Valentine Transit, Inc. v. Kernizan

• Citation: 191 A.D.2d 159,594 N.Y.S.2d 180
• Parties: VALENTINE TRANSIT, INC., Michael Alexander and Rosalyn Alexander, Plaintiffs-Respondents, v. Jean Y. KERNIZAN, Sherman Taxi Medallion Sales, Inc., et al., Defendants, and Republic National Bank of New York, Defendant-Appellant.
• Decision Date: 02 March 1993
• Court: New York Supreme Court — Appellate Division

Page 180

594 N.Y.S.2d 180

191 A.D.2d 159

VALENTINE TRANSIT, INC., Michael Alexander and Rosalyn

Alexander, Plaintiffs-Respondents, v. Jean Y. KERNIZAN, Sherman Taxi Medallion Sales, Inc., et

al., Defendants,

and

Republic National Bank of New York, Defendant-Appellant.

Supreme Court, Appellate Division,

First Department.

March 2, 1993.

Before SULLIVAN, J.P., and MILONAS, KUPFERMAN and ROSS, JJ.

MEMORANDUM DECISION.

Order of the Supreme Court, New York County (Harold Tompkins, J.), entered on October 7, 1991, which, inter alia, granted the cross-motion for reargument by defendant Republic National Bank of New York but adhered to its previous determination granting the motion by plaintiff Valentine Transit, Inc. for summary judgment against the bank, is unanimously reversed on the law to the extent appealed from and plaintiff's motion for summary judgment denied, with costs and disbursements.

In 1986, plaintiff Valentine Transit, Inc. purchased a New York City taxi medallion through defendant Sherman Taxi Medallion Sales, Inc., then known as Herman Sherman Associates, acting as a broker. When Valentine decided to sell the medallion, it again contacted Sherman to make the arrangements. Sherman found a buyer later that year, defendant Jean Kernizan, who deposited $12,000 with Sherman as a down payment. Thereafter, a check in the amount of $111,766.33 drawn on defendant Melrose Credit Union, which financed the transaction, and payable to plaintiffs Michael and Rosalyn Alexander, principals of Valentine, was delivered to Sherman. This check, bearing only the endorsement of Michael Alexander, claimed by plaintiffs to be a forgery, was deposited by Sherman with defendant-appellant Republic National Bank of New York. Although Republic honored the check upon presentment, plaintiffs allege that they never received any of the proceeds.

Valentine commenced this action in March of 1988 against Kernizan, Sherman, the New York City Taxi and Limousine Commission and others. The complaint was amended in June of 1989 to include Melrose and Republic as defendants and, subsequently, the Supreme Court authorized the addition of Michael and Rosalyn Alexander as plaintiffs. While plaintiffs challenge the genuineness of the endorsement of Michael Alexander on the check, this motion is limited to the issue of whether Republic is liable to them based upon whether the check was wrongly honored without its having been endorsed by the second payee, Rosalyn Alexander. In granting Valentine's motion for summary judgment against Republic and adhering to that determination upon reargument, the Supreme Court inexplicably relied upon UCC 4-401, which is inapplicable herein, instead presumably, of UCC 3-116 which provides that "[a]n instrument payable to the order of two or more persons ... (b) if not in the alternative is payable to all of them and may be negotiated, discharged or enforced only by all of them."

However, there is merit to defendant's argument that the court prematurely granted summary judgment. According to CPLR 3212(a), a "party may move for summary judgment in any action, after issue has been joined." In that regard, defendant answered the original amended complaint but was afforded no opportunity to respond to the second amended complaint prior to the court granting Valentine's motion for summary judgment, which was made at the same time that it requested permission to amend by adding Michael and Rosalyn Alexander as party plaintiffs. Consequently, issue had not yet been joined, and the Court of Appeals has held that the requirement prescribed in CPLR 3212(a) must be "strictly adhered to" (City of Rochester v. Chiarella, 65 N.Y.2d 92, 101, 490 N.Y.S.2d 174, 479 N.E.2d 810). As the court explained in John and Mary Markle Foundation v. Manufacturers Hanover Trust Company, 173 A.D.2d 784, 785-786, 570...