[*1]
Guzzone v Masluf Realty Corp.
2014 NY Slip Op 50501(U) [43 Misc 3d 1205(A)]
Decided on April 1, 2014
Supreme Court, Kings County
Demarest, J.
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This opinion is uncorrected and will not be published in the printed Official Reports.


Decided on April 1, 2014
Supreme Court, Kings County


Alice Guzzone and Nicholas Guzzone, Plaintiffs,

against

Masluf Realty Corp., et al., Defendants.




501951/2013



Attorneys for Plaintiffs:

Craig A. Eaton, Esq.

Eaton & Torrenzano, LLP

1662 Sheepshead Bay Road

Brooklyn, NY 11235

Attorneys for Defendants:

John R. Stevenson, Esq.

Law offices of J.R. Stevenson

154 Grand Street

New York, NY 10013

Carolyn E. Demarest, J.

The following papers numbered:

NYSCEF Numbered

Notice of Motion/Order to Show Cause/

Petition/Cross Motion and

Affidavits (Affirmations) Annexed2, 4 [*2]

Opposing Affidavits (Affirmations)7-11

Reply Affidavits (Affirmations)13

Affidavit (Affirmation)

Other PapersMemoranda of Law6, 12

Plaintiffs Alice and Nicholas Guzzone move pursuant to CPLR 3213 for an order granting summary judgment against defendants Masluf Realty Corp., 1166 Manhattan Avenue LLC, and Henry R. Fulton for payment allegedly owed on a promissory Note. The motion is denied.



BACKGROUNDPlaintiffs claim that, on or about May 15, 2008, defendants executed a promissory Note in favor of plaintiff Alice Guzzone, secured by a mortgage covering the premises known as 1178-1200 Manhattan Avenue, Brooklyn, New York, 1164-1166 Manhattan Avenue, Brooklyn, New York, and 112-02 14th Road, College Point, New York. The Note acknowledged indebtedness of $1,150,000, and required defendants to make monthly payments of $8,438.29 in interest and principal for a term of ten years. On or about July 28, 2008, defendant Henry Fulton executed a Reconfirmation of Mortgage, and defendants entered into an Affidavit of Confession of Judgment, with Fulton signing as President of defendant Masluf Realty Corp. and Managing Member of defendant 1166 Manhattan Avenue LLC. No attempt has been made to foreclose upon the mortgage. On January 21, 2010, Alice Guzzone assigned the mortgage, along with the subject Note, to herself and her husband Nicholas Guzzone.

Defendants, through Fulton, made monthly payments totaling $379,723.05 pursuant to the subject Note until April 1, 2012. According to plaintiffs, defendant Fulton caused an event of default to occur when he failed to pay the monthly installment due April 1, 2012. Defendants were notified in writing of their default on June 22, 2012.

Fulton claims that Nicholas Guzzone introduced him to attorney Alan H. Young ("Young") in 1975. Fulton admits that Young represented him on a variety of legal matters over the years, but disputes that Young represented him in the transaction relating to the subject Note. With respect to the subject Note, Fulton claims that, in or around July 2008, he learned that Young had taken out a loan in Fulton's name from the plaintiffs, and that the loan was secured by a mortgage on Fulton's property located at 1178-1200 Manhattan Avenue. Fulton claims that the total amount of the loan obtained by Young was $1,500,000, comprised of the purported proceeds of the subject Note, and a second Note and mortgage in the amount of $350,000, also dated May 15, 2008. Fulton claims that Nicholas Guzzone advised him that Young had used the proceeds to purchase real estate in Monticello, New York. Fulton states that Young threatened and harassed him to persuade Fulton to allow the [*3]mortgages to stand, and to sign both the subject Note and the associated mortgage documents. Fulton states that he "reluctantly" signed certain documents in July of 2008. Fulton claims that he does not know whether the documents he signed were the originals of the copy of the Note and mortgage attached to plaintiff's CPLR 3213 motion, but does not actually deny that his signature appears on the copies. The copy of the subject Note annexed to plaintiffs' motion is dated May 15, 2008, and Young's notary stamp appears beneath Fulton's signature.

Fulton does not dispute that he made payments on the Note until April 1, 2012, but claims that he stopped making payments because he was unable to find evidence that plaintiffs had ever transferred the sum of $1,500,000 to Young intended for Fulton's benefit, and that he therefore came to suspect that the subject Note and mortgage were part of a fraudulent scheme perpetrated primarily by Young. Fulton claims, and plaintiffs do not dispute, that he sent a letter to Alice Guzzone on June 15, 2012 requesting evidence that she had transferred the $1,500,000 to Young for Fulton's benefit, specifically seeking canceled checks or other documents. Fulton claims, and plaintiffs do not dispute, that he never received any response to this letter, and that plaintiffs have not provided him with any documentary evidence of the purported $1,500,000 transfer to Young. On July 11, 2012, Fulton's attorney sent a letter to plaintiffs' attorney requesting documentation of the loan. On August 15, 2012, plaintiffs' attorney, Craig Eaton, responded to the letter, but did not provide the requested documentation. Fulton's attorney sent another letter to Eaton on August 24, 2012, repeating Fulton's request for documentation. Plaintiffs do not dispute that Eaton did not respond to this letter. Plaintiffs do not explain their failure to prove the transfer of funds with documentary evidence. Fulton also claims that he never received any beneficial interest in 10717 LLC or 3D Associates LLC, two entities which Young claimed to have set up to manage the Monticello property in upstate New York.

