Opinion
NO: 90-2058
December 13, 2001
MEMORANDUM AND ORDER
Background
On March 19, 1991, I entered a consent judgment in this case against Tim Tyler Zufle and Diane Reed Zufle ("Zufles"), in the principal amount of $227,820, together with interest. The complaint upon which this judgment was rendered arose out of the Zufles' endorsements of a promissory note signed by a corporation, Silent Partner, Inc. ("Silent Partner"). Tim Zufle was the Chief Executive Officer of' Silent Partner. Silent Partner was not a party to the consent judgment, because it had declared bankruptcy.
Plaintiff alleges that in June, 1997, the Federal Deposit Insurance Corporation ("FDIC") assigned the judgment to the Reliant Group ("Reliant"). Plaintiff further alleges that on November 11, 1998, Reliant assigned its interest in this judgment to The Quantum Varde Asset Fund, LLC ("Quantum"), plaintiff herein.
On May 17, 2000, I granted Quantum's motion to be substituted as party plaintiff. On February 16, 2001, Quantum timely filed a complaint to revive the March 19, 1991 judgment.
Before me is plaintiff's motion for summary judgment on the complaint to revive the judgment. Defendants oppose the motion, arguing that the 1997 assignment to Reliant failed to assign the 1991 judgment. As Reliant can assign no greater interest than it holds, defendants contend that Quantum did not receive the judgment from Reliant in the 1998 assignment. Oral argument on the summary judgment motion was held on December 12, 2001.
Discussion Standard for Summary Judgment
Summary judgment shall be rendered if the pleadings, depositions, discovery responses, and affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. FRCP 56. When a party fails "to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial," summary judgment against that party is appropriate. Celotex Corporation v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265, 273.
Choice of Law
The parties now agree that New York law is the law applicable to the interpretation of the 1997 assignment documents. I concur. The 1997 agreement expressly provides that it will be governed by New York law. Choice of law clauses are generally honored in New York. Further, N.Y. Oblig. Law § 5-1401 (Consol. 2001) provides that parties to any agreement arising out of a transaction covering not less than $250,000 may agree that New York law will govern the contract, regardless of whether the agreement bears a reasonable relation to New York. The 1991 judgment had a value in excess of $250,000. Accordingly, the parties' choice of New York law will be upheld.
The 1997 Agreement
Under New York law, a valid assignment requires an act or words that show an intent that the assignor be divested of all control and right to a cause of action. No particular form or language is required. Miller v. Wells Fargo Bank, 540 F.2d 548, 557 (2d Cir. 1976). An assignment contemplates "a completed transfer of the entire interest of the assignor in the particular subject of the assignment, whereby the assignor is divested of all control over the thing assigned." Id., at 558.
The 1997 Assignment and Bill of Sale provides, inter alia, that:
. . . the Seller has agreed to contribute to the Purchaser all of the Seller's right, title and interest, if any, in and to the "JDC" and "Small Balance Assets" (as such terms are defined in the Contribution Agreement) listed on Exhibit A attached hereto (the "Assets").
Exhibit "A" refers to an asset described as "Silent Partner, Inc." The asset is listed as having a book value of $264,436.70.
Defendants argue that this purported assignment was ineffective, since there is no judgment against Silent Partner, Inc., and the Zufles' names are not mentioned in the asset description. They claim that the description of the asset as "Silent Partner, Inc." indicates that all that was intended to be transferred was the underlying promissory note, and not the judgment. I disagree. The language of the documents themselves, as well as common sense, makes it clear that "Silent Partner" was merely a descriptive term used to describe the asset, which by 1997 unequivocally consisted of a judgment against the endorsers of the original Silent Partner note.
As reflected in the Assignment and Bill of Sale, the FDIC intended to assign to Reliant the "JDC and Small Balance Assets listed on Exhibit A." The term "JDC" in the assignment documents is defined as "judgments, deficiencies, and charge-offs." The term "Small Balance Asset" is defined as "the right to receive from any Person a sum of money in payment of an obligation of such Person, which right may not be characterized as a Judgment, Deficiency, or Charge-Off." The Silent Partner asset, i.e., the 1991 judgment consensually entered into by the endorsers of the Silent Partner note, clearly falls within the meaning of the term "JDC."
I further note that the agreement does not expressly limit itself to the promissory note, nor does it contain an express reservation of the 1991 judgment in favor of the FDIC. In the case of In re 24-52 44th Street, Long Island City, 26 N.Y.S.2d 265 (N.Y.Sup.Ct. 1941), the assignees of a bond sought to collect from the bond's guarantors. The guarantors argued that the bond was divested of the guarantee when the bond was assigned without express statement that the guarantee was included in the assignment. The court disagreed, noting that under New York law, the assignment of a principal obligation generally carries with it all related rights, even those not referred to in the assignment. Further, the assignor had not reserved its rights against the guarantor.
Champerty
The defendants allege in their opposition that Reliant's purchase of the 1991 judgment constitutes champerty. The New York anti-champerty statute prohibits the acquisition of a debt "with the intent and for the purpose of bringing an action or proceeding thereon. N.Y. Jud. Law § 489 (McKinney 2001). Defendants argue that since no payment was ever made on the judgment, Quantum could not have intended anything other than filing suit on the claim when it purchased the asset. I disagree.
There is no violation of § 489 when the "primary purpose of the suit is collection of the debt acquired." Elliot Assoc. v. Banco de la Nacion, 194 F.3d 363, 372 (2d Cir. 1999). In First National Bank of Bay Shore v. Felder, 331 N.Y.S.2d 306 (1972), the court held that purchase of a judgment did not amount to champerty, even though the assignee who bought the judgment was a collection agency. For an excellent discussion of the history and scope of New York's anti-champerty law, see Bluebird Partners v. first Fidelity Bank, 709 N.Y.2d 726, 731 N.E.2d 581, 709 N.Y.S.2d 865 (2000). See also Moses v. McDivitt, 1882 WL 12577 (N.Y. 1882), cited by Bluebird Partners, in which the court stated that the purchase of assets for investment or profit "is not made illegal by the existence of the intent on . . . [the purchaser's] part at the time of the purchase, which must always exist in the case of such purchases, to bring suit upon them if necessary for their collection."
Conclusion
Rule 56(c) mandates the entry of summary judgment, "after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corporation v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552 (1986). Defendants have produced no evidence or law to rebut the prima facie case made by the plaintiff that the asset assigned was the 1991 judgment.
Accordingly,
Considering the foregoing,
IT IS ORDERED that the plaintiff's motion for summary judgment is GRANTED, and the March 19, 1991 judgment is hereby revived.