Emperor Indus., Inc. v Rothbaum

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[*1] Emperor Indus., Inc. v Rothbaum 2007 NY Slip Op 52142(U) [17 Misc 3d 1125(A)] Decided on November 8, 2007 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 November 8, 2007
Supreme Court, New York County

Emperor Industries, Inc., Plaintiff,


Barry Rothbaum a/k/a Barry Roth, Defendant.


Attorneys for the Plaintiff:

Philip H. Kalban, Esq.

Putney, Twombly, Hall & Hirson, LLP

521 Fifth Avenue

New York, NY 10175

Attorneys for the Defendant:

Susan Schneiderman, Esq.

Ballon Stoll Bader & Nadler, P.C.

1450 Broadway

New York, NY 10018

Bernard J. Fried, J.

Plaintiff Emperor Industries, Inc. ("Emperor" or "Plaintiff") brings this motion for summary judgment in lieu of complaint, pursuant to C.P.L.R. § 3213, seeking judgment against Defendant, Barry Rothbaum, in the amount of $219,585.75 plus interest and costs.

Plaintiff is a manufacturer and importer of garments with a principal place of business in New York City. (Wong Aff. ¶ 2.) Defendant was "chief salesman" and an officer of Emperor and related companies from April 1997 to July 2007, when he resigned. (Id. at ¶ 3.) During the course of his employment, Mr. Rothbaum borrowed more than $300,000, with the understanding that the loans would be "without interest so long as defendant continued in his employment with plaintiff and its affiliated companies." (Id. at ¶ 5.)

Plaintiff asserts that as of June 3, 2006, Mr. Rothbaum owed a total of $267,146.29. (Id. at ¶ 6.) After the deduction of sales commissions, the total balance of Mr. Rothbaum's outstanding debt to Emperor was $219,585.75. (Id. at ¶ 7.) Plaintiff further asserts that the president of the corporation, Mr. Wallace Kim Wai Wong, has demanded repayment on behalf of [*2]Emperor, both directly and through his attorney, and that "Defendant has failed and refused to make any further repayment." (Id. at ¶ 8.)

The basis for Plaintiff's motion for summary judgment in lieu of complaint is a memorandum, dated June 3, 2006 (the "Memo"). (See Wong Aff. Exh. A.) The Memo is addressed to the attention of "Waalce," from "Fories" and Re: "Loan of Barry." It contains a table, with columns for date, loan amount, bonus, deduction of sales commission, and balance. At the top of the column labeled, "Loan" and containing sums which appear to be the amount of each loan, the words, "To Barry" are written in by hand. The last amount appearing in the "Balance" column is $267,146.29. Appearing below the table, near the bottom of the page, is a mark that, according to Plaintiff, represents the Defendant's initials. This is not disputed by the Defendant.

Defendant does, however, dispute the assertion that the Memo is an appropriate basis for a motion under § 3213. Defendant argues that the Memo is "indecipherable on its face. Nowhere does the document reflect Mr. Rothbaum's agreement to the amount allegedly due or any commitment to repay the alleged loans." (Schneiderman Affirm. ¶ 10.) Furthermore, although Plaintiff argues that there is ample authority supporting the proposition that an account stated is within the purview of § 3213, Defendant points to other significant authority holding that an account stated is not an instrument for the payment of money only, and that Plaintiff's motion is therefore facially insufficient. (Id. at ¶¶ 7-9.)

Section 3213 provides for accelerated judgment in an action that is "based upon an instrument for the payment of money only or upon any judgment." In such an action, the plaintiff may serve the defendant with a summons and, in lieu of a complaint, a notice of motion for summary judgment and supporting papers. The purpose of the rule is "to provide a speedy and effective means of securing a judgment on claims presumptively meritorious." Interman Indus. Prods., Ltd. v. R.S.M. Electron Power, 37 NY2d 151 (1975); see also David D. Siegel, New York Practice 448 (3d ed. 1999) ("CPLR 3213 recognizes that some claims have greater presumptive merit than others and should have easier access to the courts than an ordinary plenary action gets.").

