Intervest Natl. Bank v Klein

[*1] Intervest Natl. Bank v Klein 2009 NY Slip Op 52652(U) [26 Misc 3d 1203(A)] Decided on December 29, 2009 Supreme Court, New York County Feinman, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 December 29, 2009
Supreme Court, New York County

Intervest National Bank, Plaintiff,

against

Harvey Klein and HADASSAH KLEIN, Defendants.



600545/2009



For the Plaintiff:

The Dweck Law Firm, LLP

By: Jack S. Dweck, Esq.

75 Rockefeller Plaza

New York, NY 10019

(212) 687-8200

For Defendant:

Boies, Schiller & Flexner, LLP

By: Motty Schulman, Esq.

333 Main Street

Armonk, NY 10504

(914) 749-8300

Paul G. Feinman, J.

Defendants move to dismiss on the grounds of forum non conveniens. Plaintiff cross-moves for summary judgment. For the reasons below, defendants' motion is conditionally granted; plaintiff's motion is deemed denied without prejudice.

Background

Plaintiff is a banking organization with offices in New York (Not. of Cross-mot., Helman Aff. ¶ 2). Defendants are owners of HHK Properties, a New Jersey limited liability company authorized to do business in New York (Dansker Aff., Exs. 5, 6). In October 2004, defendants secured a mortgage from plaintiff on four properties located in Springfield, Massachusetts (Not. of Cross-mot. Ex. 1). Contemporaneously, defendants each executed personal guarantees in which they agreed to jointly and severally guarantee the obligations arising under "[1] Paragraph 32(c) of the Mortgage and [2] any other paragraph contained in the Mortgage . . . which is cross-referenced to paragraph 32(c) of the Mortgage (the Carve Out Obligations')" (Not. of Cross-mot., Exs. 3, 4). Pursuant to paragraph 32 (c), there are six occurrences which can result in personal liability being imposed upon defendants, including "any loss resulting from the intentional or fraudulent commission of waste or omission of an action which results in waste to the Mortgaged Property" (Not. of Cross-mot. Ex. 1).

In October 2008, the City of Springfield commenced a proceeding in the Massachusetts, Western Division, Housing Court Department, with regard to the premises alleging "a myriad of State Sanitary Code . . . violations" (Not. of Cross-mot., Ex. 5, Order ¶ 1). A series of [*2]inspections and hearings were held which found "an exhaustive list of outstanding violations" on the premises which "violate[d] the Code's standards of fitness for human habitation" (Not. of Cross-mot., Ex. 5, Order ¶ 2 and n 1). In that proceeding, the court specifically found that defendants "demonstrated an unwillingness or inability to correct these violations" and, accordingly, appointed a receiver with the authority to collect all rental revenues from the properties' tenants and "repair/maintain the premises" (Not. of Cross-mot., Ex. 5, Order ¶¶ 2, 4, 5-7).

Plaintiff then commenced this action for, among other things, (1) breach of contract alleging that "defendants' unwillingness or failure to cure the conditions which gave rise to [the] violations" constitutes a breach of the guaranty agreements; (2) an accounting of HHK Properties LLC to determine whether defendants misappropriated monies to which plaintiff may be entitled; and (3) money damages alleging that "[d]efendants aided and abetted and rendered substantial assistance to [HHK Properties] in the causation of losses from the intention and/or fraudulent commission of waste with respect to the [premises]" (Not. of Cross-mot., Ex. 10, Compl. ¶ 20). Defendants now move to dismiss on the grounds of forum non conveniens (Not. of Mot.).

Analysis

The doctrine of forum non conveniens vests this court with the discretion to "stay or dismiss [an] action in whole or in part on any conditions that may be just" when it is "in the interest of substantial justice" (CPLR 327 [a]; see National Bank & Trust Co. of N. Am. v Banco De Vizcaya, 72 NY2d 1005, 1007 [1988], cert denied 489 US 1067 [1989]). This determination "is in general committed to the discretion of the [trial] courts [after] reviewing and evaluating all the pertinent competing considerations" (Silver v Great Am. Ins. Co., 29 NY2d 356, 361 n 3 [1972], quoting Varkonyi v S.A. Empresa De Viacao Airea Rio Grandense [Varig], 22 NY2d 333, 337 [1968]) and will not be disturbed absent an abuse of discretion (see Banco Ambrosiano v Artoc Bank & Trust, 62 NY2d 65, 73 [1984]).

