Gerstenhaber v. Gerstenhaber

The following e-filed documents, listed by NYSCEF document number (Motion 001) 16, 18, 20, 21, 22, 23, 24, 25, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 47, 48, 49, 50 were read on this motion to/for JUDGMENT — SUMMARY IN LIEU OF COMPLAINT. DECISION ORDER ON MOTION Plaintiff David Gerstenhaber moves for an order: (1) pursuant to CPLR §3213, granting summary judgment in lieu of complaint against his wife, defendant Kelly Gerstenhaber, on the ground that she has failed to tender payment upon demand under eight promissory notes executed on October 7,2013, December 20,2013, February 28, 2014, April 15, 2014, May 6, 2014, May 28, 2014, June 30, 2014 and August 4, 2014 (“the Notes”), by plaintiff, as lender, and defendant, as borrower; and (2) awarding damages to plaintiff allegedly caused by defendant’s failure to pay the amounts due and owing under the promissory notes, including principal, accrued and unpaid interest, late fees, costs, expenses, reasonable attorneys’ fees and prejudgment interest. “When an action is based upon an instrument for the payment of money only…, the plaintiff may serve with the summons a notice of motion for summary judgment in lieu of a complaint.” CPLR §3213. “In order to qualify for CPLR 3213 treatment, plaintiff must be able to establish a prima facie case by proof of the agreement and a failure to make the payments called for thereunder (citations omitted). Once plaintiff has met its burden, it is incumbent upon defendant to establish, by admissible evidence, that a triable issue of fact exists (citations omitted).” SCP (Bermuda) Inc. v. Bermudatel Ltd., 224 AD2d 214, 216 (1st Dep’t 1996). See also, Solanki v. Pandya, 269 AD2d 189 (1st Dep’t 2000); Bank Leumi Trust Co. v. Rattet & Liebman, 182 AD2d 541 (1st Dep’t 1992). Defendant has acknowledged that she signed 12 different promissory notes evidencing loans of approximately $7.4 million,¹ in connection with monies that she borrowed from plaintiff and then provided in the form of loans and/or gifts to the Speyer Legacy School, an independent school in Manhattan, to assist in its construction of a new campus.² Defendant, however, opposes the motion and cross-moves for an order pursuant to CPLR §602 consolidating or granting a joint trial of the instant action with the parties’ pending divorce action, David Gerstenhaber v. Kelly Posner Gerstenhaber, Index No. 350069/19, in which the parties’ separate property, the equitable distribution of assets and debts between the parties and support will be adjudicated.³ Defendant argues that: (i) the promissory notes are unenforceable because none of the notes were signed before a notary public or acknowledged in the form of a deed as is required for financial agreements between spouses during the marriage (see, DRL §236[B][3]); (ii) there are issues of fact as to whether defendant, who is an economist and hedge fund manager, breached his fiduciary duty to plaintiff in the execution of the notes by overreaching and by failing to advise her to seek the advice of counsel prior to signing the instruments;⁴ (iii) the promissory notes do not contain a specific due date for the repayment of principal and outside proof is necessary to determine when they were due;⁵ and (iv) the terms of the notes were amended between the parties.⁶ DRL §236(B)(3) provides that “an agreement between the parties, made before or during the marriage, shall be valid and enforceable in a matrimonial action if such agreement is in writing subscribed by the parties and acknowledged or proven in the manner required to entitle a deed to be recorded.” See, Real Property Law §§291, 292, 298, 299, 303, 304 and 306. “[T]he unambiguous statutory language of section 236(B)(3), its history and related statutory provisions establish that the Legislature did not mean for the formality of acknowledgement to be expendable.” Matisoff v. Dobi, 90 NY2d 127, 135 (1997). See also, Galetta v. Galetta, 21 NY3d 186, 191 (2013).⁷ Thus, the Appellate Division, First Department, held that a written guaranty executed by the husband during the marriage which required him to repay loans extended by the wife was not enforceable where the guaranty failed to comply with DRL §236(B)(3). Popowich v. Korman, 73 AD3d 515 (1st Dep’t 2010). See also, Ballesteros v. Ballesteros, 137 AD3d 722 (2nd Dep’t 2016), in which the Appellate Division, Second Department, held that an agreement titled ‘Promissory Note’ constituted an agreement between spouses which could not be enforced since in failed to meet the formalities of DRL §236(B)(3); Jorge R vJanettS, 68 Misc3d 1205(A) (Sup Ct, NY Co. 2020), in which the court held that a post-nuptial agreement which was not acknowledged was not enforceable. The statute itself and the legislative history “provide[] no support for [the] contention that the Legislature intended some agreement, though unacknowledged, to be enforceable.” Matisoff v. Dobi, supra at 134. Thus, the formalities of DRL §236(B)(3) apply to the subject promissory notes. Plaintiff, however, argues that even if this Court were to find that the unacknowledged promissory notes at issue here are unenforceable in the context of the matrimonial action, section 236(B)(3) does not preclude enforcement where, as here, enforcement is sought outside the context of a matrimonial action. See, e.g., Matter of Estate ofSbarra, 17 AD3d 975, 976 (3rd Dep’t 2005), in which the Appellate Division, Third Department, held that a separation agreement, which survived the judgment of divorce, could be enforced in a subsequent action where defendant had affirmatively alleged in the earlier divorce action that the agreement was valid and had received the benefit of the separation agreement’s provisions for division of the marital property in the earlier action; Singer v. Singer, 261 AD2d 531 (2nd Dep’t 1999), in which the Appellate Division, Second Department, held that a separation agreement was enforceable as an independent contract in a plenary action even though the agreement would not be enforceable as an “opting out” agreement in a matrimonial action because it was not acknowledged. The Court noted that there was “no impediment to enforcement in a contract action of the provisions of the parties’ agreement insofar as it concerns their personal property and certain monetary obligations” since the parties’ companion action for divorce had already been dismissed. Singer v. Singer, supra at 532; and Mojdeh M. v. Jamshid A., 36 Misc3d 1209(A) (Sup Ct, Kings Co. 2012), the court held that a “mehrieh” dowry agreement entered into by the parties prior to the marriage could not be enforced in the context of the matrimonial action, since it was not acknowledged or proven in the manner required to entitle a deed to be recorded, but could be enforced in subsequent plenary contract action. However, unlike the case cited above, the instant action to enforce the promissory notes was not commenced after the resolution of the action for divorce.⁸ Rather, the alleged debt is an integral part of a highly contentious dispute which continues to be litigated between the parties. The purchase of a separate index number is a mere technicality which cannot exempt the subject notes from the unequivocal mandate set forth in DRL §236(B)(3). Therefore, the issue of the alleged debt purportedly memorialized in the promissory notes is not ripe for summary disposition and enforcement herein. Rather the division of the parties’ separate and marital assets and liabilities must be determined in the context of equitable distribution in the matrimonial action. Accordingly, based on the papers submitted and the oral argument held on the record on August 3, 2020, plaintiff’s motion for summary judgment in lieu of complaint is denied, and the cross-motion to consolidate the instant action with the pending divorce action is granted. This constitutes the decision and order of this Court. CHECK ONE: X         CASE DISPOSED NON-FINAL DISPOSITION GRANTED X            DENIED GRANTED IN PART OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE Dated: November 6, 2020