| Johnson v Societe Generale S.A. |
| 2012 NY Slip Op 03268 [94 AD3d 663] |
| April 26, 2012 |
| Appellate Division, First Department |
| Ken Johnson et al., Respondents, v Societe Generale S.A.,Appellant. |
—[*1] Ferber Chan Essner & Coller, LLP, New York (Robert M. Kaplan of counsel), forrespondents.
Amended judgment, Supreme Court, New York County (Jeffrey K. Oing, J.), entered June15, 2011, deleting the words "with prejudice" from a prior judgment, pursuant to an order, samecourt and Justice, entered May 9, 2011, which granted plaintiffs' motion to correct the priorjudgment pursuant to CPLR 5019 (a), reversed, on the law, without costs, the amended judgmentvacated and plaintiffs' motion denied. The Clerk is directed to reinstate the prior judgment.
Plaintiffs were entitled to payment of notes and warrants, purchased from Societe GeneraleAcceptance N.V. (Acceptance), if the value of certain underlying investment funds at maturitywas higher than the funds value at inception. Defendant Societe Generale S.A. (SGSA) provideda guarantee for the punctual payment of any amounts due plaintiffs from Acceptance.
In August 2008, plaintiffs filed a complaint against SGSA and others alleging that theinvestments had been mismanaged and that SGSA, as guarantor, was obligated to pay plaintiffsthe amount that would have been due in the absence of the mismanagement. After SGSA movedto dismiss the complaint with prejudice, plaintiff filed an amended complaint, which assertedessentially the same theory of liability as the original complaint, but named only SGSA asdefendant.
In November, 2008, SGSA moved to dismiss the amended complaint, with prejudice. OnJanuary 12, 2010, Judicial Hearing Officer Ira Gammerman granted SGSA's motion "to theextent that the complaint is dismissed for failure to state a cause of action." The court found thatthe "clear language" of the guarantee obligated SGSA to make payments only where Acceptancewas obliged to make payments, but failed to do so, and that there had been no determination thatthe funds were not profitable due to Acceptance's mismanagement. The court rejected defendant'sstatute of limitations argument and did not reach its forum non conveniens argument.
On March 4, 2010, the Clerk signed and entered a judgment, drafted by defense counsel,which dismissed the amended complaint "with prejudice and without costs or disbursements."Plaintiff appealed from the judgment and on January 27, 2011, this Court unanimously affirmed,stating: "Plaintiff investors' factual allegations failed to support a claim that they were entitled tolegal recourse against defendant guarantor based on its guaranty of the [*2]nonparty debtor's alleged payment obligations owed to plaintiffs.The amended complaint essentially acknowledges that there is no definitive sum owed plaintiffsby the debtor, and that a trial on plaintiffs' claims against the debtor would be necessary todetermine such sum, if any. Plaintiffs' 'belie[f]' that the debtor might owe them $1,000,000 inpayments on their investments is entirely speculative and unsupported. Accordingly, noobligation can be said to have accrued against the guarantor here" (80 AD3d 530 [2011][citations omitted]).
On February 22, 2011, plaintiffs moved to correct the judgment, pursuant to CPLR 5019 (a),by striking the phrase "with prejudice," or, in the alternative, to modify and/or vacate thejudgment, pursuant to CPLR 2221 and 5015, to conform to the trial court's January 12, 2010order granting the motion to dismiss. Prior to the motion, plaintiffs did not challenge thejudgment insofar as it provided for dismissal with prejudice—either in the trial court or ontheir appeal from the order that dismissed the amended complaint.
The motion court, which succeeded Judicial Hearing Officer Gammerman, granted themotion to resettle. Observing that "there is nothing in Judge Gammerman's decision that says orthat indicates that the plaintiffs' claims were to be dismissed with prejudice," the court found thatinclusion of the phrase "with prejudice" was "an administerial act" by the clerk, which the courtdid not review before entry. We now reverse.
Under CPLR 5019 (a), a trial court has the discretion to correct a judgment which contains amistake, defect, or irregularity not affecting a substantial right of a party (see Kiker v NassauCounty, 85 NY2d 879, 881 [1995]). Where the alleged error is substantive, other than onethat is clearly inconsistent with the intentions of the court and the parties as demonstrated by therecord, relief should be obtained either through an appeal from the judgment, or, if grounds forvacatur exist, through a motion to vacate pursuant to CPLR 5015 (a) (see Salamone v Wincaf Props., 9 AD3d127, 133-134 [2004], lv dismissed 4 NY3d 794 [2005], abrogated on othergrounds by Frank v Meadowlakes Dev. Corp., 6 NY3d 687 [2006]).
