supreme court - state of new york ias term part 23...

Bayside Carting, Inc. ( “Bayside”) and for leave to enter a

1

Bayside and a default judgment against DefendantsRotondo, Rotondo Contracting and Statewide Recycling:

Notice of Motion dated October 29, 2002;Affidavit of Frank Peretore sworn to on October 30, 2002;Affidavit of Mark Bregar sworn to on October 28, 2002;Plaintiff’s Memorandum of Law.

Plaintiff moves for summary judgment against Defendants FRJ Leasing

Corporation (“FRJ”) and

42nd StreetNew York, New York 10036-6910

The following papers were read on Plaintiff ’s motion for summary judgmentagainst Defendants FRJ and

& Associates, P.C.330 West

& Peretore, P.C.110 Park StreetStaten Island, New York 10306

COUNSEL FOR DEFENDANTSRotondi

BAYSIDE CARTING, INC., FRANKROTONDO, JR., ROTONDOCONTRACTING CORP., STATEWIDERECYCLING, INC.,

Defendants.

COUNSEL FOR PLAINTIFFPeretore

-

FRJ LEASING CORPORATION,

- against

002/MOT D

AMERICAN EXPRESS EQUIPMENTFINANCE,

Plaintiff,

12-4~-02Motion Sequence No.:

5-02Submission Date:

I-1

IAS TERM PART 23 NASSAU COUNTY

PRESENT:HONORABLE LEONARD B. AUSTIN

Justice Motion R/D: 1

NEW YORK- STATE OF SUPREME COURT

10556/01INDEXNO.

*.”

2

“ * * *all present and all present and futureaccounts, accounts receivable, inventoryproceeds. Chattel paper, contract rights,documents, instruments, general intangiblesand the books and records pertaining to theforegoing and the equipment containing saidbooks and records together with all moniesdeposit accounts, insurance proceeds andother rights to payment due or to become duethereunder and all repossessions and returnsthereunder * *

$3,499.69. The first payment was due on February 28, 1996 with subsequent payments

to be made on the same day of each successive month until the outstanding balance

had been paid in full.

The obligations of FRJ under the promissory note were secured by a Security

Agreement whereby FRJ pledged “1 new Komatsu WA 380 Loader, Serial Number

A46084 and

$209,981.40. The note was to be repaid in 60 equal installments of

Rockford in the

principal sum of

Rockford Industries, Inc. ( “Rockford ”).

On February 28, 1996, FRJ executed a promissory note with

10556/01

default judgment against the Defendants Frank Rotondo, Jr. ( “Rotondo ”), Rotondo

Contracting Corp. ( “Contracting ”) and Statewide Recycling, Inc. ( “Statewide ”).

BACKGROUND

Plaintiff, American Express Equipment Finance ( “American Express ”) brings this

action seeking to recover on three promissory notes and to recover the items pledged

as security for the promissory notes. American Express is the successor in interest to

AMERICAN EXPRESS EQUIPMENT FINANCE v. FRJ LEASING CORPORATION, etal.,Index No.

IO KEL Permanent Self Cleaning Overhead

3

$192,936.52. The obligations of FRJ under this note were

secured by a Security Agreement dated September 20, 1996 wherein FRJ pledged as

security its interest in one Picking Station Serial Number C-96-166 and the component

parts thereof, and one Mastermag 8PCB

Rockford dated September 20, 1996

in the principal sum of

.”

This security agreement was perfected by filing same with the New York State

Departments of Motor Vehicles and State.

FRJ executed a third promissory note with

, and whether presently and/orhereinafter acquired by Debtor or in whichDebtor has and interest, and all the proceedsof the foregoing * * *

, regardlessof location

, fixtures, property,intangible property, intellectual property, andassets of Debtor [FRJ] of any kind

* in all equipment and any and allinventory, accounts, receivables, goods,machinery, furniture

“ * *

CWO75-22-3P

and

: 2WLNCCJFXTK943434 and one Atlas Roll-off Hoist, Serial Number

4864F, VIN:-

$148,962.00. The obligations of FRJ pursuant to the promissory

note were secured by a Security Agreement dated September 5, 1996 wherein FRJ

pledged as security its interest in one 1996 Western Star Tractor

Rockford

in the principal sum of

10556/01

This security interest was perfected by filing same with the New York State

Departments of Motor Vehicles and State.