The question of what type of document may be considered an instrument for the payment of money only has been called "a vexing problem, and, according to one commentator, there is already a plethora of irreconcilable case law on this subject." Interman 37 NY2d at 154 (1975) (citations omitted). Such difficulties are especially apparent with regard to § 3213 claims based on accounts stated.[FN1]

Here, however, the proper question is not whether an account stated is sufficient to support a motion for summary judgment in lieu of complaint, but rather, whether, on this particular statement of account, the terms of the loan agreement are set forth with sufficient [*3]clarity as to warrant accelerated judgment.

In Seaman-Andwall Corp. v. Wright Mach. Corp., 31 AD2d 136 (1st Dep't 1968) aff'd 29 NY2d 617 (1971), the Appellate Division set forth what the Court of Appeals later referred to as "the most cogent analysis of the standard to be applied in ascertaining whether an instrument qualifies for CPLR 3213 treatment." Interman, 37 NY2d at 155. The Seaman-Andwall Court determined that a plaintiff makes out a prima facie case for summary judgment in lieu of complaint by proof of an instrument and the defendant's failure to make payment according to its terms. 31 AD2d at 137 (emphasis added). The terms of payment must therefore be apparent on the face of the instrument itself. See Stern v. Chemical Bank, 83 Misc 2d 508, 514 (NY Civ. Ct. 1975) ("An instrument within the intent of the statute is one which clearly, unequivocally and unconditionally sets forth the basis for liability and the particular liability involved."). If outside proof, other than "simple proof of nonpayment or a similar de minimis deviation from the face of the document," is needed to establish the prima facie case, then the accelerated relief of § 3213 is unavailable. Weissman v. Sinorm Deli, 88 NY2d 437, 444 (1996); Kerin v. Kaufman, 296 AD2d 336, 337 (1st Dep't 2002).

Although from the face of the instrument upon which the present action is based, it appears that more than $300,000 in loans have been rendered "to Barry," and that the balance remaining is $267,146.29, there is no indication as to how or when - or even to whom - the payments should be made. There is also no indication of what interest rate should apply; and although Mr. Wong asserts in his affidavit that the loan was to be "without interest so long as defendant continued in his employment with plaintiff and its affiliated companies" (¶ 5), it is unclear whether, at the termination of Mr. Rothbaum's employment, the loans would simply start accruing interest, or whether the entire outstanding balance would become payable immediately. Furthermore, Mr. Wong avers that he has demanded that Mr. Rothbaum "repay to plaintiff the outstanding indebtedness" (¶ 8), but there is no indication of whether that demand was for a single payment of the entire balance or for a series of payments in smaller amounts.

These deficiencies require me to look toward "outside proof," i.e. something beyond the four corners of the Memo itself, in order to determine whether and to what extent the Defendant has failed to honor his obligation to repay Emperor. Where the terms of the loan arrangement are not apparent from the face of the instrument itself, a prima facie case for summary judgment in lieu of complaint has not been met. Seamann-Andwall, 31 AD2d at 137; Weissman, 88 NY2d at 444. Plaintiff's motion for summary judgment in lieu of complaint is therefore denied.

For the foregoing reasons, it is hereby

ORDERED that Plaintiff's motion for summary judgment in lieu of complaint is denied; and it is further

ORDERED that Plaintiff shall serve a formal complaint upon Defendant's attorney within twenty (20) days of service on Plaintiff's counsel of a copy of this order with notice of entry and Defendant shall move against or serve an answer to the complaint within twenty (20) days after service of the complaint. [*4]

Dated November __, 2007



J.S.C. Footnotes

Footnote 1:See Interman Indus. Prods., Ltd. v. R.S.M. Electron Power, Inc., 37 NY2d 151 (1975) (holding that an account stated that is not subscribed by the party to be charged was insufficient to support § 3213 motion, and further stating that even were the account stated to be supported by a promissory note, the appropriate basis for the motion is the note, and not the account stated); but see Rhee v. Meyers, 162 AD2d 397, 398 (1st Dep't 1990) (holding that, although Interman provides that the basis for a § 3213 motion must be "something more than simply an account stated," such a document may be sufficient if it is "consonant with the terms of the fixed agreement, ... especially where the rendering of statements in connection with that account indicates a history of transactional activity.")

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