| Viafax Corp. v Citicorp Leasing, Inc. |
| 2008 NY Slip Op 06983 [54 AD3d 846] |
| September 16, 2008 |
| Appellate Division, Second Department |
| Viafax Corp. et al., Appellants, v Citicorp Leasing, Inc.,Respondent. |
—[*1] Platzer, Swergold, Karlin, Levine, Goldberg & Jaslow, LLP (Steven D. Karlin of counsel),for respondent.
In an action, inter alia, to recover damages for the failure to conduct the sale of collateral in acommercially reasonable manner and breach of the implied covenant of good faith and fairdealing, the plaintiffs appeal, as limited by their brief, from so much of an order of the SupremeCourt, Nassau County (Bucaria, J.), dated October 10, 2007, as granted that branch of thedefendant's motion which was to dismiss the complaint pursuant to CPLR 3211 (a) (4), anddenied their cross motion to consolidate the action with an action entitled Citicorp Leasing,Inc. v Viafax Corp., pending in the Supreme Court, Nassau County, under index No.5554/05.
Ordered that the order is reversed insofar as appealed from, on the law and in the exercise ofdiscretion, with costs, that branch of the defendant's motion which was to dismiss the complaintpursuant to CPLR 3211 (a) (4) is denied, the plaintiffs' cross motion to consolidate the actionwith an action entitled Citicorp Leasing, Inc. v Viafax Corp., pending in the SupremeCourt, Nassau County, under index No. 5554/05, is granted, and the matter is remitted to theSupreme Court, Nassau County, for further proceedings, including the amendment of the captionto reflect the consolidation.
The plaintiff Viafax Corp. (hereinafter Viafax) is a dissolved domestic corporation whichwas formerly engaged in the business of leasing motor vehicles. The defendant Citicorp Leasing,Inc. (hereinafter Citicorp), is a secured creditor who advanced the plaintiff funds to finance thepurchase of motor vehicles pursuant to a 1999 loan agreement which was personally guaranteedby the individual [*2]plaintiffs Mark Doyle and Robert Allgier(hereinafter the guarantors). Viafax allegedly defaulted on its obligations under the loanagreement commencing in October 2003 and an auction thereafter was conducted to sell thecollateral which secured the loan agreement, including all motor vehicles and leases for whichfinancing was provided. Citicorp was the only bidder at the auction, and it purchased the subjectcollateral for the sum of $1,098,735.
Citicorp subsequently commenced an action (hereinafter the first action) against Viafax andthe guarantors seeking to recover an alleged deficiency of more than $7 million which remaineddue after crediting Viafax with the proceeds of the auction. In their answer, Viafax and theguarantors raised, inter alia, three affirmative defenses alleging that Citicorp's claims were barredby its failure to act in good faith in the servicing of the loan agreement, and the repossession andsale of the collateral. Viafax and the guarantors also raised five affirmative defenses alleging thatCiticorp was not entitled to a deficiency judgment because it failed to dispose of the collateral ina commercially reasonable manner as required by UCC 9-610 (b), thereby reducing the amountreceived on the disposition of the collateral. In addition, Viafax and the guarantors interposedtwo counterclaims in the first action which were predicated upon Citicorp's alleged failure todispose of the collateral in a commercially reasonable manner, and breach of the implied duty ofgood faith and fair dealing. The counterclaims sought an accounting and, in effect, to recover anysurplus which would have existed if the collateral had been sold in a commercially reasonablemanner. Citicorp thereafter moved for summary judgment on its complaint, and dismissal of theaffirmative defenses and counterclaims. By order dated December 19, 2006, the Supreme Court(Bucaria, J.) denied that branch of Citicorp's motion in the first action which was for summaryjudgment, concluding that issues of fact existed as to whether Citicorp conducted the sale of thecollateral in a commercially reasonable manner. The court also, inter alia, dismissed the threeaffirmative defenses alleging that Citicorp failed to act in good faith because they wereinsufficiently pleaded, and dismissed the two counterclaims on the ground that, in the loanagreement, Viafax had waived its right to interpose counterclaims.
Shortly thereafter, by summons and complaint filed on February 5, 2007, Viafax and theguarantors commenced this action (hereinafter the second action) against Citicorp seeking anaccounting and damages based upon Citicorp's alleged failure to dispose of the chattel in acommercially reasonable manner, and breach of the implied duty of good faith and fair dealing.Citicorp responded by moving, inter alia, pursuant to CPLR 3211 (a) (4) to dismiss the complaintin the second action upon the ground that there was a prior action pending between the parties.Viafax and the guarantors opposed the motion, and cross-moved for consolidation. The SupremeCourt granted that branch of Citicorp's motion which was to dismiss the complaint in the secondaction pursuant to CPLR 3211 (a) (4). The court concluded that the first cause of action set forthin the complaint, alleging failure to dispose of the chattel in a commercially reasonable manner,was duplicative of still pending affirmative defenses in the first action, and that Viafax and theguarantors could obtain full redress of their rights in the first action. The court further concludedthat the second cause of action alleging that Citicorp had breached its implied duty of good faithand fair dealing was barred because the three affirmative defenses alleging lack of good faith inthe first action had been dismissed on the merits. We reverse.
