To be Argued by:
JONATHAN D. PRESSMENT
(Time Requested: 15 Minutes)
APL- 2014-00021
New York County Clerk's Index No. 651437/12
Grnurt nf Appeals
nftqe
~tate nf New lnrk
______ _. .. ._ ____ __
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK INTERNATIONAL", NEW YORK BRANCH,
Plaintiff-Respondent,
-against-
FRANCISCO JAVIER HERRERA NAVARRO,
Defendant-Appellant,
-and-
THE ESTATE OF EDUARDO GUZMAN SOLIS,
BRIEF FOR PLAINTIFF-RESPONDENT
HAYNES AND BOONE LLP
JONATHAN D. PRESSMENT
YELENA KOTLARSKY
30 Rockefeller Plaza, 26th Floor
New York, New York 10112
Tel.: (212) 659-7300
Fax: (212) 918-8989
Defendant.
Attorneys for Plaintiff-Respondent
Date Completed: September 18, 2014
TABLE OF CONTENTS
PRELIMINARY STATEMENT ................................................................................ I
QUESTIONS PRESENTED ...................................................................................... 6
STATEMENT OF FACTS ........................................................................................ ?
A. The Guaranty ................................................................................................... 7
B. The Federal Action .......................................................................................... 9
TilE PROCEEDINGS BELOW ............................................................................. 13
A. The Underlying Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . .. . . . . . .. . . . . . . . . .. .. . . . . . . . . . . 13
B. The Trial Court Order ................................................................................... 16
C. Rabobank's Appeal To The First Department.. ............................................ 17
D. Appellant's Appeal To This Court ............................................................... 20
ARG"UMENT .......................................................................................................... 20
I. TilE STANDARDS GOVERNING THIS APPEAL ................................... 20
II. TilE APPELLATE DIVISION'S ORDER SHOULD BE AFFIRMED ..... 21
A. The Appellate Division Correctly Concluded That Appellant
Cannot Avoid Liability Under the Guaranty By Claiming That
The Federal Judgment Was Obtained Through "Collusion" ............. 22
1. Appellant Cannot Avoid Liability Under The Guaranty
Based On A Defense That He Expressly Waived The Right
To Assert ................................................................................... 22
2. Appellant Cannot Escape The Scope Of His Waiver By
Recasting His Alleged "Collusion" Defense As The
Failure Of A Condition Precedent To Enforcement Of The
Guaranty ................................................................................... 30
B. The Appellate Division Correctly Concluded That, Even Were
Appellant Entitled To Assert A Defense To An Action To Collect
On The Guaranty, The Undisputed Facts Demonstrate That
Appellant's Alleged "Collusion" Defense Lacks Merit ..................... 38
1. The Undisputed Facts Demonstrate That Appellant's
"Collusion" Defense Is Meritless Because The Federal
Judgment Resulted From Appellant's Own Inaction ............. 38
2. Appellant's Dramatization Does Not Undermine The
Undisputed Determinative Facts And Relies Upon A Series
of Half-Truths And Fallacies Belied By The Record ............... 43
CONCLUSION ....................................................................................................... 45
..
11
TABLE OF AUTHORITIES
Page(s)
Cases
62 7 Acquisition Co. v. 62 7 Greenwich, LLC,
85 A.D.3d 645 (1st Dep't 2011) ........................................................................ 28
Acadia Woods Partners, LLC v. Signal Lake Fund LP,
102 A.D.3d 522 (1st Dep't 2013) ...................................................................... 25
Banco Do Estado De Sao Paulo, S.A. v. Mendes Junior Int'l Co.,
249 A.D.2d 137 (1st Dep't 1998) ................................................................ 26, 28
Barclays Bank of N.Y. v. Heady Elec. Co.,
174 A.D.2d 963 (3d Dep't 1991) ....................................................................... 36
Beal Sav. Bank v. Viola Sommer,
8 N.Y.3d 318 (2007) .......................................................................................... 24
In re Boca Enters. Inc.,
204 B.R. 407 (S.D.N.Y. 1997) ........................................................................... 26
Branham v. Lowes Orpheum Cinemas, Inc.,
31 A.D.3d 319 (1st Dep't 2006), aff'd, 8 N.Y.3d 931 (2007) ........................... 23
Canterbury Realty & Equip. Corp. v. Poughkeepsie Sav. Bank,
135 A.D.2d 102 (3d Dep't 1988) ........................................................... 34, 35, 36
Citibank, N.A. v. Plapinger,
66 N. Y.2d 90 ( 1985) ................................................................................... passim
Danann Realty Corp. v. Harris,
5 N.Y.2d 317 (1959) .................................................................................... 27, 29
Davimos v. Halle,
35 A.D.3d 270 (1st Dep't 2006) ........................................................................ 21
European Am. Bank v. Mr. Wemmick, Ltd.,
160 A.D.2d 905 (2d Dep't 1990) ................................................................. 29, 30
...
111
Famolaro v. Crest Offset, Inc.,
24 A.D.3d 604 (2d Dep't 2005) ......................................................................... 21
Gannett Co. v. Tesler,
177 A.D.2d 353 (1st Dep't 1991) ...................................................................... 28
Gardner v. Goodyear Dental Vulcanite Co.,
131 U.S. 103 (1873) ........................................................................................... 33
Gen. Trading Co. v. A&D Food Corp.,
292 A.D.2d 266 (1st Dep't 2002) ................................................................ 25,28
God's Battalion of Prayer Pentecostal Church, Inc. v. Miele Assoc.,
LLP,
6 N.Y.3d 371 (2006) .......................................................................................... 24
Grand Pac. Fin. Corp. v 97-111 Hale, LLC,
90 A.D.3d 534 (1st Dep't 2011) ......................................................................... 25
Greenfield v. Philles Records, Inc.,
98 N.Y.2d 562 (2002) ........................................................................................ 24
Hotel 71 Mezz Lender LLC v. Falor,
14 N.Y.3d 303 (2010) ........................................................................................ 28
Juste v. Niewdach,
26 A.D.3d 416 (2d Dep't 2006) ......................................................................... 21
Laba v. Carey,
29 N.Y.2d 302 (1971) ........................................................................................ 24
Lane v. Lane,
175 A.D.2d 103 (2d Dep't 1991) ....................................................................... 33
LFR Collections LLC v. Elan Law Offices,
117 A.D.3d 486 (1st Dep't 2014) ...................................................................... 24
Mfrs. & Traders Trust Co. v. Sullivan,
188 A.D.2d 1023 (4th Dep't 1992) .................................................................... 36
N. Fork Bank v. ABC Merch. Servs., Inc.,
49 A.D.3d 701 (2d Dep't 2008) ......................................................................... 25
IV
Petra Mtge. Capital Corp., LLC v. Amalgamated Bank,
No. 101283/2010,2014 N.Y. Misc. LEXIS 2533 (Sup. Ct., N.Y.
County June 6, 2014) ......................................................................................... 37
Pike v. N.Y Life Ins. Co.,
72 A.D.3d 1043 (2d Dep't 2010) ................................................................. 29,30
Preamble Props., L.P. v. Thomas K. Woodard Antiques Corp.,
293 A.D.2d 330 (1st Dep't 2002) ...................................................................... 33
Preferred Capital Inc., v. PBK, Inc.,
309 A.D.2d 1168 (4thDep't2003) .................................................................... 31
Preferred Equities Corp. v. Ziegelman,
190 A.D.2d 784 (2d Dep't 1993) ....................................................................... 28
Pub. Serv. Mut. Ins. Co. v. Zucker,
225 A.D.2d 308 (1st Dep't 1996) ...................................................................... 23
Red Tulip, LLC v. Neiva,
44 A.D.3d 204 (1st Dep't 2007) .................................................................. 28, 29
Rojas- Wassil v. Villalona,
114 A.D.3d 517 (1st Dep't 2014) ...................................................................... 23
Rothouse v. Ass 'n of Lake Mohegan Park Prop. Owners, Inc.,
15 A.D.2d 739 (1st Dep't 1962) ......................................................................... 20
S.J. Cape/in Assocs. v. Globe Mfg. Corp.,
34 N.Y.2d 338 (1974) ........................................................................................ 42
S. Spring Hill Gold Mining Co. v. Amador Medean Gold Mining Co.,
145U.S.300(1892) ........................................................................................... 33
Shaw v. Time-Life Records,
38 N.Y.2d 201 (1975) ........................................................................................ 42
Signature Bank v. Lara Maint. Corp.,
No. 016790/2009, 2011 WL 2669744 (Sup. Ct., Nassau County
June 21, 2011) .............................................................................................. 34, 37
Silbert v. Silbert,
85 A.D.2d 661 (2d Dep't 1981) ......................................................................... 26
v
Sterling Nat'/ Bank v Biaggi,
No. 604015/04,2006 N.Y. Misc. LEXIS 9404 (Sup. Ct., N.Y.
County Sept. 28, 2006) ...................................................................................... 25
Sunbelt Rentals, Inc. v. NY Renaissance,
No. 152106/2012, 2013 N.Y. Misc. LEXIS 6024 (Sup. Ct., N.Y.
County Dec. 16, 2013) ....................................................................................... 33
Zheng v. City of N. Y,
19 N.Y.3d 556 (2012) .................................................................................. 23, 24
Other Authorities
23 N.Y. Jur. 2d Contribution, Indemnity, & Subrogation§ 155 (2013) ................ 31
63 N.Y. Jur. 2d Guaranty and Suretyship§ 391 (2012) ......................................... 31
CPLR 3212(b) ......................................................................................................... 21
CPLR3213 .......................................................................................................... 7,13
Black's Law Dictionary (9th ed. 2009) ................................................................... 23
Edward Beal, Cardinal Rules of Legal Interpretation
55 (A.E. Randall ed., 3d ed. 1924) ..................................................................... 23
Fed. R. Civ. P. 55(b) ............................................................................................... 40
Federal Rule 55 ....................................................................................................... 40
Rule 55.2(b) ofthe Local Rules ........................................................................ 40,41
Vl
Respondent Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.,
"Rabobank International," New York Branch ("Rabobank"), respectfully submits
this brief in opposition to the appeal brought by Appellant Francisco Javier Herrera
Navarro ("Appellant") from the January 16, 2014 decision and order of the
Supreme Court, Appellate Division, First Department (the "Appellant Division"),
which correctly reversed the trial court's denial ofRabobank's Motion for
Summary Judgment in Lieu of Complaint (the "Motion") and directed the entry of
summary judgment in Rabobank's favor.
PRELIMINARY STATEMENT
This appeal presents a simple question: can a guarantor who has waived the
right to contest liability for a guaranty by challenging the "validity or
enforceability" of the underlying debt or raising "any . .. circumstance which
might otherwise constitute a defense[,]" nonetheless avoid enforcement of the
guaranty against him by challenging the "validity or enforceability" of the
underlying debt? Were the answer to that question not already self-evident, the
Appellate Division, citing this Court's decision in Citibank, N.A. v. Plapinger, 66
N.Y.2d 90 (1985), correctly concluded that the answer is no.
Hoping to elude the inescapable conclusion reached by the Appellate
Division and further postpone the day when he will be required to satisfy the terms
of the "absolute and unconditional" guaranty (the "Guaranty") he executed in
favor of Rabobank, Appellant filed this appeal in an effort to renege on the
contractual waiver of defenses to which he knowingly and willingly agreed as part
of that Guaranty in 2005.
Pursuant to the terms of the Guaranty, Appellant guaranteed "all obligations
and liabilities" of Agra Services USA, Inc. ("Agra USA")-- a company for which
Appellant served as an officer and director. Appellant further agreed that
Rabobank would be entitled to enforce the Guaranty against him "irrespective of ..
. any lack of validity or enforceability of [the underlying obligations] ... or ...
any other circumstance which might otherwise constitute a defense available to, or
discharge of' Appellant.
Rabobank commenced this action with a motion for summary judgment in
lieu of complaint to enforce Appellant's obligation to ensure payment of a liability
of Agra USA to Rabobank under the Guaranty. Specifically, Rabobank seeks
payment of a nearly $42 million judgment (the "Federal Judgment") that it
obtained against Agra USA in federal court as a result of Agra USA's failure to
respond to a complaint filed against it (and Appellant) by Rabobank in the United
States District Court for the Southern District of New York (the "Federal Action").
None of the requisite elements governing Rabobank's claim for breach of
the Guaranty are disputed. Appellant does not dispute that he executed the
Guaranty and willingly agreed to its terms-- including his guarantee of"all
2
obligations and liabilities" of Agra USA and his contractual waiver of all defenses.
Appellant also does not dispute the existence of the Federal Judgment entered by
the Southern District ofNew York-- a $42 million liability of Agra USA. Finally,
it is beyond dispute that no payments have been made toward satisfaction of the
Federal Judgment-- either by Agra USA or by Appellant pursuant to the terms of
the Guaranty. It follows inexorably that Rabobank is entitled to a judgment for the
full amount of the Federal Judgment due from Appellant under the terms of his
Guaranty.
Appellant sought to avoid this fate before both the trial court and the
Appellate Division by arguing that the Federal Judgment fails to qualify as a "valid
obligation" of Agra USA -- a defense that Appellant expressly waived under the
Guaranty. The basis of Appellant's argument is a baseless conspiracy theory by
which Appellant claims that Rabobank manufactured the Federal Judgment
through "collusion" with a court-appointed receiver from Deloitte & Touche, who
was charged with overseeing the affairs of Agra USA's parent in a Canadian
bankruptcy and who, Appellant contends, appointed himself a director of Agra
USA for the sole purpose of orchestrating the Federal Judgment on Rabobank's
behalf. Appellant's argument not only strains credulity and ignores a litany of
undisputed facts -- including the fact that the receiver over whom Appellant alleges
Rabobank had control had not yet been appointed to serve at the time of Agra
3
USA's default in the Federal Action-- it ignores Appellant's contractual waiver of
all defenses under the Guaranty.
The trial court failed to give effect to Appellant's waiver and erroneously
concluded that Appellant's "collusion" defense raised a factual issue precluding
summary judgment. The Appellate Division properly reversed the trial court's
decision and granted Rabobank' s Motion, concluding that Appellant had waived
all defenses and that, "no matter how labeled, Herrera's assertion of collusion is, in
fact, a defense to his guaranty .... " The Appellate Division further concluded
that, even absent the waiver, on the face of the pleadings, Appellant's purported
defense lacked merit.
Appellant's present appeal follows the very same script offered by his prior
briefing before each of the lower courts. Once again, Appellant pens a tale of
alleged "collusion" between Rabobank and the court-appointed receiver from
Deloitte & Touche to argue that the Federal Judgment is somehow invalid or
unenforceable and that, as a result, Rabobank has failed to establish a required
element of its claim-- an underlying debt triggering the Guaranty. Appellant's
arguments are without basis in law or fact.
As a threshold matter, there is no dispute that Appellant unconditionally
waived, in writing, the right to raise the very defense he now seeks to employ -- an
attack on the "validity or enforceability" of the underlying debt. Appellant further
4
expressly agreed more broadly to waive any "circumstance which might otherwise
constitute a defense available to ... [Appellant]." Appellant's contractual waiver
is valid and binding, and prevents him from contesting Rabobank's enforcement of
the terms of the Guaranty.
Appellant's attempt to escape his waiver by recasting his alleged "collusion"
defense as a factual issue preventing Rabobank from establishing an element of its
prima facie case-- an underlying debt triggering the Guaranty-- falls flat.
Contrary to Appellant's arguments, Rabobank has made a prima facie showing of
an underlying debt-- it submitted a copy of the Federal Judgment along with its
original motion. Appellant does not dispute the existence or authenticity of the
Federal Judgment submitted in support ofRabobank's Motion. Rather, Appellant
argues that the Federal Judgment should not exist because it was improperly
obtained. That argument, however, does not nullify Rabobank's prima facie
showing -- it merely asserts a defense in response to it that Appellant expressly
waived any right to assert.
Finally, even assuming, arguendo, that Appellant is free to offer his theory
of "collusion" -- and he is not -- the undisputed facts demonstrate that Appellant's
theory is meritless. Appellant admits that he was the only officer or director of
Agra USA at the time Rabobank commenced the Federal Action against Agra USA
and Appellant. Appellant admits that he remained the only officer or director of
5
Agra USA, as well as a defendant in the Federal Action, for the entire period in
which Agra USA was obligated to answer or otherwise respond to the complaint in
the Federal Action. Appellant admits that, while he was its only officer or director,
Agra USA failed to respond to the complaint filed in the Federal Action despite the
fact that Appellant hired his own counsel to respond to the claims asserted against
him individually. Appellant admits that he was the only officer or director of Agra
USA and a defendant in the Federal Action at the time Rabobank sought and
obtained entry of a default against Agra USA in the Federal Action. And, tellingly,
Appellant completely omits to mention that he had every opportunity to oppose
Rabobank's motion for entry of the Federal Judgment, yet chose not to do so.
Given these undisputed facts, Appellant's claim of"collusion" rings hollow.
For these reasons, and for the reasons advanced in detail below, the decision
and order of the Appellate Division should be affirmed.
1.
QUESTIONS PRESENTED
QUESTION: Did the Appellate Division correctly conclude that
Appellant's contractual waiver of defenses precludes him from
contesting liability for the Federal Judgment under the terms of his
Guaranty by claiming that Rabobank obtained the Federal Judgment
through alleged "collusion" with a court-appointed receiver?
6
ANSWER: Yes.
2. QUESTION: Did the Appellate Division correctly conclude that,
even were consideration of Appellant's "collusion" argument proper,
the undisputed facts of the record demonstrate that the argument is
meritless?
ANSWER: Yes.
STATEMENT OF FACTS1
A. The Guaranty
Appellant is the former Chief Executive Officer of Agra Services of Canada,
Inc. ("Agra Canada") and a former director and officer of Agra Canada's subsidiary,
Agra USA (R. 113, 338). On or about September 7, 2005, Appellant executed the
Guaranty in favor ofRabobank pursuant to which Appellant "unconditionally
guarantee[ d]" the payment of "all obligations and liabilities of [ Agra USA]" (the
"Agra USA Obligation") (R. 171-77).
Specifically, Section 1(b) of the Guaranty provides:
[Appellant] hereby unconditionally guarantees:
1 The facts relevant to this Appeal are derived from the papers submitted in connection with
Rabobank's original Motion contained in the Record on Appeal ("R.") including: (1) the
Affidavit of William Fitzgerald, sworn to on April27, 2012 (along with its exhibits) (R. 41-
218); (2) the Affidavit ofT. Barry Kingham In Opposition sworn to on June 1, 2012 (along
with exhibits including the affidavit of Appellant sworn to on May 29, 2012) (R 237-65); (3)
the Affirmation of Jonathan D. Pressment in Further Support of the Motion dated June 7,
2012 (along with exhibits) (R. 283-295); and (4) the Surreply Affirmation ofT. Barry
Kingham In Opposition to Plaintiffs Motion Pursuant to CPLR 3213 dated June 20, 2012
(along with exhibits) (R. 326-84).
7
(b) the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all
obligations and liabilities of [ Agra USA] to
[Rabobank] now or hereafter existing, including
without limitation under the Repayment Agreement,
whether for principal, interest, fees, expenses or
otherwise.
(R. 172) (emphasis added).2
The Guaranty also provides that Appellant "agrees that [Rabobank] shall not
be required to resort first for payment to [ Agra Canada] or any other persons or
corporations, including without limitation, any other guarantors, their properties or
estates, or to any collateral or security, property, liens or other rights or remedies
whatsoever" (R. 172).
Section 2 of the Guaranty further provides that Appellant's obligations are
absolute and unconditional and that Appellant voluntarily agrees to waive any right
to contest Rabobank's enforcement of the Guaranty based upon the alleged invalidity
or unenforceability of the underlying debt or any other circumstance which might
otherwise constitute a defense available to Appellant as follows:
Section 2. Guaranty Absolute. The Guarantor
guarantees that the Obligations will be paid strictly in
2 The Guaranty includes a separate provision by which Appellant guaranteed certain payment
obligations of Agra Canada to Rabobank (the "Agra Canada Obligation"). Although
Rabobank's Motion sought enforcement of both the Agra Canada and Agra USA
Obligations, and Rabobank respectfully disagrees with the trial court's findings with respect
to the Agra Canada Obligation, Rabobank restricted its appeal before the Appellate Division
(and this Court) to only that portion of the trial court's Order which erroneously denied
Rabobank's Motion as to the Agra USA Obligation.
8
accordance with the terms of the applicable agreements,
notes or other instruments under which the Obligations
arise, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such
terms or the rights of the Purchaser with respect thereto.
The liability of the Guarantor under this Guaranty shall be
absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of any such
agreement, note or instrument;
(ii) any change in the time, manner or place of payment
of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of
or any consent to departure from any such
agreement, note or other instrument;
(iii) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of
or consent to departure from any other guaranty, for
all or any of the Obligations; or
(iv) any other circumstance which might otherwise
constitute a defense available to, or a discharge of,
the Seller or a guarantor.
(R. 172) (bold typeface in original).
Finally, the Guaranty also includes a choice of law provision pursuant to
which Appellant agreed that New York law would govern any disputes arising from
the Guaranty (R. 176-77).
B. The Federal Action
On March 2, 20 12, Rabobank commenced the Federal Action against
Appellant, Agra USA and the estate of Eduardo Guzman Solis ("Guzman") --
Appellant's former business partner at Agra Canada and Agra USA (R. 285-293).
9
Among other things, the Federal Action sought to enforce a guaranty provided by
Agra USA (the "Agra USA Guaranty"), pursuant to which Agra USA
unconditionally guaranteed certain payment obligations of Agra Canada to
Rabobank (R. 285-93). Similar to the Guaranty executed by Appellant, the Agra
USA Guaranty was absolute and unconditional irrespective of any claim that the
underlying obligations were invalid or unenforceable and regardless of "any other
circumstance which might otherwise constitute a defense available to . . . [ Agra
USA]" (R. 333). The Agra USA Guaranty was executed by Appellant and
Guzman, on behalf of Agra USA, in their capacities as the directors of Agra USA
(R. 338).
On March 7, 2012, Agra USA was duly served with a copy of the Complaint
filed in the Federal Action (the "Federal Complaint") (R. 285). At the time of the
filing and service of the Federal Complaint on Agra USA, Appellant was the only
officer or director of Agra USA (R. 251, 328-30, 338). Appellant was further
aware of the Federal Action, including the claims asserted against Agra USA, by
virtue of the fact that he was also a defendant in the Federal Action (R. 329).
Appellant remained Agra USA's only officer or director and a defendant in the
Federal Action for the entire period during which Agra USA was obligated to
answer or otherwise respond to the Federal Complaint (R. 294, 338, 363-67, 370-
71).
10
There is no dispute that while Appellant hired his own counsel to represent
him in the Federal Action in his individual capacity, he failed to obtain counsel for
Agra USA or to otherwise ensure that it was represented in the Federal Action. As
a result, Agra USA failed to answer, appear or otherwise respond to the Federal
Complaint (R. 295, 379). Accordingly, on April3, 2012 --at a time when
Appellant was the only officer or director of Agra USA -- Rabobank requested that
default be entered against Agra USA in the Federal Action (R. 379).
On April 3, the court in the Federal Action entered a Certificate of Default
(the "Default") against Agra USA (R. 379). At the time the Default was entered,
Appellant was still a defendant in the Federal Action and was still the only officer
or director of Agra USA (R. 294, 330, 338, 379). In fact, Appellant was not
removed as a director of Agra USA until April 11, 20 12 -- more than a week after
the Default was entered against Agra USA (R. 330).
On April16, 2012, Rabobank filed an Order to Show Cause for entry of
default judgment (the "Federal Judgment Motion") against Agra USA in the
Federal Action based on the Default (R. 375). There is no dispute that, at the time
Rabobank filed its Federal Judgment Motion against Agra USA, Appellant: (i) was
still a defendant in the Federal Action; (ii) was served with notice ofRabobank's
Federal Judgment Motion (including copies of the Federal Judgment Motion
papers); and (iii) was specifically advised of his opportunity to submit papers in
11
opposition to Rabobank's Federal Judgment Motion by April23, 2012, and to
appear at an April24, 2012 hearing on the Federal Judgment Motion (R. 294, 375-
82). There is similarly no dispute that Appellant remained a defendant in the
Federal Action until he was dismissed from the Federal Action on April24, 2012 --
one day after papers in opposition to the Federal Judgment Motion were due and
after a hearing on the Federal Judgment Motion was held (R. 294, 375-76).3
Finally, there can be no dispute that, despite being well aware of his
Guaranty of "all obligations and liabilities" of Agra USA, and despite being given
an opportunity to submit papers in opposition to the Federal Judgment Motion and
being advised of a hearing at which he could oppose the Federal Judgment Motion,
Appellant did not oppose entry of the Federal Judgment against Agra USA in any
manner whatsoever.
On April 30, 2012, based on the Default entered against Agra USA on April
3, 2012 --while Appellant was still the only officer or director of Agra USA-- the
Court in the Federal Action entered the Federal Judgment (R. 383). There is no
dispute that Agra USA has failed to make any payments to Rabobank toward
satisfaction of the Federal Judgment, and the Federal Judgment remains a liability
of Agra USA in the amount of $41 ,991,980 to this day. There is also no dispute
3 By Order dated April 24, 2012, the Federal Action was dismissed as against Appellant and
Guzman, on consent, due to concerns regarding the federal court's diversity jurisdiction as to
those defendants (R. 294). Thereafter, Rabobank proceeded in the Federal Action solely with
respect to its claims against Agra USA.
