State Bank of India v ADA Inflight Catering Corp.

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State Bank of India v ADA Inflight Catering Corp. 2011 NY Slip Op 32663(U) October 11, 2011 Supreme Court, New York County Docket Number: 103664/10 Judge: Louis B. York Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. SCANNEDON 1011412011 [* 1] SUPREME COURT OF THE STATE OF NEW YORK - NEW YORK - COUNTY n PART INDEX NO. \STATE BANK OF INDIA vs. ADA INFLIGHT CATERING CORP. SEQUENCE NUMBER : 004 MOTION DATE MOTION SEQ. NO. - SUMMARY JUDGMENT MOTION CAL. NO. thls motion tolfor Notice of Motion/ Order to Show Cause - Affidavita - Exhiblts Anewerlng Affidavits - Exhiblts I I I Replying Affldavlts Cross-Motion: ... pfipEe8 NUMBERED Yes 0 No FILED Upon the foregolng papera, it I ordered that thls motion s NEW YORK COUNTY CLERKS OFFICE 0 FINAL DISPOSITION NON-FIN ALaSkOSITION [? REFERENCE Check if appropriate: 0 DO NOT POST Check one: [* 2] SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 2 -----_-----------__-_________________I_ X STATE BANK OF I N D I A , Plaintiff , Index No.: 103664/10 -againstDECISION ADA INFLIGHT CATERING CORP., RITA J. GAGLANI, BHADRA R. SHAH, DARSHAN R. SHAH, and KAVITA J. GAGLANI, ILED OCT 12 2011 Defendants. X _ _ _ - - _ _ _ _ _ _ l _ _ _ _ _ _ _ l _ _ _ _ _ _ _ _ _ _ _ L I _ _ _ _ _ I _ NEW YORK COUNTY CLERK'S OFFICE LOUIS B. YORK, J.: P l a i n t i f f moves, pursuant to CPLR 3212, for summary judgment as against ADA Inflight Catering Corp. (ADA), Bhadra R. Shah (Bhadra), Darshan R. Shah ( D a r s h a n ) a n d Kavita J . G a g l a n i (Gaglani) on all c a u s e s of a c t i o n appearing in the f i r s t amended complaint, as well as on all of defendants' counterclaims interposed in their answer, in which defendants s e e k a permanent injunction and a declaratory judgment that they are n o t o b l i g a t e d t o plaintiff. BACKGROUND Pursuant to a c r e d i t agreement entered i n t o between plaintiff and ADA, d a t e d September 1 0 , 2 0 0 7 , plaintiff a g r e e d to extend two loans f o r a t o t a l amount of $500,000.00. The first loan, in the form of a line o f credit, was for the amount of $200,000.00. In consideration of this extension of credit, ADA 1 [* 3] was required to repay the full amount that it drew on the earlier of (1) the date that plaintiff demanded payment, or (2) the termination date of the contract: September 10, 2008. In conjunction with this agreement, ADA executed a demand promissory note on September 10, 2007. Pursuant to the terms of the demand promissory note, ADA was to pay interest on the unpaid principal the last day of every month, commencing on October 31, 2007, at a rate equal to 1.5% over the prime rate, until the entire balance was p a i d off. Further, a n y amount still outstanding on the due date, either by demand or termination of the agreement, would bear an interest rate of 3.5% above the prime rate until totally discharged. During the period of the loan, plaintiff s t a t e s t h a . t the prime rate was 6.5%. In addition to the foregoing line of credit, under the terms of the agreement, plaintiff also agreed to extend a term loan to ADA in a principal amount not to exceed $300,000.00. In connection with this loan, ADA executed a term note, dated September 10, 2007. Pursuant to the terms of this loan, ADA was to repay the principal amount of $300,000.00 in 20 equal quarterly installments of $15,000.00, commencing on the first day following three months after the first disbursement date. In addition, ADA was to pay interest on the unpaid principal of this loan, commencing on October 1, 2007, at the rate of 1.5% above 2 [* 4] the prime rate until the entire loan was repaid. Similar to the credit line terms, a n y amount of principal or interest remaining unpaid on the due date would b e a r an interest rate of 3.5% above the prime rate until p a i d in f u l l . Each of these two notes provides: The undersigned promises to pay all reasonable outof-pocket costs and expenses (including without limitation reasonable counsel fees and expenses), in connection with the enforcement (whether through negotiations, l e g a l proceedings or otherwise) of this note, whether or not a lawsuit is filed or commenced. On or about the same date that the agreement and notes were executed, plaintiff alleges that it and ADA also entered into a security agreement, by which terms ADA granted a continuing lien and general security interest in a l l of ADA s right, title and interest in certain property, including, without limitation, accounts receivable, deposit accounts, inventory and equipment, documents of title and intangible property. It is noted that plaintiff has not provided a copy of this security agreement in its papers. Plaintiff also alleges that a UCC-1 was filed with the New Jersey Department of Treasury to perfect this security interest, but no copy of that financing statement has been provided to the c o u r t . In addition, plaintiff has provided a security agreement entered into between plaintiff a n d Gaglani and Rita J. Gaglani (Rita), in which Gaglani a n d Rita grant plaintiff a s e c u r i t y interest in their cooperative apartment lccated in New York City. 3 [* 5] Defendants Bhadra, Darshan and Gaglani each signed a separate guaranty agreement, personally guaranteeing ADA s Pursuant to the terms of the obligations to p l a i n t i f f . guarantees, each guarantor agreed to be a primary obligor, and not merely a surety, the due [sic], punctual a n d complete payment of performance, whether at stated maturity, by acceleration or otherwise, of the Obligations of [ADA] to the Bank. Further, the guarantees provide that the guaranty \\isa guarantee of payment and performance and not of collection, and that plaintiff is not r e q u i r e d to exhaust a n y remedies against the Borrower prior to the effectiveness of the Guarantor s obligation to pay the full amount of the Obligations. These guarantees state that they are absolute and unconditional, shall n o t be subject to any countercla im, s e t o f f deduction, diminution, abatement, recoupment, suspension, deferment, reduction or defense (other than payment in full of the Obligations or f u l l a n d s t r i c t compliance by the Guarantor with his obligations hereunder) based upon any claim that the Guarantor or a n y other Person may have against the Bank or any o t h e r Person. I I Further, the guarantors waive any right to enforcement, assertion or exercise against [ A D A ] , and that plaintiff is not required to exhaust any remedies or mitigate damages resulting from any default by ADA. Paragraph 14 of the guarantees states that the guarantor shall be liable to the Bank and shall pay to the Bank immediately on demand as part of its liability under 4 [* 6] this Guaranty a11 costs and expenses of the Bank, including all reasonable fees and disbursement of the Bank s counsel incurred in the collection or enforcement or attempted collection or attempted enforcement of the Bank s rights under this Guaranty Agreement, whether within or apart from any legal action or proceeding. Plaintiff has submitted a copy of its records reflecting a l l payments made on the credit line and loan, and asserts that ADA has not paid any principal or interest on either loan since J u l y 9, 2009, nor has any of the guarantors made any payment to it on behalf of ADA. According to plaintiff, the amount of the unpaid balance on the loan is $195,000.00, and the u n p a i d balance on the credit line is $176,060.53. On or about December 21, 2009, plaintiff s attorneys sent a letter by certified mail, return receipt requested, and by regular mail, to ADA, Bhadra, Darshan, Gaglani and Rita, advising them that they were i n default. This letter a l s o informed the recipients that plaintiff was accelerating the debt and demanding full payment. All of the defendants signed and r e t u r n e d the post office receipt cards, acknowledging receipt of the letter. Further, ADA acknowledged the d e b t in a letter, signed by Darshan on behalf of ADA, to plaintiff s counsel on January 4 , 2010. Plaintiff states that the amount of interest accrued on the loans, as of May 10, 2011, brings the total due to $445,559.60. By the time that the initial complaint was served in this action, ADA had filed a Chapter 11 Petition in the Bankruptcy Court, thereby placing an automatic stay on these p r o c e e d i n g s . 