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ALTHOUGH VOLUNTARY PAYMENTS ON A DEFAULT JUDGMENT MAY WAIVE THE PERSONAL JURISDICTION DEFENSE TO THE FAILURE TO MOVE TO VACATE A DEFAULT JUDGMENT WITHIN A YEAR, HERE THE GARNISHMENT OF DEFENDANT’S WAGES FOR MORE THAN A YEAR DID NOT WAIVE THE DEFENSE (FIRST DEPT). ​

The First Department, reversing Supreme Court, determined defendant did not waive the personal jurisdiction defense (CPLR 5015(a)(4)) by waiting more that a year to move to vacate the default judgment, despite the garnishment of defendant’s wages during that time. Voluntary payments on a default judgment would have waived the defense, but not garnishment:

The proper approach for determining whether a defendant has waived the CPLR 5015(a)(4) personal jurisdiction defense involves the consideration of whether the defendant’s particular actions amount to “an intentional relinquishment of a known right” … , and results from the taking of some affirmative action evincing the intent to accept a judgment’s validity — such as the making of voluntary payments to satisfy a default judgment prior to moving to vacate … . The mere fact that a defendant, like defendant here, was subject to payments pursuant to a wage garnishment order for more than one year without taking some action is not, without more, a proper basis for finding waiver of the ability to seek relief under CPLR 5015(a)(4) … . Esgro Capital Mgt., LLC v Banks, 2023 NY Slip Op 06312, First Dept 12-7-23

Practice Practice: Making voluntary payments on a default judgment would waive a defendant’s personal-jurisdiction defense to the failure to move to vacate a default judgment within a year. But the garnishment of defendant’s wages for more than a year did not waive the defense.

 

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THERE WAS A SURPLUS AFTER THE FORECLOSURE SALE OF DEFENDANT’S PROPERTY; DEFENDANT HAD ENTERED A HOME EQUITY LINE OF CREDIT WITH CITIBANK; CITIBANK, NOT DEFENDANT, WAS ENTITLED TO THE SURPLUS FUNDS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the defendant, owner of the equity of redemption after a foreclosure sale of defendant’s property, was not entitled to the surplus funds after the sale. Defendant had entered a home equity line of credit with Citibank. Citibank was entitled to the surplus funds:

“‘[S]urplus money proceedings . . . are not collateral to the foreclosure, but are in the action itself[,] [a]nd the rights of lienors subsequent to the mortgage under foreclosure are before the court and must be protected as much as those of the owner of the property'” … . “‘Surplus money from a foreclosure sale is not a general asset of the owner of the equity of redemption, but stands in the place of the property for the purpose of distribution among those having vested interests in or liens on the property. The rights of the parties are fixed at the time of the foreclosure sale, and the rights of a second lienholder are transferred to any surplus'” … . “Under New York law, the lien of a junior mortgagee who is made a party to a foreclosure action brought by a senior mortgagee, although cut-off and extinguished as to the land, continues as a lien upon the surplus funds arising from the foreclosure” … . “‘[U]pon the foreclosure of the first mortgage, the lien of the second mortgage follow[s] the surplus into the hands of the [municipality’s] financial officer, and the remedy of the second mortgagee is to enforce his or her claim in the court by whose direction the foreclosure had taken place'” … . Maspeth Fed. Sav. & Loan Assn. v O’Connell, 2023 NY Slip Op 06037, Second Dept 11-22-23

Practice Point: In addition to the mortgage which was foreclosed, defendant property-owner had entered a home equity line of credit with Citibank. There were surplus funds after the foreclosure sale. Citibank, not defendant, was entitled to the surplus funds.

 

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HERE THE MEMORANDUM OF UNDERSTANDING REQUIRED INSTALLATION AND MAINTENANCE OF A GUTTER, DOWNSPOUT AND FENCE FOR $2500; THE MEMORANDUM WAS NOT AN “INSTRUMENT FOR THE PAYMENT OF MONEY ONLY” AND THEREFORE “SUMMARY JUDGMENT IN LIEU OF COMPLAINT” WAS NOT AVAILABLE (FOURTH DEPT).

