Telcar Group, Ltd. v Telcar Certified Ltd.

[*1] Telcar Group, Ltd. v Telcar Certified Ltd. 2009 NY Slip Op 52103(U) [25 Misc 3d 1215(A)] Decided on September 14, 2009 Supreme Court, Suffolk County Pines, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through November 18, 2009; it will not be published in the printed Official Reports.

Decided on September 14, 2009
Supreme Court, Suffolk County

Telcar Group, Ltd. n/k/a MIGNONE HOLDINGS, LLC, Plaintiff,

against

Telcar Certified Ltd. and ANTHONY LEVEY, Defendants.



27352-2004



Attorney for Plaintiff/Third Party Defendant

The Law Office of Elias C. Schwartz

By: Michelle Englander, Esq.

343 Great Neck Road

Great Neck, New York 11021

Attorney for Defendants/Third Party Plaintiffs Clifford Schwartz, Esq.

Schwartz & Blumenstein

250 West 57th Street, Suite 1619

New York, New York 10107

Emily Pines, J.

ORDERED, that the motion (motion sequence number 005) by plaintiff and third-party defendant for summary judgment is granted; and it is further

ORDERED, that the first counterclaim against third-party plaintiffs is severed and continued and will proceed to trial on October 27, 2009 at 9:30 a.m. before the undersigned.

Plaintiff, Telcar Group, LTD, n/k/a Mignone Holdings, LLC., ("Telcar Group") and third-party defendant, Angelo Mignone ("Mignone"), move by Notice of Motion for an Order pursuant to CPLR §3212 granting them summary judgment against defendants and third-party plaintiff on the four causes of action set forth in the Complaint and the six causes of action/counterclaims contained within the Answer; and severing and continuing the first counterclaim of third-party defendant. In support of the motion, Telcar Group and Mignone submit an affidavit of Mignone, an affirmation of counsel, a copy of the pleadings, the deposition transcript of defendant/third-party plaintiff, Anthony Levey ("Levey"), together with exhibits to the aforesaid documents. Defendants Telcar Certified LTD ("Certified") and Levey oppose the motion for summary judgment and submit an affidavit by Levey, an affirmation of counsel, copies of the pleadings, a bankruptcy Court Order and exhibits to the aforementioned documents. [*2]

Although the parties' familiarity with the factual and procedural history is presumed, a brief synopsis is warranted. Telcar Group was a company involved in the business of representing manufacturers selling furniture to school districts and this action centers around whether certain accounts receivables were included in an Asset Purchase Agreement dated October 20, 2003 and ultimately transferred to defendants/third-party plaintiffs. Plaintiff and third-party defendant assert that these disputed receivables were not included in the Asset Purchase Agreement and that they are the rightful owner of the receivables. Defendants/third-party plaintiffs claim that in fact, they are the owners of the disputed receivables. Specifically, in the Asset Purchase Agreement, plaintiff agreed to sell its assets to non-party, Telcar Holdings, LLC ("Holdings"). The Asset Purchase Agreement stated at §1.1(b) that Telcar Group was selling and transferring all of the assets including but not limited to: (b) All of the accounts, notes and other receivables and all rights relating thereto existing or accrued as of the Closing Date (as defined below), except for those receivables set forth on Schedule 1.1(b), and specifically excluding (x) receivables from any account debtor that as of the Closing Date is in bankruptcy or otherwise in a reorganization process and (y) receivables from the Principals or any Affiliate (as defined in Section 1.5(c) hereof) of the Principals (collectively, "Eligible Receivables");

Schedule 1.1(b), annexed to the motion papers indicated that the "excluded receivables" were "all accounts receivable of the Seller that have been outstanding for more than 150 days as of the Closing Date." Additionally, a document captioned "TELCAR GROUP, LTD. A/R AGING SUMMARY As of October 8, 2003" listed the accounts receivable over 150 days. These are the receivables which are the crux of the dispute between the parties.