5 [* 7] On F e b r u a r y 8, 2011, ADA's bankruptcy action was dismissed by the Bankruptcy C o u r t with prejudice. M a r l b o r o u g h A f f , Ex. E. Thereafter, plaintiff filed its first amended complaint, asserting six c a u s e s of action: (1) breach of contract as against against ADA; (4) breach of the guarantees against each individual defendant, jointly and severally; (5) declaratory judgment against each of the individual defendants, jointly and s e v e r a l l y ; and (6) expenses and fees against the individual defendants, jointly and severally. Pursuant to the s e c u r i t y agreement executed by R i t a and Gaglani, plaintiff has a security interest in their cooperative apartment located at 310 East 4 g t h Street, Unit 9F, New York, New York. On September 14, 2010, plaint,iff's attorneys sent a letter to all of the defendants enclosing a notice of s a l e f o r September 27, 2010 of the cooperative unit. The defendants filed a motion for a temporary restraining o r d e r and preliminary injunction t o enjoin the s a l e of the cooperative unit. After o r a l argument on defendants' motion, the court issued the following decision with respect to Gaglani's argument against the sale: "Upon the foregoing papers, it is ordered that this motion for a preliminary injunction is denied. The fact of the matter is that the movant acknowledged that the,signatures on the Security Agreement and the guarantee were her signatures. If she didn't read what she signed that is no defense and the court determines t h a t another separate-the credit agreementdid not negate the effect of h e r signatures on those 6 [* 8] two documents. " The sale of the cooperative apartment was thereafter rescheduled for November 30, 2010, but the day before, on November 29, 2010, Rita filed a Chapter 13 petition in the Bankruptcy Court. A hearing on plaintiff's motion to l i f t the automatic stay was to take place in the B a n k r u p t c y C o u r t after . the instant motion was filed. In support of its motion, plaintiff has included excerpts from the deposition testimony of Darshan in which he admits owing the money to the bank, and the excerpts from the deposition testimony of Gaglani, in which she acknowledges her signature on the guaranty. The only defendant who submitted opposition to t h e instant motion is Gaglani, who asserts that, in ruling on the preliminary injunction, the court failed to rule on Gaglani's first affirmative defense, that the guaranty was defective because it incorrectly identified her as an officer of ADA, and that the date of the signature on the guaranty is September 10, 2007, even though Gaglani states that she was not present at the signing. According to Gaglani, this raises factual questions which cannot be determined in a motion for summary judgment. Further, Gaglani asserts that she only signed a signature page and never saw'the remainder of the document to which that'signature page was attached. Among the counterclaims asserted by defendants is an 7 [* 9] injunction on the sale of Gaglani's 50% of the shares in the cooperative apartment based on the alleged invalidity of the guaranty and security agreement. In reply, Varma, plaintiff's chief executive officer, states that the arguments posited by Gaglani are the same arguments that were presented to t h i s court with respect to defendants' motion for a preliminary injunction and that they h a v e already been rejected by the court. Plaintiff maintains that, when the documents were signed, it was unaware t h a t Rita did not own 100% of the cooperative unit, and only became aware of Gaglani's interest when it received the share certificates f o r the apartment. Since the security agreement already identified the co-operative as collateral, plaintiff advised Rita that s h e would have to have Gaglani sign as well, and the agreement was sent to Gaglani in the United Kingdom, where