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ACTION TO ENFORCE A FOREIGN JUDGMENT AGAINST A DELAWARE DISSOLVED LIMITED LIABILITY COMPANY COULD NOT BE MAINTAINED BECAUSE THE CERTIFICATE OF CANCELLATION HAS NOT BEEN NULLIFIED (FIRST DEPT).

The First Department, reversing Supreme Court, determined the action to domesticate and enforce a foreign judgment after defendant corporation had been dissolved could not be maintained:

Plaintiff commenced this action against defendant, a Delaware limited liability company, to domesticate and enforce a foreign judgment in its favor several months after defendant had been dissolved and a certificate of cancellation filed (see 6 Del C § 18-203[a]). As the certificate of cancellation has not been nullified and plaintiff does not seek nullification, plaintiff cannot maintain this action (6 Del C § 18-803[b]) … . Epie v Herakles Farms, LLC, 2020 NY Slip Op 05283, First Dept 10-1-20

 

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A NOTICE OF LIEN CAN NOT BE DISCHARGED ABSENT A TRIAL IF IT IS VALID ON ITS FACE (FIRST DEPT).

The First Department, reversing Supreme Court, determined the notice of lien should not have been discharged because it was valid on its face:

… Supreme Court … granted the motion of defendants … to reduce or discharge the mechanic’s lien filed by plaintiff … to the extent of reducing the lien from $33,837,618.34 to $3,566,357.42 … .

A court has no inherent power to vacate, modify or discharge a notice of lien pursuant to Lien Law § 19(6) where there is no defect on the face of the lien, and any dispute concerning the lien’s validity must await a trial … . Pizzarotti, LLC v FPG Maiden Lane LLC, 2020 NY Slip Op 05305, First Dept 10-1-20

 

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WHEN THE MERITS OF A MOTION TO REARGUE ARE ADDRESSED THE DENIAL IS APPEALABLE; THE PERSONAL SERVICE REQUIREMENTS FOR THE NOTICE OF SALE PURSUANT TO THE LIEN LAW WERE NOT MET, THEREFORE THE 10-DAY PERIOD FOR BRINGING A SPECIAL PROCEEDING TO CONTEST THE VALIDITY OF THE LIEN DID NOT START TO RUN (THIRD DEPT).

The Third Department noted that where the court addresses the merits of a motion to reargue it will be deemed to have granted the motion to reargue for purposes of appeal. Therefore, although the denial of a motion to reargue is not appealable, the denial after addressing the merits is appealable. In that case the motion is treated as if the motion to reargue were granted and then the original decision was adhered to. The court also noted that the requirements for the personal service of a notice of sale were not met in this case. Therefore the 10-day period for bringing a special proceeding to determined the validity of the lien did not start to run:

“Although, generally, no appeal lies from an order denying a motion to reargue, where the court actually addresses the merits of the moving party’s motion, we will deem the court to have granted reargument and adhered to its prior decision — notwithstanding language in the order indicating that reargument was denied” … . * * *

Under Lien Law §201-a, petitioner’s 10-day time period to “commence a special proceeding to determine the validity of the lien” does not begin to run until service upon it of the “notice of sale” by respondent, the lienor. Service of such notice of sale by the lienor must be effectuated by personal service “within the county where [the] lien arose,” unless the person to be served “cannot with due diligence be found within such county” (Lien Law § 201). … As Supreme Court correctly found, and as the record reflects, respondent failed to submit any proof that it exercised due diligence in seeking to effect personal service upon petitioner of the notice of lien and sale before improperly resorting to the statutory alternative of certified mail service. As a result, the 10-day time limitation for petitioner to challenge the lien under Lien Law § 201-a did not begin to run … . Matter of Manufacturers & Traders Trust Co. v J.D. Mar. Serv., 2020 NY Slip Op 05260, Third Dept 10-1-20

 

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THE PROMISSORY NOTE WAS NOT DEMONSTRATED TO BE AN INSTRUMENT FOR THE PAYMENT OF MONEY ONLY, THE MOTION FOR SUMMARY JUDGMENT IN LIEU OF COMPLAINT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s motion for summary judgment in lieu of complaint (CPLR 3213) based upon a promissory note should not have been granted. The note was not demonstrated to be an instrument for the payment of money only:

Pursuant to CPLR 3213, a plaintiff demonstrates its prima facie entitlement to judgment as a matter of law with respect to a promissory note if it shows “the existence of a promissory note, executed by the defendant, containing an unequivocal and unconditional obligation to repay, and the failure by the defendant to pay in accordance with the note’s terms” … . “Where the instrument requires something in addition to defendant’s explicit promise to pay a sum of money, CPLR 3213 is unavailable” … . Once the plaintiff has established its prima facie entitlement to judgment as a matter of law, “the burden then shifts to the defendant to submit evidence establishing the existence of a triable issue with respect to a bona fide defense” … .

