Defendants unconditionally guarantees the payment of any and all indebtedness, liabilities and obligations of every kind owed by Defendants to the Bank. Plaintiff asserts that Defendants have defaulted and have failed to make payment to Plaintiff pursuant to the terms and conditions of the loan, and that the total due and owing is the principal sum of $79,779.57 together with interest as of May 25, 2006, in the amount of $4,082.20, and accrued late charges in the amount of $725.04, for a total amount due of $84,586.81 plus interest.
Plaintiff commenced the within action by the filing of a Summons and Complaint in the Onondaga County Clerk's Office on or about June 5, 2006. Defendants Collamer Road LLC; Collamer Management, LLC; Sportscenter 481, LLC; and Paul J. Curtin, Jr., served an Answer with affirmative defenses and a counterclaim dated July 13, 2006, two deposition Notices, and a Notice for Discovery and Inspection dated April 27, 2006. Defendants Hardy 481 Group, LLC and David J. Hardy served an Answer with affirmative defenses and a counterclaim dated July 7, 2006, and two deposition Notices to depose officers of Plaintiff, and a Notice to conduct third-party discovery of Alliance Bank dated May 5, 2006.
Defendants' deposition notices and notice to conduct discovery were served in response to the related transaction and lawsuit (Index No. 2006-1574) by Plaintiff to foreclose a Note and Mortgage on Sportcenter 481 commenced on March 9, 2006. The underlying allegations and facts appear to be virtually identical.
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In opposition to Plaintiff's motion, and in support of Defendants' cross-motion, Defendants contend that Defendant Collamer Road, LLC, was created in December, 1999, to operate and construct a sports facility in DeWitt, New York. Defendants negotiated with Alliance Bank for permanent financing and loan in the amount of $1,690,000.00 over 20 years, plus interest, and Alliance Bank also provided an equipment loan for $136,000.00, which would have a seven-year term requiring monthly payments of principal and interest. Sportcenter 481, opened in the Summer of 2001, catering to athletic events. Defendants contend that two officers of Alliance Bank, James Getman and Michael Giles, personally monitored the loan and visited the mortgaged property. Defendants would furnish details of the financial reports and projections to Alliance Bank on a regular basis. Defendants and Alliance Bank had a long-term relationship, and Alliance Bank was fully aware of and approved its business model, which was of a seasonal nature.
Plaintiff commenced a foreclosure action relating to an alleged default on a Note and Mortgage on March 9, 2006 (Index No. 2006-1574).
In June of 2005, Defendants met with Alliance Bank to undertake a renovation in the amount of $225,000.00 to replace the artificial turf in an attempt to increase customer use. Defendants contend that the renovations were in direct response to Alliance Bank's request that cash flow be increased. Defendants state that Alliance Bank encouraged and approved the renovations, and in consideration, it was understood that Defendants would defer paying some taxes in the short run in order to finance the renovations, but Defendants would still maintain the debt service to Alliance Bank. To accomplish this, Defendants Curtin and Hardy borrowed $75,000.00 on a personal line of credit in the Summer of 2005. Defendants contend that, at that time, Alliance Bank concealed from them their efforts to sell Defendants' loan to a so-called "vulture fund" which specializes in buying debt at a substantial discount while at the same time continuing to negotiate with Defendants. Defendants allege that on December 22, 2005, Plaintiff was formed as a limited liability company for the alleged sole purpose of receiving an assignment from Alliance Bank of Defendants' loan. Defendants were contacted on December 23, 2005, and, for the first time, were advised that the loan was sold.
Specifically, Defendants contend that: Alliance Bank breached a covenant of good faith between them; Alliance Bank intended that Defendants be in default of their loans when they were assigned; Alliance Bank's actions constitute unclean hands, and Plaintiff therefore should be denied the remedy to foreclose and executing on the Promissory Note and Guaranties; Plaintiff's business entity was created only 1-2 days prior to the assignment of the mortgage and notes and is therefore void pursuant to Judiciary Law § 489; Defendants served discovery demands dated April 27, 2006, and May 5, 2006, respectively, including to take depositions, and Plaintiff has failed to comply with the discovery demands; nowhere in the "Allonge" referred to and attached to Plaintiff's Complaint relating to the assignment between Alliance Bank and Plaintiff is there any reference to the assignment of the personal guaranties and, therefore, the personal guaranties did not survive as a matter of law. Nothing in the assignment specifically refers to the personal guaranties of Defendants Curtin and Hardy being assigned and transferred by Alliance Bank.