12
that Appellant has failed to make any payments toward satisfaction of the Federal
Judgment as required by his Guaranty.
THE PROCEEDINGS BELOW
A. The Underlying Action
On April 30, 2012, hours prior to entry of the Federal Judgment in the Federal
Action, Rabobank filed its Motion for summary judgment in lieu of complaint in the
New York State Supreme Court (New York County) based on Appellant's breach of
the provision of the Guaranty pertaining to the Agra Canada Obligation.4
On June 1, 2012, Appellant filed papers in opposition to the Motion asserting,
among other things, that: ( 1) a motion pursuant to CPLR 3 213 was inappropriate
because the Guaranty was purportedly "not an instrument for the payment of money
only"; and (2) that certain factual issues existed as to the payment obligations owed
to Rabobank by Agra Canada (R. 237-82).5
On June 7, 2012, Rabobank filed reply papers (the "Reply") in further support
of its Motion (R. 296-311 ). Apart from addressing the arguments raised by
Appellant's opposition, Rabobank asserted that summary judgment was further
warranted -- pursuant to Section 1 (b) of the Guaranty (pertaining to the Agra USA
4 As noted herein, Rabobank's claims with respect to this portion of the Motion are not the
subject of this appeal. (Seen. 3, infra).
5 Although the Motion originally sought entry of summary judgment against the estate of
Appellant's former business partner, Guzman, Guzman's estate failed to appear, answer or
otherwise respond to the Motion. Accordingly, Rabobank obtained a default judgment
against the estate in October 2013.
13
Obligation)-- given the federal court's entry of the Federal Judgment against Agra
USA following Rabobank's filing ofthe Motion (R. 296-311).6
Following the filing ofRabobank's Reply, Appellant filed a surreply (the
"Surreply") in further opposition to the Motion in order to address the portion of
Rabobank's Reply concerning Appellant's liability for the Federal Judgment under
the Agra USA Obligation provision of his Guaranty (R. 312-25). Appellant asserted
that the Federal Judgment was "collusive" because Rabobank allegedly controlled a
receiver from the international accounting firm ofDeloitte & Touche who was
appointed by the Canadian bankruptcy court overseeing the administration of Agra
USA's parent, Agra Canada, in bankruptcy at the time the Federal Judgment was
entered (R. 318-19).
Oral argument on the Motion was held on July 10,2012. At oral argument,
Rabobank's counsel specifically addressed Appellant's liability for the Agra USA
Obligation:
[MR. PRESSMENT:]There are two obligations being guaranteed by
Mr. Herrera. We've discussed already the Agra
Canada [Obligation] .... The second is that
pursuant to Paragraph B of section one that's at
the top of the same page, Your Honor, it's on
6 Appellant appears to suggest that Rabobank waited until its Reply to seek enforcement of
Appellant's liability for the Agra USA Obligation to prevent Appellant from opposing
Rabobank's Motion on that issue. See App. Br. at 11, n. 6. This is not true. As Appellant
concedes, the Federal Judgment was not entered at the time Rabobank filed its Motion. /d.
Moreover, Appellant neglects to mention that Rabobank consented to Appellant's filing of a
surreply to permit him an opportunity to respond to Rabobank's claim concerning
Appellant's liability for the Agra USA Obligation (R. 326).
14
page two, Mr. Herrera unconditionally guaranteed
the punctual payment when due, whether --
THE COURT: Hang on. Okay.
MR. PRESSMENT: -- whether its stated maturity by acceleration or
otherwise of all obligations and liabilities of the
company to the purchaser, which is Agra U.S.A.,
Inc. It's a defined term in the guarantee. Now or
herein existing ... whether for principal[,]
interest[,] fees, expenses or otherwise.
THE COURT:
Your Honor, it is undisputed that Rabobank
possesses a judgment from Judge Gardephe in the
Southern District of New York for the full
amount due under the guarantee here today.
And that, you say, that would obviously be an
obligation of liability of the company?
MR. PRESSMENT: Correct, Your Honor ....
(R. 26-27).
Rabobank's counsel further addressed Appellant's argument that the Federal
Judgment was somehow a "collusive" judgment:
MR. PRESSMENT: Your Honor, if I may, on that issue of default, in
fact at all times prior to default and up to the date
of default, the only known director was Mr.
Kingham's client, Mr. Herrera, and that is true for
the entire time after the complaint was served.
THE COURT: That's a bit of a problem.
MR. PRESSMENT: Thirty-one days that he had to answer, Mr.
Herrera never said word one. And, in fact, Mr.
Herrera was still in the case after default was
granted against Agra U.S.A. Mr. Herrera was
still in the case when Judge Gardephe set a
hearing on the motion for default judgment, and
15
(R 30-31).
Mr. Herrera said not word one. He rested on his
hands and now offers this argument, despite
under the guarantee having waived any and all
defenses.
Finally, Rabobank highlighted Appellant's waiver of defenses under the
Guaranty:
(R. 31).
And, Your Honor, in order for the Court to even
consider Mr. Herrera's argument, it needs to get
around well established Court of Appeals
precedent and Citibank v. Plapinger, which said a
waiver that, Your Honor, used the exact same
language found in Mr. Herrera's guarantee,
waiving "any circumstance which might
otherwise constitute a defense," effectively
waives any and all defenses. It did so in the
Citibank case, just as it must do so in this case.
B. The Trial Court Order
On December 11, 2012, the trial court issued its decision and order (R. 7-
17). While correctly recognizing: (i) Rabobank's Federal Judgment against Agra
USA; (ii) Appellant's guaranty of"all obligations and liabilities" of Agra USA;
(iii) Appellant's waiver of all defenses; and (iv) Appellant's failure to make any
payment toward satisfaction of the Federal Judgment under the terms of his
Guaranty, the trial court nonetheless concluded, in error, that issues of material fact
precluded it from awarding Rabobank summary judgment based entirely on
Appellant's claim that the Federal Judgment was obtained through "collusion" (R.
16
17). The Trial Court's order was entered in the office of the Clerk of the Court on
January 11, 2013.
C. Rabobank's Appeal To The First Department
Rabobank served a Notice of Entry and Notice of Appeal to the Appellate
Division on January 11, 2013 (R. 5-6, 18-19).7 On January 16, 2014, the Appellate
Division issued its Order (the "Order") reversing the trial court's decision and
granting Rabobank summary judgment as against Appellant for the full amount of
the Federal Judgment pursuant to the terms of the Guaranty (R. viii-xxvi).
In the Order, the Appellate Division specifically acknowledged Appellant's
claim that Rabobank had "engineered" the Federal Judgment by "collusion"-- the
very same claim he attempts to advance in this appeal:
Herrera concludes, Rabobank engineered the default
judgment by collusion, and the judgment therefore
does not actually constitute an 'obligation' of Agra
USA under section 1(b) ofthe guaranty. Thus, Herrera
concludes, because no obligation came into existence,
his guaranty was never triggered at all.
(R. xii).
7 Rabobank appealed only that portion of the trial court's order pertaining to Appellant's
liability for the Agra USA Obligation. Appellant suggests that Rabobank's decision to
forego an appeal of the trial court's decision with respect to the Agra Canada Obligation,
demonstrates that Rabobank concedes that Appellant's waiver is not a bar to all defenses and
that Appellant's arguments as to the Agra Canada Obligation are "viable." See Appellant's
Opening Brief at 17, n. 7; 27, n. 11. Appellant is incorrect. Because Rabobank need only
demonstrate Appellant's breach of one provision of his Guaranty to obtain summary
judgment, and because an analysis of Appellant's liability for the Agra USA Obligation
involves a review of considerably less material than an analysis of Appellant's liability for
the Agra Canada Obligation, Rabobank chose to proceed with an appeal solely on the issue
of Appellant's liability for the Agra USA Obligation.
17
The Appellate Division nonetheless directed entry of summary judgment in
Rabobank's favor based on its finding that Appellant had waived any right to assert
his claim of"collusion" in opposition to Rabobank's efforts to enforce the terms of
the Guaranty:
[Appellant's] argument has no merit. As noted above,
[Appellant's] guaranty stated that it was 'absolute and
unconditional' despite any circumstances that might
otherwise constitute a defense. Because Herrera's
guaranty clearly provides that he waives all defenses,
his position depends on his framing the collusion
argument as something other than a 'defense.' Thus,
[Appellant's] argument is merely a semantic one,
meant to force the issue into a framework more
favorable to his position by, in essence, reframing a
defense as the failure of a condition precedent.
However, no valid basis for this argument exists. On
the contrary, no matter how labeled, Herrera's
assertion of collusion is, in fact, a defense to his
guaranty inasmuch as he offers it in an effort to avoid
performance under the guaranty ....
(R. xiii) (internal citations omitted).
The Appellate Division correctly determined that Appellant's argument --
by which he recasts his alleged "collusion" defense as a failure of a condition
precedent to enforcement of the Guaranty -- if accepted, would render Appellant's
waiver of defenses entirely meaningless as follows:
[Appellant] cannot avoid his agreement simply by
declaring that a defense is not really a defense because
it actually calls into question the validity of the
obligation. This exception would swallow the rule
18
whole, since many defenses - including, for example,
fraudulent inducement - could be said to call an entire
obligation into question. Indeed, courts have rejected
similar arguments ....
(R. xiii-xiv) (internal citations omitted).
Finally, the Appellate Division concluded that even if Appellant were
entitled to assert his alleged "collusion" defense in opposition to Rabobank's
claim, on the face of certain undisputed facts the defense lacked merit as follows:
(R. xiv-xv).
Even if the issue of control were relevant, the record
presents no material issue of fact on that issue ....
[N]either party disputes that on March 7, 2012, when
Rabobank served the complaint on Agra USA in the
federal action, [Appellant] was still a director of that
company. Nonetheless, he did not cause an answer or
other response to the complaint to be interposed on
behalf of that company, and he did not attempt to do so
despite the fact that he was still a director of the
company. Nor does Herrera allege in his papers that
anyone prevented him from doing so ....
The dissent, on which Appellant places considerable reliance, disagreed
with the findings of the majority and concluded that Appellant's allegations of
"collusion" precluded Rabobank from establishing a "valid obligation" triggering
Appellant's Guaranty. However, the dissent failed to address Appellant's waiver
of defenses and simply accepted Appellant's characterization of his "collusion"
defense as the failure of a condition precedent -- an oversight not lost on the
majority (R. xvii). The dissent also failed to acknowledge, much less address, the
19
fact that Appellant was given an opportunity to oppose Rabobank's Federal
Judgment Motion in writing and at a hearing and chose to do neither.
D. Appellant's Appeal To This Court
On January 27, 2012, Appellant filed his Notice of Appeal of the Appellate
Division's Order with this Court (R. vi). On March 6, 2014, Appellant filed a
motion to supplement the appellate record with additional documents he claimed
were relevant to his claim of"collusion" --copies of which were submitted for the
Court's review. On June 5, 2014, the Court denied Appellant's motion finding no
basis to expand the record to permit Appellant an opportunity to submit additional
materials in aid of his appeal.
ARGUMENT
POINT I
THE STANDARDS GOVERNING THIS APPEAL
It is well settled that a denial of summary judgment warrants de novo
review. Rothouse v. Ass 'n of Lake Mohegan Park Prop. Owners, Inc., 15 A.D.2d
739, 739 (1st Dep't 1962) ("We, of course, are free to resolve de novo the question
of whether summary judgment should be granted.")
A motion for summary judgment shall be granted if "upon all the papers and
proofs submitted, the cause of action or defense shall be established sufficiently to
20
warrant the court as a matter of law in directing judgment in favor of any party."
CPLR 3212(b).
POINT II
THE APPELLATE DIVISION'S ORDER SHOULD BE AFFIRMED
Appellant does not dispute that: (i) he executed the Guaranty and guaranteed
"all obligations and liabilities" of Agra USA; (ii) Rabobank possesses the Federal
Judgment against Agra USA in the amount of $41,991 ,980; and (iii) that no
payments have been made toward satisfaction of Federal Judgment either by Agra
USA or by Appellant pursuant to the terms of his Guaranty. App. Br. at 10-11,
16.8
Given these undisputed facts, there can be no dispute that Rabobank has
satisfied each of the requisite elements governing its claim for enforcement of the
Guaranty with respect to the Federal Judgment: (1) the existence of the Guaranty;
(2) an underlying debt-- the Federal Judgment; and (3) the guarantor's non-
payment. See Davimos v. Halle, 35 A.D.3d 270, 272 (1st Dep't 2006); see also
Juste v. Niewdach, 26 A.D.3d 416, 417 (2d Dep't 2006); Famolaro v. Crest Offset,
Inc., 24 A.D.3d 604, 604-05 (2d Dep't 2005).
Appellant nonetheless attempts to escape liability under the Guaranty --just
as he did before each of the lower courts-- by attacking the validity of the Federal
8 Citations to Appellant's Brief will appear as "App. Br."
21
Judgment. Specifically, Appellant asserts that he "has raised a fact issue as to
collusion that eliminates the underlying debt, and thus calls into question the
existence of an 'obligation' of Agra USA." App. Br. at 16-17.
The Appellate Division considered and properly rejected Appellant's
argument, finding that Appellant had expressly waived any right to assert his
alleged "collusion" defense and that, irrespective of his waiver, the undisputed
facts of the record rendered Appellant's purported defense meritless. Nothing has
changed. Both the law and the undisputed facts remain the same and each is fatal
to Appellant's attempt to avoid liability for the Federal Judgment under the
Guaranty.
A. The Appellate Division Correctly Concluded That Appellant
Cannot Avoid Liability Under the Guaranty By Claiming That The
Federal Judgment Was Obtained Through "Collusion"
1. Appellant Cannot Avoid Liability Under The Guaranty Based On A
Defense That He Expressly Waived The Right To Assert
As a threshold matter, regardless of the merits of Appellant's "collusion"
argument -- and the argument is meritless -- there can be no dispute that Appellant
expressly waived any right to assert that argument (as a defense or otherwise)
under the Guaranty. On this point, the waiver to which Appellant agreed is clear
and unequivocal:
Section 2. Guaranty Absolute. The Guarantor
guarantees that the Obligations will be paid strictly in
accordance with the terms of the applicable agreements,
22
notes or other instruments under which the Obligations
arise, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such
terms or the rights of the Purchase with respect thereto.
The liability of the Guarantor under this Guaranty shall be
absolute and unconditional irrespective of:
(i)
(iv)
any lack of validity or enforceability of any such
. 9 agreement, note or znstrument;
any other circumstance which might otherwise
constitute a defense available to, or a discharge of,
the Seller or a guarantor.
(R. 172) (bold typeface in original) (emphasis added). Tellingly, Appellant's
opening brief omits the provision of his Guaranty in which Appellant affirmatively
waived the very defense he now seeks to employ -- a challenge to the "validity or
enforcement" of the underlying obligation (Compare App. Br. at 6 with R. at 172). 10
9 It is well-settled that a contract should be enforced according to its plain meaning. Zheng v.
City ofN.Y., 19 N.Y.3d 556,575 (2012). The plain meaning of"instrument" is "a written
legal document that defines rights, duties, entitlements, or liabilities .... "Black's Law
Dictionary (9th ed. 2009) ("An 'instrument' seems to embrace contracts, deeds, statutes,
wills, Orders in Council, orders ... whether in writing or in print, or partly in both; in fact,
any written or printed document that may have to be interpreted by the Courts." (citing
Edward Beal, Cardinal Rules of Legal Interpretation 55 (A.E. Randall ed., 3d ed. 1924))).
10 Although Appellant's waiver of any right to contest the "validity or enforceability" of the
underlying debt was not addressed by the Appellate Division -- despite being put before each
of the lower courts -- there is no question that this Court may properly consider the impact of
that waiver on appeal since the language ofthe waiver itself is not in dispute and the issue of
its impact is an issue oflaw. See Rojas-Wassil v. Villalona, 114 A.D.3d 517, 517-18 (1st
Dep't 2014); Branham v. Lowes Orpheum Cinemas, Inc., 31 A.D.3d 319,323 n. 2 (1st Dep't
2006), aff'd, 8 N.Y.3d 931 (2007); Pub. Serv. Mut. Ins. Co. v. Zucker, 225 A.D.2d 308, 309
(1st Dep't 1996).
23
Under New York law, "a written agreement that is complete, clear and
unambiguous on its face must be enforced according to the plain meaning of its
terms." Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 569 (2002); Zheng v.
City of N.Y., 19 N.Y.3d 556, 575 (2012); Laba v. Carey, 29 N.Y.2d 302, 308
(1971) (same). Here, the "plain meaning" of Appellant's waiver strips him of any
right to assert a defense based on the alleged invalidity or unenforceability of the
underlying debt and, even more broadly, "any other circumstance which might
otherwise constitute a defense available" to him.
To permit Appellant to offer a defense of"collusion" in the face of the
waiver to which he willingly agreed would be to render the waiver entirely
meaningless. That cannot be. See Beal Sav. Bank v. Viola Sommer, 8 N.Y.3d 318,
324 (2007) ("A reading of the contract should not render any portion meaningless"
(citing God's Battalion of Prayer Pentecostal Church, Inc. v. Miele Assoc., LLP, 6
N.Y.3d 371, 374 (2006))).
In fact, New York courts routinely enforce waivers of the very type agreed
to by Appellant in which the guarantor waives any right to contest the "validity or
enforceability" of the underlying debt triggering the guaranty. See, e.g., LFR
Collections LLC v. Elan Law Offices, 117 A.D.3d 486,486 (1st Dep't 2014)
(granting plaintiffs motion for summary judgment in lieu of complaint where
"unconditional guarantee ... waived the right to interpose a defense [and] stated
24
that it would not be affected by any invalidity or unenforceability of the underlying
obligation of the borrower"); Acadia Woods Partners, LLC v. Signal Lake Fund
LP, 102 A.D.3d 522, 523 (1st Dep't 2013) (defense alleging unenforceability of
the underlying debt barred where "the guaranty explicitly disclaims defenses
pertaining to the 'invalidity, irregularity or unenforceability' of the note"); Grand
Pac. Fin. Corp. v 97-111 Hale, LLC, 90 A.D.3d 534, 534 (1st Dep't 2011)
(upholding grant of summary judgment where guaranty was absolute and
unconditional "irrespective of any lack of validity or enforceability of any loan
document"); N. Fork Bank v. ABC Merch. Servs., Inc., 49 A.D.3d 701, 702 (2d
Dep't 2008) (barring fraud defense where guaranty was "absolute and
unconditional regardless of the validity or enforceability of any other obligation");
Sterling Nat'/ Bank v Biaggi, No. 604015/04, 2006 N.Y. Misc. LEXIS 9404, at *12
(Sup. Ct., N.Y. County Sept. 28, 2006) (upholding guaranty waiver that was
"absolute and unconditional, and []not subject to any defenses or counterclaims
raised by the guarantors as to their enforceability, or concerning the validity of the
underlying debt.")
New York courts have similarly enforced waivers, of the sort further agreed
to by Appellant, in which a guarantor agrees to waive any right to contest liability
under the Guaranty based upon "any other circumstances that might otherwise
constitute a defense .... " See, e.g., Gen. Trading Co. v. A&D Food Corp., 292
25
A.D.2d 266,266-67 (1st Dep't 2002) (summary judgment held appropriate where
unconditional guaranty waived all defenses); Banco Do Estado De Sao Paulo, S.A.
v. Mendes Junior Int'l Co., 249 A.D.2d 137, 138 (1st Dep't 1998) (fraud defense
barred where guaranty was enforceable "irrespective of ... any other
circumstances which might constitute a defense") (alteration in original); see also
In re Boco Enters. Inc., 204 B.R. 407, 415 (S.D.N.Y. 1997); Silbert v. Silbert, 85
A.D.2d 661, 662 (2d Dep't 1981) (barring guarantor's defense that plaintiff
brought about the default triggering the guaranty because guaranty was absolute
and unconditional "irrespective of ... any other circumstances which might
otherwise constitute a ... defense of a surety or guarantor.")
As the Appellate Division correctly noted, on this point, this Court's decision
in Citibank, N.A. v. Plapinger, 66 N.Y.2d 90 (1985) --a case cited bymany of the
foregoing decisions-- is instructive (R. xiv). In Citibank, several lender banks
sued a group of guarantors to collect upon a guaranty executed in connection with
a loan. In opposition to the lenders' motion for summary judgment, the guarantors
asserted a host of defenses including a defense of fraud in the inducement and, as
is the case here, the failure of a condition precedent. Citibank, 66 N. Y .2d at 92-93.
This Court held that even though the guarantors raised triable issues of fact as to
alleged fraudulent inducement, the guaranty's waiver of defenses "foreclose[ d) as a
matter of law" the guarantors from pursuing any of the defenses asserted. !d. at 93.
26
In arriving at its decision in Citibank, this Court relied upon the language of
the defendants' guaranty in which the defendants agreed that their obligations
would remain unconditional irrespective of "any other circumstance which might
otherwise constitute a defense" to the guaranty-- the exact same language of
Appellant's waiver here. See Id. at 95. The Court held that the defendants' waiver
precluded them from asserting any defenses including a defense of fraudulent
inducement or the failure of a condition precedent as follows:
To permit [the defendants to assert a defense
of fraudulent inducement or the failure of a
condition precedent] would in effect
condone defendants' own fraud in
'deliberately misrepresenting [their] true
intention' when putting their signatures to
their 'absolute and unconditional' guarantee.
Citibank, 66 N.Y.2d at 95-96 (citing Danann Realty Corp. v. Harris, 5 N.Y.2d 317,
320 (1959)).
The Citibank case presents perhaps the most potent argument for avoidance
of a contractual waiver of defenses -- a claim that the defendant was fraudulently
induced into agreeing to the waiver itself. Yet, this Court held that even there, a
defendant who has agreed to waive "any other circumstance which might
otherwise constitute a defense" to enforcement of the guaranty was contractually
barred from asserting a defense to a claim seeking enforcement of the Guaranty.
Citibank, 66 N.Y.2d at 92.
27
New York courts have consistently cited the decision in Citibank to preclude
the assertion of defenses by defendants in actions to collect upon guarantees where
the guarantees contained express waivers of such defenses. See, e.g., 627
Acquisition Co. v. 627 Greenwich, LLC, 85 A.D.3d 645, 647 (1st Dep't 2011); Red
Tulip, LLC v. Neiva, 44 A.D.3d 204, 209-10 (1st Dep't 2007) (waiver identical to
Appellant's herein posed an "insurmountable obstacle" to the guarantor's assertion
of affirmative defenses in action to enforce the guaranty); see also Hotel71 Mezz
Lender LLC v. Falor, 14 N.Y.3d 303,307 (2010); Gen. Trading Co. v. A & D
Food Corp., 292 A.D.2d 266, 267 (1st Dep't 2002); Banco do Estado de Sao Paulo
S.A. v. Mendes Junior Int'l Co., 249 A.D.2d 137, 138 (1st Dep't 1998); Preferred
Equities Corp. v. Ziegelman, 190 A.D.2d 784, 784 (2d Dep't 1993); Gannett Co. v.
Tesler, 177 A.D.2d 353, 354 (1st Dep't 1991).
The same result should follow here, where to permit Appellant to assert a
defense contesting the "validity or enforceability" of the underlying debt triggering
the Guaranty-- the Federal Judgment-- despite having executed an "absolute and
unconditional" guaranty in which he expressly waived any right to assert that
defense (R. 172) or to assert "any other circumstance which might otherwise
constitute a defense" available to him, "would in effect condone [Appellant's] own
fraud in 'deliberately misrepresenting [his] true intention' when putting [his]
28
signature[] to [his] 'absolute and unconditional guarantee."' Citibank, 66 N.Y.2d
at 95 (citing Danann, 5 N.Y.2d at 320). 11
Appellant's attempt to discount the effectiveness of his waiver by asserting
that it may not be used to "immunize [Rabobank] from its own wrongdoing," is
without merit. App. Br. at 24-25. Each of the cases cited by Appellant in support
of this argument is inapposite. The decision in Red Tulip, LLC v. Neiva, 44 A.D.3d
204, 211 (1st Dep't 2007) does not support Appellant's argument-- it actually
supports Rabobank's claim. App. Br. at 24. In Red Tulip, the Court concluded
that a waiver of defenses identical to that agreed to by Appellant herein posed "an
insurmountable obstacle" to the assertion of a defense in an action brought to
collect on the guaranty. Red Tulip, 44 A.D.3d at 209 (emphasis added). 12
The two remaining cases relied on by Appellant in support of this argument
are similarly unavailing. See App. Br. at 25 (citing Pike v. NY. Life Ins. Co., 72
A.D.3d 1043 (2dDep't2010) and European Am. Bankv. Mr. Wemmick, Ltd., 160
11 Appellant's attempt to distinguish Citibank relies entirely on Appellant's efforts to recast his
alleged "collusion" defense as the failure of a condition. App. Br. at 19, n. 8. As discussed
herein, Appellant's efforts are insupportable. See Point 11.8.2, infra. Moreover, this Court in
Citibank specifically precluded the defendants from contesting liability for failure of a
condition precedent based upon the defendants' execution of the very same waiver agreed to
by Appellant here. Citibank, 66 N.Y.2d at 95-96.
