| Katz v Marra |
| 2010 NY Slip Op 04957 [74 AD3d 888] |
| June 8, 2010 |
| Appellate Division, Second Department |
| Jacob Katz, Respondent, v Benedetto Marra,Appellant. |
—[*1] DiConza, LaRocca, Dicunto & Kaplin, LLP, Brooklyn, N.Y. (Richard A. Kaplin of counsel),for respondent.
In an action for specific performance of a contract for the sale of real property, the defendantappeals from (1) an order of the Supreme Court, Kings County (Vaughan, J.), dated September10, 2008, which denied his motion to vacate an order and judgment (one paper) of the same courtdated November 20, 2006, granting the plaintiff's unopposed motion for summary judgment onthe complaint and awarding the plaintiff specific performance of the contract, and (2) an order ofthe same court, also dated September 10, 2008, which denied his motion to vacate an order of thesame court dated January 3, 2008, granting the plaintiff's unopposed motion for the appointmentof a special referee to sign a deed transferring the subject real property to the plaintiff.
Ordered that the orders dated September 10, 2008, are affirmed, with one bill of costs.
In September 1997 the plaintiff entered into a contract for the purchase of the defendant'sapartment building in Brooklyn. The contract price relating thereto was $270,000. As requiredby the contract, the plaintiff tendered the sum of $20,700 as a down payment.
The original closing date was set for November 21, 1997. On the consent of the parties, theclosing date apparently was extended in order to permit the plaintiff additional time to obtainfinancing through a mortgage loan. On December 12, 1997, Greenpoint Savings Bank issued amortgage loan commitment to 3615-15 Realty Corp. (hereinafter Realty Corp.), a corporationwholly owned by the plaintiff. On December 18, 1997, the plaintiff assigned to Realty Corp. hisrights under the subject contract of sale. The last mortgage commitment extension granted toRealty Corp. by Greenpoint expired on April 10, 1998. The record does not reveal that anyfurther mortgage loan commitments were obtained in connection with the transaction. Theclosing did not take place.
In 1999, the plaintiff commenced an action in the Supreme Court, Kings County, bysummons with notice. The plaintiff, however, failed to file a complaint. Thereafter, in 2003, the[*2]plaintiff commenced the instant action for specificperformance of the subject contract.
In May 2006, the plaintiff moved for summary judgment on the complaint. By order andjudgment dated October 17, 2006, the Supreme Court granted the plaintiff's motion, upon thedefendant's default. In September 2007, the plaintiff moved for the appointment of a specialreferee to sign a deed conveying the property to him. The defendant similarly did not oppose thatmotion. By order dated January 3, 2008, the Supreme Court granted the plaintiff's motion for theappointment of a special referee to sign a deed conveying to the plaintiff the subject property.
In 2008, the defendant moved to vacate the order and judgment dated October 17, 2006, aswell as the order dated January 3, 2008. The Supreme Court denied the defendant's motions. Weaffirm.
Pursuant to CPLR 5015 (a), "[t]he court which rendered a judgment or order may relieve aparty from it upon such terms as may be just." This statute sets forth certain grounds for vacatur,including excusable default, newly-discovered evidence, fraud, misrepresentation, and lack ofjurisdiction. As recognized by the Court of Appeals, the drafters of CPLR 5015 did not envisionthat this statute would provide an exhaustive list of the grounds for vacatur (see Woodson vMendon Leasing Corp., 100 NY2d 62, 68 [2003]). Instead, a court retains "its discretionarypower to 'vacate its own judgment for sufficient reason and in the interests of substantial justice'" (Goldman v Cotter, 10 AD3d289, 293 [2004], quoting Woodson v Mendon Leasing Corp., 100 NY2d at 68;see Ladd v Stevenson, 112 NY 325, 332 [1889]). However, "[a] court's inherent power toexercise control over its judgment is not plenary, and should be resorted to only to relieve a partyfrom judgments taken through [fraud,] mistake, inadvertence, surprise or excusable neglect"(Matter of McKenna v County of Nassau, Off. of County Attorney, 61 NY2d 739, 742[1984] [internal quotation marks omitted]; see Long Is. Light. Co. v Century Indem. Co., 52 AD3d 383, 384[2008]; Quinn v Guerra, 26 AD3d872, 873 [2006]).
Here, the defendant failed to establish grounds warranting relief under CPLR 5015 (a) (1). Adefendant seeking to vacate an order entered upon his or her default in opposing a motionpursuant to CPLR 5015 (a) (1) must demonstrate both a reasonable excuse and a potentiallymeritorious defense (see Newell vHirsch, 65 AD3d 1108, 1109 [2009]; Pisciotta v Lifestyle Designs, Inc., 62 AD3d 850, 853 [2009]; Simpson v Town of Southampton, 43AD3d 1033, 1033-1034 [2007]). In this regard, as acknowledged by our dissentingcolleagues, the defendant did not set forth a reasonable excuse for his defaults. Indeed, heessentially offered no excuse whatsoever.
