Jackal Holdings LLC v JSS Holdings Corp.
Annotate this CaseDecided on December 30, 2005
Supreme Court, Kings County
Jackal Holdings LLC, Plaintiff,
against
JSS Holdings Corp., FRANK DEFALCO, CARMINE F. DEFALCO and CONSTANCE DEFALCO, Defendants.
30002/04
Francois A. Rivera, J.
On July 12, 2005, plaintiff commenced the instant proceeding bearing index number 19095/05 by filing a summons and notice of motion for summary judgment in lieu of complaint pursuant to CPLR §3213. Plaintiff seeks an order directing the entry of judgment against JSS Holdings Corporation (hereinafter JSS) and Frank DeFalco (DeFalco) in the sum of one million forty five thousand dollars ($1,045,000.00) plus interest at the rate of 12% per annum on the principal sum of one million dollars ($1,000,000.00) from April 18, 2005. On September 2, 2005, defendants JSS and DeFalco served opposition papers to plaintiff's motion. On September 16, 2005, plaintiff served a reply to the defendants' opposition papers.
Plaintiff's motion papers consist of the summons, notice of motion, an affirmation by Eliot S. Martin, the affidavits of Charles Benanty and Christopher Whent, and five annexed exhibits. Eliot Martin is plaintiff's counsel in the instant proceeding; Charles Benanty is the managing member of the plaintiff; Christopher Whent is plaintiff's counsel in the related prior, [*2]and now, consolidated action bearing index number 30002/04. The annexed exhibits are a replacement promissory note dated April 18, 2002; a guarantee of note signed in March of 2001; a ratification of guarantee dated April 18, 2002; a letter from plaintiff's counsel to defendants' counsel dated April 27, 2005; a responsive letter from defendants' counsel to plaintiff dated April 29, 2005; and a reply letter from plaintiff's counsel to defendants' counsel.
The replacement promissory note is signed by DeFalco, as Vice-President of defendant JSS and promises to pay the plaintiff or its assignees the principal sum of one million dollars ($1,000,000.00) with interest at the rate of four and one-half (4.5%) per cent per annum. The note calls for the payment of interest commencing April 18, 2003 and on each April 18, thereafter, until April 18, 2007, when the entire balance together with accrued interest would be fully payable.
The guarantee of note was signed by DeFalco and unconditionally guaranteed to Jackal Holdings Management, LLC, the full and prompt payment of each and every financial obligation of JSS. The guarantee of note contained the following salient language: Upon any default by Maker/Debtor, beyond the Notice and Cure periods provided in the Note or the Security Agreement, the liability of the guarantor shall be effectively immediately, without demand, presentment, protest or notice of any kind, all of which are hereby waived, and without any suit or action against the Maker/ Secured Party and without any further steps to be taken or further conditions to be performed by anyone.
The ratification of guarantee, signed by Frank DeFalco, Carmine F. DeFalco and Constance DeFalco on April 18, 2002, ratified and confirmed their guarantee to Jackal Holdings Management LLC, of the obligations of JSS on the aforementioned replacement promissory note for ($1,000,000.00) one million dollars. The April 27, 2005 letter from plaintiff's counsel to defendants' counsel made a demand for payment of the forty-five thousand dollars ($45,000.00) interest payment due on April 18, 2005. The follow up letters did not reflect payment by the defendants of the demanded sum.
Defendants opposition papers do not contest plaintiff's use of the procedural vehicle of CPLR §3213. Rather, their opposition papers claim that there are issues of fact which preclude the granting of an accelerated judgement. The opposition papers consists of the affidavit of DeFalco, the affirmation of their counsel and six exhibits. The first exhibit is the summons and verified complaint bearing index number 30002/04. The second exhibit is a letter dated August 11, 2005 from Charles Benanty to Frank DeFalco advising defendant of his default on payment on the promissory note on April 18, 2005. The third exhibit is a letter from Frank DeFalco to Charles Benanty. The fourth exhibit is an order of this court dated August 5, 2005. That order denied an order to show to dismiss the special proceeding bearing index number 19095/05 and consolidated that proceeding with the earlier commenced action bearing index number 30002/04. The fifth exhibit is a copy of an order to show cause seeking to disqualify Christopher Whent from serving as plaintiff's counsel.