The Fourth Department, reversing County Court, determined summary judgment in lieu of complaint was not available because the underlying document was not “an instrument for the payment of money only:”

By motion for summary judgment in lieu of complaint (see CPLR 3213), plaintiff moved for judgment in the amount of $2,500.00, plus interest, pursuant to a memorandum of understanding between the parties regarding the installation and maintenance of a gutter, downspout, and fence between their adjoining properties.  * * *

… [T]he court erred in granting the motion inasmuch as the parties’ memorandum of understanding is not “an instrument for the payment of money only” (CPLR 3213 …). Where, as here, an agreement ” ‘requires something in addition to [an] explicit promise to pay a sum of money, CPLR 3213 is unavailable’ ”  Ellicottville Inn Condominium Assn. v Kempisty, 2023 NY Slip Op 05826, Fourth Dept 11-17-23

Practice Point: When a document requires something in addition to the payment of money (here the installation and maintenance of a gutter, downspout and a fence) it is not an “instrument for the payment of money only” and cannot be enforced by summary judgment in lieu of complaint.

 

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PURSUANT TO THE MANDATORY VICTIMS RESTITUTION ACT (MVRA), A LIEN BASED UPON A RESTITUTION ORDER IN A CRIMINAL CASE CAN BE ENFORCED BY THE PRIVATE CRIME VICTIM (SECOND DEPT).

The Second Department, reversing Supreme Court, in a comprehensive full-fledged opinion by Justice Christopher, determined that a lien based on a restitution order pursuant to the Mandatory Victims Restitution Act (MVRA) can be enforced by the crime victim. Here an insurance company (National Union), which presumably paid the restitution to the crime victim, was substituted for the victim:

This appeal provides an opportunity to examine 18 USC § 3664(m)(1)(B) of the Mandatory Victims Restitution Act of 1996 (hereinafter the MVRA), wherein we determine that a crime victim named in a restitution order who has obtained an abstract of judgment and, as in this case, has docketed and recorded that abstract in accordance with the rules of this state may enforce that lien pursuant to this state’s laws. For the reasons that follow, we hold that section 3664(m)(1)(B) provides a mechanism by which a private victim may enforce such a lien, and that the Supreme Court erred when it … determined that the victim was limited to only recording the abstract of judgment as a lien and dismissed the petition of National Union Fire Insurance Company … (hereinafter National Union) … pursuant to CPLR 404(a) and 3211(a)(7) for failure to state a cause of action. * * *

Our review of the legislative history of the MVRA … supports our conclusion that pursuant to 18 USC § 3664(m)(1)(B), once a victim named in a restitution order has obtained a lien on the property of the defendant, the victim may enforce that lien. * * *

The petition and documentary evidence demonstrated that in accordance with 18 USC § 3664(m)(1)(B), National Union obtained an abstract of judgment of the restitution order at issue from the Clerk of the United States District Court for the Southern District of New York, which was docketed with the Westchester County Clerk (see CPLR 5018[c]), and thus, had an enforceable lien on [the criminal defendant’s] property … . Therefore, the petition sufficiently alleges that National Union is a judgment creditor permitted to commence this proceeding pursuant to CPLR 5206(e). Matter of National Union Fire Ins. Co. of Pittsburgh, Pa, 2023 NY Slip Op 05503, Second Dept 11-1-23

Practice Point: A lien against a criminal defendant’s property based on a restitution order can, pursuant to the Mandatory Victims Restitution Act (MVRA), be enforced by the crime victim.

 

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CASE REMITTED FOR A DETERMINATION OF THE CONSTITUTIONALITY OF THE GUARANTY LAW WHICH WAS FOUND TO HAVE BARRED PLAINTIFF’S CLAIM FOR CERTAIN AMOUNTS (FIRST DEPT).

The First Department sent this case back for a determination whether guarantees at issue are constitutional:

In view of the recent decision in Melendez v City of New York (2023 WL 2746183, 2023 US Dist LEXIS 57050 [SD NY, Mar. 31, 2023, No. 20-CV-5301 (RA)] finding the guaranty law unconstitutional, we remand the constitutional question raised by the parties here so the parties can further develop the record in the trial court for the purpose of applying the Contracts Clause test for constitutionality … . Plaintiff is directed to serve notice on nonparty City of New York under CPLR 1012(b)(2) and file proof of service in order for the City to “intervene in support of its constitutionality” … .

