Boglioli v Advantage Diagnostics Inc.

[*1] Boglioli v Advantage Diagnostics Inc. 2007 NY Slip Op 52508(U) [18 Misc 3d 1114(A)] Decided on December 27, 2007 Supreme Court, Nassau County Austin, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 December 27, 2007
Supreme Court, Nassau County

Lauren R. Boglioli, M.D., Plaintiff,

against

Advantage Diagnostics Inc. and John Chiano, Defendants.



06-019637



Counsel for Plaintiff

Anthony T. Scotto, Esq.

585 Stewart Avenue

Suite 306

Garden City, New York 11530

Counsel for Defendant

Law Office of Felice J. Muraco, P.C.

114 Old Country Road - Suite 420

Mineola, New York 11501

Leonard B. Austin, J.

Plaintiff, Lauren R. Boglioli, M.D. ("Boglioli"), moves for summary judgment against the Defendant, John Chiano ("Chiano"). Defendant, Advantage Diagnostics,

Inc. ("Advantage"), cross-moves to vacate the default judgment entered against [*2]it.[FN1]BACKGROUND

Defendants own or lease equipment used to perform medical tests. Upon completion of the tests, Defendants provide a VCR tape generated by their equipment and a patient worksheet to Boglioli.

Boglioli, a physician, who is board certified in cardiovascular diseases and internal medicine, would then review the material provided to her and prepare a written report to Advantage. She would also forward a bill to Advantage along with her review and report.

Advantage would then provide the report prepared by Boglioli to the referring physician who would be billed for the test. The bill to the referring doctor would include the fee charged by Boglioli for the review and report. Advantage would receive payment from the referring physician. Advantage would then pay Boglioli.

Boglioli charged between $30 and $40 for her review of the test and the preparation of her report. The agreement between Boglioli and Advantage was not incorporated into a writing. Boglioli provided services to Advantage based upon this arrangement for about two and half years prior to September 2006.

In September 2006, Boglioli became concerned with Advantage's ability to pay her fees because she had not been paid for services rendered from January through September 2006. At that point, Boglioli met with Chiano, Advantage's principal, and advised him that she would not perform any further services for Advantage or him until they had reached an agreement providing for the payment of the amounts due for services previously rendered and for prompt payment for all services to be rendered in the future.

On September 19, 2006, Chiano executed an "ACKNOWLEDGMENT AND GUARANTY" ("Guaranty"). The Guaranty acknowledged that Advantage owed Boglioli the sum of $141,460 for services rendered through September 19, 2006.

As part of the Guaranty, Advantage issued a check to Boglioli dated September 15, 2006 in partial payment of the amount due for services rendered prior to July 2006. The check indicates numerically that it is for $15,000. However, the handwritten portion of the check indicates it is for "Fifteen dollars". This check was dishonored by the bank because of the discrepancy.

The Guaranty further acknowledged that the following checks had been issued to Bogliolo toward payment for services rendered due prior to July 2006:

(a). October 15, 2006 - $15,000

(b). November 15, 2006 - $20,000

(c). December 15, 2006 - $20,000 [FN2]. [*3]

The Guaranty also provided that Boglioli would be paid $7,500 dollars bi-monthly with the first payment due on September 29, 2006. Such payment would be first applied to services rendered in connection with new accounts. The balance would then be applied to old accounts receivable. Thereafter, Advantage was to pay all future invoices within 30 days of receipt.

The final paragraph of the Guaranty states:

I personally guarantee that the funds will be available on the due dates of each check issued by Advantage Diagnostics Inc. to Lauren Boglioli, M.D. and all monthly installments will be paid. In the event of default in paying any sum within ten (10) days after notice of default, I will be personally liable for said sums and any and all monies, costs or expense incurred by Dr. Boglioli to recover said monies, including reasonable attorneys' fee."

Subsequent to the execution of the Guaranty, Boglioli reviewed her invoices and found that she was actually due $138,500.

By letter dated October 6, 2006, Anthony Scotto, Esq., Plaintiff's attorney, advised Advantage and Chiano of the problems with the checks, that such descrepancies in the checks were being treated as a default under the terms of the Guaranty and that Defendants were being given ten (10) days from that date to cure the default. The letters were sent by certified mail, return receipt requested. The return receipts reflect the letters were received by Advantage and Chiano on October 10, 2006.

