Opinion
Index No. 901890-22
12-15-2022
Special Proceeding Application of TD Bank, NA, as successor in interest to TD AUTO FINANCE LLC, Petitioner/Plaintiff v. One 2016 Cadillac Escalade, VIN: 1GYS4KKJ4GR222393, Defendant-in-rem, IN MOTION MOTORS, INC., BUTTER MANAGEMENT LLC, CARMAX, INC., and THE NEW YORK STATE DEPARTMENT OF MOTOR VEHICLES, Respondents/Defendants.
Law Offices of Rudolph J. Meola Attorneys for Petitioner By: Rudolph J. Meola, Esq. And John M. Dubuc, Esq. Jeffrey D. Herman, Esq. Attorneys for Respondent In Motion Autos, Inc. By: Jeffrey D. Herman, Esq. The Town Law Firm, P.C. Attorneys for Respondent Carmax, Inc. By: James T. Towne, Jr., Esq.
Unpublished Opinion
Law Offices of Rudolph J. Meola Attorneys for Petitioner By: Rudolph J. Meola, Esq. And John M. Dubuc, Esq.
Jeffrey D. Herman, Esq. Attorneys for Respondent In Motion Autos, Inc. By: Jeffrey D. Herman, Esq.
The Town Law Firm, P.C. Attorneys for Respondent Carmax, Inc. By: James T. Towne, Jr., Esq.
David A. Weinstein, J.
In this hybrid action, petitioner/plaintiff ("petitioner") TD Bank, NA, as successor in interest to TD Auto Finance LLC ("TD" or the "Bank"), by Amended Order to Show Cause ("OTSC") filed on July 15, 2022 seeks a declaration and order directing respondent New York State Department of Motor Vehicles ("DMV") to restore its claimed interest as a priority lien holder on the title record and issue a new title for one 2016 Cadillac Escalade, VIN No. 1GYS4KKJ4GR222393 (the "Vehicle" or "Cadillac").
Although this is a hybrid proceeding, for simplicity's sake I refer to the petitioner/plaintiff as "petitioner," and the respondents/defendants as "respondents."
According to the allegations in the amended verified petition and complaint, dated July 12, 2022 ("Pet"), as of April 4, 2016 TD held a security interest and lien on the Vehicle, which was reflected on its Certificate of Title, with the owner listed as respondent Butter Management, LLC ("Butter") (Pet ¶ 4 & Ex 1). On or about October 15, 2021, the Cadillac was impounded and was sold by the New York City Parking Enforcement Unit through a New York City Marshal's execution of sale to one David Jaikaran, who purchased the Vehicle on behalf of his company, respondent In Motion Motors, Inc. ("In Motion") (id. ¶ 5 & Ex 2). TD claims that at that time, pursuant to an installment contract, Butter still owed $32,175.19 for the purchase of the Vehicle, with interest accruing at $5.90 per diem (id. ¶ 6).
On or about February 25, 2022, Jaikaran contacted TD and requested a lien release, which TD issued evidencing that Butter's debt had been resolved (id. ¶¶ 12-13). With the lien release in hand, In Motion sold the Vehicle to respondent CarMax, Inc. ("CarMax") for $42,000 (id. ¶ 15). TD now claims that it issued the lien release in error (id. ¶ 13).
This matter was then commenced on March 16, 2022 by the filing of a petition and OTSC which did not name CarMax as a respondent. In opposition, respondent In Motion submitted an affidavit from Jaikaran in which he advised the parties and the Court of Carmax's purchase of the Vehicle (Affidavit in Support of Dave Jaikaran, sworn to on May 20, 2022 ["Jaikaran Aff"]). As a result, by letter dated June 23, 2022, I sought the views of petitioner's counsel as to whether Carmax was a necessary party, since it appeared to now be the owner and in possession of the Vehicle. In a response dated June 29, 2022, claimant agreed to amend the petition and add Carmax as a respondent, which it did in the Amended Verified Petition and Complaint. Although the amended pleading was issued in response to a letter from the Court raising the issue of whether Carmax was a necessary party, the revised petition and complaint also added a new plenary claim against In Motion, for unjust enrichment. A new OTSC was issued, but beyond directing service on Carmax, the substantive terms of both were the same.