Given the vitality of the constitutional question, we also reverse the dismissal of plaintiff’s claim for those amounts the court determined were barred by the guaranty law for a determination following the court’s resolution of the constitutional issue. 45-47-49 Eighth Ave. LLC v Conti, 2023 NY Slip Op 05180, First Dept 10-12-23

Practice Point: Supreme Court had held plaintiff’s claim to certain amounts was barred by the guaranty law. A federal court has held the guaranty law unconstitutional. This matter was sent back for a determination of the constitutional question.

 

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THE MOTION TO VACATE THE DEFAULT SHOULD HAVE BEEN GRANTED IN THE INTEREST OF JUSTICE, NO NEED TO DEMONSTRATE A REASONABLE EXCUSE; THE LOAN AGREEMENT WAS CRIMINALLY USURIOUS; THE MOTION TO DISIMISS BASED ON DOCUMENTARY EVIDENCE SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the default judgment should have been vacated in the interest of justice and the complaint dismissed based on documentary evidence. The loan which was the basis of the action was criminally usurious:

“CPLR 5015(a) ‘does not provide an exhaustive list as to when a default judgment may be vacated'” … . “In addition to the grounds set forth in section 5015(a), a court may vacate a default ‘for sufficient reason and in the interests of substantial justice'” … . “[A] party is not necessarily required to establish a reasonable excuse in order to be entitled to vacatur in the interest of justice” … . * * *

The plaintiff does not dispute that the agreement effected an annual interest rate exceeding the criminally usurious threshold of 25% (see Penal Law § 190.40).

… “Under CPLR 3211(a)(1), a dismissal is warranted only if the documentary evidence utterly refutes plaintiff’s factual allegations, conclusively establishing a defense as a matter of law” … . Here, … the defendants conclusively established through the submission of the agreement that it constituted a criminally usurious loan … . Crystal Springs Capital, Inc. v Big Thicket Coin, LLC, 2023 NY Slip Op 05121, Second Dept 10-11-23

Practice Point: A motion to vacate a default in the interest of justice does not require a reasonable excuse.

Practice Point: The usurious loan agreement justified dismissal based on documentary evidence.

 

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THE FRAUDULENT-CONVEYANCE CAUSES OF ACTION INVOLVED CONNECTICUT PROPERTIES AND WERE TIME-BARRED IN CONNECTICUT; NEW YORK’S BORROWING STATUTE RENDERED THE ACTIONS TIME-BARRED IN NEW YORK (FIRST DEPT).

The First Department, reversing Supreme Court, determined the fraudulent-conveyances causes of action should have been dismissed as time-barred under New York’s borrowing statute. The properties which were conveyed are in Connecticut and the action is time-barred under Connecticut law:

Plaintiff’s claims are time-barred pursuant to CPLR 202, New York’s borrowing statute. Under CPLR 202, where a nonresident plaintiff asserts causes of action in a New York court, “the claim must be timely under both New York and the jurisdiction where the action accrued” … . “Consequently, . . . it is the shorter of the two states’ statutes of limitations that controls the timeliness of the action” … . For purposes of CPLR 202, “a cause of action accrues at the time and in the place of the injury” and “[w]hen an alleged injury is purely economic, the place of injury is usually where the plaintiff resides and sustains the economic impact of the loss” … .

Here, plaintiff is a resident of Connecticut and alleges only economic injury. Moreover, it does not dispute that, under Connecticut law, where the claims accrued for purposes of the borrowing statute, the statute of limitations for the asserted causes of action has expired (see Conn Gen Stat § 52-552j …). National Auditing Servs. & Consulting, LLC v Assa, 2023 NY Slip Op 03198, First Dept 6-13-23

Practice Point: Causes of action which accrued in another state must be timely under both that state’s and New York’s statutes of limitations.

 

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IN THIS SUIT BY A NEW JERSEY CASINO TO RECOVER DEFENDANT’S GAMBLING DEBT, DEFENDANT RAISED AFFIRMATIVE DEFENSES ALLEGING PLAINTIFF CASINO VIOLATED PROVISIONS OF NEW JERSEY’S CASINO CONTROL ACT (CCA); THE CONTROLLING AGENCY, THE CASINO CONTROL COMMISSION (CCC), HAS PRIMARY JURISDICTION OVER THOSE COMPLAINTS; THE COMPLAINTS MUST BE RULED ON BEFORE THE COURT CAN CONSIDER PLAINTIFF’S SUMMARY JUDGMENT MOTION (FIRST DEPT).