Advantage never issued new checks or made any of the other payment due pursuant to the terms of the Guaranty.

Advantage and Chiano concede money is owed to Boglioli but assert they owe Boglioli less than the amount stated in the Guaranty. However, they concede the basic agreement described by Boglioli.

Chiano's sole defense involves a claim that he executed the Guaranty under duress because Boglioli refused to provide reports for tests Advantage conducted and provided to her for review unless Chiano acceded to the terms of the Guaranty. Chiano asserts that if Advantage did not obtain the reports from Boglioli, it would have been driven out of business.

Chiano asserts that the Guaranty did not obligate him to pay Boglioli the $141,460 stated in the Guaranty. He claims that the Defendants agreed to pay Boglioli the amount as determined by an itemized statements taking into account the amounts already paid to Boglioli and any other offsets to which Advantage might be entitled. Defendants point to a handwritten notation on the bottom of the first page of the Guaranty that states, "As per Melissa, itemized statement w/offset of payment will be [*4]given to verify amount" as an indication that they were not obligated to make any payments until the amount due had been confirmed in an itemized statement.

DISCUSSION

The elements of a cause of action for breach of contract are the existence of a contract between the plaintiff and defendant, consideration, performance by the plaintiff, breach by the defendant and damages resulting from the breach. Furia v. Furia, 116 AD2d 694 (2nd Dept. 1986).

Boglioli undeniably had a contract with Advantage. Advantage admits its agreement with Boglioli pursuant to which it was obligated to pay her between $30 and $40 per review and report. Additionally, Advantage agrees it owes money to Boglioli under the terms of that agreement and the Guaranty. The only issue in dispute as between Boglioli and Advantage is the amount due.

Chiano's defense to his personal guaranty of Advantage's obligations is that he signed the Guaranty under duress. Chiano claims that he signed the Guaranty because Boglioli advised him she would withhold reports unless he agreed to its terms. If Boglioli did not provide the reports, Advantage would driven out of business.

However, when the parties entered into the Guaranty, Advantage was already in default under its agreement with Boglioli. Advantage's own records reflect that Boglioli had been paid only $26,000 in 2006. These payments do not indicate whether they are for services rendered in 2006 or some other period. Those payments had been made sporadically.

Boglioli had received two payments of $4,000 in March 2006, a payment of $4,000 in early April 2006 and a payment of $10,000 in August 2006. Boglioli has submitted invoices totaling $138,500 for reports prepared between January 24 and September 13, 2006. Neither Advantage nor Chiano specifically contests any of these invoices.

"A contract is voidable on the grounds of duress when it is established that the party making the claim was forced to agree to it by means of a wrongful threat precluding the exercise of his free will (citations omitted)." Austin Instruments, Inc. v. Loral Corp., 29 NY2d 124, 130 (1971). See, Stewart A. Muller Construction Co., Inc. v. New York Telephone Co., 40 NY2d 955 (1976); and Baratta v. Kozlowski, 94 AD2d 454 (2nd Dept. 1983).

A contract may be void because of duress where one party to a contract has threatened to breach an existing contract by withholding performance unless the other party accedes to additional demands and the breach will result in irreparable harm. Friends Lumber Inc. v. Cornell Development Corp., 243 AD2d 886 (3rd Dept. 1997); and Sosnoff v. Carter, 165 AD2d 486 (1st Dept. 1991).

The only additional promise Boglioli obtained in the Guaranty was Chiano's personal guaranty of Advantage's obligation to pay her for services previously rendered.

Chiano's claim of duress is vague and conclusory. He claims Boglioli threatened to withhold reports unless he agreed to the Guaranty He claims Boglioli's withholding of the reports would cause Advantage financial ruin. However, he does not indicate how many reports Boglioli threatened to withhold or how that would affect Advantage's financial viability. He also does not indicate whether other doctors were reviewing materials or preparing reports for Advantage. Duress cannot be found where, such as [*5]here, the purported threats are nothing more than the assertion of the party's legal rights. See, Stewart M. Muller Construction Co. v. New York Telephone Co., 40 NY2d 955, 956 (1976).

Furthermore, the parties entered into the Guaranty because Boglioli had not been paid for work she had admittedly performed.

Boglioli had received only one payment of $10,000 between May 1 and September 19, 2006. During this same period, Boglioli had provided invoices to Advantage for reports prepared totaling $97,640. Advantage and Chiano do not contest the accuracy of any of these invoices. They do not claim Boglioli was billing for services she did not perform or charging amounts not in accordance with their agreement.

