1626 2nd Ave. LLC v Salsberg

[*1] 1626 2nd Ave. LLC v Salsberg 2012 NY Slip Op 50287(U) Decided on February 17, 2012 Supreme Court, New York County Fried, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on February 17, 2012
Supreme Court, New York County

1626 2nd Avenue LLC, Plaintiff,

against

Steven Salsberg and NICK CAMAJ, Defendants.



603492/2009



APPEARANCES:

For the Plaintiff:

LAW OFFICES OF BRUCE

LEVINSON, ESQ.

747 Third Avenue

New York, NY 10017

By: Gregory Brown, Esq.

For Defendant Salsberg:

JOSHUA E. ABRAHAM, ESQ.

380 Madison Avenue

New York, NY 10017

By: Joshua E. Abraham, Esq.

For Defendant Camaj:

STERN & ZINGMAN, LLP

331 Madison Avenue

New York, NY 10017

By: Cheryl R. Ginsberg, Esq.

Bernard J. Fried, J.

By this motion, Plaintiff, 1626 Second Avenue LLC ("Second Avenue"), moves for summary judgment against Defendants, Steven Salsberg ("Salsberg") and Nicola (a/k/a Nick) Camaj ("Camaj"). Plaintiff seeks the entry of judgment against Defendants, in the amount of $3,147,190.67, as well as the dismissal of the counterclaim asserted by Salsberg. By cross-motion, Salsberg and Camaj both seek dismissal of the complaint. Salsberg also seeks summary judgment in his favor on his counterclaim, and Camaj further seeks dismissal of the cross-claim asserted against him by Salsberg. [*2]

Briefly, the events giving rise to this lawsuit are as follows. Second Avenue is the owner of a commercial space located at 1626 2nd Avenue, New York City (the "Premises"). Defendants, Camaj and Salsberg, are the principals of Notte Restaurant Corp. ("Notte"), a New York corporation which was formerly in the business of operating a café and wine bar at 1626 2nd Avenue. In September 2007, Notte and Second Avenue entered into a written lease agreement, whereby Notte would lease the Premises for ten years (the "Lease"). (See Pecora Aff.[FN1] Ex. A.) Also in September 2007, the parties executed a guaranty agreement (the "Guaranty"), whereby: The undersigned guarantys [sic] to the Landlord, its successors and assigns the full faithful and prompt performance of any and all obligations of Tenant under the lease, including without limitation, the obligation to pay rent and additional rent as those terms are defined in the lease, to the latest date that Tenant, its assigns and subleases, if any, shall have . . . (a) Vacated and surrendered the . . . premises . . . , and (b) Delivered the keys . . . and; (c) Paid to the Landlord all accrued rent . . .

(Pecora Affirm. Ex. C.)

The Guaranty defines "LANDLORD" as Second Avenue, "TENANT" as Notte, and "Guarantor" as Salsberg. There is no dispute that Salsberg and Camaj signed the Guaranty, however, Camaj asserts that he believed he was signing another page of the Lease, and not the Guaranty; and Salsberg contends that Notte, and not Salsberg, was intended to be the guarantor.

There is no dispute that, by January 2009, Notte had defaulted on its obligations to pay rent to Second Avenue. However, Salsberg contends that the reason for nonpayment was Second Avenue's delay in issuing a Letter of No Objection, which would enable Notte to obtain a liquor license and provide outdoor seating for customers. In early 2009, Salsberg and Notte brought an action against Second Avenue, in this court, asserting causes of action for fraudulent inducement, negligent misrepresentation and breach of contract, all arising out of the alleged delay in the issuance of the Letter of No Objection.[FN2] (The "Notte Action.")

In response, Second Avenue commenced a summary non-payment proceeding against Notte in the Civil Court of the City of New York (the "Civil Court Action")[FN3]. On July 21, 2009, the Civil Court entered a judgment, awarding to Second Avenue money damages of $459,039.20, and restoring to it possession of the Premises. (See Pecora Aff. Ex. D.) By Order dated May 24, 2010, the Appellate Term, First Department, affirmed the Civil Court's judgment. (Pecora Aff. Ex. K.)

