Senior Litigation Associate Craig H. Handler was recently successful in defeating a motion for summary judgment in lieu of complaint filed in connection with contentious litigation between two former business partners.
The plaintiff, who sold the defendant his 50% interest in a popular east end business venture in accordance with an asset purchase agreement and promissory note, commenced the action in Supreme Court, Suffolk County, after the defendant allegedly defaulted on the note by failing to make scheduled payments. The action was commenced using the accelerated judgment provisions afforded by CPLR 3213, a statute permitting a party to circumvent the conventional process of commencing an action by summons and complaint, but only when the action is based upon an “instrument for the payment of money only” and when the instrument contains an “unconditional promise to pay.”
In opposing the motion, Mr. Handler argued that the note did not constitute an “instrument for the payment of money only,” since it did not contain an express waiver of the defendant’s right to assert defenses and counterclaims. Thus, without such a waiver, the note did not contain an unconditional promise to pay as required by the statute. Furthermore, Mr. Handler argued that the motion must also be denied since the note was inextricably intertwined with the contemporaneously executed purchase agreement, which the plaintiff may have breached by violating a restrictive covenant.
The Supreme Court agreed with both of Mr. Handler’s arguments, denying the plaintiff’s motion in its entirety. In its decision, the Court ruled that since the note is not an instrument for the payment of money only, the case is not proper for an accelerated judgement pursuant to CPLR 3213. In addition, the Court ruled that the defendant is entitled to appear in the action so that he may assert affirmative defenses and counterclaims for damages due to the plaintiff’s violation of the restrictive covenant, which might ultimately offset the amount demanded under the note.