The Guaranty reflects nothing more than an attempt by Boglioli to obtain payment for work performed and to assure prompt payment for service to be rendered in the future. Asserting one's legal rights does not constitute duress. Friends Lumber, Inc. v. Cornell Development Corp., supra at 130.

Finally, this action was commenced on November 27, 2006. The Guaranty is dated September 19, 2006. Until Defendants' motion to vacate the default judgment or reargue this Court's order of June 25, 2007, no claim of duress was raised either affirmatively in a plenary action to set the Guaranty aside or as a defense to this action. Indeed, in his pro se answer dated January 2, 2007, Chiano only averred that a full accounting had not been completed so that the claimed amount due was incorrect. Duress renders a contract voidable, not void. Regent Partners, Inc. v. Parr Development Co., Inc., 960 F. Supp. 607, 612 (E.D.NY 1977). The fact that Defendants did not act promptly to disaffirm the Guaranty negates their attempt to raise the defense at this juncture. Joseph F. Egan, Inc. v. City of New York, 17 NY2d 90, 98 (1996); and Fruchthandler v. Green, 233 AD2d 214, 215 (1st Dept. 1996).

A review of all the papers in this matter indicates the only real dispute between the parties is the amount owed to Boglioli. Where a review of papers submitted in connection with a motion for summary judgment reveals that the only issue is that of damages, the court may order an immediate trial before a referee on the issue of damages. CPLR 3212(c). Therefore, summary judgment on the issue of liability should be granted.

The Guaranty provides for Defendants to pay Boglioli's attorneys fees in the event of a default. Such provisions are valid and will be enforced. Arent, Fox, Kinter Plotkin & Kahn PLLC v. Lurzer GmbH, 297 AD2d 590 (1st Dept. 2002).

Legal fees are awarded on a quantum meruit basis and cannot be determined summarily. See, Simoni v. Time-Line, Ltd., 272 AD2d 537 (2nd Dept. 2000); and Borg v. Belair Ridge Development Corp., 270 AD2d 377 (2nd Dept. 2000). Therefore, this issue must also be referred to a hearing.

The application to vacate Advantage's default must be denied. In order to vacate a default judgment, the movant must demonstrate both an excusable default and a meritorious defense. CPLR 5015 (a)(1). See also, Newton v. The Nutty Irishman, 38 AD3d 630 (2nd Dept, 2007). Assuming arguendo that Chiano's belief that his filing a pro se answer covered both Defendants, the motion must fail. As set forth herein, there is no meritorious defense to liability. Certainly, Defendants can establish their defense as to damages at the time of the hearing before the Special Referee. [*6]

Accordingly, it is,

ORDERED, that Plaintiff's motion for summary judgment is granted as to liability; and it is further,

ORDERED, that this action is respectfully referred to Special Referee Frank Schellace on February 5, 2008 at 9:30 a.m to hear and determine all issues relating to Plaintiff's damages including but not limited to reasonable attorney's fees; and it is further,

ORDERED, that counsel for the Plaintiff shall serve upon counsel for Defendants, and file with the Clerk of this Court, a copy of this Order with Notice of Entry, a Note of Issue and pay all appropriate fees on or before January 28, 2008; and it is further,

ORDERED, that the County Clerk of Nassau County is directed to enter judgment in favor of the Plaintiff and against the Defendants for the amount of damages as determined by the Special Referee together with interest from the date of commencement of this action, legal fees as determined by the Special Referee and costs and disbursements as taxed by the Clerk.

This constitutes the decision and Order of the Court.

Dated: Mineola, NY_____________________________

December 27, 2007Hon. LEONARD B. AUSTIN, J.S.C. Footnotes

Footnote 1:By Stipulation dated September 18, 2007, the parties consented to vacate the default judgment against Advantage. The Stipulation provided that the judgment would stand as security. The papers submitted in connection with Advantage's motion to vacate the default judgment were read and considered as the opposition to Boglioli's motion for summary judgment.

Footnote 2:These checks have the same problem as the September 15, 2006; to wit: the amount written numerically differs from the amount written in words. In view of the problem involving the September 15, 2006 check, these checks were never presented for payment. The Court notes that pursuant to Uniform Commercial Code §3-118(c) words control over figures unless the words are ambiguous.