On September 5, 1996 FRJ executed a second promissory note with


Bayside, Contracting, Statewide and Rotondo pursuant to three separate Unconditional

Guaranty agreements executed by Rotondo, individually, and on behalf of the corporate

guarantors simultaneously with the execution of the promissory notes and Security

Agreements.

4

.”

This security interest was perfected by filing same with the New York State

Departments of Motor Vehicles State.

The obligations of FRJ under all three promissory notes were guaranteed by

* * * all equipment and any and all inventory,accounts, receivables, furniture, fixtures,property, intangible property, intellectualproperty and assets of Debtor (FRJ) of anykind, regardless of location, and whetherpresently and/or hereinafter acquired by Debtoror in which Debtor has an interest, and all theproceeds of the foregoing * * *

“

20X8HN216454 and American Roll Off Hoist Serial

Number Bl-1224 and

IXPAL

w/ 425

Caterpillar Engine VIN:

B9X2R N3492 62, one 1988 Roll Off Peterbilt Model

Number 357 w/425 Caterpillar Engine VIN: lXPALBOXOJN264066 and American Roll

Off Hoist Serial Number 806516, one 1987 Roll Off Peterbilt Model Number 357

lXP5D

B9X9R N3584 15, one 1994 Peterbilt Tractor Model

Number 379 w/sleeper cab and 425 Caterpillar Engines and Road Ranger

Transmissions VIN:

XP5D

10556/01

Magnet, Serial Number M8216 and the component parts thereof, one 1994 Peterbilt

Tractor Model Number 379 w/sleeper cab and 425 Caterpillar Engines and Road

Ranger Transmissions VI N: 1


§306(b). Defendant Rotondo was served by delivering a

copy of the summons and complaint to a person of suitable age and discretion at 186

Broadway, Huntington Station, New York and by mailing a copy thereof to him at the

same address. Said address is Rotondo ’s actual place of business. CPLR 308 (2).

The Order to Show Cause seeking an Order of Seizure was served upon the

corporate Defendants and Rotondo simultaneous with the service of process. Only

5

IO,2001 by filing the summons and

complaint with the County Clerk, Nassau County. At the same time, American Express

moved for an Order of Seizure. The complaint alleges six causes of action. The first

three seek recovery under the promissory notes, conversion of the chattel, breach of

warranty and unjust enrichment. As a part of the relief demanded, Plaintiff also seeks

reasonable counsel fees.

The Summons and Complaint were served on the corporate Defendants on July

16, 2001, by serving the Secretary of State as Statutory Agent for the corporations.

Business Corporation Law

$17,347.34.

This actions was commenced on July

$53,226.32 and the balance outstanding on the September 20

1996 promissory note was

$45,495.97, the balance outstanding on the September 5, 1996

promissory note was

10556/01

FRJ defaulted in payment on the promissory notes. In the event of a default in

payment, the holder of the promissory note had the right to accelerate the payments

and declare the entire outstanding balance due. American Express has chosen to do

this. As of October 28, 2002, the balance outstanding on the February 28, 1996

promissory note was


Franc0 Rotondo Jr., was deposed on behalf of the appearing Defendants on

September 5, 2002. At his deposition, he testified that FRJ had sold the two 1994

Peterbilt Tractors, the 1988 Roll Off Peterbilt and the 1987 Roll Off Peterbilt which were

pledged as security in connection with the September 20, 1996 Security Agreement and

the 1996 Western Star Tractor and the Atlas Roll-off Hoist pledged as Security in

connection with the September 5, 1996 Security Agreement.

Mr. Rotondo further testified that the Komatsu Loader that was pledged as

security in connection with the February 28, 1996 Security Agreement was still in the

possession of FRJ and was located at 186 Broadway, Huntington Station, New York.

6

Bayside generally deny the allegations of the complaint, interpose several affirmative

defenses and a single counterclaim which alleges that the calculation of the sums due is

incorrect. Defendants Rotondo, Contracting and Statewide have never appeared in the

action.

Bayside which

interposed an answer to the complaint dated January 8, 2002. In that answer, FRJ and

$334,000.00 within 30 days of the date of the order. American Express

never posted the bond.

