[*1]
Amazon Props. US, LLC v Park Ave. Bank
2014 NY Slip Op 50862(U) [43 Misc 3d 1230(A)]
Decided on June 4, 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This opinion is uncorrected and will not be published in the printed Official Reports.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 June 4, 2014
Supreme Court, Kings County


Amazon Properties US, LLC, Plaintiffs,

against

The Park Avenue Bank, RAYMOND BARCIA, VOULA PETRIDIS, Defendants. THE PARK AVENUE BANK, RAYMOND BARCIA, VOULA PETRIDIS, Third-Party Plaintiffs, MENACHEM SEGAL, Third-Party Defendant.




429/2010



Attorneys for Plaintiff:



Moshe Mortner, Esq.



The Mortner Law Office



40 Wall Street, 28th Floor



New York, NY 10005



Attorney for Defendants:



Kristine L. Grinberg, Esq.



Kriss & Feuerstein



360 Lexington Ave., Ste. 1200



New York, NY 10017


Carolyn E. Demarest, J.

The following papers read on this motion:Papers Numbered



Notice of Motion/Order to Show Cause/Petition/



Cross Motion and Affidavits(Affirmations)Annexed 1, 4



Opposing Affidavits (Affirmations)8



Reply Affidavits(Affirmations)Affidavits(Affirmations)Other Papers (Memoranda of Law)2-3, 5-7

In this action by plaintiff Amazon Properties US, LLP ("Amazon") for breach of contract, breach of the implied covenant of good faith and fair dealing, interference with a contractual relationship, and conversion, plaintiff moves for summary judgment on liability pursuant to CPLR 3212 for the relief demanded in its fifth and sixth causes of action in its verified complaint, and dismissing the verified answer and affirmative defenses of defendants Park Avenue Bank ("PAB"), Raymond Barcia ("Barcia"), and Voula Petridis ("Petridis"), on the claimed ground that no triable issues of fact exist. Defendants/third-party plaintiffs cross-move to amend the caption to substitute Valley National Bank as the successor to defendant Park Avenue Bank and pursuant to CPLR 3212 for summary judgment dismissing plaintiff's verified complaint. The motion to amend the caption was granted at oral argument and defendants' tardy response to plaintiff's motion was accepted. BACKGROUND

On or about July 10, 2008, PAB extended a loan in the principal amount of $100,000 to Amazon (the "Loan"), evidenced by a promissory note (the "Note") and a commercial security agreement (the "Security Agreement"), pursuant to a business loan agreement (the "Loan Agreement"). On that same date, Segal, the managing partner and chief executive officer of Amazon, executed a commercial guaranty (the "Guaranty") guaranteeing all amounts due from plaintiff to PAB. The original maturity date of the Loan was July 10, 2009 (the "Original Maturity Date"), however, it is undisputed that plaintiff failed to make payments due on June 1, 2009 and thereafter. On July 8, 2009, plaintiff caused PAB to issue a cashier's check in the amount of $85,000 (the "Cashier's Check") payable to Solo Management Group, LLC ("Solo"), [*2]which, according to the plaintiff, was for the purpose of a real estate transaction. Funding for this Cashier's Check was withdrawn from plaintiff's money market account at PAB. Plaintiff did not use the Cashier's Check dated July 8, 2009, but, rather, sought to have the Cashier's Check re-issued by PAB on October 26, 2009. Plaintiff explains in its Verified Complaint that he sought a re-issued Cashier's Check because Solo requested that the funds be re-cut in a different way. PAB, through defendant Barcia, the branch manager, and defendant Petridis, the Vice President of Small Business Lending at PAB, refused to re-issue the Cashier's Check. When plaintiff attempted to use the original Cashier's Check, it was returned due to insufficient funds and because, according to the plaintiff, Barcia had issued a stop order on the Cashier's Check.