From documentary evidence annexed to Fulton's opposition, it appears that Young was disbarred on April 21, 2009, after he voluntarily resigned his law license and acknowledged that he could not defend himself from charges of professional misconduct involving irregularities in his attorney escrow account (Matter of Alan H. Young, 63 AD3d 90 [2d Dept 2009]). Young died March 28, 2011, and Fulton claims that some time after that date, he learned that many of Young's clients had accused him of stealing large sums of money from his law firm's escrow account. Plaintiffs' attorney claims that Young had possession of the original Note until his death, but that all of Young's files have been lost or destroyed, so the original Note cannot be produced.

Plaintiffs claim that Fulton and the other defendants received consideration for their execution of the subject Note, and that they are not obligated to provide him with any documentation of the loan under the terms of the Note. Plaintiffs also claim that Fulton's opposition to their motion stems from his discovery that Young never gave him an interest in the aforementioned entities, in which plaintiffs were neither owners, members, officers, or affiliates. Plaintiffs also claim that Fulton discovered, after Young's death, that one of the entities, 10717 LLC, a purported recipient of the loan proceeds through Young, was in [*4]bankruptcy. Plaintiffs claim that Fulton is merely "attempt[ing] to create a smokescreen to explain his refusal to pay."

DISCUSSION"When an action is based on an instrument for the payment of money only or upon any judgment, the plaintiff may serve with the summons a notice of motion for summary judgment and the supporting papers in lieu of a complaint" (CPLR §3213). An instrument qualifies under CPLR §3213 "if the instrument contains an unconditional promise to pay a sum certain over a stated period of time" (Bloom v Lugli, 81 AD3d 579, 579 [2d Dept 2011]). "It is incontestable that plaintiff would prove a prima facie case by proof of the note and a failure to make its payments called for by the terms" (Seaman-Andwall Corp. v Wright Mach. Corp., 31 AD2d 136, 137 [1st dept 1968] see also Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). "Once the plaintiff submits evidence establishing its prima facie case, the burden then shifts to the defendant to submit evidence establishing the existence of a triable issue of fact with respect to a bona fide defense" (Griffon V. LLC v 11 East 36th, LLC, 90 AD3d 705, 707 [2d Dept 2011]). In order to obtain summary judgment, the movant must establish its cause of action or defense sufficiently to warrant a court's directing judgment in its favor as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact. (Griffon V. LLC v 11 East 36th, LLC, 90 AD3d at 707).


In support of the instant motion, plaintiffs submit an affirmation in support from their attorney, Craig A. Eaton, and an affidavit from one of the plaintiffs, Alice Guzzone, asserting that defendants have failed to pay a sum certain required by the terms of the subject Note. Plaintiffs also submitted a copy of the subject Note. Defendant Fulton admits in his opposition that he signed the Note and stopped making payments on or about April 1, 2012.

Because plaintiffs have made out a prima facie case for recovery by submitting the subject Note and proof of non-payment, to defeat plaintiff's motion defendants must show that a triable issue of fact exists with respect to a bona fide defense (Griffon V. LLC v 11 East 36th, LLC, 90 AD3d at 707). The core of Fulton's defense centers on the allegedly fraudulent actions of his attorney, Alan Young, and his contention that no money was ever transferred by plaintiff to him personally, or to Young for his benefit. Plaintiffs dispute Fulton's account of the circumstances of the loan, and claim that they did transfer the monies covered by the subject Note to Young, for the benefit of defendants.[FN1] [*5]Although Fulton asked plaintiffs for documentation of the transfer prior to the instant action, no such documentation was ever provided. It is noted that plaintiff Nicholas Guzzone has not provided an affidavit, or otherwise disputed, defendant's assertion that it was Nicholas who advised him of the purchase of the real estate in Monticello. The plaintiffs' attorney did submit a reply affirmation characterizing the purported investments in real estate as "independent business transactions in real estate between Defendants and Alan Young," but the annexed affirmation of Alice Guzzone does not support that claim. Motions for summary judgment must be supported by affidavit of a person with knowledge of the facts (CPLR 3212[b]). Generally, affirmations of attorneys without personal knowledge of the facts have no intrinsic evidentiary value in summary judgment proceedings. (See Morales v Coram Materials Corp., 51 AD3d 86, 96 [2d Dept 2008]). Attorney affirmations may be considered competent if supported by documentary evidence (see Ellman v Village of Rhinebeck, 41 AD3d 635, 636 [2d Dept 2007]), but the documentary evidence must support the specific facts which the attorney affirms to be true (see Warrington v. Ryder Truck Rental, Inc., 35 AD3d 455, 456 [2d Dept 2006]). Since the affidavit of Alice Guzzone does not address the business relationship, or lack thereof, between defendant and plaintiff Nicholas Guzzone, counsel's assertions that on that subject cannot be credited.

