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Everything You Wanted To Know About Replevin, But Were Afraid To Ask

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  • Posted on: Oct 23 2020

Every now and then, we come across a legal principle that we do not frequently write about. One such principle is replevin.

A plaintiff brings an action in replevin to recover personal property that was wrongfully taken or withheld. Pivar v. Graduate School of Figurative Art, 290 A.D.2d 212, 212 (1st Dept. 2002) (citations omitted). In a replevin action, the plaintiff seeks the return of property, not money damages. Genger v. Genger, 2016 N.Y. Slip Op. 30602 (Sup. Ct., N.Y. County 2016) (“The objective of replevin is recovery of the property, and the alternative relief or remedy is ‘fixation of its value.’”) (citations omitted). A claim to recover property is generally governed by the law of the jurisdiction in which the property is located. See Garrison Special Opportunities Fund LP v. Fidelity Nat’l Card Servs., Inc., 130 A.D.3d 546, 548 (1st Dept. 2015).

A replevin action can arise in a number of situations, such as where two or more parties claim a right to possess personal property, but only one has a superior right to that property, or where the property was lawfully withheld but was not released to the person having the greater right to the property. In the commercial context, replevin actions are often asserted by a creditor seeking to recover collateral when a debtor defaults on a secured loan. 

Sometimes, a replevin action will be brought against a party acting in good faith for coming into possession of personal property that was stolen – e.g., a good-faith purchaser for value. In that instance, the true owner must make a demand for return of the property and the person in possession of it must refuse to return it. Solomon R. Guggenheim Found v. Lubell, 77 N.Y.2d 311, 317-18 (1991). Until demand is made and refused, possession of the stolen property by the good-faith purchaser for value is not considered wrongful. Id. at 318. An example of this type of replevin action is where a plaintiff, such as an art gallery, seeks to recover stolen artwork in the possession of an innocent third-party. Id. at 314-315.

To prevail in a replevin action, the plaintiff must establish that the defendant is in possession of property to which the plaintiff claims a superior right. Nissan Motor Acceptance Corp. v. Scialpi, 94 A.D.3d 1067 (2d Dept. 2012). That someone other than the plaintiff is the true owner of the property is no defense to a replevin action: “the plaintiff need only establish a superior possessory right in the chattel to that of the defendant.” G & S Quality v. Bank of China, 233 A.D.2d 215, 216 (1st Dept. 1996); see also Pivar, 290 A.D.2d at 212.

In today’s article, we examine Melrose Credit Union v. Matatov, 2020 N.Y. Slip Op. 05897 (2d Dept. Oct. 21, 2020) (here), an action for, inter alia, replevin and recovery under a promissory note.

Melrose Credit Union involved a balloon promissory note in the sum of $1,200,000 that Sipro Matatov (“Matatov”) and Shell Express Cab Corp. executed in plaintiff’s favor, along with a related security agreement in plaintiff’s favor. Plaintiff claimed that Matatov and defendant, Michael, Adam, Jesse Express Cab Corp., also known as Michael Adam Jesse Express Cab Corp., executed a separate balloon promissory note in the sum of $1,200,000 in plaintiff’s favor, along with a related security agreement in plaintiff’s favor.

Plaintiff alleged that, under the terms of the notes, defendants were required to make 35 successive monthly payments of principal and interest, to be followed by a final balloon payment on the maturity date of each of the loans. Plaintiff further alleged that defendants defaulted under the terms of the notes by failing to pay the balances of the loans on the maturity date.

Plaintiff brought the action, inter alia, for replevin and to recover money due on the promissory notes. The first and eighth causes of action asserted in the complaint sought to recover damages for breach of contract. In that regard, plaintiff sought to recover, among other things, the outstanding principal balance of $1,105,000 with respect to each of the notes. The fourth and eleventh causes of action asserted in the complaint were for replevin. In this regard, plaintiff sought immediate possession of the collateral pledged in the security agreements.

Defendants interposed a verified answer in which they generally denied certain factual allegations in the complaint. However, they did not assert any affirmative defenses.