In May 2010, Salsberg and Notte filed a supplemental complaint in the Notte Action, asserting additional causes of action for breach of UCC Article 9, arising out of Second Avenue's retention of certain collateral which had been pledged as security in connection with the Lease. [*3]By their supplemental complaint, Salsberg and Notte seek a declaratory judgment that they have applied the collateral in full satisfaction of Notte's monetary obligations, and they further seek compensatory damages of $2.5 million, punitive damages of $5 million, and reformation of the Lease.

In November 2009, Plaintiff commenced the present action, seeking to collect the $459,039.20 judgment from Salsberg and Camaj, pursuant to the Guaranty. Plaintiff also seeks additional rent, which it contends will continue to accrue through the pendency of this action, and attorneys' fees. In response, Salsberg asserts a counterclaim of fraudulent inducement, as well as a cross-claim, against Camaj, for contribution.[FN4] Like his claim of fraudulent inducement asserted in the Notte action, Salsberg's counterclaim arises out of the alleged delay, by Second Avenue, in issuing the Letter of No Objection.

I turn to Second Avenue's motion, first. Second Avenue seeks summary judgment on its claim that Salsberg and Camaj are liable under the Guaranty. In addition to enforcing the Civil Court's judgment of $459,039.20 against Salsberg and Camaj, individually, Second Avenue also seeks to hold the two individual defendants liable, under the Guaranty, for rent and additional rent, as allegedly contemplated by the Lease, totaling $2,688,151.47, and for attorneys' fees. Finally, Second Avenue seeks dismissal of Salsberg's counterclaim.

I first address the prong of the motion dealing with liability under the Guaranty.

Second Avenue argues that, since there is no dispute that Notte is liable for the judgment of the Civil Court, and there is no dispute that Salsberg and Camaj signed the Guaranty, pursuant to which they agreed to guarantee all obligations of Notte under the Lease, there can be no dispute that both Salsberg and Camaj are liable under the Guaranty for payment of the Civil Court judgment. Second Avenue further argues that the Lease contains an acceleration clause, which provides that, in the event of default or "dispossess by summary proceedings . . . rent and additional rent shall become due thereupon and be paid up to the time of such . . . dispossess." (See Pecora Aff. Exs. A and B, ¶ 18.[FN5]) This provision further permits the owner to re-let the premises at a rate lower than that provided for by the Lease, and requires tenant to "pay Owner as liquidated damages . . . any deficiency between the rent . . . to be paid [under this Lease] and the net amount, if any, of the rents collected on account of the subsequent lease . . . for each month of the period that would otherwise have constituted the balance of the term of this lease." (Id.) Second Avenue argues that Notte is liable under this provision for liquidated damages totaling more than $2.6 million, and that the Guaranty attaches liability to Salsberg and Camaj for this amount.

Both Salsberg and Camaj argue that they are not individually liable under the Guaranty. Salsberg argues, first, that the Guaranty does not satisfy the Statute of Frauds, GOL § 5-[*4]701(a)(2), because it is not clear, from the four corners of the document, itself, exactly who is intended to be the Guarantor. Salsberg argues that it is improper to enforce a guaranty which is barred by the Statute of Frauds for its failure to include an essential term — the identity of the guarantor. Moreover, since the Guaranty defines "TENANT" as Notte, and subsequently provides that, "TENANT( Guarantor') hereby guarantys [sic] and agrees . . .", Salsberg argues that, in fact, Notte is the Guarantor, and Salsberg signed merely as a representative of Notte. He argues that Camaj's signature, directly above the signature line, provides further evidence that Notte is the guarantor, because there would otherwise have been no reason for the two principals to sign. Salsberg further argues that, since it is undisputed that Second Avenue (or, at the very least, an employee acting on its behalf) drafted the Guaranty, any ambiguities must be construed against Second Avenue. Since the Guaranty is unclear as to the identity of the guarantor, Salsberg asserts that this ambiguity must be construed in his favor, and the Guaranty be deemed unenforceable. For all of these reasons, in addition to opposing Second Avenue's motion, Salsberg also cross-moves for summary judgment in his favor, dismissing the complaint.

