HSBC Guyerzeller Bank AG v. Chascona N.V.

42 A.D.3d 381, 841 N.Y.S.2d 11
CourtAppellate Division of the Supreme Court of the State of New York
DecidedJuly 26, 2007
StatusPublished
Cited by7 cases

This text of 42 A.D.3d 381 (HSBC Guyerzeller Bank AG v. Chascona N.V.) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
HSBC Guyerzeller Bank AG v. Chascona N.V., 42 A.D.3d 381, 841 N.Y.S.2d 11 (N.Y. Ct. App. 2007).

Opinion

Order, Supreme Court, New York County (Herman Cahn, J.), entered August 19, 2005, which denied the motion by defendants CIBC Mellon Trust and Daimler Chrysler to dismiss the [382]*382complaint and granted nonparty respondent Samuel Montagu Co.’s cross motion to substitute itself as plaintiff, affirmed, without costs.

The covenants requiring the borrower’s consent to any assignment of the loan agreement and selecting the law of England as governing were unambiguously incorporated by reference into the note. Under the substantive law of England, defendant Mora Hotel was entitled to set aside the assignment of the note because Montagu neither sought nor obtained the consent of the receiver of the hotel defendants’ New York assets, who had the exclusive right to give such consent (see Linden Gardens Trust Ltd. v Lenesta Sludge Disposals Ltd., [1994] 1 AC 85, [1993] 3 All ER 417; Hendry v Chartsearch Ltd., [1998] CLC 1382). The loan agreement set forth the terms of the loan, which were incorporated into the note, and was a commercial contract. Thus, policies against alienation of an estate in land are not implicated and the general rule of Linden governs. The parties made substantial submissions interpreting a foreign law and there was no improvident exercise of discretion in not holding a hearing (CPLR 4511 [d]).

Furthermore, under Linden and Hendry, the assignment was valid as between Montagu and plaintiff, but not as between Montagu and the debtor Mora. Once the assignment was invalidated by the receiver’s objection, the note, as to Mora, reverted back to Montagu, and there was a transfer of interest (CPLR 1018). Since Montagu and plaintiff are affiliates in the HSBC family and were involved in the underlying transactions from the inception, and since the hotel defendants and receiver were aware of Montagu’s and plaintiff’s claims and roles and the foreclosure complaint details the mortgage history and the assignment, and since the relief Montagu seeks is the same as that sought by plaintiff, the substitution motion was properly granted in the exercise of the court’s discretion (see Johnson v State of New York, 10 AD3d 596, 597 [2004]; Fairbanks Capital Corp. v Nagel, 289 AD2d 99, 100 [2001]; Bellini v Gersalle Realty Corp., 120 AD2d 345, 347-348 [1986]).

We have considered the parties’ remaining arguments for affirmative relief and find them unavailing. Concur—Andrias, J.E, Williams and Sweeny, JJ.

Sullivan and McGuire, JJ., concur in a separate memorandum by McGuire, J., as follows: I agree that Supreme Court correctly concluded that the note unambiguously incorporated the loan agreement, including the provision specifying that the agreement was governed by English law. I agree as well that, as Supreme Court stated in its written opinion, under English law [383]*383“Guyerzeller never received a proper assignment” and thus was without standing to maintain the foreclosure action. In my view, however, we should not decide the issue of whether the motion of Montagu as a nonparty to be substituted as plaintiff under CPLR 1018 properly was granted. The resolution of that issue appears to turn on whether the assignment entirely was ineffective or whether, once the receiver objected to the purported assignment, the note thereby reverted back to Montagu so that a “transfer of interest” within the meaning of CPLR 1018 occurred during the pendency of the foreclosure action. Apart from the question of whether that issue turns on subtleties of English law we are not in a position to decide, I note that CIBC Mellon Trust and Daimler Chrysler (collectively, Chrysler) argue with considerable force that even if the assignment was effective as between Guyerzeller and Montagu, neither the receiver’s objection to the assignment nor Supreme Court’s determination that “Guyerzeller never received a proper assignment” would be sufficient to cause the assignment to revert back automatically to Montagu.

Rather, I would construe Montagu’s motion as a motion to intervene as plaintiff under CPLR 1013 (see Northern Westchester Professional Park Assoc. v Town of Bedford, 60 NY2d 492, 499 [1983] [authority of Appellate Division is as broad as that of Supreme Court]; see also CPLR 2001; Bennett Rd. Sewer Co. v Town Bd. of Town of Camillus, 243 AD2d 61, 65 [1998]; Technical Tape v Spray-Tuck, Inc., 146 AD2d 517, 518 [1989], lv dismissed 74 NY2d 791 [1989]). Even so construed, Montagu’s motion would have to be denied if Chrysler were correct with respect to the first of the two central contentions it makes in connection with the invalidity of the assignment: Guyerzeller’s resultant lack of standing renders the foreclosure action jurisdictionally defective so that Supreme Court was required to dismiss the action and was without power to issue any orders curing this defect retroactively.

Guyerzeller’s lack of standing, however, did not deprive Supreme Court of subject matter jurisdiction. In Security Pac. Natl. Bank v Evans (31 AD3d 278 [2006]), the plaintiff bank had ceased to exist at the time it commenced a foreclosure action by virtue of having merged with another bank. Although this Court concluded that the plaintiff lacked capacity rather than standing, it rejected the dissent’s contention that the action would have to be dismissed on jurisdictional grounds if the plaintiff lacked standing (id. at 279-280). As this Court stated: “Even if, as the dissent contends, plaintiff’s status should properly be viewed as raising an issue of standing, not legal [384]*384capacity, we cannot agree with its additional conclusion that a lack of standing divests the court of subject matter jurisdiction over the action. ‘The question of subject matter jurisdiction is a question of judicial power: whether the court has the power, conferred by the Constitution or statute, to entertain the case before it’ (Matter of Fry, 89 NY2d at 718). Because New York’s Supreme Court ‘is a court of original, unlimited and unqualified jurisdiction’ (Kagen v Kagen, 21 NY2d 532, 537 [1968]), it is competent to entertain all causes of action, including mortgage foreclosure actions (Matter of Fry at 718)” (id. at 280). What was true in Security Pacific, also is true here: “[i]n this case, the Supreme Court always had the power to hear the foreclosure action” (id.).

In Gaines v City of New York (215 NY 533 [1915]), the issue was the applicability of Code of Civil Procedure § 405, the predecessor to CPLR 205 (a), when an action was dismissed for lack of subject matter jurisdiction. Like CPLR 205 (a), section 405 provided that if an action that had been timely commenced thereafter was terminated “ ‘in any other manner than by a voluntary discontinuance, a dismissal of the complaint for neglect to prosecute the action, or a' final judgment upon the merits’ ” (215 NY at 537, quoting Code Civ Pro § 405), a new action could be commenced within a prescribed time period following the action’s termination despite the intervening expiration of the statute of limitations. Because the action had been dismissed for lack of subject matter jurisdiction, the Appellate Division concluded that section 405 did not apply so as to permit a new action to be commenced, the earlier action having been regarded as “a nullity for all purposes” (id.). In an opinion by Judge Cardozo, the Court rejected that view. After stating that the “broad and liberal purpose [of section 405] is not to be frittered away by any narrow construction” (id.

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Cite This Page — Counsel Stack

Bluebook (online)
42 A.D.3d 381, 841 N.Y.S.2d 11, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hsbc-guyerzeller-bank-ag-v-chascona-nv-nyappdiv-2007.