Plaintiff subsequently moved for, among other relief, summary judgment on the first, fourth, eighth, and eleventh causes of action. Defendants opposed plaintiff’s motion. On July 26, 2017, the motion court, inter alia, denied those branches of plaintiff’s motion.

Thereafter, plaintiff moved for, among other relief, leave to reargue those branches of its prior motion which were for summary judgment on the first, fourth, eighth, and eleventh causes of action. On October 30, 2017, the motion court, inter alia, granted reargument and, upon reargument, adhered to its original determination in the July 26, 2017 order, denying those branches of plaintiff’s motion. Plaintiff appealed.

The Appellate Division, Second Department reversed.

With regard to the replevin causes of action, the Court held that “plaintiff established, prima facie, that the defendants were in default under the terms of the respective notes and that, under the terms of the respective security agreements, it was entitled to take immediate possession of the collateral pledged therein.” Slip Op. at *3 (citations omitted). The Court rejected defendants’ argument that there were triable issues of fact. Id. As noted by the Court in its recitation of the facts, “defendants conceded that ‘there [was] no dispute as to the fact that loan documents were signed and money was transferred’ [and] … they had failed to make the final balloon payments in accordance with the terms of the respective notes.” Id. at *2.

With regard to the causes of action to collect on the promissory note, the Court held that “plaintiff established, prima facie, its entitlement to summary judgment on the first and eighth causes of action by establishing the existence of each promissory note executed by the respective defendants, and by demonstrating that the defendants defaulted by failing to make the final balloon payment on the maturity date of each of the loans.” Slip Op. at *2 (citations omitted); See also Bethpage Fed. Credit Union v. Luzzi, 177 A.D.3d 944, 945 (2d Dept. 2019) (“To establish a prima facie case in an action to recover on a promissory note, the plaintiff must submit the note, along with evidence of the defendants’ failure to make payments on the note according to its terms.”) (citations omitted).

The Court rejected defendants’ argument that there were triable issues of fact; namely, whether plaintiff established that it sent a timely notice of default to the defendants, and whether plaintiff and defendants agreed to oral modifications of the two notes and the two security agreements. Slip Op. at *2.

First, the Court said that the unambiguous language of the notes demonstrated that notice was not required to be sent: “Although the notes provide[d] that the holder “may send written notice” of a default …, there [was] nothing in the notes or the security agreements that required the plaintiff to do so before it was entitled to enforce the note upon the defendants’ defaults.” Id. (orig’l emphasis) (citation omitted).

Second, the Court said that there was insufficient evidence showing that the parties orally agreed to modify the terms of the notes: “Regardless of whether the notes or security agreements contained a clause prohibiting oral modifications, and regardless of the applicability of General Obligations Law §§ 15-301 or 5-1103, … defendants provided no … description of the alleged oral modifications … such as when, where, or by whom the alleged oral modifications were made.” Id. at *3. In fact, noted the Court, defendants “failed to even allege that the plaintiff had agreed to a new maturity date for the two loans or to the amount of the allegedly new monthly payments.” Id. At most, held the Court, the evidence showed that there was “a mere agreement to agree which [was] too indefinite to be enforceable.…” Id. (citations omitted).

Takeaway

A plaintiff asserting a cause of action sounding in replevin must establish that the defendant is in possession of property to which the plaintiff claims a superior right. In Melrose Credit Union, the Court found that plaintiff made its prima facie showing of entitlement to the replevin of the collateral that was secured by the notes and security agreements – that is, plaintiff demonstrated that it lawfully held the notes and security, defendants defaulted thereunder by virtue of their nonpayment, defendants were in possession of the collateral, and plaintiff had a right to possession and delivery of the collateral under the terms of the agreements. 

A promissory note is enforceable under traditional principles of contract law. As such, “a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms … [and] courts may not by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing.” Beinstein v. Navani, 131 A.D.3d 401, 405 (1st Dept. 2015) (citations and internal quotation marks omitted). In Melrose Credit Union, the Court applied the plain and unambiguous meaning of the notes in rejecting defendants’ “contention that written notice of default was a condition precedent to commencing or maintaining [the] action.” Slip Op. at *2. 

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