| Chase Equip. Leasing Inc. v Architectural Air, L.L.C. |
| 2011 NY Slip Op 03663 [84 AD3d 439] |
| May 3, 2011 |
| Appellate Division, First Department |
| Chase Equipment Leasing Inc.,Respondent, v Architectural Air, L.L.C., et al., Appellants. |
—[*1] Hahn & Hessen, LLP, New York (Zachary G. Newman of counsel), for respondent.
Order, Supreme Court, New York County (James A. Yates, J.), entered March 24, 2010,which, insofar as appealed from, granted plaintiff's motion to dismiss the counterclaims forconversion, breach of the implied duty of good faith, and pre-possession commerciallyunreasonable failure to dispose of collateral, and related defenses, unanimously modified, on thelaw, to deny the motion as to the counterclaim for conversion, and otherwise affirmed, withoutcosts.
Plaintiff, as a secured party, was not obligated to act in a commercially reasonable mannerbefore taking possession of the collateral (Bank Leumi USA v Agati, 5 AD3d 292, 293 [2004]). Nor was it soobligated by having, as defendants assert, practical control over the collateral, given defendants'refusal to surrender possession unless plaintiff modified the underlying loan or capitulated totheir other demands. Plaintiff's refusal to dispose of the collateral while simultaneously notallowing defendants to do so does not raise an inference of bad faith. In any event, defendants'claim based on the implied covenant of good faith is barred by the no-waiver clause permittingplaintiff's delay in exercising its remedies (see Chemical Bank v PIC Motors Corp., 87AD2d 447, 450 [1982], affd 58 NY2d 1023 [1983]); the duty of good faith does notimply obligations inconsistent with contractual provisions (see 511 W. 232nd Owners Corp. vJennifer Realty Co., 98 NY2d 144, 153 [2002]).
However, we find that the equipment that defendant Carl added to the airplane that served ascollateral was expressly exempt from becoming collateral itself by the plain meaning of section1.5 of the security agreement, regardless of the location of that provision within the agreement.[*2]Therefore, Carl has a superior right to ownership orpossession of the added-on equipment, which provides a basis for his conversion counterclaim.Concur—Saxe, J.P., Friedman, Freedman and Richter, JJ.