Taylor Bldg. Mgt., Inc. v Global Payments Direct, Inc.

[*1] Taylor Bldg. Mgt., Inc. v Global Payments Direct, Inc. 2008 NY Slip Op 50988(U) [19 Misc 3d 1133(A)] Decided on March 20, 2008 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 March 20, 2008
Supreme Court, New York County

Taylor Building Management, Inc., Plaintiff,

against

Global Payments Direct, Inc., and Priority Payments Systems, LLC, Defendants.



602264/07



APPEARANCES:

GERALD LEVINE, ESQ.

LEVINE SAMUEL, LLP

130 West 42nd Street

New York, NY

Attorneys for the Plaintiff

MICHAEL A. SEXTON, ESQ.

WEINBERG WHEELER

950 East Paces Ferry Road, Ste. 3000

Atlanta, GA 30326

Attorneys for Global Payments

DANIEL SCHNAPP, ESQ.

FOX, ROTHSCHILD, LLP

100 Park Avenue

New York, NY 10017

Attorneys for Priority Payment

DANIEL G. LYONS, ESQ.

WESTERMAN, BALL, EDERER,

MILLER AND SHARFSTEIN, LLP

170 Old Country Road, Ste. 400

Mineola, NY 11501 Attorneys for Global Payments

GERALD E. ARTH, ESQ.

FOX, ROTHSCHILD, LLP

200 Market Street

Philadelphia, PA 19103

Attorneys for Priority Payments

Bernard J. Fried, J.

Motion sequence numbers 002 and 003 are consolidated for disposition.

In this action seeking specific performance of a settlement agreement, defendants Global Payments Direct, LLC ("Global")[FN1] and Priority Payments Systems, LLC ("Priority")[FN2] move pursuant to CPLR 3211(a)(1), (5), and (7) to dismiss the complaint. Plaintiff Taylor Building Management, Inc. ("Taylor") cross moves pursuant to CPLR 3211( c) to convert both of the motions to dismiss into motions for summary judgment and, upon conversion, for summary judgment in its favor on the first, second, eighth and twelfth causes of action in the complaint.

Plaintiff Taylor is a corporation that provides back office services for Global Hotels, Inc., a business entity that offers short term rental apartments to foreign visitors to New York City. Defendant Priority provided credit card processing services to Taylor pursuant to a Merchant Processing Application and Agreement (the "Service Agreement"). The Service Agreement authorized Priority to place a percentage of its collection of Taylor's credit card sales into a reserve account as security against charge backs.[FN3]

In early March, 2007, Taylor commenced an action against Priority in Suffolk County, alleging that Priority was holding an excessive percentage of Taylor's funds in the reserve account. On March 23, the parties entered into a settlement agreement resolving that action. (Lyons Aff, Ex. E) The settlement agreement provides that upon execution of the agreement, Priority would pay Taylor $300,000 from the reserve account. As to the remainder of the funds in the reserve account, Taylor agreed that, on or before May 15, 2007, it would deliver an irrevocable letter of credit for the remaining balance in the reserve account to Priority which "shall be in a form and from an issuer acceptable to Priority and shall name priority as the sole beneficiary." Upon confirmation from the bank that it had issued the letter of credit in a form acceptable to Priority, Priority agreed to wire the balance of the reserve fund to the bank. The settlement agreement also states that Priority is not [*2]obligated to accept the letter of credit if Taylor attempts to deliver it after May 15. (Lyons Aff, Ex. E, paras. A & B)

Paragraph F of the settlement agreement contains a broad release of Priority, which states, in pertinent part:

Taylor . . . does hereby release and discharge Priority

(including its predecessors, successors, assigns, affiliates,

parents, subsidiaries, shareholders, members directors,

officers, employees, agents, attorneys, insurers and

representatives) from any and all claims, rights, demands

losses, expenses, actions or causes of action whatsoever,

in law or in equity, from the beginning of the world until

the date of this Agreement . . . which Taylor ever had,

has or may have against Priority . . . and excluding only

any Claims to enforce the express terms of this

Agreement. (emphasis added)