Defendants contend that, if they were allowed discovery, they would be able to pursue their champerty defense based on Judiciary Law § 489 by determining Plaintiff's loan portfolio, investment strategies, resum É s of principals, among other things, which Defendants believe will show that Plaintiff acquired Defendants' Promissory Note and Commercial Guaranty for the primary, improper purpose of bringing an action to enforce and collect on the above promissory instruments.
In response, Plaintiff contends that the guaranties do not require that there be a specific assignment of the documents when the underlying indebtedness is assigned from one holder to another as the guarantors obligated themselves to pay the indebtedness no matter to whom it is owed. Plaintiff disputes that Defendants undertook certain renovations to the business premises on Collamer Road in 2005 in lieu of paying the delinquent property taxes as there is no evidence that Alliance Bank agreed to this. Finally, Plaintiff contends that the defenses of unclean hands and promissory estoppel is not a remedy relating to this lawsuit to enforce the terms of the bank loan, and where an entity such as Plaintiff merely seeks to obtain full payment on a debt instrument and is forced by the reasons of the debtors' default and refusal to pay, to bring an action to enforce said instrument, as this action is not a violation of the statutory prohibition against champerty as set forth in Judiciary Law, § 489.
On summary judgment, it is well settled that the moving party "must establish its cause of action or defense sufficiently to warrant the court as a matter of law in directing judgment in its favor (CPLR § 3212[b]), and he must do so by tender of evidentiary proof in admissible form." See, Friends of Animals v. Associated Fur Manufacturers, 46 NY2d 1065 (1979). The burden then shifts to the non-moving parties to lay bare their proof to show that a genuine question of fact exists. See, Oswald v. City of Niagara , 13 AD3d 1155 (4th Dept. 2004). Moreover, the courts in New York have held that summary judgment should be denied where the motion is premature because there has been no reasonable opportunity for discovery. See, Hobbs v. Emprotech Corp. , 12 AD3d 1063 (4th Dept. 2004); Hager v. Denny's, Inc., 281 AD2d 921 (4th Dept. 2001); Groves v. Land's End Hous. Co., 80 NY2d 978 (1992).
In addition, CPLR § 3212(f) states in pertinent part:
"Should it appear from affidavits submitted in opposition to the motion that facts essential to justify opposition may exist but cannot then be stated, the court may deny the motion or may order a continuance to permit affidavits to be obtained or disclosure to be had and may make such order as may be just." CPLR 3212(f).
In the case at bar, Defendants served their collective discovery demands, including a demand to take depositions and obtain other documentary evidence, on Plaintiff, by demands dated April 27, 2006, and May 5, 2006, respectively, to obtain facts and evidence to support their defense of champerty based on Judiciary Law § 489. Defendants contend that Plaintiff's action is void because Plaintiff received the assignment of the Promissory Note, personal and commercial Guaranties for the improper purpose of seeking judgment on Defendants' indebtedness. Plaintiff does not dispute the fact that they formed Pramco IV, LLC, within two days before the alleged assignment.
Here, Defendants' demands for financial information and its attempt to obtain facts of the transaction between Alliance Bank and Plaintiff is clearly relevant to Defendants' defense on the above Promissory Note and Guaranties. Titleserv v. Zenobio, 210 AD2d 314 (2d Dept. 1994); see also, Samide v. Roman Catholic Diocese of Brooklyn , 5 AD3d 463 (2d Dept. 2004). Defendants' Affidavits in opposition adequately establish "that facts essential to justify opposition may exist but [could not] then be stated." See, Hobbs v. Emprotech Corp., supra; see also, Rincon v. Finger Lakes Racing Association, 11 AD3d 950 (4th Dept. 2004).
The Court finds that Defendants have been denied the opportunity for reasonable discovery and, therefore, pursuant to CPLR § 3212(f) denies Plaintiff's motion for summary judgment to enforce the Promissory Note dated March 28, 2001.
The Court further grants Defendants' cross-motion dated October 20, 2006, for an Order seeking discovery from Plaintiff. Plaintiff shall fully comply and completely answer Defendants' collective discovery demands dated April 27, 2006, and May 5, 2006, respectively, within thirty (30) days of the date of service upon Plaintiff of the Notice of entry of the filing of this Order.
All depositions shall take place on or before ninety (90) days following service of Notice of entry of the filing of this Order. The above constitutes the Decision and Order of this Court.