Yellowbook Sales & Distrib. Co., Inc. v DiGiovanni

[*1] Yellowbook Sales & Distrib. Co., Inc. v DiGiovanni 2012 NY Slip Op 51581(U) Decided on April 16, 2012 Supreme Court, Columbia County McGrath, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 April 16, 2012
Supreme Court, Columbia County

Yellowbook Sales & Distribution Co., Inc., Plaintiffs,

against

Louis DiGiovanni and JENNIFER WALKER, Defendants.



2397-11



RELIN, GOLDSTEIN & CRANE, LLP

Attorneys for Plaintiffs

MAYNARD, O'CONNOR, SMITH & CATALINOTTO, LLP

For the Defendant Louis DiGiovanni

MICHAEL C. HOWARD, ESQ.

For the Defendant Jennifer Walker

Patrick J. McGrath, J.

In this contract action, defendants each move for summary judgment, and plaintiff has submitted a cross motion for summary judgment against each defendant.

Plaintiff is seeking a sum due under a form contract for advertising services which it rendered in its directories to the now defunct Columbia Magnetic Imaging, P.C. (hereinafter "Columbia"). Yellow Book's basis for imposing personal liability against the two named defendants individually is that they both signed the contract form. Under the signature line is a legend which states, "Individually and for Customer." Following the words "Individually and for Customer," under the same signature line, is a legend which states "Title." Beneath the words "Individually and for Customer" is a legend which states, "Read Clause 15G on Reverse Side." The reverse side of the form contains 15 numbered clauses in three columns in small print on a single page. Clause 15 (G) reads, "the signer of this contract, does, by his/her execution of this [*2]agreement, personally and individually undertakes and assumes, jointly and severally with the Customer, the full performance of the agreement, including payments of amounts due hereunder."

Louis DiGiovanni, former President of Columbia, signed one such form contract on December 7, 2008 for 2008 advertising services. On October 24, 2008, defendant Jennifer Walker, the office manager at Columbia, signed the same contract for 2009 advertising services. She also signed a corresponding document agreeing to the contract's terms and conditions, which also acknowledged plaintiff's right to seek attorneys' fees in the event of a default. On January 13, 2009, defendant Walker signed a contract for 2009 advertising.

Defendant DiGiovanni's affidavit in support of his motion states that he signed the contract, but was not aware of any personal guarantee for Columbia's obligations to plaintiff. He states that no representative from the plaintiff raised this issue with him. He states that one of the office staff handed him the contract and told him it had to be signed in order to obtain advertisement services with plaintiff. He states he never intended to personally guarantee the obligations of Columbia. He states that as a result of this lawsuit, he has reviewed the contract with his attorney, who has pointed out that section 15(G) contains the language that is quoted above. He notes that this is in 4-5 point type, and is "buried" at the end of a lengthy contract, under the heading "Miscellaneous." He states that this practice is deceptive, and plaintiff should not be rewarded for it.

Counsel for DiGiovanni argues that the Court of Appeals has held that "an agent for a disclosed principal will not be personally bound unless there is clear and explicit evidence of the agent's intention to substitute or superadd his personal liability for, or to, that of his principal'." Savoy Record Co. v. Cardinal Export Corp., 15 NY2d 1, 3 (1964). Counsel also relies on Salzman Sign Co. v. Beck, 10 NY2d 63 (1961), the Court noted that "[i]n modern times most commercial business is done between corporations, everyone in business knows that an individual stockholder or officer is not liable for his corporation's engagements unless he signs individually, and where individual responsibility is demanded the nearly universal practice is that the officer signs twice once as an officer and again as an individual. There is great danger in allowing a single sentence in a long contract to bind individually a person who signs only as a corporate officer. In many situations the signing officer holds little or no stock and if the language of the agreement makes him individually liable his estate may be stuck for a very large obligation which he never dreamed of assuming." Counsel notes that the instant contract only has one signature line. Counsel cites a string of trial court decisions in which the tactics of this plaintiff have been criticized as deceptive. Yellow Book v. Greene, 1993 WL 603209, Law Journal, Feb 8, 1994, at 27., col 1 (District Court Nassau County 1994); Yellow Book Co., Inc. v. Williams, NY Law Journal, September 26, 1994, at 31, col 2 (Sup. Ct,. Nassau County); Yellow Book of NY v. Platt, 2003 NY Slip Op 50578U (Dist. Ct. Nassau County) ("Yellow Book's desire to therefore obtain a personal guarantee from a corporate director or officer when permitting the purchase of services on other than a cash-on-the-barrelhead transaction is thus perfectly logical. However, pursuant to applicable legal precedent Yellow Book is not permitted [*3]to achieve this end through the utilization of ambiguity and confusion. Yellow Book's end must be achieved in an open and aboveboard manner, so that the individual signatories understand that they have the option of accepting personal liability, or declining to do business with Yellow Book.") Counsel notes that plaintiff has admitted in a trial context that it chooses not to use two signatures lines because it will dissuade individuals from signing. Yellow Book of NY v. Platt, supra, citing Yellow Book v. Davis, (index No. 378/99, Feb. 26, 2001 [Nassau Dist Ct] [Fairgrieve, J.]).