12 Appellant's pruning oflanguage from Red Tulip is of no avail. The portion of the Red Tulip
decision extracted by Appellant appears as dicta following the court's decision to bar the
defendant from asserting any defenses. Moreover, the language cited by Appellant pertained
to the court's analysis of a defense specifically reserved under the guaranty at issue in that
case -- the defense of actual payment. Red Tulip, 44 A.D.3d at 209-10. That is not the case
here. Appellant reserved no defenses under the Guaranty.
29
A.D.2d 905, 906-907 (2d Dep't 1990)). Neither of the cases involved a contractual
waiver of all defenses. Moreover, each of the cases pertained to affirmative claims
brought by the guarantors for fraud. See Pike, 72 A.D.3d at 1051 (permitting
plaintiffs to proceed with affirmative claims that they were defrauded despite
waiver of "rights, claims and demands"); European Am. Bank, 160 A.D.2d at 906-
907 (permitting defendant to assert counterclaim for fraud despite waiver of "set-
offs and counterclaims"). That is not the case here. Appellant does not allege that
Rabobank defrauded him. Nor does Appellant claim that he was deceived or lulled
into failing to respond to the Federal Complaint on behalf of Agra USA or that he
failed to oppose Rabobank's Federal Judgment Motion based upon any
representations made to him by Rabobank. Thus, Appellant's contention that
Rabobank is seeking to use the language of his waiver to shield itself from "[its]
own fraud" is simply unsupported by anything.
Accordingly, Appellant's waiver bars his assertion of any defense-- even
one of alleged "collusion"-- in order to avoid performance under the Guaranty.
2. Appellant Cannot Escape The Scope Of His Waiver By Recasting His
Alleged ''Collusion" Defense As The Failure Of A Condition Precedent To
Enforcement Of The Guaranty
Faced with the clear and unequivocal language of his waiver, Appellant
resorts to an argument of semantics by attempting to recast his alleged "collusion"
defense as the failure of a "condition[] precedent to recovery on a guaranty[.]" App.
30
Br. at 16. Specifically, Appellant argues that his "collusion" defense is not actually a
defense, but rather, a "challenge" to one of the three elements governing
Rabobank' s claim -- "the existence of an indebtedness covered by the guaranty ...
. " App. Br. at 15.
As the Appellate Division correctly noted, Appellant's argument lacks merit:
(R. xiii-xiv).
On the contrary, no matter how labeled, [Appellant's]
assertion of collusion is, in fact, a defense to his
guaranty inasmuch as he offers it in an effort to avoid
performance under the guaranty ....
Herrera cannot avoid his agreement simply by
declaring that a defense is not really a defense because
it actually calls into question the validity of the
obligation. This exception would swallow the rule
whole, since many defenses - including, for example,
fraudulent inducement - could be said to call an entire
obligation into question.
Indeed, Appellant's claim of "collusion" is routinely viewed as a defense
under New York law. See 23 N.Y. Jur. 2d Contribution, Indemnity, & Subrogation
§ 155 (2013) ("[T]he indemnitor may []set up the defense that the judgment in the
prior action against the indemnitee was procured by collusion or fraud.")
(emphasis added); 63 N.Y. Jur. 2d Guaranty and Suretyship§ 391 (2012) ("The
rule that a surety may ... set up fraud or collusion by the principal obligor and the
creditor in the obtaining of a judgment as a defense in an action to recover from
the surety .... ") (emphasis added); Preferred Capital Inc., v. PBK, Inc., 309
31
A.D.2d 1168, 1168-69 (4th Dep't 2003) (granting plaintiffs motion for summary
judgment where defendants' "affirmative defense of fraud and collusion" was
based merely on unsubstantiated suspicions) (emphasis added).
Even were this not so, Appellant readily concedes -- as he must -- that
"collusion can be a defense .... " App. Br. at 22, n. 9. Appellant also concedes--
as he must-- that he expressly waived the right to assert any circumstance that
"might" constitute a defense (R. 172). Given Appellant's concession that a claim
of collusion "can be a defense" and his waiver of any circumstance that "might"
constitute a defense, there can be no question that, by his own admission,
Appellant is precluded from avoiding performance under the Guaranty pursuant to
a claim of "collusion" no matter how labeled.
Moreover, regardless ofhow characterized, Appellant's challenge to
Rabobank's prima facie showing is insupportable. Appellant's argument is simple-
-"he disputes the very existence" of the Federal Judgment. App. Br. at 18. The
thrust of Appellant's claim is set forth in his opening brief as follows:
Mr. Herrera does not challenge the validity of the
Guaranty or his non-payment. He does challenge
whether an 'obligation' exists-- the 'underlying debt'-
-that is subject to the Guaranty. Mr. Herrera has
raised a fact issue as to collusion that eliminates the
underlying debt, and thus calls into question the
existence of an 'obligation' of Agra USA
App. Br. at 16-17.
32
Appellant's argument suffers from a fatal flaw -- the mere fact that
Appellant questions the propriety of Federal Judgment does not, in and of itself,
"eliminate[] the underlying debt" or otherwise render it non-existent. 13 There is no
question that the Federal Judgment exists and has existed for the more than two
years that have passed since it was first entered by the Southern District of New
York. The Federal Judgment has not been vacated, removed or modified.
Appellant may not simply "wish away" the Federal Judgment to suit his defense.
Accordingly, Appellant's argument fails on its face! 4
Appellant's related argument-- questioning the validity of the Federal
Judgment-- is similarly doomed. App. Br. at 2. Appellant specifically waived the
13 For this reason, Appellant's reliance on the decisions in Preamble Props., L.P. v. Thomas K
Woodard Antiques Corp., 293 A.D.2d 330 (1st Dep't 2002) and Sunbelt Rentals, Inc. v. N.Y.
Renaissance, No. 152106/2012, 2013 N.Y. Misc. LEXIS 6024 (Sup. Ct., N.Y. County Dec.
16, 2013) for the proposition that Rabobank must establish "the existence of an underlying
debt" is misplaced. App. Br. at 16. In each of those cases the guarantors raised questions as
to whether the debt triggering the guaranty existed. See Preamble, 293 A.D.2d at 331 (on the
face of the guaranty, the debt sought was not covered by the guaranty); Sunbelt Rentals, 2013
N.Y. Misc. LEXIS, at* 15-16 (questions existed as to whether the debt sued upon was
incurred by the primary obligor or another similarly named entity) Appellant does not
question the fact that the Federal Judgment exists as against Agra USA -- he readily concedes
the fact. App. Br. at 10-11. Appellant merely contends that the Federal Judgment should not
exist.
14 Appellant's argument cannot be resuscitated by holdings from a trio of cases cited for his
assertion that a collusive judgment is "void" ab initio. App. Br. at 22-23. None of the cases
on which Appellant relies stand for the proposition that Appellant seeks to advance. See S.
Spring Hill Gold Mining Co. v. Amador Medean Gold Mining Co., 145 U.S. 300,301 (1892)
(dealing with a merger of two adversary corporations after a decision was rendered with no
allegations of collusion); Gardner v. Goodyear Dental Vulcanite Co., 131 U.S. 103, 103
(1873) (holding that no controversy existed after the parties privately resolved the dispute);
Lane v. Lane, 175 A.D.2d 103, 105-06 (2d Dep't 1991) (in a case not even involving a
contractual waiver of defenses, permitting interested party to intervene in order to file a
motion to vacate a default judgment allegedly obtained through collusion) Moreover, the
cases cited involved efforts to vacate or modify decisions rendered. That is not the case here.
33
right to assert any such argument when he agreed that his liability under the
Guaranty would be "absolute and unconditional irrespective of ... any lack of
validity or enforceability of [the underlying debt]" (R. 172) (emphasis added).
Even absent this waiver, Appellant's attack on the validity of the Federal Judgment
would still be barred based on his waiver of"any circumstance that might otherwise
constitute a defense" available to him (R. 172).15
Finally, Appellant is also unable to gain support for his position in two lower
court decisions on which he places near exclusive reliance -- neither of which is
sufficient to ignore Appellant's waiver of defenses, disregard this Court's decision
in Citibank or otherwise require reversal of the Appellate Division's well-reasoned
decision. See App. Br. at 19-21 (citing Canterbury Realty & Equip. Corp. v.
Poughkeepsie Sav. Bank, 135 A.D.2d 102 (3d Dep't 1988); Signature Bank v. Lara
Maint. Corp., No. 016790/2009, 2011 WL 2669744 (Sup. Ct., Nassau County June
21, 2011)).
As an initial matter, the decision in Canterbury Realty & Equip. Corp. v.
Poughkeepsie Sav. Bank, 135 A.D.2d 102 (3d Dep't 1988) --on which both
Appellant and the Appellate Division's dissent place considerable weight-- was
15 Appellant's assertion that a ruling in Rabobank's favor "would lead to unjust results"
because it would permit the submission of a forged note to trigger the Guaranty is absurd.
App. Br. at 23. Appellant does not question the authenticity or existence of the Federal
Judgment-- he merely argues that it should not have been entered. Accordingly, this case
does not present an authentication issue of any sort.
34
predicated on a waiver of defenses that was not nearly as broad as the waiver at
issue in this action. The guarantors in Canterbury waived only those defenses of
the primary obligor as to the primary obligation. Canterbury, 135 A.D.2d at 105-
06. As a result, the Canterbury guarantors were free to assert a variety of defenses
of their own. !d. That is not the case here. Appellant did not merely waive the
defenses of Agra USA -- he waived any right to contest the "validity or
enforceability" of the underlying debt or to assert a defense based on "any other
circumstance which might otherwise constitute a defense available to ...
[Appellant]." (R. 172).
Further, the guarantees at issue in Canterbury contained specific conditions
precedent to the lender's ability to trigger their enforcement. Canterbury, 135
A.D.2d at 106. Each of the conditions precedent -- including whether the primary
obligor suffered an adverse change in its financial condition or had suspended its
business or whether the lender deemed itself insecure -- inherently raised factual
issues precluding an award of summary judgment.16 !d. That is also not the case
here. The Guaranty does not set forth any conditions precedent to its enforcement
16 The degree of insecurity felt by the lender in Canterbury, in particular, raised factual issues
precluding an award of summary judgment because the guarantors produced evidence that
the lender and primary obligor had agreed to a valid and binding modification of the credit
agreement triggering the guarantees. Canterbury, 135 A.D.2d at 107. Here, there is no
question that the Federal Judgment has not been modified.
35
against Appellant. Nor are there any factual issues as to the existence of the Federal
Judgment triggering Appellant's Guaranty. See infra at pp. 34-36.
The Canterbury court's reliance on the general proposition that "[a]
promisee who prevents the promisor from being able to perform the promise
cannot maintain a suit for nonperformance" is similarly unavailing. Canterbury,
135 A.D.2d at 107. Even in the fictionalized account offered by Appellant's brief,
Appellant does not allege that anyone prevented him from taking action as a
director of Agra USA to answer or otherwise respond to the complaint in the
Federal Action-- he simply chose not to do so. And Appellant has absolutely no
answer for his failure to oppose Rabobank's Federal Judgment Motion seeking
entry of the Federal Judgment despite the fact that Appellant was: (i) served with
Rabobank's motion; (ii) given time to submit papers in opposition; and (iii)
provided with an opportunity to further contest entry of the Federal Judgment at a
hearing (R. 375-76). 17
17 Although not cited by Appellant, the Appellate Division's dissent placed additional reliance
on the decisions in Barclays Bank of NY. v. Heady Elec. Co., 174 A.D.2d 963 (3d Dep't
1991) and Mfrs. & Traders Trust Co. v. Sullivan, 188 A.D.2d 1023 (4th Dep't 1992).
Neither of those decisions is applicable. The court in Barclays suggested that the
enforceability of a waiver may depend on the nature of the claims asserted and stated, as an
example, that a waiver "will not be enforced to bar a viable setoff or counterclaim sounding
in fraud." Barclays, 174 A.D.2d at 965. Appellant does not-- as was the case in Barclays --
assert a claim for setoff or a counterclaim, cite a public policy sufficient to render his waiver
invalid or claim that he was defrauded into permitting entry of the Default and the Federal
Judgment. The decision in Manufacturers is even less applicable -- Manufacturers did not
involve a contractual waiver of defenses at all. See Manufacturers, 188 A.D.2d at 1023.
36
Appellant's reliance on the decision in Signature Bank v. Lara Maint. Corp.,
No. 016790/2009, 2011 WL 2669744 (Sup. Ct., Nassau County June 21, 2011) is
equally unavailing. Signature Bank involved a claim to collect on guarantees of a
term loan and promissory note pursuant to which defendants appear to have
waived certain defenses. Signature Bank, 2011 WL 2669744 at *3-5. There, the
trial court determined that defendant's waiver did not encompass a waiver of
defenses "regarding payment" or defenses pertaining to modifications of the
payment terms. !d. at *5.
Accordingly, the Signature Bank court permitted the defendants to assert
defenses as to "whether there has been a failure to pay in accordance with any
payment terms agreed to" or as allegedly modified. !d. at *6. That is not the case
here, where Appellant's waiver of defenses contains no carve-out for claims of
alleged "collusion." Nor does Appellant contend that he has made payment toward
satisfaction of the Federal Judgment or that the Federal Judgment has been
modified to relieve him of his obligations under the Guaranty.18
Thus, Appellant's attempt to escape the terms of his waiver by reframing his
defense as the failure of a condition precedent should, once again, be rejected.
18 Appellant's additional citation to Petra Mtge. Capital Corp., LLC v. Amalgamated Bank, No.
101283/2010, 2014 N.Y. Misc. LEXIS 2533 (Sup. Ct., N.Y. County June 6, 2014) in support
of the proposition that "a collusive default judgment ... is no obligation at all" is of no avail.
App. Br. at 21. Petra concerned a borrower's motion for summary judgment to avoid
foreclosure and is not at all analogous to this action. Notably, Petra did not involve a
contractual waiver of defenses.
37
B. The Appellate Division Correctly Concluded That, Even Were Appellant
Entitled To Assert A Defense To An Action To Collect On The Guaranty,
The Undisputed Facts Demonstrate That Appellant's Alleged "Collusion"
Defense Lacks Merit
Even assuming, arguendo, that Appellant is entitled to assert his alleged
defense of "collusion" -- and he is not -- the undisputed facts demonstrate that
Appellant's defense is entirely without merit. In fact, rather than provide a
legitimate defense -- albeit one he waived the ability to assert -- Appellant's
fanciful allegations of"collusion" serve merely to divert this Court's attention
away from Appellant's valid and binding waiver of defenses in hopes that the sheer
appearance of impropriety will convince this court to find factual "issues" where
none, in fact, exist. Appellant's effort should be rejected.
1. The Undisputed Facts Demonstrate That Appellant's
"Collusion" Defense Is Meritless Because The Federal
Judgment Resulted From Appellant's Own Inaction
Ultimately, regardless of the distractions offered by Appellant, a review of
the undisputed timeline of events preceding entry of the Federal Judgment make it
abundantly clear that Appellant was the victim of nothing other than his own
inaction:
• There is no dispute that Appellant was the only officer or director of
Agra USA at the time Rabobank commenced the Federal Action against
Agra USA and Appellant (R. 251, 330, 338);
38
• There is no dispute that, at the time of the Federal Action, Appellant was
well-aware that he had guaranteed all obligations and liabilities of Agra
USA to Rabobank and that Rabobank had asserted claims for damages
against Agra USA in the Federal Action (R. 172, 285-93);
• There is no dispute that Appellant remained the only officer or director of
Agra USA and a defendant in the Federal Action for the entire period
during which Agra USA was obligated to appear, answer or otherwise
respond to the complaint filed in the Federal Action (R. 5, 12, 294, 338,
363-64, 379);
• There is no dispute that, while Appellant was the only officer or director
of Agra USA, Appellant failed to ensure that Agra USA answered or
otherwise responded to the Federal Complaint despite the fact that
Appellant hired his own counsel to respond to the claims asserted against
him individually in the Federal Action (R. 294, 363-67);
• There is no dispute that Appellant remained the only officer or director of
Agra USA and a defendant in the Federal Action at the time Rabobank
sought and obtained entry of the Default against Agra USA in the Federal
Action on April3, 2012 (R. 294, 379);19
19 In briefing before the lower courts, Appellant attempted to marginalize the significance of the
April 3 Default date -- a date on which he was still a director of Agra USA -- because the
39
• There is no dispute that, although Appellant was no longer an officer or
director of Agra USA after being removed on April 11, 2012, Appellant
remained a defendant in the Federal Action when Rabobank filed its
Federal Judgment Motion seeking entry of the Federal Judgment against
Agra USA on April16, 2012 (R. 12, 294, 375-76);
• There is no dispute that, Appellant was served with copies of the Federal
Judgment Motion on April16, 2012, and was specifically informed of the
opportunity to: (i) submit papers in opposition to the Federal Judgment
Motion by April23, 2012; and (ii) attend a hearing on the Federal
Judgment Motion scheduled for April24, 2012 (R. 375-76);20
• There is no dispute that, despite being a defendant in the Federal Action
and being aware of his opportunities to oppose the Federal Judgment
Motion, Appellant chose not to submit papers in opposition to the Federal
Federal Judgment was not entered on that date. Appellant misses the point. The Federal
Judgment was predicated entirely on Agra USA's Default. Absent the Default there would
be no Federal Judgment. Yet, the Default occurred on Appellant's watch (R. 319, 379).
Appellant does not offer any claim -- much less, any proof-- that he even attempted to assert
an answer or otherwise respond to the Federal Complaint on Agra USA's behalf, or that he
was prevented from doing so (R. xv).
20 Rabobank sought and obtained entry of the Default pursuant to Federal Rule 55. Under the
Federal Rules, because the judgment was sought for a sum certain, Rabobank was entitled to
the Clerk's entry of a default judgment for the full amount of the Federal Judgment as of
April3 --the date the Default was entered. Fed. R. Civ. P. 55(b). However, because the
Default was only being sought with respect to Agra USA and not as to the two additional
defendants (including Appellant) in the Federal Action, Rabobank was obligated to apply to
the court for entry ofajudgment pursuant to Rule 55.2(b) ofthe Local Rules ofthe Southern
District ofNew York.
40
Judgment Motion by the April23, 2012 deadline (or at any time) (R. 12,
294, 375-76); and
• There is no dispute that, despite being a defendant in the Federal Action
and being aware of his opportunity to oppose entry of the Federal
Judgment at the April 24, 2012 hearing, Appellant chose not to attend
that hearing or oppose the Federal Judgment Motion in any manner
whatsoever (R. 12, 294, 375-76).21
None of these facts are disputed-- instead, Appellant ignores them entirely.
The reason is clear -- these facts firmly establish that Appellant's "collusion"
defense is merely a ruse designed to avoid a fate of summary judgment that
Appellant has brought entirely upon himself. To the extent Appellant had any
concerns regarding the legitimacy of the Default or the propriety of the Federal
Judgment he was free to raise those concerns by filing papers in opposition to the
Federal Judgment Motion or by attending the hearing on the Federal Judgment
Motion -- both of which Appellant could have done while still a defendant in the
Federal Action. Appellant chose not to do so.
21 Appellant's conspiracy theory is further undermined by the fact that Rabobank could have
ensured that Appellant would not oppose its Order to Show Cause for entry of the Federal
Judgment simply by waiting for the Court to dismiss the claims against Appellant and the
remaining co-defendant, Guzman, before seeking entry of a monetary judgment. Had
Rabobank done that, pursuant to local civil rule 55.2(b) of the Local Rules of the Southern
District ofNew York, Rabobank would have been entitled to entry of the Federal Judgment
from the clerk of the court absent any opportunity for the submission of opposition and
absent any hearing. Rabobank did not do that.
41
It defies logic for an individual who was advised that a motion for default
judgment was being made with respect to a company for which he had guaranteed
all liabilities (in a case in which he was a defendant), and who rejected invitations
to oppose the motion both in writing and at a hearing, to assert that the resulting
judgment was obtained by "collusion." 22
Appellant cannot overcome the obstacles posed by these undisputed facts
with conjecture alone. It is well-settled that "[m]otions for summary judgment
may not be defeated merely by surmise, conjecture or suspicion." Shaw v. Time-
Life Records, 38 N.Y.2d 201, 207 (1975); see also S.J. Cape/in Assocs. v. Globe
Mfg. Corp., 34 N.Y.2d 338, 342 (1974) ("Bald conclusory assertions, even if
believable, are not enough [to defeat summary judgment].") (alteration in original)
(internal quotation marks omitted).
Given the undisputed determinative facts, Appellant's skewed recitation of
events cannot save Appellant from the fate of summary judgment.
22 Appellant points to a portion of the Appellate Division's opinion in which it addresses the
dissent and states that, "the dissent does not acknowledge that the collusion, even if it
existed, goes to the question of how and when the default judgment was entered, not to the
question of the underlying indebtedness" to suggest that the majority was somehow
"confused." App. Br. at 17 (citing R. xvii). Not so. Appellant overlooks the fact that the
majority had gone through each of the undisputed facts surrounding Appellant's failure to
prevent entry of the Default and the Federal Judgment (R. xiv-xv). Moreover, the majority
appears to have been stating, as detailed herein, that Appellant does not challenge "the
underlying indebtedness"-- the existence of the Federal Judgment-- but, rather asserts a
defense attacking the manner in which the indebtedness arose. That is a defense that
Appellant waived the right to assert.
42
2. Appellant's Dramatization Does Not Undermine The Undisputed
Determinative Facts And Relies Upon A Series of Half-Truths And
Fallacies Belied By The Record
Although Rabobank need not delve into Appellant's dramatic rendering of
alleged "facts," a sampling of the artistic license employed by Appellant
demonstrates the fallacies and half-truths upon which his empty theory relies.
For example, in an obvious effort to avoid blame for the fraud he attempts to
pin on his partner, Guzman, Appellant asserts that he was merely a "nominal
officer and director" who "was largely uninvolved in either [Agra Canada's or
Agra USA's] business operations." App. Br. at 4. In fact, Appellant was the Chief
Executive Officer of Agra Canada and served as an officer and director for both
Agra Canada and Agra USA-- hardly "nominal" positions (R. 113, 338).
Similarly, Appellant asserts that "[u]pon learning of Guzman's fraud
[between December 2011 and January 2012], Rabobank immediately began to
assume control over Agra Canada and Agra USA." App. Br. at 7. Yet, in
Appellant's own sworn affidavit from May 2012 --executed after the Federal
Judgment was entered against Agra USA -- Appellant admitted that he took control
over Agra's activities after the alleged death of his partner, Guzman, in December
2011, stating, "[s]ince Mr. Guzman's death, I have taken over the responsibility
for Agra Services' activities" (R. 252) (emphasis added). Appellant's counsel
confirmed Appellant's control of Agra Services' operations following the death of
43
Guzman and echoed the statements set forth in Appellant's May 2012 Affidavit in
subsequent briefing (R. 273).
Appellant further claims that Rabobank immediately "caused its agent,
Deloitte & Touche ... to be appointed as the receiver and trustee of Agra Canada's
bankrupt estate [after discovery of the fraudulent scheme underlying this action]"
and that the receiver and Rabobank "shared the same attorney[.]" App. Br. at 7.
Again, Appellant distorts the facts. Appellant himself submitted proof that
Deloitte & Touche was appointed pursuant to an Order of a Canadian Bankruptcy
Court-- not Rabobank --and that it was represented by its own counsel at the firm
of Blake, Cassels & Graydon LLP (R. 339-342).
Appellant's claim that "Rabobank caused Deloitte to formally remove
[Appellant] as the director and officer of Agra USA. (R. 368-369)" is similarly
belied by the record. App. Br. at 8. The evidence to which Appellant refers does
not state that Rabobank "caused Deloitte to formally remove [Appellant] as the
director and officer of Agra USA" at all (R. 368-371).
Finally, Appellant suggests that he was dismissed from the Federal Action
on April 19, 20 12 -- prior to the deadline for submission of opposition to the
Federal Judgment Motion and prior to the hearing held on the Federal Judgment
Motion. App. Br. at 9, n. 4. In fact, Appellant was not dismissed from the Federal
Action until April 24, 2012 -- a day after he could have submitted written
44
opposition to the Federal Judgment Motion and after a hearing on the Federal
Judgment Motion was held at which Appellant was invited to appear but chose not
to do so (R. 294).
These limited examples from Appellant's opening brief further demonstrate
that Appellant's defense is not only without basis in law, it is without basis in fact.
CONCLUSION
For the foregoing reasons and authorities, it is respectfully requested that
this Court affirm the decision and order of the Appellate Division in its entirety,
together with such other and further relief as the Court may deem just and proper.
