Flushing Savs. Bank, FSB v Leading Ins. Servs., Inc.
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Flushing Savs. Bank, FSB v Leading Ins. Servs., Inc. 2012 NY Slip Op 30314(U) January 24, 2012 Supreme Court, Nassau County Docket Number: 5194-11 Judge: Timothy S. Driscoll Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] SUPREME COURT - STATE OF NEW YORK SHORT FORM ORDER Present: HON. TIMOTHY S. DRISCOLL Justice Supreme Court ------------------------- x FLUSHING SAVINGS BANK, FSB, TRIALIIAS PART: 16 NASSAU COUNTY Plaintiff, Index No: 5194- -against- Motion Seq. No. Submission Date: 11/23/12 LEADING INSURANCE SERVICES, INC., Defendant. -------------------------------------------------------------------- x The following papers have been read on this motion: Amended Notice of Motion , Amended Affirmation in Support and Exhibits .... Eng Affidavit in Baldasare Affidavit upport""""""""""""""""I"" . Sup ................ ..I. po rt.... ..................... .......... .......... .... ......... .............. ........ Baquet Affirmation in Support and Exhibit........................................................... Affirmation in Opposition and Exhibits.................................................................. Rep Iy Affirmation............................................. .... ........ .... ""'" I"" ... This matter is before the Court for decision on the motion fied by Plaintiff Flushing Savings Ban , FSB (" FSB" or " Plaintiff' ) on September 14 2011 which was submitted on November 23 2011. For the reasons set forth below , the Cour denies the motion. BACKGROUND A. Relief Sought Plaintiff moves for an Order granting parial summar judgment to Plaintiff and scheduling a hearing to determine Plaintiff's damages. Defendants Leading Insurance Services , Inc. (" LIS" ) and Leading Insurance Group ",t:" [* 2] Insurance Co. , B. Ltd. (" LIG" ) (collectively " Leading Defendants ) oppose Plaintiff's motion. The Paries ' History The Amended Complaint (Ex. G to Baquet Aff. in Supp. ) alleges as follows: 2 FSB is a banking corporation with an office located in Hyde Park , New York. LIG is a foreign insurance company domiciled in Korea and LIS is a foreign corporation authorized to do business in New York. W &X Evergreen , LLC (" W &X" ) is obligor and FSB is obligee with respect to a promissory note ("Note ) dated April 21 , 2008 in the original amount of$2 337 500. 00 (Ex. A to Am. Compl.). The Note is secured by a mortgage (" Mortgage ) dated April 21 , 2008 , made by W&X as mortgagor to FSB as mortgagee in the original principal amount of $2 337 500. 00 (id. at Ex. B). The Mortgage is a first lien on the premises (" Premises ) located at 747 Evergreen Avenue , Brooklyn, New York. s required under the Mortgage , in or about June of2010 , W&X obtained an all-risk insurance policy (" Policy ) from LIG , relevant portions of which are anexed (Ex. C to Am. Compl.). The Policy became effective on June 23 , 2010 and was to remain in effect until June 23 2011. The Policy covers inter alia damage or destrction to the Premises caused by fire. The Policy lists FSB as first mortgagee and loss payee. The Policy contains a New York standard mortgage clause which provides , in pertinent part , as follows: (The insurer) wil pay for covered loss of or damage to buildings or structures to each mortgageholder shown in the Declarations in their order of precedence , as interests may appear.. .If (the insurer denies the insured' s) claim because of (the insured' s) acts or because (the insured) failed to comply with the terms of this Coverage Part , the mortgageholder wil stil have the right to receive loss payment if the mortgageholder: (1) pays any premium due under this Coverage Par at (the insurer s) request if (the insured) has failed to do so; (2) submits a signed , sworn 1 As discussed infra there is a related action (" Related Action ) pending in the Supreme Court of Kings v. Leading Insurance Group Insurance Co. , Ltd. , United Aline Services, Inc. a/k/a United A line Co., Ltd.. Flushing Savings Bank, FSB, and Empire State Certifed Development Corporation Kings County Index # 29281- 10. Defendants oppose Plaintiffs motion on the grounds that , in light of the Court' recent denial of Plaintiffs motion to consolidate the above-captioned action (" Instant Action ) with the Related Action in Nassau County, granting Plaintiffs motion would subject Leading to the possibility of inconsistent findings. The Related Action was filed prior to the Instant Action. County titled W&X Evergreen, LLC 2 Pursuant to a stipulation dated September 1 , 2011 , the parties agreed that Plaintiff could fie the Amended Complaint which amended the caption to reflect that LIG is now a part defendant. [* 3] proof of loss within 60 days after receiving notice from (the insurer) that the (insured) has failed to do so; and (3) has notified (the insurer) of any change in ownership, occupancy or substantial change in risk known to the mortgageholder. On or about July 1 , loss. Thereafter , 2010 , a fire (" Fire ) occurred at the Premises which resulted in a total W &X fied a claim with the Leading Defendants and sought loss payment under the Policy. By letter dated November 8 , 20 I 0 (" Disclaimer Letter ), counsel for the Leading Defendants notified W &X that LIG disclaimed and rescinded coverage to W &X under the Policy for the loss caused by the Fire. In the Disclaimer Letter , the Leading Defendants asserted that 1) based on their investigation (" Investigation ), the Premises were not protected by an operational fire sprinkler system (" Sprinkler System ); 2) W &X had made a material misrepresentation on their insurance application (" Application ) by representing that the Premises were protected by a Sprinkler System; 3) the Policy contained a Protective Safeguards Endorsement that requiredW&X to main a Spri)1ler System at the Premises; 4) W&X failed to comply with the terms of the Policy by failing to maintain the Sprinkler System; and 5) the basis for their disclaimer of rescission and coverage to W &X under the Policy was that W &X had made a material misrepresentation on its Application or had failed to comply with certain terms of the Policy. On November 5 , 2010 , FSB , through counsel , sent a letter to counsel for the Leading Defendants which advised them inter alia that FSB claimed entitlement to proceeds under the Policy as first mortgagee with respect to the Premises. The Leading Defendants have never demanded that FSB pay any premium dl!e under the Policy. In addition , upon information and belief, W &X has timely paid all premiums due under the Policy. The Leading Defendants have never demanded that FSB submit a signed , sworn proof of loss to the Leading Defendants. And at all times prior to and since the Fire , FSB has never been aware of any change in ownership or occupancy at the Premises , or any substantial change in risk relating to the Premises or W &X. On November 17 2010 , counsel for the Leading Defendant sent a letter to FSB' s prior counsel in which the Leading Defendants stated that they were investigating FSB' s entitlement to coverage under the Policy in light of the facts discovered during the Investigation. On December 17 , 2010 , FSB' s prior counsel responded by letter in which he demanded that the Leading Defendants make loss payment to FSB as soon as possible. The parties have exchanged [* 4] subsequent communication reflecting FSB' s position that it is entitled to loss payment and the Leading Defendants ' refusal to make that payment. The Amended Complaint contains four (4) causes of action: 1) request for a declaratory judgment that FSB is entitled to coverage under the Policy in the entire outstanding amount which Mortgage which , as of March 21 , 2011 , was $2 281 907. of , 2) request for a judgment of specific performance directing the Leading Defendants to provide coverage to FSB under the Policy, 3) breach of contract with respect to the Policy by virtue of the Leading Defendants refusal to remit loss payment to FSB , and 4) breach of the implied covenant of good faith and fair dealing. In their Answer (Ex. H to Baquet Aff. in Supp. ), the Leading Defendants assert inter alia that 1) under the Policy, Plaintiff is entitled to , at most , the replacement cost of the Premises , not the full amount of the Mortgage ( 45); and 2) the Policy does not constitute a valid contract due to W&X' s material misrepresentations to the Leading Defendants ( 63). They also assert twenty five (25) affrmative defenses , including the claim that Plaintiff was aware of the misrepresentations made by W &X in the Application and , therefore , is not entitled to recover insurance proceedings from Defendants (Eighteenth Affrmative Defense). Plaintiff provides Affidavits in Support of Richard Eng (" Eng ) and Joseph Baldasare Baldasare ), Vice Presidents of FSB , who affrm the truth of the allegations in the Complaint. Eng also affirms that he observed the Premises shortly after the Fire which had been destroyed resulting in a total loss to the Premises. The outstanding amount of the Mortgage at that time was clearly less than the maximum face value of the Policy. Thus , Eng submits , pursuant to the Policy, FSB is entitled to payment from Defendants in the total amount outstanding on the Mortgage. Baldasare affrms inter alia that 1) as mortgagee , FSB would have been aware of any change ownership in the Premises and , as reflected by the ACRIS documentation provided , there has been no such change from the date of the Note and Mortgage through the date of the Fire and W &X continues to own the Premises to date; 2) FSB was never aware of any change in occupancy at the Premises , or any change in risk relating to the Premises or W&X; 3) in determining whether to extend a mortgage to W &X , FSB obtained appraisals and inspections of the Premises in March of 2008 which reflected a Sprinkler System at the Premises; 4) FSB never ii, [* 5] knew , or had reason to know , that the Sprinkler System at the Premises was not in working order assuming the truth of that assertion; and 5) notwithstanding FSB' s satisfaction of its conditions to loss payment , the Leading Defendants persist in their refusal to remit payment to FSB. In opposition , Leading Defendants ' counsel submits that , while the Leading Defendants believe that FSB is entitled to loss payment under the Policy regardless of the validity of the Leading Defendants ' defenses to coverage against W&X' s claim for coverage , the Cour should deny the motion in light of Plaintiff's " fail( ure) to recognize the significance of W &X' s claim against Leading for the same insurance proceeds " (Havkins Aff. in Opp. at 4). In the Related Action , W &X has asserted causes of action for a declaratory judgment and breach of contract based on its position that W &X is entitled to $3.24 milion in coverage for the loss of its buildings. Leading Defendants ' counsel provides a copy of the complaint in the Related Action Related Complaint" ) (Ex. C to Hawkins Aff. in Opp. ). seeking to recover $3 In the Related Complaint , W&X is 240 000 in insurance coverage for the loss of buildings in the Fire. W alleges that it