Defendant Walker also seeks summary judgment based on similar arguments. She submits an affidavit wherein she states that she was the office manager of Columbia. She states at the time she signed the piece of paper, she was not told by any representative of Yellow Book that she was signing a personal guarantee. She states that she had no decision making authority with respect to Columbia's advertising, and thought she was signing a receipt. She states that she was doing her job, and following instructions from her employer. She also states that she has since reviewed the contract with her attorney, who has pointed out paragraph 15(G), in small type, on a separate page, unlabeled at the end of the contract. She also argues that these practices are deceptive.

Counsel for defendant Walker argues that plaintiff cannot demonstrate that defendant intended to be personally bound by the contract. Counsel states that plaintiff was specifically asked in a Notice to Admit whether a representative informed defendant or Dr. DiGiovanni about the personal guarantee. Plaintiff responded that "a copy of the contract was left with the customer." Counsel states that the contract is ambiguous, and therefore, plaintiff cannot establish defendant's intent to be bound.

Plaintiff submits separate cross-motions against the defendants. In the motion against DiGiovanni, plaintiff provides the affidavit of James Griffiths, a "Corporate Representative"of the plaintiff, who has knowledge and access to all records of the plaintiff, including records in connection with the instant matter. He provides copies of the instant contract, which includes defendant's signature and the personal guarantee in Paragraph 15. He states that Columbia retained invoices and statements of account, which were sent to the attention of defendant Walker, showing amounts due for advertising. He states that the financial billing statements establish that defendant DiGiovanni is liable for $1,912.70 for 2008 advertising, no part of which has been paid. Mr. Griffith states that he has been advised by his attorney that Yellow Book of NY, Inc. v Shelley, 74 AD3d 1333 (2d Dept. 2010) is controlling case law here, which overcomes defendant's argument concerning the lack of awareness of personal liability.

Mr. Griffithsalso provides his affidavit in support of the cross motion against defendant Walker which provides similar factual allegations as above. In addition, plaintiff notes that on October 24, 2008, defendant Jennifer Walker, the office manager at Columbia, signed the same contract for 2009 advertising services. She also signed a corresponding document agreeing to the contract's terms and conditions, which also acknowledged plaintiff's right to seek attorneys' fees in the event of a default. That document required that she acknowledge that she had signed in her [*4]personal capacity. On January 13, 2009, defendant Walker signed a contract for 2009 advertising. He states that the financial billing statements establish that defendant Walker is liable for $8,028.81 for 2009 advertising, no part of which has been paid. He also cites Yellow Book of NY, Inc. v Shelley, supra.

Summary judgment "shall be granted if, upon all the papers and proof submitted, the cause of action...shall be established sufficiently to warrant the court as a matter of law in directing judgment in favor of any party...[T]he motion shall be denied if any party shall show facts sufficient to require a trial of any issue of fact." CPLR 3212(b). Movants have a prima facie burden of submitting proof, in evidentiary form, sufficient to demonstrate that there is an absence of any material issue of fact. Winegrad v. New York Univ. Med. Ctr., 64 NY2d 851(1985); Zuckerman v. City of New York, 49 NY2d 557 (1980); Davenport v. County of Nassau, 279 AD2d 497 (2d Dept. 2001). If the movant meets this burden, then the burden shifts to the opponent to produce evidentiary proof to demonstrate the existence of a triable issue of fact. See Davenport v. County of Nassau, supra.

