INDEX NO. 1965712000 SUPREME COURT - STATE OF NEW YORK IAS TERM PART 23 NASSAU COUNTY PRESENT: HONORABLE LEONARD B. AUSTIN Justice Motion R/D: 7-8-02 Submission Date: 12-12-02 Motion Sequence No.: O03,004/MOT D GILBERT SPECTOR and MYRA SPECTOR, Plaintiffs, X COUNSEL FOR PLAINTIFFS Mark A. Billhimer, Esq. 150 Broad Hollow Road - Suite 109 Melville, New York 11747 - against - GOTHAM BANK OF NEW YORK, RICHARD MARCHINI and LAURENCE R. MARCHINI, JR., Defendants. X COUNSEL FOR DEFENDANTS Herzfeld & Rubin, P.C. 40 Wall Street New York, New York 10005 ORDER The following papers were read on Defendants motion to dismiss the amended complaint and to consolidate and Plaintiff s cross-motion directing completion of discovery, leave to replead and entry of a default judgment. Notice of Motion, dated June 7,2002; Affirmation of Peter J. Kurshan, Esq., dated June 7, 2002; Defendants Memorandum of Law; Notice of Cross-motion, dated October 31 1 2002; Affirmation of Mark A. Billhimer, Esq., dated October 26, 2002; Plaintiff s Memorandum of Law; Defendant s Reply Memorandum of Law. Defendants Gotham Bank of New York, Richard Marchini and Laurence 1
Marchini, Jr., move to dismiss the amended complaint pursuant to CPLE 3211, or alternatively, for an order pursuant to CPLR 602 consolidating the above captioned action with another action pending in the Supreme Court, Westchester County. Plaintiffs cross-move for (1) an order compelling further discovery in accord with this Court s May 9, 2002 Preliminary Conference order; (2) leave to replead the amended verified complaint, if necessary, and serve a second amended verified complaint, or alternatively, for leave to replead the entire complaint after the completion of discovery; and (3) an order declaring Defendants to be in default in answering the initial complaint pursuant to CPLR 3215. BACKGROUND In this action, the Plaintiffs allege that the Defendants breached certain contractual, statutory and tort-based duties by improperly releasing, and/or failing to use reasonable care in the custody and preservation of, collateral given as security for a. promissory note which the Plaintiffs personally had guaranteed. The Plaintiffs further allege that the Defendants made a series of fraudulent statements and misrepresentations on which they relied and which induced them to enter in the personal guarantee (Cmplt.,lq 174-I 91). By order and decision dated March 14, 2002, this Court granted stated branches of a prior motion to dismiss the complaint made by the Defendants Gotham Bank of New York, Richard Marchini and Laurence Marchini, Jr. In granting the motion, this 2
Court permitted the Plaintiffs to replead specified claims which had been dismissed. In accord with the Courts order, the Plaintiffs have now served a first amended complaint containing several repleaded causes of action. The Defendants now move to dismiss the amended complaint pursuant to CPLR 3211 (a), arguing, in sum and substance, that the Plaintiffs claims are (1) substantively defective; (2) conclusively without merit by virtue of certain documentary evidence (CPLR 3211 [a][l]), or (3) otherwise foreclosed by the doctrine of collateral estoppel based on certain findings made in a related, Westchester County action. The Defendants motion is granted in part and denied in part. The Plaintiffs cross-motion is granted to the extent indicated below. DISCUSSION Initially, the Court rejects the Plaintiffs contention that the Defendants present application is barred by application of the single motion rule contained in CPLR 3214 [e]. Since the presently noticed motion to dismiss is addressed to an amended pleaded which superseded the original complaint (Aikens Const. of Rome, Inc. v. Simons, 284 A.D. 2d 946 [4th Dept. 20011; Titus v. Titus, 275 A.D. 2d 409 [2nd Dept. 2000]), the Defendants motion is not violative of the single motion rule set forth in CPLR 3211 (e). See, Shellv v. Shelly, 180 Misc. 2d 275, 281-282 (Sup. Ct., Westchester Co. 1999). See also, Siegel, Practice Commentaries, McKinney s Cons. 3
Laws of N.Y., Book 7B, CPLR 321155, at 77. Nor are the Defendants in default because they failed to answer those portions of the superseded, original complaint which survived the Defendants first motion to dismiss * ** (Pltffs Notice of Motion, q 3). See, Shellv v. Shelly, supra at 283. With respect to the merits of the Defendants motion, to succeed on a motion to dismiss pursuant to CPLR 3211 (a) (I), the documentary evidence that forms the basis of the defense must resolve all factual issues as a matter of law, and it must conclusively dispose of the Plaintiffs claim. New York Communitv Bank v. Snuq Harbor Square Venture, 299 A.D. 2d 329 (2nd Dept. 2002). See also, Arnav Industries, Inc. Retirement Trust v. Brown, Ravsman, Millstein, Felder & Steiner. L.L.P., 96 N.Y. 2d 300, 303 (2001); and Leon v. Martinez, 84 N.Y. 2d 83, 88 (1994). Moreover, on a motion to dismiss pursuant to CPLR 3211 (a) (7), the Court must accept as true, the facts alleged in the complaint and submissions in opposition to the motion and accord Plaintiffs the benefit of every possible favorable inference. In so doing, the Court must only determine whether the facts as alleged fit within any cognizable legal theory. Sokoloff v. Harriman Estates Development Corp., 96 N.Y. 2d 409, 414 (2001). See also, Polonetskv v. Better Homes Depot, 97 N.Y. 2d 46, 54 (2001); and Leon v. Martinez, supra at 87-8. With these principles in mind, and affording the Plaintiffs amended pleading the liberal construction to which it is entitled (Leon v. Martinez, supra), the Court finds that 4
the newly reframed first and second causes of action - alleging violation of UCC 5s 9-504 (3), and 9-507 - adequately remedy the pleading deficiency which originally prompted the Court to dismiss these claims; i.e., the absence of factual allegations relating to whether the underlying promissory note had lapsed into default at the time the Defendants allegedly disposed of certain security collateralizing the note. Although the factual averments provided may not qualify as a model of drafting clarity (See, e.g., Cmplt.,q 122), giving them the benefit of every favorable inference, they suffice to supply the previously omitted factual claims relating to the purported disposition of the collateral at issue. See gen lly, Marine Midland Bank, N.A. v. Kristin Intern. Ltd., 141 A.D. 2d 259 (4th Dept, 1988). See also, Associates Commercial Corp. v. Libertv Truck Sales & Leasing, Inc., 286 A.D. 2d 311 (2nd Dept. 2001); 108th Street Owners Corp. v. Overseas Commodities, Ltd., 238 A.D. 2d 324 (2nd Dept. 1997); Marine Midland Bank v. CMR Indus., 159 A.D. 2d 94, (2nd Dept. 1990). Moreover, the Court notes in this respect - and the Defendants themselves have conceded - that discovery in this case is still in its early stages. (Defs Reply Mem. at 15). The third cause of action, which purports to replead the previously dismissed eighth cause of action, should be dismissed, however, since the Court did not grant the Plaintiffs leave to replead this claim. The Court s March 14, 2002 order expressly granted leave only to the extent that Plaintiffs may replead [the original] fifth, sixth, seventh, tenth and eleventh causes of action * * * (Dec. at 14 [3 decretal paragraph]). 5
As to the repleaded fourth cause of action, alleging breach of the Plaintiffs personal guarantees, the Court agrees that the Plaintiffs should be precluded or collaterally estopped from relying on certain claims derived from stated provisions of the guarantee (Spector Guarantee, 5s 4, 7-8). Specifically, and in its prior March 14 order, this Court rejected the contention that section 4 of the guarantee supported the Plaintiffs breach of guarantee claim (Dec. at 9). Moreover, the Plaintiffs should be also estopped from arguing that the release of the Omnicom collateral without notice violated stated portions of sections 4, 7 and 8 of the 1999 guarantee, since these same arguments were previously made in the Westchester County action and decided against the Plaintiffs in that forum (Defs Exh., D [Spector Mem. in Support of Renewal]; and Order of DiBlasi, J. dated March 18, 2002 [Defs Exh., HI ). See, Anunziato v. Kar Grabber Mfo. Co., Inc., 298 A.D. 2d 476 (2 d Dept. 2002); and Bank v. Brooklyn Law School, 297 A.D. 2d 770 (2nd Dept. 2002). However, that branch of the Plaintiffs fourth cause of action which alleges that the Defendants failed to account for alleged surplus collateral funds was not actually litigated in the Westchester County action, nor have the Defendants offered conclusive documentary evidence or contractual analysis warranting its dismissal at this CPLR 3211 motion stage. Held v. Kaufman, 91 N.Y. 2d 425,433 (1998); and Leon v. Martinez, supra. By virtue of the foregoing, the related claims based upon the Defendants 6
SPECTOR V. GOTHAM BANK OF NEW YORK, et al., purported failure to act in good faith with respect to the guarantee are also sustainable at this juncture. See, Murphv v American Home Prods. Corp., 58 N.Y. 2d 293, 304 (1983). See also, I-IO Industry Assocs., LLC v. Trim Corp. of America, 297 A.D. 2d 630 (2nd Dept. 2002). Further, keeping in mind that discovery remains incomplete, and guided by the principle that the any documentary evidence tendered must conclusively resolve all issues of fact, the Court declines to dismiss the Plaintiffs fifth cause of action and the related declaratory judgment cause of action (Cmplt.,~~l57-170; 193-197), both of which allege in sum, the invalidity and/or breach of the so-called April, 1998 hypothecation