Camaj, for his part, argues that he never intended to sign the Guaranty, and that the document, itself, contains no reference to him. He therefore argues that, even though his signature appears on the document, he is not bound by it. Camaj contends that Second Avenue has not established that the parties intended for Camaj to be bound by the Guaranty, since Second Avenue does not allege that Camaj agreed to sign the Guaranty, and since the Lease expressly names only Salsberg as the Guarantor. Therefore, Camaj, like Salsberg, not only opposes Second Avenue's motion, but also cross-moves for summary judgment, dismissing the complaint as to him. Camaj further seeks dismissal of Salsberg's cross-claim, for contribution, arguing that, even if the Guaranty is enforceable against Salsbgerg or Notte, he is nonetheless not, individually, bound by it.

On a motion for summary judgment, it is the obligation of the moving party to present evidentiary proof, in admissible form, establishing its prima facie entitlement to judgment. Zuckerman v. City of New York, 49 NY2d 557, 562 (1980). Failure to establish a prima facie case requires denial of the motion, regardless of the sufficiency of the opposition papers. Winegrad v. New York Univ. Medical Center, 64 NY2d 851 (1985). Once a prima facie case is established, however, it becomes incumbent upon the opponent of the motion to come forward with competent, admissible evidence establishing the existence of a triable issue of material fact. Id. at 853. "[M]ere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient" for this purpose. Zuckerman, 49 NY2d at 562.

In order to establish its prima facie right to summary judgment on its claim for enforcement of the Guaranty, Second Avenue "must prove the existence of the guaranty, the underlying debt and the guarantor's failure to perform under the guaranty." Davimos v. Halle, 35 AD3d 270, 272 (1st Dep't 2006) (citing city of New York v. Clarose Cinema Corp., 256 AD2d 69, 71 (1st Dep't 1998)). There is no dispute, here, that the Guaranty exists, and there is no dispute that the guarantor - whoever it may be - has not performed in accordance with its terms. Second Avenue argues that the signatures of Salsberg and Camaj on the Guaranty are sufficient evidence that they are the parties bound thereby.

However, it is well-settled that a guaranty "is to be interpreted in the strictest manner." White Rose Food v. Saleh, 99 NY2d 589, 591 (2003). The Guaranty, here, contains three [*5]separate references to the purported guarantor. The first is contained in the document's heading, which appears as follows: "LANDLORD: 1626 2nd Ave LLCTENANT: Notte Restaurant Corp.Guarantor: Steven P. SalsbergPREMISES: 1626 Second Avenue"

(Pecora Aff. Ex. C.)

Thus, it appears that Steven P. Salsberg is the intended guarantor.

The next reference is contained in the first sentence of the body of the document, which reads, "In order to induce the aforesaid Landlord to enter into the foregoing Lease and for other valuable consideration, the receipt wherefore is hereby acknowledged, TENANT( Guarantor'), hereby guarantys [sic] and agrees . . ." (Id.)

There is no dispute that "TENANT" refers to Notte, but the above language appears to broaden the definition of "Guarantor" to include Notte, in addition to, or, perhaps, instead of, Salsberg. Alternatively, by replacing "TENANT" with Notte, and "Guarantor" with Steven P. Salsberg, this line reads, "In order to induce the aforesaid Landlord to enter into the foregoing lease . . . Notte (Steven P. Salsberg) hereby guarantys . . ." By this reading, it appears that Notte, by its principal, Steven P. Salsberg, is the party making the guaranty.

Finally, subsection (1) of the Guaranty provides that, "The undersigned guarantys [sic] to the Landlord, its successors and assigns the full faithful and prompt performance of any and all obligations of Tenant under the lease . . ." (Id., emphasis added.)

Since the "undersigned" are both Salsberg and Camaj, this provision appears to redefine the "Guarantor," once again, to include both of these individuals.Strict interpretation of the Guaranty therefore leads to the conclusion that the party, or parties, guaranteeing Notte's obligations under the Lease are either Salsberg, Notte, Notte by Salsberg, Notte by Salsberg and Camaj, or Salsberg and Camaj, individually. While, under ordinary circumstances, the proposition that a tenant would guarantee its own obligations under a lease would be nonsensical, the ambiguity surrounding the identity of the guarantor, here, leaves me unable to conclude that Second Avenue has established, conclusively, that there is no disputed issue of fact and that it is entitled to enforce the Guaranty against Salsberg and Camaj. Since it has failed to establish a prima facie case, Second Avenue's motion for summary judgment is denied, even before consideration of the opposition papers. Winegrad v. New York Univ. Medical Center, 64 NY2d 851 (1985).

