National Credit Sys., Inc. v Veterinary Emergency Ctr., P.C.
Annotate this CaseDecided on February 27, 2006
Civil Court of the City of New York, Richmond County
National Credit Systems, Inc., Plaintiff,
against
Veterinary Emergency Center, P.C., Defendant.
038733/03
Kenneth P. Sherman, J.
This matter involves an agreement involving debt collection services. Plaintiff, National Credit Systems, Inc., is in the business of debt collection. Defendant, Veterinary Emergency Center, P.C., allegedly engaged the services of the plaintiff to collect debts owed by various [*2]owners of animals that had received veterinary care at defendant's facility. Plaintiff alleges that the defendant executed multiple separate agreements to retain its services. Each agreement represents a separate contract, reflecting a distinct delinquent account, wherein money was owed to the plaintiff. Plaintiff moves for summary judgment, pursuant to CPLR § 3212, on each of the purported agreements, alleging that the defendant has failed to pay the plaintiff the fees associated with these contracts.
The language of each purported contract provides, in relevant part, that the plaintiff is entitled to a "commission rate of 50 (fifty) percent" for matters submitted for collection. Pursuant to the terms of the purported contract, the plaintiff is entitled to the 50% commission not only upon collection, but is also entitled to the full fee if the defendant settles the account directly with the debtor, or if the defendant should "withdraw the claim for any reason". It is undisputed that in February of 2000, the defendant withdrew the claims from the plaintiff. Plaintiff argues that pursuant to the terms of the contract, upon defendant withdrawing the claims, plaintiff was entitled to a 50% commission on those claims. Defendant claims that it withdrew the claims due to the plaintiff's inattentiveness in handling the claims.
Plaintiff commenced this action in November of 2003, alleging that the defendant withdrew the accounts and failed to pay the appropriate fee. The plaintiff's first cause of action is for breach of contract based upon the defendant's failure to pay the 50% fee once it withdrew the claims. The second cause of action is for an account stated.
The crux of the plaintiff's claim for summary judgment is fairly simple and straightforward. The terms of the purported agreement provide that in the event any collection matter was withdrawn by defendant, the plaintiff would be entitled to collect the 50% commission as though the debt was fully collected. Plaintiff's Affidavit of Facts submitted by its Vice President, Lynn Goldberg, makes no allegations concerning any efforts undertaken by the plaintiff to collect on the debts. The affidavit merely states that there was an agreement to pay the 50% fee if any of the matters were withdrawn, that the referenced matters were indeed withdrawn, and that plaintiff hasn't received any fees on the withdrawn claims. The plaintiff does not rebut the defendant's claim that the plaintiff basically did nothing with reference to these collections matters. In essence, the plaintiff claims it is entitled to its fee, whether or not they undertook any action to collect on the debts. A cursory reading of the language of the purported agreement would tend to buttress that assertion. However, a more careful analysis of the alleged contract, and the motion papers submitted by both sides, reveal a number of issues precluding summary judgment.
Summary judgment is a drastic remedy and should only be granted if the movant has made a prima facie showing of entitlement to judgment as a matter of law by demonstrating there are no triable issues of fact. Alvarez v. Prospect Hospital, 68 NY2d 320 (1986); Zuckerman v. City of New York, 49 NY2d 557, 563 (1980). If the movant fails to make such a showing the motion must be denied, regardless of what is contained in the opposition papers. Winegard v. New York University Medical Center, 64 NY2d 851 (1985). The court's function is to determine if there are triable issues of fact, not to make an ultimate determination on those issues. Matter of Suffolk County Dept. of Social Services v. James M, 83 NY2d 178 (1994).
Consideration
It is axiomatic that every contract must be supported by valid consideration (see Umscheid v. Simnacher, 160 AD2d 380 [2d Dept. 1984]. There must be a mutual exchange of [*3]promises, a quid pro quo, flowing between the parties (see Banque Arabe Internationale D'Investissement v. Bulk Oil (USA) Inc., 726 F. Supp. 1411, 1419 [SD NY 1989]). If the promisor loses nothing, or is not obligated to do anything, and the promisee acquires nothing by the arrangement, there will be no consideration (see Kinley Corp. V. Ancira, 859 F. Supp. 652, 657 [WD NY 1994]). Upon reading the language of the alleged agreement between parties, the court is strained to find any promise or obligation undertaken by the plaintiff. Under a literal reading of the language of the purported contract, the plaintiff is apparently entitled to its fee no matter what action it takes, or fails to take. While it is true the plaintiff may expend great time and effort in collecting the debts referred by the defendant, under the explicit terms of the agreement, it is not obligated to do so. The plaintiff's own motion papers seem to advance the notion that there is no obligation on its part to do anything. It should be noted that the plaintiff is not even claiming to have undertaken efforts to collect these debts, but instead argues it is entitled to collect the fee, under any and all circumstances. While courts will generally not scrutinize the adequacy of consideration, there must still be some benefit, however minimal, flowing to each party (see Apfel v. Prudential-Bache Sec., 81 NY2d 470, 476 [1993]). It would seem, that the contract on its face, is not supported by any consideration on the part of the plaintiff.
