Mosbacher v JP Morgan Chase Bank, N.A.

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Mosbacher v JP Morgan Chase Bank, N.A. 2012 NY Slip Op 30480(U) February 15, 2012 Sup Ct, Nassau County Docket Number: 4972-11 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 MOSHE MOSBACHER and M. MOSBACHER DIAMOND CORP., Plaintiffs, TRIAL/IAS PART: 16 NASSAU COUNTY Index No: 4972- Motion Seq. No: 1 -against- Submission Date: 12/2/11 JP MORGAN CHASE BANK, N. A., Defendant. -------------------------------------------------------------------- x. The following papers having been read on this motion: Notice of Motion, Affidavits in Support and Exhibits........... Memorandum of Law in Support............................................. Affirmation in Opposition and Exhibits............................... Memorandum of Law in Further Support........................... This matter is before the Court for decision on the motion filed by Defendant JP Morgan Chase Ban , N. A.(" Chase " December 2 A. or " Defendant" ) on August 23 , 2011 and submitted on 2011. For the reasons set forth below, the Cour denies the motion. Relief Sought Defendant moves for an Order , pursuant to CPLR 3211(a)(1), (3), (5) and (7), dismissing this action in its entirety. Plaintiffs Moshe Mosbacher (" Mosbacher ) and M. Mosbacher Diamond Corp. (" Corp. (collectively " Plaintiffs B. The Paries ' ) oppose Defendant's motion. History These paries were involved in a prior related action (" Related Action Chase Bank, NA. Mosbacher a/k/a Moishe v. ) titled JPMorgan M Mosbacher Diamond Corp. and Moshe Mosbacher a/kJa Moishe S. Mosbacher Nassau County Index Number 010794/09. The Related Action was the subject of a decision by the Honorable Daniel Palmieri dated April 26, 2010 [* 2] Related Decision ) (Ex. F to Capuano Aff. in Supp. In the verified complaint in the Related Action (" Related Complaint" ) (Ex. D to Capuano Aff. in Supp. ), plaintiff Chase asserted three causes of action: 1) on or about August 31 , 1998 Corp. made and delivered to Chase a Business Revolving Creditlnk Agreement (" BRCA" reflecting Corp.'s promise to pay the principal sum of up to $100 000 , which was subsequently increased in the amount of$7 500 at Corp.'s request , and failed to pay sums owing on the BRCA; 2) on or about August 31 , 1998 , Mosbacher guaranteed Corp. s payments under the BRCA , and is liable for payments owed by Corp. under the BRCA; and 3) pursuant to the BRCA and guarantee , defendants are liable for attorney s fees and other costs incurred in enforcing the BRCA and guarantee. In their verified answer to the Related Complaint (" Related Answer ) (Ex. E to Capuano Aff. in Supp. ), Corp. and Mosbacher asserted four affirmative defenses. In its fourth affirmative defense , alleging negligent misrepresentation , Corp. and Mosbacher alleged that Chase " forced the corporate defendant out of business without working capital by refusing to restore the revolving credit line and fuds to the defendant(' )s ban account after promising to do so after the tax lien was resolved. The Verified Complaint in the instant action (" Instant Complaint" ) (Ex. H to Capuano Aff. in Supp. ) contains three (3) causes of action: 1) Chase breached its implied covenant of good faith and fair dealing, and is liable for negligent misrepresentation , with respect to Corp. by virtue of its failure to pay a ta lien (" Tax Obligation ) and restore Plaintiffs ' revolving line of credit as promised , and its refusal to grant Corp. access to its account so that it could satisfy the Tax Obligation; 2) Chase is liable for negligent misrepresentation , and breached its implied covenant of good faith and fair dealing, with respect to Corp. by failing to cooperate with Corp. in restoring its line of credit which led to the cessation of Corp. ' s business operations; and 3) Chase breached its implied covenant of good faith and fair dealing, and is liable for negligent misrepresentation , with respect to Mosbacher by its failure to pay the Tax Obligation , resulting in Mosbacher losing his income and assets. The Instant Complaint includes the allegation that: The determination of the (Related Decision) that the plaintiffs ' (sic) stated valid claims against Chase Ban for negligent misrepresentation and for breach of the in this action. implied covenant of good faith and fair dealing, are res judicata Instant Compl. at [* 3] In support of Chase s instant motion , Shirley M. Herring (" Herring ), a First Vice President of Chase , affirms that on August 31 , 1998 , Corp. executed the BRCA (Ex. A to