Opinion
Index No. 650276/2015
03-14-2022
NCCMI, INC., Plaintiff, v. BERSIN PROPERTIES, LLC, Scott Congel, Defendant.
The following e-filed documents, listed by NYSCEF document number (Motion 006) 218, 219, 220, 221, 222, 223, 224, 225, 226, 227, 228, 229, 230, 231, 232, 233, 234, 235, 236, 237, 238, 240, 241, 242, 243, 244, 245, 246, 247, 248, 249, 250, 251, 252, 253, 254, 255, 256, 257, 258, 260, 339 were read on this motion to/for PRECLUDE.
The following e-filed documents, listed by NYSCEF document number (Motion 007) 265, 266, 267, 268, 269, 270, 271, 272, 273, 274, 275, 276, 277, 311, 312, 313, 314, 315, 316, 317, 318, 319, 320, 321, 322, 323, 324, 325, 326, 327, 328, 329, 330, 331, 332, 333, 334, 335, 336, 337, 338, 345, 346, 347, 348, 349, 350, 351, 352, 353 were read on this motion to/for JUDGMENT - SUMMARY.
The following e-filed documents, listed by NYSCEF document number (Motion 008) 278, 279, 280, 281, 282, 283, 284, 285, 286, 287, 288, 289, 290, 291, 292, 297, 298, 299, 300, 301, 302, 303, 304, 305, 306, 307, 308, 309, 310, 341, 342, 343, 344, 354, 355, 356, 357, 358 were read on this motion to/for PARTIAL SUMMARY JUDGMENT.
In this contractual dispute over a loan agreement and guaranty, successor to lender , plaintiff, NCCMI, Inc. ("Lender"), moves, pursuant to CPLR 3212, for summary judgment (motion sequence 007). Defendants, Bersin Properties, LLC ("Bersin" or "Borrower") and Scott R. Congel ("Congel"), move, pursuant to CPLR 3212(e), for partial summary judgment on all claims brought against Congel for personal liability under the Indemnity and Guaranty Agreement ("Guaranty") (motion sequence 008). Plaintiff also moves, to preclude defendants’ real estate finance expert (motion sequence 006).
On March 25, 2008, by Bill of Sale, Nomura Credit & Capital, Inc. conveyed all of its right, title and interest in and to the Loan to Lender.
BACKGROUND
On January 29, 2007, Bersin entered into a $135 million Amended and Restated Loan Agreement (the "Loan" or "Loan Agreement") with Nomura Credit & Capital, Inc. ("Nomura") for the renovation and re-leasing of the Medley Centre project ("the project") located in Irondequoit, New York (Plaintiff's Rule 19A Statement of Material Facts [SMF], motion no. 007, New York St Cts Elec Filing [NYSCEF] Doc No. 267 ¶ 1). In connection with the Loan Agreement, Nomura and defendants also entered an Indemnity and Guaranty ("Guaranty") dated January 29, 2007 and executed on January 8, 2007 (Defendants’ SMF, motion no. 008, NYSCEF Doc No. 280 ¶ 5; Plaintiff's Response to Defendants’ SMF, motion no. 008, NYSCEF Doc No. 310 ¶ 5). The Loan Agreement had an Initial Maturity Date of February 9, 2009, with an option for three consecutive one-year extensions, subject to Bersin Properties’ satisfaction of certain criteria (NYSCEF Doc No. 280 ¶ 2). From January 29, 2007 to February 9, 2009, Nomura/Lender had funded $44 million to the project (NYSCEF Doc No. 280 ¶ 4).