Several factors must be considered to determine whether dismissal on forum non conveniens grounds is warranted (see H & J Blits v Blits, 65 NY2d 1014, 1015 [1985]). They include (1) the potential burden on New York courts (see United States Aviation Underwriters v United States Fire Ins. Co., 134 AD2d 187, 190 [1st Dept 1987]; (2) "the need to apply foreign law" (Fox v Fusco, 4 AD3d 313, 313 [1st Dept 2004]); (3) the availability of an alternate forum (see Ghose v CNA Reins. Co. Ltd., 43 AD3d 656, 660 [1st Dept 2007], lv denied 10 NY3d 712 [2008]); (4) the potential prejudice to the nonmovant (see Siegel, NY Prac § 28, at 30-31 [4th ed]); (5) the parties' residence (see K.T. v Dash, 37 AD3d 107, 115 [1st Dept 2006]); (6) "the place of occurrence of the events out of which the action arose" (United States Aviation Underwriters v United States Fire Ins. Co., 134 AD2d 187, 190 [1st Dept 1987]; see Kinder Morgan Energy Partners, L.P. v Ace Am. Ins. Co., 55 AD3d 482, 482 [1 Dept 2008], lv denied 12 NY3d 714 [2009]); and (7) the location of witnesses (see Alberta & Orient Glycol Co., Ltd. v Factory Mut. Ins. Co., 49 AD3d 276, 277 [1st Dept 2008], lv denied 10 NY3d 713 [2008]).

As the movants, defendants bear the burden of showing that dismissal is warranted (see Travelers Cas. & Sur. Co. v Honeywell Intl. Inc., 48 AD3d 225, 225-226 [2008]; Kefalas v Kontogiannis, 44 AD3d 624, 625 [2d Dept 2007]). Here, in support of dismissal, defendants point to the following factors: (1) the properties are situated in Massachusetts; (2) the receiver and tenants of the 30 residential units are potential witnesses and would be unduly burdened by [*3]having to travel to New York to give testimony or appear for trial; (3) defendants could not compel the appearance of recalcitrant witnesses before a New York court because a New York subpoena is not enforceable in Massachusetts (see Judiciary Law § 2-b; Siegel, NY Prac § 383, at 650 [4th ed] ["a New York subpoena may not be served outside the state"]; Coutts Bank [Switzerland] v Anatian, 275 AD2d 609, 611 [1st Dept 2000]); (4) the action is governed by Massachusetts law pursuant to the choice of law clause of the mortgage (Not. of Cross-mot., Ex. 1, Mortgage ¶ 36 [u]) and the forum selection clauses of the guarantee agreements (Not of Mot. Exs. 3-4, ¶ 18); (5) Massachusetts has a greater interest in the resolution than New York because the breach of contract cause of action is premised upon waste, and "each state has a manifest interest' in deciding disputes concerning real property located within [it]'" (Defs. Memo of Law, at 7, quoting Black Riv. Assoc. v Newman, 218 AD2d 273, 281-281 [4th Dept 1996]); (6) a more appropriate and convenient forum is readily available in Massachusetts; and (7) New York does not have a substantial nexus to this matter.

Here, peripheral litigation has already been commenced in a Massachusetts forum. A Massachusetts forum has appointed Lorilee, LLC, located in S. Wellfleet, Massachusetts, as the receiver. Plaintiff's complaint is premised upon the alleged waste of several properties all of which are situated in Springfield, Massachusetts (Not. of Cross-mot., Ex. 10, Compl.). Determining liability and the extent of losses, if any, under the first cause of action, for breach of contract, and the fourth cause of action, for losses caused by the commission of waste, is necessarily contingent upon the condition of the properties. Plaintiff's own pleadings aver that "[t]he operative clause is Paragraph 32 (c) (iv), which has given rise to this suit" (Not. of Cross-mot., Helman Aff. ¶ 8), which clause guaranties "any loss resulting from the intentional or fraudulent commission of waste or omission of an action which results in waste to the Mortgaged Property" (Not. of Cross-mot. Ex. 1). To determine liability and the extent of such liability, if any, testimony about the premises' conditions will be necessary from that receiver and from the premises' numerous tenants. However "needlessly restrictive," the law remains that "a New York subpoena may not reach beyond New York borders whatever the bases or justifications may be in the particular situation" (Siegel, NY Prac § 383, at 651 [4th ed]; see Judiciary Law § 2-b).

