Settlement Agreement Found To Be an Instrument for The Payment of Money Only Sufficient to Grant Summary Judgment In Lieu of Complaint

• Posted on: Dec 27 2023

By: Jeffrey M. Haber

In past articles, we have examined a motion under CPLR § 3213 (see, e.g., here, here, here, here, and here). CPLR § 3213 is a procedural mechanism that allows a party to make a motion for summary judgment before filing a complaint in actions based upon “an instrument for the payment of money only or a judgment.” The purpose of the statute “is to provide an accelerated procedure where liability for a certain sum is clearly established by the instrument itself.”¹ 

CPLR § 3213 is a device that “for the limited matters within its embrace, melded pleading and motion practice into one step, allowing a summary judgment motion to be made before issue was joined.”² The provision is “intended to provide a speedy and effective means of securing a judgment on claims presumptively meritorious … [and where] a formal complaint is superfluous and even the delay incident upon waiting for an answer and then moving for summary judgment is needless.”³

“The prototypical example of an instrument within the ambit of [CPLR § 3213] is of course a negotiable instrument for the payment of money – an unconditional promise to pay a sum certain, signed by the maker and due on demand or at a definite time.”⁴ Generally, CPLR § 3213 is used to enforce “some variety of commercial paper in which the party to be charged has formally and explicitly acknowledged an indebtedness,” so that “a prima facie case would be made out by the instrument and a failure to make the payments called for by its terms.”⁵ 

A promissory note may qualify as such an instrument,⁶ so long as the plaintiff submits proof of the existence of the note and of the defendant’s failure to make payment.⁷ Such proof must be in admissible form sufficient to establish the absence of any material, triable issues of fact.⁸ 

A settlement agreement may also qualify as instrument for the payment of money, when the agreement contains an unconditional promise to pay a sum certain, signed by one the parties and due on demand or at a definite time. In Insitro, Inc. v. Cellaria, Inc., 2022 N.Y. Slip Op. 30902(U) (Sup. Ct., N.Y. County Mar. 14, 2022) (here), a case that we examined here, the court held that a settlement agreement constituted an instrument for the payment of money only because the agreement contained an unconditional commitment by the defendant to make certain installment payments to the plaintiff over a certain period of time. 

The cases show, however, that “[w]here the instrument requires something in addition to defendant’s explicit promise to pay a sum of money, CPLR 3213 is unavailable.”⁹ A plaintiff’s prima facie proof “cannot be drawn from sources outside the agreement itself.”¹⁰ 

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.¹¹

On December 14, 2023, the Supreme Court, New York County decided Brooke v. Streit, 2023 N.Y. Slip Op. 51426(U) (Lebovits, J.) (here), a case involving a motion for summary judgment in lieu of complaint and a settlement agreement. As discussed below, the motion court held that the agreement fell within the scope of CPLR § 3213.

Plaintiff moved for summary judgment in lieu of complaint to enforce a settlement agreement he entered into with defendants Michael Streit and Streit’s single-member LLC, Home Enterprises Group LLC (collectively, “Defendant”). In 2019, the parties began work on a home-development project in the Town of Southampton, New York. Plaintiff handled the financing, providing partial funding and securing the remainder from a bank. Defendant oversaw the development aspects of the project, including hiring a builder and managing the day-to-day home design and construction.

The Southampton project exceeded the parties’ initial cost predictions. Priceless Custom Homes, Inc. (“Priceless”), the construction company hired for the project, provided the remaining funds needed for its completion. After further delays and unforeseen costs, Plaintiff terminated Priceless’ services and sued Priceless for fraud and unjust enrichment.¹² As that action progressed, the parties entered into a settlement agreement to resolve who would pay for the legal fees and expenses incurred from the prolonged litigation. Four amended agreements were signed by the parties, with the most recent version executed on January 28, 2021.

Defendant claimed that he entered into the agreements under economic duress. Defendant argued that Plaintiff threatened to sue him and exclude him from all future projects, leveraging his financial vulnerability stemming from an 18-month jail term for grand larceny. Plaintiff maintained that Defendant voluntarily agreed to reimburse him for the legal fees and expenses resulting from the Priceless Lawsuit. 

Plaintiff moved to enforce the terms of the settlement agreement under CPLR 3213. 

Defendant opposed the motion, arguing that the settlement agreement was not an instrument for the payment of money only, because it discussed other projects that he worked on with Plaintiff. The motion court disagreed and granted the motion.

The motion court held that the discussion of auxiliary projects between the parties in the settlement agreement did not establish that additional performance from those projects was required for payment.¹³ The motion court explained that the obligations imposed by the settlement agreement involved only the payment of money, without any non-monetary performance.¹⁴ As such, concluded the motion court, plaintiff’s claim fell within the scope of CPLR 3213.¹⁵

Since Defendant was in default of the terms of the settlement agreement, and did not contest that he had not cured his defaults, the motion court held that Plaintiff was entitled to the principal amount, pre-judgment interest, and attorney fees, as stipulated to in the settlement agreement.¹⁶

Having determined that Plaintiff’s claim came within the scope of CLR 3213, the motion court addressed Defendant’s asserted defenses.