In order to establish its prima facie right to summary judgment on its claim for enforcement of the Guarantee, plaintiff "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, 826 N.Y.S.2d 61 (1st Dept. 2006) citing City of New York v. Clarose Cinema Corp., 256 AD2d 69, 71 (1st Dept. 1998). There is no dispute here that the Guaranty exists and that the guarantors have not performed in accordance with its terms. As such, cross-movant plaintiff has met its initial burden.

In opposition to plaintiff's motion and in support of their own motions, both defendants argue the deceptive nature of the document itself. This exact contract, or contracts strikingly similar, have been extensively litigated in the trial court in the 1st and 2nd Departments, as noted in defendant DiGiovanni's Memorandum of Law. However, the most recent Appellate Department case concerning the plaintiff, and the language of this contract (paragraph 15) was in Yellow Book of NY, Inc. v Shelley, 74 AD3d 1333 (2d Dept. 2010), as cited in the defendant's motion. In that case, the defendant, who was the president of the corporate defendant 2 Shell Interiors, Inc., signed certain advertising contracts with the plaintiff. Just as in this case, there was a notation under the signature line on each contract which recited that the signatory was signing "Individually and for the Company," [here, it states "Customer" instead of "Company"]. As in this case, the contract directed the signatory to read a clause on the reverse side of the particular contract. As in this case, the clause in question in each of the respective contracts explicitly provided that the signatory of the contract agreed to accept personal liability for full performance. As in this case, the contracts further provided that no oral agreements could alter the contract terms.

Plaintiff Yellow Book moved for summary judgment on the complaint against both Shelley in his individual capacity and 2 Shell. In opposition, Shelley claimed that he told the plaintiff's representatives that he was signing only for the company and not individually. Shelley argued that he was not individually liable pursuant to the contracts, and the Court rejected his [*5]contention.

The Court noted that "an agent who signs an agreement on behalf of a disclosed principal will not be held liable for its performance unless the agent clearly and explicitly intended to substitute his personal liability for that of his principal." The Court further held that "in the instant case, Shelley, as president of 2 Shell explicitly agreed to accept personal liability. Accordingly, the plaintiff, by submitting the signed contracts in connection with its motion, established its entitlement to judgment as a matter of law against Shelley. Since the written contracts between the parties were unambiguous, parol evidence with respect to a contrary intent was not admissible. Since Shelley relied on parol evidence in opposition to the plaintiff's motion, he failed to raise a triable issue of fact."

The facts are not in any way distinguishable from the instant matter against either defendant. While DiGiovanni was the president of Columbia, whereas Walker was the office manager, the Court in Shelley placed its emphasis on the unambiguous language in the contract, which "explicitly" notified the defendant that he was personally guaranteeing the obligation.

Several other courts in the Second Department and the Appellate Term thereof have since relied on Shelley in similar cases involving this plaintiff and its contracts. Yellow Book of NY, Inc. v. Marra, 2009 NY Slip Op 33003U (Nassau County, Sup. Ct. 2009) ("[t]he signer of a written agreement is conclusively bound by its terms unless there is a showing, absent here, of fraud, duress or some other wrongful act. A person is presumed to have read what he signs. Further, a party will not be excused from an agreement by a failure or even a claimed inability to read it. Thus, the law presumes that one who is capable of reading something has read the document which she/he executed, and is conclusively bound by the terms thereof. With respect to paragraph 15(F) of the contracts that are the subject of this litigation, in Yellow Book of New York, Inc. v. Shelley, 74 AD3d 1333 (2d Dept. 2010), the Court held that the written contracts, like the ones in the instant matter, were unambiguous'."); Yellow Book of NY, Inc. v. Albano, 2009 NY Slip Op 32319U (Nassau County, Sup. Ct. 2009); Yellow Book Co., Inc. v.Mega, 190 Misc 2d 108 (App. Term 9 & 10 Jud. Dists. 2001) citing Yellow Book Co., Inc. v. Baum, N.Y.L.J., January 2, 2001, (App. Term 9 & 10 Jud. Dists.).