The agreement also contains an integration clause that explicitly states that it is the entire agreement between the parties, that it supersedes all prior or contemporaneous understandings or agreements and that it can only be supplemented or modified by a writing signed by all the parties to the agreement. (Lyons Aff., Ex. E. Para I [2])

Like Priority, Global is also a credit card processor. In early March, 2007, Global commenced a lawsuit in Georgia against a New York limited partnership called "Woogo" and its alleged alter ego, Taylor. Woogo is also in the business of short term apartment rentals in New York and Global's complaint in the Georgia lawsuit alleges that Woogo is liable for approximately one million dollars ($1,000,000) in accrued charge backs. On March 20, the judge in the Georgia lawsuit issued a temporary restraining order that prohibited Woogo and Taylor, "from dissipating transferring, pledging, encumbering, selling, disposing of, or making any use of any and all moneys . . . received from Global Payments Direct, Inc. or Priority Payment Systems, LLC . . . ." up to $1.15 million. The order extends "to all monies received from . . . Global Payments Direct, Inc. or Priority Payment Systems, LLC wherever they may be traced and whether kept separate or comingled with other monies." Global sent notices and copies of the temporary restraining order to, inter alia, Signature Bank and Bank Hapoalim. (Ofer Aff., Ex. 12)

Taylor's motion to dismiss the Georgia lawsuit was pending at the time Taylor filed the complaint in this action.

Prior to the commencement of the Georgia lawsuit, Global, through its counsel, contacted Priority and demanded that Priority, "turn over to Global any amount held by it in relation to Woogo/Taylor up to $1,151,633.62." In the letter, Global reserved its right to seek any and all legal remedies if Priority did not comply with its demand.

Thereafter, on or about May 10, 2007, Global and Priority entered into an Assignment and Assumption Agreement ("the Assignment") whereby Priority assigned all of its rights and obligations under the Service Agreement and the settlement agreement to Global. In furtherance of the assignment, Priority transferred the money remaining in Taylor's reserve fund to Global. It appears from the documentary evidence that at the time of the Assignment, Priority and Taylor were [*3]still negotiating the terms of the letter of credit to be issued by Bank Hapoalim. (Ofer Aff, Ex. 9) Although, after the assignment, Taylor and Global continued those negotiations (Ofer Aff., Ex. 15), Taylor was unable to procure a letter of credit that was acceptable to Global by the May 15th deadline and Global, therefore declared Taylor in default of its obligation in the settlement agreement.

At this time, Global continues to hold the money in Taylor's reserve fund.

The complaint alleges thirteen causes of action (Lyon, Aff., Ex. B). In the first cause of action against both defendants, Taylor alleges that Priority did not have the right to assign the Settlement Agreement and it seeks a declaratory judgment enforcing its "rights to proceed with exchanging a letter of credit issued by Bank Hapoalim for the reserve account." Alternatively, the second cause of action seeks specific performance enforcing the settlement agreement against Global and a judgment compelling Global to accept the Bank Hapoalim letter of credit in a form allegedly agreed to by Priority. Again, in the alternative, the third cause of action seeks to specifically enforce the settlement agreement against Priority and it seeks a judgment compelling Priority to accept the terms of the letter of credit it allegedly agreed to. The fourth cause of action charges Priority with breach of the covenant of good faith and fair dealing and the fifth cause of action states a tortious interference claim against Global based on Global's alleged interference with Taylor's contractual relations with its banks, the conduct of its business and its settlement with Priority. The sixth cause of action appears to state a prima facie tort claim against Priority and Global and the seventh cause of action charges both of those entities with breach of fiduciary duty by failing to turn over the money they are holding in the reserve fund. The eighth and ninth causes of action, respectively, charge Global and Priority with conversion and the tenth cause of action states a damages claim against Global and Priority for alleged unauthorized debits. The eleventh cause of action demands that Priority and Global specifically perform the Service Agreement by using the reserve funds to credit customers for all sales between September 2006 and March 16, 2007. The twelfth cause of action seeks to enjoin Priority from transferring the reserve account to Global and alternatively, in the thirteenth cause of action, Taylor seeks an injunction requiring Global to return the funds to Priority.[FN4]