However, this court is not determining that there was indeed no consideration flowing from the plaintiff. As stated previously, a court's job in reviewing a summary judgment motion is to find issues, not resolve them. The court realizes there is a very good likelihood that there was a verbal commitment to collect these debts, or an implicit understanding between the parties that the plaintiff would do so. Courts will generally avoid interpretation of a contract that renders a contract unenforceable for lack of mutual obligation, and will instead enforce the contract where the parties have demonstrated an intention to be contractually bound (see Curtis Properties Corp. V. Greif Companies, 212 AD2d 259 [1st Dept. 1995]). So it is quite probable that the plaintiff can demonstrate there were mutual obligations between the parties, but the contract, on its face, does not lend itself to that conclusion. The court must turn to other extrinsic factors to determine whether there was an intent that the parties be mutually obligated and contractually bound. When a contract is ambiguous, or appears to be incomplete as to a material term, the court may refer to extrinsic evidence to determine the parties intent (see Greenfield v. Philles Records, Inc., 98 NY2d 562 [2002]). More specifically, the validity of a written contract is not contingent upon the express inclusion of consideration, consideration may be implied, or proven through parole evidence (see, Richman v. Brookhaven Servicing Corp., 80 Misc 2d 563 [Dist Ct, Suffolk County 1975]; Anonymous v. Anonymous, 2 Misc 3d 1002 [Sup Ct, NY County 2004]). Clearly, the fact that the court must resort to extrinsic evidence to determine if there were mutual obligations and consideration requires a fact finding trial, and precludes granting of summary judgment.
Covenant of good faith and fair dealing
Finally, assuming there was a valid contract between the parties, supported by mutual consideration, there is still an issue as to whether the plaintiff has breached the implied covenant of good faith and fair dealing. Under New York law every contract carries with it an implied covenant that the contracting parties will exercise good faith in performing their duties under a contract (see 511 West 232nd Owners Corp., 98 NY2d 144,153 [2002]). "Encompassed within the implied obligation of each promisor to exercise good faith are any promises which a [*4]reasonable person in the position of the promisee would be justified in understanding were included" Dalton v. Educational Testing Service, 87 NY2d 384,389 (1995), quoting Rowe v. Great Atlantic & Pacific Tea Co., 46 NY2d 62,69 (1978). In this instance, assuming there was valid consideration, and the plaintiff was obligated to make efforts to collect on these debts, the issue remains whether the plaintiff made good faith efforts to do so. If the plaintiff simply sat back and did nothing, and waited for the defendant to eventually withdraw these uncollected claims, such action would clearly be a breach of the plaintiff's implied covenant of good faith and fair dealing. Whether or not the plaintiff did absolutely nothing to collect on these debts, thereby breaching the implied covenant of good faith, is yet another issue that would need to be resolved at trial.
The plaintiff has referred this court to a previous unpublished decision by the Honorable Beverly Cohen rendered in Supreme Court New York County, wherein Justice Cohen ruled that under the explicit terms of an almost identical contract, defendant had no defense to paying the fees for claims submitted to the plaintiff. However, the facts underlying that ruling are quite different than the facts submitted on this motion. In that matter, plaintiff apparently submitted proof that the plaintiff expended "some effort in collecting debts", and that the defendant "failed to cooperate on a number of matters" ( see National Credit Systems, Inc. V. Kostas P. Velis, Sup Ct, NY County, September 16, 1999, Index No. 604343/97, at 6). In that context, the court can understand finding that the plaintiff not only had an underlying obligation to collect on the debts, but did indeed take steps to collect. That is not the case in this matter, here plaintiff has offered no evidence that it was either obligated to perform any collection pursuant to the agreement, or that it actually took any steps to perform their collection obligation. Furthermore, this court is not bound, under the doctrine of stare decisis, to follow Justice Cohen's decision (see View Coach Lines v. Storms, 102 AD2d 663 [2d Dept. 1984]). To the extent that holding is at odds with this court's ruling, this court chooses not to adopt the determinations of Justice Cohen.
In summary, the court finds that the plaintiff has not met its burden of demonstrating that there are no triable issues of fact. Accordingly, plaintiff's motion for summary judgment is denied. Additionally, although plaintiff's notice of motion also seeks an order striking the defendant's answer for failure to respond to discovery demands, there is no reference to that request for relief in the affidavit of Lynn Goldberg in support of plaintiff's motion. That affidavit, like the rest of the papers submitted in support of the motion, are silent as to any discovery violations. Therefore, that branch of plaintiff's motion is also denied.
The foregoing shall constitute the Decision and Order of the Court.
February 27, 2006
KENNETH P. SHERMAN
Judge, Civil Court
ASN
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