In light of this conclusion, I make no findings with regard to Second Avenue's claim that Salsberg and Camaj are liable for rent and additional rent under the Lease's purported acceleration clause.

Turning, next, to the cross-motions, the question is whether the above ambiguities render the Guaranty unenforceable, as Salsberg and Camaj both argue, or whether they simply present issues of fact such that summary judgment is inappropriate.

With regard to Salsberg's cross-motion, I note, first, that his papers are not supported by the affidavit of a party having personal knowledge of the facts, as is required by CPLR 3212(b). [*6]The only affidavit submitted in support of Salsberg's cross-motion is that of his attorney, which merely serves to introduce documentary evidence. Although the attorney states that his affirmation is "based on personal knowledge and based on a review of the case file maintained by [his] office," he does not offer any factual allegations, and his affirmation is of no probative value and unavailing. Bendik v. Dybowski, 227 AD2d 228 (1st Dep't 1996); Zuckerman v. City of New York, 49 NY2d 557, 563 (1980). The only factual allegations submitted in support of Salsberg's cross-motion are contained in his Rule 19-a Statement, which is an unverified, unsworn document.[FN6] Although it contains citations to the documentary evidence, it also contains purported statements of fact with almost no citations to the affidavit or testimony of a person having knowledge of the events discussed.[FN7] As such, it does not constitute "evidentiary proof in admissible form." Zuckerman, 49 NY2d at 562. The documentary evidence submitted is insufficient, on its own, to establish Salsberg's entitlement to summary judgment, since it does not serve to clarify the ambiguities in the Guaranty, noted above. Salsberg thus has not established that there are no disputed issues of material fact and that he is entitled to summary judgment. See, e.g. Friends of Animals, Inc. v. Associated Fur Manufacturers, Inc., 46 NY2d 1065, 1067 (1979). His cross-motion is therefore denied.

I turn, next, to Camaj's cross-motion. Camaj contends that he is not named in the Guaranty, that he did not intend to sign the Guaranty, and that the Guaranty therefore is not binding upon him. In support of his cross-motion, he submits his own affidavit, along with the affidavit of Claudia Cofrancesco, a former employee of Second Avenue who was involved with the signing of the Lease and the Guaranty. Cofrancesco avers that she negotiated the terms of the Lease with Salsberg and his attorney, and that she informed Salsberg that "Landlord would only enter into a lease with Notte if Mr. Salsberg signed a personal guaranty. Landlord was insistent that the personal guaranty be signed by Mr. Salsberg in particular due to past experiences in dealing with Mr. Salsberg." (Cofrancesco Aff. ¶¶ 4-5.) Cofrancesco further states: Landlord did not request that Nick Camaj sign a personal guaranty, and there was absolutely no discussion concerning the possibility that Mr. Camaj serve as guarantor. . . . Moreover, Mr. Salsberg never told me that Nick Camaj would sign the guaranty, I never heard Mr. Salsberg ask Mr. Camaj to sign the guaranty, I never heard Mr. Camaj agree to sign a guaranty, and I never agreed to have Mr. Camaj sign a guaranty. To the contrary, I explicitly remember Steven Salsberg making reference to the fact that he was the sole guarantor of Notte's obligations [*7]under the Lease.

(Id. ¶¶ 8-9.)

Notwithstanding Cofrancesco's testimony, however, it is well-settled that a party may be bound by his signature on an agreement, even though he may have failed to read its contents. See, e.g., Humble Oil & Refining Co. v. Jaybert Esso Service Station, Inc., 30 AD2d 952 (1st Dep't 1968); see also Metzger v. Aetna Ins. Co., 227 NY 411 (1920) ("He who signs or accepts a written contract, in the absence of fraud or other wrongful act on the part of another contracting party, is conclusively presumed to know its contents and to assent to them . . .").It is undisputed that Camaj has not alleged fraud or any other wrongful act, and the presence of his signature alone, is thus sufficient to defeat his cross-motion.[FN8]