Both Global and Priority argue that agreements, such as the settlement agreement at issue here, are freely assignable and that the reference to "assigns" in paragraph F of the settlement agreement demonstrates that the parties contemplated that it would be assigned. In addition, they contend that the draft letter of credit that Priority purportedly agreed to on March 8, 2007, was superceded the settlement agreement dated March 23 which expressly states that it "supersedes any prior or contemporaneous understandings or agreements." ; that the settlement agreement specifically states that the letter of credit shall be in a form acceptable to Priority and that, although the agreement states that Bank Hapoalim is an acceptable issuer, the agreement does not state that the form of the March 8 draft letter of credit is acceptable.

They also argue that the covenant of good faith and fair dealing that is inherent in every contract does not impose any obligation on either Priority or Global beyond what the terms of the contract provide and that the doctrine of good faith and fair dealing cannot be used as a substitute [*4]for a nonviable breach of contract claim.

Moreover, they claim that specific performance is not available as a remedy where monetary damages will suffice.

Global contends that Taylor has failed to plead all the necessary elements of a tortious interference with contract claim; that the breach of fiduciary duty claim will not lie because this was an arms length transaction between sophisticated business entities and neither Global nor Priority owed Taylor a fiduciary duty and that the conversion claim must be dismissed because it arises out of the same facts as the breach of contract claim.

In opposition to dismissal and in support of summary judgment, Taylor argues that the assignment was tantamount to an unauthorized attachment; that the assignment was impermissible because it materially increased Taylor's burden of risk and that the settlement agreement did not contemplate that Taylor would have to renegotiate the form of the letter of credit. Taylor also contends that Global breached the settlement agreement and the covenant of good faith and fair dealing inherent in that agreement by demanding terms in the letter of credit that were inconsistent with the settlement agreement's intent; that Priority and Global had a fiduciary duty to Taylor to prevent misuse of the reserve fund; that it has adequately plead all the elements of claims for prima facie tort and tortious interference with contractual relations and that Priority's delivery of the reserve fund to Global and Global's rejection of the letter of credit and its unjustified retention of the reserve fund constitute conversions.

Dismissal of a complaint pursuant to CPLR 3211 (a)(1) is warranted where "the documentary evidence conclusively establishes a defense to the asserted claims as a matter of law." (150 Broadway NY Associates, LP v. Bodner, 14 AD3d 1, 5 [1st Dept 2004] citing Leon v. Martinez, 84 NY2d 83, 88 [1994]) In 150 Broadway, the court stated:

In particular, where a written agreement . . .

unambiguously contradicts the allegations

supporting a litigant's cause of action for breach

of contract, the contract itself constitutes

documentary evidence warranting dismissal of

the complaint pursuant to CPLR 3211 (a)(1),

regardless of any extrinsic evidence or self-

serving allegations offered by the proponent

of the claim. (see Excel Graphics Tech. v.

CFG/AGSCB 75 Ninth Ave., 1 AD3d 65, 69

[2003], lv dismissed 2 NY3d 794 [2004])

( 150 Broadway, 14 AD3d at 5-6)

This rule derives from the well settled principle that it is the court's job to enforce a clear and complete written agreement according to its terms, without considering extrinsic evidence to create ambiguities that are not present on the face of the document. (Vermont Teddy Bear Co. v. 538 Madison Realty Co., 1 N.Y3d 470, 475 [2004]; Greenfield v. Phillies Records, 98 NY2d 562, 569 [2002])

Under New York law, contracts which do not involve exceptional personal skills and which the assignee can perform without adversely affecting the rights and interests of the adverse party are [*5]freely assignable absent a contractual, statutory or public policy prohibition. (See e.g., General Obligations Law, Section 13-101; see also 6 NY Jur. 2d Assignments, Section 5 at 238; In re Stralem, 303 AD2d 120, 122 [2nd Dept 2003]) "That the contract is silent about its assignability does not mean it is not assignable." (Eisner Computer Solutions, LLC v. Gluckstern, 293 AD2d 289 [1st Dept 2002]) A clear and unambiguous provision is essential to effectively prevent assignment. (Special Products Mfg., Inc. v. Douglass, 159 AD2d 847 [3rd Dept 1990]; 6 NY Jur.2d, Assignments, Section 10 at 244-245)

In this case, even though the settlement agreement is silent as to its assignability, the above stated principles of law establish that the contract was freely assignable. The agreement did not involve personal services or exceptional personal skills and there is no statutory or public policy interest that would prevent its assignment.