To finance the purchase, Holdings entered into an agreement with Commerce Bank for a revolving line of credit of $2,000,000.00 in exchange for which Commerce acquired a security interest in Holdings' assets. Holdings withdrew approximately $1,500,000.00 on the line of credit and subsequently defaulted in payment to Commerce. As a result, Commerce commenced foreclosure proceedings against Holdings, and ultimately, Holdings surrendered the assets to Commerce. Thereafter, on or about June 30, 2004, Certified and Levey purchased the foreclosed assets from Commerce for $700,000.00, pursuant to an Asset Purchase Agreement. Parenthetically, it appears that prior to Holdings purchase from Telcar Group, Mignone and Levey may have been negotiating the purchase of Telcar Group's assets directly between themselves, but that such negotiations were unsuccessful. The June 30, 2004 Asset Purchase Agreement contained the following provisions: 7.3 Title to the Collateral. The Buyer hereby acknowledges that: (i) the Buyer is only taking title to the Collateral currently in the possession of Borrower, excluding however approximately $25,000.00 in payments on accounts receivable currently in possession of Borrower or Borrower's counsel; (ii) that none of the Collateral is currently in the possession of Lender; and (iii) the Buyer is fully familiar with the Collateral and has had sufficient opportunity to perform its own investigation as to the existence, condition, location and use of the Collateral, and inspect the Collateral that it is acquiring hereunder.[*3]13.3 Entire Agreement. This Agreement and the other documents delivered in connection herewith contain the entire understanding and agreement of the parties relating to the subject matter hereof and supersede all prior and/or contemporaneous understandings and agreements of any kind and nature (whether written or oral) among the parties with respect to such subject matter, all of which are merged herein. No party hereto has relied upon any representation or promise (whether written or oral) not expressly set forth herein.

Subsequently, on or about July 1, 2004 [FN1], Mignone and Levey entered into a "letter agreement" wherein each agreed to perform certain tasks in conjunction with the June 30, 2004 Asset Purchase Agreement. Specifically, Mignone agreed to cooperate with Levey "including but not limited to the deposit of receivables" and to "provide relevant information as to existing contracts, existing receivables and the business of Telcar generally." (Letter agreement at ¶10). In turn, Levey acknowledged that he had been "provided complete access to the books and records of Telcar and is not relying upon any representation of any kind or nature whatsoever by Telcar, Mignone or Kenneth Bogart." (Letter agreement at ¶11).

Telcar's Complaint sets forth four (4) causes of action alleging conversion of the receivables by defendants and a declaratory judgment that it is the owner of the disputed receivables. The amended third-party Complaint alleges that third-party plaintiffs are the owners of the disputed receivables and also asserts claims against third-party defendants sounding in fraud arising from alleged misrepresentations by Mignone regarding the disputed receivables and hiding of the books and records of Telcar Group. The third-party Complaint also alleges that Mignone breached a cooperation clause contained in a letter agreement dated July 1, 2004 and that Mignone was responsible for the actions of the bankruptcy trustee in commencing an action against Levey. Plaintiffs/third-party defendants served a Verified Answer to the third-party complaint and also asserted a counterclaim alleging Levey's breach of the letter agreement regarding the completion of certain outstanding jobs and seeking indemnification as a result of claims that arose thereto.

Telcar Group and Mignone now move for summary judgment and claim there are no questions of fact surrounding the ownership of the disputed receivables. Specifically, they refer to provision 1.1(b) of the October 20, 2003 Asset Purchase Agreement which specifically excluded certain receivables from the sale to Holdings. Thus, plaintiffs assert that these receivables always remained the property of Telcar Group, were not part of the assets foreclosed by Commerce and hence, were not sold to Certified pursuant to the June 30, 2004 Asset Purchase Agreement. Therefore, plaintiffs argue that they are entitled to summary judgment declaring them the rightful owner of the disputed receivables and to recovery of the monies received by Levey on account of payment of the disputed receivables.

