Westnine Associates v. West 109th Street Associates

• Decision Date: 17 September 1998
• Citation: 677 N.Y.S.2d 557,247 A.D.2d 76
• Parties: , 1998 N.Y. Slip Op. 7914, 1998 N.Y. Slip Op. 7915 WESTNINE ASSOCIATES, etc., Plaintiff-Respondent, v. WEST 109TH STREET ASSOCIATES, etc., et al., Defendants, Abraham A. Mendel, et al., Defendants-Appellants.
• Court: New York Supreme Court — Appellate Division

Page 557

677 N.Y.S.2d 557

247 A.D.2d 76, 1998 N.Y. Slip Op. 7914,

1998 N.Y. Slip Op. 7915

WESTNINE ASSOCIATES, etc., Plaintiff-Respondent, v. WEST 109TH STREET ASSOCIATES, etc., et al., Defendants Abraham A. Mendel, et al., Defendants-Appellants.

Supreme Court, Appellate Division First Department.

Sept. 17, 1998.

Neal Schwarzfeld, of counsel (Schwarzfeld, Ganfer & Shore, LLP, attorneys) for plaintiff-respondent.

Abraham A. Mendel, Solomon J. Borg, defendants-appellants pro se.

Before SULLIVAN, J.P., ROSENBERGER, WALLACH and ANDRIAS, JJ.

SULLIVAN, Justice Presiding.

This is an action commenced prior to July 1, 1992, the effective date of the commencement of an action by filing provisions enacted in 1992 (L.1992, ch. 216), which, inter alia, amended CPLR 203(c) to provide that, where an action is commenced by filing (see CPLR 304), it is deemed, for Statute of Limitations purposes, to have been commenced when the summons and complaint are filed with the clerk of the court. Here, a supplemental summons and amended complaint, adding new parties defendant and asserting a new cause of action, were filed prior to the expiration of the Statute of Limitations applicable to the underlying action as well as the newly interposed claim but, concededly, were not served upon the newly joined defendants until after the running of the Statute of Limitations. The issue before us is whether, in this pre-amendment action, the timeliness of the post-amendment interposition of the new claim and addition of new parties is determined by the timeliness of the filing, or of the service, of the supplemental summons and amended complaint.

In 1987, West 109th Street Associates, a limited partnership, entered into an agreement with Westnine Associates, pursuant to which Westnine extended a $1,000,000 mortgage loan to West 109th Street. The loan was personally guaranteed by defendants Abraham Mendel and Solomon Borg pursuant to a guarantee agreement. In a January 1990 restructuring of the loan, Mendel and Borg withdrew as general partners of West 109th Street. Hofra Associates, Inc., a partner in Westnine, became the general partner of West 109th Street. At the same time, West 109th Street entered into a modification of the mortgage loan with Westnine, and Mendel and Borg reconfirmed and ratified their guarantee subject to the conditions set forth in a contemporaneously executed letter agreement.

Approximately one year later, on February 27, 1991, Westnine sent a notice of default to West 109th Street, with a copy to Borg, advising them that the loan was in default and demanding payment on the loan, as well as performance under the guarantee. On August 16, 1991, Westnine commenced this foreclosure action by service of the complaint on Hofra, the new general partner of West 109th Street. The summons and complaint did not name either Mendel or Borg as a defendant. No relief was sought with respect to the guarantee.

Thereafter, by order to show cause dated February 24, 1997, Westnine sought leave to file a supplemental summons and amended complaint in this action adding Mendel and Borg as defendants and, pending determination of the motion, a toll of the running of the Statute of Limitations. The proposed amended complaint contained a new second cause of action seeking a deficiency judgment against Mendel and Borg based on their obligation under the guarantee. In the order to show cause, the IAS court declined to toll the running of the Statute of Limitations. Leave to serve an amended complaint and supplemental summons was granted on March 19, 1997. Mendel and Borg were served with the supplemental summons and amended complaint on June 9, 1997, almost three months later and after the expiration of the Statute of Limitations. In an effort to avoid the bar of the Statute of Limitations, Westnine, on February 26, 1997, by the filing of a summons and complaint, had commenced a separate action seeking recovery under the guarantee.

Mendel and Borg moved to dismiss the latter action based on RPAPL 1301(3)'s prohibition, without leave of the foreclosure court, against multiple actions and its requirement that mortgagees obtain all the relief to which they are entitled in the foreclosure action. (Anron Air Sys. v. Columbia Sussex Corp., 202 A.D.2d 460, 609 N.Y.S.2d 49; Irving Trust Co. v. Seltzer, 265 App.Div. 696, 699, 40 N.Y.S.2d 451.) Westnine cross-moved to consolidate the guarantee action with the instant foreclosure proceeding. Mendel and Borg also moved to dismiss, as untimely, the amended complaint's second cause of action asserting a claim for a deficiency judgment. In a consolidated decision, the IAS court dismissed the guarantee action based upon RPAPL 1301(3)'s prohibition against multiple actions but denied dismissal of the deficiency cause of action. In light of its dismissal of the guarantee action, it also denied consolidation.

In rejecting Mendel and Borg's untimeliness claim with respect to the interposition of the deficiency-judgment cause of action in the foreclosure proceeding, the court held that Arnold v. Mayal Realty Co., 299 N.Y. 57, 85 N.E.2d 616, upon which the two movants relied, was no longer relevant since it was decided in 1949 under the then prevailing commencement of an action by service system no longer in effect. Arnold had held that a claim against an additional defendant is deemed interposed when the supplemental summons and complaint are served upon him. The IAS court held that, since July 1, 1992, the filing of the summons and complaint constitutes the commencement of an action. The court further found that the issue of when, under the commencement by filing system, an action is...