Newbury Place Reo III, LLC v Sulton

[*1] Newbury Place Reo III, LLC v Sulton 2015 NY Slip Op 50985(U) Decided on July 1, 2015 Supreme Court, Kings County Rivera, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 July 1, 2015
Supreme Court, Kings County

Newbury Place Reo III, LLC, Plaintiff,

against

Andre Sulton, NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, 2099 BERGEN STREET REALTY LLC, et.al., Defendants.



12914/12



Attorney for Plaintiff

Richard O'Brien, Esq

Leopold & Associates, PLLC

80 Business Park Drive, Suite 110

Armonk, NY 10504

(914) 219-5787

Attorney for Defendant/Counterclaim Plaintiff

Carl E. Person

225 East 36th Street — Suite 3A

New York, NY 10016

(212) 307-4444
Francois A. Rivera, J.

Recitation in accordance with CPLR 2219 (a) of the papers considered on the motion of [*2]defendant/counterclaim plaintiff Andre Sulton (hereinafter Sulton), filed on November 12, 2014, under motion sequence number seven, for an order entering a default against Newbury Place REO III, LLC (hereinafter NPR or plaintiff) pursuant to CPLR 3025 for failure to timely answer Sulton's counterclaim.

- Notice of Motion

- Affirmation of Sulton's counsel in support

- Exhibits A-F

Affirmation in Opposition by NPR

Exhibits A-K

Reply

Recitation in accordance with CPLR 2219 (a) of the papers considered on the motion of NPR, filed on January 23, 2015, under motion sequence number eight, for an order compelling Sulton to accept its late answer to the counterclaim pursuant to CPLR 3012 (d).

- Notice of Motion

- Affirmation of NPR's counsel in support

- Exhibits A-L

Affirmation in Opposition by Sulton

Exhibits A-F

BACKGROUND

On June 21, 2012, plaintiff NPR commenced the instant mortgage foreclosure action by filing a summons, complaint and a notice of pendency with the Kings County Clerk's office. Sulton interposed an answer with counterclaims dated July 10, 2013.

NPR interposed a reply to Sulton's counterclaims dated July 17, 2013.

By notice of motion filed on March 13, 2014, under motion sequence number two, Sulton sought an order granting leave to amend his answer. By order dated June 13, 2014, the Court granted Sulton's motion to amend its answer. The June 13, 2014, order directed that NPR be deemed served with the proposed amended answer as of June 13, 2014 and that NPR serve its reply to the amended answer by July 13, 2014. There is only one counterclaim asserted by Sulton. It is undisputed that NPR failed to serve a reply.

The complaint alleges in pertinent part, that on July 24, 2008, Sulton executed and delivered a note (hereinafter the subject note) in favor of Wachovia Mortgage FSB on a loan in the amount of $618,750.00. On the same date, Sulton executed and delivered to NPR's assignor a mortgage (the subject mortgage) on certain real property known as 2099 Bergen Street, Brooklyn, New York 11233 (the subject property) to secure the subject note. On September 8, 2011, the mortgage was assigned to NPR. On August 1, 2009 and thereafter, Sulton failed to make monthly payments due and owing on the subject note. NPR thereafter accelerated the subject note and commenced the instant action.

LAW AND APPLICATION

[*3]Sultan's Motion for Default Against NPR

Sulton seeks an order pursuant to CPLR 3025 granting judgment on its counterclaim for a declaratory judgment as against NPR. In particular, Sulton seeks an order declaring: "that neither the plaintiff nor its predecessors and successors in interest have a right to enforce note."

Pursuant to CPLR 3001, the Supreme Court may render a declaratory judgment having the effect of a final judgment as to the rights and other legal relations of the parties to a "justiciable controversy" whether or not further relief is or could be claimed. To constitute a justiciable controversy, there must be a real dispute between adverse parties, involving substantial legal interests for which a declaration of rights will have some practical effect (see Chanos v MADAC, LLC, 74 AD3d 1007, 1008 [2nd Dept 2010]).

The primary purpose of a declaratory judgment is to stabilize an uncertain or disputed jural relationship with respect to present or prospective obligations (Village of Woodbury v Brach, 99 AD3d 697, 699 [2nd Dept 2012] citing, Chanos v MADAC, LLC, 74 AD3d 1007, 1008 [2nd Dept 2010]). "Where there is no necessity for resorting to the declaratory judgment it should not be employed" (Hesse v Speece, 204 AD2d 514, 515 [2nd Dept 1994] citing James v Alderton Dock Yards, 256 NY 298, 305 [1931]). Furthermore, a declaratory judgment is ex vi termini a judgment on the merits (Dupigny v St. Louis, 115 AD3d 638, 640 [2nd Dept 2014]). Until disputed questions of fact necessary to be determined before judgment can be rendered are settled, it is plain that rights and legal relations cannot be determined, defined and declared (Id).

The main purpose of CPLR 3011 is to state the instances in which a responsive pleading is required (Siegel, New York Practice § 229, 4th Ed). It specifically provides, in pertinent part, that a counterclaim requires a reply. An amended pleading, once served, supersedes the initial pleading and becomes the only pleading in the case as though the initial pleading was never served (see Elegante Leasing, Ltd. v Cross Trans Svc, Inc., 11 AD3d 650 [2nd Dept 2004]; see also, Titus v Titus, 275 AD2d 409 [2nd Dept 2000]).

A default judgment in a declaratory judgment action will not be granted on the default and pleadings alone. (Patrick M. Connors, Practice Commentaries, McKinney's Cons.Laws of NY, Book 7B, CPLR, C3001:23). Rather, it is necessary that plaintiff establish a right to a declaration by taking the stand to attest to all parts of the claim. A declaratory action is unlike ordinary actions where proof on a default application can be made solely on paper (Id. see also CPLR 3215[f]). Accordingly, Sultan's motion is denied.