Herring Aff. in Supp. ). On September 15 2008 , Corp. opened a Chase Business Classic Account (" Business Account" ), as reflected by the signature card (" Signature Card" ) provided at Ex. B). By executing the Signature Card , Mosbacher , on behalf of Corp. , acknowledged (id. receipt of Chase s Customer Agreement (" Customer Agreement" (id. at Ex. C) and agreed to be bound by its terms and conditions. Paragraph 3 of the BRCA provides , in pertinent par , as follows: (Chase) is not obligated to honor a request for a Loan on an account which is deemed delinquent or after the occurence of an Event of Default. Paragraph 7 of the BRCA provides , in pertinent par , as follows: If any Event of Default occurs, then (Chase s) obligation to make Loans shall immediately terminate , and the Loans together with accrued interest thereon shall be immediately due and payable. Paragraph 7(j) of the BRCA provides that an Event of Default occurs when a lien is placed against the assets of Corp. by a creditor other than Chase. Paragraph 7(h) of the BRCA provides that an Event of Default occurs when Chase determines that there has been an " adverse change in the financial or business condition" of Corp. Under the terms of the Signature Card , Corp. acknowledged receipt of, and agreed to be bound by, the Customer Agreement. The Customer Agreement contains the following language in bold tye and capital letters on page 19 of the Customers Agreement: YOU AGREE THAT WE SHALL NOT BE LIABLE FOR INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES REGARDLESS OF THE FORM OF ACTION AND EVEN IF WE HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. Defendants ' counsel affrms that Chase fied a motion for summar judgment in the Related Action. In the Related Decision , the Court granted Chase s motion with respect to Moshe and Mosbacher s first , second and third affirmative defenses based on lack of . jurisdiction , unenforceability of the Mosbacher guaranty and Statute of Frauds , respectively. The Court in the Related Decision ruled that the first , second and third affrmative defenses in the Related Answer were " without merit" (Related Dec. at p. 5). With respect to the fourth counterclaim in the Related Answer , based on negligent misrepresentation , the Court in the Related Action ruled that: [* 4] (t)his defense raises factors beyond the simple fact of the default in payment , which alone is addressed by the plaintiff's affiant , Heffleman. The statements of (Chase attorney concerning the circumstances surrounding the tax lien and the decision by (Chase) personnel to withhold credit is not stated to have been made on personal knowledge , and is thus without probative force (citations omitted). The Court therefore itsprimafaGie finds that with respect to this claim (Chase) has failed to make out case , which requires that the motion be denied to that extent. Dismissal of this defense would have been denied in any event. In essence , the recitation of the events by Mosbacher surrounding (Corp.'s) default raises an issue of fact as to a breach of the implied covenant of good faith and fair dealing, which is read into every contract (citations omitted). Related Dec. at p. 7 Chase s counsel affirms that neither Defendants nor Chase raised the theory of the implied covenant of good faith and fair dealing in their motion and opposition papers in the Related Action , copies of which are provided (Ex. G to Capuano Aff. in Supp. ). Chase disputes Plaintiffs ' allegation that the Cour in the Related Decision ruled that Plaintiffs " stated valid claims against" Chase. Chase s counsel affrms , fuher , that a Certificate oflncorporation for Corp. was fied in the Office of the County Clerk of New York County on April 17 , 1995. Corp. was dissolved by proclamation on July 29, 2009 (" Dissolution ) as reflected by the printout provided from the New York State , Deparment of State s website (Ex. I to Capuano Aff. in Supp. ). That documentation reflects that , as of August 2 2011 , Corp.'s status was inactive due to a Dissolution by Proclamation/Annulment of Authority (JuI29 , 2009). In opposition , Plaintiffs ' counsel notes that the Related Decision outlined the affidavit of Mosbacher in the Related Action , which Chase did not rebut. Mosbacher previously asserted, inter alia that: 1) on December 16, 2008 , the New York State Department of Taxation and Finance (" Tax Deparment" ) erroneously imposed a tax lien on Corp.'s account; 2) two days later , Chase received notice that , upon the remittance of$15 000 , the lien and levy on the account