Amalgamated Bank v Helmsley-Spear, Inc.
Annotate this CaseDecided on December 6, 2012
Supreme Court, New York County
Amalgamated Bank, Plaintiff,
against
Helmsley-Spear, Inc. and JAMES G. MCCAULEY, Defendants.
603573/2009
Emmet, Marvin & Martin, LLP for the plaintiff.
Herrick, Feinstein LLP for the movants.
Shirley Werner Kornreich, J.
Non-parties Schneider & Schneider, Inc. and Lynn C. Schneider move by order to show cause: (1) for an Order, pursuant to CPLR 1012(a) and 1013, permitting them to intervene in this action; and (2) for an Order, pursuant to CPLR 5015(a)(1) and (a)(3), vacating the default judgment entered against defendant Helmsley-Spear, Inc. (Helmsley). Plaintiff Amalgamated Bank (Amalgamated) opposes the motion. Movants' motion is granted for the reasons that follow.
Factual Background & Procedural History
Amalgamated commenced this action in 2009 to recover damages arising from an allegedly negligent appraisal that defendant James G. McCauley, an employee of Helmsley, issued to Amalgamated in 2006 for an office building located in Yonkers.
Helmsley failed to answer or make an appearance. In an Order dated November 19, 2010, this Court granted Amalgamated's motion for a default judgment against Helmsley. For almost two years thereafter, McCauley was forced to defend this case on his own and to personally pay for his legal fees. Amalgamated finally reached a settlement with McCauley and filed a stipulation discontinuing its claims against him with prejudice on November 14, 2012, after much motion practice, less than a month before a trial was scheduled to commence and while this motion was sub judice. Thus, both named defendants, Helmsley and McCauley, are no longer participants in this action.
The basis for movants' proposed intervention relates to events that occurred in 2007, less than a year after the subject appraisal was issued.
In October 2007, Lynn Schneider sold her shares in Helmsley to HSI Holdings (the 2007 Sale), an entity controlled by an individual named Kent Swig. Swig has controlled Helmsley since the commencement of the instant action, and it was allegedly Swig's decision to allow Helmsley to default. HSI Holdings, allegedly, is judgment-proof. After Amalgamated obtained a default judgment against Helmsley, it sought to enforce it by collecting the proceeds that Schneider received from the 2007 Sale on the ground that the 2007 Sale was a fraudulent transfer of Helmsley's assets. To do so, on March 14, 2012, Amalgamated commenced another action in this court styled Amalgamated Bank v Schneider & Schneider, Inc., Index No. 650776/2012 [*2](Oing, J.) (the Supplemental Proceeding), in which Amalgamated asserted claims against movants under CPLR 5225(b) and New York Debtor and Creditor Law §§ 273, 276, 276-a, and 278.
Movants now seek to intervene in this action on Helmsley's behalf and vacate the default judgment against it. Movants contend that they are the real parties in interest because they ultimately may be held liable for the defendants' actions, none of which occurred due to the fault of movants. Specifically, they allege (1) movants had no involvement with the subject appraisal; and (2) movants had no involvement with the decision to allow Helmsley to default. Movants aver that they knew nothing of the action and it would be inequitable for them, as innocent third-parties in the dispute between plaintiff and defendants, to pay the price for alleged wrongdoing in which they played no part and which has not been adjudicated on the merits.
Discussion
Pursuant to CPLR 1012(a)(2), "any person shall be permitted to intervene in an action when the representation of the person's interest by the parties is or may be inadequate and the person is or may be bound by the judgment.'" Yuppie Puppy Pet Products, Inc. v Street Smart Realty, LLC, 77 AD3d 197, 200 (1st Dept 2010). CPLR 1013 provides that "a court may, in its discretion, permit intervention when, inter alia, the [person's] claim or defense and the main action have a common question of law or fact, provided the intervention does not unduly delay determination of the action or prejudice the rights of any party." Id. at 200-01. "Consideration of any motion to intervene begins with the question of whether the motion is timely. In examining the timeliness of the motion, courts do not engage in mere mechanical measurements of time, but consider whether the delay in seeking intervention would cause a delay in resolution of the action or otherwise prejudice a party." Id. at 201. "Intervention is liberally allowed by courts, permitting persons to intervene in actions where they have a bona fide interest in an issue involved in that action." Id. CPLR 5015(a)(1) provides that "[t]he court which rendered a judgment or order may relieve a party from it upon such terms as may be just . . . upon the ground of excusable default." Brown v Suggs, 38 AD3d 329 (1st Dept 2007).