With regard to the third-party complaint, plaintiffs/third-party defendants also claim that they are entitled to summary judgment dismissing the claim for fraud based upon alleged false [*4]representations by Mignone to Levey regarding the disputed receivables. Here, plaintiffs/third-party defendants refer to paragraph 11 of the letter agreement wherein Levey specifically acknowledges that he is not relying upon any representations and has been provided complete access to the books and records of Telcar. Thus, they argue that Levey's claims of hiding the books and false representations must be dismissed. Additionally, Levey testified in his examination before trial that his own accountant had advised him that the purchase of Telcar Group was a bad investment, but that he never raised the issue with Mignone. Further, on the issue of Telcar Group N.J. LLC ("Telcar NJ"), plaintiff/third-party defendants argue that Levey has admitted in his deposition that Telcar NJ was turned over to him and thus, the third cause of action in the third-party complaint must be dismissed. Finally, plaintiffs/third-party defendants argue that Certified and Levey have failed to demonstrate Mignone's breach of paragraph 10 of the letter agreement (the "cooperation clause").[FN2]

Defendants/third-party plaintiffs oppose the motion for summary judgment and assert that Mignone specifically provided Levey with the list of "Excluded Receivables" and represented to Levey that they would belong to him if he purchased Holdings from Commerce Bank. Therefore, they argue that Mignone should be estopped from claiming ownership of the disputed receivables or at a minimum that summary judgment must be denied as there is a question of fact regarding these receivables. Turning to the third-party complaint, defendants/third-party plaintiffs likewise assert that questions of fact preclude summary judgment. Levey asserts that Mignone provided the bankruptcy trustee with false information to induce him to commence proceedings against Levey in violation of the terms of the letter agreement and that such is borne out by certain letters from Mignone's counsel to the trustee's counsel annexed to the opposition papers.

The law is well settled that to obtain summary judgment, the moving party must make a prima facie showing of entitlement to judgment as a matter of law, offering sufficient evidence to demonstrate the absence of any material issues of fact. Goldberger v. Brick & Ballerstein, Inc., 217 AD2d 682, 629 NYS2d 813 (2d Dept. 1995) (internal citations omitted). The burden then shifts to the party opposing the motion to come forward with proof in admissible form demonstrating there are genuine issues of material fact which preclude the granting of summary judgment. Zayas v. Half Hollow Hills Cent. School Dist., 226 AD2d 713, 641 NYS2d 701 (2d Dept. 1996). Bald conclusory assertions are insufficient to defeat a motion for summary judgment. Orange County-Poughkeepsie Ltd Partnership v. Bonte, 37 AD3d 684, 830 NYS2d 571 (2d Dep't 2007). "It is not up to the court to determine issues of credibility or the probability of success on the merits, but rather to determine whether there exists a genuine issue of fact." Triangle Fire Protection Corp. v. Manufacturer's Hanover Trust Co., 172 AD2d 658, 570 NYS2d 960 (2d Dept. 1991). A motion for summary judgment "should not be granted where the facts are in dispute, where conflicting inferences may be drawn from the evidence, or where there are issues of credibility." Scott v. Long Island Power Auth., 294 AD2d 348, 741 NYS2d 708 (2d Dept. 2002). [*5]

It has been repeatedly recognized that an agreement which is clear and unambiguous on its face must be enforced according to its terms. Greenfield v. Philles Records, Inc., 98 NY2d 562, 750 NYS2d 565, 780 NE2d 166 (2002); Salerno v. Odoardi, 41 AD3d 574, 838 NYS2d 156 (2d Dept. 2007); Norma Reynolds Realty, Inc. v. Edelman, 29 AD3d 969, 817 NYS2d 85 (2d Dept. 2006). "The construction and interpretation of an unambiguous written contract is an issue of law within the province of the court, as is the inquiry of whether the writing is ambiguous in the first instance. If the language is free from ambiguity, its meaning may be determined as a matter of law on the basis of the writing alone without resort to extrinsic evidence. The objective is to determine the parties' intention as derived from the language employed in the contract." New York Schools Insurance Reciprocal v. Honeywell, Inc., 55 AD3d 702, 867 NYS2d 456 (2d Dept. 2008); quoting, Katina, Inc., v. Famiglietti, 306 AD2d 440, 761 NYS2d 327. See also, Hindes v. Weisz, 303 AD2d 459, 756 NYS2d 601 (2d Dept. 2003).