This Court's research reveals no Third Department case directly on point as to this specific plaintiff or to this specific contract. "The doctrine of stare decisis requires trial courts in this department to follow precedents set by the Appellate Division of another department until the Court of Appeals or this court pronounces a contrary rule." Mountain View Coach Lines, Inc. v. Storms, 102 AD2d 663, 664-65 (2d Dept. 1984). Despite the defendants' convincing arguments, and the well reasoned trial level court decisions that predated Shelley, that decision is now "binding authority at the nisi prius level." Mountain View Coach Lines, Inc. v. Storms, at 664; see also In re Patrick "BB", 284 AD2d 636 (3d Dept. 2001).

In light of the above finding that the contract is unambiguous, defendant DiGiovanni's reply argument that Mr. Griffith did not have any personal contact with the defendants is [*6]irrelevant, as any such parole evidence would not be admissible to vary the terms. Richardson, Evidence § 625, at 622 [Prince 10th ed]); see also Riggs v. Riggs, 205 AD2d 864 (3d Dept. 1994).

In addition to the above arguments, counsel for both defendants claim that there was no consideration for the personal guarantee, and that this is a defense to the personal guarantee. Counsel for DiGiovanni cites Fopeco, Inc. v. General Coatings Technologies, Inc., 107 AD2d 609 (1st Dept. 1985) wherein the Court noted that if proven at trial, lack of consideration for a personal guarantee is a viable defense. The Court held that "both the maker of the note and the guarantor can assert this defense in defeat of summary judgment since neither the principal nor the guarantor is accountable for anything which has not been received." However, there is no dispute that Columbia received advertising services. Counsel also argues that in many commercial transactions or commercial leases, the banks or lessors will not lend without a personal guarantee. Here, counsel for both defendants argue that "there is no evidence to indicate that Yellowbook would not have sold advertising to Colunbia if Dr. DiGiovanni had not given his personal guaranty. To the contrary, it would seem that Yellowbook would have sold advertising to Columbia regardless of whether Dr. DiGiovanni [or Ms. Walker] assumed personal liability." Counsels' arguments here are speculative as to what plaintiff would have done had defendant not signed the contract, and are insufficient to avoid summary judgment.

In accordance with the above, it is hereby

ORDERED, that the defendant Louis DiGiovanni's motion for summary judgment is denied; and it is further,

ORDERED, that the defendant Jennifer Walker's motion for summary judgment is denied; and it is further,

ORDERED, that the plaintiff's cross motion for summary judgement against defendant Louis DiGiovanni is granted; and it is further,

ORDERED, that the plaintiff's cross motion for summary judgement against defendant Jennifer Walker is granted.

This shall constitute the Decision, Order and Judgment of the Court. This Decision, Order and Judgment is being returned to the attorneys for the plaintiff. All original supporting documentation is being filed with the County Clerk's Office. The signing of this Decision, Order and Judgment shall not constitute entry or filing under CPLR 2220. Counsel is not relieved from the applicable provisions of that rule relating to filing, entry, and notice of entry.

SO ORDERED AND ADJUDGED.

ENTER. [*7]

Dated:April 16, 2012

Hudson, New York

PATRICK J. McGRATH

Supreme Court Justice

Papers Considered:

1.Notice of Motion for Summary Judgment, January 17, 2012; Affidavit in Support of Motion for Summary Judgment, Louis A. DiGiovanni, M.D., dated Janury 5, 2012; Attorney Affirmation, Justin W. Gray, Esq., dated January 17, 2012; annexed Exhibits A-C; Memorandum of Law, dated January 17, 2012.

2.Notice of Motion for Summary Judgment, February 1, 2012; Affidavit in Support of Motion for Summary Judgment, Jennifer Walker, dated February 1, 2012; Attorney Affidavit, Michael C. Howard, Esq., dated February 12, 2012; annexed Exhibits A-C.

3.Notice of Cross Motion, dated February 7, 2012 (as to defendant Louis DiGiovanni); Affidavit, James Griffiths, dated February 6, 2012, with annexed Exhibit A.

4.Notice of Cross Motion, dated February 7, 2012 (as to defendant Jennifer Walker); Affidavit, James Griffiths, dated February 6, 2012, with annexed Exhibit A.

5.Affidavit in Opposition, Justin W. Gray, Esq., dated February 9, 2012.