Case Name: Jane Gladstein, Appellant, v. Christopher H. Martorella, Defendant. iStar FM Loan LLC, Intervenor-Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 2010-07-13
Citations: 75 A.D.3d 465
Docket Number: 
Parties: Jane Gladstein, Appellant, v Christopher H. Martorella, Defendant. iStar FM Loan LLC, Intervenor-Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 75
Pages: 465–468

Head Matter:
Jane Gladstein, Appellant, v Christopher H. Martorella, Defendant. iStar FM Loan LLC, Intervenor-Respondent.
[904 NYS2d 418]

Opinion:
Order, Supreme Court, New York County (Louis B. York, J.), entered August 19, 2009, which granted proposed intervenor's (iStar) motion to intervene as a plaintiff, directed amendment of the summons and complaint to reflect the intervention, and preliminarily enjoined the parties, pending further order of the court, from removing any of the funds presently on deposit with the court, reversed, on the law and the facts, with costs, iStar's motion to intervene denied, and the injunctive relief vacated.
Plaintiff sued defendant for breach of contract and was initially granted summary judgment for $2 million, but, upon reargument, the IAS court reversed itself, and, as a condition of granting defendant the related relief of restraining plaintiff from seeking to enforce its contract rights, defendant deposited with the court the amount in dispute, $2 million. This Court reversed that order (Gladstein v Martorella, 71 AD3d 427 [2010]), making plaintiff, once again, defendant's judgment creditor.
Entirely unrelated to plaintiffs contract with defendant or any of the issues of law and fact involved in plaintiffs action to enforce that contract, iStar was the assignee of a mortgage, secured by, inter alia, insurance proceeds arising from any claims in connection with the mortgaged Pennsylvania premises owned by 1419 Tower LI] an entity allegedly controlled by defendant. Tower litigated an insurance claim against its carrier in a Philadelphia court and recovered more than $5 million, which it deposited in its general revenue accounts, and, in the meantime, defaulted on the mortgage. iStar claimed entitlement to the insurance proceeds recovered by Tower, but Tower had apparently already expended the proceeds; the $2 million that was deposited by defendant with the court in the present action seems to have been withdrawn from Tower's general revenue accounts before iStar made any demands for the insurance proceeds.
Since there are no issues of law or fact that iStar's claim to the insurance proceeds has in common with the present action, there is no basis to allow it to intervene in the present action as a matter of judicial discretion under CPLR 1013. Moreover, such an intervention would significantly prejudice plaintiff by potentially depriving her of the funds to which she already enjoys an entitlement by reason of her judgment. Nor is iStar entitled to intervene as a matter of right pursuant to CPLR 1012, since its legal rights are not adversely affected by plaintiffs judgment, regardless that the practical pecuniary effect of that judgment's enforcement will be to hinder iStar's enforcement of its security interest. iStar's interest is not with the judgment itself, but in reaching the deposited funds, to which, as we have held, plaintiff is entitled.
Furthermore, since it appears that the insurance proceeds were not placed in a segregated account but, rather, were commingled with Tower's other revenues and expenses, it cannot be determined as a matter of law whether the deposited funds were ultimately derived, in whole or in part, from the insurance proceeds. Thus, the insurance proceeds that were received into and moved among Tower's accounts, and in diverse manners paid out of its accounts, are not "identifiable," and therefore not subject to iStar's claimed security interest (UCC 9-315 [a] [2]; [b] [2]). But even if iStar's accounting and tracing methodology were to be credited, and the insurance proceeds were found to be identifiable, they would still not be subject to iStar's claimed security interest because Tower, the debtor, was no longer in possession of the proceeds when iStar first demanded them, and there is no record indication of any collusion by plaintiff with Tower to violate iStar's rights as a secured creditor (UCC 9-332 [a], [b]). Concur—Andrias, J.E, Saxe, Sweeny and Catterson, JJ.