Summary
holding finance company not subject to claim under New York's Franchised Motor Vehicle Dealer Act
Summary of this case from McLaughlin Equipment Company, Inc. v. Newcourt Credit Group, (S.D.Ind. 2004)Opinion
April 14, 1993
Appeal from the Supreme Court, Monroe County, Calvaruso, J.
Present — Denman, P.J., Green, Balio, Fallon and Boehm, JJ.
Order unanimously reversed on the law without costs, motion granted in part and cross motion denied. Memorandum: Pursuant to capital loan and security agreements and a promissory note executed by defendant Dioguardi Jeep Eagle, Inc. (Jeep Eagle), plaintiff agreed to extend financing, at its discretion, to Jeep Eagle, enabling it to purchase motor vehicles under a floor plan financing arrangement for resale to the public. Jeep Eagle's obligations thereunder were personally guaranteed by defendants Thomas and Joyce Dioguardi. In addition, plaintiff obtained duly filed security interests in the property of Jeep Eagle. Thereafter, Jeep Eagle defaulted on its obligations, and plaintiff brought this action against Jeep Eagle, seeking $630,000 for breach of the security agreements, and against all defendants seeking $592,000 for breach of the floor plan financing and capital loan agreements and upon the Dioguardis' personal guarantees. In their answer, defendants asserted four affirmative defenses and counterclaims, alleging that plaintiff had breached its implied duty of good faith and fair dealing and had violated the Franchised Motor Vehicle Dealer Act (Vehicle and Traffic Law §§ 460-471 [Dealer Act]).
Plaintiff moved to dismiss the affirmative defenses and counterclaims and for summary judgment. Defendants cross-moved for leave to amend their answer and submitted a proposed amended answer, asserting eight affirmative defenses and counterclaims. Supreme Court denied plaintiff's motion and granted defendants' cross motion.
Supreme Court should have granted plaintiff's motion to dismiss the affirmative defenses and counterclaims in the original answer. Although an obligation of good faith and fair dealing is implied in every contract (Gordon v Nationwide Mut. Ins. Co., 30 N.Y.2d 427, cert denied 410 U.S. 931), that obligation may not be implied when it would be inconsistent with other terms of the contract between the parties (Murphy v American Home Prods. Corp., 58 N.Y.2d 293, 304; see also, Gillman v Chase Manhattan Bank, 73 N.Y.2d 1, 15-16). Jeep Eagle's agreements with plaintiff gave plaintiff the sole discretion to continue to extend financing. Plaintiff had no obligation to do so, particularly in light of Jeep Eagle's default and its declining financial situation. A financing institution does not act in bad faith when it exercises its contractual right to terminate financing (Gillman v Chase Manhattan Bank, supra). Thus, the affirmative defenses and counterclaims based on breach of an implied duty of good faith and fair dealing are meritless. In addition, the affirmative defenses and counterclaims based upon alleged violations of the Dealer Act must be dismissed because plaintiff, a financing company having no franchise agreement with Jeep Eagle, is not an entity subject to suit under the Dealer Act (see, Vehicle and Traffic Law §§ 460, 462; § 469).
Additionally, Supreme Court should not have granted defendants leave to serve an amended answer. Although leave to amend should be freely granted (CPLR 3025 [b]), such relief should not be granted where, as here, the proposed pleading is insufficient on its face (see, Andersen v University of Rochester, 91 A.D.2d 851, 852). The first five affirmative defenses and counterclaims of the proposed amended answer are all premised on breach of an implied duty of good faith and fair dealing and a violation of the Dealer Act, none of which, for the reasons discussed, may be maintained. The proposed sixth affirmative defense and counterclaim based upon fraud is insufficient on its face because defendants have failed to set forth in detail the alleged fraudulent representations (see, CPLR 3016 [b]; Barclay Arms v Barclay Arms Assocs., 144 A.D.2d 287, affd 74 N.Y.2d 644). The existence of a contractual relationship between the parties, by itself, created no fiduciary duty and, therefore, the proposed seventh affirmative defense and counterclaim is insufficient on its face. Finally, the proposed eighth affirmative defense and counterclaim, based upon prima facie tort, is also insufficient on its face because defendants have failed to allege that plaintiff acted solely out of disinterested malevolence (see, Burns Jackson Miller Summit Spitzer v Lindner, 59 N.Y.2d 314, 333; Christopher Lisa Matthew Policano v North Am. Precis Syndicate, 129 A.D.2d 488, 489-490).
Although plaintiff obtained possession of the collateral by court order, it was not required to dispose of the collateral before commencing this action (see, Chemical Bank v Alco Gems Corp., 151 A.D.2d 366). The only remaining issues of fact concern whether retention of the collateral was commercially reasonable (see, First Intl. Bank v Blankstein Son, 59 N.Y.2d 436) and whether there is a deficiency. Thus, plaintiff is entitled to partial summary judgment on the issue of liability (see, Chrysler Credit Corp. v Mitchell, 94 A.D.2d 971; General Elec. Credit Corp. v Durante Bros. Sons, 79 A.D.2d 509; see also, Telmark, Inc. v Lavigne, 124 A.D.2d 1055).