Chase Equip. Leasing Inc. v Architectural Air, L.L.C.

Chase Equip. Leasing Inc. v Architectural Air, L.L.C. 2011 NY Slip Op 03663 Decided on May 3, 2011 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided on May 3, 2011
Saxe, J.P., Friedman, Freedman, Richter, JJ.
4940 650168/09

[*1]Chase Equipment Leasing Inc., Plaintiff-Respondent,

v

Architectural Air, L.L.C., et al., Defendants-Appellants.



 
Chaffetz Lindsey LLP, New York (Peter R. Chaffetz of
counsel), for appellants.
Hahn & Hessen, LLP, New York (Zachary G. Newman of
counsel), for respondent.

Order, Supreme Court, New York County (James A. Yates, J.), entered March 24, 2010, which, insofar as appealed from, granted plaintiff's motion to dismiss the counterclaims for conversion, breach of the implied duty of good faith, and pre-possession commercially unreasonable failure to dispose of collateral, and related defenses, unanimously modified, on the law, to deny the motion as to the counterclaim for conversion, and otherwise affirmed, without costs.

Plaintiff, as a secured party, was not obligated to act in a commercially reasonable manner before taking possession of the collateral (Bank Leumi USA v Agati, 5 AD3d 292, 293 [2004]). Nor was it so obligated by having, as defendants assert, practical control over the collateral, given defendants' refusal to surrender possession unless plaintiff modified the underlying loan or capitulated to their other demands. Plaintiff's refusal to dispose of the collateral while simultaneously not allowing defendants to do so does not raise an inference of bad faith. In any event, defendants' claim based on the implied covenant of good faith is barred by the no-waiver clause permitting plaintiff's delay in exercising its remedies (see Chemical Bank v PIC Motors Corp., 87 AD2d 447, 450 [1982], affd 58 NY2d 1023 [1983]); the duty of good faith does not imply obligations inconsistent with contractual provisions (see 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144, 153 [2002]).

However, we find that the equipment that defendant Carl added to the airplane that served as collateral was expressly exempt from becoming collateral itself by the plain meaning of
§ 1.5 of the security agreement, regardless of the location of that provision within the agreement. [*2]Therefore, Carl has a superior right to ownership or possession of the added-on equipment, which provides a basis for his conversion counterclaim.

THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

ENTERED: MAY 3, 2011

CLERK