This is a motion-action brought under CPLR 3213 by plaintiff, BS Financial Group Inc., against defendant, Gregory Carmichael, seeking $1.3 million plus 24% annual default interest.

Carmichael executed a guarantee of the obligations of nonparty GEK Realty and Home Improvement LLC under a promissory note executed in favor of BS Financial's predecessor in interest. The note was also secured by a mortgage on real property in Brooklyn. Under the note, the borrower owed approximately $1.3 million plus interest; and, upon default, would also be liable to pay 24% annual interest. BS Financial alleges that GEK Realty defaulted on its obligations under the note; that Carmichael is therefore responsible for those obligations; and that the provisions of the note, mortgage, and guarantee establishing Carmichael's obligations [*2]qualify under CPLR 3213 as an instrument for the payment of money only.

This court agrees that the loan documents relied upon by BS Financial constitute an instrument for the payment of money only. But BS Financial has not established its entitlement to the $1.3 million plus 24% interest that it seeks.

As an initial matter, BS Financial concedes that it was unable to serve Carmichael by means set out in CPLR 308, because its process server established that Carmichael no longer lives or works at either of the two possible addresses that BS Financial had on file for Carmichael. (See NYSCEF No. 18 at 3-4 [affidavits of service].) BS Financial therefore served Carmichael by certified mail sent to his last known address, pursuant to a provision of the guarantee. (See id. at 1 [letter from counsel describing service]; NYSCEF No. 17 [affidavit of service by certified mail]; NYSCEF No. 6 at ¶ 14 [guarantee].)

Service by these means was permissible as a matter of contract, notwithstanding the otherwise-applicable requirements of CPLR 308. (See Alfred E. Mann Living Trust v. ETIRC Aviation S.a.r.l., 78 AD3d 137, 139-140 [1st Dept 2010].) This court has little difficulty concluding that service by certified mail to Carmichael's last-known address—indeed, an address Carmichael had given in an affidavit less than 18 months earlier (see NYSCEF No. 13 at ¶ 2)—is sufficient to meet the minimum requirements of due process. And service was completed, at the latest, when the affidavit of service by certified mail was filed on November 21, 2021, which is more than 30 days before the return date of BS Financial's motion, as required under CPLR 320 and CPLR 3213. This court therefore has personal jurisdiction over this motion-action.

BS Financial relies on a promissory note, guarantee, and provisions of a rider to the mortgage. These documents, taken together, qualify as an instrument for the payment of money only. (See e.g. Board of Mgrs. of the Saratoga Condominium v Shuminer, 148 AD3d 609, 611 [1st Dept 2017].) Nonetheless, BS Financial has not established prima facie that it is entitled to judgment as a matter of law against Carmichael.

Part of the sum claimed by BS Financial consists of default interest accruing at 24% annually. Affidavits submitted by BS Financial in support of the motion represent that this interest rate was set in a rider attached to the mortgage that secured the underlying promissory note. (See NYSCEF No. 3 at ¶¶ 7, 8; NYSCEF No. 10 at ¶¶ 7, 13.) But no rider is attached to the copy of the mortgage that BS Financial has submitted on this motion. (See NYSCEF No. 5.) This court has no way to tell whether BS Financial is, in fact, entitled to the requested default interest.

The absence of the rider admittedly goes only to that default interest, not the principal amount of $1.3 million. BS Financial's motion papers do not, however, establish its entitlement to that sum, either. The guarantee provides if GEK Realty defaults on the note, and the lender (i.e., BS Financial) sends written notice of the default to the guarantor (i.e., Carmichael), the guarantor must then cure the default by paying the required amounts within 10 days. (See NYSCEF No. 6 at ¶ 2.) BS Financial contends that it provided the requisite written notice, relying on a letter dated August 10, 2021. (See NYSCEF No. 11 at ¶ 3 [attorney affirmation]; NYSCEF No. 12 [copy of letter].) The August 10 letter is not sufficient.