Borrower, on February 9, 2009 and February 13, 2009, believing that its loan had been extended, made draw requests for $54 million and $2.8 million, which were both declined (NYSCEF Doc No. 267 ¶¶ 16, 18). On March 18, 2009, Centerline Servicing Inc. (Centerline or "the loan servicer"), Lender's loan servicer, sent Borrower notice, on Lender's behalf, that the Loan had "matured on February 9, 2009 and all principal, interest and other sums owed by Borrower to Lender are due and payable" (Maturity Notice, NYSCEF Doc No. 14). On May 22, 2009, the loan servicer sent Borrower a Default Notice, stating that "[w]e are aware that Borrower takes the position that it has duly exercised the extension option set forth in Section 2.8 of the Loan Agreement. We disagree with that position" (Default Notice, NYSCEF Doc No. 15). On April 25, 2014, Borrower commenced suit in a separate action, alleging, among other things, that Nomura/Lender had breached the Loan Agreement by failing to extend the maturity date and declining to fund its draw requests (Bersin suit, NYSCEF Doc No. 26). On January 30, 2015, Lender commenced this action for Borrower's failure to repay the Loan at maturity and sought to foreclose the mortgages encumbering the project (Complaint, NYSCEF Doc No. 2). On March 24, 2015, Borrower interposed an Answer contesting the action (Answer, NYSCEF Doc No. 25). Originally filed as an action for foreclosure, this matter has since been converted into one for recovery of debt. Leave to serve a first and second supplemental complaint was granted on October 6, 2015 and July 5, 2016, respectively (first supplemental complaint, NYSCEF Doc No. 85; second supplemental complaint, NYSCEF Doc No. 132). Plaintiff in its second supplemental complaint asserts that Congel is jointly and severally liable, alongside Bersin, for the cost of the Loan pursuant to the Guaranty (NYSCEF Doc No. 132).
The Loan Agreement
The Loan Agreement defines the "Initial Maturity Date" as February 9, 2009. In addition and in pertinent part, it provides:
"SECTION 2.8 Extension of the Initial Maturity Date. Borrower shall have the option to extend the term of the Loan beyond the Initial Maturity Date for three (3) successive terms (each, an "Extension Option") of one (1) year each (the Initial Maturity Date following the exercise of each such option is hereinafter the "Extended Maturity Date") upon satisfaction of the following terms and conditions:
(a) no Default shall have occurred and be continuing at the time the applicable Extension Option is exercised and on the date that the applicable extension term is commenced;
(b) Borrower shall notify Lender of its irrevocable election to extend the Maturity Date as aforesaid not earlier than six (6) months, and no later than one (1) month, prior to the Initial Maturity Date or any Extended Maturity Date, as applicable;
(c) if the Interest Rate Cap Agreement is scheduled to mature prior to the applicable Extended Maturity Date, Borrower shall obtain and deliver to Lender not later than ten (10) Business Days prior to the first day of each Extension Option, one or more Replacement Interest Rate Cap Agreements from an Acceptable Counterparty which Replacement Interest Rate Cap Agreement shall be effective commencing on the first date of such Extension Option and shall have a maturity date not earlier than the applicable Extended Maturity Date; and
(d) In connection with each Extension Option, Borrower shall have delivered to Lender together with its notice pursuant to subsection (b) of this Section 2.8 and as of the commencement of the applicable Extension Option, an Officer's Certificate in form acceptable to Lender certifying that each of the representations and warranties of Borrower contained in the Loan Documents is true, complete and correct in all material respects as of the date of such Officer's Certificate to the extent such representation and warranties are not matters which by their nature can no longer be true and correct as a result of the passage of time.
(Loan Agreement, NYSCEF Doc No. 3)
...
SECTION 2.2 Interest Rate.
2.2.7 Interest Rate Cap Agreement.
(f) Each Interest Rate Cap Agreement obtained in accordance with this Section 2.2 shall provide for a strike price equal to the Strike Price; provided. however, Borrower shall have the right to effect an increase in the applicable Strike Price by virtue of depositing additional amounts into the Debt Service Reserve Account (and thereby increasing Proforma Net Cash Flow). Such deposits must be made prior to the date on which the required additional or replacement Rate Cap Agreement is obtained.
...
4.1.18 No Set-off. The Loan Documents are not subject to any right of rescission, set off, counterclaim or defense by Borrower, Sole Member, or Guarantor, including the defense of usury, nor would the operation of any of the terms of the Loan Documents, or the exercise of any right thereunder, render the Loan Documents unenforceable (subject to principles of equity and bankruptcy, insolvency and other laws generally affecting creditors’ rights and the enforcement of debtors’ obligations), and Borrower, Sole Member, and Guarantor have not asserted any right of rescission, set off, counterclaim or defense with respect thereto.
(id. )
...