and security agreement by which Plaintiff Gilbert Spector pledged as security, 50 shares of his own stock in a privately held company known as Hogil Pharmaceutical Corp (Cmplt., 77 17-18, 133; Defs Exh., C ). Upon a review of the parties conflicting contentions, the Court is persuaded that at this juncture, outstanding factual issues and unresolved interpretive questions exist with respect to whether the parties intended the 1998 hypothecation agreement to serve as security for the subsequently executed, 1999 demand note at issue here; whether there was adequate consideration supporting the pledge insofar as applied to the 1999 demand note - as opposed to a previously discharged, 1998 promissory note; and whether, under the circumstances presented, the Defendants complied with all conditions and pertinent contractual obligations, if any, before conveying the hypothecation agreement (and underlying note) to a third party; to wit: Diana Wendy. 7
That branch of the Defendants motion which is to dismiss the Plaintiffs seventh and eight causes of action sounding in fraud and fraud in the inducement (Cmplt., m 174-192), similarly must be denied. The record reveals that this Court previously sustained the same fraud claims (the original fourteenth and fifteenth causes of action) in connection with the Defendants first motion to dismiss (Dec., at 11). In particular, the Court concluded that these claims were adequately pleaded, a finding which constitutes the law of the case, See, Souffrant v. Star Ins. Co., 300 A.D. 2d 569 (2nd Dept. 2002); MJD Construction, Inc. v. Woodstock Lawn & Home Maintenance, 299 A.D. 2d 459 (2nd Dept. 2002); and Thomas v. Dietrick, 284 A.D. 2d 325 (2nd Dept. 2001). In the exercise of its discretion, that branch of the Defendants motion, which is, in effect, for an order transferring venue of the within action to Westchester County, and upon transfer, for consolidation of the this matter with the action there pending, cannot be granted. Although the two actions at issue are related, they involve certain dissimilar parties, raise different factual issues, and implicate distinctive legal questions which, in the Courts view, militates against transfer and consolidation. See, Sokolow, Dunaud, Mercadier & Carreras LLP v. Lather, 299 A.D. 2d 64, 73-74 (I Dept. 2002); Snitow & Paulev v. Abromowitz, 289 A.D. 2d 54 (I Dept. 2001). See also, M & K Computer Corp. v. MBS Industries. Inc., 271 A.D. 2d 660 (2nd Dept. 2000); J.T. Mauro Co. v. Genesee Vallev Group Health Assn., 284 A.D. 2d 998 (4th Dept. 1992). In this respect, the Plaintiff in the Westchester County action, Diana Wendy, has 8
already moved for, and received final judgment on, her principal claim relating to the Plaintiffs 1999 guarantee agreement, which judgment has been affirmed by the Appellate Division, Second Department (Wendy v. Spector, 287 A.D. 2d 558 [2nd Dept. 20011). Moreover, the record indicates that the Plaintiffs have commenced a derivative action in Nassau County against Howard and Diana Wendy seeking recovery of the Hogil stock pledged in conjunction with the 1998 hypothecation agreement (Pltffs Exh., C ). To the extent that the Plaintiffs request relief in the alternative for leave to replead and/or serve yet another amended complaint if the Court finds any technical pleading deficiencies in the current complaint (M. Bilhimer Aff.,r[ 53) that relief must be denied, since the Court has not dismissed any claims based on technical pleading defects or deficiencies. Finally, in accordance with the last branch of the Plaintiffs cross-motion which is for an order compelling compliance with the Court s May 9, 2002 Preliminary Conference Order (Pltffs Exh., A ),that Court agrees that with the dismissal motion relating to the amended complaint now resolved, a conference to address completing discovery must be held. The Court has considered the parties remaining contentions and concludes that none warrants an award of relief except to the extent granted above. Accordingly, it is,
ORDERED that the Defendants motion to dismiss the complaint pursuant to CPLR 3211 is granted to the extent that the third cause of action is dismissed, and it is further, ORDERED that the Plaintiffs are precluded from certain raising claims previously raised and decided against them in this action or by the Court in the Westchester County action, as set forth herein above and Defendants motion is otherwise denied, and it is further, ORDERED that the Plaintiffs cross-motion is granted only to the extent that the parties shall appear before the undersigned for a conference relative to discovery on. April 7, 2003 at 9:30 a.m. and, in all other respects, is denied. This constitutes the decision and Order of the Court. Dated: Mineola, NY March 28, 2003 APR 0 4 2003 10