In its pleading, TD seeks a declaration that it continues to be a first priority lien holder for the Cadillac, as well as an order (1) directing DMV to rescind any title issued for the Vehicle that does not reflect TD's lien for the alleged debt owed by Butter and to issue a new title with the lien information reinstated; and (2) permitting TD to repossess the Vehicle (id. ¶¶ 16-19). TD also seeks damages of $42,000 against In Motion under its claim for unjust enrichment (id. ¶¶ 20-23). The OTSC further directed respondents to show cause why an order should not issue "confirming that Petitioner/Plaintiff holds the sole ownership and first priority lien interest in the Subject Vehicle described in the caption herein, and directing respondent [DMV] to rescind any title that does not list TD Bank, NA as the sole owner and conform in its records Petitioner/Plaintiff['s] priority interests on the title to the Subject Vehicle."
There is no ad damnum clause in the petition, but petitioner asserts that In Motion was unjustly enriched to the tune of $42,000, and should not be permitted to retain that "profit" (see Pet ¶¶ 20, 23).
In opposition, In Motion advised that the Cadillac is no longer located in New York, but is at a CarMax dealership in Connecticut (Reply Affirmation of Jeffrey D. Herman in Opposition to Amended Order to Show Cause, dated July 12, 2022 ["Herman 7/12/22 Aff"] ¶¶ 4-7). In Motion clarified that when Jaikaran previously contacted TD to inquire about a lien release, he also offered to pay any balance owed on the Vehicle, but TD simply issued the lien release outright and advised that the lien recorded by TD was "released/terminated" as of March 5, 2016 (id. ¶ 14, Ex 1; see also Pet, Ex 2 [letter from In Motion to TD inquiring as to payoff amount]). It asserts that as a good faith purchaser of the Cadillac, it should not be held liable for the amount of the lien, and the Bank should be estopped from seeking damages against it (Reply Affirmation of Jeffrey D. Herman, Esq., dated May 20, 2022, ¶¶ 57-58). In Motion also contends that it purchased the Cadillac from the New York City Marshal's public auction for $26,000 and then sold it for $42,000 to CarMax, and thus any claim for unjust enrichment must be limited to a maximum of $16,000 (Herman 7/12/22 Aff ¶ 15).
The description below incorporates the arguments made in In Motion's opposition papers to both the first and second OTSC.
In Motion has also provided an affidavit from Jaikaran, in which he explains that he purchased the Vehicle from a New York City Marshal's Public Auction in Brooklyn, New York for $26,000 (id. ¶ 6). Although the Bank claims to be owed $32,000 pursuant to an alleged contract with Butter, Jaikaran states that when he asked for a payoff amount for the lien, TD personnel advised him that the Bank would not provide such information until In Motion presented a title evidencing its ownership of the Vehicle (id. ¶ 9). In response, In Motion obtained a new title for the Cadillac indicating that In Motion was the new owner, and sent it to the Bank with a request for a lien release or a payoff amount (id. ¶¶ 11-12; Pet Ex 2).
Jaikaran clarified that his company, which he operates out of his home in Jamaica, New York, is "In Motion Autos, Inc.," which was mistakenly referred to in the petition and amended petition as "In Motion Motors, Inc." (Jaikaran Aff ¶¶ 1-4). In Motion does not argue that the mis-naming has any impact on the outcome of these motions, and I will refer to this respondent as "In Motion" without resolving the question of its correct name.
After approximately one month, the Bank provided In Motion with a lien release for the Vehicle (Jaikaran Aff ¶ 14, Ex 1). In Motion also received an additional notice (DMV form MV-901), dated February 28, 2022, indicating that TD's security interest in the Cadillac had been satisfied (id. ¶ 15, Ex 2).
Jaikaran argues that In Motion sold the vehicle to CarMax in reliance on these representations from TD, and the Bank should therefore be estopped from recouping any unpaid balance from In Motion that stems from TD's unsubstantiated contract with Butter (id. ¶ 5). In particular, he contends that In Motion had no knowledge of the alleged balance owed by Butter to TD for its prior purchase of the Cadillac until it received a copy of the initial OTSC in this matter (id. ¶ 20).
For its part, Carmax has cross-moved to dismiss the petition for lack of in rem jurisdiction, as the vehicle was sold and removed from New York State prior to notice of service of this proceeding on Carmax (Affirmation of James T. Town, Jr., Esq., dated September 6, 2022 ["Town Aff"] ¶¶ 3-7). CarMax further argues that because TD affirmatively released its lien on the Cadillac prior to CarMax's purchase of the Vehicle and no longer had a security interest in the Vehicle at the time of the sale, CarMax was a good faith purchaser that should not be penalized for TD's claimed mistake in releasing its lien after In Motion purchased the Cadillac at auction (id. ¶¶ 8-11).