Further, although the defendant moved to vacate the order and judgment pursuant to CPLR5015 (a) (3), he failed to establish that the plaintiff procured that order and judgment by fraud,misrepresentation, or other misconduct (see CPLR 5015 [a] [3]; Citicorp Vendor Fin., Inc. v Island GardenBasketball, Inc., 27 AD3d 608, 609 [2006]; Badgett v Badgett, 2 AD3d 379 [2003]). There is no support in therecord for the position of the dissent that the plaintiff appears to have obtained summaryjudgment through an affirmative misrepresentation or that he made implicit affirmations tomislead the court.
In our view, this case does not warrant the invocation of a court's inherent power to vacateits orders and judgment in the interest of substantial justice. Notwithstanding the dissent'scharacterization, there is nothing unique or unusual about this case. This Court has previouslyfound that claims of financial distress are not sufficient to justify the exercise of the court'sinherent discretionary power to vacate its own judgment in the interests of substantial justice (see Matter of Dayton Towers Corp. vGethers, 24 AD3d 663, 664 [2005]). Simply stated, this is not an appropriate case inwhich to exercise the broad equity power of a court to vacate its own orders and judgment.
We note that the cases cited by the dissent for the proposition that vacatur is warranted in theinterest of substantial justice are inapposite and/or distinguishable. For instance, in Ruben vAmerican & Foreign Ins. Co. (185 AD2d 63 [1992]), the court vacated a judgment, upon the"joint" motion and consent of the parties. Other cases relied upon by the dissent, such asGovernment Empls. Ins. Co. v Employers Commercial Union Ins. Co. (62 AD2d 123[1978]) and Soggs v Crocco (247 AD2d 887 [1998]), did not involve a motion to vacatean order or judgment entered upon default.[*3]
The defendant's remaining contentions either need not beconsidered in light of our determination or are without merit.
Accordingly, the Supreme Court providently exercised its discretion in denying thedefendant's motions. Prudenti, P.J., Rivera and Fisher, JJ., concur.
Belen, J., dissents and votes to reverse the orders appealed from and grant the defendant'smotions with the following memorandum, in which Austin, J. concurs:
In a case involving specific performance of a contract for the sale of a residential building,the majority finds that the facts did not warrant invoking the Supreme Court's inherentdiscretionary power to vacate a default judgment in the interest of substantial justice. They reachthis conclusion even though denying vacatur in this case awards specific performance to aplaintiff who never had standing to prosecute this action because of an assignment of his rightsto the contract of sale which he entered into nine years before moving for summary judgment onthe complaint.
The majority also affirms the order denying the motion to vacate an order and judgmentdated November 20, 2006, awarding summary judgment to the plaintiff for specific performanceeven though the plaintiff did not establish a prima facie right to any relief given that themortgage loan commitment upon which he relied was not even issued to him and further, itexpired eight years before moving for summary judgment. As a result of the affirmances here,the plaintiff realizes specific performance even though he sat on his rights for nearly a decade,during which time the defendant maintained the property at an expense of more than $350,000,and during which time the value of the property rose dramatically.
Because I believe that denying vacatur under these circumstances results in a substantialinjustice to the defendant and a wholly unwarranted windfall to the plaintiff, I respectfullydissent.
At the outset, I recognize that CPLR 5015 (a) authorizes a court to vacate a default judgmenton the ground of, inter alia, excusable neglect or misrepresentation, as long as the movantdemonstrates a reasonable excuse for its default and a meritorious defense to the action (seeCPLR 5015 [a] [1], [3]; Verde Elec.Corp. v Federal Ins. Co., 50 AD3d 672, 672-673 [2008]; Bank of N.Y. v Lagakos, 27 AD3d678 [2006]). I further recognize that in moving for vacatur of the order and judgment datedNovember 20, 2006, awarding summary judgment to the plaintiff for specific performance, thedefendant did not set forth a reasonable excuse for his default. Such failure, under the uniquecircumstances of this case, is not fatal to the defendant's motion.
Indeed, the stated bases for vacatur of judgments set forth in CPLR 5015 (a) were neverintended to provide a fully comprehensive list of possible grounds therefor (see Woodson vMendon Leasing Corp., 100 NY2d 62, 68 [2003]; Ruben v American & Foreign Ins.Co., 185 AD2d 63, 67 [1992]; Government Empls. Ins. Co. v Employers CommercialUnion Ins. Co., 62 AD2d 123, 127 [1978]). Instead, "the drafters of that provision intendedthat the courts retain and exercise their inherent discretionary power in situations that warrantedvacatur but which the drafters could not easily foresee" (Woodson v Mendon LeasingCorp., 100 NY2d at 68). As the Advisory Committee on Practice and Procedure explained,"[t]he court's inherent power to relieve a party from the operation of a judgment in the interest ofsubstantial justice is not limited in any way by the proposed rules. 'The whole power of the courtto relieve from judgments taken through 'mistake, inadvertence or excusable neglect' is notlimited . . . ; but in the exercise of its control over its judgments it may open themupon the applications of anyone for [*4]sufficient reason, in thefurtherance of justice. Its power to do so does not depend upon any statute, but is inherent' " (3rdPreliminary Report of Advisory Comm on Prac and Proc, Title 50, at 204 [Mar. 1, 1959],quoting Ladd v Stevenson, 112 NY 325, 332 [1889]).