The core allegations set forth in the first cause of action in the second action are duplicativeof the still-pending affirmative defenses in the first action, which allege that Citicorp failed to actin a commercially reasonable manner in various aspects of the disposition of the chattel.However, contrary to the court's conclusion, Viafax and the guarantors cannot obtain full redressof their rights in the first [*3]action because the pendingaffirmative defenses merely challenge Citicorp's right to recover a deficiency in the amountclaimed, and do not entitle Viafax and the guarantors to affirmative relief (see Enrico & SonsContr. v Bridgemarket Assoc., 252 AD2d 429 [1998]). Citicorp's arguments regarding thesufficiency of the first cause of action are raised for the first time on appeal, and thus are notproperly before this Court (see Resnick v Doukas, 261 AD2d 375 [1999]; see also Gallagher v Gallagher, 51AD3d 718 [2008]; Edme vTanenbaum, 50 AD3d 624 [2008]; Matter of AIU Ins. Co. v Rodriguez, 43 AD3d 1042 [2007]).
Furthermore, the court improperly concluded that its dismissal of the three affirmativedefenses alleging lack of good faith in the first action barred the second cause of actionpredicated upon Citicorp's alleged breach of its implied duty of good faith and fair dealing. Thedismissal of these defenses because they were insufficiently pleaded was not a dismissal on themerits which barred them from being asserted in a new action (see Tortura v Sullivan Papain BlockMcGrath & Cannavo, P.C., 41 AD3d 584 [2007]; Asgahar v Tringali Realty, Inc., 18 AD3d 408 [2005]; Hodge vHotel Empls. & Rest. Empls. Union Local 100 of AFL-CIO, 269 AD2d 330 [2000]).Moreover, the complaint in the second action is not barred by Viafax's waiver of the right tointerpose counterclaims (see Bendat v Premier Broadcast Group, 175 AD2d 536 [1991];European Am. Bank v Mr. Wemmick, Ltd., 160 AD2d 905 [1990]). Accordingly, thatbranch of Citicorp's motion which was to dismiss the complaint in the second action pursuant toCPLR 3211 (a) (4) should have been denied.
The cross motion of Viafax and the guarantors for consolidation also should have beengranted. A motion to consolidate pursuant to CPLR 602 (a) should be granted absent a showingof prejudice to a substantial right by the party opposing the motion (see Mas-Edwards v Ultimate Servs.,Inc., 45 AD3d 540 [2007]; Kally v Mount Sinai Hosp., 44 AD3d 1010 [2007]; GAM Prop. Corp. v Sorrento Lactalis,Inc., 41 AD3d 645, 646 [2007]; Nigro v Pickett, 39 AD3d 720, 722 [2007]). Consolidation isappropriate where it will avoid unnecessary duplication of trials, save unnecessary costs andexpense, and prevent an injustice which would result from divergent decisions based on the samefacts (see Best Price Jewelers.Com, Inc.v Internet Data Stor. & Sys., Inc., 51 AD3d 839 [2008]; Mas-Edwards v Ultimate Servs., Inc.,45 AD3d 540 [2007]). Here, both actions arise from the same transaction, concern the sameparties, and involve common questions of law and fact. Furthermore, Citicorp failed todemonstrate that consolidation would prejudice it by delaying resolution of its action to recover adeficiency from Viafax and the guarantors. Under these circumstances, consolidation iswarranted in the interest of judicial economy (see Best Price Jewelers.Com, Inc. v Internet Data Stor. & Sys., Inc., 51AD3d 839 [2008]; Kally v MountSinai Hosp., 44 AD3d 1010 [2007]; Nigro v Pickett, 39 AD3d 720, 722 [2007]).
We decline to address Citicorp's request for certain affirmative relief since a nonappealingparty is not entitled to such relief (see Hecht v City of New York, 60 NY2d 57, 61[1983]; Castro v Maple RunCondominium Assn., 41 AD3d 412, 414 [2007]; Piquette v City of New York, 4 AD3d 402 [2004]). Skelos, J.P.,Ritter, Florio and Carni, JJ., concur. [See 2007 NY Slip Op 33309 (U).]