[T]he Debt shall be fully recourse to Borrower ... if Borrower defaults hereunder in any way and Borrower or any Guarantor contests or in any way interferes with, directly or indirectly, any foreclosure action, Uniform Commercial Code sale and/or deed in lieu of foreclosure transaction commenced by Lender or with any other enforcement of Lender's rights, powers or remedies under any of the Loan Documents or under any document evidencing, securing or otherwise relating to all or any portion of the Property (whether by making any motion, bringing any counterclaim, claiming any defense, seeking any injunction or other restraint, commencing any action, seeking to consolidate any such foreclosure or other enforcement with any other action, or otherwise)"
(id. at 154—155).
Guaranty
Notwithstanding anything to the contrary in this Agreement, the Loan Agreement, the Notes or any of the Loan Documents the Debt shall be fully recourse to Borrower (vii) if Borrower defaults hereunder in any way and Borrower or any Guarantor contests or in any way interferes with, directly or indirectly, any foreclosure action, Uniform Commercial Code sale and/or deed in lieu of foreclosure transaction commenced by Lender or with any other enforcement of Lender's rights, powers or remedies under any of the Loan Documents or under any document evidencing, securing or otherwise relating to all or any portion of the Property (whether by making any motion, bringing any counterclaim, claiming any defense, seeking any injunction or other restraint, commencing any action, seeking to consolidate any such foreclosure or other enforcement with any other action, or otherwise).
(Guaranty, NYSCEF Doc No. 102 at 4).
ARGUMENTS
Lender argues that it has established its prima facie case for summary judgment under a promissory note and guaranty by showing execution and delivery of the note, maturity of the debt, and Borrower's failure to make required payments thereunder. It asserts that by the express terms of the Loan Agreement, Borrower's obligation was absolute and unconditional, and not subject to any defense, counterclaim or setoff. Moreover, it contends that Congel triggered his personal liability for the Loan, pursuant to the Guaranty, by interposing an answer and contesting the instant action.
In opposition, Borrower disputes that the debt matured. It argues that Bersin fulfilled all the criteria for extension of the loan maturity date but for one, the procurement of an interest rate cap agreement (IRCA), which, at the time of the financial crisis of 2008, was unobtainable. As it was commercially unreasonable to obtain an IRCA at the time, Borrower argues, defendants treated the loan as having been extended and the IRCA condition as being excused. Moreover, it points to the conduct of both Nomura and Centerline to show that all parties, at least until Bersin received the maturity notice on March 18, 2009 (NYSCEF Doc No. 14), collectively understood that the loan had been extended. Centerline had continued to request loan interest payments, which Bersin argues would "only make sense if the loan were active, because otherwise Centerline would have demanded the unpaid principal and not merely the interest due" (Defendants’ memo of law in opposition to NCCMI's motion for summary judgment, NYSCEF Doc No. 311 at 6). Bersin contends that pressure from Nomura's senior leadership during the financial crisis led to Nomura's "about-face" concerning the maturity date and loan extension (id. at 7).
Defendants move pursuant to CPLR 3212(e) to dismiss the claim that pursuant to the Guaranty, Congel is personally liable for the unpaid principal loan amount totaling $44 million. According to defendants, the Guaranty clearly delineates the obligations between Congel and Bersin in the repayment of the loan. "Borrower," is defined in the Loan Agreement as only Bersin Properties, LLC, and not encompassing Congel (NYSCEF Doc No. 132 at 1). Therefore, the carve-out provision that states that upon a triggering event, the debt would become "fully recourse to ‘Borrower’ " excludes Congel (id. at 4). Moreover, defendants argue that plaintiff's claim that the Guaranty contained a scrivener's error is time-barred by the applicable six-year statute of limitations. Lastly, it contends that plaintiff should be estopped from asserting mutual mistake as plaintiff's second supplemental complaint is silent on the issue, thereby waiving the claim.
