Chase Manhattan Bank, N.A. v. Natarelli
| Decision Date | 14 December 1977 |
| Citation | 93 Misc.2d 78,401 N.Y.S.2d 404,23 UCC Rep.Serv. 539 |
| Court | New York Supreme Court |
| Parties | , 23 UCC Rep.Serv. 539 The CHASE MANHATTAN BANK, N.A., Plaintiff, v. Shirley NATARELLI, Defendant. |
By notice of motion dated August 12, 1977, plaintiff, The Chase Manhattan Bank, hereinafter referred to as the Bank, moved to dismiss affirmative defenses and counterclaims interposed by the defendant, Shirley Natarelli, hereinafter referred to as Shirley, against plaintiff's action for deficiency sums due upon a note. Thereafter, by order to show cause, dated August 22, 1977, defendant moved to vacate a default judgment entered in the Monroe County Clerk's Office against her on July 27, 1977, in the amount of $39,969.03, including interest, and to permit her to interpose an answer containing affirmative defenses and counterclaims. Both motions were consolidated and argued together.
The facts are undisputed. On June 22, 1973 both Mario and Shirley Natarelli, husband and wife, executed a guaranty agreement with Chase Manhattan Bank guaranteeing the payment of present and future credit extended to Glenwood Stone Company, a corporation of which Shirley Natarelli is secretary and Mario Natarelli is president. Mario Natarelli was also the owner of the realty occupied by Glenwood Stone Company. On June 22, 1973, Mario Natarelli executed a collateral security mortgage whereby the realty was given as security to the Bank for the amount of $80,000 already owed by Glenwood to the Bank and for future indebtedness "as security for a guarantee given by the mortgagor" to the Bank, dated the same day. This mortgage was recorded in the Monroe County Clerk's office on June 28, 1973. On January 27, 1975, Mario gave a second collateral security mortgage to the Bank upon the same realty for the amount of $50,000, which was recorded in the Monroe County Clerk's office on the same date. This mortgage also secured "all fixtures, chattels and articles of personal property" on the premises. On the same date, Mario, as president of Glenwood, executed a demand note in the amount of $121,500., reflecting the balance then owed the Bank by Glenwood.
By letter dated August 8, 1976, counsel for the Bank notified the Internal Revenue Service, which had seized Glenwood's personal property, that pursuant to a "prior perfected lien" the Bank would conduct a public foreclosure sale of Glenwood's personal property under Article 9 of the Uniform Commercial Code. Shortly thereafter, the property was sold at public sale. The auctioneer's statement, dated September 25, 1976, sets forth that the personal property was sold for the gross amount of $7,390.10 minus expenses, or a net amount of $6,474.14. The proceeds of the sale were applied to the balance of the principal still due and owing on the note at that time, leaving a balance of $115,075.86.
Personal notice of the sale was given to Glenwood's counsel, who was also the personal attorney for Mario. This same counsel presently represents Shirley in the motions now before this court. He also represented Mario and Glenwood Stone Company in the action brought by the Bank to foreclose the two collateral security mortgages. Although Shirley was not given personal notice of the public auction, Mario was present when preparation for the public auction sale of Glenwood's assets was being made by the Bank and notice of the sale was published in both the Rochester Democrat and Chronicle and the Buffalo Evening News.
By summons and complaint, dated August 8, 1975, the Bank commenced a foreclosure action on both mortgages on the real estate located on the Sweden-Walker Road against Glenwood and Mario. A judgment of foreclosure and sale was duly entered in the Monroe County Clerk's Office on April 2, 1976, in the amount of $147,316.78, plus $88.25 as costs. On July 7, 1976, after the notice of sale was published in the Daily Record and the notice also posted, the property was sold to the Bank, the highest bidder, for $200.00 and transferred to the Bank by Referee's deed dated July 19, 1976.
The Bank, by notice of motion on October 6, 1976, moved for a deficiency judgment against Mario for the balance of the unsatisfied mortgage debt, based on the January 27, 1975 note, and on the guaranty agreement Mario had personally executed June 22, 1973 with the Bank.