PAB sent plaintiff a notice of default dated August 17, 2009 (the "Notice of Default"), advising that PAB had decided to restrict plaintiff's account as a result of its default on the Loan. On November 11, 2009, PAB credited $85,000 to plaintiff's commercial loan account. Plaintiff alleges that PAB converted the dishonored Cashier's Check and applied it as a setoff against the Loan. The terms of the Loan Agreement, Note, and Security Agreement provide for a right of set-off as follows:



To the extent permitted by applicable law, [PAB] reserves a right of



setoff in all [Plaintiff's] accounts with [PAB] (whether checking,



savings, or some other account...). This includes all accounts [Plaintiff]



holds jointly with someone else and all accounts [Plaintiff] may open



in the future . . . [Plaintiff] authorizes [PAB], to the extent permitted by



applicable law, to charge or setoff all sums owing on the indebtedness



against any and all such accounts, and, at [PAB's] option, to administratively freeze all such accounts to allow [PAB] to protect [PAB's] charge and



setoff rights provided in this paragraph.

It is undisputed that on December 1, 2009, plaintiff executed and delivered to PAB a Change in Terms Agreement extending the maturity date of the Loan to December 1, 2010 and requiring monthly payments starting on January 1, 2010 (the "Change Agreement")[FN1] . Plaintiff claims that Petridis and Barcia knew about the Change Agreement on October 26, 2009 and breached it by refusing to re-issue the Cashier's Check and subsequently dishonoring the July Cashier's Check, applying the funds as a set-off against amounts Amazon owed to PAB. Defendants contend that plaintiff had again defaulted on the Loan by failing to make required monthly payments under the Change Agreement and that such action was authorized under the terms of the Loan.

On March 12, 2010, PAB was placed into receivership by the Federal Deposit Insurance Corporation ("FDIC"), as receiver, and all assets of PAB were sold to Valley National Bank ("VNB") pursuant to the statutory authority granted to the FDIC under 12 USC 1821(d)(2)(A). This asset sale occurred pursuant to a Purchase and Assumption Agreement, dated March 12, [*3]2010 (the "PAA"), between VNB and the FDIC. Under the terms of the PAA the Loan was assigned and transferred from the FDIC to VNB. DISCUSSION

Plaintiff moves for summary judgment on the fifth and sixth causes of action asserted in the Verified Complaint, and to strike the defendants' answer. 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 (Zuckerman v City of New York, 49 NY2d 557, 562 [1980] CPLR 3212 [b]). Where the proponent of the motion makes a prima facie showing of entitlement to summary judgment, the burden shifts to the party opposing the motion to demonstrate by admissible evidence the existence of a factual issue requiring a trial of the action (Vermette v Kenworth Truck Co., 68 NY2d 714, 717 [1986]). The parties' competing contentions are viewed in the light most favorable to the party opposing the motion (Marine Midland Bank, N.A. v Dino & Artie's Automatic Transmission Co., 168 AD2d 610 [2d Dept 1990]).



Plaintiff's fifth and sixth causes of action are based upon PAB's wrongful dishonor of the Cashier's Check and allege that the set-off constituted a conversion of plaintiff's funds. "A certified check, as in the case of a cashier's check, is the primary obligation of the bank once it is certified" (Dalessio v Kressler, 6 AD3d 57, 62 [2d Dept 2004] UCC 4-303). Under UCC 4-303, once a bank has accepted a check by certifying it, the bank must make payment on the certified check regardless of a subsequently received stop-payment order (see Quistgaard v EAB European American Bank and Trust Co., 182 AD2d 510 [1st Dept 1992] see also Dziurak v Chase Manhattan Bank, N.A., 58 AD2d 103 [2d Dept 1977]). Once PAB issued the Cashier's Check on July 8, 2009, it had no right to issue a stop-payment order on it (see Dziurak, 58 AD2d at 106). By submitting evidence of the Cashier's Check and that PAB had improperly issued a stop payment order on it, plaintiff has demonstrated his prima facie entitlement to judgment as a matter of law on its wrongful dishonor claim (see Hart v North Fork Bank, 37 AD3d 414, 415 [2d Dept 2007]).