Plaintiff argues that defendants’ literal construction of the Guaranty would render portions of the Guaranty meaningless and/or duplicative of the Loan Agreement, and lead to the absurd result where Borrower, with no assets other than the mortgaged property, would become its own guarantor. Instead, it argues that it was a scrivener's error that the term "Borrower" was used instead of "Indemnitor." It points to the pre-contract term sheets executed by Congel, the initial drafts of the Guaranty exchanged between counsel for defendants and Lender, and the preamble to the Guaranty, to show that the purpose, intent and effect of the Guaranty was to provide for the Guarantor's (Congel's) personal liability for the Debt to the same extent that the Borrower would be personally liable pursuant to the Loan Agreement (Edlin aff, NYSCEF Doc No. 309 at 2). Moreover, it argues that there is no requirement that a party making a claim under a contract that contains a scrivener's error plead the existence of that error in its complaint. Furthermore, in moving for leave to supplement the initial complaint, plaintiff made clear that any interpretation of the Guaranty that did not acknowledge Congel's potential liability for the Debt upon the occurrence of a triggering event was in error and did not reflect the parties’ agreement and intent, despite the use of the phrase "recourse to Borrower" in the Guaranty.
Finally, plaintiff moves to preclude the expert report of Richard K. Hollowell offered by Bersin and to preclude Hollowell from offering opinions in connection with the loan agreement. Plaintiff alleges that the opinions in the Hollowell Report do not aid the factfinder and impermissibly intrude on the court's role as the sole interpreter of the loan documents.
DISCUSSION
"[T]he proponent of a motion for summary judgment must demonstrate that there are no material issues of fact in dispute, and that it is entitled to judgment as a matter of law" ( Ostrov v Rozbruch , 91 AD3d 147, 152 [1st Dept 2012] ; see also Winegrad v New York Univ. Med. Ctr. , 64 NY2d 851, 853 [1985] ; Stelick v Gangl , 47 AD2d 789, 789 [3d Dept 1975] ["the burden is upon the movant to produce evidence whereby it must clearly appear that no material and triable issue of fact is presented by the pleadings"]). "Once such a prima facie showing has been made, the burden shifts to the party opposing the motion to produce evidentiary proof in admissible form sufficient to raise material issues of fact which require a trial of the action" ( Cabrera v Rodriguez , 72 AD3d 553, 553-554 [1st Dept 2010] ). On a motion for summary judgment, "facts must be viewed in the light most favorable to the non-moving party" ( Vega v Restani Constr. Corp. , 18 NY3d 499, 503 [2012] [internal quotation marks and citation omitted]). If there is any doubt as to the existence of a triable issue of fact, summary judgment must be denied ( Rotuba Extruders v Ceppos , 46 NY2d 223, 231 [1978] ).
Loan Agreement
It is undisputed that the Loan maturity date was February 9, 2009. It is also undisputed that in order for Borrower to exercise its right to extend the maturity date it had to satisfy certain terms and conditions set forth in Section 2.8 of the Loan Agreement. Plaintiff has shown its entitlement to judgment as a matter of law by submitting, in support of its motion, proof of the promissory note and guarantee and of the defendants’ failure to make the payments provided by the terms of the Loan Agreement and Guaranty ( Kowalski Enters. v Sem Intl. , 250 AD2d 648, 648 [2d Dept 1998] ; see North Fork Bank v Hamptons Mist Mgt. Corp. , 225 AD2d 595, 596 [2d Dept 1996] ).
The burden then shifts to defendants to raise a material issue of fact requiring a trial ( North Fork Bank , 225 AD2d at 596 ). Bersin has failed to raise an issue of fact. While Bersin argues that the final requirement would have caused Bersin to purchase a "commercially unreasonable and cost prohibitive strike rate that would result in Bersin paying for the IRCA at least ten times what it paid the previous year," it also concedes that it failed to fulfill the terms and conditions required by the Loan Agreement (NYSCEF Doc No. 311 at 2, 11-12). Bersin's arguments as to the impossibility of fulfilling the loan extension criteria are unconvincing because Borrower had the option to effectuate an increase in the Strike Price by depositing funds into the Debt Service Reserve Account (NYSCEF Doc No. 3 at § 2.2.7(f)). Therefore, the loan was not extended, and the maturity date remained, regardless of Bersin's assumptions otherwise ( Flushing Unique Homes, LLC v Brooklyn Fed. Sav. Bank , 100 AD3d 956, 957 [2d Dept 2012] ["The Bank established its entitlement to judgment as a matter of law by demonstrating, prima facie, that the maturity date of the loan was not extended because the plaintiff failed to comply with the conditions contained in the note when it purported to exercise its option to extend the term of the loan"]). Moreover, it is undisputed that the loan remains unpaid even if Borrower had properly qualified for all three of the one-year contractual extensions.
