Community Capital Bank v 'Til the Phat Lady Sings LLC

[*1] Community Capital Bank v 'Til the Phat Lady Sings LLC 2005 NY Slip Op 50023(U) Decided on January 10, 2005 Supreme Court, Kings County Belen, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on January 10, 2005
Supreme Court, Kings County

COMMUNITY CAPITAL BANK, Plaintiff,

against

'TIL THE PHAT LADY SINGS LLC, DAVID CHUN, CAROL ANN CHUN, and EVANGELINE HANDY, Defendants.



570/2004

Ariel E. Belen, J.

plaintiff Community Capital Bank ("CCB") moves for summary judgment in lieu of complaint pursuant to CPLR 3213 against defendants, jointly and severally, David and Carol Ann Chun ("Chuns"), 'Til the Phat Lady Sings LLC ("Phat Lady LLC"), and Evangeline Handy.

The dispute in this case arises from the nonpayment of two promissory notes payable to plaintiff CCB in the amounts of $175,000 and $25,000. The Chuns and Ms. Handy are members of Phat Lady LLC. The funds from the both of these notes were used by defendants as venture funding for a restaurant operated by Phat Lady LLC called Evangeline's Supper Club. In order to obtain the notes, the Chuns and Ms. Handy each executed a written guarantee of payments due to CCB under the notes. Additionally, the notes were secured by fixtures and equipment purchased for the business and real property owned by the Chuns.

CPLR 3213 provides in pertinent part: "When an action is based upon an instrument for the payment of money only or upon any judgment, the plaintiff may serve with the summons a notice of motion for summary judgment and the supporting papers in lieu of a complaint."[*2]

The primary purpose of the statute "was to provide an effective means of promptly obtaining a judgment against a defendant where his liability for a certain sum of money would be established prima facie by the proof of a judgment or instrument and proof of nonpayment of a sum in accordance with the terms thereof." Holmes v. Allstate Ins. Co., 33 AD2d 96 (1st Dep't, 969). The statute is intended to provide a speedy and effective means of securing a judgment on claims that are presumptively meritorious. Shaw v. Krebs, 85 AD2d 913, 913-914 (1981).

The standard for summary judgment in CPLR 3213 cases was discussed in Interman Ind. Products, Ltd. v. R.S.M. Electron Power, Inc., 37 NY2d 151 (1975). In that case, the Court of Appeals held that in order to obtain summary judgment on a loan agreement, promissory note, guarantee, or similar instrument for the payment of money only, the lender need only demonstrate that the contract exists and was duly executed, and that there is a default by reason of nonpayment thereunder. Interman Ind. Products, 37 NY2d 151, 155. The court further noted that a plaintiff in such an action has established a prima facie case against the borrower when it is found that the note(s) in question were (a) duly executed and (b) are in default and unpaid. Id. Therefore, when a plaintiff has established his prima facie case and the defendant has raised no meritorious defense, summary judgment must be granted.

In another action similar to the one before this court, the Fourth Department noted that to not grant summary judgment when a plaintiff has proved his prima facie case and no meritorious defense has been raised would be incompatible with the Legislature's express purpose in creating such an efficient avenue of seeking relief. See Logan v. Williamson & Co. 64 AD2d 466 (4th Dep't, 1978).

In the instant action, defendants both admit to the proper execution of the promissory notes and to the default of payments due under them. As a result, plaintiff has clearly established its prima facie case. In order to defeat plaintiff's motion for summary judgment, it is thus now incumbent on defendants to "come forward with matters of an evidentiary nature to demonstrate the presence of triable issues." Mallad Construction Corp. v. County Federal Savings and Loan Assoc., 32 NY2d 285, 290 (1973). Although defendants correctly point out that summary judgment should be granted judiciously, when a party cannot raise such factual or evidentiary issues, the court must grant summary judgment. Oates v. Marino, 482 NYS2d 738 (1st Dep't, 1984).

In order to defeat summary judgment, defendants attempt to raise several defenses and purported issues of triable fact. The Chuns first argue that further discovery is needed to determine whether CCB properly calculated the amounts remaining due. In this connection, defendants do not dispute or produce evidence to support a claim that the figures presented by CCB are inaccurate. Rather, the Chuns make unsubstantiated and conclusory allegations that discovery might uncover an error in CCB's calculations. The Court of Appeals has routinely held that such "expressions of hope" that issues of fact may exist are not sufficient to raise an issue of triable fact and thereby defeat summary judgment. See Gilbert Frank Corp. v. Federal Insurance Co., 70 NY2d 966 (1988) (Defendant's "expression of hope" in opposing a motion for summary judgment was insufficient to establish an issue of triable fact); See also Zuckerman v. City of New York, 49 NY2d 557,562 (held that "mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient" for the purposes of establishing issues of triable fact).

Moreover, any purported dispute as to the exact amount remaining due under the notes has no bearing on the plaintiff's prima facie case as verification of CCB's damages could take place during an inquest on damages, irrespective of this court's judgment on liability. A defendant may not defeat summary judgment in a CPLR 3213 action by raising issues and defenses extrinsic to the plaintiff's prima facie case. See, Logan v. Williamson & Co., (4th Dep't., 1978), 64 AD2d 466. As a result, such discovery as suggested by the Chuns is unwarranted and a defense based on such a suggestion is without merit.