Dated: September 18, 2014
New York, New York
B
Respectfully submitted,
HAYNES AND BOONE, LLP
atha . Pressment
Y elena Kotlarsky
30 Rockefeller Plaza, 26th Floor
New York, New York 10112
(212) 659-7300
Attorneys for Respondent Cooperatieve
Centrale Raiffeisen-Boerenleenbank
B.A., "Rabobank International, "New
York Branch
45
UNREPORTED DECISIONS
Q Neutral
As of: September 10, 2014 1:16PM EDT
Petra Mtge. Capital Com .. LLC v Amalgamated Bank
Supreme Court of New York. New York County
June 6, 2014, Decided
101283/2010
Reporter
2014 N.Y. Misc. LEXIS 2533; 2014 NY Slip Op 31460(U)
1**2] PETRA MORTGAGE CAPITAL CORP., LLC and
PETRA CRE CDO 2007-1, LTD., Plaintiffs, -against Prior History: Petra Mtge. Capital Corp.. LLC v.
AMALGAMATED BANK, as Trustee of Longview Ultra I Amalgamated Ban/c. 94 A.D.3d 671. 942 N.Y.S.2d 786. 2012
Construction Loan Investment Fund, Defendant. Index No. N.Y. App. Div. LEXIS 3225 (N.Y. App. Div. 1st Dep't. 2012)
651861/10;AMALGAMATED BANK, as Trustee of
Longview Ultra I Construction Loan Investment Fund (now Core Terms
known as Longview Ultra Construction Loan Investment -------------------
Fund), individually and as agent for itself and the other Lenders funding, affirmative defense, obligations, advances, Lender,
signatory thereto including Petra Mortgage Capital Corp. LLC Mortgage, summary judgment, documents, interrogatories,
as Co-Lender, Plaintiffs -against- FORT TRYON TOWER cross claim, sequence, further ordered, counterclaims, loans,
SPE LLC, MARSON CONTRACTING CO., INC., ALL loan agreement, discovery, Contracting, default, pledge, event
ROCK CRUSHING, INC., LIBERTY MECHANICAL of default, cross motion, set forth, requirements, requests,
CONTRACTORS, LLC, TECTONIC ENGINEERING AND damages, notice, moves, specific performance, cause of action,
SURVEYING CONSULTANTS, P.C., S.J. ELECTRIC, INC., mechanic's lien
MG ENGINEERING, P.C., RUTHERFORD THOMPSON,
THE STATE OF NEW YORK, THE COMMISSIONER OF Judges: 1*11 HON. Saliann Scarpulla, J.S.C.
lABOR OF THE STATE OF NEW YORK, THE NEW . • .
YORK STATE DEPARTMENT OF TAXATION, THE CITY Optmon by: Saliann Scarpulla
OF NEW YORK, NEW YORK CITY DEPARTMENT OF
FINANCE, THE NEW YORK CITY ENVIRONMENTAL Opinion
------------------------------------CONTROL BOARD BUREAU, and "JOHN DOE #1 to John
Doe #50" both inclusive, the names of the last 50 defendants DECISION/ORDER
being fictitious, said defendants' true names being unknown to [**3! HON. SALIANN SCARPULLA, J.:
plaintiff, it being thereby intended to designate holders of · ·
judgments and/or liens and/or other interests which affect the These actions stem from a real estate loan which originated in
mortgaged premises described in the complaint and lessees, 2007, for the construction of a new residential building in
tenants, occupants and other persons and entities who may be Washington Heights, Manhattan. In the first action, Petra
in possession of portions of the mortgaged premises described Mortgage Capital Corp. LLC and Petra CRE CDO 2001-1,
in the complaint, Defendants. Index No. 101283/10;ALL Ltd. v. Amalgamated Bank, as Trustee of Longview ULTRA I
ROCK CRUSHING, INC., Plaintiff, -against- FORT TRYON Construction Loan Investment Fund, Index No. 651861/2010,
SPE, LLC, MARSON CONTRACTING CO., INC., ("action no. 1 "), plaintiffs Petra Mortgage Capital Corp. LLC
AMALGAMATED BANK, as Trustee of Longview Ultra I ("Petra") and Petra CRE CDO 2007-1, Ltd ("Petra CDO")
Construction Loan Investment Fund, AS AGENT, PETRA (collectively "plaintiffs") move, pursuant to CPLR 3001 and
MORTGAGE CAPITAL CORP. LLC, RUTHERFORD H. 3212 (e), for partial summary judgment on their fourth cause of
THOMPSON III, et al., Defendants. Index No. 100618/09 action, which seeks a declaratory judgment that defendant
. Amalgamated Bank ("Amalgamated"), as Trustee of Longview
Notice: THIS OPINION IS UNCORRECTED AND WILL Ultra I Construction Loan Investment Fund ("Longview"), will
NOT BE PUBLISHED IN THE PRINTED OFFICIAL be obligated to pay plaintiffs certain sums provided for under
REPORTS. the guarantee set forth in the Intercreditor Agreement ("ICA"),
described below, and [**4] dismissing
Page 2ofll
2014 N.Y. Misc. LEXIS 2533, *2; 2014 NY Slip Op 31460(U), **2
Amalgamated's affirmative defenses which apply to plaintiffs' of its obligations under the loans; and (c) 1*41 Amalgamated is
fourth cause of action - the sixth, seventh, and ninth through obligated to resume funding and disburse construction
twelfth affirmative defenses. (Motion sequence no. 008.) Those advances for the completion of the project; (2) summary
[*21 affirmative defenses allege, respectively, that plaintiffs: judgment on Fort Tryon's second counterclaim for specific
breached the ICA, breached the implied covenant of good faith performance ordering Amalgamated to fund the remaining
and fair dealing, received all the benefits to which they were balance of the loans necessary to complete the project; and (3)
entitled under the ICA, are not entitled to declaratory judgment dismissing Amalgamated's action for foreclosure and a
because the contractual requirements pertaining to the guaranty deficiency judgment. (Motion sequence no. 007.)
have not been met, are not entitled to judgment because they
seek damages in an amount not provided for in the ICA, and
lack standing to bring their claims.
Amalgamated also moves, pursuant to CPLR 3021, to compel
discovery. (Motion sequence no. 009.)
Amalgamated also purports to move for summary judgment on
its affirmative defenses and cross claims, and for dismissal of
all claims and cross claims asserted by other parties in a third
action, All Rock Crushing, Inc. v. Fort Tryon Tower SPE, LLC,
Marson Contracting Co., Amalgamated Bank, as Trustee of
Longview Ultra I Construction Loan Investment Fund, as
In the second action, Amalgamated Bank, as Trustee of agen~ Petra Mortgage Capital Corp. LLC, Rutherford H.
Longview Ultra I Construction Loan Investment Fund (now Thompson III, et al. Index No. 100618/2009, ("action no. 3").
known as Longview Ultra Construction Loan Investment In addition, Fort Tryon and Thompson seek summary
Fund), individually and as agent for itself and the other judgment dismissing the complaint against them by All Rock
Lenders signatory thereto including Petra Mortgage Capital Crushing, Inc. ("All Rock"), [*5] and terminating the
Corp. LLC as Co-Lender v. Fort Tryon Tower SPELLC, mechanic's lien alleged therein. However, there are no separate
Marson Contracting Co., All Rock Crushing, Inc., Liberty notices of motion or cross motion in action no. 3, [**6] and as
Mechanical Contractors LLC, Tectonic Engineering and the Court (J. Kapnick) noted on the record on October 7, 2013,
Surveying Consultants, P.C., SJ. Electric, Inc., MG even though Amalgamated and Fort Tryon put both index
Engineering, P.C., Rutherford Thompson III, et al., Index No. numbers on their papers, "you can\ make the same motion in
101283/2010 ("action no. 2"), defendants Fort Tryon Tower two cases .... [T]here is no motion officially in the All Rock
SPE LLC ("Fort Tryon") [*3] and its principal, Rutherford case." In the interest of judicial economy, these will be treated
Thompson ("Thompson"), move to strike the note of issue and as a properly filed motion and cross motion, and will be
statement of readiness and, pursuant to CPLR 3124, to compel discussed below.
further discovery. This Court (J. Kapnick) denied that branch of
the motion that seeks to strike the note of issue, for the reasons Motion sequence nos. 008 and 009 in action no. 1, motion
stated on the record on October 7, 2013. (Motion sequence no. sequence nos. 006 and 007 in action no. 2, and Amalgamated's
006.) request for summary judgment on its affirmative defenses and
In addition, Amalgamated moves for summary judgment on its
first and second causes of action, which seek, respectively, an
order foreclosing on mortgages given by [**5) Fort Try on and
an order for a deficiency judgment against Fort Try on and
cross claims, and for dismissal of all claims and cross claims
asserted by other parties, and Fort Tryon's and Thompson's
cross motion for summary judgment in action no. 3 are
consolidated for disposition.
Thompson, and dismissing the counterclaims alleged by Fort Background
Tryon and Thompson. The court notes that only the fust and
second counterclaims alleged in the amended verified
complaint are alleged against Amalgamated) Fort Tryon and
Thompson cross-move for: (1) summary judgment on their first
counterclaim for declaratory judgment, declaring (a) that
Amalgamated's claims that the terms of the loans that are the
subject of this action have expired and that the principal
amounts of the loans are now due and payable, are without
merit; (b) Fort Tryon is not in default
On June 15, 2007, Petra and Amalgamated entered into certain
agreements to lend up to $95 million to Fort Tryon. Fort Tryon
intended to use the funds to develop a luxury high-rise mixed-
use condominium on 184th Street and Fort Washington
Avenue in Manhattan, and to perform certain [*6] construction
work on the adjacent Fort Tryon Jewish Center. On the same
day, Petra and Amalgamated also entered into the ICA, which
sets forth their respective rights
1 The amended answer was served after this court's order, dated December 16, 2011 {the "Order"), which dismissed the first through the fourth,
and the proposed seventh, counterclaims.
Page 3 of 11
2014 N.Y. Misc. LEXIS 2533, *6; 2014 NY Slip Op 31460(U), **6
and obligations in relation to the loan. Under the ICA, Amalgamated wrote back, stating "I have ordered a title
Amalgamated was designated "administrative agent" for itself continuation for tomorrow's funding. I will let you know if and
and for Petra, and "Lead-Lender." Petra, designated "Co- when we receive clear Title so we can proceed with funding."
Lender," held Note A-2 and was obligated to fund up to $50 The following day, Amalgamated wrote
million of the loan "[u]pon Lead Lender's determination that
Lender [Amalgamated and Petra, jointly] is obligated to fund
the loan." The ICA provides that Petra was to fund the first $30
million of the loan, Petra and Amalgamated were to fund the
next $40 million on a pro-rata basis, and Amalgamated was to
fund the remaining $25 million, if 1**71 drawn. Amalgamated
had the primary authority to administer the loan and to enforce
the associated notes and mortgages.
Section 2-e of the ICA, the guaranty upon which Petra relies,
provides, in relevant part, that
Provided Co-Lender has complied with the terms of this
Agreement, including without limitation its obligation to
make advances hereunder, Lead Lender agrees to
guarantee to Co-Lender repayment of the Guaranteed
Amount following a determination by [*71 Lead Lender
and Co-Lender, each exercising their reasonable
discretion, that there has been a recovery of all Liquidation
proceeds and other payments or recoveries that Co-Lender
and Lead Lender have reasonably determined will be
ultimately recoverable following an Event of Default and
acceleration of the Loan."Guaranteed Amount" is defined
as:
an amount equal to the Note A-2 Principal Balance up to
the maximum amount of $45,000,000, less the sum of (a)
all payments of any type applied to the repayment of the
principal portion of Note A-2 actually received by Co-
Lender, (b) all amounts previously advanced by Lead
Lender and (c) all unreimbursed Costs up to $200,000 in
the aggregate and Advances paid or incurred by Lead
Lender.
The loan to Fort Tryon closed on or about June 15, 2007, with
an initial advance paid by Petra. Amalgamated forwarded
funding requests nos. 2 through 16 to Petra, from July 23, 2007
to September 23, 2008, all of which Petra paid in the required
amount. On May 27, 2009, Amalgamated faxed Petra a notice
for funding unpaid insurance premiums on the property. Petra
responded the same day, stating that it was preparing to fund,
but that "[t]here were issues previously [*81 with mechanic's
liens on the property. Will this premium funding maintain a
first lien position?"
Please be advised that we have received the title
endorsement for the [F]ort Tryon project and there are
numerous [m]echanic's lien[s] on the property. 1**81
Please hold off from sending your portion of the advance
until further notification.Subsequently, Amalgamated
notified Petra of three further protective advances that
Amalgamated would make, and inquired whether Petra
would share in funding them. Amalgamated noted that,
pursuant to the ICA, Petra had "the right, but not the
obligation, to advance its pro rata share of such protective
advances." Petra chose not to participate in funding those
advances. By letter to Fort Tryon, dated August 19, 2009,
Amalgamated declared an event of default. By that time,
Petra had advanced more than $30 million on the loan, and
Amalgamated had advanced approximately $2 million.
Amalgamated commenced a foreclosure action (action no.
2) on January [*9]29, 2010.
Discussion
A movant seeking summary judgment must make a prima facie
showing of entitlement to judgment as a matter of law and offer
sufficient evidence to eliminate any material issues of fact.
Winegrad 1'. Nea: York U11il•. Med. Ctr., 6-1 N. L!d 851, 853,
476 NE.2d 64'2, .f-87 N Y.S.2d 316 (1985 i. Once a showing has
been made, the burden shifts to the opposing party to
demonstrate the existence of a triable issue of fact. AJYU!.Y.~Y,
Prospect Hosp., 68 N Y.,2d 320. 324,_5(!.LN..,E.2d S.Z~Jm5QB
N. Y.S.2d 92L(l98.QJ.; Z.uc;,kenr.JJJ:!L.l:.c._Ci!YJ!.fNea· Y.:Qrk, .... -!()
N. Y.2d 557, 5(j_2, 404 N.E.2d 718, .f-27 N.Y,,~,2d 595 (198(}).
In action no. 2, Amalgamated moves for summary judgment on
its first and second causes of action for foreclosure of the
mortgage note, and to dismiss Fort Tryon's and Thompson's
counterclaims against it on the grounds that Fort Tryon allowed
certain events of default to occur. Amalgamated contends that
the events of default consisted of Fort Tryon's failure to make a
maturity date payment on June 30, 2009, failure to timely pay
property taxes and insurance premiums in 2009, and allowance
of four mechanic's liens to be recorded against the property, by,
respectively, All Rock, Marson Contracting Co. ("Marson"),
Liberty Mechanical Contractors, P.C., and Tectonic
Engineering and 1**9] Surveying l*IOJ Consultants, P.C. In
opposition, Fort Tryon argues that its default was triggered by
Amalgamated's
Page 4of11
2014 N.Y. Misc. LEXIS 2533, *10; 2014 NY Slip Op 31460(U), **9
failure to fund its draw request, and plaintiffs therefore may not
rely on the defaults to foreclose on the mortgage note.
This court (J. Kapnick), in its December 16, 2011 Order (the
"2011 Order"), held that Amalgamated may not rely upon the
All Rock lien to show a default on the part of Fort Tryon. The
other liens Amalgamated alleges constituted events of default
were recorded no earlier than December 2008, after the last
advance was paid.
It is undisputed that Amalgamated paid no advances to Fort
Tryon after September 30, 2008. Moreover, Amalgamated's
project manager for the Fort Tryon project certified on
September 8, 2008 that "all requirements for the draw have
Subsequently, in an October 22, 2008 email to Thompson,
Nisson refers to "draws" for construction work that was already
done, the payment of which she was inclined to recommend.
Fort Tryon submitted a so-called "pencil" requisition for draw
no. 17.2 Amalgamated argues that this document "was not an
actual or proper draw request" because it lacked the supporting
documentation required by the loan documents, but that
contention is not based upon any fact in the record. In any
event, as this Court (J. Kapnick) previously noted in the
December 16, 2011 Order, the loan agreements expressly
provide that any provision set forth in them can be waived by
Amalgamated.
been met," and, that as of that date, there was no event of Accordingly, even if the documentation that Fort Tryon
default. Pursuant to the Building Loan Agreement, for a draw submitted in support of a 17th draw request did not have the
to be funded, one of the "requirements" was that there be no required support, the evidence submitted shows that the
"event of default." In addition, another Amalgamated Amalgamated personnel responsible for addressing draw
employee, Adam Landenwitch, made a certification on requests treated Fort Tryon's documents as a proper 17th
September 30, 2008, that he had "reviewed the draw request, request, thereby indicating that Amalgamated waived the
the enclosures and determined that the loan is in balance and all 1**11] supporting documentation requirement. Nor has
requirements for [*11] the draw have been met." It is also Amalgamated refuted that Fort Try on had, at least, provided
undisputed that, pursuant to the loan documents, Fort Tryon sufficient documentation in its initial request to require
was barred from seeking financing from any other source, and Amalgamated to work on the request and to return it to Fort
that Amalgamated knew that Fort Tryon's ability to repay the Tryon so it could make a full, formal request. Amalgamated
loans was dependent upon the sale of the envisioned has presented no evidence to contradict Fort Tryon's prima
condominium apartments. facie showing that it presented enough of a 17th draw request
Amalgamated argues that Fort Tryon did not submit a draw
request after its 16th request. Fort Tryon, however, provides
to require Amalgamated to at least move toward a finalization
of that request and that Amalgamated failed to do so.
evidence that it submitted a 17th draw request, and it is In the fall of 2008, Petra was experiencing financial difficulties
undisputed that Amalgamated failed to pay it. An October 29, and sought to have Amalgamated assume responsibility for
2008 memorandum from ULTRA staff, addressed to the Petra's remammg funding obligations. Amalgamated
LongView ULTRA Construction Loan Investment Fund acknowledged, however, that regardless of Petra's ability (or
Investment Committee, lists among several proposals, that lack thereof) to continue funding the construction project,
1**10] "ULTRA will fund the pending draw requests." Amalgamated was obligated [*14] to continue funding its
Inasmuch as the 16th draw request was funded on September contractual share of such costs. Thus, in a December 9, 2008
30, 2008, the "pending draw requests" referred to in the memorandum addressed to the chairman of Amalgamated's
October memorandum was for an additional, 17th request. board of directors, Fierce noted that "[a]lthough ULTRA is not
Similarly, a September 25, 2008 e-mail from Stephen Nugent obligated to pay Petra's future fundings, ULTRA is obligated to
of Amalgamated, which copied Nisson, acknowledges that the fund the maximum amount committed to the project of $45
17th draw request had been made. Nugent's email states: "I've million." Fierce also noted that, at that time, ULTRA
already processed Draw #16 .... At this point it doesn~ make outstanding balance was $1,034,566.09.
any sense to combine #16 and #17 as #16 is virtually [*12]
done." Nisson responded "I asked [Thompson] to combine
draws so they would get done once [he] spoke to them. I can't
go to committee until [O]ctober and I need them to fund until
then at least if not longer."
Moreover, although Amalgamated continued to fund protective
advances, as well as interest payments to itself and to Petra, it
funded no construction advance after the
2 In his affidavit in support of the cross motion, Thompson explains the draw process: "Fort Tryon would submit a 'pencil' requisition for the
costs for work completed. This penciled version would then be reviewed by Amalgamated and its consultants, and then returned. When
returned, Fort Tryon would then submit the formal or I* 13] final draw application."
Page 5 of 11
2014 N.Y. Misc. LEXIS 2533, *14; 2014 NY Slip Op 31460(U), **11
16th advance. Because Fort Tryon was barred from seeking
financing from other sources, once Amalgamated stopped
paying advances to Fort Tryon, subcontractors who had already
performed the work referred to in Nisson's October 22, 2008
email filed mechanic's liens. Without the construction advances
Fort Tryon would be unable to finish construction and to repay
the loans.
As stated in the 2011 Order, "[i]t has long been established that
'[a] promisee who prevents the promisor from being able to
perform the promise can not maintain suit for 1**12]
nonperformance; lie discharges the promisor from duty.'"
Citing Canterbwy Realtv ,',1 E(JUip. Com.J::.}'qyghkeepsje Sav.
Bank. 135 A.D.2d 102, 107, 52-1 N:Y.S'.2d 53! (3d Dep't 19881
!*15] (quotation marks and citations omitted). Accordingly,
because the so-called defaults upon which Amalgamated relies
were caused by Amalgamated's halt in processing and paying
advances, Amalgamated's motion for summary judgment on its
cause of action for foreclosure is denied.
Additionally, for the same reasons, Fort Tryon's and
Thompson's cross motion for dismissal of Amalgamated's
action for foreclosure and a deficiency judgment is granted, and
the portion of Fort Tryon's and Thompson's motion to compel
further discovery is denied as moot.
The guaranty, which is the subject of Amalgamated's second
cause of action for a deficiency judgment against Fort Tryon
and Thompson, is an irrevocable guaranty of payment by Fort
Tryon of "the Total Debt" in accordance with the terms and
conditions of the Loan Agreement." The Building Loan
Agreement defines "Total Debt" as "collectively, the Debt and
Other Debts." "Debt" is defined as "the outstanding principal
amount of the Building Loan together with all interest accrued
and unpaid thereon ... ," and "Other Debt" is defined as
"collectively, the Debt,' as defined in each of the Senior Loan
Agreement and the Project Loan Agreement." As such,
Thompson's !*16] guarantee extends no further than Fort
Tryon's indebtedness to Amalgamated and Petra, As
Amalgamated has failed to establish that Fort Tryon is in
default of its debt to Amalgamated and Petra, Amalgamated's
motion for summary judgment with regard to the second causes
of action is also denied.
In addition to their cross motion for dismissal of the mortgage
foreclosure action, Fort Tryon and Thompson also
cross-move for summary judgment on their first 1**131
counterclaim for declaratory judgment, and on Fort Tryon's
second counterclaim for specific performance ordering
Amalgamated to fund the remaining balance of the loans
necessary to complete the project.
Both the Building Loan Agreement and the Project Loan
Agreement, each dated June 15, 2007, provide that
Subject to and upon the terms and conditions set forth
herein, Agent [Amalgamated] agrees to make on behalf of
Lenders [Amalgamated and Petra] ... Advances of the
[loan that is the subject of each agreement], in an
aggregate principal amount not to exceed the [amount
provided for in each agreement] in the aggregate. No
Lender is obligated to fund amounts in excess of the
amount of its Maximum Comrnitment.Each of these
agreements defines "Maximum !*17] Commitment" as:
the obligation of the Agent to fund advances of the
[subject] Loan to Borrower on behalf of Each Lender ...
in an aggregate principal amount at any one time
outstanding not to exceed the amount set forth in each ...
Loan Note payable to such Lender, as such amount may
be modified from time to time.
Amalgamated, as lender, is not obligated to fund advances
beyond the sum of the loan notes payable to it, plus such sums
as Amalgamated, as agent, paid it in interest on the loans from
October 30, 2008 to the present. However, Amalgamated, as
agent, is obligated to continue to disburse advances on the
aggregate principal amount of the loans to Fort Tryon. As
discussed above, Amalgamated failed to fund the 17th request,
in violation of its obligation to do so.3 Accordingly, Fort
Tryon's motion for summary judgment on its first counterclaim
for a declaratory judgment is granted.
1**14] Fori Tryon also moves for summary judgment on its
second counterclaim for specific performance compelling
Amalgamated to provide funding for the remaining balance of
the loan amounts. Specific performance is an equitable remedy
that is appropriate where money damages would be inadequate,
because the breach for which damages are
3 It bears noting that, while Petra is a signatory to both the Building Loan Agreement and the Project Loan Agreement, it not a party to the
agreements, but is identified as a lender for which Amalgamated is to act as the administrative agent. The loan agreements are contracts
between Fort Tryon and 1*18] Amalgamated, as administrative agent, and nothing in either of the loan agreements conditions Amalgamated's
obligations, as agent, upon any action on the part of Petra.
Page 6 of 11
2014 N.Y. Misc. LEXIS 2533, *17; 2014 NY Slip Op 31460(U), **14
sought concerns a unique object or parcel of land, or for other
reasons. See generally (~(1Q .... E .... 4Ql.:1.03 .... 5Zr.f! .... St,.R<;qf.tJ:.:CQ!J!.,,
3QQ.A1lf.diZ1:.. LZS., .. 7S.:: .... lY •. Y.S .. 'fd..,"L5 .... Cl.st.Jl<::PL .... f.QQf.).. ''In
general, specific performance will not be ordered where money
damages 'would be adequate to protect the expectation interest
of the injured party."' Sokoloff 1 •. Harriman Estates Dev. Corp ..
96 N.Y2d 409. 415, 754 NE.2d 1M, 729 NYS.2d 425 (2001)
(quoting Restatement {Second[ of' Contracts§ 359 [11).
"Because money is fungible, a party seeking enforcement of an
agreement to lend money would be expected to borrow money
elsewhere and recover damages based on the higher costs
associated with the replacement loan. Nevertheless, exceptions
to the general rules exist. . )* 19] .. [S]pecific performance has
been awarded where the subject matter of a particular contract
is unique and has no established market value." f.??~ti.r.JY .. .I!.M
fiQl<./ing~; J,LC ''· CttigrQLJP Q/QbqLMkt.§.:, .. R!~qlf.Y ('QI.JJ.,... 69.
AJ),}_d.2.l:Y., .... f..l .. 7. •... 8.89/Y, .. }~,.~.>.~,.?d. .. Z23 .. {':!J!! .. Lkp) .. 'fQ()9.). (internal
quotation marks and citations omitted). Moreover, '"cases of
construction mortgages are an exception' to the general rule.