The only Defendants to have appeared in this action are FRJ and

Bayside opposed that motion asserting that there was a dispute as

to the amounts due on the promissory notes.

By decision dated May 2, 2002, this Court granted American Express ’ motion for

an order of seizure on condition that American Express post a bond or undertaking in

the amount of

10556/01

Defendants FRJ and


(2nd Dept., 1982).

In this case, the summons and complaint were served upon the Defendants

Contracting, Statewide and Rotondo in July, 2001. The application for a default against

7

660.A.D.2d & S Beer and Soda Discounts, Inc., 91

(2nd

Dept., 1984); and Winkelman v. H

A.D.2d 951 Finan v. Queens Transit Corp., 100

3 294.

In order to avoid the automatic dismissal mandated by CPLR 3215(c), the

Plaintiff must demonstrate that the action has merit and sufficient excuse for failure to

enter a default within one year.

3rd

IOKEI that were pledged as security in

connection with the September 20, 1996 Security Agreement were also in the

possession of FRJ and were located at 1345 New York Avenue, Huntington Station,

New York.

DISCUSSION

A. Default Judqment

CPLR 3215(c) provides that a request for a default judgment must be made

within one year after default or the action shall be dismissed as abandoned. This can

be avoided on good cause shown. If the action is brought against multiple Defendants

in which some appear and some default, the Plaintiff must still seek to enter a default

judgment against the defaulting Defendants within a year of the default. The Court may

then direct that the inquest against the defaulting Defendants be held at the time of, or

after, the trial against the appearing Defendants. CPLR 3215(d). See, Siegel, New York

Practice

10556/01

The Picking Station and Mastermag 8PCB


(2”d Dept., 1990).

To establish entitlement to judgment as a matter of law on a promissory note, the

Plaintiff must establish the existence of the promissory note executed by the Defendant,

an unequivocal and unconditional obligation to repay and a default in payment by the

8

A.D.2d 401,

supra; and Bras

v. Atlas Construction Co., 166

N.Y.2d 557 (1980). Once the moving party has

made a prima facie showing of entitlement to judgment as a matter of the law, the party

opposing summary judgment must come forward with proof in evidentiary form

establishing that issues of fact exist which necessitate a trial or demonstrate an

acceptable reason for failing to do so. Zuckerman v. Citv of New York,

N.Y.2d 361 (1974). The party moving for summary judgment

must make a prima facie showing of entitlement to judgment as a matter of law.

Zuckerman v. City of New York, 49

N.Y.2d 320 (1986);

Andre v. Pomerov, 35

Summarv Judament

Summary judgment is drastic remedy which will be granted only when it is clear

that, there are no issues of fact. Alvarez v. Prospect H OSP., 69

10556/01

these Defendants was not made until October, 2002, more than one year after service.

While the papers submitted to the Court in connection with this motion, in particular, the

affidavit of Mark Bregar, demonstrate a meritorious claim on the guarantee against

these Defendants, American Express has failed to make a showing or even argue that it

has a sufficient excuse for failing to enter a default against these Defendants within one

year, Therefore, the action against these Defendants must be dismissed as

abandoned.

B.


A.D.2d

9

N.Y.2d 63 (1961). Clear and explicit intent to guarantee the obligation is established

by having the guarantor sign in that capacity and by the language contained in the

guarantee. Harrison Court Assocs. v. 220 Westchester Avenue Assocs., 203

(2nd Dept., 1977). The intent to guarantee

payment of the obligation must be clear and explicit. See, Salzman Sian Co., v. Beck,

IO

A.D.2d 625

$5-701(a)(2). See, Schulman v. Westchester

Mechanical Contractors. Inc., 56

(qfh Dept., 1996).

To be enforceable, the guarantee must be in writing subscribed by the person to

be charged. General Obligations Law

A.D.2d 669 Kev Bank of Maine v. Lisi, 225

(lst Dept.

1996); and

(2nd Dept., 1999); Chemical Bank v. Nemeroff, 233 A.D. 2d 239 A.D.2d 351

Allvn, 262Securitv Systems. Inc., v.

$116,069.63.

Therefore, Plaintiff is entitled to summary judgment against the Defendant FRJ in this

amount.