would be released; 3) Mosbacher presented a notarized letter instructing Chase to send the $15 000 to the Tax Department; 4) as of December 24 , 2008 , Chase refused to comply, and did not send the tax payment until around Januar 20 , 2009; 5) given the nature of Mosbacher business , which involved wholesale diamonds , he was unable to conduct business with an active account and credit line and his business was destroyed. [* 5] The Parties ' Positions C. Chase submits that it has demonstrated its right to dismissal ofthe Instant Complaint in light of the fact that 1) Plaintiffs ' assertion that the Cour in the Related Action determined that Plaintiffs stated valid claims against Chase is inaccurate; 2) Corp. lacks standing to maintain this action in light of the Dissolution; 3) the BRCA explicitly provides that a) Chase is not obligated to honor a request for a Loan on a delinquent account , or after an Event of Default; b) Chase obligation to make Loans immediately terminated upon the fiing of the tax lien , which constituted an Event of Default pursuant to ~ 7(j); and 4) Plaintiffs are bared from recovering consequential damages in light of the language in the Customer Agreement expressly providing that Chase is not liable for indirect , special or consequential damages. Plaintiffs submit that 1) as Chase did not appeal the Related Decision, Justice Palmieri' conclusion that Plaintiffs ' claims for negligent misrepresentation were " fit for a trier of fact" (Sarfaty Aff. in Opp. at ~ 7) becomes the law of the case as to the paries; and 2) the waiver language in the Customer Agreement does not bar the instant action because Plaintiffs are seeking actual damages. Plaintiffs note that the Related Decision included determinations that in light of Mosbacher s allegations regarding Chase s defayin paying Plaintiffs ' tax obligation there existed " an issue of fact.. . as to the good faith and fair dealing of ( Chase) in its handling of the ta lien , (baring) summar judgment with respect to the fourh defense " (Prior Dec. at pp. 9- 10). In reply, Chase submits that 1) in light of the fact that Mosbacher and Corp. did not assert the doctrine of good faith and fair dealing in the Related Action , and it was the Cour in the Related Action who raised that issue sua sponte Chase did not have the opportnity to litigate that issue in the Related Action and the doctrines oflaw of the case , collateral estoppel and res judicata are inapplicable; 2) Plaintiffs have failed to plead the elements of a negligent misrepresentation action in light of their inabilty to establish a special or privity- like relationship between the parties , and/or damages suffered as a resuh of Chase s conduct; 3) the contractual provision in the Customer Agreement clearly bars Plaintiffs ' claims as the damages sought by Plaintiffs are , in fact , consequential damages; and 4) the implied covenant of good faith and fair dealing does not negate Chase s explicit rights under the parties ' agreements. RULING OF THE COURT A. Standards of Dismissal A complaint may be dismissed based upon documentary evidence pursuant to [* 6] CPLR ~ 3211(a)(1)only if the factual allegations contained therein are definitively contradicted Yew Prospect, by the evidence submitted or a defense is conclusively established thereby. v. Sta-Bright Services, Inc. Szulman 305 AD. 2d 588 (2d Dept. 2003); v. LLC Sutton 17 AD. 3d 570 (2d Dept. 2005). A motion interposed pursuant to CPLR ~ 3211 (a)(7), which seeks to dismiss a complaint for failure to state a cause of action , must be denied if the factual allegations contained in the 232 268 (1977); 511 w: v. Guggenheimer complaint constitute a cause of action cognizable at law. v. Owners Corp. 98 N. Jennifer Realty Co., 43 N. Y.2d Ginzburg, 2d 144 (2002). When entertaining such an application , the Court must liberally construe the pleading. In so doing, the Court must accept the facts alleged as true and accord to the plaintiff every favorable inference Leon which may be drawn therefrom. v. Martinez 84 N. 2d 83 (1994). On such a motion however , the Court wil not presume as true bare legal conclusions and factual claims which are Herrick, Feinstein 298 AD. 2d 372 (2d Dept. v. Palazzolo flatly contradicted by the evidence. 