The Chuns further argue that the plaintiff's motion should be defeated pursuant to CPLR 3212(f) because discovery is required into the financial records of the co-defendant, 'Til the Phat Lady LLC, which are allegedly within the exclusive control of Ms. Handy. The Chuns claim that such records would substantiate the amount remaining due under the notes. [*3]

CPLR 3212(f) provides that "should it appear from affidavits submitted in opposition to the motion [for summary judgment] 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 other order as may be just." In order to invoke CPLR 3212(f), the Chuns must show that the evidence necessary to support their defenses or oppose the motion for summary judgment is within the exclusive "knowledge or control" of the moving party. See Nadeau v. Connell, 663 NYS2d 420, 421 (3d Dep't, 1997) In a recent case before the Second Department, the court held that defendant's opposition to a motion for summary judgment in a personal injury action was insufficient because defendants did not establish that facts essential to oppose the motion were within the exclusive knowledge of the plaintiffs. Pearsall v. Saracco, 759 NYS2d 886 (2d Dep't, 2003).

In their affirmation in opposition, the Chuns only claim that Phat Lady LLC's financial records are in the exclusive control of Ms. Handy and do not allege that such records are within the exclusive control of CCB, the moving party in this action. As the records in question are likely within the control of either Phat Lady LLC, Ms. Handy, or the Chuns, discovery pursuant to CPLR 3212(f) is not warranted. Additionally, as the above discussion has noted, any defense based on disputing the exact amount remaining due under the notes is inapposite and would therefore not be a sufficient method by which to invoke CPLR 3212(f).

The only remaining defense that defendants offer for the court's consideration concerns the status and disposition of collateral securing the loan. Defendants claim that much of the collateral was destroyed in a flood of the subject premises and that the former and current landlords of the premises have misappropriated some of the remaining fixtures and equipment.

The Chuns further assert that co-defendant Handy has also misappropriated some of the collateral. Notably, however, as between the current parties at bar, there are no allegations of any misappropriation of collateral by the plaintiff CCB. As noted above, a defendant may not defeat summary judgment in a CPLR 3213 action by raising issues and defenses extrinsic to the plaintiff's prima facie case. See Logan, 64 AD2d 466. As a result, such assertions with respect to Ms. Handy's and/or the current and former landlords' handling of any of the disputed collateral are wholly unrelated to the current case before this court. Such allegations may perhaps be the basis of future claims between different parties but do not have any bearing on this case.

Defendants also claim that an issue of triable fact exists with respect to the amount due under the notes after taking the value of the collateral into account. Defendants claim that any amount currently due under the notes will be affected by discovery into the disposition and value of any remaining collateral. In response, plaintiff points out several independent reasons why the issue of defendants' liability is separate and distinct from any concern over the disputed collateral.

First, the terms of the loan documents, security agreement, and personal guarantees in this case all provide that CCB may choose to pursue its rights to satisfy the outstanding amounts by executing against the collateral or may choose to pursue an action for full satisfaction of the amount due without concern for the collateral. The Third Department previously ruled on a case involving similarly explicit language of alternative, non-exclusive remedies. In Corvetti v. Hudson, 252 AD2d 787 (3rd Dep't., 1998), the defendant personally guaranteed a $200,000 note payable to the plaintiff. Upon default, defendant averred that plaintiff was obligated to first attempt to satisfy the remaining balance by executing against the security interest included in the note. The Third Department rejected this defendant's attempt to oppose summary judgment. It held that "[t]he fact that plaintiff could have resorted to other means of satisfying guarantor's obligation under the promissory note was irrelevant on motion for summary judgment in lieu of complaint where, under express terms of guarantee, plaintiff was not required to 'enforce any remedies against (guarantor)' or 'seek to enforce or resort to any remedies with respect to any security interest, lien or encumbrance'." Corvetti v. Hudson, 252 AD2d 787 (3d Dep't, 1998).

In addition, , New York's UCC § 9-601(a)(1) expressly provides, "After default, a secured party may reduce a claim to judgment, foreclose, or otherwise enforce the claim, security interest, or agricultural lien by any available judicial procedure." UCC 9-601(c) further states, "The rights [*4]under subsections (a) and (b) are cumulative and may be exercised simultaneously." The UCC thus provides that a creditor need not pursue any security before seeking relief by any available judicial procedure.

Finally, the case law appears well-settled that, even absent explicit language contained in the promissory note, a plaintiff has the right to collect on a secured note from a defendant without resorting to any security. In State Bank of Albany v. Duesler, 344 NYS2d 114 (3d Dep't, 1973), the plaintiff sued to collect on the balance due under a promissory note.. In opposing plaintiff's motion for summary judgment, the defendant claimed that the motion should fail because plaintiff did not first seek to execute against the security included in the note. Id. at 115. The Third Department held that plaintiff was entitled to summary judgment because the plaintiff had a right to collect the secured note without resorting to any security. Id. The court further held that the presence or absence of security was of concern only to the defendant. Id.

Taking each of these three independent bases into account, it is clear that any issues regarding the disposition, status, or value of any secured collateral is the sole concern of the defendants. As noted above, such disputes may well be the basis of causes of action extraneous to the issues to be decided in this case. Since any dispute as to the disposition and value of collateral securing the notes has no bearing on motion before the court, no triable issues exist regarding the disposition and value of any claimed collateral in relation to its effect on the amount currently due under the loans.

As discussed above, plaintiff has clearly stated a prima facie case in its motion for summary judgment in lieu of complaint. In response, defendants attempt to present various purported defenses and issues of fact, which have each been found to be wholly irrelevant to the plaintiff's prima facie case. In light of the foregoing discussion, it is clear that no issues of triable fact have been established by the defendants and no meritorious defense has been presented sufficient to defeat summary judgment. As a result, this court must grant plaintiff's motion for summary judgment pursuant to CPLR 3213 against defendants, 'Til the Phat Lady Sings, LLC, David Chun, Carol Ann Chun, and Evangeline Handy jointly and severally. An inquest to determine the appropriate award will be held on February 4, 2005.The foregoing constitutes the decision, order and judgment of this court.

E N T E R :

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J.S.C.