"The tort of conversion is established when one who owns and has a right to possession of personal property proves that the property is in the unauthorized possession of another who has acted to exclude the rights of the owner" (Republic of Haiti v Duvalier, 211 AD2d 379, 384 [1st Dept 1995]). Where the property is money, it must be specifically identifiable, such as the funds of a specific, named bank account, and must be subject to an obligation to be returned (see id.). Defendants do not dispute that PAB credited $85,000 to plaintiff's commercial loan account on November 11, 2009. However, PAB issued the Cashier's Check on July 8, 2009 and then improperly issued a stop-payment order on October 29, 2009. Although PAB did reserve set-off rights in the Loan Agreement and had the right to restrict plaintiff's account upon the Notice of Default dated August 17, 2009, PAB was already obligated to pay $85,000 to Solo based on the Cashier's Check. PAB, therefore, wrongfully dishonored the Cashier's Check and had no right to convert the $85,000 to itself as a set-off against plaintiff's indebtedness to PAB. Accordingly, plaintiff is entitled to summary judgment on its conversion claim and is entitled to the return of the funds.

Defendants argue that all of plaintiff's claims are barred by the D'Oench doctrine, which



invalidates certain agreements between a bank's representatives and borrowers to modify the terms of a loan prior to the FDIC's appointment as a receiver for the bank, unless the agreement meets certain requirements, such as being reduced to writing (see D'Oench, Duhme & Co. v FDIC, 315 US 447 [1942] Aurora Loan Services v Sadek, 809 F Supp 2d 235 [SDNY 2011]). This doctrine has since been codified in 12 USC § 1823(e). The purpose of the doctrine " is to allow federal and state bank examiners to rely on a bank's records in evaluating the worth of the bank's assets'" (id. at 24, citing Langley v Federal Deposit Ins. Corp., 484 US 86, 91-92 [1987]). Citing an 8th Circuit case, FDIC v Newhart, 892 F2d 47 [8th Cir 1989], defendants contend that the D'Oench doctrine has been expanded to allow the FDIC and its transferees and assignees to take assets of failed banks free of all defenses, and that VNB now holds the Loan free of all of plaintiff's claims and defenses. However, defendants' interpretation of the D'Oench doctrine is much too broad. The D'Oench doctrine, and the holding in Newhart, only stand for the proposition that the FDIC and its transferees take assets of failed banks free of any personal defenses based on undisclosed agreements that are not in writing (FDIC v Newhart, 892 F2d at 50). In the instant action, all of the Loan documents, as well as the Change Agreement, are in writing. The D'Oench doctrine does not apply here because the Change Agreement was executed in writing months before PAB was placed in receivership by the FDIC in March of 2010. As such, the Change Agreement and other Loan documents would have been in PAB's records and available to the FDIC. In any event, plaintiff's suit is premised upon PAB's wrongful dishonor of its own Cashier's Check, which is independent of defendant's right to apply plaintiff's funds as a set-off. Accordingly, defendants' cross-motion to dismiss the Verified Complaint must be denied as to the claims against the defendant PAB.