'Since the law regards land as unique[,] an agreement to buy
land can be specifically enforced even though the defendant's
sole obligation is to pay money .... Although the question is
close, it may not be too great a stretch to include advances
under a construction mortgage."' !d., quoting Southampton
Wholesale Food Term. v Pnwidence Pmduc£2.Jt'arehouse Cq!.l.
729 F Supv 663, 66-1 ([). Mass. 1955). "In such circumstances,
the 'agreement. .. is not a simple contract to lend money. It is
an integral part of a contract to sell [or develop] real [**15)
property."' !<./, .fi.L.'f:?.0:2.f.I (quoting lir.f:.g_mqn y, Nr:.?..hfi..IJ., 1:?.5
Ivfisc. 2d 332, 347, 471} N.Y.S.2d 422 (S!JJ!... Ct. Nassau Co.
1984)).
Here, Fort Tryon has established that a particular parcel of land
is at issue, upon which significant work has already been done,
and, in connection with which, easements [*20] and
governmental approvals have been obtained. Fort Tryon has
therefore established prima facie entitlement to summary
judgment on its claim for specific performance.
In opposition, Amalgamated maintains that Fort Tryon's
reliance on Destim· USA Holdings is misplaced, because that
case involved a lender refusing to pay a properly submitted
draw request, and Fort Tryon cannot show that Amalgamated
breached the loan agreement, because Fort Tryon did not
submit any proper draw request that Amalgamated failed to
fund. However, as discussed above, I find that the evidence
submitted shows that Fort Tryon, at a minimum, initiated the
17th request, and that Amalgamated was required to at least
move toward a finalization of that
request, and which Amalgamated failed to do. Accordingly, an
order of specific performance is appropriate.
In action no. 1, Plaintiffs seek a declaration that: "following a
determination by Plaintiff[s] and Defendant that there has been
a recovery of all proceeds, payments or recoveries reasonably
determined to be recoverable after an Event of Default or
acceleration of the Loan, Defendant is obligated under the
Guaranty to repay Plaintiff[s] the amounts funded by
Plaintiff[s] [*21] that [they] have not been repaid from such
proceeds." (Motion Seq. No. 008.). As I have dismissed
Amalgamated's action for foreclosure, this motion must be
denied, without prejudice.
Plaintiffs also move to dismiss Amalgamated's sixth, seventh,
ninth, tenth, eleventh and twelfth affirmative defenses. On a
motion to dismiss affirmative defenses, "the plaintiff bears the
burden of demonstrating that [such] defenses are without merit
as 1**16] a matter of law. In deciding a motion to dismiss a
defense, the defendant is entitled to the benefit of every
reasonable intendment of the pleading, which is to be liberally
construed." 534 E. 11th St. Hous. Dev. Fund Com. v Hendrick,
90 AD3d 541. 541-542, 935 N.Y.S.2d 23 (1st Dept. 2011)
(internal citations omitted).
The sixth affirmative defense alleges breach of contract. In its
amended answer, Amalgamated "avers that Plaintiffs' ultimate
compliance with the terms of the ICA can only be determined
upon completion of the foreclosure process and all other acts
and proceedings contemplated by the ICA" As the foreclosure
action has been dismissed, and pursuant to this decision and
order, Amalgamated must continue funding the project,
moving to dismiss this affirmative !*22] defense is denied as
premature.
The seventh affirmative defense, alleges breach of the implied
covenant of good faith. In ABli.A.mf:!.rQ . .H.qnk, N, V.J·JtUi!AJn(,,
17 NY3df.Q{), 952 N.E.2d 46.3. 928 N.Y,SM6:!7Lf..QLU, upon
which Amalgamated relies, the Court held that plaintiffs
allegation that, by fraudulent transfers to the defendant, MBIA
Insurance had "'substantially reduc[ed] the likelihood that [it
would] be able' to meet its obligations under the terms of [its]
policies," stated a claim for violation of the implied covenant.
ABN, 17 N. Y3d at 228-229 (quoting ABN Amhro Bank. N. F.,
81 AD3 "'37, 254, 916 N. Y.S.2d 12 (1st Dept :!OJ 1) (Abdus
Salaam, J., dissenting in part)). There, at the time that the action
was commenced, multiple policies that had been issued by
MBIA Insurance remained in effect. Here, by contrast, it is
undisputed that Petra had sufficient funds to meet its
contractual obligations until Amalgamated decided to stop
funding Fort Tryon, for reasons having nothing to do with
Petra, and that, thereafter,
Page 7 ofll
2014 N.Y. Misc. LEXIS 2533, *22; 2014 NY Slip Op 31460(U), **16
Petra had no obligation to fund. Accordingly, the seventh
affirmative defense is dismissed.
The ninth affirmative defense alleges that "[P]laintiffs have
received all benefit and/or consideration to which they are
entitled (*2JI under the ICA" Plaintiffs argue that this 1**171
affirmative defense should be dismissed because Petra has not
received any of the Guaranteed Amount due to it under the
Guaranty, and therefore has not received all the benefits and/or
consideration to which it is entitled. Amalgamated does not
address this argument, ths the ninth affirmative defense is
dismissed without opposition.
The tenth affirmative defense, which alleges that the
contractual requirements pertaining to the guaranty have not
been met, is also denied as premature for the reasons stated
above. The eleventh affirmative defense, which alleges that
plaintiffs seek damages in an amount not provided for in the
ICA is a reason to tailor the judgment to the damages provided
for in the ICA, but is not a reason to deny plaintiffs judgment,
and therefore is dismissed.
requirements of Section 12(b) of the [ICA]." Amalgamated
executed an (undated) acknowledgment of receipt of the [*:!51
notice of pledge. The pledge provides that Greenwich "shall
not be deemed to have assumed any obligations of [REIT)
under the Loan Documents except to the extent necessary in
order to satisfy any conditions set forth in the Loan
Documents." Accordingly, Petra has standing because of rights
accruing from the execution of the ICA to Petra's assignment of
its rights to REIT, and Petra CDO has standing pursuant to
REIT's assignment of its rights to it, which assignment was not
negated by the pledge.
Also in action no. 1, Amalgamated seeks five categories of
documents, as well as deposition testimony regarding those
documents. The first two categories are: (1) documents
material to Amalgamated's "defense against [Petra's) claim that
the Loan's status was such that [Amalgamated) was required to
take certain actions pursuant to the [ICA] that it did not take or
did not take in a timely manner;" and (2) "responses to
interrogatories seeking factual detail underlying [Petra's] claims
that the Loan's status required [Amalgamated] to take certain
actions that it did not take or did not take in a timely manner."
Finally, the twelfth affirmative defense, that plaintiffs lack The other three categories seek documents relevant to
standing, is also dismissed. Amalgamated's challenge to Amalgamated's defenses that Petra [*26] breached the ICA by
plaintiffs' standing also fails. The documentary e~dence sho~s disabling itself from performing its obligations thereunder, and
that, after the loan closed in June 2007, Petra assigned all of Its that one or more plaintiffs lack standing.
rights, title and interest in the loan to its affiliate Petra Fund
Reit Corp. ("REIT"). Petra, as co-originator of the {*24)loan Amalgamated's motion to compel is denied, as it lacks
with Amalgamated, held all claims accruing between the specificity as to precisely what is sought. Amalgamated's
closing of the loan and the assignment to REIT. REIT "supporting papers [are] inadequate because they fail[] to
subsequently assigned its interest in the ICA in an assignment specify which interrogatories the [plaintiffs] allegedly failed to
and assumption agreement, to Petra CDO, and pledged its adequately answer, and [**19] which documents the
interest to nonparty Greenwich Capital, pursuant to section 12 [plaintiffs] failed to produce." I._enor..f? v /(fLIJtt:.Q}1itz, GtAdl'!f!..!.r.teT:
(b) of the ICA That section provides, in relevant part: & Grai(man, P. C., 76 A.D.3d 556, 558, 907 N. }~S.2d 255 (2d
Co-Lender shall have the right to transfer all or any portion
of Loan A-2 or any interest therein to a Co-Lender Pledgee
(as hereinafter defined). Notwithstanding any other
provision hereof, Lead Lender consents to Co-Lenders
pledge which for the purposes hereof shall include a
transaction governed by a repurchase agreement (a Co-
Lender Pledge) of Loan A-2 .... Upon written notice by
Co-Lender to Lead Lender that a Co-Lender Pledge has
been effected, Lead Lender agrees to acknowledge receipt
of such notice ....
[**UI] Petra served a notice of pledge (undated) on
Amalgamated, which stated, in part, "[t]his correspondence
constitutes notice to you that the Pledge has been entered into
with [Greenwich Capital] in accordance with the
Dep't 2010).
Even were I to review the motion to compel on the merits, I
would reach the same conclusion. To the extent that
Amalgamated seeks discovery relevant to its affirmative
defense that Petra committed a breach of the ICA in the form of
repudiation, the motion is denied. Plaintiffs assert that they can
not be compelled to produce documents relevant to an unpled
affirmative defense. I need not address this, because it is plain
that there is no viable repudiation claim here, and therefore no
relevance to discovery sought to show whether Petra would
have been able to fund an additional advance is not relevant.
Repudiation can take the form of either "'a statement by the
obligor 1.*271 to the obligee indicating that the obligor will
commit a breach ... 'or 'a voluntary affirmative act which
Page 8 ofll
2014 N.Y. Misc. LEXIS 2533, *27; 2014 NY Slip Op 31460(U), **19
renders the obligor unable or apparently unable to perform under the ICA However, Amalgamated alleges no obligation
without such a breach."' .t'YPt.(Q!.! ... fQt'r..'f:1 .... .1~fl.fi!HlD$..l.: ..... Niagqrq that Petra failed to perform because of a lack of funds, or for
M9.b..ftW..k.J?.QJt..:!lr...Cqrp"·9..4.N..Y...2...d..::f.Sf;J,4f}), . .705.N,E,.'f4..P.SQ., qfj2... any other reason, and it is undisputed that Petra made every
N.Y.S.2d 664 (1998) (quoting Restatement fSecmul/ gf payment that it was required to make under the ICA, and,
Contracts § 250) (emphasis added); See also Computer indeed, stood ready to participate in the September 28, 2008
Possibilities Unlimited 1· Mobil Oil Co .. 301 /ill2d 70, 77, 7-17 protective advance. Greg Fierce ("Fierce"), Amalgamated's
N. YS.2d .f.68 (1st Dept 2002). former senior vice president and its [**21) head of commercial
In support of their argument, Amalgamated submits the
affidavit of James Freel ("Freel"), senior vice president of
Amalgamated, as trustee of Longview. Freel states in his
affidavit that in the fall of 2008, Petra representatives told
Thompson that Petra was both unwilling and unable to
continue funding the project. However, a statement made to a
non-obligee does not constitute a repudiation, unless the
obligor requests that the statement be repeated to the obligee.
(;QJJJP!.!.!.r:..r ....... J~Q,~~:i.lzi..t.i.t.i.f?.§, JQI A,l),2...d.t~t ...... ..Z7; li.r:..!i.!fl.i!I.Il.!.tl!.li
l.Sf:J;Q!.!d.L.C9!!!rrJJ.:t!i. .. 'r!.'f5U . ..l.b1...(4). Amalgamated does not
contend that Petra made any such request.
[**20] Amalgamated also submits an affidavit from Deborah
C. Nisson ("Nisson"), who was senior vice president and
portfolio manager of Longview from 2005 until (*281 January
2010. Nisson states in her affidavit that in the fall of 2008,
Petra representatives told her that Petra was unwilling to
provide future funding for the loan. However, at her deposition,
when Nisson was asked "Were you ever privy to a discussion
to analyze or discuss whether Petra had possibly not complied
with any of its obligations under the [ICA]," she answered "I
don't recall." Nisson does attach as an exhibit to her affidavit, a
July 7, 2009 e-mail that she wrote to Chet Davis, at
Amalgamated, in which she stated, "I do not think that I have
anything in writing from Petra regarding their refusal to fund
future fundings because the communication was via
telephone." Leaving aside Nisson's failure to quote what she
claims to have been told, it is undisputed that in September
2008, Petra fulfilled its obligation with respect to draw request
no. 16, and that thereafter, Amalgamated presented Petra with
no further draw requests from Fort Tryon. Amalgamated takes
the position, in both actions, that Fort Tryon made no further
requests for advances. At his deposition, Freel testified that
"[a]s I sit here today, I am not of the opinion that Petra has
breached any aspects of the [*29( [ICA]," and, when asked
specifically "[C]an you say ... that Petra has complied with its
obligation to make advances under the [ICA]," he replied "[t]o
the best of my knowledge."
Amalgamated also argues that, by transferring funds to an
affiliate, Petra disabled itself from performing its obligations
real estate from April 2007 until September 2010, testified at
his deposition that he was not aware of any instance where
Petra refused a funding request that Amalgamated had
approved, and that the fact that Amalgamated stopped funding
Fort Tryon had nothing to do with Petra. Amalgamated argues
that, had it presented more draw requests to Petra, Petra might
not have been able to fund them. At oral argument, counsel for
Amalgamated stated that it could clearly be inferred that 1*301
the reason why Fort Tryon made no request for an advance
beyond the 16th is that Petra's principal told Thompson that
Petra could not continue to fund the project. However, this
alleged inference is insufficient, and Amalgamated cites no
case, and this court knows of none, where a repudiation has
been found on the ground that a party's actions may have
disabled it from performing a hypothetical future duty.4
In Computer Possibilities, the case upon which Amalgamated
most heavily relies, the plaintiff was required by its contract
with the defendant to offer to sell a computer software
program, that the defendant would endorse for use by its
dealers, at prices not to exceed those specified in the contract.
Thereafter, the plaintiff entered into a marketing and
distribution agreement with another company, pursuant to
which that company would control the prices at which the
software program would be sold. The Court held that the
plaintiff repudiated its contract with the defendant 1*311 when
it ceded control of the prices charged for the program, because
from then on it could not fulfill its contractual duty to set the
prices charged at no more than those set forth in the plaintiti's
contract with the defendant.
[**22] Here, by contrast, any inability by Petra to fund an
additional draw request is speculative, inasmuch as
Amalgamated never presented any such request to Petra.
Amalgamated contends that the ICA requires Petra not only to
fund advances, but also to "continue to be available for
funding," and '"to ensure' that funds were advanced when
required." Notably, however, the ICA does not require Petra to
maintain a specified level of capital, or "to ensure" anything.
The obligation that it imposes upon Petra is, once certain
preconditions have been met, "to fund the Loan
4 Amalgamated's argument that Petra "failed to fund [the May 2009 protective advance) despite being asked to do so" ignores Amalgamated's
repeated acknowledgment that Petra had no obligation to fund protective advances.
Page 9 of11
2014 N.Y. Misc. LEXIS 2533, *31; 2014 NY Slip Op 31460(U), **22
pursuant to the Loan documents and the terms thereof." By the the notice of motion to compel, Amalgamated must 1*341 not
testimony of Amalgamated's own witnesses, Petra fulfilled that have had a copy of those documents at the time that it moved to
obligation. In sum, Amalgamated has failed to show by compel. To the extent Amalgamated moves to compel
probative evidence that Petra repudiated the ICA, either additional documents regarding standing, the motion is denied.
verbally, or by disabling itself from performing its obligations And to the extent that Amalgamated moves to compel
thereunder. Accordingly, no discovery showing that Petra additional discovery for the remaining categories stated in its
might have been unable to fund an additional [*32] motion, or additional deposition testimony, the motion is also
construction advance subsequent to the would have any denied.
relevance.
In action no. 3, Amalgamated alleged affirmative defenses and
Amalgamated also moves to compel additional responses to its counterclaims against All Rock, and brought cross claims
interrogatories, seeking "responses to interrogatories seeking against Marson, Fort Tryon and Thompson, which asserted its
factual detail underlying [Petra's] claims that the Loan's status mortgage lien's priority over claims by Fort Tryon and all other
required [Amalgamated) to take certain actions that it did not defendants, declaring All Rock's lien null and void, restraining
take or did not take in a timely manner." As noted above, and enjoining Fort Tryon 1**241 and Thompson from making
Amalgamated fails to identify the specific interrogatories for payments in satisfaction of the All Rock lien, and seeking
which it seeks additional responses. damages incurred by reason of All Rock's lien against Marson
jointly and severally with All Rock. Additionally, Fort Tryon
Amalgamated served its interrogatories in September 2011. and Thompson cross moved for summary judgment for
Plaintiffs initially responded to the interrogatories on dismissal of All Rock's action and termination of the
September 23, 2011, and after receiving a letter from mechanic's lien upon which the action is based, on the grounds
Amalgamated on March 1, 2013, provided supplemental that All Rock has willfully failed to appear for a deposition in
responses on April 29, 2013. Plaintiffs objected to certain the action that it commenced. Fort Tryon and Thompson also
interrogatories, and provided answers to other interrogatories move [*35] to dismiss the cross claims asserted by Marson for
over objection. For a number of interrogatories including foreclosure on a mechanics lien, dismissal of the cross claim
numbers 5 through 19, plaintiffs objected on the ground that the and termination of the lien upon which it is based, on the
answers called for legal conclusions and not evidentiary matter. grounds that Marson has failed to appear by counsel following
Of most relevance to this motion, are interrogatory no. 10, this court's (J. Kapnick) November 30, 2011 order relieving
which 1**23] states: "Describe in detail all the actions Marson's prior counsel.
Plaintiffs contend Defendant should have taken under the
Intercreditor Agreement, but [*33) allegedly did not take, and All [*36] Rock and Marson have failed to appear on these
identify when you believe Defendants should have taken such motions and have not put in any opposition. By virtue of their
action," and interrogatory no. 11, which states: "Describe in default, All Rock's and Marson's claims and cross claims
detail all the actions Plaintiffs contend Defendant should have asserted against Amalgamated, Fort Tryon and Thompson are
taken under the Intercreditor Agreement but allegedly did not dismissed, and the liens upon which they are based are
take in a sufficiently timely manner, and identify when you terminated. As for Amalgamated's motion for summary
believe Defendant should have taken such actions." Plaintiffs' judgment on its counterclaims and cross claims, it advances no
beliefs as to what Amalgamated should or should not have argument in support of what is asserted in its verified answer.
done, and plaintiffs' beliefs as to the appropriate timing of such Its memoranda of law submitted in support contain no
actions, are not appropriate areas of inquiry for interrogatories. arguments as to why summary judgment should be granted, nor
See Pineda v. J. B. Roerig & Co.. 43 AD.2d 827. 351 do its affidavits contain any supporting documents. As
N.Y.S.2d 701 (1st Dep\ 1974); Mijatol'ic Noonan. 172 A.D.2d Amalgamated fails to make any showing in support of its
806, 8Qt1 ... Sfl).. _ _N.,_Y.S.,.2d_176 (2d_Dept 19211 ("Interrogatories motion for summary judgment on its cross claims against Fort
which call for opinions or conclusions of law, rather than Tryon and Thompson, the motion for summary judgment is
relevant facts, should be stricken"). To the extent Amalgamated denied, and Amalgamated's cross claims against Fort Tryon
moves to compel further responses to its interrogatories, it is and Thompson are dismissed.
denied.
In accordance with the foregoing it is
As to the request for documents relating to standing, the
documents submitted with Iacono's reply affidavit show that ORDERED that, in Petra Mortgage Capital Corp. UC and
both plaintiffs have standing. Inasmuch as Iacono's affidavit is Petra CRE CDO 2001-1, Ltd. v. Amalgamated Bank, as
dated July 9, 2013, eleven days after the date of
Page 10ofll
2014 N.Y. Misc. LEXIS 2533, *36; 2014 NY Slip Op 31460(U), **24
Trustee of Longview ULTRA I Construction Loan 1**251 Thompson, III (motion sequence [*39] no. 007) is denied; and
Investment Fund, No. 651861/2010, the portion of the motion it is further
by plaintiffs Petra Mortgage Capital Corp. LLC and Petra CRE
CDO 2007-1, [*371 LTD. for a declaratory judgment (motion ORDERED that in Amalgamated Bank, as Trustee of Longview
sequence no. 8), is denied as premature, without prejudice; and Ultra I Construction Loan Investment Fund (now known as
it is further Longview Ultra Construction Loan Investment Fund),
individually and as agent for itself and the other Lenders
ORDERED that, in Petra Mortgage Capital Corp. UC and signatory thereto including Petra Mortgage Capital Corp. LLC
Petra CRE CDO 2001-1, Ltd. v. Amalgamated Bank, as as Co-Lender v. Fort Tryon Tower SPE UC, et al., Index No.
Trustee of Longview ULTRA I Construction Loan Investment 101283/2010, the cross motion (motions sequence no. 007) by
Fund, Index No. 651861/2010, the portion of the motion by defendants Fort Tryon Tower SPE LLC and Thompson for
plaintiffs to dismiss defendant Amalgamated Bank's sixth, summary judgment on their first and second counterclaims
seventh, and ninth through twelfth affirmative defenses (motion plaintiff Amalgamated Bank is granted; and it is
sequence no. 8) is denied as to the sixth and tenth affirmative
defenses, and is granted as to the seventh, ninth, eleventh and ADJUDGED and DEClARED that: (a) the terms of the loans
twelfth affirmative defenses of defendant Amalgamated Bank, that are the subject of this action have not expired and the
as Trustee of Longview Ultra I Construction Loan Investment principal amounts of the loans are not now due and payable; (b)
Fund, and the seventh, ninth, eleventh and twelfth affirmative Fort Tryon is not in default of its obligations under the loans;
defenses are dismissed; and it is further and (c) Amalgamated is obligated to resume funding
construction advances toward the completion of the
ORDERED that, in Petra Mortgage Capital Corp. UC and construction project and Amalgamated, as administrative agent
Petra CRE CDO 2001-1, Ltd. v. Amalgamated Bank, as for itself and the other lenders, is obligated to resume
Trustee of Longview ULTRA I Construction Loan Investment disbursing advances toward the completion of the project; and
Fund, Index No. 651861/2010, the motion by defendant it is further [**27] ORDERED that Amalgamated, as agent,
Amalgamated Bank to compel discovery (motion sequence no. shall advance funds to [*40] pay for Fort Tryon's construction
009) is denied; and it is further project, consistent with the requirements and procedures set
forth in the Construction Loan Agreement and the Project Loan
ORDERED that, in Amalgamated Bank, as Trustee of Agreement; and it is further
Longview Ultra I Construction Loan [* 38] Investment Fund
(now known as Longview Ultra Construction Loan Investment ORDERED that Amalgamated Bank, as Trustee of Longview
Fund), individually and as agent for itself and the other Ultra I Construction Loan Investment Fund (now known as
Lenders signatory thereto including Petra Mortgage Capital Longview Ultra Construction Loan Investment Fund),
Corp. UC as Co-Lender v. Fort Tryon Tower SPE UC, et al., individually and as agent for itself and the other Lenders
Index No. 101283/2010, as to the motion by defendants Fort signatory thereto including Petra Mortgage Capital Corp. UC
Tryon and Rutherford H. Thompson, III to strike the note of as Co-Lender v. Fort Tryon Tower SPE LLC, et al., Index No.
issue and statement of readiness and to compel discovery 101283/2010 is dismissed; and it is further
(motion sequence no. 006), the portion of the motion to strike
the note [**26] of issue and statement of readiness is denied ORDERED that the Oerk is directed to enter judgment
for the reasons set forth on the record on October 7, 2013, and accordingly; and it is further
the portion of the motion to compel discovery is denied as
moot; and it is further ORDERED that, in All Rock Crushing, Inc. v. Fort Tryon
Tower SPE, UC, Mar son Contracting Co., Amalgamated
ORDERED that, in Amalgamated Bank, as Trustee of Bank, as Trustee of Longview Ultra I Construction Loan
Longview Ultra I Construction Loan Investment Fund (now Investment Fund, as agent, Petra Mortgage Capital Corp.
known as Longview Ultra Construction Loan Investment UC, Rutherford H. Thompson III, et a/. Index No.
Fund), individually and as agent for itself and the other 100618/2009, the motion by defendant Amalgamated Bank for
Lenders signatory thereto including Petra Mortgage Capital summary judgment (deemed motion sequence no. 002) is
Corp. UC as Co-Lender v. Fort Tryon Tower SPE LLC, eta/., granted only to the extent that it is brought against plaintiff All
Index No. 101283/2010, the motion by plaintiff Amalgamated Rock and defendant Marson, and is in all other respects denied,
Bank for summary judgment against defendants Fort Tryon and Amalgamated's cross claims against [*411 Fort Tryon and
Tower SPE LLC and Rutherford Thompson are dismissed; and it is further
Page 11 ofll
2014 N.Y. Misc. LEXIS 2533, *41; 2014 NY Slip Op 31460(U), **27
ORDERED that in All Rock Crushing, Inc. v. Fort Tryon
Tower SPE, LLC, Marson Contracting Co., Amalgamated ADJUDGED and DEClARED that any change order or
Bank, as Trustee of Longview Ultra I Construction Loan agreement purporting to increase above the sum of
Investment Fund, as agent, Petra Mortgage Capital Corp. $2,910,375.57 the amount to be paid to plaintiff for the
LLC, Rutherford H. Thompson III, et al. Index No. provision of work, or materials to or for Fort Tryon's
100618/2009, the cross motion brought by defendants Fort construction project was null and void ab initio; and it is further
Tryon and Thompson (deemed motion sequence no. 002) to
strike All Rock's complaint, dismiss the action and terminate ORDERED that the affirmative defenses and cross claims
the mechanic's lien, and to dismiss [**28] Marson's cross asserted against Amalgamated, Fort Tryon and Thompson by
claim and terminate the lien upon which it is based, is granted All Rock and Marson are dismissed; and it is further
on default; and it is further ORDERED that the Clerk is directed to enter judgment
ORDERED that the Clerk is directed to enter judgment accordingly.
accordingly; and it is further This constitutes the decision and order of this Court.