NPR's Motion to Amend the Caption

NPR seeks permission to amend the caption by substituting Caerus Terra Properties, LLC (hereinafter CTP) as plaintiff. NPR asserts that CTP is the current holder of the note and accordingly the caption should be reflect the transfer of the interest to CTP.

Prior to reaching the merits of NPR's motion the Court takes notice of certain prior motions and orders in the instant action. The court may take judicial notice of undisputed court records and files (Kingsbrook Jewish Medical Center v. Allstate Ins. Co., 61 AD3d 13 [2d 2009] citing Matter of Khatibi v. Weill, 8 AD3d 485 [2d 2004]).

By notice of motion dated March 24, 2014, the defendant moved pursuant to UCC-3-804 [*4]and GBL 394-a(2) for an order requiring plaintiff to post a bond based on plaintiff's lost note affidavit. By notice of motion filed on July 28, 2014, the plaintiff moved for summary judgment and to appoint a referee.

By order dated November 14, 2014, the Court denied the plaintiff's motion to appoint a receiver and granted the defendant's motion to compel the plaintiff to post a bond. Plaintiff was directed to post a bond pursuant to UCC 3-804 in the amount of $1,237,500 as a condition precedent to making any application for relief to this court.

UCC 3-804 provides that the "owner of an instrument which is lost, whether by destruction, theft or otherwise, may maintain an action in his own name and recover from any party liable thereon upon due proof of his ownership, the facts which prevent his production of the instrument and its terms. The court shall require security, in an amount fixed by the court not less than twice the amount allegedly unpaid on the instrument" (see UCC 3-804). The provision is intended to allow plaintiffs who claim ownership on a lost, destroyed, or stolen instrument (see UCC 3-804 Official Comment). However, when a plaintiff is not in possession of the instrument, then the terms of the instrument, the ownership, and an accounting for its absence must be established (Id.). Furthermore, a court is authorized to require security indemnifying the obligor. The requirement is therefore not an absolute one, and the matter is left to the discretion of the court (Id.).

As of the date the plaintiff submitted its cross motion, the plaintiff had not posted a bond. There is no explanation in the plaintiff's motion papers as to the failure to comply with this Court's directive.

Accordingly, as the plaintiff seeks affirmative relief, the motion is denied for failing to comply with this Court's order to post a bond. Furthermore, the plaintiff is directed to show cause by motion filed on or before September 1, 2015, why an order should not be entered dismissing the complaint for failure to comply with the November 14, 2014 order. In the event the plaintiff posts the bond in the required amount on or before that date then an order to show cause need not be brought.

NPR's Motion to Serve a Late Reply to the Counterclaim

NPR is not barred from making the instant motion due to its failure to post the bond because the motion is in response to the defendant's counterclaim, rather than prosecution of the action under NPR's own pleading. NPR moves to file a late answer under CPLR 3012(d) which provides for extensions of time to appear or plead. The statute provides:

(d) Extension of time to appear or plead. Upon the application of a party, the court may extend the time to appear or plead, or compel the acceptance of a pleading untimely served, upon such terms as may be just and upon a showing of reasonable excuse for delay or default (see CPLR 3012[d]).

By order dated June 13, 2014, the plaintiff was directed to reply to the counterclaim by a July 13, 2014. As there was an order issued and a date certain to comply, CPLR 2004 is applicable. CPLR 2004 provides for extensions of time fixed by any statute, rule or order. When a party is moving under CPLR 3012(d) or CPLR 2004 it is required to provide a reasonable excuse for their default and demonstrate the existence of a potentially meritorious defense to the action (Tewari v. Tsoutsouras, 75 NY2d 1 [1989]; U.S. Bank Nat. Ass'n v. Sachdev, 128 AD3d 807, —- [*5]N.Y.S.3d —— [2d Dept 2015])

In the instant matter, counsel for NPR asserts that he attempted to serve the reply in hand to counsel for Sulton on September 5, 2014, a mere forty-five days after the date that this Court's order directed NPR to reply. Ultimately, the reply was served ninety-six days after the Court had directed NPR to serve the reply. NPR claims that the lateness was due to law office failure, namely "confusion as to pending motions and also defendant's failure to serve a Notice of entry of the short form order which directed the service of the reply."

Whether an excuse is reasonable is a determination within the sound discretion of the Supreme Court (GMAC Mortg. LLC v. Guccione,127 AD3d 1136 [2d Dept 2015]). Where a party asserts law office failure, it must provide a detailed and credible explanation of the default (Id.). Law office failure should not be excused where a default results not from an isolated, inadvertent mistake, but from repeated neglect (Id.).

In the instant action, NPR has not offered a reasonable excuse for the delay. NPR was present on the date that the June 13, 2014 order was issued and was actually aware of the deadline contained therein. There has been no excuse offered that explains NPR's failure to comply. Accordingly, the Court need not reach whether there is a meritorious defense. The motion to extend the time to submit a reply is denied.

Inasmuch as the defendant's counterclaim is for a declaratory judgment he must take the stand to attest to all parts of the claim. Therefore, denying the plaintiff the opportunity to reply has no adverse consequence. The plaintiff is in the exact same position as if he had replied with a general denial.

CONCLUSION

Sulton's motion for default judgment on its counterclaim for a declaratory judgment as against NPR is denied.

NPR's motion to amend the caption and substitute the plaintiff is denied.

NPR's motion for an order permitting a late answer is denied.

The foregoing constitutes the decision and order of this court.

ENTER:—————————————————————————-x

J.S.C.