|Smith v Charles|
|2012 NY Slip Op 52226(U) [37 Misc 3d 1229(A)]|
|Decided on December 5, 2012|
|Supreme Court, Kings County|
|Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.|
|This opinion is uncorrected and will not be published in the printed Official Reports.|
Sandra Smith, Stephen Straun, and Colin Charles, Plaintiff,
Kay Annette Charles and Edward Gonzalez, Defendant.
Sandra Smith, Stephen Straun and Colin Charles (the plaintiffs) move for an
order directing that defendants, Kay Annette Charles and Edward Gonzalez (the defendants)
repay $125,000 owed on three promissory notes, together with interest and the costs associated
with this litigation.
Daphne Charles, who passed away on May 28, 2007, utilized a trust and left her house at 1284 Carroll Street in Brooklyn to her five children. They decided, after lengthy and contested discussions, to sell the house to the youngest daughter, defendant Kay Charles. The subsequently drafted contract stipulated that Kay Charles would pay $500,000 for the house and give each of her four siblings $125,000. The contract further stipulated in this regard that Kay Charles would initially pay $100,000 to each of her brothers, Paul Charles and Colin Charles, and initially pay $75,000, respectively, to her brother Stephen Straun and her sister Sandra Smith.
An outstanding balance of $150,000 remained despite these initial payments, and Kay Charles agreed to pay this balance through four promissory notes, which she signed on January 11, 2008, the same day as the original agreement. Two $25,000 notes were issued, one to Paul Charles and the other to Colin Charles, and two $50,000 notes were issued, one to Stephen Straun and the other to Sandra Smith. The contract provided for payments of all the promissory notes on or before December 31, 2009. The plaintiffs herein seek to recover only $125,000 of the $150,000 owed because Paul Charles has not joined the action as a plaintiff.
Kay Charles failed to pay on time, and the plaintiffs began email inquiries about the notes in January 2010. Defendant Charles initially requested more time, but as the emails continued, her responses grew less frequent. The plaintiffs proposed several solutions to the problem, such as charging her rent, refinancing the house, providing funds to move her into another house, and selling the property, but defendant Charles was unresponsive to any of the suggested resolutions.
An October 2010 letter, sent via certified mail from the plaintiffs' counsel to Kay Charles,
sought payment within 45 days to prevent further legal action. Defendant Charles' November 12,
2010 email to her brother, Stephen, acknowledged receipt of this letter but no payment followed.
Consequently, the plaintiffs commenced this action on April 8, 2011 by filing their pro se
complaint, which alleges that defendant Charles breached her contract with the plaintiffs as she
failed to timely [*2]repay the notes. The complaint demands
$125,000 in relief ($50,00 for Sandra Smith, $50,000 for Stephen Straun, and $25,000 for Colin
Charles), together with interest on the debt and recovery of litigation costs.
The plaintiffs contend that
defendant Charles breached her contractual obligation by failing to repay the promissory notes by
December 31, 2009, the contractually specified date. The defendants make four responsive
arguments. First, defendant Gonzalez claims that, pursuant to CPLR 3211 (a) (7), the plaintiffs
fail to state a claim against him. Second, the defendants contend that the plaintiffs present
improper papers which requires denying their motion. Third, defendant Charles urges denying
the plaintiffs' motion because it requests relief specifically excluded in the promissory notes.
Lastly, defendant Charles regards the lis pendens on the defendants' house as inappropriate in this
matter and ripe for cancellation.
The defendants submit no evidence questioning the notes' existence or the default, which
thus makes granting the plaintiffs' motion appropriate. Nonetheless, the defendants seek
dismissal as to defendant Gonzalez, to limit liability by denying interest and litigation costs, and
to vacate the lis pendency placed on their property.
The first issue concerns defendant Gonzalez's dismissal from the action, pursuant to CPLR 3211 (a) (7), for the plaintiffs' alleged failure to state a claim against him. Defendant Gonzalez seeks this relief in his opposing affirmation to the show cause order rather than in a cross motion. Appellate Division, Second Department case law has warned about the need for cross motions when seeking affirmative relief (Lee v Colley Group McMontebello, LLC, 90 AD3d 1000, 1000-1001  [the plaintiff "was required to serve a notice of cross motion in order to obtain the affirmative relief of an extension of time to serve the summons with notice upon the defendant . . . "]; DeLorenzo v Gabbino Pizza Corp.,83 AD3d 992, 993  ["To the extent that the plaintiff attempted to informally seek leave to effect late service of the original summons and complaint . . . that affirmative relief should have been sought in a notice of cross motion to the Supreme Court"]; DiLacio v New York City Dist. Council of United Bhd. of Carpenters & Joiners of Am.,80 AD3d 553, 559  ["To the extent that the plaintiff now seeks either leave to amend the complaint or leave to replead, the issue is not properly before this Court, as the plaintiff did not cross-move for this relief before the Supreme Court"]; 99 Cents Concepts, Inc. v Queens Broadway, LLC, 70 AD3d 656, 659  ["plaintiff failed to cross-move for any affirmative relief pursuant to CPLR . . . the contention is not properly before us"] [internal citations omitted]).