To establish entitlement to judgment as a matter of law on a guarantee, the

Plaintiff must establish the existence of the underlying promissory note or obligation, the

guarantee and the failure of the prime obligor to make payment in accordance with the

terms of the promissory note or obligation. E.D.S.

(2nd Dept., 1995). Plaintiff has established the existence of three promissory notes

executed by the Defendant FRJ which contain a clear and unequivocal obligation to

repay and the default of FRJ in making payment. Plaintiff has also established the

amount due on these notes which, as of the making of this motion, was

A.D.2d 601Baccarav, 214 (2nd Dept. 2001); and East New York Savinss Bank v.

2d

488

DeLuca, M.D., P.C. v. North Shore Medical lmasinq LLP, 287 A.D.

10556/01

obligor. James


Duffv,

10

& (3rd Dept., 1978); General Motors Acceptance Corp. v. Berq A.D.2d 927

& Services, Inc.,

66

(I”’

Dept., 1976).

Paragraph IO of the various Security Agreements signed by FRJ grants the

secured party the right to take possession of the collateral and to sell the collateral in

such a manner as the secured party may deem appropriate. This contractual right

exists independent of, and in addition to, any rights granted to the Secured Party by the

UCC. See, General Electric Credit Corp. v. Marcella ’s Appliance Sales

A.D.2d 815

(2nd Dept. 1986); and

MGD Graphic Systems, Inc. v. New York Press Publishina, Inc., 52

9-503. See, Leban

Store Fixture Co.. Inc. v. August Properties, 117 A.D. 2d 782

§

Bayside on the guarantee.

With regard to the claims for summary judgment on the conversion cause of

action, if American Express was a secured creditor it could, upon default, take

possession of the collateral without judicial process if possession can be taken without

a breach of the peace pursuant to Uniform Commercial Code

Bayside have opposed this motion. Therefore, Plaintiff is

entitled to judgment against

Bayside. See, Yellow Book

of New York, LLP v. Platt, 2003 WL 1389103 (Dist. Ct. Nassau Co.) Plaintiff has also

established the obligations of FRJ under the promissory notes and the default of FRJ in

payment. Neither FRJ or

Bayside has guaranteed the obligations of FRJ

under the terms of the promissory notes. The guarantee is a writing which is clear and

explicit. It was signed by Frank Rotondo, Jr., on behalf of

supra.

Plaintiff has established that

(2nd Dept., 1994). See, Salzman Siqn Co., v. Beck,

10556/01

244

AMERICAN EXPRESS EQUIPMENT FINANCE V. FRJ LEASING CORPORATION, etal.,Index No.

damnum in the complaint. Where a

party seeks punitive damages, the demand for such damages should be made in the

11

65,66. Since the

value of the items and the actual date of the conversion is not established, the matter

should be set down for an assessment of damages on these issues.

Plaintiff, in its papers, also seeks punitive damages on its conversion action even

though such relief is not sought as part of the ad

§§ Jur.2d, Conversion (lst Dept., 1987). See also, 23 NY A.D.2d 539

Plavinq Sessions, Inc. v. Deluxe Laboratories, Inc., 129Lonq

(2nd Dept., 1975).

American Express has established its superior right to possession of the items

pledged as security pursuant to the security agreements. It has, therefore, established

an entitlement to judgment on the issue of liability.

The measure of damages in a conversion action is the value of the goods at the

time of the conversion.

A.D.2d 352 Also Distributors, Ltd., 48

(3rd Dept., 2000); and AMF

Incorporated v.

A.D.2d 668

Rockford under the security agreement,

including the right to take possession of and sell the collateral. American Express has

not availed itself of these statutory or contractual rights notwithstanding this Courts

earlier granting of Plaintiffs motion for an order of seizure.

To establish a claim for conversion, the Plaintiff must prove that Plaintiff has legal

ownership or a superior right of possession to a specific, identifiable thing and that the

Defendant exercised unauthorized control over this specific item in contravention of

Plaintiff ’s rights. Hart v. Citv of Albanv, 272

10556/01

118 Misc. 2d 525 (Sup. Ct. Nassau Co. 1983). As the successor in interest to Rockford,

American Express obtained the rights of


(3rd Dept. 1973). The matter must be set down for a hearing to

determine the fair and reasonable value of the services rendered by Plaintiff ’s attorneys.