submitted a claim to LIG which has refused to pay the claim. Thus FSB and W &X are each seeking insurance proceeds for the same loss that the other believes it is entitled (id. at C. 4). The Paries ' Positions Plaintiff submits that it has demonstrated its right to summar judgment on the issue of Defendants ' liability by establishing that the Premises is covered by the Policy, the conditions to FSB' s entitlement to payment thereunder have been satisfied and Defendants have improperly failed to remit payment to Plaintiff. Plaintiff contends that the Leading Defendants are required to remit loss payment toFSB before they may pay W &X under the circumstances of this Action and irrespective of whether W&X made material misrepresentations on its Application. The Leading Defendants contend that , in light of the Court' s recent denial of Plaintiff's motion to consolidate the Instant Action with the Related Action in Nassau County, awarding summary judgment to FSB would subject the Leading Defendants to the possibility of inconsistent findings in that the Court may conclude that FSB is the rightful loss payee , while the Court in the Related Action may determine that W &X has a superior right to payment. Given that FSB and W &X are asserting that their claims have priority, complete relief can only be obtained if all paries are bound by the outcome of a dispositive motion , which cannot occur in the Instant Action in light of the fact that W &X is not a part in the Instant Action. Even if the Court were to agree with FSB' s interpretation of the Policy and conclude that FSB has superior ."",, [* 6] rights to coverage , that determination would not be binding on the Court in the Related Action. Thus , in light of the absence of W &X in the Instant Action, an award of summar judgment in the Instant Action exposes the Leading Defendants to the possibility of inconsistent verdicts. In reply, Plaintiff contends that the Leading Defendants are obligated to first pay the amount due on the Mortgage to FSB , the Mortgagee. Thus, even if W &X is successful in the Related Action , W &X wil be entitled to , at most , the difference between the amount paid to the named mortgagees and the value of the Policy. Accordingly, Plaintiff argues , it is appropriate for . the Cour to grants its motion for parial summar judgment. RULING OF THE COURT Summar Judgment Standards A. 3212(e), summary judgment may be granted as to one or more causes Pursuant to CPLR of action , or par thereof, in favor of anyone or more paries, to the extent waranted , on such terms as may be just. The cour may also direct 1) that the cause of action as to which sumar judgment is granted shall be severed from any remaining cause of action; or 2) that the entry of the summary judgment shall be held in abeyance pending the determination of any remaining cause of action. To grant summary judgment , the cour must find that there are no material , triable issues of fact , that the movant has established his cause of action or defense sufficiently to warant the cour , as a matter oflaw , directing judgment in his favor , and that the proof tendered is in admissible form. v. Menekou Crean 222 A.D. 2d 418 , 419- 420 (2d Dept 1995). If the movant tenders sufficient admissible evidence to show that there are no material issues of fact , the burden then shifts to the opponent to produce admissible proof establishing a material issue of fact. at 420. Summar judgment is a drastic remedy that should not be granted where there is Id Id. any doubt regarding the existence of a triable issue of fact. B. Collateral Estoppel Collateral estoppel , or issue preclusion , precludes a par from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that par, Maybaum, (1999), quoting whether or not the tribunals or causes of action are the same. 933 N. Y.S.2d at 47 , citing Ryan v. Parker v. Blauvelt Volunteer Fire Co. New York Tel. Co. 62 N. Y.2d 494 93 N. Y.2d 343 349 500 (1984). The doctrine applies if the issue in the second action is identical to an issue that was raised, necessarily decided and material in the first action , and the plaintiff had a full and fair opportunity to litigate the issue in ... [* 7] the earlier action. C. Id. at 48 , quoting Parker 93 N. Y.2d at 349. Application of these Principles to the Instant Action The Court denies Plaintiff's motion in light of its concerns regarding the possibility that granting parial sumar judgment to Plaintiff in the Instant Action, in which W &X is not a named par and has not litigated the relevant issues , creates the possibility of a decision in the Related Action that is inconsistent with the Court' s decision regarding the distribution of the proceeds from the Policy. While the Cour appreciates Plaintiff's argument that Plaintiff is entitled to be paid first , prior to W &X , and therefore is entitled to judgment now there exists the possibilty that the Cour in the Related Action wil have a different view of the maner in which the insurance proceeds should be distributed , and wil issue a decision that reflects a different view of the paries ' rights and obligations. In light of these concerns , the Cour denies Plaintiff's motion. All matters not decided herein are hereby denied. This constitutes the decision and order of the Court. The Court reminds counsel for the paries of their required appearance before the Court for a conference on Januar 27 2012 at 9:30 a. ENTER DATED: Mineola, NY Januar 24 2012 HON. TIMOTHY S. DRISCOLL lS. ENTERED JAN 30 2012 NASSAU COUNTY COUTY CLIRK" OFFiCE
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