Both the CPLR and its case law, as cited, mandate notice of a cross motion seeking
affirmative relief for a court to grant a party's request (see Siegel, Practice Commentaries,
McKinney's Cons Laws of NY, Book 7B, CPLR C2215:1D; Siegel, NY Prac § 249, at 223
[4th ed.]). Edward Gonzalez improperly requests his dismissal from the action through an
opposing affirmation instead of making a cross motion. The failure to make the cross motion
prevents the dismissal of the action as against him at this time.
Here, the plaintiffs submitted their verified complaint with a verification signed by plaintiff
Sandra Smith. This notarized verification recites that the plaintiff had been duly sworn and that
she confirmed the complaint as true. Furthermore, Exhibits A through N annexed to the verified
complaint collectively contain all the factual allegations supporting the show cause order. Hence,
the plaintiffs overcome the threshold challenge regarding their papers by having submitted a
verified pleading, namely, their verified complaint, which presents the necessary and relevant
factual allegations to support the requested relief.
defendants highlight the striking of provisions in the promissory notes concerning collecting
interest and litigation costs as the basis for opposing the plaintiffs' claims for such recovery.
Several CPLR provisions address interest in a case, like this one, asserting a breach of contract. The Court of Appeals has explained in NML Capital v Republic of Argentina, 17 NY3d 250, 258  that "CPLR 5001 permits a party that prevailed in a breach of contract action to obtain prejudgment interest . . ." The ruling also recognized that "[u]nder CPLR 5001, interest on a sum awarded as a result of a breach of contract is computed from the earliest date that the claim accrued . . . And where a contract provides for periodic payments or installments, the defaulting party is required to pay prejudgment interest on any missed payment from the date the payment [*4]became due" (Id. at 257-258).
The NML Capital decision further explained (a) that "[i]f the parties failed to include a provision in the contract addressing the interest rate that governs . . . in the event of a breach, New York's statutory rate will be applied as the default rate"(Id. at 258); and (b) that "CPLR 5004 sets forth a statutory rate of 9% per annum" (id.). In addition, CPLR 5003 addresses the right to collect postjudgment interest and provides that "[e]very money judgment shall bear interest from the date of its entry." Hence, the plaintiffs are entitled to both prejudgment and postjudgment interest at a 9% interest rate, pursuant, collectively, to CPLR 5001 (b), 5003 and 5004.
The defendants cite crossed-out language in the promissory note in attempting to deny the
plaintiff's statutory right to collect interest. First, the defendants highlight the promissory note's
language that "during the term of this note, the Maker shall make above-stated payment on the
date indicated without interest"(emphasis added). The defendants correctly note that
interest, therefore, should not accrue during the term of the note, i.e., from January 11,
2008 to December 31, 2009. However, structuring a note as interest-free before its maturity fails
to "evince an intention, contrary to CPLR 5001 (b), to defer the running of prejudgment interest
until commencement of the action at the earliest" (Takeuchi v Silberman, 41 AD3d 336, 336 ). Hence, a note
which negates interest during its term still subjects a borrower to the CPLR 5001 (a) and 5001 (b)
requirements after the borrower defaults (id).Finally, the defendants offer no
evidence proving when the cross outs occurred or if a mutual agreement existed to alter the
promissory notes. The cross outs may thus simply reflect a unilateral act contravening the mutual
assent reflected in the unaltered sales agreement that spawned the promissory notes. The
defendants in other words have inadequately shown a waiver of the plaintiffs' right to interest
under CPLR 5001 et. seq.
(2) Litigation expenses
"[A]ttorney's fees are incidents of litigation and a prevailing party may not collect them from the loser unless an award is authorized by agreement between the parties, statute or court rule" (Baker v Health Mgt. Sys., 98 NY2d 80, 88 , rearg denied 98 NY2d728  quoting Hooper v Assoc. v AGS Computers, 74 NY2d 487, 491 ). Here, the promissory notes, as mentioned earlier, incorporate the parties' prior sales agreement. More specifically, each applicable promissory note states that "(t)his note is executed and delivered pursuant to a Sales Agreement entered into between the Maker and the Payee." More importantly, that prior sales agreement specifically states that if defendant Charles defaults, then she "agrees to be liable for all costs, expenses, and attorney fees necessary for the collection of said sums due under the promissory notes." However, defendant Charles claims that she crossed out the language on the promissory notes regarding future litigation costs thereby precluding the plaintiffs' recovery. Hence, the issue concerns whether defendant Charles' cross outs override the joint selling agreement.
