Opinion
Index No. 652474/2023
08-24-2023
Lim Chap Huat, Plaintiff, v. Global Arena Holding, Inc., Defendant.
Davis Wright Tremaine LLP, New York, NY (John M. Magliery and Sarah Anne Baugh of counsel), for plaintiff. Goldberg Weprin Finkel Goldstein LLP (Kevin J. Nash of counsel), for defendant.
Unpublished Opinion
Davis Wright Tremaine LLP, New York, NY (John M. Magliery and Sarah Anne Baugh of counsel), for plaintiff.
Goldberg Weprin Finkel Goldstein LLP (Kevin J. Nash of counsel), for defendant.
Hon. Gerald Lebovits, J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 001) 2, 6, 7, 8, 9, 10, 11 were read on this motion for SUMMARY JUDGMENT IN LIEU OF COMPLAINT.
In this action on a convertible promissory note, plaintiff Lim Chap Huat moves for summary judgment in lieu of complaint under CPLR 3213 against defendant, Global Arena Holding, Inc. The motion is denied, and the motion-action is converted into a plenary action.
The accelerated procedure under CPLR 3213 is available only for "instruments for the payment of money only," such as promissory notes. (See Gurewitsch v Fawer, 2023 NY Slip Op 50639[U], *2 [Sup Ct, NY County 2023].) To succeed on a CPLR 3213 motion, a plaintiff must prove its right to payment "from the face of a document, without regard to extrinsic evidence." (Matas v Alpargatas S.A.I.C., 274 A.D.2d 327, 328 [1st Dept 2000].)
To support his motion, plaintiff submits a copy of the parties' promissory note, the amendment to the promissory note, a notice of default sent by him to defendant, and defendant's emailed response proposing a repayment schedule for the principal and interest. Defendant attacks this showing by arguing that its liability under the note on which plaintiff relies cannot be determined solely by reference to the note itself and proof of nonpayment. This court agrees.
Defendant argues that § 2 (c) of the promissory note requires payment to be made ratably across not only the note at issue here, but also other promissory notes issued in a series by defendant. Thus, defendant contends, this court must look beyond the four corners of this note to determine the amount due to plaintiff, foreclosing CPLR 3213 treatment for the note. In response, Plaintiff argues that § 2 (c) applies only in cases of prepayment, not payment upon maturity. On plaintiff's reading, his entitlement to repayment at maturity would not be affected by the amounts outstanding on other notes (or the interests of the other noteholders), such that his right to collect on the amounts due on his note may be enforced through CPLR 3213. Plaintiff contends that this interpretation is bolstered by the language of § 5 of the note, which conditions defendant's right to prepayment on making those prepayments ratably, based on the sum of the outstanding principal and unpaid interest on all the notes.
The specification in § 5 of ratability for prepayment, and the absence of a comparable express provision for ratability for payments made at maturity, supports plaintiff's interpretation. On the other hand, the language of § 2 (c), considered in the context of § 2's overall structure, supports defendant's reading. Section 2 (a) defines the amount due under the note, and specifies that the amount due shall be payable on the note's maturity date. Section 2 (b) permits prepayment (and permits conversion of prepayments of the note into equity). Section 2 (c) provides that payments on the notes shall be applied ratably. Because § 2 (c) follows provisions discussing both payment on maturity and prepayment before maturity, one might reasonably expect § 2 (c)'s ratability language to apply to both types of payment, at least absent an express limitation to prepayment that § 2 (c) does not contain.
Lender asserts that this interpretation is foreclosed by the Appellate Division, First Department's decision in Weinman v Blake & Knowles Steam Pump Works (156 AD 168 [1st Dept 1913]). But Weinman holds only that the borrower in that case could properly have agreed to pay a ratable prepayment premium while still also committing only to pay face value at maturity-not that payment at maturity must be paid at face value without ratability, as lender would have it. (See id. at 172-173.)
Given these two reasonable readings of § 2 (c), the language of the note is ambiguous. As a result, no way exists to determine the extent of defendant's liability without considering evidence beyond the scope of the note itself. Plaintiff therefore may not collect on the note through CPLR 3213, and his summary-judgment motion must be denied.
To the extent that plaintiff is arguing it may rely on CPLR 3213 due to a 2021 amendment to the note executed by the parties, this court disagrees. That amendment extended the note's maturity date, and modified its conversion provisions, but provided that "[a]ll other terms and conditions of the Loan Documents"-including § 2 (c)'s ratability language-were "hereby ratified and confirmed. (NYSCEF No. 4 at 23.)
There is no merit to plaintiff's arguments either that defendant was required to establish a material dispute of fact to warrant denial of the motion. The burden shifts to defendant to raise a triable issue of fact only once plaintiff has satisfied the threshold showing that CPLR 3213 may be employed to collect on the note. (See Weissman v Sinorm Deli, Inc., 88 N.Y.2d 437, 444-445 [1996].) As discussed above, plaintiff has not done so.
This court also is not persuaded by plaintiff's contention, made for the first time on reply, that the court should grant summary judgment on liability and schedule an immediate trial on damages under CPLR 3212 (c). CPLR 3213 affords the court discretion to determine the appropriate procedural path for the action upon the denial of plaintiff's motion. But here, given that issue has not been joined and that questions remain about how defendant's payments under the note are to be applied-potentially implicating the interests of other noteholders beyond plaintiff-the court disagrees with plaintiff's assertion that "the only triable issues of fact... relate to the amount or extent of damages." (CPLR 3212 [c].)
Accordingly, it is
ORDERED that plaintiff's CPLR 3213 motion for summary judgment in lieu of complaint is denied; and it is further
ORDERED that the CPLR 3213 motion-action is converted into a plenary action; and that plaintiff's moving papers are deemed the complaint in this action and the defendant's opposition papers are deemed the answer; and it is further
ORDERED that the parties shall appear before the court for a preliminary conference on September 22, 2023.