Defendant Successfully Raises Issues of Fact in Promissory Note Action Sufficient to Defendant Summary Judgment Under CPLR 3213

• Posted on: Aug 15 2022

By: Jeffrey M. Haber

It is not often that a defendant can defeat a motion for summary judgment under CPLR § 3213. In Landa v. Friedman, 2022 N.Y. Slip Op. 32673(U) (Sup. Ct. N.Y. County Aug. 5, 2022) (here), however, that is exactly what happened.

[Ed. Note: In our prior articles on the subject, the motion was granted almost every time it was made. See, e.g., here, here and here.] 

Under CPLR § 3213, a plaintiff may seek summary judgment in lieu of a complaint “[w]hen [the] action is based upon an instrument for the payment of money only.”¹ The purpose of the statute “is to provide an accelerated procedure where liability for a certain sum is clearly established by the instrument itself.”² 

A promissory note may qualify as such an instrument, so long as the plaintiff submits proof of the existence of the note and of the defendant’s failure to make payment.³ Such proof must be in admissible form sufficient to establish the absence of any material, triable issues of fact.⁴ However, “[w]here the instrument requires something in addition to defendant’s explicit promise to pay a sum of money, CPLR 3213 is unavailable.”⁵ A plaintiff’s prima facie proof “cannot be drawn from sources outside the agreement itself.”⁶ 

Once the movant meets this burden, it becomes incumbent upon the party opposing the motion to come forward with proof in admissible form to raise a triable issue of fact.⁷ 

In Landa, plaintiff, as Trustee of the Golda Landa 2011 Irrevocable Trust, submitted seven promissory notes and a sworn affidavit to support the motion. Each note was in the principal amount of $28,000.00 signed by defendant and his ex-wife. The notes were dated October 31, 2013 and had a maturity date ranging from December 2015 through December 2021. The notes were executed several months after plaintiff’s mother provided $269,287.00 as a down payment on a Manhattan condominium unit for defendant and his then-wife. Defendant and his then-wife lived in the apartment until May 2018, when defendant commenced a divorce proceeding against his wife. No note was repaid, and no payment was demanded from October 2013 until July 2020. 

Plaintiff commenced the action in in December 2021, seeking recovery on the notes from defendant. 

The Court held that the foregoing facts presented factual issues as to whether the funds were intended as a loan or a gift.

The Court noted that “[e]ven assuming that the plaintiff had met his burden in the first instance under CPLR 3213,” defendant’s affidavit and submissions “ha[d] raised triable issues of fact in regard to whether the down payment for [the] apartment … was intended as a gift ….”⁸ In that regard, defendant averred that the money was intended as a gift, not a loan, and that the circumstances surrounding execution of the notes confirmed that fact. According to defendant, in October 2013, several months after the closing on the apartment, plaintiff asked defendant and his then-wife to sign the notes “in order for you guys to get the gift without tax.” Defendant claimed that the notes were “made in the precise amount of $28,000.00, to be split between the signatories, $14,000.00 each, … because $14,000.00 was the limit for tax-free gifts under the 2013 Internal Revenue Code, leaving the full amount untaxed.”⁹ Defendant claimed that the notes “submitted by the plaintiff were missing a third page, which included an amortization or ‘note forgiveness’ schedule that required no repayment at all and provided that each note would ultimately be forgiven.”¹⁰ Defendant also observed that the notes contained no merger clause precluding proof of the oral representations that the funds were intended as a gift.¹¹ 

Further, said the Court, “defendant correctly argue[d] that the relationship of the parties involved increase[d] the likelihood that, notwithstanding the existence of the notes, the funds were intended as gift.”¹² 

Thus, concluded the Court, plaintiff did not demonstrate “entitlement to summary relief by means of CPLR 3213.”¹³ 

Takeaway

CPLR § 3213 is designed to afford a speedy and efficient remedy by which to secure a judgment in certain cases where service of formal papers would be unnecessary for the expeditious resolution of the dispute between the parties. This accelerated procedure, however, is limited solely to an action based either upon an instrument for the payment of money only or upon a judgment. To qualify for CPLR § 3213 treatment, plaintiff must prove a prima facie case by the instrument and a failure to make the payments called for by its terms.

While at first blush the notes at issue in Landa appeared to be instruments suited for the accelerated judgment provisions of CPLR § 3213, closer scrutiny was necessary because of the circumstances surrounding execution of the notes. Plaintiff’s entitlement to recovery under the notes required proof, outside the notes, that the money provided was in fact a loan. Since proof of a loan was necessary before defendant’s obligation to pay became enforceable, the notes could not be said to be the simple unconditional promise to pay which would render them each “an instrument for the payment of money only”. Accordingly, the Landa Court concluded that the use of the expedited procedures provided by CPLR § 3213 was not available.

Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

Footnotes

1. See HSBC Bank USA v. Community Parking Inc., 108 A.D.3d 487 (1st Dept. 2013); Allied Irish Banks, P.L.C. v. Young Men’s Christian Assn. of Greenwich, 105 A.D.3d 516 (1st Dept. 2013); German Am. Capital Corp. v. Oxley Dev. Co., LLC, 102 A.D.3d 408 (1st Dept. 2013).
2. G.O.V. Jewelry, Inc. v. United Parcel Serv., 181 A.D.2d 517, 517 (1st Dept. 1992).
3. See Bonds Fin’l, Inc. v. Kestrel Techs., LLC, 48 A.D.3d 230 (1st Dept. 2008); Seaman-Andwall Corp. v. Wright Machine Corp., 31 A.D.2d 136 (1st Dept. 1968).
4. See CPLR § 3212(b); Jacobsen v. New York City Health & Hosps. Corp., 22 N.Y.3d 824 (2014); Alvarez v. Prospect Hosp., 68 N.Y.2d 320 (1986); Zuckerman v. City of New York, 49 N.Y.2d 557 (1980).
5. Weissman v. Sinorm Deli, 88 N.Y.2d 437, 444 (1996).
6. Rhee v. Meyers, 162 A.D.2d 397, 398 (1st Dept. 1990); see Ian Woodner Family Collection, Inc. v. Abaris Brooks, Ltd., 284 A.D.2d 163 (1st Dept. 2001).
7. See Alvarez v Prospect Hosp., supra; Zuckerman, supra.
8. Slip Op. at *2 (citing Jurkiewicz v. Zechewytz, 15 A.D.3d 721 (3d Dept. 2005); Dayan v. Yurkowski, 238 A.D.2d 541 (2d Dept. 1997)).
9. Id. at *3.
10. Id.
11. “[P]arol evidence may be offered ‘to show that a writing, although purporting to be a contract, is, in fact, no contract at all.’” Polygram Holding, Inc. v. Cafaro, 42 A.D.3d 339, 340 (1st Dept. 2007) (quoting Val-Ford Realty Corp. v. J.Z.’s Toy World, 231 A.D.2d 434, 435 (1st Dept, 1996)).
12. Slip op. at *3 (citations omitted).
13. Id. at *4.