Plaintiff's argument that the assignment somehow created a burden on its ability to procure an acceptable letter of credit is belied by its own documentary evidence that establishes that Priority had been dissatisfied with the terms of the draft letter of credit issued by Hapoalim Bank and, on the date of the assignment, Priority was still negotiating with the bank regarding the terms of the letter of credit. On May 11, the day after the assignment, Global contacted the bank to continue the negotiations that Priority had initiated. For the most part, Global relied on Priority's objections and negotiations with Bank Hapoalim and it does not appear that Global added any new material objections to the terms of the letter of credit. ( Ofer Aff., Exs. 8, 9 and 15) Accordingly, the assignment itself, did not adversely affect Taylor's rights or interests or impair Taylor's ability to obtain an acceptable letter of credit.

As to Taylor's third cause of action alleging that the assignment breached of the implied covenant of good faith and fair dealing, "[a]lthough a duty of good faith and fair dealing is implicit in every contract, the duty cannot be used to create independent obligations beyond those agreed upon . . .." (Sutton Assocs. v. Lexis-Nexis, 196 Misc 2d 30 [Sup. Ct. Nassau County 2003], see also, Murphy v. American Home Products, Corp., 58 NY2d 293 [1983][the doctrine of good faith and fair dealing can only be employed "in furtherance of other terms of the agreement of the parties."]) Taylor's allegation that Priority's assignment of "its obligations to Taylor" (Lyons Aff., Ex. B, para 87) constituted a breach of the covenant of good faith and fair dealing must be dismissed not only because it imposes a duty that is not found in the express language of the contract, but because of the conclusion that settlement agreement was freely assignable.

Therefore, because Priority's assignment of the settlement agreement to Global was valid, the first cause of action seeking a declaration that the assignment was invalid; the third cause of action against Priority for specific performance of the settlement agreement and the fourth cause of action against Priority for breach of the implied covenant of good faith and fair dealing are dismissed.

Taylor's second cause of action against Global for specific performance, based on its contention that the March 23, 2007 settlement agreement required Priority and its assignee Global to accept a letter of credit from Bank Hapoalim on the same terms as contained in a March 8, 2007 draft letter of credit from Signature Bank, is without merit.

The settlement agreement unambiguously provides that Priority, and by assignment Global, had the right to approve the terms of Bank Hapoalim's letter of credit. Moreover, the merger clause in the March 23, 2007 settlement agreement specifically states that it supersedes all prior and contemporaneous agreements. Accordingly, even if Priority had, in a March 8th email (Ofer Aff., Ex. [*6]7), indicated its approval of the form of a letter of credit from a different bank, that alleged approval was superseded by the clear language of the subsequent settlement agreement. Here, there is no ambiguity in the agreement regarding Priority's right to approve the terms of the letter of credit that would require the court to examine extrinsic evidence to determine the intent of the parties. (See, W.W.W. Assocs., Inc. V. Giancontieri, 77 NY2d 157, 162 [1990]["A familiar and eminently sensible proposition of law is that, when the parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms."]) The agreement states that the letter of credit shall be "in a form . . . acceptable to Priority . . . ." and, accordingly, the second cause of action for specific performance is dismissed.

In the fifth cause of action Taylor alleges that Global tortiously interfered with its "contractual relations with its banks, with the conduct of its business and with its settlement with Priority." (Complaint, para. 91) This cause of action is dismissed because Taylor fails to identify any contracts or allege that any third party actually breached a contract with Taylor. (Kronos v. AVX Corp., 81 NY2d 90, 94 [1993][Interference with contractual relations "consists of four elements: (1) the existence of a contract between plaintiff and a third party; (2) defendant's knowledge of the contract; (3) defendant's intentional inducement of the third party to breach or otherwise render performance impossible and (4) damages to plaintiff."])