While residence is a relevant consideration, it is not determinative. Despite New York residency, dismissal based upon forum non conveniens is warranted when, as here, the subject of the contract is real property located in a sister state, the necessary witnesses and documents are in that state, and litigation has already been commenced there which is at least peripheral to the instant dispute (see Frontier Mfg. v Comp-Aire Sys., Inc./Joy, 94 AD2d 960, 960-961 [4th Dept 1983] [holding that residency not dispositive]). Also, here the contract's choice of law and forum selection clauses militate in favor of not retaining jurisdiction (id.). Rather, the application of the forum non conviens doctrine "should turn on considerations of justice, fairness and convenience and not solely on the residence of one of the parties. Although such residence is, of course, an important factor to be considered, forum non conveniens relief should be granted when it plainly appears that New York is an inconvenient forum and that another is available which will best serve the ends of justice and the convenience of the parties. The great advantage of the doctrine—its flexibility based on the facts and circumstances of a particular case—is severely, if not completely, undercut when [*4]our courts are prevented from applying it solely because one of the parties is a New York resident or corporation"

(Silver v Great Am. Ins. Co., 29 NY2d at 361).

While this court recognizes the significance of plaintiff's opposition, the focus of which is the parties' New York residency, it is also mindful that the Court of Appeals and the Appellate Division, First Department, have often noted, "No one factor is controlling" (Islamic Republic of Iran v Pahlavi, 62 NY2d 474, 479 [1984]; see e.g. Silver v Great Am. Ins. Co., 29 NY2d at 361; Gaslow v QA Invs. LLC, 36 AD3d 286, 287 [1st Dept 2006]; Phat Tan Nguyen v Banque Indosuez, 19 AD3d 292, 294 [1st Dept 2005], lv denied 6 NY3d 703 [2006]; Shin-Etsu Chem. Co., Ltd. v ICICI Bank Ltd., 9 AD3d 171, 176 [1st Dept 2004]; Intertec Contr. A/S v Turner Steiner Intl., S.A., 6 AD3d 1, 4 [1st Dept 2004]).

Given the totality of the circumstances presented in this case, the court is persuaded that defendants have "met [the] heavy burden to establish that New York [i]s an inconvenient forum" (Kuwaiti Eng'g Group v Consortium of Intl. Consultants, LLC, 50 AD3d 599, 600 [1st Dept 2008]), and that the interest of substantial justice would best be furthered by dismissing this action upon the condition that defendants consent to jurisdiction before an appropriate Massachusetts forum (see American BankNote Corp. v Daniele, 45 AD3d 338, 339 [1st Dept 2007]).

Accordingly, defendants' motion to dismiss on the ground of forum non conveniens is granted on the following conditions: (1) within 10 days of the date of entry of this order, plaintiff shall designate a forum within the jurisdiction of Massachusetts and notify defendants of such designation; (2) within 20 days of the date of entry of this order, defendants shall serve upon plaintiffs a duly executed stipulation consenting to the jurisdiction of the Massachusetts forum designated by plaintiff; (3) within 60 days of the date of entry of this order, plaintiff must commence the action in that Massachusetts forum (see Adamowicz v Besnainou, 58 AD3d 546, 546 [1st Dept 2009]).

This court need not address the merits of plaintiff's motion for summary judgment because it is rendered academic by this order's resolution of defendants' motion to dismiss (see Purgatorio v Trump, 198 AD2d 37, 38 [1st Dept 1993]; Carr v Integon Gen. Ins. Corp., 185 AD2d 831, 832 [2d Dept 1992]). Accordingly, it is

ORDERED that defendants' motion to dismiss on the grounds of forum non conveniens is granted, and it is further

ORDERED that plaintiff shall designate a forum within the jurisdiction of the Commonwealth of Massachusetts and notify defendants of such designation within 10 days of the date of entry of this order, and it is further

ORDERED that defendants shall serve upon plaintiff a duly executed stipulation consenting to the jurisdiction of the Massachusetts forum designated by plaintiff within 20 days

of the date of entry of this order, and it is further

ORDERED that plaintiff shall commence the action in the Massachusetts forum within 60 days of the date of entry of this order, and it is further

ORDERED that upon service of a copy of this order together with a copy of a stipulation [*5]signed by plaintiff and defendants consenting to the Massachusetts forum, the Clerk of this Court may enter a judgment dismissing this action; and it is further

ORDERED that plaintiff's cross-motion for summary judgment is deemed denied without prejudice because it is rendered academic by this decision and order.

This constitutes the decision and order of the court.

Dated: December 29, 2009____________________________________

New York, New YorkJ.S.C.

(2009 Pt 12 D & O_600545_2009_008_gms(FNC).wpd)