Chase Equipment Leasing Inc. v. Architectural Air

Order, Supreme Court, New York County (James A. Yates, J.), entered March 24, 2010, which, insofar as appealed from, granted plaintiff’s motion to dismiss the counterclaims for conversion, breach of the implied duty of good faith, and prepossession commercially unreasonable failure to dispose of collateral, and related defenses, unanimously modified, on the law, to deny the motion as to the counterclaim for conversion, and otherwise affirmed, without costs. Plaintiff, as a secured party, was not obligated to act in a commercially reasonable manner before taking possession of the collateral (Bank Leumi USA v Agati, 5 AD3d 292, 293 [2004]). Nor was it so obligated by having, as defendants assert, practical control over the collateral, given defendants’ refusal to surrender possession unless plaintiff modified the underlying loan or capitulated to their other demands. Plaintiff’s refusal to dispose of the collateral while simultaneously not allowing defendants to do so does not raise an inference of bad faith. In any event, defendants’ claim based on the implied covenant of good faith is barred by the no-waiver clause permitting plaintiff’s delay in exercising its remedies (see Chemical Bank v PIC Motors Corp., 87 AD2d 447, 450 [1982], affd 58 NY2d 1023 [1983]); the duty of good faith does not imply obligations inconsistent with contractual provisions (see 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144, 153 [2002]). However, we find that the equipment that defendant Carl added to the airplane that served as collateral was expressly exempt from becoming collateral itself by the plain meaning of section 1.5 of the security agreement, regardless of the location of that provision within the agreement. Therefore, Carl has a superior right to ownership or possession of the added-on equipment, which provides a basis for his conversion counterclaim. Concur — Saxe, J.P, Friedman, Freedman and Richter, JJ.