The Notice of Cross-Motion only cites to CPLR 3211(a)(9) as a ground for dismissal, based on lack of in rem jurisdiction. However, the supporting affirmation also asserts that the Bank's declaratory relief must be dismissed because, on the face of the Amended Petition/Complaint, CarMax is a bona fide purchaser. Thus, CarMax's motion also seeks dismissal because the Bank has failed to state a cause of action against it (see Ricciardi v State, 201 A.D.3d 577, 578 [1st Dept 2022], lv denied 38 N.Y.3d 914 [2022] [motion court properly exercised discretion in disregarding fact that the notice of cross motion did not state the grounds for relief, since grounds were made clear in the supporting affirmation]; see also Miller v Brunner, 164 A.D.3d 1228, 1230-1231 [2d Dept 2018] [where wrong ground designated but other CPLR 3211(a) grounds apply, court may treat motion as having specified the right ground and grant relief, if there is no prejudice]).
In support of its cross-motion, Carmax provides an affidavit from Bryan Hogan, the Location Manager for its Hartford, Connecticut dealership (Affidavit of Bryan Hogan, sworn to on September 6, 2022 ["Hogan Aff"] ¶ 1). He avers that his dealership first reached out to In Motion concerning the purchase of the Cadillac in March 2022, and on March 19, 2022 CarMax entered into a purchase agreement with In Motion for the Vehicle in the amount of $43,600 (id. ¶¶ 2-4, Ex A). As part of the purchase, In Motion provided and CarMax relied on a copy of DMV form MV-901, dated February 28, 2022, which indicated that TD's lien had been released (id. ¶ 5, Ex B). In Motion also confirmed to CarMax that it had received a lien release from TD, and there were no further liens on the Vehicle (id.).
According to Hogan, at no time during the purchase of the Cadillac was CarMax aware that TD or anyone else claimed to have a lien on the Vehicle, and CarMax purchased the Cadillac in reliance on the information it received indicating an absence of any liens (id. ¶¶ 6-7). Hogan states that the first time that CarMax learned of TD's claimed lien was when a process server delivered a copy of the OTSC to the Hartford dealership on or about July 19, 2022, 122 days after CarMax had purchased and accepted delivery of the vehicle (id. ¶ 8). Since learning of the dispute, Carmax has retained possession of the vehicle at its dealership in Hartford (id. ¶¶ 9-13).
In reply to In Motion's opposition, the Bank has submitted an affirmation from counsel that essentially confirms the facts asserted by the respondents, but reiterates the allegations that Butter had defaulted on its installment contract for the purchase of the Vehicle, and there was an outstanding balance of $32,175,19 with interest accruing at $5.90 per diem from October 15, 2021 (Reply Affirmation of John M. Dubuc, Esq., dated June 14, 2022 ["Reply Aff"] ¶¶ 5-12). According to counsel, who does not claim any personal knowledge of the facts at issue, an employee of TD mistakenly issued the lien release on the Cadillac (id. ¶ 13). Due to this purported "mistake," the Bank seeks to have the release invalidated and the lien reinstated based on the argument that In Motion did not detrimentally rely on the lien release when it sold the Vehicle to CarMax (id. ¶ 16). The Bank further contends that it has an equitable claim for unjust enrichment against In Motion for damages, since In Motion profited from the sale of the Cadillac (id. ¶¶ 17-18).
The Bank initially filed a Reply on October 18, 2022 in error (NYSCEF Doc. No. 46) as this documents is denoted an affirmation from Attorney Dubuc, but was signed by attorney Rudolph J. Meola. An Amended Reply was filed on October 19, 2022 (NYSCEF Doc. No. 47), which fixes this issue, and is identical to the earlier Reply in all other respects.
In an effort to provide evidence in support of its allegations, the Bank offered a document denoted as an "affidavit" from one Destini Dumas, a person that the Bank identifies as an authorized representative of TD, located in the State of Florida (Reply Aff, Ex 1). The document states that, based on Ms. Dumas' review of business records, she determined that an employee "mistakenly believed" that an employee misread a report in TD's computer system and determined on that basis that no money was due and owing on the account (id. ¶¶ 8-9). However, the Dumas document is neither signed by Ms. Dumas, nor is it notarized, nor does petitioner provide any of the records which she is alleged to have reviewed except for the retail installment contract and Notice of Recorded Lien, neither of which address how the lien release was issued.