Equally unconvincing is Borrower's argument that the doctrine of in pari delicto bars Lender's claim because Borrower "frustrated Bersin's good faith attempts to satisfy the IRCA condition" (NYSCEF Doc No. 311 at 12). The doctrine of in pari delicto mandates that the courts will not intercede to resolve a dispute between two wrongdoers ( Kirschner v KPMG LLP , 15 NY3d 446, 464 [2010] ). It is inapplicable here because there is no allegation or evidence that plaintiff, along with Borrower, participated in joint immoral or unconscionable conduct ( Chemical Bank v Stahl , 237 AD2d 231, 232 [1st Dept 1997] [in pari delicto "requires immoral or unconscionable conduct that makes the wrongdoing of the party against which it is asserted at least equal to that of the party asserting it"]; Williams Electronics Games, Inc. v Garrity 366 F3d 569, 574 [7th Cir 2004] ["The defense of in pari delicto is intended for situations in which the victim is a participant in the misconduct giving rise to his claim ... as in the classic case of the highwayman who sued his partner for an accounting of the profits of the robbery they had committed together"] [internal citations omitted]). Here, the parties are plainly on opposite sides of, rather than joint participants in, Lender's alleged breach.
Lastly, Bersin argues that the waiver of defenses in Section 4.1.18 of the Loan Agreement only waives defenses to repayment that existed at the time the document was executed. This argument is unavailing when New York courts have consistently upheld broadly worded waiver language of this type to preclude assertion of defenses to repayment that are absolute and unconditional, and not subject to defense, setoff or counterclaim that might otherwise be available to a guarantor at the time of default and enforcement ( Citibank v Plapinger , 66 NY2d 90, 92 [1985] ; Red Tulip, LLC v Neiva , 44 AD3d 204, 205 [1st Dept 2007], lv dismissed 10 NY3d 741 [2008], lv denied 13 NY3d 709 [2009] ; General Trading Co. v A & D Food Corp. , 292 AD2d 266, 267 [1st Dept 2002] ).
Accordingly, plaintiff's summary judgment motion on the cause of action on a promissory note is granted.
Guaranty
Defendants argue that the Guaranty raises two issues: (1) that the debt recourse provision did not run to Congel personally and (2) enforcement of such would be punitive and retaliatory.
As explained by the court in G3-Purves St., LLC v Thomson Purves, LLC (101 AD3d 37, 41 [2d Dept 2012] ), a non-recourse loan agreement, such as the one here, "largely exempts the borrower and guarantors from personal liability for the remaining debt in the event of a default and leaves the lender with the sole recourse of repossession of the property which served as security under the loan agreement." In other words, the loan itself is structured to be non-recourse with respect to Congel, except that under the Guaranty, certain events trigger Congel's personal liability. Congel maintains that he only assumed personal liability for losses incurred by the lender as a result of events enumerated under the Guaranty, Section 1 (a)-(q), such as fraud, misappropriation or physical damage or waste of the property.
However, plaintiff argues that Congel's liability is bifurcated under the Guaranty: not only is he personally liable for "loss recourse," as enumerated and uncontested by Congel, but also "full recourse," exposing Congel to liability for the entire amount of the loan. The full recourse triggering events include filing an answer or claiming a defense. At issue here is the full recourse liability portion of the carve-out that states, "fully recourse to Borrower," which plaintiff argues was meant to say, "fully recourse to Indemnitor" but for a scrivener's error. Additions of carve-out provisions that enforce recourse liability upon certain triggering acts, such as assertion of affirmative defenses to foreclosure, filing of bankruptcy or transfers of collateral, are enforceable and valid (see First Nationwide Bank v Brookhaven Realty Assocs. , 223 AD2d 618, 621 [2d Dept 1996], lv dismissed 88 NY2d 963 [1996] ).