Here, the plaintiffs failed to establish, prima facie, that the subject promissory note was an instrument for the payment of money only … . In support of their motion, the plaintiffs submitted the promissory note, which refers to the asset sale/purchase agreement and provides the defendants with “an absolute right of set-off against the entire unpaid principal balance of [the] Note based upon any and all provisions of the Asset Sale/Purchase Agreement.” Under the circumstances, “outside proof” was required, “other than simple proof of nonpayment,” to establish the plaintiffs’ prima facie case … . Express Valentine Auto Repair Shop, Inc. v New York Taxi 2, Inc., 2020 NY Slip Op 03644, Second Dept 7-1-20

 

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THE HOLDER OF A DEED INTENDED AS SECURITY IN THE NATURE OF A MORTGAGE MUST PROCEED BY FORECLOSURE TO EXTINGUISH THE MORTGAGOR’S INTEREST; HERE THE SUBSEQUENT GOOD FAITH PURCHASERS OF THE PROPERTY WERE ENTITLED TO SUMMARY JUDGMENT DISMISSING THE MORTGAGEE’S CAUSES OF ACTION SEEKING RESCISSION OF THEIR DEED AND A DECLARATION THEIR DEED WAS NULL AND VOID (SECOND DEPT).

The Second Department determined a deed which facially appears to evidence an absolute conveyance was actually intended as security in the nature of a mortgage. The holder of such a deed (here American Lending) must proceed by foreclosure to extinguish the mortgagor’s interest. The subsequent purchasers of the property (the Romond defendants) were good faith purchasers. Therefore the Romond defendants were entitled to dismissal of American Lending’s complaint seeking rescission of the Romond deed and a declaration the deed was null and void:

In 2009, the defendant Dana Grigg sought to purchase certain property … . When financing for the transaction fell through, Grigg entered into an … agreement with the plaintiff, American Lending Corp. … to borrow … $385,000. The terms of the loan, which were memorialized in a note, included a provision that after 90 days, if the loan had not been repaid in full, American Lending would be authorized to file a joint deed in the property records and to “seek a Summary Judgment instead of following a regular foreclosure proceedings [sic].” In June 2009, Grigg purchased the subject property and executed … a deed from himself to himself and American Lending (… the joint deed). Grigg subsequently defaulted under the terms of the loan. * * *

Real Property Law § 320 provides, in pertinent part, that a “deed conveying real property, which, by any other written instrument, appears to be intended only as a security in the nature of a mortgage, although an absolute conveyance in terms, must be considered a mortgage” … .  … “The holder of a deed given as security must proceed in the same manner as any other mortgagee—by foreclosure and sale—to extinguish the mortgagor’s interest” … .

… [T]he Romond defendants established … that the joint deed was given as security for the loan from American Lending to Grigg. Therefore, pursuant to Real Property Law § 320, the joint deed must be considered a mortgage, and American Lending’s sole remedy for Grigg’s breach of its terms was to commence an action sounding in foreclosure. Moreover, under the circumstances at bar, the Romond defendants established that they were good faith purchasers of the subject property (see Real Property Law § 290 …). American Lending Corp. v Grigg, 2020 NY Slip Op 03211, Second Dept 6-10-20

 

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THE MORTGAGE-PAYMENT MODIFICATION AGREEMENT DID NOT CONSTITUTE AN ACKNOWLEDGMENT OF THE MORTGAGE DEBT WITHIN THE MEANING OF GENERAL OBLIGATIONS LAW 17-101; THEREFORE THE STATUTE OF LIMITATIONS DID NOT START ANEW; THE FORECLOSURE ACTION IS TIME-BARRED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant’s trial payments as a condition for entering a mortgage-payment modification agreement (the Plan) did not amount to an acknowledgment of the debt such that the statute of limitations would start running anew:

” General Obligations Law § 17-101 effectively revives a time-barred claim when the debtor has signed a writing which validly acknowledges the debt'” … . “The writing, in order to constitute an acknowledgment, must recognize an existing debt and must contain nothing inconsistent with an intention on the part of the debtor to pay it” … . “In order to demonstrate that the statute of limitations has been renewed by a partial payment, it must be shown that the payment was accompanied by circumstances amounting to an absolute and unqualified acknowledgment by the debtor of more being due, from which a promise may be inferred to pay the remainder'” … . * * *

