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  • Tom Holman

Creditor’s Motion for Summary Judgment in Lieu of a Complaint Granted in Part and Denied in Part by

In a recent Nassau County Supreme Court decision, Axis Capital, Inc. v. Tariq Khan, 606716/14, NYLJ 1202730330007, the Court granted a motion for summary judgment in lieu of filing a complaint pursuant to CPLR §3213 as it related to liability but denied the motion as it related to damages.

This action arose from Khan personally guaranteeing obligations of South Bay, his limited liability company, to non-party Leasehampton Equipment Services. South Bay defaulted on the lease and the equipment was re-possessed and sold. Rather than file a complaint, Axis Capital, as Leasehampton's assignee, moved for summary judgment in lieu of filing a complaint pursuant to CPLR §3213 to collect upon Khan’s personal guaranty. Khan argued that this action was not amenable to summary judgment in lieu of complaint as Axis Capital failed to make to show that the sale was “commercially reasonable” which is required to entitle Axis to summary judgment. Khan also claimed that the lease in question was a secured transaction governed by Article 9 of the UCC, and that this action should be classified as a deficiency suit after the sale of repossessed collateral.

CPLR §3213 provides: “When an action is based upon an instrument for the payment of money only or upon any judgment, the plaintiff may serve with the summons a notice of motion for summary judgment and the supporting papers in lieu of a complaint.” An absolute and unconditional guaranty is generally held to qualify as an “instrument for the payment of money only” within the meaning of CPLR §3213. On a CPLR §3213 motion to recover on a guaranty, the submission of the executed guaranty and an affidavit of nonpayment is generally held to be sufficient to establish the plaintiff's prima facie case.

The Court found in favor of Axis Capital on the issue of liability holding that it had established a prima facie right to judgment as a matter of law on the issue of liability by submitting the Personal Guaranty executed by Khan, the language of which was “absolute and unconditional,” together with the affidavit of a “Recovery Specialist” attesting to the payment default. However, the Court denied Axis Capital’s motion as it related to the amount of damages that should be recovered. The Court found that Axis Capital’s motion was flawed where it failed to identify the exact amount of damages that were owed. The Affidavit in Support that was submitted merely stated that “South Bay owes Axis Capital no less than the amount of $98,190.08.” The Court held that there was “no documentary substantiation, nor any attempt to explain the derivation of the amount due or to reconcile it with the payment terms of the Lease.”

With respect to the question of commercial reasonableness raised by Khan, the Court held that “the case law is not clear as to what level of proof is required on the part of the debtor or guarantor to place the matter in issue.” The Court decided not to reach an answer on this question for the purposes of this motion holding that “the absence of any details regarding the facts and circumstances of the sale, and particularly the amount of proceeds derived therefrom, highlights the conclusory nature of plaintiff's proof of damages.”

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