Ascertaining whether or not a writing is ambiguous is a question of law for the trial court ( W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162 [1990] ). In interpreting a contract, the court must "enforce a clear and complete written agreement according to the plain meaning of its terms, without looking to extrinsic evidence to create ambiguities not present on the face of the document" ( 150 Broadway NY Assoc., L.P. v Bodner, 14 AD3d 1, 6 [1st Dept 2004] ). The objective of contract interpretation is to give effect to the intent of the contracting parties "as revealed by the language they chose to use" ( Bolt Elec., Inc. v City of New York , 223 F3d 146, 150 [2d Cir 2000] ). The court does not "resort to extrinsic evidence unless the contract's language itself is ambiguous; if, in the context of the entire agreement, the plain meaning of the text is clear, our inquiry ends there" ( CP III Rincon Towers, Inc. v Cohen , 666 Fed Appx 46, 51 [2d Cir 2016] ). The test for ambiguity in a written agreement is well settled: "[A] contract is ambiguous if on its face it is reasonably susceptible of more than one interpretation" ( China Privatization Fund (Del), L.P. v Galaxy Entertainment Group Ltd. , 95 AD3d 769, 770 [1st Dept 2012] [internal quotation marks and citation omitted]). Further, the Court must construe a contract in a manner that avoids inconsistencies and reasonably harmonizes its terms ( James v Jamie Towers Hous. Co., 294 AD2d 268, 269 [1st Dept 2002], affd 99 NY2d 639 [2003] ; see National Conversion Corp. v Cedar Bldg. Corp. , 23 NY2d 621, 625 [1969] ).
Here, the court finds the contract to be ambiguous with respect to the language "fully recourse to Borrower." To interpret the full recourse portion of the guaranty according to its literal terms would exempt Congel from personal liability for filing an answer. Per the Guaranty, "Indemnitor" is defined as both Congel and Borrower and "Borrower" is defined as only Bersin. However, were we to read Guaranty as a whole, there would be clear tension between the full recourse provision and the rest of the document ( Solco Plumbing Supply, Inc. v Hart , 123 AD3d 798, 800 [2d Dept 2014] ["[I]n determining the meaning of contractual language, a court should not read a contract so as to render any term, phrase, or provision meaningless or superfluous, but should give effect to all of the contract's provisions"] [internal quotation marks and citation omitted]). As evidenced by the Preamble of the Guaranty, Congel's personal liability, as opposed to only liability for Losses, was contemplated:
"WHEREAS, as a condition to making the Loan to Borrower, Lender has required that Indemnitor indemnify Lender from and against and guarantee payment to Lender of those items for which Borrower is personally liable and for which Lender has recourse against Borrower under the terms of the Notes and the Security Instruments; and
WHEREAS, Congel is the owner of the beneficial interests in Borrower, the extension of the Loan to Borrower is of substantial benefit to Congel and, therefore, Congel desires to indemnify Lender from and against and guarantee payment to Lender of certain items specifically set forth in this Agreement and/or the Loan Agreement for which Borrower is liable and for which Lender has recourse against Borrower under the terms of the Notes, the Loan Agreement and the Security Instruments"
Further, Section 5(b) states:
"Indemnitor hereby acknowledges that Lender's appraisal of the Property is such that Lender is not willing to accept the consequences of the inclusion of Indemnitor's indemnity set forth herein among the obligations secured by the Security Instruments and the other Loan Documents and that Lender would not make the Loan but for the unsecured personal liability undertaken by Indemnitor herein."
(NYSCEF No. 102).
Moreover, to interpret the full recourse portion of the guaranty as defendants wish would render portions of the Loan Agreement superfluous (NYSCEF Doc No. 3 at 154). While superfluity is not necessarily fatal to a contract, New York law disfavors adopting an interpretation that would render an individual provision superfluous ( Wyeth v King Pharms., Inc. , 396 F Supp 2d 280, 287 [ED NY 2005] ["New York law disfavors contract interpretations that render provisions of a contract superfluous"][internal quotation marks and citation omitted]). In addition, the First Department has held that as a rule, "an interpretation of an instrument that would result in making a person or entity the guarantor of his, her or its own debt must be rejected" ( 150 Broadway NY Assoc., L.P., 14 AD3d at 8 ; see PNC Capital Recovery v. Mechanical Parking Sys., 283 AD2d 268, 271 [1st Dept 2001], lv dismissed 96 NY2d 937 [2001], appeal dismissed 98 NY2d 763 [2002] ; see 1471 Second Corp. v NAT of NY Corp. , 162 AD3d 449, 450 [1st Dept 2018] ).