ADJUDGED and DEClARED that the lien recorded by Dated: New York, New York
defendant Marson on or about December 24, 2008 on the
property located at 33-35 Overlook Terrace and 730-734 West June 6, 2014
184th Street in Manhattan is null and void ab initio, and said
lien is hereby discharged; and it is further ENTER:
ADJUDGED and DEClARED that the lien recorded by /s/ Saliann Scarpulla
plaintiff All Rock on or about July 31, 2008 on the property
located at 33-35 Overlook Terrace and 730-734 West 184th Saliann Scarpulla, J.S.C
Street in Manhattan is null and void ab [*421 initio, and said
lien is hereby discharged; and it is further
Signature Bank v. Laro Maintenance Corp., 2011 WL 2669744 (2011)
2011 WL 2669744 (N.Y.Sup.), 2011 N.Y. Slip Op. 31797(U) (Trial Order)
Supreme Court, New York.
Nassau County
SIGNATURE BANK, Plaintiff,
v.
LARO MAINTENANCE CORPORATION, Laro Government Services, Inc., Laro Service Systems, Inc., Laro
Window Cleaning Corp., Laro Holdings, Inc., Robert Bertuglia, Jr;, and Paige Bertuglia, Defendants.
No. 016790/2009.
June 21, 2011.
Short form Order
(This opinion is uncorrected and not selected for official publication.]
Present: Hon. Ira B. Warshawsky, Justice.
TRIAUIAS PART 7
MOTION DATE: 4/29/2011
MOTION SEQUENCE: 002
The following papers read on this motion:
Notice of Plaintiff's Motion for Summary Judgment, Salvatore Trifiletti Affidavit, and Exhibits Annexed ............................ 1
Plaintiff's Memorandum of Law in Support of its Motion ......................................................................................................................... 2
Robert Bertuglia Mfidavit in Opposition and Exhibits Annexed ............................................................................................................. 3
Defendants' Memorandum of Law in Opposition .......................................................................................................................................... 4
Salvatore Trifiletti Reply Mfidavit and Exhibits Annexed ......................................................................................................................... 5
Plaintiffs Reply Memorandum of Law ............................................................................................................................................................... 6
PRELIMINARY STATEMENT
WestlavvNexr lG) 2014 Thomson Reuters. No claim to original U.S. Government Works.
Signature Bank v. Laro Maintenance Corp., 2011 WL 2669744 (2011)
Plaintiff Signature Bank moves for summary judgment against Defendants Robert Bertuglia, Jr. and Paige Bertuglia. The
court previously granted Signature Bank's motion for default judgment against non-appearing Defendants Laro Maintenance
Corp., Laro Government services, Inc., Laro Service Systems, Inc, Laro Window Cleaning Corp., and Laro Holdings, Inc. by
a Decision and Order dated May 24, 2011
STANDARD
Summary judgment terminates a case before a trial, and it is therefore a drastic remedy that will not be granted if there is any
doubt with regard to a genuine issue of material fact, since it is normally the jury's function to determine the facts. (Sillman v.
Twentieth Century-Fox Film Cor., 3 NY2d 395 [1957]). When summary judgment is determined on the proof, it is equivalent
to a directed verdict: if contrary inferences can reasonably be drawn from the evidence, then genuine issues of material fact
preclude summary judgment. (Gerard v. Inglese, 11 AD2d 381 [2d Dep't 1960].
It is not the court's function to weigh the credibility of contradictory proof on a motion for summary judgment. (Ferrante v.
American Lung Assoc., 90 NY2d 623 [1997]). Thus the evidence will be considered in the light most favorable to the
opposing party. (Tortorello v. Carlin, 260 A.D.2d 201, 206 [1" Dept. 2003]). However, where a party is otherwise entitled to
a judgment as a matter of law, an opposing party may not simply manufacture a feigned issue of fact to defeat summary
judgment. A material issue of fact "must be genuine, bona fide and substantial to require a trial." (Leumi financial Corp. v.
Richter, 24 AD2d 855 [1'' Dep't 1965] quoting Richard v. Credit Suisse, 242 NY 346 [1926]).
If a party has presented a prima facie case of entitlement to summary judgment, because no triable issues of material fact
exist, the opposing party is obligated to come forward and bare his proof by affidavit of an individual with personal
knowledge, or with an attorney's affirmation to which appended material in admissible form, and the failure to do so may
lead the court to believe that there is no triable issue of fact. (Zuckerman v. City of New York, 49 N. Y.2d 557, 562 [1980]).
Summary judgment is therefore generally appropriate when any dispute involves only issues of law (see, e.g., Surrey
Strathmore Corp. v. Dollar Sav. Bank of New York, 36 N.Y.2d 173 [1975], Rosman v. Trans World Airlines, Inc., 34 N.Y.2d
385 [1974]), when the record objectively establishes that a party cannot support its allegations or has completely established
them (see, e.g., Alvarez v. Prospect Hospital, 68 NY2d 320 [1986], Ferluckaj v. Goldman Sacks & Co., 12 NY3d 316
[2009]), or when any unresolved fact issue is immaterial or is manufactured from patently incredible evidence (see, e.g.,Bank
of New York v. 125-127 Allen Street Assoc., 59 AD3d 220 [1'' Dep't 2009]).
DISCUSSION
This action arises from Plaintiffs attempt to collect on a Credit Agreement, embracing a Term Loan, a Revolving Note, and
certain Letters of Credit, from defendants Robert Bertuglia, Jr. and Paige Bertuglia as guarantors, since the Borrowers are
now defunct corporations. The Amended Verified Complaint alleges sixteen causes of action. As stated above, this court
previously granted default judgment against the non-appearing defunct corporate defendants. The First through Tenth Causes
of Action were stated against these defendants.
The Eleventh through Sixteenth Causes of Action are stated against the defendants against which this motion is made. The
Eleventh and Twelfth Causes of Action assert non-payment by Robert Bertuglia, Jr. in accordance with his obligations under
a Guaranty Agreement with the Plaintiff. The Thirteenth Cause of Action is for attorney's fees due from Robert Bertuglia, Jr.
under the same Guaranty Agreement. The Fourteenth and Fifteenth Causes of Action allege non-payment by Paige Bertuglia
in accordance with obligations under a Guaranty Agreement with the Plaintiff. The Sixteenth Cause of Action seeks
attorney's fees under the same Guaranty Agreement.
In order to establish a prima facie case for recovery on a promissory note and guaranty, the plaintiff must prove the existence
of the underlying debt and the guaranty at issue and the failure to make payment thereunder. (Hotel 71 Mezz Lender LLC v.
Mitchell, 63 AD3d 447 [1st Dept. 2009], E.D.S. Security Sys., Inc. v. Allyn, 262 AD2d 351 [2d Dept. 1999]). The plaintiff has
submitted the Credit Agreement, Term Loan Agreement, Revolving Note Agreement, Letters of Credit, Robert Bertuglia's
WestlawNexr if:) 2014 Thomson Reuters. No claim to original U.S. Government Works. 2
Signature Bank v. Laro Maintenance Corp., 2011 WL 2669744 (2011)
Guaranty Agreement, and Paige Bertuglia's Guaranty Agreement, and the sworn Affidavit of Salvatore Trifiletti. The
plaintiff has not submitted any statement of account or similar documentary evidence of payments made and amounts due
and owing. However, the defendants do not dispute at this time any amounts borrowed or presently due and owing. On the
other hand, defendants Robert and Paige Bertuglia do strongly contest that there is any default under the Credit Agreement
inasmuch as the Plaintiff consented to or even encouraged the corporate defendants' default through an agent of the Plaintiff.
The Plaintiff asserts that the Bertuglia defendants have waived their present argument that Plaintiff Signature Bank
orchestrated the alleged default or non-payment under the Credit Agreement, because the Guaranty Agreements contained
broad waiver clauses. (Cf. Millerton Agway Cooperative, Inc. v. Briarcliff Farms, Inc., 17 NY2d 57 (1966], Citibank, NA. v.
Allan R. Plapinger, 66 NY2d 90 [1985]). Most cases cited by the Plaintiff regarded waiver clauses which did not waive
defenses regarding payment (see, e.g., Quest Commercial, LLC v. Rovner, 35 AD3d 576 [2d Dept. 2006]), and thus the
Bertuglia defendants' present argument regarding Plaintiffs consent or modification to payment terms or Plaintiffs otherwise
engaging the alleged default, would arguably not be barred by such clauses. In any case, Plaintiffs argument is not a defense
to the Guaranty Agreement itself, much less a counter-claim or set-off. Rather, the Bertuglia defendants contest issues that go
to a basic fact question that the Plaintiff must resolve in order to establish a prima facie case, and that is the issue whether
there has been a failure to pay in accordance with any payment terms agreed to between the Plaintiff and the Borrowers or
Guarantors. (See JP Morgan Chase Bank v. Liberty Mut. Ins. Co., 189 F.Supp.2d 24, 27 [SDNY 2002] [noting that "nothing
in the doctrine of Plapinger precludes a defense of fraudulent inducement or concealment premised on fraudulent
misrepresentations in the Bonds themselves"]).
Indeed, the principal cases cited by the plaintiff rely on Citibank, NA v. Allan r. Plapinger (66 NY2d 90 [1985]) which
involved only a defense of fraudulent inducement as a direct challenge to the validity of a Guaranty Agreement. That case
held that a guarantor who had signed an "unconditional" Guaranty Agreement could not later contend in court that the
Guaranty was in fact entered into only on reliance upon some alleged oral representations and thus was not entered into
unconditionally as was represented in the Guaranty. In contrast, the Bertuglia defendants' argument here does not in any way
now assert that their expressly unconditional promise to guarantee the corporate defendants' obligations was not in fact
unconditional or was premised on some oral representations. As already stated, the issues that the Bertuglia defendants raise
go to questions regarding whether Plaintiff in fact changed the payment terms or otherwise orchestrated the default in
disregard of the memorialized terms in the Credit Agreement.
The Bertuglia defendants' proffer of proof is not insubstantial. They contend that Signature Bank demanded that the
corporate defendants employ a financial crisis manager, Stephen O'Donnell. They further contend that Stephen O'Donnell
was an agent of Plaintiff Signature Bank, and he proceeded to cut off Robert Bertuglia from his authority to manage the
corporate defendants and to demand payment of certain obligations. For example, Robert Bertuglia's sworn Affidavit
presents various emails which reveal that Stephen O'Donnell excluded him from various meetings and eventually assumed
all authority to conduct financial transfers on behalf of the corporate defendants. Tending to show that Stephen O'Donnell
was an agent of Plaintiff Signature Bank, an email from Jonathan R. Zimbalist reveals that "Signature Bank does not want
you to attend the meeting tomorrow," and said email forwarded another email by Sal Trifiletti, Manager of Special Assets for
Signature Bank addressed to Stephen O'Donnell's email account as well as Jonathn Zimbalist's. These facts are sufficient to
raise triable issues of fact regarding Plaintiff Signature Bank's knowledge and encouragement of any impending default
under the Credit Agreement and whether there was a modification of terms, precedent breach of contract, or breach of the
implied covenant of good faith and fair dealing with respect to Plaintiffs conduct toward the Bertuglia defendants.
Plaintiffs motion for summary judgment as against defendants Robert Bertuglia, Jr. and Paige Bertuglia is denied.
This constitutes the Decision and Order of the court.
DATED: June 21, 2011
<>
J.S.C.
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Signature Bank v. Laro Maintenance Corp., 2011 WL 2669744 (2011)
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WesttawNext •.¢) 2014 Thomson Reuters. No claim to original U.S. Government Works. 4
Caution
As of: September 15, 2014 3:41PM EDT
Sterling Natl. Bank v Biaggi
Supreme Court of New York. New York Oc~unty
Septemher 28, 2006. Decided; October 5, 2006, Filed
6Cl4015/04
Reporter
2006 N.Y. Misc. LEXIS 9404; 2006 NY Slip Op 30685(U); 2006 WL 6349200
1**21 STERLING NATIONAL BANK, Plaintiff, -against- against each defendant (First, Second and Third Causes of
MARIO BIAGGI, JR., KEITH ALLEN ORLEAN, and Action in the amended complaint), and dismissing defendants'
PHILLIP CERVONE, Defendants. INDEX NO. 604015/04 affirmative defenses and counterclaims; (2) pursuant to CPLR
3212 {e), severing its Fourth Cause of Action for fraud, for
Notice: THIS OPINION IS UNCORRECTED AND WILL completion of discovery and trial; (3) setting a hearing before a
NOT BE PUBLISHED IN THE PRINTED OFFICIAL Special Referee to report and recommend an amount of
REPORTS. attorneys' fees to be included in a separate money judgment;
Subsequent History: Affirmed by Sterling Nat!. Bank v.
Biaggi, .f7 A.D.3d -136, 849 N. Y.S. 7d 521, 200R l'U: App. Di1·.
LEXIS 129 (N.Y. App. Dil'. 1stDep't, 2008)
and (4) pursuant to 22 NYCRR 130-1.1, imposing sanctions on
defendants for their assertion of frivolous defenses and
counterclaims.
In Motion Sequence No. 004, defendant Mario Biaggi, Jr.
Core Terms moves for an order pursuant to CPLR 3212 1"'21 granting
summary judgment dismissing the First Cause of Action for
guaranty, loan agreement, counterclaims, collateral, guarantor, breach of 1**31 guaranty and the Fourth Cause of Action for
defenses, obligations, defendants', affirmative defense, cause of fraud as against him. In Motion Sequence No. 005, defendants
action, funds, undersigned, waived, spreadsheet, damages, Keith Allen Orlean and Phillip Cervone move for an order
attorney's fees, documents, unconditional, calculated, modified, pursuant to CPLR 3212 granting summary judgment
submits, summary judgment motion, guaranty agreement,
enforcing, personal guaranty, summary judgment, money
judgment, matter of law, fraud claim, modification
Judges: 1"'11 JOAN A MADDEN, J.
Opinion by: JOAN A MADDEN
Opinion
JOAN A. MADDEN, J.:
In this action for breach of guaranty and fraud, plaintiff Sterling
National Bank (Sterling) seeks recovery of more $1.95 million
in damages arising out of defendants' execution of personal
guaranties to secure a loan made by Sterling to non-party
Merchants Ad-Vantage Corp. (Merchants).
Motion Sequence Nos. 003, 004 and 005 are consolidated for
disposition. In Motion Sequence No. 003, Sterling moves for
an order: (1) pursuant to CPLR 3212, awarding partial
summary judgment on its breach of guaranty claims
dismissing the Fourth Cause of Action for fraud as against
them, and an order pursuant to CPLR 2201, staying this action
on the ground that a criminal investigation is being conducted
which impairs their ability to defend themselves in this case.
For the reasons set forth below, Sterling's motion is granted
only to the extent of awarding judgment as to liability on its
guaranty claims, and defendants' motions are granted only to
the extent of dismissing Sterling's fraud claim.
I. BACKGROUND
Plaintiff Sterling is a national banking association. Non-party
Merchants is an entity that was engaged in the business of,
among other things, making loans to businesses which were
secured by the business's credit card receivables. On November
12, 1999, Merchants entered into a written Loan, Security and
Service Agreement (the "Loan Agreement") with Sterling,
pursuant to which Sterling agreed to lend funds to Merchants,
1"'31 on a revolving loan basis, in amounts to be determined by
Sterling from time-to-time. Subject to the limitations of the
Loan Agreement, the amount available for lending to
Merchants was variable and
Page 2of9
2006 N.Y. Misc. LEXIS 9404, *4; 2006 NY Slip Op 30685(U), **2
depended on the amount of eligible collateral Merchants
provided to Sterling. In other words, the more eligible collateral
Merchants pledged to Sterling, the more funds were available
for Sterling to lend to Merchants against that collateral. The
collateral consisted of future credit card receivables that retail
vendors pledged to Merchants, and Merchants, in tum,
assigned to Sterling.
As an additional inducement for Sterling to enter into the Loan
Agreement with Merchants, and as additional security for
repayment of the amount due under the Loan [**4]
Agreement, on November 12, 1999, three of Merchants'
principals, defendants Biaggi, Orlean and Cervone, each
executed an identical written personal guaranty of all
Merchants' liabilities under the Loan Agreement (the three
personal guaranties and the Loan Agreement will be referred to
collectively as the "Loan Documents"). By their express terms,
the guaranties provided that Biaggi, Orlean and Cervone
"absolutely and unconditionally guarantee [*4] the full and
prompt payment when due" and "agree that they shall be jointly
and severally bound here under." Sterling alleges that it
performed all of its obligations under the Loan Documents,
including advancing millions of dollars to Merchants.
Each defendant interposed an answer asserting numerous and
in some instances identical affirmative defenses including
fraud, breach of contract, breach of the implied covenant of
good faith and fair dealing, payment, failure to act in a
commercially reasonable manner, equitable and promissory
estoppel, statute of frauds, statute of limitations, waiver,
release, unclean hands, failure to liquidate collateral in a
commercially reasonable manner and failure to liquidate
collateral on demand. Defendant Biaggi also asserted
counterclaims for fraud and breach of contract.l Defendants
Orlean and Cervone asserted a counterclaim for fraud.
Sterling now moves for partial summary judgment on its First,
Second and Third Causes of Action [*61 against defendants
Biaggi, Orlean and Cervone, for breach of the guaranties, and
to sever for discovery and trial its Fourth Cause Action for
fraud. Defendants Biaggi, Orlean and Cervone move for
summary judgment dismissing Sterling's fraud claim. Biaggi
also moves for summary judgment dismissing the breach of
guaranty claim asserted against him, and Orlean and Cervone
seek to stay the instant action based on the ongoing criminal
investigation.
It is undisputed that on or about September 15, 2004, II. DISCUSSION
Merchants defaulted in its obligations under the Loan
Agreement by, among other things, failing to pay when due,
payments of interest and principal. By letters dated September
A. Sterling's Motion for Summary .Judgment on its Breach
of Guaranty Claims
15, 2004, Sterling notified Merchants and the three personal Sterling's breach of guaranty claims arise out of defendants'
guarantors of Merchants' default under the Loan Agreement,
and pursuant to the Loan Documents, demanded payment of
the amount allegedly owed at that time of $1,922,248.54,
together with interest, fees and expenses, including attorney's
fees.
On December 1, 2004, Sterling commenced the instant action
against the three personal guarantors. The First, Second and
Third Causes of Action in the amended complaint assert
separate claims against each guarantor for breach of guaranty
and seek a money judgment in the amount of $1,950,848.92
together with interest from November 19, 2004 at the rate
provided in the Loan Agreement, and costs, disbursements and
attorney's [*51 fees. The Fourth Cause of Action for fraud is
asserted against the three defendants collectively, and seeks a
money judgment "in amount to be determined at trial, but not
less that $1,950,848.92, together with interest from November
19, 2004 at the rate provided in the Loan Agreement, costs,
disbursements and [**51 attorney's fees."
execution of personal guaranties to secure loans made by
Sterling to Merchants. For the reasons below, this Court
concludes that each of the guaranties is binding, valid, and
enforceable, and that the debt they secure remains outstanding
to Sterling. Moreover, the counterclaims and affirmative
defenses 1**6] raised by defendants were either waived in the
guaranties, or are insufficient to raise a triable issue of fact.
However, based on the record before the Court, Sterling is only
entitled to partial summary judgment as to the issue of liability
on its guaranty claims, as Sterling fails to satisfy its !*71 prima
facie burden as to the amount of the outstanding balance of the
indebtedness.
To prevail on a motion for summary judgment to enforce a
written guaranty, plaintiff must demonstrate, by admissible
evidence, the absolute and unconditional guaranty, the
underlying debt, and a failure to make the required payments.
See Kensington House Co. v Oram. 293 AD2d 304, 739
N. Y.S.2d 572 (1st Dept 2002); City of New York v Clarose
Cinema Corp., 256AD2d 69, 71, 681 N.Y.S.2d 251 (1st
t Biaggi has withdrawn his a:mnterclaim for violation of the Equal Opportunity Credit Act, and his affirmative defense of lack of consideration.
Page 3 of9
2006 N.Y. Misc. LEXIS 9404, *7; 2006 NY Slip Op 30685(U), **6
Dept 1998); BNU::illll:!1.r..i.g.f...(;.g[/2c v Cjg,r..e. 17.f._AD4d 203, 568
N. Y.S.2d 65 (I st 12?.P.Ll.9.2.l); Chemical Bank \l GerQJiimo Auto
Parts Cmp., 225 :if)],d __ 1..liL ... 619__N.Y,_$_,Jd 340...£/st l)ept 1996).
To sustain its burden on damages, plaintiff must come forward
with supporting documentary evidence or an explanation as to
how the total amount of the debt was calculated; conclusory
allegations as to the amount due are insufficient. See HSBC
Bank USA v /PO. LLC. 290 AD2d 246, 735 N.Y.S.2d 531 (1st
Dept 2002); Wamco XW Ltd. 1' Chestnut Estates Development
Corp .. 251 AD2d 888. 674 N. Y.S.2d 523 (3rd Dept 1998); First
American Bank of Ne11.' York v L. V. Lowden. Inc .. 197 AD2d
77-1. 602 N.Y.S.2d 720 (3rd Dept 1993); Transamerica
Commercial Financia ((;Q.[Jl,.E_.B.gy_A.., ... .MJLttltg!!~Loi..~~c;gtia. hK.,.
178AD2d 6..91. 576 N.Y.S.2d 939 Q.r4.12§12L.l.I}!}_D._.
In support of its motion for summary judgment, Sterling [*8]
submits the absolute and unconditional written personal
guaranties signed by defendants, principals in Merchants, in
which they irrevocably agreed to guaranty all of Merchants'
obligations under the Loan Agreement. Sterling also submits an
affidavit from its Senior Vice President, John Gallo and
supporting documentation, including the Loan Agreement,
various correspondence, and a [**7] spreadsheet as to the
amount purportedly due.2 While the affidavit and the
supporting documents establish prima facie that Merchants and
defendant guarantors breached their obligations under the Loan
Document by failing to pay when due, payments and interest
and principal, Sterling fails to tender sufficient evidentiary
proof as to the amount of the debt. See HSBC Bank USA v /PO.
LLC. supra; U'IJ:.l!lr& .. KVII Ltd. ,, Chestnut l~'states Deve.lQP.llY::IIt
Cmp .. supra; First American Bank o(New York 1' L. V. Lowden.
six-page spreadsheet.3 Gallo's reply affidavit, however, fails to
adequately explain the basis for the calculations, as he provides
nothing more than the following conclusory statements:
This amount [the $1,950,848.92] was calculated in
accordance with the applicable provisions of the Loan
Agreement by charging Merchants with all advances,
interest and other charges on the loan and crediting
Merchants with all payments [**8] made on the account
through November 19, 2004. Because this was a revolving
loan, and because there are so many individual
transactions in the loan account, [*10} which include daily
credits, debits and changes in interest rates, a more
detailed explanation or documentation is not possible ....
Attached as Exhibit 1 is a spreadsheet illustrating all
advances, collections and ending balances showing a total
due as of March 31, 2006 of $2,154,762.89. This
represents the amount of $1.950.848.92 - the balance due
as of November 19, 20041 previously swore to-plus all
charges and less all credits through March 31,2006.
As indicated above, Gallo refers to the spreadsheet annexed to
his reply affidavit. By itself, the spreadsheet fails to constitute
evidentiary proof as to the amount of the debt. The spreadsheet
lists total sums for each month in columns labeled "beginning
balances," "advances," "collections," and "ending balance."
Presumably, the sums on the spread sheet were taken from
documents in plaintiffs possession, but Sterling submits none
of those [*11] supporting documents and submits no affidavit
from an employee with actual knowledge of the underlying
basis for information contained in the spreadsheet. See
Inc., supra; Transamerica Commercial Financial Corp. 1' Rm• Transamerica Conunercial Financial Corp. v Roy A. Matthews
A Matthews o(Scotia.lnc., supra. o(Scotia.Jnc., supra. Thus, the spreadsheet alone is insufficient
to establish the amount owed.
Sterling's original moving affidavit of John Gallo includes only
a conclusory statement that the total amount due as Under these circumstances, absent sufficient supporting
$1,950,848.92, without any explanation or acknowledgment as documentary evidence or an explanation as to how the total
to how that amount was calculated or any supporting amount of the debt was calculated, Sterling has failed to make
documentary evidence. When defendants Orlean and Cervone out a prima facie case as to the amount of the debt and
raised this objection in their opposition papers, Sterling
responded with a reply affidavit from Gallo and a
2 To the extent Defendants Orlean and Cervone object to Gallo's affidavit on the ground that it is not supported by first-hand knowledge, they
are correct that Gallo's March 3, 2006 affidavit does not include a statement 1*9] that it was made on first-hand knowledge. Gallo subsequently
cured this defect by including a statement in his reply affidavit that his March 3, 2006 affidavit "was made by me upon first hand knowledge of
the facts stated therein."