Defendants also seek to dismiss plaintiff's claims against the individual defendants Barcia and Petridis. Plaintiff claims that Barcia and Petridis breached the implied covenant of good faith and fair dealing by deliberately breaching the Change Agreement. Plaintiff also claims that the individual defendants tortiously interfered with plaintiff's contractual relationships. In its third cause of action, plaintiff alleges that defendants Barcia and Petridis wrongfully, knowingly, and intentionally induced PAB to breach the Change Agreement with the plaintiff by stopping payment on the Cashier's Check and declaring plaintiff in default. Defendants argue that Barcia and Petridis cannot be held individually liable because there is no privity of contract between them and Plaintiff, and that Barcia and Petridis acted as employees and agents of PAB. A plausible claim for a breach of contract does not, without more, provide a basis for a tortious interference claim against the corporate employees whose actions resulted in the alleged breach (see Joan Hansen & Co. v Everlast World's Boxing Headquarters, 296 AD2d 103, 108-109 [1st Dept 2002]). A pleading must allege that the individual defendants acted with malice to impair the plaintiff's business for their own personal profit (id. at 110). Here, plaintiff has failed to show that Barcia and Petridis acted with malice and there is no indication that they personally profited. Accordingly, these claims against the individual defendants are dismissed.

The fourth cause of action alleges that the actions of the defendants interfered with plaintiff's contractual relationship with Solo based on the allegation that PAB's refusal to reissue the Cashier's Check prevented Amazon from closing on its purported real estate transaction with Solo. Tortious interference with a contract requires (1) the existence of a valid contract between the plaintiff and a third party, (2) defendant's knowledge of the contract, (3) defendant's [*4]intentional procurement of the third party's breach of that contract, (4) actual breach of that contract, and (5) damages (see Lama Holding Co. v Smith Barney Inc., 88 NY2d 413, 424 [1996]). "[C]onduct constituting tortious interference with business relations is, by definition, conduct directed not at the plaintiff itself, but at the party with which the plaintiff has or seeks to have a relationship" (Carvel Corp. v Noonan, 3 NY3d 182, 192 [2004]). Plaintiff's only support for the existence of a contractual relationship with Solo is based on the affidavit of Segal. Plaintiff has provided no documentary evidence of a contract with Solo. Further, PAB's conduct was directed solely at the plaintiff and not at Solo as the third party. Additionally, plaintiff has not shown that Solo breached the purported contract, only that plaintiff was allegedly rendered unable to perform (see Industron Assocs. v United Innovations, 259 AD2d 592 [2d Dept 1999]). Plaintiff has failed to sustain its fourth cause of action and it is dismissed (see American Preferred Prescription, Inc. v Health Management, Inc., 252 AD2d 414 [1st Dept 1998]).



Lastly, plaintiff moves to dismiss defendants' affirmative defenses. Defendants have listed fourteen boilerplate affirmative defenses, the majority of which are conclusory and fail to plead any supporting facts. Conclusory affirmative defenses that merely plead conclusions of law without any supporting facts are properly dismissed (see Fireman's Fund Ins. Co. v Farrell, 57 AD3d 721 [2d Dept 2008]). The only affirmative defenses that may be sustained are the fourth and thirteenth affirmative defenses that claim that plaintiff is in breach of its obligations under the Note and Change Agreement and claim an offset against any amounts claimed by plaintiff. Plaintiff does not dispute that plaintiff has failed to make payments pursuant to the Change Agreement. Therefore, defendant PAB may have a reasonable claim for an offset based on plaintiff's failure to make payments on the Loan.



CONCLUSION

Accordingly, plaintiff's motion for summary judgment is granted as to liability as to the fifth and sixth causes of action. Defendants' cross-motion for summary judgment dismissing the verified complaint is granted only as to the individual defendants. Defendants' affirmative defenses are stricken, except for the fourth and thirteenth affirmative defenses.

This constitutes the decision and order of the court.

E N T E R :



_______________________________________J.S.C.



Court granted summary judgment to plaintiff on wrongful dishonor claim because bank had no right to stop payment on plaintiff's cashier's check once check had been issued—Applicability of D'Oench doctrine

Footnotes


Footnote 1:Although the complaint alleges plaintiff "did enter into a new Change in Terms Agreement" on October 26, 2009, in its 19-A statement in response to defendants' 19-A statement asserting that "Plaintiff executed and delivered" such Agreement on December 1, 2009, plaintiff indicates "No genuine issue exists to be tried".