As to Taylor's allegations regarding the banks, the documentary evidence establishes that Taylor did not have an existing contract or letter of credit with either Signature Bank or Bank Hapoalim. (Ofer Aff., Exs. 6, 8 and 9) Accordingly, Taylor has failed to satisfy the first element necessary to state a claim for tortious interference with contract. (See, Blume v. A & R Fuels, 32 AD3d 811 [2nd Dept 2006][essential element is the existence of a valid contract between plaintiff and a third party.])

Taylor's claim that Global "interfered with the conduct of [Taylor's] business" is vague and insufficient to support a tortious interference with contract claim as it fails to identify a third party contract that was allegedly breached. (See, Krinos Foods, Inc. v. Vintage Food Corp., 30 AD3d 332, 333 [1st Dept 2006]

The final basis for the tortious interference claim appears to be that Global caused Priority to breach its settlement agreement with Taylor. However, because the settlement agreement was freely assignable, Priority's assignment of that agreement to Global did not cause Priority to breach its contract with Taylor and, therefore, the assignment does not support a claim for tortious interference with contract.

The sixth cause of action sounding in prima facie tort is dismissed. Although Taylor alleges in that cause of action that the defendants' sole motivation was to cause harm to Taylor, that conclusory allegation is inherently incredible. Indeed, plaintiff alleges in affidavits and in its memorandum of law that Global's motive in failing to approve the letter of credit was to obtain an extrajudicial attachment of funds in the reserve account to secure any judgment Global might obtain in the Georgia lawsuit. (Ofer Aff., para 52; Levine Aff, para 2, 11, 22) These allegations demonstrate that Global had a self interest for its actions and that its sole motivation was not merely "disinterested malevolence." (See, Curiano v. Suozzi, 63 NY2d 113, 117 [1984])

Although it is well settled that on a motion to dismiss the facts pleaded are presumed to be true and are accorded every favorable inference, "allegations consisting of bare legal conclusions, as well as factual claims inherently incredible or flatly contradicted by documentary evidence are not [*7]entitled to such consideration." (ECB I, Inv. v. Golman Sachs & Co., 5 NY3d 11, 27, citing Caniglia v. Chicago Tribune-N.Y. News Syndicate, 204 AD2d 233, 233-234 [1st Dept 1994])

A fiduciary relationship [FN5] exists between entities when one of them is under a duty to act for or to give advice for the benefit of the other regarding matters within the scope of their relations. (HF Management Services, LLC v. Pistone, 34 AD3d 82, 84 [1st Dept 2006]; EBC I Inc. V. Goldman Sachs & Co., 5 NY3d 11, 19 [2005]) Generally, no such fiduciary relationship exists between sophisticated parties engaged in an arms length business transaction. Rather the relationship of the parties is contractual in nature. (Dembeck v. 220 Central Park South, LLC, 33 AD3d 491, 492 [1st Dept 2006])

Here, not only were Global's actions in holding the reserve funds permitted by Section 23.2 of the Service Agreement [FN6] between the parties, but Taylor fails to plead any facts to demonstrate that the relationship between the parties was one of trust and confidence and not a straightforward business transaction between a credit card processor and a merchant. Accordingly, the seventh cause of action alleging breach of fiduciary duty against Global is dismissed.

Under New York law, "[a] conversion takes place when someone, intentionally and without authority, assumes or exercises control over personal property belonging to someone else, interfering with that person's right of possession." (Colavito v. NY Organ Donor Net., 8 NY3d 43, 49 [2006])[internal citations omitted])

In the ninth cause of action, Taylor alleges that Priority's transfer of the funds in the reserve account to Global constituted a conversion. However, Section 21.3 [FN7] of the Merchant Services Program Guide (Lyons Aff., Ex. C) gave Priority the authority to assign the Merchant Services Agreement, and necessarily as a part of the agreement, the reserve account, to Global. Section 21.3 of the Merchant Services Program Guide specifically states that, prior to the assignment, Priority was not required to provide notice to or obtain consent from Taylor.

