SIMON v. INDUSTRY CITY DISTILLERY INC (2018)

Order, Supreme Court, New York County (Barry R. Ostrager, J.), entered October 31, 2017, which denied plaintiff's motion for summary judgment in lieu of complaint, unanimously reversed, on the law, with costs, and the motion granted, and the matter is remanded for further proceedings in accordance herewith.

Plaintiff's affidavit, to which was attached the fully executed note with a maturity date of August 31, 2017, his demand letter, and defendant's response, established prima facie his entitlement to summary judgment in lieu of complaint (see Seaman–Andwall Corp. v. Wright Mach. Corp., 31 A.D.2d 136, 295 N.Y.S.2d 752 [1st Dept. 1968], affd 29 N.Y.2d 617, 324 N.Y.S.2d 410, 273 N.E.2d 138 [1971] ).  In opposition, defendant failed to submit evidentiary proof sufficient to raise an issue as to any defenses to the note (see Interman Indus. Prods. v. R.S.M. Electron Power, 37 N.Y.2d 151, 155, 371 N.Y.S.2d 675, 332 N.E.2d 859 [1975] ).

The conversion option contained in the note does not alter the fact that the note is “an instrument for the payment of money only” and a proper subject of a motion pursuant to CPLR 3213 (Kornfeld v. NRX Tech., 93 A.D.2d 772, 773, 461 N.Y.S.2d 342 [1st Dept. 1983], affd 62 N.Y.2d 686, 476 N.Y.S.2d 523, 465 N.E.2d 30 [1984] ).  By virtue of an affidavit by one of its founders and shareholders, defendant is precluded from asserting that plaintiff exercised his right to convert the note into common stock, a position inconsistent with that taken in the 2014 litigation, i.e., that plaintiff was “merely a creditor of [defendant]” (see Madden v. Corey, 251 A.D.2d 257, 675 N.Y.S.2d 52 [1st Dept. 1998] ).  Defendant also failed to provide proof that the note was converted into its common stock (see Seaman–Andwall Corp., 31 A.D.2d at 137–138, 295 N.Y.S.2d 752).  Defendant's allegations of breach of fiduciary duty and the implied covenant of good faith and fair dealing are unsupported (Kornfeld, 93 A.D.2d at 773, 461 N.Y.S.2d 342).

Pursuant to paragraph 11 of the note, which provides, “If any action or proceeding is commenced to enforce this Note ․, the prevailing party ․ shall be entitled to recover from the other party the reasonable attorney's fees, costs and expenses incurred by such prevailing party,” the matter is remanded for a determination of attorney's fees, costs, and expenses.