KNUTSEN v. JMK BUILDING CORP (2026)

DECISION & ORDER

In an action, inter alia, to recover damages for breach of a promissory note, the defendant JMK Building Corp. appeals from an order of the Supreme Court, Rockland County (Keith J. Cornell, J.), dated October 10, 2024.  The order, insofar as appealed from, granted the plaintiffs' motion for summary judgment on the first cause of action to the extent of awarding the plaintiffs damages in the principal sum of $450,000, plus interest.

ORDERED that the order is reversed insofar as appealed from, on the law, with costs, and the plaintiffs' motion for summary judgment on the first cause of action is denied.

In 1998, John Knutsen, Sr. (hereinafter John Sr.), the owner and operator of the defendant JMK Building Corp. (hereinafter JMK), allegedly loaned the sum of $1,089,455.87 to JMK and received a promissory note.

On June 14, 1999, John Sr.'s wife, Magny Knutsen (hereinafter Magny), executed a will that provided for the creation of a credit shelter trust and named John Sr. as a trustee and beneficiary.  The will provided, inter alia, that if John Sr. survived Magny, the trust would dissolve upon his death, and the couple's children, the plaintiffs, Linda Knutsen and Irene Owens, and John Knutsen, Jr., would receive the corpus.

In an instrument dated June 28, 1999, John Sr. assigned Magny “the promissory note of JMK ․ to [John Sr.], dated September 30, 1998, upon which a balance of $1,089,455.87 remains due, and which note is payable on demand with interest at the rate of 8% per annum.”

Magny died in 2000.  At the time of her death, the corpus of her trust consisted of a $675,000 loan obligation from JMK to the trust.  The following year, an unsecured promissory note was created to memorialize JMK's purported promise to repay the trust the $675,000 debt, plus 8% interest per annum.  According to the accountant, a flood at his office destroyed his copy of the note.

John Sr. died in 2016.  After his death, the new owner and president of JMK, the defendant Kevin Knutsen (hereinafter Kevin), allegedly refused to pay the $675,000 debt to the plaintiffs.

In 2018, the plaintiffs commenced this action against JMK and Kevin.  The first cause of action, asserted against JMK, was to recover damages for breach of the lost promissory note.

The plaintiffs subsequently moved for summary judgment on the first cause of action.  In an order dated October 10, 2024, the Supreme Court granted the motion to the extent of awarding the plaintiffs damages in the principal sum of $450,000, plus interest.  JMK appeals.

A party “seeking to recover upon a lost note must provide due proof of [its] ownership of the note, the facts which prevent production of the note, and the note's terms” (Wells Fargo Bank, N.A. v. Shteynberg, 187 A.D.3d 967, 968, 130 N.Y.S.3d 691 [internal quotation marks omitted] ).

Here, the plaintiffs proffered a transcript of the deposition testimony of JMK's accountant, in which he testified that the only copy of the note of which he was aware was lost in a flood, which precluded its production.  However, the plaintiffs failed to eliminate triable issues of fact regarding the terms of the note and whether it remained enforceable against JMK. Under these circumstances, the plaintiffs failed to demonstrate their prima facie entitlement to judgment as a matter of law on the first cause of action, to recover damages for breach of the lost promissory note against JMK.

Since the plaintiffs failed to demonstrate their entitlement to judgment as a matter of law on the first cause of action, the Supreme Court should have denied their motion for summary judgment on that cause of action, without regard to the sufficiency of JMK's opposition papers (see Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853, 487 N.Y.S.2d 316, 476 N.E.2d 642).

In light of the foregoing, we need not reach JMK's remaining contentions.

LASALLE, P.J., VOUTSINAS, LOVE and HOM, JJ., concur.