Neither Mario nor Glenwood interposed an answer or affidavit in opposition to the complaint for foreclosure or for the notice of motion for the deficiency judgment. Mario appeared through a notice of appearance served by his attorney. After several adjournments, Justice Robert J. McDowell, of this court, by order entered October 21, 1976, directed that the Referee's Report of Sale be confirmed and that proof in connection with the motion for the deficiency judgment be taken in this court on December 1, 1976. On that date Mario's counsel requested an adjournment because he was not prepared to proceed, stating he had not yet received his appraiser's report. Counsel indicated that an appraisal would soon be forthcoming from appraiser Guy Humphreys and that he would make this report available to the Bank's attorney.
Justice Robert P. Kennedy of this court granted an adjournment. It is significant to note that at this same appearance before Justice Kennedy, the attorneys for the Bank and for Mario stipulated on the record (see, CPLR § 2105) that the only "issue remaining and contested between the parties in this action, is the question of the fair and reasonable market value of the subject premises upon which the mortgage foreclosure action was brought."
After further adjournment, also granted at the request of Mario's attorney, proof was heard at a non-jury trial before Justice Kennedy on March 3, 1977, at which time Mario and his counsel were present, as was counsel for the Bank. At the trial, the Bank presented an appraisal report appraising the fair market value of the property at $175,000. Mario not only failed to introduce an appraiser's report as counsel had earlier indicated he wanted to do, but also failed to offer any proof in opposition.
By order dated March 8, 1977, Justice Kennedy determined that the Bank was entitled to a deficiency judgment of $37,456.70, plus interest. This sum reflected the deficiency over and above the market value of $175,000, as proven by the Bank through its appraiser's report, set off from the "total of all prior liens and encumbrances" in the amount of $212,456. On March 10, 1977, a judgment was entered in the Monroe County Clerk's office against Mario for $38,898.70, including interest, and a copy of the judgment with notice of entry was served on defendant's counsel. Mario made no post-verdict motion for a new trial, pursuant to CPLR § 4405, nor did counsel file and serve a Notice of Appeal from the judgment.
Mario, however, did move within thirty days after entry of the judgment to reopen on the asserted grounds of newly-discovered evidence in the form of an appraisal report which had been prepared by Frank Natarelli, the father of Mario. Although, by Frank Natarelli's own admission, the appraisal is dated July 12, 1976, 1 it was never made available to the court or to the Bank's attorneys or otherwise offered as proof at the trial before Justice Kennedy. Subsequently, by order dated April 14, 1977, Justice Edward O. Provenzano of this court denied the motion to reopen "in all respects". A Notice of Appeal from this order has been filed and served but no appeal has as yet been perfected.
On June 30, 1977, a summons and complaint were personally served on Shirley seeking judgment for $38,898.70 plus interest, as the deficiency due under the guaranty agreement she and her husband had executed on behalf of Glenwood on June 22, 1973. On July 27, 1977, a default judgment was entered against Shirley in the Monroe County Clerk's office in the amount of $39,969.06. It appears she neither answered the complaint nor otherwise appeared in the action. On the same day, plaintiff's counsel served a copy of the judgment with notice of entry on Shirley's counsel and, on the same date, Shirley's counsel served an answer containing five affirmative defenses and four counterclaims upon plaintiff's counsel. 2
The Bank has now moved to dismiss Shirley's answer and counterclaims upon a number of grounds, including failure to state a cause of action and res judicata. Shirley has moved to open and vacate the default judgment against her and for an order permitting her to interpose an answer and various counterclaims. Her application has been granted to the extent of reserving decision with respect to her first and second affirmative defenses and the first counterclaim (see, 5 Weinstein-Korn-Miller, New York Civil Practice, par. 5015.03). The resolution of the issues relating to these two affirmative defenses and counterclaim forms the basis for this decision. The remaining affirmative defenses and counterclaims were dismissed by this court upon oral argument, and incorporated in an order of this court dated October 3, 1977, but a few additional comments are appropriate.
In her third affirmative defense and second counterclaim, Shirley alleges that after the Bank assumed possession of Glenwood's property in the foreclosure action, the Bank was negligent in preserving the value of the property and thereby diminished its value. However, in the foreclosure action another Justice of this court, upon the evidence presented, determined the fair market value of the property. This prior determination is res judicata and cannot be collaterally attacked in this action either by way of defense or affirmative claim.
The question of the respective parties' care in maintaining the property was...
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