Amalgamated argues that movants' motion is not timely because movants waited over a year to move after they became aware of the default judgment against Helmsley. Movants contend that the proper calculation of time should begin when the Supplemental Proceeding was commenced and that their motion was filed merely two months thereafter. Movants' argument is more persuasive because the commencement of the Supplemental Proceeding is what created a real possibility that movants would face liability for Helmsley's default judgment.
Next, Amalgamated contends that movants should not be allowed to intervene because they are not technically "bound" by the default judgment. This argument misses the point of intervention. Amalgamated's ultimate recovery on that judgment is likely to come from movants in the Supplemental Proceeding, and thus, Movants' interests are impacted. Indeed, the circumstances present in this case — a default judgment against a defendant being used as a predicate for liability against the proposed intervener in a separate proceeding — are not unique, and courts have permitted intervention in similar circumstances. See, e.g., Yuppie Puppy, supra (intervention and vacator of default judgment allowed where default judgment was used by plaintiff as defense against proposed intervener in separate foreclosure action).
Additionally, the Court of Appeals has permitted intervention and vacated a default judgment where, as here, the case was almost ready to proceed to trial. See Oppenheimer v Westcott, 47 NY2d 595 (1979). In Oppenheimer, the Court of Appeals explained:
[*3]
"Without a valid judgment against [defendant], [plaintiff] has no claim against the [proposed interveners]. In light of that fact and of [defendant]'s insolvency, it is manifest that no one has a greater or more legitimate interest in setting aside [plaintiff]'s judgment against [defendant] than they do.
Id. at 602 (emphasis added).
Here, as in Oppenheimer, plaintiff is using the default judgment against Helmsley as a predicate for liability against movants in the Supplemental Proceeding. Moreover, here, as in Yuppie Puppy, "[plaintiff] cannot be permitted to have it both ways, arguing on the one hand that [movants] cannot be permitted to intervene in this action to defend its interest and then arguing on the other that the judgment in which [movants were] not permitted to defend [themselves] is to be given preclusive effect in the [Supplemental Proceeding]. It is axiomatic that the potentially binding nature of the judgment on the proposed intervener is the most heavily weighted factor in determining whether to permit intervention." Yuppie Puppy, 77 AD3d at 202.Finally, movants have established that they are capable of putting forth a meritorious defense without the need to delay the trial. In fact, prior to Amalgamated discontinuing its claims against McCauley, movants contended that they were fully capable of participating in the trial that was scheduled to commence on December 4, 2012. Consequently, plaintiff will not be prejudiced by further discovery or delay. The result, trial on the merits, is squarely in line with the long established policy of this Court, which is "to allow matters to proceed to trial on the merits, whenever possible." Congress Talcott Corp. v Pacemakers Trading Corp., 161 AD2d 554, 555 (1st Dept 1990) (citing Lipsig, Sullivan, Mollen & Liapakis, P.C. v Shamy, 86 AD2d 520, 521 (1st Dept 1982) ("It is the general policy of the courts to permit actions to be determined by a trial on the merits wherever possible and for that purpose a liberal policy is adopted with respect to opening default judgments in furtherance of justice to the end that the parties may have their day in court to litigate the issues."). Accordingly, it is
ORDERED that the motion by non-parties Schneider & Schneider, Inc. and Lynn C. Schneider to intervene and to vacate the default judgement against defendant Helmsley-Spear, Inc. is granted and said default judgment is hereby vacated; and it is further
ORDERED that plaintiff and movants are to appear in Part 54, Supreme Court, New York County, 60 Centre St., rm. 228, New York, NY, for a pre-trial conference on January 8, 2013 at 11:00 in the forenoon.
Dated: December 6, 2012ENTER:
__________________________
J.S.C.
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