The Bank also argues that CarMax's cross-motion for dismissal due to lack of in rem jurisdiction - because the Vehicle is in Connecticut - is irrelevant since the court has personal jurisdiction over the parties, and such has not been disputed (id. ¶¶ 21-22).
Discussion
I. Jurisdiction
TD is correct that the absence of the Cadillac from New York does not deprive this Court of jurisdiction over this matter. Although it is true that "where personal jurisdiction is lacking, a New York court cannot attach property not within its jurisdiction.... where a court acquires jurisdiction over the person of one who owns or controls property, it is equally well settled that the court can compel observance of its decrees by proceedings in personam against the owner within the jurisdiction" (Hotel 71 Mezz Lender LLC v Falor, 14 N.Y.3d 303, 311-312 [2010] [internal quotation and citation omitted]). Respondents in this matter do not dispute that this Court has personal jurisdiction over them, and thus the absence of in rem jurisdiction due to the Vehicle being located outside of the State is irrelevant, as this Court "has jurisdiction over [respondents'] tangible or intangible property, even if the situs of the property is outside New York (id.).
II. Request for Declaratory Relief
In its pleading, the Bank sought relief in the form of two plenary causes of action under what it refers to as its "Complaint" (Pet ¶¶ 16-23). The first cause of action is for a declaration in the form of an order reinstating TD's alleged interest in the Cadillac, declaring that the Bank holds the rightful title, rescinding any title that does not list TD as the sole owner, and finding that TD has the right to immediate possession of the vehicle (id. ¶¶ 16-19). In addition, through the OTSC, petitioner seeks an order directing DMV to issue a title re-listing TD as the lienholder.
There is no basis in the record before me for such relief. It is undisputed that the Bank issued a lien release on the Cadillac to In Motion, as well as DMV form MV-901 indicating that its security interest in the Vehicle was satisfied. Although TD alleges that it released its lien in error, it has failed to present admissible evidence of such through the so-called "affidavit" of Destini Dumas, as it was neither personally signed nor sworn to before a notary (see supra p 5-6; SunTrust Bank v Morris, 169 A.D.3d 951, 952 [2d Dept 2019] [unsigned affidavit not in admissible form is insufficient in support or as opposition to dispositive motion]; Autiello v Cummins, 66 A.D.3d 1072, 1074 [3d Dept 2009] [unsworn letter is of no probative value and incompetent support for opposition to dispositive motion]; Briggs v 2244 Morris, L.P., 30 A.D.3d 216, 216 [1st Dept 2006] [unsworn statement is hearsay and may not be used to oppose dispositive motion where it is the only evidence submitted in opposition]).
Even assuming that I could consider Dumas' statement as valid evidence, and that a claim of mistake resulting from the manner in which information is recorded in TD's own system rendered voidable the clear title received by In Motion, it is undisputed that TD had taken no steps to re-assert its title (or even inform In Motion of its contention that it had a continuing right to a lien) at the time the Vehicle was sold to CarMax. It is also undisputed that In Motion, who had perfected title in the Vehicle, then sold the Cadillac to CarMax and provided it with the means to perfect its title with the DMV as well. Under these facts, the Bank authorized the disposition of the Cadillac free of its security interest (see Genesee Regional Bank v Palumbo, 9 Misc.3d 823, 831 [Sup Ct Monroe County 2005] [in accordance with UCC § 9-315, security interest in collateral will not continue after sale where secured party authorized the disposition free of the security interest]).
UCC § 2-403 provides that "a person with voidable title has power to transfer a good title to a good faith purchaser for value." Since by the Bank's argument In Motion had at worst a voidable (but not void) title, it had the authority to convey good title under UCC § 2-403 to CarMax, which was also a "good faith purchaser of value" (see Sheridan Suzuki v Caruso Auto Sales, Inc., 110 Misc.2d 823, 825-826 [Sup Ct Erie County 1981] [Once a vehicle transfer is perfected in accordance with Vehicle & Traffic Law § 2113, buyer of vehicle may successfully pass title to "bona fide purchaser for value"]; see also People v Whitehead, 48 A.D.3d 237, 237-238 [1st Dept 2008], lv denied 10 N.Y.3d 872 [2008][UCC 2-403 "provides that a holder having only voidable title to merchandise can nevertheless convey good title to a good faith purchaser for value"]; Tavoulareas v Steven Kessler Motor Cars, Inc., 259 A.D.2d 262, 263 [1st Dept 1999] [where party is a good faith purchaser of vehicle under UCC § 2-403, he or she cannot be held liable in conversion for not returning the subject vehicle]).