Where, as here, a contract or contract provision has been deemed ambiguous, the parties are entitled to "submit extrinsic evidence as an aid in construction, and the resolution of the ambiguity is for the trier of fact" ( Bana Elec. Corp. v Bethpage Union Free Sch. Dist. , 76 AD3d 987, 988 [2d Dept 2010] [internal quotation marks and citation omitted]). As such, plaintiff submits documents generated during the negotiation and drafting process and alleges that during this time a scrivener's error was made. Plaintiff explains:
"After Congel had executed two term sheets unambiguously requiring him to personally guaranty all recourse obligations, including repayment of the Loan, his counsel was provided with a draft Guaranty that did precisely that. Far from objecting, counsel returned the draft with a written notation that the language describing the Indemnitor's recourse liability should be conformed to the language used in the Loan Agreement. In response, Nomura's counsel adopted the Loan Agreement's language literally, neglecting to change the phrase "recourse to Borrower" to "recourse to Indemnitor," as appropriate in the Guaranty"
(plaintiff's memo of law in opposition to defendants’ motion for partial summary judgment, NYSCEF Doc No. 309 at 2).
Defendants point to Congel's testimony at his deposition to support its argument that Congel never agreed to be personally liable. In addition, defendants contend that even NCCMI's former executive, Yoshikazu Okano, recognized that the Loan was not personally guaranteed by Congel since he described in an email to other NCCMI colleagues and staff that "the payments are not guaranteed by anyone in this loan" and that "it is a sort of performance guaranty but not the guaranty for the payments of principal and interest" (Okano email, NYSCEF Doc No. 286).
Indeed, a review of the voluminous discovery in this case, including proposed and final modifications of the guaranty, reveals that it is possible the full recourse provision at issue was scrutinized. The term sheets dated October 18, 2006 and November 28, 2006 include the full recourse language, as does an email between NCCMI and defendants’ representatives outlining the lender's carve-out section of its form application (October 18, 2006 term sheet, NYSCEF Doc No. 299; November 28, 2006 term sheet, NYSCEF Doc No. 341; email regarding carve-out provision, NYSCEF Doc No. 298). However, when drafts of the guaranty were exchanged, defendants’ counsel requested that the language immediately preceding the list of triggering events of loss recourse "conform to loan agreement" (Thelen draft Guaranty, NYSCEF Doc No. 343; Borrower comments to Thelen draft Guaranty, NYSCEF Doc No. 344). Immediately thereafter, plaintiff alleges, is when the scrivener's error occurred, as their counsel failed to change the phrase, "fully recourse to Borrower" as it states in the loan agreement, to "fully recourse to Indemnitor" in the full recourse portion of the guaranty. The full recourse provision is somewhat buried, having no heading or title, and being the second paragraph following the enumerated loss recourse events. Other portions of the same paragraph were edited, though, and the word Guarantor was replaced with Congel. Thus, even after an analysis of the drafting history, it is unclear if "fully recourse to Borrower" was deliberate and intentional.
As to plaintiff's argument that the portion of the guaranty at issue was a scrivener's error, "[i]n contract law, a scrivener's error, like a mutual mistake, occurs when the intention of the parties is identical at the time of the transaction but the written agreement does not express that intention because of that error; this permits a court acting in equity to reform an agreement" ( Washington v. NYC Medical Practice, P.C. , 2021 WL 918753, *5, 2021 US Dist LEXIS 44992, *12, 2021 WL 918753 [SD NY, Mar. 10, 2021, No. 18-CV-9052 (PAC) ]). Without a mutual mistake, or a unilateral mistake coupled with fraud, reformation would be inappropriate ( Vollbrecht v Jacobson , 40 AD3d 1243, 1245 [3d Dept 2007] ["A party seeking reformation must establish, by clear and convincing evidence, that the writing in question was executed under mutual mistake or unilateral mistake coupled with fraud"][internal quotation marks and citation omitted]; Amend v Hurley , 293 NY 587, 595 [1944] ["Reformation may not be granted upon a probability nor even upon a mere preponderance of evidence, but only upon a certainty of error"]). Here, it cannot be said as a matter of law that the contract was executed under mutual mistake, nor is there any evidence that there was a unilateral mistake in addition to fraud.