Taken as a whole, the letter appears to be a notice to GEK Realty of its own default, not a notice to Carmichael of GEK Realty's default. The letter is addressed to GEK Realty at the [*3]address given for GEK Realty in the promissory note.^[FN1] The letter's salutation is "Dear Sir or Madam," not "Dear Sir" or "Dear Mr. Carmichael." (See NYSCEF No. 12 at 1.) The letter states that "[y]ou are in default of the Loan Documents by reason of, among other things, your failure" to pay the underlying sum owed under the note before the note's maturity date. (Id. [emphases added].) The obligation to pay the underlying sum, and thus the asserted default on that obligation, was that of GEK Realty, not Carmichael. Indeed, if this letter constituted written notice to Carmichael under the guarantee, he necessarily could not be in default of his obligations, because it would be the letter itself that would trigger those obligations. Moreover, beyond an initial reference to the guarantee as a component of the loan documents at issue, the letter does not discuss the guarantor's obligations (as distinct from the borrower's obligations). (See generally NYSCEF No. 12.)

In short, the August 2021 letter relied upon by BS Financial does not establish that Carmichael's obligation to pay the $1.3 million (plus interest) was ever triggered, such that BS Financial may obtain a judgment against him now for that sum. Nor does BS Financial provide other evidence demonstrating that Carmichael is now obligated under the guarantee to pay the requested amount. BS Financial has not met its obligation to show a prima facie entitlement to judgment as a matter of law under the instrument on which it relies.

For these reasons, BS Financial's CPLR 3213 motion is denied.

Upon denial of a CPLR 3213 motion, the motion court typically converts the motion-action into an ordinary plenary action (deeming the moving and answering papers the complaint and answer, respectively); but it has the discretion, under the statute, to direct another appropriate disposition.

In this case, treating BS Financial's motion papers as a complaint (plus supporting exhibits) would be perhaps slightly anomalous, because the complaint as currently framed does not make out a cause of action given the documentary deficiencies discussed above. But the most obvious alternative, namely dismissing BS Financial's motion-action altogether in light of those deficiencies, would be inappropriate.

Although BS Financial failed here to provide the documents needed to support its claim against Carmichael under the guarantee, BS Financial may yet be able to do so in the future. Dismissing the motion-action based on BS Financial's current failures of proof would be, in effect, granting summary judgment to the nonmoving party—a final judgment on the merits. (See Schulz v Barrows, 263 AD2d 565, 571 [3d Dept 1999], affd 94 NY2d 624, 628 [2000].) As a result, dismissal would create a claim-preclusion bar on BS Financial's recommencing this motion-action even if it were to remedy the gaps in its proof discussed above. That would risk conferring a multi-million-dollar windfall on Carmichael, if he is in fact liable under the guarantee for $1.3 million plus 24% annual default interest.

This court therefore concludes that electing to convert the motion-action into a plenary action is the proper course. BS Financial's moving papers shall be deemed a complaint with [*4]exhibits—albeit one under which BS Financial does not currently have a cause of action. (Any anomalies that might result could be remedied by a motion for leave to amend the pleadings to add the missing documents, if they exist and support BS Financial's claim.) Carmichael shall be afforded the opportunity to file an answer upon service of a copy of this order with notice of its entry.

Accordingly, for the foregoing reasons, it is hereby

ORDERED that BS Financial's motion under CPLR 3213 for summary judgment in lieu of complaint is denied; and it is further

ORDERED that the motion is converted into a plenary action, and BS Financial's motion papers are deemed a complaint with supporting exhibits; and it is further

ORDERED that BS Financial shall serve (i) a copy of this order with notice of entry, and (ii) another copy of its motion papers, on Carmichael at his last known address by certified mail, return receipt requested; and it is further

ORDERED that Carmichael shall within 30 days of service answer or otherwise respond to the complaint.