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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: January 15, 2019

Court Grants Summary Judgment in Lieu of Complaint on Notes

On January 2, 2019, Justice Sherwood of the New York County Commercial Division issued a decision in Greenberg v. DeRosa, 2019 NY Slip Op. 30046(U), granting summary judgment in lieu of complaint on notes, explaining:

CPLR 3213 provides for accelerated judgment where the instrument sued upon is for the payment of money only and where the right to payment can be ascertained from the face of the document without regard to extrinsic evidence. An action on a promissory note is an action for payment of money only. The usual standards for summary judgment apply to CPLR 3213 motions. The instrument and evidence of failure to make payments in accordance with its terms constitute a prima facie case for summary judgment.

The debt and the defendant’s default are undisputed. It is undisputed the notes are an instrument for the payment of money only, and the proper subject for a motion for summary judgment in lieu of complaint.

According to General Obligations Law§ 15-301, a written agreement or other written instrument which contains a provision to the effect that it cannot be changed orally, cannot be changed by an executory agreement unless such executory agreement is in writing and signed by the party against whom enforcement of the change is sought or by his agent. The Notes at issue contain such a provision. There is no writing signed by Greenberg changing the maturity date of the notes or promising to forbear. Nor is there an admission by Greenberg of such a representation, other than the promise to forbear until March 19, 2018. As far as DeRosa claims they had an oral agreement to forbear, as the parties dispute the very terms and conditions of the alleged oral forbearance, their discussions do not qualify as a substitute for the required writing.

As far as DeRosa claims Greenberg breached the implied covenant of good faith and fair dealing, the implied covenant embraces a pledge that neither party shall do anything that will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract. A breach of the covenant is a breach of the contract itself. The covenant of good faith and fair dealing is breached when a party acts in a manner that, although not expressly forbidden by the contractual provision, would deprive the other party of the benefits of the agreement.

The covenant encompasses any promises that a reasonable person in the position of the promisee would be justified in understanding were included. However, the obligations imposed by an implied covenant of good faith and fair dealing are limited to obligations in aid and furtherance of the explicit terms of the parties’ agreement. The covenant cannot be construed so broadly as to nullify the express terms of a contract, or to create independent contractual rights. To establish a breach of the implied covenant, the plaintiff must allege facts that tend to show that the defendants sought to prevent performance of the contract or to withhold its benefits from the plaintiff.

Greenberg’s forbearance to enforce the notes is not a term of the notes, nor does it have. the effect of destroying or injuring DeRosa’s right to receive the fruits of the contract or the benefits of the underlying agreement. In fact, as the covenant cannot be construed so broadly as to nullify the express terms of a contract, or to create independent contractual rights, the court cannot construe the failure to forbear to be a breach of the covenant, as that would effectively nullify the express terms of the contract. As the elements of the claim are undisputed, and De Rosa has failed to allege facts which could constitute a defense, let alone provide admissible evidence, the motion shall be granted.

(Internal quotations and citations omitted).

Cases in the Commercial Division of the New York courts usually involve a motion to dismiss at the outset and then a motion for summary judgment at the close of discovery, so such motions are a big part of our practice. The decision above is about a special procedure in New York for quickly resolving claims relating to unpaid notes or similar documents allowing the plaintiff to move for summary judgment at the beginning of an action. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions about seeking or opposing a motion for pre-trial dismissal or judgment of a commercial lawsuit.

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