Here, "[t]he court was without authority to resettle the judgment by deleting the words 'withprejudice' since that revision changed the judgment 'in a matter of substance' " (Roth v SouthNassau Communities Hosp., 239 AD2d 331, 332 [1997]; see also Dependable PrintedCircuit Corp. v Mnemotron Corp., 22 AD2d 911 [1964] ["In our opinion, the resettlementherein (striking the phrase 'with prejudice' and substituting the phrase 'without prejudice')changed the judgment in a matter of substance, and the Special Term had no revisory power overthe judgment to effect such a change"]). Further, plaintiffs waived their claim that the phrase"with prejudice" should have been deleted from the judgment by not raising the substantive issuein the prior appeal (see Harbas v Gilmore, 214 AD2d 440, 441 [1995], lv dismissed87 NY2d 861 [1995] [rejecting the argument that the court should have amended the orderso as to delete the phrase "with prejudice," after that order had been affirmed on appeal, on theground that such a change would involve a matter of substance beyond the court's inherent powerof control over its judgments]).
Kiker v Nassau County (85 NY2d 879 [1995], supra), is inapposite. InKiker, the Court of Appeals held that a clerk's mistake in computing interest on ajudgment could be remedied pursuant to CPLR 5019, even though direct appeal of the judgmentwas complete. However, the Court found that no substantive right of the parties was affected bythe rate of interest because "[t]he correct rate of interest was not contested by the parties; it wasdictated by [*3]statute. Moreover, the trial court never decidedwhat rate should be applied. Rather, the County Clerk erroneously applied the wrong rate due toa ministerial error. Indeed, plaintiff cannot show that his rights are affected when the right he isnow claiming, a right to a 9% interest on his judgment, has never existed" (id. at 881).
Unlike the correct interest rate, the determination of whether to dismiss the complaint with orwithout prejudice is not mandated by statute, and it cannot be said that the insertion of the words"with prejudice" in the original judgment was clearly inconsistent with the intention of the courtas demonstrated by the record. The court addressed the substance of plaintiff's claims and foundthat "plaintiffs cannot demonstrate that Acceptance was obligated to make a payment to themupon maturity of the funds. Therefore, plaintiffs also cannot demonstrate that [SGSA], asguarantor, is obligated to make a payment to plaintiffs." Based on this finding, in its decretalparagraphs, the court stated:
"Accordingly, it is ORDERED that defendant's motion to dismiss the amended complaint isgranted and the amended complaint is dismissed, and it is further
"ORDERED that the Clerk is directed to enter judgment accordingly."
Defendant's motion was to dismiss the amended complaint with prejudice and thecorresponding judgment dismissing the amended complaint with prejudice cannot be deemed theresult of a clerical error. In this regard, we note that the court was under the mistaken impressionthat a "with prejudice" dismissal had not been requested by defendant.Concur—Mazzarelli, J.P., Friedman and Freedman, JJ.
Andrias and Catterson, JJ., dissent in a memorandum by Catterson, J., as follows: In myview, a trial court has discretion to amend a judgment to cure mistakes, defects and irregularitiesthat do not affect substantial rights of parties (see CPLR 5019 [a]), or to make it reflectwhat the court's original order intended (see Matter of Owens v Stuart, 292 AD2d 677,678 [3d Dept 2002]). While the defendant moved to dismiss with prejudice, the court's orderdismissing the complaint did not state that the dismissal was with prejudice. Rather, the phrasewas included for the first time in a judgment signed and entered by the County Clerk, which wasprepared by the defendant's attorneys, and which was not submitted to the court for review priorto entry.
The determination of whether a judgment is with or without prejudice can affect thesubstantial rights of the parties when it reflects the discretionary determination of a judge.However, where, as here, the evidence supports the conclusion that a provision of the judgment[*4]is the product of an error by the clerk, that error is subject tocorrection pursuant to CPLR 5019. (See Kiker v Nassau County, 85 NY2d 879 [1995].)Indeed, there is no evidence whatsoever that the determination of "with prejudice" wasconsidered or resolved by the court on the defendant's motion.