Flushing Nat. Bank v. Municipal Assistance Corp. of City of New York

• Decision Date: 30 June 1976
• Citation: 393 N.Y.S.2d 873,89 Misc.2d 342
• Parties: FLUSHING NATIONAL BANK, on behalf of itself and all other holders of notes of the City of New York maturing on or before
• Court: New York Supreme Court

Page 873

393 N.Y.S.2d 873

89 Misc.2d 342

FLUSHING NATIONAL BANK, on behalf of itself and all other

holders of notes of the City of New York maturing

on or before June 30, 1976, Plaintiff, v. MUNICIPAL ASSISTANCE CORPORATION FOR the CITY OF NEW YORK et

al., Defendants.

PYRAMID SERVICE CO., on behalf of itself and all other

holders of unpaid short term obligations of the

City of New York matured between

December 11, 1975 through

March 12, 1976, Plaintiff, v. The CITY OF NEW YORK, Defendant.

Action Nos. 1, 2.

Supreme Court, New York County.

March 17, 1977.

William I. Niles, Bethpage, for Pyramid Service Co. (Action no. 2).

Richenthal, Abrams & Moss, New York City, for Flushing National Bank.

Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for Municipal Assistance Corp.

Louis J. Lefkowitz, Atty. Gen., for New York State Emergency Financial Control Bd.

W. Bernard Richland, Corp. Counsel, New York City, for the City of New York.

Earle C. Bastow, Utica, amicus curiae.

DECISION ON MOTION FOR CONSOLIDATION AND FOR CLASS ACTION

AUTHORIZATION

JAMES GIBSON, Justice.

Plaintiff in action No. 2 moves (1) for an order determining whether that action is to be maintained as a class action (CPLR 904) and (2) for an order consolidating it with action No. 1 (CPLR 602(a)).

In action No. 2, the complaint challenges the constitutionality of the New York State Emergency Moratorium Act for the City of New York (L.1975, ch. 874, as amd. by ch. 875) as violative of the just compensation provisions of the Federal and State Constitutions as in cases of appropriations of property. The complaint relates to notes issued by the city and purportedly subject to the Moratorium Act and demands judgment, among other things, that the court determine and declare the rate of interest necessary to afford just compensati to the holders and thereupon award judgment for the principal sums due on the notes and interest as so determined.

In action No. 1--the Flushing action--which sought a declaration of unconstitutionality on other grounds, the plaintiff succeeded and that action has proceeded to judgment. Following decision of the appeal by the Court of Appeals (40 N.Y.2d 731, 390 N.Y.S.2d 22, 358 N.E.2d 848), that court's remittitur was issued to this Supreme Court on February 8, 1977 (40 N.Y.2d 1094, 392 N.Y.S.2d 424, 360 N.E.2d 1106). Pursuant to the remittitur, this court on February 23, 1977 determined the interest rate payable on the notes after maturity by fixing the rate at six percent, 88 Misc.2d 1047, 391 N.Y.S.2d 969. Judgment upon its notes, with interest at six percent, was awarded Flushing on March 3, 1977 (N.Y.L.J., Mar. 7, 1977, p. 11, col. 2) and signed March 10, 1977. Thus, plaintiff would consolidate its action, which is barely at the trial stage, if that, with an action which has proceeded to judgment.

The Court of Appeals held the Moratorium Act unconstitutional as violative of the faith and credit provisions of the New York State Constitution (art. VIII, § 2); but it seems to be movant's position that it is entitled, nevertheless, to a declaration of unconstitutionality under its own theory and pleading as well, that is, as denying 'just compensation' under the Federal and State Constitutions.

I

The motion for class action status must be denied. Aside from any other consideration, movant has failed to satisfy two of the statutory prerequisites thereto. Neither the unverified complaint nor the moving affidavit--made, incidentally, by the attorney and not by the party--makes any demonstration whatsoever with respect to the requirement that the 'representative parties will fairly and adequately protect the interests of the class' (CPLR 901(a) (4)). The complaint contains the bare allegations that plaintiff is a Florida partnership--without identification of its members or the nature of its business--and is 'the owner and holder of certain short term obligations issued by defendant' which are matured and unpaid. Although these skeletal allegations establish plaintiff's interest, they fall far short of satisfying subdivision 4. The decision in Matter of Douglaston Civic Assn. v. Galvin, 36 N.Y.2d 1, 7--8, 364 N.Y.S.2d 830, 835--836, 324 N.E.2d 317, 320--321, although decided in a somewhat different context, is instructive.

Second, the record facts conclusively negate any contention that this proposed 'class action is superior to other available methods for the fair and efficient adjudication of the controversy' (CPLR 901(a)(5)). Although none of the courts which dealt with this case held that Flushing should be accorded the formal class action status sought (84 Misc.2d 976, 379 N.Y.S.2d 978, affd. 52 A.D.2d 84, 382 N.Y.S.2d 764, revd. 40 N.Y.2d 731, 390 N.Y.S.2d 22, 358 N.E.2d 848; and see 40 N.Y.2d 1088, 392 N.Y.S.2d 392, 360 N.E.2d 1075 (decided Jan. 14, 1977)), the Court of Appeals by its remittitur of February 8, 1977 (40 N.Y.2d 1094, 392 N.Y.S.2d 424, 360 N.E.2d 1106) fashioned a remedy closely akin to it for the benefit of noteholders other than the Flushing plaintiff. In compliance with the remittitur, and in particular with paragraph B thereof, this court on March 16, 1977 entered an order establishing simple and expeditious procedures whereby noteholders who have not consented to an extension may make applications for, and in proper cases recover, judgments for the amounts of their notes, with interest (N.Y.L.J., Mar. 17, 1977, p. 10, col. 5). ¹ Certainly, these procedures, whereby every noteholder entitled to recover will be awarded judgment in very short order, by entry at the foot of the Flushing judgment, are far simpler and far more expeditious than any relief obtainable by movant in an independent class action or otherwise. The Flushing judgment includes interest at six percent, as would any recovery by movant Pyramid, and to the extent that movant may consider that rate inadequate under the constitutional provisions invoked, the ordinary appeal process would appear to be available. Clearly then, plaintiff Pyramid has not shown that its class action is a 'superior' method of procedure (CPLR 901(a)(5)). To dispel any doubt as to plaintiff's right to appeal without intervention, ² plaintiff may, as hereinafter held, apply for permission to intervene for the sole purpose of appealing the adjudication of interest rate, no other issue having been left open by the Court of Appeals decision and remittitur (40 N.Y.2d 731, 390 N.Y.S.2d 22, 358 N.E.2d 848, Supra).

In this case, further, class action status is inappropriate, not only within the context of the Flushing action with which consolidation is sought, but under general principles as well. Citing paragraph 5 of subdivision a, hereinbefore discussed, an eminent commentator observes...