Opinion
No. 652120/10.
10-15-2014
INVESTEC BANK PLC f/k/a/ Investec Bank (UK) LIMITED, Plaintiff, v. OPALGEM INVESTMENTS CORP. (a/k/a Opalgem Limited ), et al., Defendants.
Christopher C. Costello, Esq., Winston & Strawn LLP, New York, for plaintiff. James English, Esq., David A. Kaminsky & Assocs., P.C., New York, for Krishnamurthy Chandra.
Christopher C. Costello, Esq., Winston & Strawn LLP, New York, for plaintiff.
James English, Esq., David A. Kaminsky & Assocs., P.C., New York, for Krishnamurthy Chandra.
Opinion
BARBARA JAFFE, J.
By order to show cause, dated May 2, 2014, defendant Krishnamurthy Chandra moves for an order vacating a default judgment entered against him and related relief. Plaintiff opposes the motion and cross moves for an order compelling Chandra to respond to information subpoenas.
I. PERTINENT UNDISPUTED BACKGROUND
In March 2008, plaintiff extended to defendant Opalgem credit in the amount of $32 million, secured by a mortgage on Chandra's Manhattan condominium unit at 2000 Broadway. The loan is guaranteed by Chandra and two entities he owns and/or controls, Elite International Finance Limited and Rockmans Investment Incorporated. (N.Y.SCEF 124, Exh. B). In the guaranty, executed by Chandra on March 20, 2008, he “irrevocably and unconditionally guarantees to pay to [plaintiff] on demand, ... all monies and liabilities which are now or at any time hereafter shall have been advanced to, become due, owing or incurred by [defendant Opalgem] to [plaintiff],” and acknowledges his liability as a principal obligor on the mortgage, separate and independent from his obligations as guarantor. (Id., sections 2.2, 3).
Pursuant to section 21.1 of the guaranty, the parties agree that the guaranty is “governed by and shall be construed in accordance with English Law.” In section 21.2, Chandra “irrevocably agrees for the exclusive benefit of [plaintiff] that the courts of England shall have jurisdiction to hear and determine any suit action or proceeding, and to settle any dispute, which may arise out of or in connection with the Guarantee and for such purposes hereby irrevocably submits to the jurisdiction of such courts.” (N.Y.SCEF 124). Chandra signed the guaranty in the presence of his attorney who attested to having witnessed his signature and having explained the guaranty to him. (Id., Exh. B).
Opalgem defaulted on the underlying obligation, and in December 2010, plaintiff commenced foreclosure proceedings on the unit, naming Chandra, Elite, and Rockmans as liable for any deficiency resulting from a foreclosure sale of the unit. On June 21, 2012, a judgment of foreclosure and sale of the unit was granted on default. (N.Y.SCEF 58).
By pledge agreement dated August 14, 2012, Chandra admitted having executed the guaranty, that Opalgem was in default on the loan, that plaintiff commenced this action against him in his personal capacity, that an order and judgment was granted against him personally, and that he had sought from plaintiff an adjournment of the auction of the unit. (N.Y.SCEF 142).
By order dated November 18, 2013, the referee's report of sale and award of deficiency was granted, on default, as against Chandra, Opalgem, Elite, and Rockmans in the amount of $13,471608.45, with interest accruing daily at the rate of $3,367.90 after August 12, 2013 until judgment is entered of $666,844.20 for a total amount of $14,138,452.65, with post-judgment interest to accrue on the total at the statutory rate until paid. (N.Y.SCEF 124, Exh. A).
By affirmation of service dated March 14, 2014, plaintiff's counsel affirms that he served Chandra that day with notice of entry of the November 2013 order. (N.Y.SCEF 103).
II. CHANDRAS'S MOTION TO VACATE
A. Contentions
Chandra argues that sections 21.1 and 21.2 of the guaranty accord exclusive and unwaivable jurisdiction over this matter to the English courts, and that therefore, this court lacks subject matter jurisdiction. He also asserts that the judgment is unenforceable because plaintiff did not demonstrate in the judgment itself that it complies with English law, because the page of the guaranty containing his signature reflects no indicia that it is part of the guaranty, and because the pages are neither initialed nor numbered. (N.Y.SCEF 121).
Chandra also claims that he did not appear because he thought the judgment is unenforceable in New York and because he is not a party to the mortgage agreement. (Id. ).
In opposition, plaintiff argues that given the location of the mortgaged premises in New York County, this court has subject matter jurisdiction over the mortgage foreclosure action, and that because the selection of England as the exclusive forum for any disputes arising from the guaranty is granted solely to plaintiff, Chandra cannot rely on it. (N.Y.SCEF 131).
In reply, Chandra reiterates the arguments set forth in his motion, and advances new arguments about the deficiency judgment being unconscionable and prejudicial, and unenforceable against him because he was not the mortgagor. (N.Y.SCEF 149). His new arguments are improperly raised on reply. (See Gumbs v. Flushing Town Center III, LP, 114 AD3d 573, 596 [1st Dept 2014] [reply papers to address arguments made in opposition to position taken by movant, not to permit movant to offer new arguments in support of motion] ).