First, the motion court rejected Defendant’s argument that he was under economic duress when he signed the settlement agreement.¹⁷ 

Under New York law, economic duress may void a contract when a party is compelled to agree to its terms by means of a wrongful threat which precludes the exercise of the party’s free will.¹⁸ Financial pressure and unequal bargaining pressure are insufficient to constitute economic duress.¹⁹ That a defendant felt economically constrained to accept the terms of an agreement is immaterial to a defendant’s economic duress claim.²⁰ Similarly, the use of financial leverage and a person’s difficult financial circumstances to one’s advantage does not create economic duress.²¹ The party asserting an economic-duress defense has the burden to establish it.²²

The motion court found that Defendant was actively involved in the negotiation of the settlement agreement, showing that Defendant “had the opportunity to negotiate terms, propose changes, and express concerns”, actions that foreclosed a duress defense.²³ 

Here, Streit agreed to a valid contract that was duly executed on January 28, 2021. He provided no evidence that he was compelled to agree to the terms of the settlement agreement by means of a wrongful threat that precluded his exercise of free will. To the contrary, email communications show that Streit actively participated, and negotiated in, the formation of the settlement agreement. In an email dated April 9, 2019, Streit wrote, “there are 2 items that need to be changed and then we are good to go [on the terms of the Agreement].” In another email later that day, Brooke and Streit’s lawyer asked Streit to “please confirm you’re ok with everything now so we can execute.” Streit later responded saying he was indeed ok with the changes. This level of active participation suggests that Streit had the opportunity to negotiate terms, propose changes, and express concerns—thus foreclosing his duress defense.²⁴

Second, the motion court rejected Defendant’s conflict-of-interest defense. Defendant argued that Plaintiff used financial leverage and Defendant’s financial circumstances to force him to use an attorney who also represented Plaintiff, thus creating an irreconcilable conflict of interest. The motion court held that Defendant’s “conflict-of-interest defense [was] unavailing.”²⁵ 

The motion court stated that it was “not persuaded … that a disinterested lawyer would believe it impossible to competently and diligently represent the interests of both [Plaintiff] and [Defendant] in preparing the settlement agreement.”²⁶ This was so, noted the motion court, because “each side consented to the simultaneous representation after full disclosure of the implications and risks involved, as required by Rule 1.7 of the New York Rules of Professional Conduct.”²⁷ 

Footnotes

1. G.O.V. Jewelry, Inc. v. United Parcel Serv., 181 A.D.2d 517, 517 (1st Dept. 1992).
2. Weissman v. Sinorm Deli, Inc., 88 N.Y.2d 437, 443 (1996). 
3. Interman Indus. Products, Ltd. v. R.S.M. Electron Power, Inc., 37 N.Y.2d 151, 154 (1975) (citations and internal quotation marks omitted).
4. Weissman, 88 N.Y.2d at 443-44 (citations, internal quotation marks and footnote omitted).
5. Interman Indus. Prods., Ltd., 37 N.Y.2d at 154-155 (1975).
6. “An unconditional guaranty is an instrument for the payment of money only within the meaning of CPLR 3213.” Cooperatieve Centrale Raiffeisen Boerenleenbank, B.A. v. Navarro, 25 N.Y.3d 485, 492 (2015).
7. 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).
8. 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).
9. Weissman, 88 N.Y.2d at 444.
10. 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).
11. See Alvarez v Prospect Hosp., supra; Zuckerman, supra.
12. See 32 Westway LLC, v. Priceless Custom Homes, Inc., Index No. 606025/2017 (Sup. Ct., Suffolk County) (the “Priceless Lawsuit”).
13. Slip Op. at *2.
14. Id.
15. Id.
16. Id. at *3.
17. Id. at *2-*3.
18. See 767 Third Ave. LLC v. Orix Capital Markets, LLC, 26 A.D.3d 216, 218 (1st Dept 2006).
19. See Edison Stone Corp. v. 42nd St. Dev. Corp, 145 A.D.2d 249, 256 (1st Dept. 1989).
20. See Dreyer and Traub v. Rubinstein, 191 A.D.2d 236, 237 (1st Dept. 1993).
21. See Matter of Will of Bryer, 72 A.D.3d 532, 532 (1st Dept. 2010); accord Bethlehem Steel Corp. v. Solow, 63 A.D.2d 611 (1st Dept. 1978).
22. See Austin Instrument v. Loral Corp., 29 N.Y.2d 124, 130 (1971).
23. Slip Op. at *3.
24. Id. (citations to the record omitted).
25. Id.
26. Id.
27. Id. (citing 22 NYCRR 1200.00 (Rule 1.7 (b); Gustavo G., 9 A.D.3d 102, 105 (1st Dept. 2004)).

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.