3 When the parties appeared before this Court in May 2005, the Court directed Sterling to provide defendants with a spreadsheet as to the
"current outstanding balance" of Merchants' loan, through April 2005. In its reply papers, Sterling submits the same spreadsheet but updated
through March 2006.
Page 4of9
2006 N.Y. Misc. LEXIS 9404, *11; 2006 NY Slip Op 30685(U), **8
the issue of damages. However, as noted above, Sterling has
established a prima facie case as to the issue of liability on its
claims for breach of the written guaranties, so the burden shifts
to defendants to establish by admissible evidence the existence
defense based on any Statute of Limitations or any claim
of laches and set-off or counterclaim of any nature or
description.
of a triable issue of fact, or a meritorious defense. See Banque Based on the clear and unequivocal language of these
Indosuez ,. Panddf, 193 AD2d 265. 603 N. Y.S.2d 3()() (1st Dept provisions, each defendant guarantor explicitly waived his right
1993}, lv dismissed 83 NY2d 907. 637 N.E.2d 279. 614 to raise any defense or counterclaim concerning the validity of
N.Y.S.2d 388 (1994}, appeal dismissed 86 NY2d 788. 655 the guaranty, or the underlying debt owed to Sterling, and as
N.E.2d 708. 631 N.Y.S.2d 611, lv dismissed 86 NY2d 809. 656 such, is foreclosed, as a matter of law, from asserting any
N.E.2d 593. 632 N.Y.S.2d 495 (1995); Bank Leumi Trust Co. ,. tiP.fenses or counterclaims as to the validity of the guaranties.
Rattet & Liebman. 182 AD2d 541. 582 N. Y.S.2d 707 (lst Dept ~ See Citibank. NA.. v Plapinger. 66 1VY2d 90. 91. 485
1992) [**91. N.E.2d 974. 495 N.Y.S.2d 309 0985) (language of guaranties
sufficiently specific [**10] to foreclose, as a matter of law,
First, with respect to defendants' assertion of affirmative defenses and counterclaims asserted against plaintiff based on
defenses and counterclaims, the Court notes that the fraud, negligence or failure to perform a condition precedent);
guaranties [*12] executed by defendants expressly provide that Palm Beach Mortgage Management. UC v Red Tulip. LLC.
they are absolute and unconditional, and are not subject to any 18 AD3d 379, 380, 795 N.Y.S.2d 559 (1st Dept 2()()5)(guaranty
defenses or counterclaims raised by the guarantors as to their 1*14] in which guarantor "absolutely, unconditionally and
P.nfor~hiHty, or concerning the validity of the underlying irrevocably" waived right to assert "any defense, set-off,
debt. ~ Specifically, each defendant guarantor counterclaim or cross claim of any nature whatsoever"
acknowledged that the concerning the guaranty was sufficiently specific to constitute
guaranty agreement and obligations of the undersigned
hereunder [Biaggi, Orlean and Cervone] are and shall at all
time continue to be absolute and unconditional in all
respects, and shall at all times be valid and enforceable
irrespective of any other agreements or circumstances of
any nature whatsoever which might otherwise constitute a
defense to this guaranty agreement and obligations of
undersigned hereunder .... This guaranty agreement sets
forth the entire agreement and understanding of Bank
[Sterling] and undersigned, and undersigned absolutely,
unconditionally and irrevocably waive any and all rights to
assert any defense, set-off, counterclaim or cross-claim of
any nature whatsoever with respect to this guaranty
agreement or the obligations of the undersigned or the
obligations of any other person or party (including,
without limitation, the Obligor)
[Merchants] relating to this [*13] guaranty agreement or
thP. ohlim~tiops of the undersigned under this guaranty
agreement. .. J/1 Defendant guarantors further agreed that
in any litigation (whether or not arising out of or relating to
the Liabilities of any security therefore), in which Bank
[Sterling] and any of them [the guarantors] shall be
adverse parties, [the guarantors] waive trial by jury and the
right to interpose any
waiver of right to plead defenses); Raven Elevator Corp. l'
Finkelstein, 223 AD2d 378. 636 N.Y.S.2d 292 list Dept). lY
dismissed 88 NY2d 1016. 672 N.E.2d 608, 649 N.Y.S.2d 382
(1996) (assertion of defenses properly barred as a matter of law
based upon absolute and unconditional disclaimer and waiver
contained in personal guaranty); New York Life Insurance Co. v
Media/Communications Partners Ltd. Partnership. 204 AD2d
235, 612 N.Y.S.2d 144 (1st Dept 1994)(summary judgment
granted where defenses to guaranty barred by absolute and
unconditional waiver); see generally, 63 NYJur2d Guaranty
and Suretyship. § 362 (2006). Moreover, as set forth below, to
the extent it could be argued that defendants' counterclaims and
defenses are not waivable, they fail to raise any triable issues of
material fact
In his opposition to Sterling's motion and in support of his
motion for summary judgment, defendant Biaggi admits
executing the guaranty, that Sterling funded the loan to
Merchants in the amounts alleged by Sterling, and that those
funds were [*15] never repaid to Sterling. Biaggi, however,
contends that his obligations under the guaranty were
"discharged" when Sterling changed the terms of the Loan
Agreement and improperly loaned money to Merchants,
without his prior written consent. Biaggi also asserts that
Sterling is suing on the wrong guaranty, and that
notwithstanding the waiver provisions in the guaranty, he
cannot waive his defense and counterclaim for fraud, and his
defenses of breach of the implied covenant of good
Page 5 of9
2006 N.Y. Misc. LEXIS 9404, *15; 2006 NY Slip Op 30685(U), **11
(**Ill faith and fair dealing, failure to liquidate collateral upon
demand and act in a commercially reasonable manner, and
estoppel.
Specifically, Biaggi argues that Sterling, without his consent,
modified the Loan Agreement by "precipitously changing] the
terms of the Loan Agreement and the maximum amount of
availability on the loan, causing Merchants to go into an
economic tailspin at the end of 2001." According to Biaggi,
Sterling also improperly altered the Loan Agreement by
continuing to "fund" Merchants with loan proceeds after April
16, 2001, without Biaggi's prior written consent, and by
eliminating a so-called "thirty-day float."4 Biaggi, however,
identifies no specific provisions in the Loan Agreement [*16]
either limiting the amount of funds loaned to Merchants,
requiring Biaggi's written or oral consent to change the amount
of funds loaned, or providing for a thirty-day float. To the
contrary, paragraph l.l(b)(ii) of the Loan Agreement gave
Sterling "sole and absolute discretion to increase or decrease"
the $500,000 advance limit provided under paragraph
l.l(b)(1). Furthermore, paragraph 14.1 required all
amendments to the agreement to be in writing and signed by
both Sterling and Merchants.
In support of his assertion that the Loan Agreement was
modified to require his consent, Biaggi relies on certain
documentary evidence, including his October 22, 1999 letter to
Sterling, Merchants' November 6, 1999 corporate resolution for
the opening of the Sterling checking account, a signature card
for the Sterling checking account, and 140 funding requests
dated between January 2000 and April16, 2001, by Biaggi to
Sterling to fund Merchants' [* 171 checking account from the
loan, which included Biaggi's signature. These documents,
however, are [**12l insufficient to establish that the Loan
Agreement was modified to require Biaggi's consent in writing
or otherwise. First, Biaggi's October 1999 letter to Sterling,
stating that any advance on Sterling's line of credit must be
approved by both Biaggi and Orlean, predates the November
12, 1999 Loan Agreement, and is not signed by a
representative of Sterling. Next, the November 9, 1999
corporate resolution was made by Merchants and not Sterling,
predates the Loan Agreement and makes no reference to the
Loan Agreement or Sterling's obligation to advance funds to
Merchants. The
signature card also does not relate to the Loan Agreement but
to the Sterling checking account. Finally, the funding requests,
although signed by Biaggi, do not establish any agreement by
Sterling not to advance loans to Merchants without Biaggi's
consentS
In any event, the following proVIsion in the guaranties
expressly provides that the loan to Merchants can be increased,
modified or transformed by Sterling without notice to, or the
consent of the guarantors:
The undersigned [the guarantors, Biaggi, Orlean and
Cervone] agree ... that the Liabilities and the obligations
of any party with respect thereto may at any time or times
and in whole or in part be increased, decreased, renewed,
extended, accelerated, modified, compromised,
transformed or released by Bank [Sterling] as it may deem
advisable, without notice to or further assent by the
undersigned and without affecting the obligations of the
undersigned hereunder ... Where, as here, the guaranty
allows for changes in the terms of the underlying loan
agreement, and expressly waives any right of the guarantor
to receive notice or approve of any modifications to the
underlying loan agreement, an alleged modification of the
loan agreement will not relieve [**13] the guarantor of his
obligations. See White Rose Food v Sal!i!lL..2.9.2 AD2d..32Z.
7'38 N.Y.S.'l.d 683 (2nd Devt 2007.), 1*191 affd 99 NY2d
589, 788 N.E.2d 602. 758 N.Y.S.2d 253 (2003)(rejecting
co-guarantor's claim that he was relieved from obligations
as co-guarantor on a promissory note by a subsequent
agreement, made without his consent, which modified the
original terms of the promissory note); Bll!lflUC H(Q!:!J.!~.J'
Andre Cafe Ltd., 183 AD2d 494, 583 N. Y.S.2d 438 1b1
Dept 1992)(guarantor bound by anticipatory agreement in
undertaking that he will not be relieved of liability by
modification of the principal contract); Country Glen.
L.L.C. v Himmelfarb, 4 Misc3d 1015[A], 798 N.Y.S.2d
344, 2004 NY Slip Op 50886[U] (Sup Ct, NY Co 2004)
(guarantor not relieved of obligations if the guaranty
permits changes and expressly waives notice to guarantor
of such changes). Accordingly, Biaggi's position that he is
not liable under the guaranty based on purported
modifications to the Loan Agreement is unavailing.
4 According to Biaggi, the thirty day float was a "system used by Sterling" under which Merchants' contract would not go into default unless by
the 31st day after receiving the contract from Merchants, no payment had been received by Sterling from the vendor.
5 Biaggi cites National Westminster B_;m.!Ud.SA v Ross. __ Ql§l:.Supp 48 !SDNY 1987) for the proposition that, if the lender unilaterally and
materially alters the express terms of a loan agreement, without the guarantor's consent, which causes the borrower to default, the I* 181
guarantor may be excused from liability. However, as determined above, Biaggi identifies no specific provision of the Loan Agreement
modified by Sterling.
Page 6of9
2006 N.Y. Misc. LEXIS 9404, *19; 2006 NY Slip Op 30685(U), **13
Next, Biaggi argues that he is not being sued on the correct collateral securing Merchants' loan, each defendant had direct
guaranty. Biaggi previously raised this identical issue when he access to all of Merchants' online information at Sterling, and
moved to dismiss the complaint for failure to state a cause of was in a position to, and in fact did, freely examine and
action. By a decision and order dated June 21, 2005, this Court determine the status of the collateral. Sterling submits Gallo's
rejected that argument, determining that the documentary proof affidavit explaining [*221 that during the course of Sterling's
established that the November 12, 1999 guaranty included an loan, Merchants and its principals Biaggi, Cervone and Orlean,
express provision that it would not [*20] be terminated, all had unrestricted access to Sterling's online data for their
superceded or cancelled by the subsequent execution and account, including cash journals showing all individual
delivery of a "new agreement of guarantee," and that the June payments posted to Merchants' [**15] accounts; dealer activity
9, 2000 guarantee, on which Biaggi relied, did not provide that reports, which are a complete listing of loan and collateral
it had the effect of terminating, cancelling or superceding the transactions; delinquency aging reports; bounce journals which
November 1999 guaranty. Thus, under the doctrine of law of list all bounced payments on a given day; statement of charges
the case, Biaggi is precluded as a matter of law from reports which include the calculation of interest on Merchants'
relitigating this same issue. See Marti!L v City_g[__Cohoes. 37. loan on a daily basis; schedule of new accounts assigned to
fjY2d 162..JJ..2.. .. N.F;,~.2d 867, 371_]'{ Y.S.2d 687 (1975}; Rosso v. Sterling by Merchants; and schedule of charge backs, which is
Beer Garden. Inc., 12 AD3d 152, 784 N.Y.S.2d 60 (1st Dept a listing of all accounts taken out of the collateral pool. Sterling
2004). also submits copies of records maintained in the ordinary
course of its business showing that during the period January
In opposing Sterling's motion for summary judgment, Biaggi 2001 through August 1, 2003, Merchants accessed the online
also relies on his fraud defense and counterclaim. Although he information for its account on approximately 2,450 occasions.
concedes that fraud in the inducement of signing a [**14] In fact, as Merchants' principals, defendants controlled the
guarantee is not a defense to an unconditional guarantee, Merchants' accounts receivable contracts that provided the
Biaggi argues that his fraud defense and counterclaim are basis for the collateral calculations, and thus, cannot claim
viable, notwithstanding the waiver language in the guaranties, justifiable reliance. See Danann Realty Corp. v Harris, 5 NYJ.d
as the alleged fraud occurred after the guaranties were 3.17. JJ.ZNE.2d597,184N.Y.S.2d599(19..59.)(fraud (*2J(will
executed. Even assuming without deciding that Biaggi and the not lie if the misrepresentation allegedly relied on was not a
other defendants can assert a defense and counterclaim for matter within the peculiar knowledge of the party against
fraud, it nevertheless fails as legally deficient. whom fraud is asserted and could have been discovered by the
. party allegedly defrauded through the exercise of due
To establish a claim of fraud, defendants must prove, With dill' ) p . s· 1n6 AD'd ---(:· .f.8-3 gence ; etraccume v tnunons. v _ 11 ), _
competent admissible evide~ce, the mis~epr~sentation. [*211 of N.Y.S.2d 810 (Jrd Dept 1984)(where information readily
a material existing fact, fals1ty, scienter, JUStifiable rehance and .1 bl to art la' · fr d h t t bl' h · ti'f' bl . , , . avm a e p y c 1m1ng au , e canno es a 1s JUS 1a e
damages. s:e Lama Hol4l!J$...f&. l' Sftf!:J.h Bam ..ruru:., ~~ NY2d reliance on alleged misrepresentation).
413. 668 N.E.2d 1370, 646 N.Y.S.2d 76 (1996); S1tzsgal v
Brown, 21 AD3d 8.f.5, 801 N.Y.S.2d 581 (ist Dept 2005);
Monaco v New York Universitv Medical Center, 213 AD2d
16 7. 623 N. Y.S.2d 566 (1st Dept), lv dism in Patt den in part 86
NY2d 882. 659 N.E.2d 767. 635 N.Y.S.2d 944 (1995).
Furthermore, in his affidavit, Biaggi admits that he had access
to all relevant information concerning Merchants' collateral,
that Merchants provided the collateral to Sterling, and that he
was chairman of the board of directors, an employee,
shareholder and investor in Merchants. Although Biaggi
Here, defendants have failed to demonstrate that they
generally denies having involvement in Merchants' day-to-day
justifiably relied to their detriment on any representation made aff . hi ffid 't · 1 d 'fi t t ts h · airS, s a aVl me u es more spec1 c s a emen s oWing
by Sterling regarding Merchants. In considering the element of hi ti' d b ta ti'al · 1 t · M h ts' t' s ac ve an su s n mvo vemen m ere an opera 1ons
justifiable reliance, the analysis must viewed in the context of d .1 b . ll 'ts tr t · 1 · d t on a a1 y as1s, as we as 1 s a eg~c p anmng an corpora e
defendants' positions as principals of Merchants whose d . . maki 1:' 1 B' · t t th t h ec1s1on- ng. ror examp e, 1agg1 s a es a e
financial condition defendants allege Sterling misrepresented. " 't d th ll t al" " ght dd't' 1 1"**161 · t mom ore e co a er , sou a 1 1ona mves ors
Defendants cannot show that their alleged reliance on any t rt' . t . th M h ts' 1 " "'f bl o pa 1c1pa e m e ere an oan, 1 a pro em arose,
representations concerning the adequacy of the collateral was St 1. uld t'fy" h' d h ld [ ~2 •1 n· t t er mg wo no 1 1m an e wou · .. m ervene o
justifiable or reasonable. The undisputed record establishes that th bl ted " B' · furth all th t "J h get e pro em correc . 1agg1 er eges a o n
during the period when Sterling allegedly made representations M h h h dled [th ] 1 ~ St li h d . urp y, w o an e oantor er ng ... a
concemmg the
Page 7 of9
2006 N.Y. Misc. LEXIS 9404, *24; 2006 NY Slip 0p 30685(U), **16
expressed a desire to work closely with [him] to monitor co- Rose I' Spa Realty Assoc., 42 NY2d 338,_,'f§.9.J:!..Ji~~d J.J72., .. }97.
defendants' efforts," "the investors were very specific about N.Y.S.2d 922 (}977). That case, however, does not deal with
requiring [him] not only to obtain information from Merchants either a guaranty or an explicit waiver of defenses. Moreover,
but also in order to provide an additional safeguard and ensure to successfully assert such defenses, detrimental reliance must
that such information was both accurate and up to date, obtain be shown. See Prospect Street Ventures /. LLC v. Eclipsrs
information from Sterling as well." Solutions Corp., 23 AD3d 213, 214, 804 N. Y.S.2d 301 Ust
Dept 2005); Health-Loom Corp. v. Soho Plaza Corp., 272
Based upon the foregoing, defendants have failed to establish a AD2d 179, 182, 709 N.Y.S.2d 165 (1st Dept 2000). As
sufficient evidentiary basis to raise any issue as to whether they determined above in connection with defendants' fraud
justifiably relied to their detriment on any representations by defenses and counterclaims, defendants cannot show that they
Sterling. Absent the essential element of justifiable reliance, justifiably relied to their detriment on any purported promises
defendants' fraud defenses and counterclaims fail as a matter of by Sterling regarding the collateral securing Merchants' loan
law, and must be dismissed. since, as principals of [*27] Merchants, they had direct access
. . , . . . . to information regarding such collateral. See pp 13-15 infra. As
As further grounds for opposmg Sterling s ~oti~n, Btaggt relies such, the equitable and promissory estoppel defenses must be
on his affirmative defense of breach of the tmplied covenant of d" . ed
lSffilSS •
good faith and fair dealing. Biaggi argues that notwithstanding
the waiver of defenses in the guaranty, an issue of fact exists as
to whether Sterling breached the implied covenant by
modifying the Loan Agreement. However, as indicated above
in [*25) connection with Biaggi's previous argument that his
obligations under the guaranty were discharged based on
Sterling's modifications of the Loan Agreement, this Court has
already determined that Biaggi's allegations as to Sterling's
purported alteration or modification of the Loan Agreement
lack factual support in the record. See pp 10-12 infra. Thus, the
defense of breach of the implied duty of good faith and fair
dealing must be dismissed.
[**18] While Biaggi also asserts an affirmative defense of
payment, he does not allege that he, Merchants or his co-
defendants paid Sterling the balance due on the loan. Rather,
Biaggi simply alleges, without any evidentiary support, that
Sterling's return of Advantage Capital's participation funds (i.e.,
funds that Advantage Capital advanced to Sterling and which
Sterling subsequently loaned to Merchants) creates an issue of
fact as to whether the return of those funds constitutes a
"payment" by Merchants of its loan. On its face this allegation
lacks merit and is insufficient to raise an issue of fact as to the
defense of payment.
Biaggi next asserts that his affirmative defenses that Sterling Biaggi's remaining affirmative defenses, in addition to being
failed to act in a commercially reasonable manner and to waived by the clear and express terms of the guaranty, are also
liquidate the collateral on demand "are recognized [**17] without merit. The breach of fiduciary duty defense must be
affirmative defenses to a motion for summary judgment based dismissed as no fiduciary relationship exists between a bank
on an unconditional guarantee." Despite the assertion of these and its guarantor. See Bank Leumi Trust Co. v Block 3102
defenses, Biaggi produces no competent evidence Corp., 180 AD2d 588, 580 N.Y.S.2d 299 (1st Dept), lv denied,
demonstrating that he or any other defendant ever made any 80 NY2d 754. 600 N.E.2d 633. 587 N.Y.S.2d 906 (1992). As to
demand on Sterling to liquidate the collateral, and admits in his the statute of limitations [*28] defense, it is not disputed that
affidavit that he "does not even know if anyone made an the instant action was commenced well within six years of the
appropriate demand to liquidate." This admission is fatal to the September 15, 2004 declaration of Merchants' default. See
defense. In addition, Biaggi offers no evidence showing or Seoulbank. New York Agency v. D &J Export & Import Cmp ..
suggesting that Sterling took any actions that were not 270 AD2d 193, 707 N.Y.S.2d 12 (JstDept 2()(}()). The statute of
commercially reasonable, or that have any bearing [*26] on the frauds defense likewise lacks merit as Sterling's claims are
enforceability of the guaranties, or that Sterling took any based on written guaranty agreements. The lack of personal
inappropriate actions with respect to the disposition of any jurisdiction defense has been waived as a result of Biaggi's
collateral. Biaggi provides no factual support for his bare and failure to move for dismissal on such grounds, CPLR 3211 (e),
conclusory allegation that Sterling diverted Merchants' and in any event, Sterling submits unrefuted evidence of proper
collateral for the use and benefit of a undisclosed third party's service. The defense of unclean hands is unavailable in the
loan. Hence, these affirmative defenses fail to raise a triable instant action seeking money damages. Finally, the waiver
issue of fact, and must be dismissed. defense must be dismissed in the absence of evidentiary proof
Biaggi further contends that he can properly assert equitable
and promissory estoppel defenses, based on the authority of
showing or suggesting that Sterling knowingly waived any of
its rights with respect to the guaranties.
Page 8 of9
2006 N.Y. Misc. LEXIS 9404, *28; 2006 NY Slip Op 30685(U), **19
1**19] Defendants Orlean and Cervone submit separate Machines Corp. v Murphy & O'Connell 183 AD2d 681, 586
opposition to Sterling's motion for summary judgment, but do N.Y.S.2d 488 (1st Dept 1992). ap_peal dism 81 NY2d 783. 610
not dispute any issue as to their liability for breach of the N.E.2d 392. 594 N.Y.S.2d 719 (1993). Thus, pursuant to the
guaranties or raise any issue as to their affirmative defenses. attorney's fees provision in the guaranties, Sterling is entitled to
Orlean and Cervone do not deny executing the guaranties. an award of reasonable attorney's 1"'31] fees incurred in
They also do not deny that Sterling funded the loan to enforcing its rights under the guaranties. The issue as to the
Merchants [*29] in the amounts alleged by Sterling, and that amount of such fees shall either be determined at trial or
those funds were never repaid to Sterling. In fact, Orlean and referred to a Special Referee, subject to further order of this
Cervone submit no affidavits denying any of the facts Court.
contained in Sterling's motion papers or the amended
complaint. Rather, they submit only an attorney's affirmation C. Defendants' Motions to Dismiss Sterling's Fraud Claim
arguing that Sterling's motion is legally insufficient in that it is
not supported by a person with personal knowledge of the
relevant facts or any documentary proof or an explanation as to
how the debt was calculated. Those arguments are addressed
above, in the context of the determination as to whether
Sterling has satisfied its burden for summary judgment by
making out a prima facie case. See pp 6-7 infra.
Defendants' motions to dismiss Sterling's Fourth Cause of
Action for fraud are granted. Sterling's claim for fraud as
asserted in the amended complaint, seeks a money judgment
that is identical to the money judgments sought in the breach of
guaranty claims, i.e. $1,950,848.92, together with interest from
November 19,2004 (the date of the breach), at the rate provided
in the Loan Agreement, and costs, disbursements and attorney's
Based on the foregoing, defendants Biaggi, Orlean and fees. Where as here, Sterling's damages are the same regardless
Cervone have failed to establish the existence of any triable of the theory of liability, it can only recover those damages
issue of material fact or meritorious defense regarding their once. See Torino v. KLM Construction. Inc., 257 AD2d 541,
liability on Sterling's breach of guaranty claims. Thus, Sterling 685 N.Y.S.2d 24 (1st Dept 1999); Covev v. Iroquios Gas
is entitled to judgment as a matter of law as to the issue of Transmission Svstem. L.P., 218 AD2d 197, 201, 637 N.YS.2d
liability on its First, Second and Third Causes of Action for 992 C3rd Dept 1996), affd 89 NY2d 952, 678 N.E.J.d -166. 655
breach of guaranty, and the issue of damages shall be N.Y.S.2d 854 0997); I allow v. Kew Gardens Hills Apartments
determined at trial. Owners, 8 Misc3d 1018[A], 803 NYS2d 18, 2005 NY Slip Op
B. Sterling's Attorney's Fees Claim
51147[U] (Sup. q Bronx Co. 2005) [**21]. Thus, as judgment
has been awarded to Sterling on its guaranty claims, the
alternative [*32] theory of liability based on fraud is rendered
Sterling also seeks an award of reasonable [*30] attorneys' fees academic, and must be dismissed. See Torino v. KLM
incu~ed in enforcing the guaranty, and a hearing before a Construction. Inc., supra. In view of this dismissal, that portion
Spectal Referee to report and recommend an amount of of Sterling's motion to sever the fraud claim for discovery and
attorneys' fees to be included in a separate money judgment. trial is denied as moot.