Nothing in defendants' opposition papers either contests or disputes the validity of the replacement promissory note, the guarantee of the promissory note and the ratification of the guarantee, all of which were signed by defendant Frank DeFalco. Nor do the defendants dispute that a forty-five thousand dollar ($45,000.00) interest payment was due and payable to the [*3]plaintiff on April 18, 2005. Nor do they deny that they failed to make that payment in April of 2005. The sole contentions of the defendants is that since they allegedly breached the promissory note prior to April of 2005, as evidenced by plaintiff's commencement of an earlier action on the alleged breach, the entire amount due was already accelerated and thus no interest was due on April 18, 2005. Their second argument is that they did not receive a proper demand for payment and as such the plaintiff's right to accelerate the total amount due was not triggered.
CPLR§3213 provides a procedure for seeking an accelerated judgment on an instrument for the payment of money only and provides in pertinent part as follows: Motion for summary judgment in lieu of complaint. 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. The summons served with such motion papers shall require the defendant to submit answering papers on the motion within the time provided in the notice of motion.... If the motion is denied, the moving and answering papers shall be deemed the complaint and answer, respectively, unless the court orders otherwise.
Plaintiff has utilized this procedure without objection by the defendants. CPLR §3213 is very much like a special proceeding that applies to negotiable instruments for the payment of money or a non-negotiable instrument if for money only. One helpful standard for what qualifies as a proper CPLR 3213 "instrument" is Seaman-Andwall v. Wright Machine Corp., 31 AD2d 136 [1st Dept 1968] which says that a case is made out for CPLR 3213 use if two things are shown: (1) the instrument itself and (2) proof of non-payment (Siegel, New York Practice §§288, 289, 4th Ed). This standard has been reaffirmed as demonstrated more recently in Mariani v. Dyer, 193 AD2d 456-457 [1st Dept 1993]. "As this court noted in Seaman-Andwall v. Wright Machine Corp. 31 AD2d 136, affd without opn 29 NY2d 617, an affidavit showing due execution and default in payment on a promissory note, ...establishes a prima facie case, and a plaintiff is entitled to summary judgment unless the defendant submits evidentiary proof sufficient to raise a triable issue with respect to the asserted defenses" (Mariani v. Dyer, 193 AD2d 456-457 [1st Dept 1993]).
Defendants interposed their answer on September 2, 2005, one month after the court issued its decision consolidating index number 19095/05 and index number 30002/04. Defendants' answer asserts that the notice of default on the note must be given in accordance with the notice of provisions of the loan agreement between the parties and that this was not done here. Defendants also contend that, inasmuch as the plaintiff has claimed a default by the defendants in performance of the loan agreement in the cause of action bearing index number 19505/05, the defendants cannot commit a separate default after the alleged first default. As noted in plaintiff's reply, this argument is without merit. The earlier alleged default is nothing more than an unproven allegation. Assuming plaintiff establishes defendants' liability for this alleged default and the default claimed in the instant motion, there will only be one recovery with a change in the measure of damages caused by the breach calculated from the date of the earlier default.
The defendants contend that the acceleration of the debt on the aforementioned [*4]replacement promissory note was ineffective because it was not sent in accordance with the notice provisions contained in the loan agreement, a separate document. Nothing contained in the plain, express language of the promissory note warrants this conclusion. While indeed the promissory note states that it is given in accordance with a loan agreement dated March 28, 2001, it does not expressly incorporate the notice provisions contained within the loan agreement. In fact, the court agrees with the analysis set forth in plaintiff's reply affirmation that the requirement for a written demand to the debtor is satisfied by the debtors receipt of actual notice of the default. Therefore, notice sent to debtor's counsel was sufficient. Furthermore, even if the court were to assume, arguendo, that notice was required to be given to the debtor in accordance with the loan agreement, under the circumstances at bar, defendants' argument would still fail. Defendants did not allege failure to receive actual notice of the default or that they were prejudiced by the deviation of the strict contractual compliance with the notice provision (Suarez v. Ingalls, 282 AD2d 599 [2nd Dept 2001]).
Plaintiff has established entitlement to summary judgment on its motion pursuant to CPLR§3213. Defendant has failed to raise a triable issue of fact. Plaintiff is directed to settle an order in accordance with this decision and order.
The foregoing constitutes the decision and order of this court.
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J.S.C.
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