Moreover, Second Avenue offers two e-mail messages, which raise a question as to Camaj's contention that he was unaware that he had signed the Guaranty. In the first, on September 6, 2007, the date the Lease was executed, Cofrancesco asks Adrienne Haber (an associate of Salsberg, in his capacity as counsel to Notte) for Camaj's "information," and asks Haber to follow up "and at a minimum get to me his full legal name, address, and SSNo.?" (Pecora Reply Aff.[FN9] Ex. A.) In the second message, sent six days later, Cofrancesco asks again for "Nicks [sic] financials." (Id. at Ex. B.) Pecora avers that Cofrancesco needed this information because "the parties were proceeding with the understanding that Camaj would serve as co-guarantor of the Lease." (Pecora Reply Aff. ¶ 5.) Pecora further avers that these e-mail messages prove that Camaj knew, or should have known, that he had signed a guaranty. The first request shows that Camaj executed the Guaranty, and the Lease, in the context of being asked for his financial information — which was only relevant to the Guaranty. Furthermore, if he truly believed he were not acting as a guarantor, the second request should have prompted him to review what he signed or at least inquire as to the necessity of his financial information. (Id. ¶ 6.) Camaj failed to do either of those things, and his signature on the Guaranty should thus be taken at face value.

Camaj, therefore, has not made out a prima facie case for dismissal of the claims against him, and his cross-motion for summary judgment is denied. Similarly, although Salsberg offers no direct opposition to the prong of Camaj's cross-motion seeking dismissal of the cross-claim, I cannot conclude, on the basis of the record before me, that there are no disputed issues of fact relating to Camaj's liability for contribution. Therefore, that prong of Camaj's cross-motion is also denied. See Winegrad, 64 NY2d at 853.

Finally, I turn to Second Avenue's motion as it pertains to dismissal of the counterclaim. Second Avenue argues that it must be dismissed as barred by the doctrine of collateral estoppel. Second Avenue contends that Notte raised the issue of the Letter of No Objection during the [*8]Civil Court Action, as the basis for its claim that it was entitled to a set-off in the amount it owed in rent. Second Avenue argues that the Civil Court decided this issue against Notte, and that, since Salsberg is in privity with Notte, he is collaterally estopped from raising the issue in this proceeding. Second Avenue further argues that, even if collateral estoppel does not apply, the counterclaim is without merit, and that Salsberg's inability to proffer any evidence in support of his counterclaim is fatal.

In response, Salsberg argues that the evidence submitted in connection with this motion demonstrates that Salsberg and Camaj were induced into signing the lease by the false representation that they would be provided with a Letter of No Objection. (See Salsberg Opp. Mem.[FN10] at 19, quoting Abraham Affirm. Ex. N.) Although he does not directly refute Plaintiff's contention that the counterclaim is barred by collateral estoppel, Salsberg contends that the Appellate Term's statement that, "[e]ven assuming, arguendo, that landlord breached the lease in the manner alleged by tenant, tenant's remedy lies in the plenary action it commenced against landlord in Supreme Court", amounts to express permission to proceed with his claims and counterclaims. (See Salsberg Opp. Mem. at 6, quoting 1626 Second Ave., LLV v. Notte Restaurant Corp., 27 Misc 3d 138(A) (App. Term 1st Dep't 2010).) Finally, Salsberg argues that additional discovery will adduce further support for his counterclaim.

In order to determine whether Salsberg is collaterally estopped from litigating, here, the issue of his entitlement to some form of damages stemming from Second Avenue's alleged breach of the Lease, I must determine, first, whether Salsberg was given a full and fair opportunity to litigate that issue in the course of the Civil Court proceedings. See, e.g., Schwartz v. Public Administrator of County of Bronx, 24 NY2d 65, 71 (1969) (for collateral estoppel to apply, "[t]here must be an identity of issue which has necessarily been decided in the prior action and is decisive of the second action, and, second, there must have been a full and fair opportunity to contest the decision now said to be controlling"). The burden is on the non-moving party to show that he did not have a full and fair opportunity to litigate the issue, and on the movant to show that the issue is identical and necessarily decided. Id.

Here, Second Avenue argues that the same questions surrounding the Letter of No Objection that are raised by way of the counterclaim were also raised, by Notte, in the Civil Court, as the basis for seeking a set-off of the amounts owed. Second Avenue argues that the issue is identical, and there can be no dispute that it was decided against Notte. Since Salsberg is in privity with Notte, he is also barred from relitigating the issue. 114 West 26th Street Associates LP v. Fortunak, 22 AD3d 346 (1st Dep't 2005).