A court thus possesses the inherent power to vacate its judgments in the interest of justice(see Woodson v Mendon Leasing Corp., 100 NY2d at 68), and the appellate courts havenot hesitated to do so when unique circumstances warranted vacatur (see e.g. Wade v Village of Whitehall,46 AD3d 1302 [2007] [default judgment vacated although no reasonable excuse givenbecause award was an unfair windfall and movant was confused about legal process];Government Empls. Ins. Co. v Employers Commercial Union Ins. Co., 62 AD2d at 127[absent a reasonable excuse, default judgment for insurance company vacated because insuredhad not been notified of policy cancellation]; Soggs v Crocco, 247 AD2d 887, 888[1998] [default judgment vacated without reasonable excuse because specific performanceimpossible under contract terms]). Moreover, Matter of McKenna v County of Nassau, Off.of County Attorney (61 NY2d 739, 742 [1984]), cited by the majority for the propositionthat a court's discretion to vacate its judgments is not plenary, is readily distinguishable from theinstant case. In McKenna, the Supreme Court abused its discretion by exceeding thetraditional authority of courts to alter the terms of an arbitrator's award (id.).
In any event, even if the majority's reliance on McKenna were correct, thecircumstances at bar satisfy the rubric of CPLR 5015. Indeed, the plaintiff appears to haveobtained summary judgment through an affirmative misrepresentation to the Supreme Court. It issignificant that, in moving for summary judgment, the plaintiff failed to establish that he wasentitled to specific performance as a matter of law. In his moving papers, the plaintiffrepresented that he had obtained extensions on his mortgage commitment and thus implicitlyaffirmed that he was able to perform, even though the extensions had expired in April 1998,approximately eight years earlier. Moreover, the mortgage commitment was to a corporation notin privity with the defendant. This appears to be an attempt to mislead the court into believingthat he was ready, willing, and able to close on the subject property, a prerequisite to a cause ofaction for specific performance (see Lot57 Acquisition Corp. v Yat Yar Equities Corp., 63 AD3d 1109, 1111 [2009]; Paglia v Pisanello, 15 AD3d 373[2005]; Cheemanlall v Toolsee, 17AD3d 392, 393 [2005]). This affirmative misrepresentation is the type of circumstancewarranting vacatur (see Matter of McKenna v County of Nassau, Off. of CountyAttorney, 61 NY2d at 742; cf.Jericho Group, Ltd. v Midtown Dev., L.P., 47 AD3d 463 [2008]; Bell v Town Bd.of Town of Pawling, 146 AD2d 729 [1989]).
In addition, there is no evidence that there were any hurdles to conveyance preventing aclosing during the nine years since the assignee corporation had received a mortgage loancommitment from Greenpoint Savings Bank in December 1997 (see Groesbeck vMorgan, 206 NY 385 [1912]; Richardson v Vajiradhammapadip Temple, 24 AD3d 649 [2005];cf. EMF Gen. Contr. Corp. vBisbee, 6 AD3d 45, 53 [2004]). However, during this period, according to thedefendant, the value of the subject premises had increased from the agreed contract price of$270,000 in 1997, to more than $1,000,000 in 2003, when the complaint in the instant action wasfiled. He also estimated that between 1997 and 2008, he had expended more than $350,000 tomaintain the subject premises on the reasonable belief that the plaintiff had abandoned thismatter. These allegations are not contested by the plaintiff. As such, given that the defaultjudgment will likely result in an enormous financial windfall for the plaintiff that neither partycould have intended at the contract signing, the defendant was severely prejudiced by theplaintiff's delay (see Richardson vVajiradhammapadip Temple, 24 AD3d 649 [2005]).
In sum, under the unique circumstances presented, the Supreme Court should have exercisedits inherent authority to vacate, in the interest of justice, both the order and judgment datedNovember 20, 2006, and the order dated January 3, 2008. I would reverse the orders appealedfrom, grant the defendant's motions to vacate, and remit the matter to the Supreme Court, KingsCounty, for a trial on the merits (see Woodson v Mendon Leasing Corp., 100 NY2d at68; Cippitelli v Town of Niskayuna, 277 AD2d 540, 541 [2000]; Soggs vCrocco, 247 AD2d at 888).