In addition, assignment of the Service Agreement to Global did not interfere with Taylor's right of possession of the reserve fund as Taylor's rights and obligations regarding the reserve fund remained the same after the assignment to Global.

As to Global's alleged conversion, the eighth cause of action states that by failing to release funds from the reserve account, Global has converted them to its own use. However, as noted above, the Service Agreement states, in Section 23.2, that the reserve fund will be held by the credit card [*8]processing company, here Global, for, "the greater of 10 months after termination of this agreement or for such longer period as is consistent with our liability for card transactions in accordance with Association Rules." Thus Global's retention of the reserve fund was authorized by the Service Agreement and did not constitute a conversion.

Moreover, Taylor may not resort to tort law to circumvent express terms of the contract between the parties. (See, Retty Financing, Inc. v. Morgan Stanley Dean Witter & Co., 293 AD2d 341, 342 [1st Dept 2002]["Plaintiff's conversion and breach of fiduciary duty claims are also properly dismissed, since they are duplicative of the breach of contract cause of action."])

Because the Service Agreement between Taylor and Priority permitted the assignment of that agreement and the reserve fund to Global and permit Global to hold the reserve funds for at least ten months after termination, the eighth and ninth causes of action against Priority and Global for conversion are dismissed.

In the tenth cause of action, Taylor alleges that Priority made unauthorized debits from the reserve account after the parties entered into the settlement agreement. However, a review of the Service Agreement demonstrates that Priority was authorized to debit Taylor's account for charge backs and to pay other fees and charges and that Priority was not required to obtain Taylor's permission to make such debits. (Lyons Aff., Ex. C, paras. 10.1; 10.13; 10.2; 17.7). Accordingly, the tenth cause of action alleging "unauthorized debits" is dismissed.

Because motions 002 and 003 to dismiss the complaint pursuant to CPLR 3211 (a)(1), (5) and (7) are granted, in their entirety, plaintiff's cross motion pursuant to CPLR 3211( c) to convert the CPLR 3211 motions into motions for summary judgment and for partial summary judgment on the first, second, eighth and twelfth causes of action is denied as moot.

Accordingly, it is ORDERED that defendant Global Payments Direct, Inc.'s motion (sequence 002) to dismiss the complaint is granted; and it is further

ORDERED that defendant Priority Payment Systems LLC's motion (sequence 003) to dismiss the complaint is granted; and it is further

ORDERED that plaintiff Taylor Building Management, Inc.'s cross motion to convert the motions to dismiss into motions for summary judgment and for partial summary judgment on the first, second, eighth and twelfth causes of action is denied; and it is further

ORDERED that the clerk is directed to enter judgment accordingly.

DATE_March 20, 2008

___________________________

J.S.C. Footnotes

Footnote 1: Motion Sequence 002

Footnote 2: Motion Sequence 003

Footnote 3: Charge backs occur when a customer challenges payment for a credit card transaction.

Footnote 4:Plaintiff has withdrawn the eleventh and thirteenth causes of action. Moreover, plaintiff does not oppose that branch of the motion that seek to dismiss the twelfth cause of action as moot.

Footnote 5:In its reply brief, Taylor concedes that this cause of action is moot as against Priority.

Footnote 6:Section 23.2 provides in pertinent part, "Any reserve account will be held by us for the greater of ten (10) months after termination of this agreement or for such longer period of time as is consistent with our liability for Card transactions in accordance with Association Rules." Paragraph 97 in the complaint alleges that the Priority account was not terminated until March 16, 2007 and thus, under the service agreement Priority, and its assignee Global, were entitled to hold the reserve funds until January, 2008 at the earliest.

Footnote 7:Section 21.3 provides in pertinent part, "Subject to Association Rules, we may assign or transfer this Agreement and our rights and obligations hereunder, and/or may delegate our duties hereunder . . . without notice to you or your consent."