Salsberg does not argue that he was denied a full and fair opportunity to litigate this issue in the Civil Court. In fact, Salsberg asserts that he adduced evidence, in the course of those proceedings, which support his claim that Notte was damaged by Second Avenue's failure to provide the Letter of No Objection. (Salsberg Opp. Mem. at 19.) Moreover, the Decision/Order of the Civil Court clearly concludes that, "respondent failed to establish entitlement to any set off for loss of business profits because of petitioner's purported failure to timely issue a letter of no [*9]objection," and "the lease fails to set forth any specific time limit concerning when said letter was to be furnished after demand." (Decision/Order of the Civil Court, annexed to the Pecora Aff. at Ex. D.)

It is thus clear that the issue of Notte's entitlement to a set-off based on the alleged failure to provide a Letter of No Objection is identical to Salsberg's counterclaim for damages based on the alleged failure to provide a Letter of No Objection, that it was necessarily decided by the Civil Court, and that Notte was afforded a full and fair opportunity to litigate it. Since Salsberg is in privity with Notte, Salaberg is also collaterally estopped from relitigating the same issue. 114 West 26th Street Associates, 22 AD3d at 346.

Therefore, Salsberg's counterclaim is dismissed on the basis of collateral estoppel.

Accordingly, it is

ORDERED that Second Avenue's motion for Summary Judgment is GRANTED with respect to the dismissal of the counterclaim, and it is DENIED in all other respects; and it is further

ORDERED that Salsberg's Cross-Motion for Summary Judgment is DENIED; and it is further

ORDERED that Camaj's Cross-Motion for Summary Judgment is DENIED; and it is further

ORDERED that the parties shall appear for a status conference on April 4, 2012 at 11:00 a.m.

Dated: February ___, 2012

ENTER:

_________________________________

J.S.C. Footnotes

Footnote 1: Affidavit of Frank Pecora in Support of Motion for Summary Judgment, July 8, 2011.

Footnote 2:Notte Restaurant Corp. and Steven Salsberg v. 1626 Second Avenue LLC, Index No. 600027/2009.

Footnote 3:1626 Second Avenue, LLC v. Notte Restaurant Corp., Index No. 59970/2009.

Footnote 4:Although the Notte Action and the present action have been proceeding along simultaneous discovery and conferencing schedules, the two actions have not been consolidated.

Footnote 5:The Lease is annexed to the Pecora Aff. at Exhibit A, however the copy submitted is illegible. Second Avenue has therefore submitted a copy of the New York Real Estate Board's "Standard Form of Store Lease," which is annexed as Exhibit B. There is no dispute that the body of the Lease is based upon, and conforms to, the Standard Form of Store Lease.

Footnote 6:Salsberg's Rule 19-a statement was further defective as a purported counter-statement, since it did not contain a set of correspondingly numbered paragraphs responding to each of the numbered paragraphs contained in Second Avenue's Rule 19-a Statement. (See Rule 19-a(b) of the Rules of the Commercial Division of the Supreme Court, 22 NYCRR 202.70.)

Footnote 7:Salsberg's Rule 19-a Statement does contain a few citations to the Civil Court testimony of Second Avenue principal, Frank Pecora (see Statement and Counterstatement of Material Fact Pursuant to Commercial Division Rule 19-a ¶¶17-18), as well as that of Steven Salsberg (id. ¶ 30), and an expert (id. ¶ 36). However, the rest of the factual assertions are unsupported, and these few citations do not, themselves, provide a factual basis for Salsberg's Cross-Motion.

Footnote 8:As set forth above, however, it is not sufficient to grant summary judgment in favor of Second Avenue, since the Guaranty is ambiguous and self-contradictory. Moreover, it is not clear whether Camaj would have signed in his personal capacity, or, as Salsberg contends, in his capacity as a principal of Notte.

Footnote 9:Reply Affidavit of Frank Pecora, August 18, 2011.

Footnote 10:Memorandum of Law in Support of Defendant Steven Salsberg's Cross-Motion for Summary Judgment and in Opposition to Plaintiff's Motion for Summary Judgment.