B. Analysis
To obtain an order vacating a default judgment on motion based on a lack of jurisdiction, a defendant must demonstrate, inter alia, a “lack of jurisdiction to render the judgment of order.” (CPLR 5015[a][4] ).
It is well-settled that “a judgment rendered without subject matter jurisdiction is void, and that the defect may be raised at any time and may not be waived.” (Nash v. Port Authority of N.Y. and NJ, 22 NY3d 220, 229 [2013] ). It is also well settled that “[a] court lacks subject matter jurisdiction when it lacks the competence to adjudicate a particular kind of controversy in the first place.” (Lischinskaya v. Carnival Corp., 56 AD3d 116, 122 [2d Dept 2008], lv denied, 12 NY3d 716 [2009] ). New York, however, is a court of “original, unlimited and unqualified jurisdiction” (Matter of Fry v. Village of Tarrytown, 89 N.Y.2d 714, 718 [1997] ), which cannot be divested by contract, and does not depend on the facts of a case (id. ).
Absent any cognizable argument that New York has no subject matter jurisdiction with respect to a foreclosure of a Manhattan unit and related deficiency judgment, Chandra is wrong in relying on the forum selection clause as divesting this court of its subject matter jurisdiction. (See CDR Creances SAS v. Cohen, 77 AD3d 489, 491 [1st Dept 2010] [forum clause does not implicate subject matter jurisdiction] ). And, absent any explanation of how a choice of law provision wrests from this court its original, unlimited and unqualified subject matter jurisdiction, and given Chandra's failure to demonstrate in the first instance that English law requires that the case be heard in England, jurisdiction is properly reposed here.
The forum selection clause accords plaintiff the exclusive right to select England as the forum. Thus, plaintiff was entitled to waive that right, and Chandra may not rely on it to avoid appearing here, absent any contention that the clause is either unjust or unreasonable. (See Jetblue Airways Corp. v. Stephenson, 88 AD3d 567 [1st Dept 2011] [where forum selection clause was included in agreement for one party's sole benefit, that party may unilaterally waive it]; cf Valens U.S. SPVI, LLC v. Hopkins Capital Ptners, Inc., 26 Misc.3d 1210[A] [Sup Ct, New York County 2010] [finding forum selection clause giving one party unilateral right to pursue litigation in any jurisdiction neither unjust nor unreasonable where agreement negotiated by sophisticated parties at arms' length] ). Moreover, a choice of law clause is not jurisdictional. (See eg Media Arts Group, Inc. v. Rhino Intern., Inc., 7 Misc.3d 1004, *2 [Sup Ct, Nassau County 2005 [choice of law provision pertains to substantive law governing contract and not to question of personal jurisdiction]; cf Blue Whale Corp. v. Grand China Shipping Dev. Co ., Ltd., 727 F3d 488, 497 [2d Cir2013] [“The choice of law clauses, whatever their significance in the ultimate determination of the merits of the dispute, do not divest the federal court of subject matter jurisdiction.”], quoting Williamson v. Recovery Ltd. Ptnship, 2007 WL 102089, *2 [SD N.Y.2007] ).
To the extent Chandra seeks to excuse his default pursuant to CPLR 5015(a)(1), his erroneous belief that there was no need to answer given his view that this court has no subject matter jurisdiction does not constitute a reasonable excuse for his default. That he is not a party to the mortgage is immaterial to his duty to appear. (Archer v. MVIAC, 118 AD3d 5 [2d Dept 2014] ; cf D & R Global Selections, SI v. Pineiro, 90 AD3d 403, 405 [1st Dept 2011] [parties that fail to take steps to protect their interest, relying instead on their own incorrect assumptions and failing to consult with attorneys, despite being advised and placed on notice to do so, do not establish reasonable excuse]; Passalacqua v. Banat, 103 A.D.2d 769 [2d Dept 1984] [fact that movant made erroneous assumptions regarding validity of action and need to defend constitutes insufficient excuse for vacatur of judgment entered] ). And, absent any showing that the laws of England afford him a defense, Chandra also fails to establish a meritorious defense.
For all of these reasons, Chandra has not sustained his burden on this motion.
III. PLAINTIFF'S CROSS MOTION TO COMPEL ANSWERS TO INFORMATION SUBPOENAS
It is undisputed that on March 31, 2014, plaintiff served on Chandra, Opalgem, Elite, and Rockmans information subpoenas, each seeking answers within seven days after receipt thereof. (N.Y.SCEF 133). Absent Chandra's timely response, plaintiff has demonstrated its entitlement to an order compelling a response.
IV. CONCLUSION
Accordingly, it is hereby
ORDERED, that defendant Krishnamurthy Chandra's motion for an order vacating the default judgment entered against him is denied; it is further
ORDERED, that plaintiff's motion for an order compelling Chandra's response to its information subpoena is granted; and it is further
ORDERED, that Chandra respond to the information subpoena within 15 days of this opinion.