Each promissory note incorporates the selling agreement, which helps determine the parties'
intent (Mayo v Royal Ins. Co. of Am., 242 AD2d 944 , lv dismissed 91
NY2d 887 ). Furthermore, defendant Charles points to no evidence addressing how the
cross outs occurred nor any evidence that the plaintiffs had concurred (e.g., by initials
accompanying the cross outs). Hence, the decisive language of the selling agreement, which
explicitly states that the parties intended recovering litigation costs as part of the deal, determines
the parties' intent in the absence of contrary evidence.
The defendants concurrently seek to vacate the lis pendens placed on their property. However, the defendants have sought this relief, like their request to dismiss defendant Gonzalez, only in defendant Charles' affirmation in opposition and not through a cross motion. Such affirmative relief, as explained earlier, requires a motion or a cross motion, and the absence of such application makes the defendants' request procedurally defective, thereby negating/preempting any substantive analysis (DeLorenzo v Gabbino Pizza Corp., 83 AD3d at 993; DiLacio v New York City Dist. Council of United Bhd. of Carpenters & Joiners of Am., 83 AD3d at 554; 99 Cents Concepts, [*5]Inc. v Queens Broadway, LLC, 80 AD3d at 659).
Accordingly, it is
ORDERED that the plaintiffs' motion is granted to the extent set forth below; and it is further
ORDERED that the County Clerk is hereby directed to enter a money judgment in favor of plaintiff Sandra Smith and against defendant Kay Annette Charles in the sum of $50,000 (representing the unpaid balance of her promissory note) with interest as prayed for allowable by law from December 31, 2009 and until the date of entry of judgment, as calculated by the County Clerk and thereafter at the statutory rate, together with 40% of the costs and disbursements of this action as taxed by the County Clerk upon submission of an appropriate bill of costs (hereinafter, the Sandra Smith money judgment); and it is further
ORDERED that the County Clerk is hereby directed to enter a money judgment in favor of plaintiff Stephen Straun and against defendant Kay Annette Charles in the sum of $50,000 (representing the unpaid balance of her promissory note) with interest as prayed for allowable by law from December 31, 2009 and until the date of entry of judgment, as calculated by the County Clerk and thereafter at the statutory rate, together with 40% of the costs and disbursements of this action as taxed by the County Clerk upon submission of an appropriate bill of costs (hereinafter, the Stephen Straun money judgment); and it is further
ORDERED that the County Clerk is hereby directed to enter a money judgment in favor of plaintiff Colin Charles and against defendant Kay Annette Charles in the sum of $25,000 (representing the unpaid balance of her promissory note) with interest as prayed for allowable by law from December 31, 2009 and until the date of entry of judgment, as calculated by the County Clerk and thereafter at the statutory rate, together with 20% of the costs and disbursements of this action as taxed by the County Clerk upon submission of an appropriate bill of costs (hereinafter, the Colin Charles money judgment); and it is further
ORDERED that defendant Gonzalez is hereby granted leave to move, if he is so advised, to dismiss claims against him within 60 days of service on defense counsel of this decision and order with notice of entry; and it is further
ORDERED that if defendant Gonzalez fails to so move, the plaintiffs may then submit to the County Clerk, and the County Clerk may then enter, in each instance, without further court order, a money judgment in favor of plaintiffs Sandra Smith, Stephen Straun, and Colin Charles and against defendant Gonzalez in the amount of (1) the money judgment of the applicable plaintiff, (2) plus interest at the statutory rate from the date of entry of such judgment, plus (3) any additional costs that such plaintiff may have incurred since the date of entry of such judgment, minus (4) any offsetting amount recovered from, or paid by, defendant Kay Annette Charles towards such judgment; and it is hereby
ORDERED that the defendants are hereby granted leave to move to vacate the lis pendens on the subject property within 60 days of service on defense counsel of this decision and order with notice of entry; and it is further
ORDERED that the plaintiffs are hereby directed to serve this decision and order with notice of entry on defense counsel within 30 days of entry and to file an affidavit of service with the County Clerk.This constitutes the decision and order of the court.
E N T E R,
yvonne lewis, JSC