Accordingly, it is,

12

(lst Dept. 1996); and Kooperman v. Picoult, 41 A.D. 2d

980, 343 N.Y.S. 2d 732

Cardali, 225

A.D. 2d 474, 639 N.Y.S. 2d 379

(3rd Dept. 1999); In re Richard J.

v.

Maaqie ’s Tavern, Inc., 257 A.D. 2d 733

(qfh Dept.), aff’d., 241 N.Y. 593 (1925) where the counsel fee to

be awarded is based upon the time spent, the complexity of the issues presented, the

nature of the services, the amount in controversy, the professional standing of counsel

and the results obtained. Once the counsel fee is established by the Court, it is added

to the total recovery to establish Plaintiff ’s counsel ’s contingency fee. See, Wood

lslip v. Brower, 42 N.Y. 2d 471, 398 N.Y.S. 2d 815

(1977); and Gair v. Peck, 6 N.Y. 2d 97, 188 N.Y.S. 2d 491 (1959). Instead, the counsel

fee must be based on the standards set forth in the seminal case of Matter of Potts, 213

A.D. 59, 209 N.Y.S. 655

Nat’1 Bank of East

Contractinq Corp., 141 Misc. 242 (Sup Ct., Washington

Co. 1930). Since the complaint does not demand punitive damages and Plaintiff has

not moved for leave to amend the complaint to make such a demand, the request for

punitive damages cannot be properly considered.

Finally, Plaintiff requests attorney ’s fees in accordance with the terms of the

notes. The notes provide for attorney ’s fees in a reasonable amount fixed at 20% of the

amount due. The Court cannot blindly accept such an approach to a counsel fee

award. The Court has the obligation to oversee the fees charged by counsel. See,

Matter of First

10556/01

complaint. See, Rock v. Belmar


14,2003 at

13

Bayside Carting, Inc. on Plaintiff ’s first, second and third

causes of action is granted; and it is further

ORDERED, that Plaintiff is granted leave to enter an Order, settled on five (5)

days notice, granting Plaintiff immediate possession and title to the items pledged as

security pursuant to the security agreement; and it is further

ORDERED, that if Plaintiff takes possession of the collateral that Plaintiff dispose

of same in a commercially reasonable manner as defined in UCC Article 9 and that the

net proceeds of sale after deduction for the expense for taking possession, holding,

preparing for sale and selling the collateral be applied to the amount outstanding on the

judgment; and it is further

ORDERED, that Plaintiff ’s motion for on the issue of liability on the fourth cause

of action is granted; and its further

ORDERED, that Plaintiff ’s motion for leave to enter a default judgment against

the Defendants, Frank Rotondo, Jr., Rotondo Contracting Corp., and Statewide

Recycling, Inc., is denied and the action against said Defendants is dismissed pursuant

to CPLR 3215(c); and it is further,

ORDERED, that this matter is respectfully referred to Special Referee

Frank Schellace (Special Term Part II Courtroom, Rm 060, Lower Level) to hear and

determine all issues relating to a determination of damages on the fourth cause of

action, if any, and for an assessment of counsel fees due herein on May

10556/01

ORDERED, that Plaintiff ’s motion for summary judgment against the Defendants

FJR Leasing Corporation and


2003

14

4 0 AR?

28,2003

2,2002, damages on the fourth cause of action and counsel fees and

costs and disbursements as taxed by the County Clerk.

This constitutes the decision and Order of the Court. n

Dated: Mineola, NYMarch

$116,069.63 together with interest

from October

(2), 311 (a) and file with the Clerk of the Court, a copy of the Order

with Notice of Entry, a Notice of Inquest and Note of Issue and Plaintiff shall pay all

appropriate fees for the filing thereof on or before April 21, 2002; and it is,

ORDEREQ, that upon the hearing on damages and the determination of

appropriate counsel fees by the Special Referee, the County Clerk is directed to enter

judgment in favor of Plaintiff in the principal sum of

9:30 a.m.; and it is further,

ORDERED, that counsel for Plaintiff shall serve Defendants herein pursuant to

CPLR 308 (1) or

10556/01


supreme court - state of new york ias term part 23...

Documents