2002). CPLR ~ 3211 (a )(3) provides for dismissal of an action where the par asserting the cause of action lacks the legal capacity, or standing, to sue. Standing goes to the jurisdictional v. Egan , 142 Matter of Eaton Assoc. Inc. basis of a cour' s authority to adjudicate a dispute. AD.2d 330 , 334- 335 (3d Dept. 1988), citing v. Allen Wright 468 U.S. 737 , 750- 751 (1984), reh. den. 468 U.S. 1250 (1984). Standing involves a determination of whether the par seeking relief has a sufficiently cognizable stake in the outcome so as to cast the dispute in a form (2004), quoting Matter of Fritz an injur in Caprer interests sought to be protected by law. v. v. Huntington Hosp., County of Albany, v. of Borough of Manhattan Community Bd. (1994). A plaintiff must thus demonstrate 2006), citing v. Graziano traditionally capable of judicial resolution. 3 NY. 3d 475 479 Schaffr 84 N. Y.2d 148, 155 fact that falls within the relevant zone of Nussbaum 36 AD.3d 176 , 183 (2d Dept. 39 N. Y.2d 339 (1976). B. Law of the Case The doctrine of the law of the case seeks to prevent relitigation of issues of law that have already been determined at an earlier stage of the proceeding. Housing Authority, Brownrigg v. New York City 29 AD. 3d 721 722 (2d Dept. 2006). The doctrine applies only to legal determinations that were necessarily resolved on the merits in a prior decision. Id. The doctrine [* 7] may be ignored in extraordinar circumstances such as a change in law or a showing of new Id. evidence. C. Res Judicata The general doctrine of gives binding effect to the judgment of a cour of res judicata competent jurisdiction and prevents the paries to an action , and those in privity with them , from Serio subsequently relitigating any questions that were necessarily decided therein. Landau, P. c. 87 AD. 3d 533 (2d Dept. 2011), citing Islip, Y.3d 8 , Town of Ross LaRossa, Mitchell v. v. Matter of Grainger (Shea Enters. 309 N. Y. 605 616 (1956). 13 (2008), quoting res judicata once a claim is brought to a final Under New York' s transactional approach to conclusion , all other claims arising out of the same transaction or series of transactions are bared, even if based on different theories or seeking a different remedy. v. Brien City of Syracuse 54 N. Y.2d 353, at 533- 534 , quoting Id. 357 (1981). Courts should to determine whether paricular claims are part of the same transaction for apply a pragmatic test res judicata purposes. This involves analyzing (a) whether the facts are related in time , space , origin or motivation , (b) whether they form a convenient trial unit , and (c) whether their treatment as a unit conforms to Maybaum v. Maybaum , 933 the paries ' expectations or business understanding or usage. Y.S.2d 43 , citingXiao Yang 47 (2d Dept. 2011), Chen v. Fischer 6 N. Y.3d 94 , 100- 101 (2005), quoting Restatement (Second) of Judgments ~ 24(2). D. 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, whether or not the tribunals or causes of action are the same. Maybaum 933 N. Y.S. 2d at 47 , citing Ryan (1999), quoting v. Parker v. Blauvelt Volunteer Fire Co. 93 N. Y.2d 343 349 New York Tel. Co. 62 N. Y.2d 494 500 (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 opportnity to litigate the issue in the earlier action. E. Id. at 48 , quoting Parker 93 N. Y.2d at 349. Application of these Principles to the Instant Action The Court concludes that , in light of Justice Palmieri' s determination in the Related Action that there existed issues of fact regarding Mosbacher and Corp. ' s claims of negligent misrepresentation by Chase warranting the denial of Chase s motion to dismiss that affirmative [* 8] defense , Chase s instant motion is precluded by the doctrine of collateral estoppel. Chase is attempting to relitigate , in the Instant Action , the issue of the viability of Plaintiffs ' negligent misrepresentation claim , which was clearly raised in the Related Action and decided against Chase by virtue of Justice Palmieri' s denial of Chase s motion for judgment dismissing Mosbacher and Corp. s affirmative defense based on negligent misrepresentation. The Cour concludes that Chase had the opportunity to litigate the issue in the Related Action in light of the fact that Mosbacher and Corp. raised the affirmative defense of negligent misrepresentation in the Related Action , and moved to dismiss that affrmative defense in its motion for summar judgment in the Related Action. In light of the foregoing, the Court denies Defendants ' motion.. All matters not decided herein are hereby denied. This constitutes the decision and order of the Court. The Cour directs counsel for the paries to appear before the Cour for a Preliminar Conference on March 8 , 2012 at 9:30 a. ENTER DATED: Mineola, NY Februar 15 2012 HON. TIMOTHY S. DRIS ENTERED FEB 22 2012 NASSAU COUNTY O,'ICE COUNTY ClIM"

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