… [T]he Plan did not constitute an “unconditional and unqualified acknowledgment of [the] debt” sufficient to reset the statute of limitations … . While the writing arguably acknowledged the existence of indebtedness, the defendant merely agreed to make three trial payments so as to receive a permanent modification offer. Any intention to repay the debt was conditioned on the parties reaching a permanent modification agreement, which condition did not occur. Under these circumstances, it cannot be said that the writing contained “nothing inconsistent with an intention on the part of the debtor to pay” the debt … . Indeed, the defendant represented in the Plan that he was unable to afford the mortgage payments. Nationstar Mtge., LLC v Dorsin, 2020 NY Slip Op 01354, Second Dept 2-26-20

 

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ALTHOUGH DOCUMENTARY EVIDENCE IS ADMISSIBLE NOTWITHSTANDING THE DEAD MAN’S STATUTE, HERE THE DECEDENT’S SIGNATURE ON THE GUARANTY WAS NOT AUTHENTICATED BY SOMEONE OTHER THAN AN INTERESTED WITNESS; THEREFORE PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT ON THE GUARANTY SHOULD NOT HAVE BEEN GRANTED (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, determined the personal guaranty signed by decedent was not authenticated. Therefore plaintiff was not entitled to summary judgment on the guaranty:

We modify, however, with respect to the cause of action under the personal guaranty purportedly signed by the decedent, because although documentary evidence is admissible notwithstanding the dead man’s statute, it must be “authenticated by a source other than an interested witness’s testimony” … . Having failed to authenticate the guaranty through “a source other than an interested witness’s testimony,” plaintiff was not entitled to summary judgment on the guaranty. Galpern v Air Chefs, L.L.C., 2020 NY Slip Op 01021, First Dept 2-13-20

 

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ACCELERATION OF A DEBT DOES NOT AFFECT THOSE INSTALLMENT PAYMENTS DUE MORE THAN SIX YEARS BEFORE THE ACTION ON THE NOTES WAS COMMENCED, ACTION ON THOSE PAYMENTS IS TIME-BARRED (FIRST DEPT).

The First Department, reversing Supreme Court, determined that installment payments due prior to six years before the action on the notes could not be recovered despite the allegation that the debt had been accelerated:

Acceleration causes those future installment payments that are not yet due and payable to become immediately due and payable. It enables a lender to advance the due date for the future installment payments and thus, the statute of limitations runs on the balance of the debt … . It does not change the due date of those past due installment payments to that of the date of acceleration … .

Accordingly, plaintiffs demonstrated, prima facie, that defendant breached each of the notes by submitting evidence of the duly executed notes and defendant’s failure to make payments in accordance with their payment terms … . Defendant, however, demonstrated prima facie, that the unpaid installment payments due prior to June 1, 2012 were time-barred. Cannell v Grail Partners, LLC, 2020 NY Slip Op 00973, First Dept 2-11-20

 

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AN EMAIL EXCHANGE WAS INSUFFICIENT TO RESTART THE STATUTE OF LIMITATIONS FOR AN OTHERWISE TIME-BARRED DEBT PURSUANT TO GENERAL OBLIGATIONS LAW 17-101 (SECOND DEPT).

The Second Department, reversing Surrogate’s Court, determined that an email exchange did not acknowledge a debt owed to decedent such that the statute of limitations started anew when the exchange took place in 2015. Any action on the debt was time barred:

Jean M. Hollis (hereinafter Jean) died in October 2015, and was survived by six children. Jean’s will, which was admitted to probate in February 2016, provided that “[i]n the event that any of my surviving children shall be indebted to me at the time of my demise, . . . then such indebtedness shall be deducted from any bequest made to said children.” In January 2016, Paul James Hollis (hereinafter the decedent), one of Jean’s children, died, and his wife, Bernadette Hollis (hereinafter Bernadette), was appointed administrator of his estate. In September 2016, the respondent Peter H. Hollis (hereinafter Peter), as an executor of Jean’s estate, filed a notice of claim against the decedent’s estate alleging that it was indebted to Jean’s estate in the sum of $147,265.35, representing the sum of $146,765.35 borrowed by the decedent from Jean between April 2005 and January 2008, and an additional loan made by Jean to the decedent in December 2011 in the sum of $500. …

The subject email arguably acknowledged that the decedent owed a pre-existing debt to Jean, inasmuch as it stated that he had been “informed” by his sister, Jeanine Hollis, that “[he] owe[s] around $140,000 to Mom.” Although the subject email initially stated that “I have every intention of paying this debt,” it then went on to state that “there are some mitigating circumstances that I would like to note sometime in the near future.” In an email sent the next day, the decedent stated “I just want the process to be fair and not arbitrary.” Since the subject email contained language inconsistent with an intention on the part of the decedent to pay the alleged debt, the court erred in concluding that the subject email renewed the statute of limitations pursuant to General Obligations Law § 17-101 … . Matter of Hollis, 2020 NY Slip Op 00860, Second Dept 2-5-20

 

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