The Court of Appeals has recognized that the doctrine of equitable estoppel is designed to:

preclude a person from asserting a right after having led another to form the reasonable belief that the right would not be asserted, and loss or prejudice to the other would result if the right were asserted. The law imposes the doctrine as a matter of fairness. Its purpose is to prevent someone from enforcing rights that would work injustice on the person against whom enforcement is sought and who, while justifiably relying on the opposing party's actions, has been misled into a detrimental change of position."To establish an estoppel, " a party must prove that it relied upon another's actions, its reliance was justifiable, and that, in consequence of such reliance, it prejudicially changed its position."

Shondel J. v. Mark D., 7 NY3d 320, 820 NYS2d 199, 853 NE2d 610 (2006). See also,Town of Hempstead v. Incorporated Village of Freeport, 15 AD3d 567, 790 NYS2d 518 (2d Dept. 2005). The Second Department has held that the elements of estoppel with regard to the party to be estopped are "(1) conduct which amounts to a false representation or concealment of material facts; (2) intention that such conduct will be acted upon by the other party; and (3) knowledge of the real facts." First Union National Bank v. Tecklenburg, 2 AD3d 575, 769 NYS2d 573 (2d Dept. 2003)(internal quotations omitted). Whether a party was misled by the conduct or representations of another party and whether the party justifiably relied on that conduct to its disadvantage can raise questions of fact precluding summary judgment. See, e.g., Fundamental Portfolio Advisors, Inc., v. Tocqueville Asset Management, 7 NY3d 96, 817 NYS2d 606, 850 NE2d 653 (2006).

In the case at bar, plaintiffs have met their prima facie burden of demonstrating entitlement to summary judgment. The plain language of the October 20, 2003 Asset Purchase Agreement stated that certain receivables were excluded from the transfer from plaintiff to Holdings. These receivables were documented on a schedule annexed to the Agreement and included in the motion papers. When Holdings Asset's were seized by Commerce, they only included those assets that were transferred by Telcar Group to Holdings; since the receivables were not transferred to Holdings, they could not have been subject to the sale to defendants. Moreover, Levey executed the June 30, 2004 [*6]Asset Purchase Agreement which provided that he had the opportunity to investigate the "existence, condition, location and use of the collateral." Further, it contained a merger clause that provided the Levey had not relied on any representation not contained within such agreement.

In opposition to the motion, defendants failed to raise a triable issue of fact regarding whether Mignone's conduct gave caused defendants to purchase the assets from Commerce. To succeed on an equitable estoppel claim, defendants must demonstrate that their reliance on any representations by Mignone were justifiable. Chadirjian v. Kanian, 123 AD2d 596, 506 NYS2d 880 (2d Dept. 1986). See also, Jordan Panel Systems, Corp. v. Turner Construction Co., 45 AD3d 165, 841 NYS2d 561 (1st Dept. 2007). Here Levey executed the June 30, 2004 Asset Purchase Agreement containing both disclosures and merger clauses and the July 1, 2004 letter agreement wherein he acknowledged that he was not relying on any representations and had been provided complete access to the books and records. Finally, Levey testified in his deposition that he was advised by his accountant that the purchase was not a good investment. In light of all of these writings and testimony, even assuming arguendo, that Mignone made certain representations, Levey cannot sustain a claim that reliance on such was justifiable. Therefore, since defendants have failed to raise a triable issue of fact regarding ownership of the receivables, the motion for summary judgment on the first and second causes of action is granted.

With regard to the third and fourth causes of action of the third-party complaint, it appears that the parties now agree that Telcar NJ was transferred to defendants/third-party plaintiffs. Thus, the motion to dismiss those causes of action is granted.

Based on the foregoing, the motion for summary judgment is granted in its entirety.

The first counterclaim in the Amended Verified Answer to the third party complaint is severed and continued and will proceed to trial on October 27, 2009 at 9:30 a.m. There will be no adjournments.

This constitutes the DECISION and ORDER of the Court. Dated: September 14, 2009 Riverhead, New York

EMILY PINES J. S. C. Footnotes

Footnote 1:In July of 2004, Holdings filed a Chapter 7 Bankruptcy Petition in the United States Bankruptcy Court for the Eastern District of New York.

Footnote 2:Plaintiffs/third-party defendants do not move for summary judgment on their counterclaim asserted in their Amended Verified Answer to the Amended Third-Party Complaint but merely seek to have such counterclaim severed and continued.