In making this argument, plaintiff asserts that it is not seeking reformation of the lease which, as defendants correctly argue, is time-barred under the applicable six-year statute of limitations (see Matter of Wallace v 600 Partners Co., 86 NY2d 543, 547 [1995] ), but instead seeks an interpretation which would recognize that the phrase at issue say, "fully recourse to Indemnitor." It is well settled that the courts may, as a matter of interpretation, carry out the intention of a contract by transposing, rejecting, or supplying words to make the meaning of the contract clearer and that any such "interpretation" is not considered to be a reformation of the contract (id. ; see Castellano v State of New York, 43 NY2d 909, 911-912 [1978] ). Nevertheless, as the Court of Appeals has stated, "such an approach is appropriate only in those limited instances where some absurdity has been identified or the contract would otherwise be unenforceable either in whole or in part" ( Matter of Wallace 86 NY2d at 547-548 ). Under the circumstances of this case the court declines to transpose "Borrower" for "Indemnitor" since there remain questions of fact that need to be resolved and plaintiff has not met its burden of identifying absurdity in the Guaranty or that it would otherwise be unenforceable either in whole or in part.
Because the extrinsic evidence neither supplies an unambiguous interpretation of the terms of the Guaranty, nor indisputable evidence of the parties’ intent, summary judgment must be denied ( CP III Rincon Towers, Inc., 666 Fed Appx at 52 ["(W)e leave determination of the parties’ intent to the ultimate factfinder"]). When the extrinsic evidence is inconclusive, the parties’ intent is a question of fact and summary judgment should be denied ( American Express Bank v Uniroyal, Inc. , 164 AD2d 275, 277 [1st Dept 1990], appeal denied 77 NY2d 807 [1991] ). Since neither party here has established its prima facie case, both plaintiff and defendants’ motions for summary judgment on the issue of the guaranty are denied ( TSR Consulting Servs. v Steinhouse , 267 AD2d 25, 27 [1st Dept 1999] [The moving party in a summary judgment motion has the burden of establishing that its construction is the only fair construction of the contract's language]).
Expert Witness
Finally, plaintiff's motion to exclude the report and testimony of plaintiffs’ expert, Richard K. Hollowell, is moot considering the court's decision above.
CONCLUSION
Based upon the foregoing, it is
ORDERED that plaintiff's motion to preclude Bersin Properties, Inc.’s expert report and expert testimony (motion sequence number 006) is denied; and it is further
ORDERED that plaintiff NCCMI, Inc.’s motion for summary judgment (motion sequence number 007) is granted in part and the Clerk is directed to enter judgment in favor of plaintiff and against defendant Bersin Properties, LLC in the amount of $44,020,365.25, together with interest as provided for by the parties’ agreement beginning on February 9, 2009, until the date of entry of judgment, less the sum of $4,000,000, as calculated by the Clerk, and thereafter at the statutory rate, together with costs and disbursements to be taxed by the Clerk upon submission of an appropriate bill of costs, and plaintiff's motion is otherwise denied; and it is further
ORDERED that defendants Bersin Properties, LLC and Scott R. Congel's motion for partial summary judgment (motion sequence number 008) is denied in its entirety; and it is further
ORDERED that the balance of the action is severed and continued; and it is further
ORDERED that the that the amount of expenses and costs incurred by plaintiff to date is referred to a Special Referee to hear and report with recommendations, except that, in the event of and upon the filing of a stipulation of the parties, as permitted by CPLR 4317, the Special Referee, or another person designated by the parties to serve as referee, shall determine the aforesaid issue; and it is further
ORDERED that this branch of plaintiff's motion is held in abeyance pending receipt of the report and recommendations of the Special Referee and a motion pursuant to CPLR 4403 or receipt of the determination of the Special Referee or the designated referee; and it is further
ORDERED that counsel for plaintiffs shall, within 30 days from the date of this order, serve a copy of this order with notice of entry, together with a completed Information Sheet, upon the Special Referee Clerk in the Motion Support Office in Rm. 119M at 60 Centre Street, who is directed to place this matter on the calendar of the Special Referee's Part (Part 50 R) for the earliest convenient date.