Each guaranty contains the following attorney's fees provision:
1**20.1 The undersigned [Biaggi, Orlean and Cervone]
agree that, whenever an attorney is used to collect or
enforce this agreement or to enforce, declare or adjudicate
any rights or obligations under this agreement, whether by
suit or by any other means whatsoever, a reasonable
attorney's fee shall be paid by each of the undersigned
against whom this guaranty agreement or any obligation or
right thereunder is sought to be enforced, declared or
adjudicated.
D. Motion by Orlean and Cervone to Stay Action
Orlean and Cervone also move for an order staying this action,
on the ground that they are "targets" of a federal criminal
investigation initiated as a result of a complaint by Sterling, and
both have asserted their Fifth Amendment rights against self-
incrimination in this case.
In view of the Court's determination herein awarding plaintiff
partial summary judgment on its breach of guaranty claims and
dismissing defendants' defenses and counterclaims, and as it
Where as here, a guaranty includes language such as this, the appears that the testimony of Orlean and Cervone is not
guaranty "is broad enough to encompass liability for the relevant to the sole remaining issue as to the amount of
plaintiffs attorney's fees." Chase Manhattan Bank. N.A. v damages, a stay is not warranted.
Marcovitz, 56 AD2d 763, 763, 392 N.Y.S.2d 435 (1st Dept),
aweal denied 42 NY2d 807 (1977); accord Int'l Business
Page 9 of9
2006 N.Y. Misc. LEXIS 9404, *32; 2006 NY Slip Op 30685(U), **21
E. Sterling's Request for Sanctions such fees shall either be determined at trial or referred to a
Special Referee, subject to further order of this Court; and it is
Finally, Sterling's motion for an order, pursuant to 22 NYCRR further
130-1.1, imposing sanctions on defendants for their assertion of
frivolous defenses and counterclaims, is denied. As Sterling has ORDERED that Sterling's motion for an order imposing
not demonstrated that defendants' defenses and counterclaims sanctions on defendants is denied; and it is further
completely 1*.\3] lack merit, sanctions are not warranted. See
Rudansky v. Giorgio Armani. S.pA., 306 AD2d 174, 764 ORDERED that defendants' counterclaims and affirmative
N.Y.S.2d 5 (1st Dept 2003); Grossman v Pendant Realty Corp., defenses are dismissed; and it is further
221 AD2d 240, 634 N.Y.S.2d 61 (181 Dept 1995), lv dism 88
NY2d 919. 670 N.E.2d 228. 646 N.Y.S.2d 987 0996).
The Court has considered the remaining arguments, and finds
them to be without merit.
Accordingly, it is
ORDERED that the motion of plaintiff Sterling National Bank
ORDERED that the motion of defendant Mario Biaggi, Jr.
(Motion Sequence No. 005) [*34] and the motion of defendant
Keith Alan Orlean and Philip Cervone (Motion Sequence
No.006), for summary judgment is granted only to the extent of
dismissing Sterling's Fourth Cause of Action for Fraud and
Sterling's Fourth Cause of Action is severed and dismissed; in
all other respects defendants' motions are denied.
(Motion Sequence No. [**22] 004) for partial summary DATED: September 25, 2006
judgment on its First, Second and Third Causes of Action in the
amended complaint is granted only to the extent of liability, Is/ Joan A Madden
and the issue of damages shall be determined at trial; and it is
J.S.C. Joan A Madden
further
ORDERED that plaintiff Sterling National Bank is entitled to
an award of reasonable attorney's fees incurred in enforcing the
guaranties, and the issue as to the amount of
USER ANNOTATIONS
No Shepard's Signal™
As of: August 20, 2014 10:29 AM EDT
Sunbelt Rentals, Inc. v New York Rennaissance
Supreme Court of New York, New York County
December 16, 2013, Decided
152106/2012
Reporter: 2013 N.Y. Misc. LEXIS 6024; 2013 NY Slip Op 33213(U)
[**2] SUNBELT RENTALS, INC., Plaintiff, -against- NEW
YORK RENAISSANCE, GOLDMAN SACHS
HEADQUARTERS LLC, BATTERY PARK CITY
AUTHORITY, JOSHUA DOLAN, DAN PIRVULESCU and
"JOHN DOE NO. 1" THROUGH JOHN DOE NO. 5",
Defendants. Index No.: 152106/2012
Notice: THIS OPINION IS UNCORRECTED AND WILL
NOT BE PUBLISHED IN THE PRINTED OFFICIAL
REPORTS.
I core Terms
guaranty, rental contract, rented, summary judgment, services,
guarantors, issue of fact, invoices, account stated, rental,
personal guaranty, argues, rental equipment, subcontractor,
constitutes, quantum, meruit
Judges: [*1] Hon. Carol Robinson Edmead, J.S.C.
Opinion by: Carol Robinson Edmead
I Opinion
DECISION AND ORDER
CAROL R. EDMEAD, J.S.C.:
MEMORANDUM DECISION
Plaintiff, Sunbelt Rentals, Inc. ("plaintiff') moves for
summary .iudgment in the amount of $36,148.78, plus interest
and costs, against defendant New York Renaissance ("NYR")
for breach of contract, quantum meruit, and account stated,l
and against defendants Joshua Dolan ("Dolan") and Dan
Pirvulescu ("Pirvulescu") (collectively, the "guarantors") for
breach of their personal guaranty.
Factual Background
According to plaintiff, Battery Park City owns the property
and improvements thereon located at 102 North End Avenue,
New York, New York (the "Premises"). With Battery Park's
consent and approval, Goldman Sachs entered into an
agreement with F.J. Schiame Construction [*2] Co., Inc.
("Schiame") for a construction project at the Premises (the
"Project").
Plaintiff contends that Schiame then entered into a
subcontract with NYR for NYR to [**3] provide labor and
materials at the Project. NYR, in tum, entered into an
agreement with plaintiff, in which plaintiff agreed to rent
construction equipment and provide supplies and services to
NYR for use at the Project (the "Rental Contract"). Plaintiff
further contends that the Rental Contract provides that NYR
shall be liable for all service charges at 1.5% per month, costs,
including attorneys' fees,2 incurred in connection with actions
undertaken by plaintiff to enforce its rights thereunder.
Plaintiff argues that as shown on several invoices billed to
NYR, it performed under its Rental Contract, as agreed and as
requested by NYR, and that NYR accepted and received the
benefit of plaintiffs performance. Plaintiff claims it regularly
billed NYR, which received, accepted and retained plaintiffs
bills, without objection. Plaintiff further argues that a balance
of $36,148.78 is due and remains unpaid [*3] although duly
demanded. Therefore, NYR breached the Rental Contract, and
is also liable under theories of quantum meruit and account
stated.
As against the guarantors, plaintiff cites to an "Application for
Credit," (Exh. G) as proof that they each signed a guaranty on
April 18, 2008, personally and unconditionally guaranteeing
payment to plaintiff of all NYR's liabilities arising from the
rental equipment, supplies and services (the "Dolan guaranty"
and "Pirvulescu guaranty," respectively). Plaintiff points out
that in his answer, Pirvulescu admitted that he personally
guaranteed the rental contract.
1 The oortion of olaintiffs motion al!ainst defendants Goldman Sachs Headauarters. LLC 9 ("Goldman Sachs") and Batterv Park Citv
Authoritv ("Batterv Park Citv") to foreclose on the mechanic's lien was withdrawn without oreiudice oer stioulation dated October 16. 2013.
Counsel for olaintiff represents that the branch of the motion to foreclose on the mechanic's lien is likewise withdrawn as against NYR,
without prejudice.
2 Plaintiff contends that its law firm is prosecuting this action on a 25% contingency basis, plus costs and expenses.
Yelena Kotlyarsky
2013 N.Y. Misc. LEXIS 6024, *3; 2013 NY Slip Op 33213(U), **3 Page 2 ofS
In opposition, Dolan argues that questions of fact exist as to for the equipment rented by AR. Pirvulescu denies ever
the enforcability of the Dolan guaranty. From July 2007 to agreeing to be personally responsible [*6] for AR's
December 2007, he met with NYR's owner, Pirvulescu, equipment rentals and did not sign any such guaranty. And,
concerning a Project Manager position with NYR. Dolan since NYR has no indebtedness to plaintiff, Pirvulescu cannot
accompanied Pirvulescu on several occasions to [**4] active be personally liable for any debt of NYR.
construction sites to gauge Dolan's field experience. Dolan
was asked to complete a New Employee Packet during his In reply, plaintiff argues that Pirvulescu's self-serving
interview at Pirvulescu's home office, and Dolan signed the affidavit is insufficient to raise an issue of fact. Plaintiff
Dolan guaranty without understanding the legal implications points out that the Application for Credit (which contains the
thereof. Dolan states that he never intended for the documents guaranty language) clearly states the customer name as "New
he signed to [*4] become effective unless and until he got the York Renaissance" and the email address is to
job. Dolan never got the position. Further, the Dolan guaranty josh@nyrenaissance.com. And, the application was signed in
is not dated, and was not intended to be delivered to plaintiff 2008, two years before AR was even formed on April 6, 2010.
or to bind Dolan. Arguably, said document was "really NYR, on the other hand, was in existence at the relevant time
intended to be more like a 1etter of intent."' Parol evidence is period. And, plaintiff does not have an account with AR and
necessary to determine the circumstances surrounding Dolan's NYR never advised plaintiff that it was operating under an
execution of the Dolan guaranty, including when he signed it assumed name or business entity other than NYR. NYR does
as well as his intent with regard to any of his actions or failure not submit any documentation demonstrating that AR, not
to act. Dolan also argues that no consideration was given to NYR, was the subcontractor on the Project. Thus, AR could
him in exchange for the Dolan guaranty, which incorrectly not have been the entity that rented the subject equipment.
states that he has a financial interest in NYR.
Pirvulescu, as an officer of NYR, also opposes the motion,
arguing that NYR was never involved with the Project.
Instead, American Renaissance ("AR"), a completely separate
company of which he is also an officer, was hired by one of
Schiame's subcontractors' affiliates (Alumicor Corp.), to
provide labor and materials at the subject Project. When AR
was awarded the subcontract from Alumicor Corp.,
Pirvulescu, on behalf of AR, contacted "Adam" of the
plaintiff about renting equipment and its work at the Project,
and they orally agreed that an account [*5] would be opened
for AR and that any rental equipment would be invoiced to
AR for payment. Pirvulescu argues that as further proof that
AR had an account and separate agreement with plaintiff, is
the fact that plaintiff filed a separate mechanic's lien against
AR (dated January 2012) (the "January 2012 lien"). AR filed
for bankruptcy protection, listing plaintiff as one of its
creditors, after it was terminated from the project and not
fully paid for its work. The bankruptcy [**5] proceeding is
still pending. Unlike AR, NYR never received any benefit of
the rented equipment or accepted plaintiff's services because
NYR was never a subcontractor at the Project to support a
quantum meruit claim. Therefore, NYR is not a proper
defendant in this action.
Further, the notice of lien shows equipment rented to NYR in
connection with a completely separate project in Brooklyn.
And, the personal guaranties stated that the
guaranties [**6] are given in consideration for
the [*7] extension of credit to rent the subject equipment. It is
uncontested that the guarantors signed their respective
guaranties.
Discussion
As the proponent of the motion for summary judgment,
plaintiff must establish its cause of action or defense
sufficiently to warrant the court directing judgment in its
favor as a matter of law in (CPLR §3212 [bl; VisionChina
Media Inc. v Shareholder Representative Services, LLC. 109
AD3d 49, 967 NYS2d 338 [1st Dept 20131; Ryan v Trustees of
Columbia University in City ofNew York. Inc., 96 AD3d 551.
947 NYS2d 85 [1st Dept 2012[). The proponent of a motion
for summary judgment must make a prima facie showing of
entitlement to judgment as a matter of law, by advancing
sufficient "evidentiary proof in admissible form" to
demonstrate the absence of any material issues of fact (People
ex rei. Cuomo v Greenberg. 95 AD3d 474, 946 NYS2d 1 [1st
Dept 2012]; Madeline D'Anthony Enterprises, Inc. v
Sokolowsky. 101 AD3d 606. 957 NYS2d 88 [1st Dept 2012/,
citin!{ Alvarez v Prospect Hosp.. 68 NY2d 320. 324, 508
NYS2d 923, 501 NE2d 572 [1986[ and Zuckerman v City of
New York. 49 NY2d 557. 562. 404 N.E.2d 718. 427 N.Y.S.2d
595 [19801},
In addition, when Pirvulescu received the subject invoices, he
objected to them because they were addressed to NYR.
Plaintiff agreed to invoice AR, but never corrected the
invoices. Therefore, an account stated claim does not lie
against NYR.
Where the proponent of the motion makes a prima facie
With respect to the Pirvulescu guaranty, Pirvulescu attests showing of entitlement [*8] to summary judgment, the
that plaintiff never asked him to be personally responsible burden shifts to the party opposing the motion to
Yelena Kotlyarsky
2013 N.Y. Misc. LEXIS 6024, *8; 2013 NY Slip Op 33213{U), **6 Page 3 of5
demonstrate by admissible evidence the existence of a factual
issue requiring a trial of the action (Wing Wong Realty Corp.
v Flintlock Const. Services. LLC. 95 AD3d 709. 945 NYS2d
62 [1st Dept 2012/citing Alvarez v Prospect Hosp .. 68 NY2d
320. 501 NE2d 572. 508 N.Y.S.2d 923 [1986/; Ostrov v
Rozbruch. 91 AD3d 147. 936 NYS2d 31 [1st Dept 20127).
Thus, to defeat a motion for summary judgment, the opposing
party must show facts sufficient to require a trial of any
material issue of fact (CPLR §3212[bl), and must set forth
evidentiary proof in admissible form in support of his or her
claim [**7] that material triable issues of fact exist
(Zuckerman at 562; IDX Capital. LLC v Phoenix Partners
Group, 83 AD 3d 569. 922 NYS2d 304 [1st Dept 2011 V. The
defendant "must assemble and lay bare fitsl affirmative proof
to demonstrate that genuine issues of fact exist" and "the issue
must be shown to be real, not feigned since a sham or
frivolous issue will not preclude summary relief" (Kornfeld v
NRX Technologies. Inc., 93 AD2d 772, 461 N.Y.S.2d 342 [1st
Dept 19831, affd62 NY2d 686, 465 N.E.2d 30, 476 N. Y.S.2d
523 fi984/; see Machado v Henry. 96 AD3d 437, 945 NYS2d
552 fist Dept 2012/; Garber v Stevens, 94 AD3d 426, 941
NYS2d 127 [1st Dept 2012/, [*9] citing Pippo v City ofNew
York. 43 AD3d 303, 304, 842 NYS2d 367 [1st Dept 20071
f"(a) party's affidavit that contradicts (his or) her prior sworn
testimony creates only a feigned issue of fact, and is
insufficient to defeat a properly supported motion for
summary judgment"l). Mere conclusions, expressions of hope
or unsubstantiated allegations or assertions are insufficient
(Siegel v City ofNew York. 86 AD3d 452, 928 NYS2d 1 fist
Dept 201llciting Zuckerman v City of New York. 49 NY2d
557. 562, 427 NYS2d 595, 404 NE2d 718 [1980]).
Here, plaintiff failed to sufficiently establish its entitlement to
summary judgment against NYR.
As to its breach of contract claim against NYR, such a claim
requires a showing of "the existence of a valid contract,
performance by the plaintiff, breach of the contract by
defendant and resulting damages" (Harris v Seward Park
Housing Corp. 79 AD3d 425, 426, 913 NYS2d 161 flst Dept
2010/; Flomenbaum v New York Univ .. 71 AD3d 80, 890
NYS2d 493 fist Dept 2009/; Morris v 702 East Fifth Street
HDFC, 46 AD 3d 478, 850 NYS2d 6 [1st Dept 20071 ).
A quantum meruit claim requires a showing of "the
performance of services in good faith, acceptance of the
services by the [*10] person to whom they are rendered, an
expectation of [**8] compensation therefor, and the
reasonable value of the services" (Georgia Malone & Co ..
Inc. v Ralph Rieder, 86 AD 3d 406, 926 NYS2d 494 [1st
Dept 2011lciting Freedman v Pearlman, 271 AD2d 301, 304,
706 N.Y.S.2d 405 [2000/).
And, an account stated claim requires a showing of
defendant's receipt and retention of the subject statement of
account without proper objection within a reasonable time
(Loheac v. Children's Corner Learning Center, 51 AD3d 476,
857 N.Y.S.2d 143 [1st Dept 2008]; Ruskin, Moscou, Evans &
Faltischek v FGH Realty Credit Corp .. 228 A.D.2d 294, 295,
644 N. Y.S.2d 206 [1st Dept 1996]). Where an account is
rendered showing a balance, if the party receiving the account
fails to dispute its correctness or completeness, that party will
be bound by it as an account stated, unless fraud, mistake or
other equitable considerations are shown (Peterson v IBJ
Schroder Bank & Trust Co .. 172 A.D.2d 165. 567 N.Y.S.2d
704 [1st Dept 1991]).
Here, plaintiff's Senior Credit Manager attests to the existence
of an equipment rental contract between plaintiff and NYR,
and that the "Rental Contract" provides for monthly service
charges and costs for collection, including attorneys' fees.
However, plaintiff does [*11] not expressly identify any of
its exhibits as constituting the Rental Contract between
plaintiff and NYR. And, while language concerning the
service charges and attorneys' fees is found in Exhibit G-the
2008 Application for Credit-this exhibit is cited to only, and
for the first time, in support of plaintiff's claims as against the
guarantors (Affidavit in Support, Paragraph 35) since it
contains a personal guaranty. Nor does plaintiff expressly
state that Exhibit G, the Application for Credit, constitutes the
"Rental Contract."3 Indeed, upon further review, said
Application for Credit makes reference [**9] to a separate,
documented "Rental Contract," as follows:
"The undersigned ("Customer") in consideration of
Lessor extending commercial credit . . . . warrants
and agrees that by executing this Agreement below: .
.. (b) Customer has, received, read, understands and
accepts all of the terms and conditions of Lessor's
rental contract, which terms and conditions are on
the reverse side of each and every rental contract,
including the Release and Indemnification Provision
in Section 8 and the Insurance Provision in Section
9; (c) such terms and conditions are deemed
incorporated into and [*12] made a part of this
Agreement .... "
The Application for Credit does not contain any "Section 8"
or "Section 9," thereby giving rise to the possibility of
3 The Aoolication for Credit. however. was executed bv "Josh Dolan" on Aori118. 2008, and Dolan is identified in the application as the
"Authorized Agent" for NYR, with an email address of "Josh@nyrenaissance.com."
Yelena Kotlyarsky
2013 N.Y. Misc. LEXIS 6024, *12; 2013 NY Slip Op 33213(U), **9 Page 4 of5
the existence of a separate document constituting the rental
agreement. Nor does plaintiff provide any documentary
evidence that NYR was engaged by Schiame for the subject
Project (as it alleges).
Thus, although the terms of the rental contract are
incorporated into the Application for Credit, plaintiff failed to
establish the existence of a valid rental contract between it
and NYR, as a matter of law.
And, notably, while plaintiff attests that it rented equipment to
NYR for four months starting from May 3, 2011 (through
September 28, 2011 ), the invoices from plaintiff to NYR
show that plaintiff rented equipment to NYR from June 2011.
However, even assuming that Exhibit G (the Application for
Credit) coupled with the invoices, constitutes the Rental
Contract, further discovery is necessary in order to determine
whether plaintiff's [*13] rental equipment was provided to
AR, instead of NYR, under an oral agreement.4 In opposition,
NYR asserts that contrary to plaintiff's unsupported and
undocumented allegation that NYR was hired by Schiame as
a subcontractor at the Project, NYR [**10] had no
involvement with the Project, and that AR, instead, was a
subcontractor on the Project that rented the equipment which
is the subject of this action. NYR does not deny executing the
Application for Credit in 2008 for the rental of plaintiff's
equipment. However, it is claimed that when AR was
awarded the subcontract at the Project, Pirvulescu spoke to
"Adam" about establishing an account to rent equipment at
AR's expense. In reply, plaintiff does not address this
allegation concerning "Adam," and plaintiff's claim that it has
no account in the name of AR is consistent with Pirvulescu's
assertion that the invoices were erroneously sent to NYR,
when they should have been billed to AR.
Further, the 2012 Lien submitted in opposition shows that AR
was a general contractor [*14] and that NYR rented
equipment from plaintiff regarding a different project location
in Brooklyn. Although AR was not in existence in 2008 when
the Application for Credit was signed, the rentals occurred in
2011, a year after AR was incorporated. Thus, an issue of fact
exists as to whether AR, as opposed to NYR, rented the
subject equipment.
Therefore, as discovery is needed in order to establish
whether the subject rentals were made by plaintiff to NYR,
summary judgment against NYR for breach of contract,
quantum meruit, and account stated is unwarranted, at this
juncture, and is denied, without prejudice (Davidof!Malito &
Hutcher, LLP v Scheiner. 38 Mise 3d 1201[A]. 966 NYS2d
345 [Table]. 2012 NY Slip Op 52311[UJ [Supreme Court.
New York County 2012] (denying summary judgment on
account stated claim where defendant claimed that all services
rendered by plaintiff to defendant were not performed to the
benefit of defendant, but to another party, i.e., his business
entities)).
As against the guarantors, on a motion for summary judgment
to enforce a written guaranty, "the creditor needs to prove an
absolute and unconditional guaranty, the
underlying [**11] [*15] debt, and the guarantor's failure to
perform under the guaranty" (Davimos v Halle. 35 AD3d 270.
826 NYS2d 61 flst Dept 2006], citing Citv of New York v
Clarose Cinema Corp .. 256 AD2d 69, 681 NYS2d 251 [1st
Dept 1998]). "rWlhere a guaranty is clear and unambiguous
on its face and, by its language, absolute and unconditional,
the signer is conclusively bound by its terms absent a showing
of fraud, duress or other wrongful act in its inducement"
(Citibank, N.A. v Uri Schwartz & Sons Diamonds Ltd., 97
AD3d 444, 948 NYS2d 275 flst Dept 20121).
Here, it is uncontested that both guarantors executed an
unconditional personal guaranty, which provides that the
guaranty is given in consideration for the extension of credit
(Movado Group. Inc. v. Presberg. 259 AD2d 371. 687
NYS2d 116 flst Dept l999]citing Sun Oil Co. v Heller, 248
NY 28. 161 NE 319 ("An extension of credit is ample
consideration for the execution of a guaranty")).
As to the guarantors, it is uncontested that Pirvulescu and
Dolan executed a guaranty of NYR's rental equipment
payment obligations. However, as explained above, plaintiff
failed to establish, at this .iuncture, the underlying debt, i.e.,
that NYR is the party obligated [*16] for the rental
equipment services at issue, for which the guarantors may be
held liable under their personal guaranties.5
[**12] Conclusion
Based on the foregoing, it is hereby
4 The Preliminarv Conference Order states that any party may move for summary judgment at any time, and the papers do not indicate that
discovery, including depositions, is complete.
5 Dolan's claim that the Dolan ~ruarantv is undated is insufficient to raise an issue of fact. as he does not denv that said ~ruarantv "bears his
silmature" (see Gettinl!er Associate v One Move Uoward. Inc .. 19 Mise 3d 1118f Al. 862 NYS2d 814 fTable 1. 2008 NY Slio Oo 50768fUl
rsuoreme Court. New York Countv 20081 (reiectine claim that ~ruarantv was merelv an unwitnessed. undated document that did not refer to
the underlvine lease where it was uncontested that the ~ruarantv bore his sienature)). And. Dolan's remainine claims. includine the claim that
he siened the Dolan ~ruarantv without understandine its leeal imolications is insufficient (Chemical Bank v Masters. 176 AD2d 591.591-592.
574 NYS2d 754 [1991] ("defendant's conclusory allegations that
Yelena Kotlyarsky
2013 N.Y. Misc. LEXIS 6024, *16; 2013 NY Slip Op 33213(U), **12 Page 5 of 5
ORDERED that the motion by plaintiff for summary
judgment against [*17] defendants New York Renaissance,
Joshua Dolan, and Dan Pirvulescu is denied, without
prejudice; and it is further
ORDERED that plaintiff shall serve a copy of this order with
notice of entry upon all parties within 20 days of entry.
This constitutes the decision and order of the Court.
ORDERED that the parties shall proceed with discovery and
filing of the note of issue as directed in the Preliminary Dated: December 16, 2013
Conference Order; and it is further
Is/ Carol Robinson Edmead
Hon. Carol Robinson Edmead, J.S.C.
he was unaware that it was a nersonall!llarantv r andl that he advised the bank that he was unwillim.>: to personally guarantee the loan" do not
raise an issue of fact as to whether the signer was fraudulently induced into signing the documents")).
Yelena Kotlyarsky