A good faith purchaser or bona fide purchaser for value means a purchaser for fair consideration without knowledge of any fraud or other facts that would indicate that there is a cloud on the title to the merchandise that he or she purchased (see generally Green v Arcadia Financial Ltd., 174 Misc.2d 411, 412-413 [Sup Ct Erie County 1997]; UCC 1-201 [b][20], [30]). CarMax's submissions make a prima facie showing that it is a good faith purchaser for value under UCC § 2-403 and the Bank's opposition to the cross-motion fails to rebut this factual showing.
Based on the foregoing, there is no basis for the relief sought in the petition. As a result, CarMax's cross-motion must be granted and the Bank's cause of action for declaratory relief denied in its entirety.
III. Unjust Enrichment
The only other cause of action asserted by the Bank is against In Motion for alleged "unjust enrichment." Although In Motion argues that the Bank authorized the disposition of the Cadillac free of its security interest and, therefore, should be estopped from seeking damages, it did not formally move for any relief from this cause of action. As a result, the issues surrounding the remaining unjust enrichment claim, including In Motion's request for attorney's fees - presumably based on a claim that the cause of action is frivolous - are not before me at this time. Therefore, a Court conference shall be held to discuss whether there is a need for a responsive pleading and further discovery on the unjust enrichment cause of action, and the parties' intentions concerning any further motion practice.
Despite naming Butter Management LLC as a respondent in this matter, the Bank has not asserted any causes of action or claims against it. Thus, as a result of the findings and rulings herein, the only remaining respondent is In Motion, who did not move to dismiss the Bank's remaining cause of action asserted against it for unjust enrichment.
Accordingly, it is hereby
ORDERED that CarMax's cross-motion is granted dismissing the amended petition/complaint as against it, and the Bank's cause of action for declaratory judgment is denied in all respects because CarMax has a valid title in the Cadillac that is not subject to TD's claimed security interest; and it is further
ORDERED that counsel for the Bank and In Motion shall appear for a Court scheduling conference via Microsoft Teams on December 23, 2022 at 1:00 p.m.
The original Decision and Order is being electronically filed with the Clerk's Office, with copies e-mailed to counsel for all parties. The electronic filing of this Decision and Order shall not constitute notice of entry. Counsel are not relieved from the applicable provisions of the CPLR respecting to filing and service of notice of entry.
Papers Considered:
1. Amended Order to Show Cause, filed July 15, 2022 and Amended Verified Petition and Complaint, dated July 12, 2022, along with Verified Petition and Complaint, dated March 14, 2022 with Exhibits annexed thereto.
2. Notice of Cross Motion and Attorney Affirmation in Opposition to Plaintiff's Application for an Amended Order to Show Cause of James T. Town, Esq., dated September 6, 2022, along with Affidavit of Bryan Hogan in Opposition to Amended Order to Show Cause, sworn to on September 6, 2022, with Exhibits annexed thereto, and Memorandum of Law in Opposition to Plaintiff's Application for an Amended Order to Show Cause, dated September 6, 2022.
3. Reply Affirmation of Jeffrey D. Herman, Esq. in Opposition to Amended Order to Show Cause, dated July 12, 2022, with Exhibit annexed thereto, along with Reply Affirmation of Jeffrey D. Herman, Esq., dated May 20, 2022, and Affidavit in Support by Dave Jaikaran, sworn to on May 20, 2022, with Exhibits annexed thereto.
4. Amended Reply Affirmation and Opposition to Cross-Motion to Dismiss of John M. Dubuc, Esq., dated October 19, 2022, with Memorandum of Law in Reply, dated, October 24, 2022, and Reply Affirmation of John M. Dubuc, Esq., dated June 14, 2022, along with unsigned and unsworn Affidavit of Destiny Dumas, filed on June 14, 2022, with Exhibits annexed thereto.
5. Memorandum of Law in Reply to Respondent/Defendant's Motion to Dismiss, dated October 24, 2022.