Plaintiffs protest that they are not obligated to provide such documentation under the terms of the subject Note. They further argue that the subject Note contains the phrase "for value received," and that defendants should therefore be precluded from presenting a defense of lack of consideration. They argue, in essence, that Fulton's execution of the document is per se evidence that there was consideration, and that Fulton may not rebut the phrase "for value received." This argument is unavailing. In Erlich v American Moninger Greenhouse Mfg. Corp. (26 NY2d 255, 258 [1970]), it was noted that a contractual recitation of receipt of consideration is an admission of fact only which may be explained or disputed by parol evidence. Finding that plaintiff had been properly awarded judgment in Erlich, the Court relied on documentary evidence, including an entry in plaintiff's checkbook, to establish that consideration had been given. Though defendants have not produced documentary evidence to rebut the recitation in the subject Note, it appears that they are still investigating the issue, and are relying on plaintiffs to come forward with documentary evidence of the loan's completion. Plaintiffs claim that they transferred the proceeds of the loan to attorney Young for the benefit of defendants, but have not produced any evidence that consideration was given, nor have they explained their failure to do so, except that plaintiffs' attorney cites to Madison Park Investors LLC v Atlantic Lofts Corp., (33 Misc 3d 1215(A) [Sup Ct 2011]), 2011 NY Slip [*6]Op 51940(U), in which the defendant claimed lack of consideration when the proceeds of a mortgage were paid to her attorney-in-fact. Plaintiffs' attorney argues that this Court should adopt Madison Park's holding that when an attorney receives funds on behalf of a client, no defense of lack of consideration will be entertained. However, Madison Park is distinguishable from the instant case on the facts, since in Madison Park plaintiff was able to show both a valid Power of Attorney, allowing the defendant's attorney-in-fact to engage in the disputed transaction, and documentary evidence that money was actually paid to the attorney-in-fact. In the instant case, there is no documentary evidence of Young's receipt of the subject funds or any written proof that he was acting as an agent of the defendants.

Although plaintiffs established a prima facie entitlement to judgment on the Note, Fulton has raised a triable issue of fact with respect to the bona fide defense of lack of consideration. It is well-settled in New York that a motion for summary judgment in lieu of a complaint may be denied if a defendant claims lack of consideration (see, e.g., American Realty Corp. of NY v SUKHU, (90 AD3d 792, 934 [2d Dept 2011]); see also Samet v Binson, 79 AD3d 1005, 1006 [2d Dept 2010]). Lack of consideration, if proved, is a valid defense to a promissory note. (Mastro v. Carroll, 296 AD2d 802 [App Div, 3d Dept 2002]). The record indicates that the bankruptcy proceeding of 10717 LLC, one purported recipient of the proceeds of the loan, revealed that Fulton had never received an interest in the company. As a result of this discovery, Fulton suspected that Young and the Guzzones had defrauded him with respect to the subject Note. In his opposition to plaintiffs' motion, Fulton claims that plaintiffs never transferred any monies to Young for Fulton's benefit, and presents evidence that plaintiffs, after repeated requests, failed to provide documentation of any such transfer.

CONCLUSION


The Court finds that plaintiffs have failed to tender sufficient evidence to rebut Fulton's defense of lack of consideration. Accordingly, a material issue of fact exists, and plaintiffs' CPLR 3213 motion for summary judgment in lieu of complaint is denied. The Court elects to exercise its discretion under CPLR 3213 to deem the 3213 motion the complaint and directs defendants to file an answer within 20 days.

Defendants' sur-reply Memorandum of Law was not considered by the Court in reaching this decision; no leave to file a sur-reply was granted.

The foregoing constitutes the decision and order of this Court.

E N T E R,

J. S. C.

Footnotes


Footnote 1:Plaintiffs argue that Fulton ratified the actions of Young by signing the reconfirmation of mortgage and making payments on the loan for nearly four years. Ratification must be performed with full knowledge of the material facts relating to the transaction (Holm v C.M.P. Sheet Metal, Inc., 89 AD2d 229, 233 [4th Dept. 1982]). Here, Fulton erroneously believed that the money purportedly transferred to Young was used to purchase an interest in two real estate management LLCs. Since Fulton's reconfirmation and payment of the mortgage were premised on a misapprehension of the material facts, he cannot be said to have ratified the actions of Young.