HJA HOLDINGS INC v. ESQUIRE DEPOSITION SERVICES LLC (2005)

Order, Supreme Court, New York County (Harold B. Beeler, J.), entered April 18, 2005, which granted defendant's motion for summary judgment dismissing the complaint and denied plaintiff's cross motion for summary judgment, unanimously modified, on the law, to declare in defendant's favor that it owns the disputed assets free and clear of any right or interest therein on the part of plaintiff, and otherwise affirmed, without costs.

Defendant purchased collateral, including the court reporting business formerly owned by plaintiff, from a senior secured lender that had acquired the collateral in foreclosure.   Under the circumstances and the provisions of Illinois law applicable in this matter, defendant was a good faith purchaser and took the collateral free and clear of any rights and interests therein subordinate to those of the senior secured lender (see Illinois Commercial Code § 9-504;  Continental Bank of Buffalo Grove, N.A. v. Krebs, 184 Ill.App.3d 693, 698, 540 N.E.2d 1023 [1989] ).   Whether defendant had, or somehow could have had knowledge of plaintiff's subordinate claim with respect to the collateral is not relevant to the dispositive issue of whether defendant acted in good faith, which it did (see Northwest Equip. Sales Co. v. W. Packers, Inc., 623 F.2d 92, 95 [1980] ).   Contrary to plaintiff's contention, the court reporting business was expressly included in the assets sold to defendant pursuant to the foreclosure sale agreement.   Nor, contrary to plaintiff's argument, is it of consequence in this litigation that no certificate was filed in New York reflecting the merger of the court reporting business with other entities, since the senior secured lender had a security interest in both the subject court reporting business and the entity into which it merged.

We modify the disposition of this action seeking declaratory relief only to declare in defendant's favor (see Lanza v. Wagner, 11 N.Y.2d 317, 334, 229 N.Y.S.2d 380, 183 N.E.2d 670 [1962], cert. denied 371 U.S. 901, 83 S.Ct. 205, 9 L.Ed.2d 164 [1962] ).