​The First Department, in a full-fledged opinion by Justice Kapnick, determined the plaintiff, a New Jersey casino (Golden Nugget), was not entitled to summary judgment this action seeking to recover defendant’s (Chan’s) $200,000 gambling debt. Defendant had raised affirmative defenses based upon complaints alleging the dice used by the casino violated the Casino Control Act (CCA) which defendant filed with the New Jersey Division of Gaming Enforcement (DGE). The Casino Control Commission has primary jurisdiction over those complaints. Therefore the complaints must be ruled upon before summary judgment can be considered by the court:

Supreme Court’s granting of summary judgment to plaintiff was premature. The motion court should instead have deferred any decision until receipt of DGE’s ruling on Chan’s “patron complaint” based on the same violations, since that grievance was filed prior to the commencement of plaintiff’s litigation and remained pending at the time of its decision. While DGE has ruled that the same scribing violations against another casino do not violate the CCA, there has been no ruling by DGE in any matter concerning defendant’s allegations of “non-transparent dice.” Accordingly, the motion for summary judgment is denied, with leave to renew upon a ruling by DGE on the “patron complaint,” or after six months if DGE has failed to resolve this issue despite sufficient notice to DGE by the parties … . Golden Nugget Atl. City LLC v Chan, 2023 NY Slip Op 02176, First Dept 4-27-23

Practice Point: Here a New Jersey sued defendant to recover a $200,000 gambling debt. Defendant raised violations of New Jersey’s Casino Control Act as affirmative defenses. Because New Jersey’s Casino Control Commission has primary jurisdiction over those complaints, they must be ruled on before the court can consider the casino’s summary judgment motion.

 

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WHEN PURELY ECONOMIC INJURY IS ALLEGED, THE CAUSE OF ACTION ACCRUES WHERE THE PLAINTIFF RESIDES; HERE PLAINTIFF RESIDED IN FLORIDA AND, PURSUANT TO NEW YORK’S BORROWING STATUTE, THE FLORIDA STATUTE OF LIMITATIONS APPLIED, RENDERING THE FRAUDULENT-TRANSFER ACTION UNTIMELY (THIRD DEPT).

The Third Department, reversing Supreme Court, determined the borrowing statute required that the Florida statute of limitations for an action alleging the fraudulent transfer of property be applied, rendering the action time-barred. Plaintiff, a Florida resident, alleged the transfer of property in New York, by defendant, a New York resident, was fraudulent in that it rendered the defendant judgment proof. The Third Department determined the injury occurred in Florida, not New York:

… [T]he parties dispute the applicability of CPLR 202, New York’s “borrowing” statute, which … provides that “[w]hen a nonresident sues on a claim that accrued outside of New York, the cause of action must be commenced within the time period provided by New York’s statute of limitations, as well as the statute of limitations in effect in the jurisdiction where the cause of action in fact accrued” … . “[A] cause of action accrues at the time and in the place of the injury . . . in tort cases involving the interpretation of CPLR 202” … . Relevant here, “[w]hen an alleged injury is purely economic, the place of injury usually is where the plaintiff resides and sustains the economic impact of the loss” … .

While plaintiff asks that we draw a distinction between tort and contract matters as it pertains to the principle that locates his economic harm — and thus accrual of his various causes of action — in his state of residence, we find little support for that premise. Although the tortious act may have occurred when the property was transferred in this state, that does not establish that the accompanying injury to plaintiff was also felt in this state or that the cause of action accrued here … . Erdely v Estate of Airday, 2023 NY Slip Op 01827, Third Dept 4-6-23

Practice Point: Here plaintiff, a Florida resident, alleged defendant, a New York resident, fraudulently transferred New York property, making defendant judgment proof. Because plaintiff alleged purely economic injury (the inability to collect money judgments), the injury occurred where plaintiff resided. Therefore, pursuant to New York’s borrowing statute, the Florida statute of limitations applied, rendering the action untimely.

 

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