In certain types of collection actions, New York has an expedited process known as a Motion for Summary Judgment in Lieu of Complaint (CPLR § 3213). The provision allows a party to commence an action without the filing of a complaint and immediately move for summary judgment but only if the “action is based upon an instrument for the payment of money only or upon any judgment.” The benefit of using CPLR § 3213 is that it enables a plaintiff to avoid much of the time and expense associated with litigation, including discovery and trial. Generally, the law applies to cases involving a promissory note or a dishonored check but attorneys have found other uses of this unique statute. However, courts will still enforce the strict requirements of the statute as demonstrated in a recent New York appellate case.

In Council Financial II, LLC v. Bortnick, the plaintiff filed a motion for summary judgment in lieu of complaint to enforce a guaranty agreement signed by the defendant, an attorney. The lower court decided in favor of the plaintiff and entered a monetary judgment in excess of $4.5 million against the defendant. The defendant appealed.

The Appellate Division, Fourth Department reviewed the standard for utilization of the expedited procedures under CPLR § 3213 and determined that such procedures can only be utilized when the claim is based upon an instrument for the payment of money and when the defendant’s liability can be ascertained without resorting to extrinsic evidence outside of the financial instrument upon which plaintiff relies. The Court noted that CPLR § 3213 “was enacted to provide quick relief on documentary claims so presumptively meritorious that a formal complaint is superfluous and even the delay incident upon waiting for an answer and then moving for summary judgment is needless.” Essentially, the statute only applies when it is clear from the face of the document that the defendant owes the money. However, the appellate court held that the statute did not apply to the current action.

Although the document upon which the plaintiff relied in Council Financial was a guaranty signed by the defendant, the Court found that the plaintiff’s action was based upon its attempt to recover the amount of the defendant’s capped liability after it was reduced by two contingency fees which the defendant had arranged to be paid directly to the plaintiff for which the defendant was to receive a dollar for dollar offset against his liability under the guaranty. The Court determined that this separate agreement between the defendant and plaintiff was extrinsic to the guaranty instrument and that while the plaintiff may eventually be entitled to judgment based upon the guaranty, it was not entitled to the expedited summary judgment available by utilizing CPLR § 3213. Indeed, the Court found that “going that far afield from the instrument itself” does not appear to comply with CPLR § 3213 and, as such, the plaintiff’s action fell short of satisfying the threshold requirements of the statute. Accordingly, the Fourth Department reversed the decision of the Supreme Court and remanded the matter to the lower court so the case could proceed.

The lesson to be learned from this case is that while utilization of CPLR § 3213 in the proper circumstances can save a plaintiff substantial time and legal fees, an attempt to use the provision when it does not apply, can cost the plaintiff both time and money.

If you have a matter which might implicate the statute and wish to be sure of your rights, please contact one of our attorneys.