she was at t h a t time. On September 19, 2007, R i t a and Gaglani's signatures were witnessed and notarized together in the United Kingdom. Plaintiff argues that Gaglani's alleged misidentification as an officer of ADA is irrelevant to her obligations under the guaranty and security agreement. Moreover, the guaranty affirmatively states that it is continuing and irrevocable. The court notes that, at the time of this decision, upon information and belief, there is a stay with respect to R i t a and 8 [* 10] plaintiff has not sought any relief as against her in this motion. Further, ADA has failed to s e r v e an answer to. plaintiff's first amended complaint. DISCUSSION "The proponent of a summary judgment motion must m a k e a prima facie showing of entitlement to judgment as a'matter of law, tendering sufficient evidence to eliminate any material issues of f a c t from the case [internal quotation marks and citation omitted]." (lSt Dept 2006). S a n t i a g o v E i l s t e i n , 35 AD3d 184, 185-186 The burden then shifts to the motion's opponent to "present evidentiary f a c t s in admissible form sufficient to raise a g e n u i n e , triable issue of fact." Mazurek v Metropolitan Dept 2006); see Zuckerman v Museum of Art, 27 AD3d 227, 2 2 8 C i t y of N e w York, 49 NY2d 557, 562 (1980). If there is a n y doubt as to the existence of a triable fact, the motion f o r summary judgment must be denied. See Rotuba Extruders, Inc. v Ceppos, 46 NY2d 223, 231 (1978). That portion of plaintiff's motion seeking summary judgment against ADA is granted on default. T h a t portion of plaintiff's motion seeking summary judgment against Bhadra and Darshan is granted without opposition. That portion of plaintiffs' motion seeking summary judgment against Gaglani is also granted. The arguments raised by Gaglani in h e r opposition were 9 [* 11] previously presented to this c o u r t and f o u n d to be wanting. Hence, Gaglani has failed to provide any valid legal reasoning to p e r s u a d e the c o u r t that plaintiff should not be granted summary against her. That portion of plaintiff's motion seeking summary judgment dismissihg the counterclaims asserted against it by Bhadra, Darshan and Gaglani is granted. As quoted above, the guaranty specifically waived the guarantors' rights to interpose any defenses or counterclaims and, consequently, such counterclaims are p r o p e r l y dismissed. Citibank, N . A . v P l a p i n g e r , 66 NY2d 90 (1985); Bank of Suffolk Coun.ty v K i t e , 49 N Y 2 d 8 2 7 (1980); P e t r a CRE CDO 2007-1, L t d . v B a n k v A l l e n , 226 A D 2 d 137 (' 1 ' Dept 1996). "All the guarantees . . . say that they are absolute and unconditional and that the guarantor waives any defenses t h a t the Borrower might have against the [ b a n k ] . Therefore, the guarantor defendants . . . should not be allowed to assert [ a n y defenses] ." 627 A c q u i s i t i o n Company, LLC v 627 G r e e n w i c h , LLC, 0 5 A D 3 d 645, Dept 2011). 647 ( l S t L a s t l y , the complaint asserted as against Rita is severed from this action due to the automatic s t a y imposed by the bankruptcy proceedings. CONCLUSION Based on the foregoing, it is hereby 10 [* 12] ORDERED that plaintiff s motion for summary judgment is granted against the following persons and the C l e r k is directed to enter judgment in favor of plaintiff and a g a i n s t defendants ADA Inflight Catering C o r p . , Bhadra R. Shah, Darshan R. Shah and Kavita J. Gaglani, jointly and severally, in t h e amount of $445,559.60, together with interest at the rate of 10% per annum from the date of May 10, 2011 until the date of the decision on this motion, and thereafter at the statutory rate, as calculated by the Clerk, together with c o s t s and disbursements to be taxed by the Clerk upon submission of an appropriate bill of costs; and it is further ORDERED that the portion of plaintiff s action that seeks the recovery of attorney s fees is severed and the issue of the amount of reasonable a t t o r n e y s fees plaintiff may recover against defendants ADA Inflight Catering Corp., Bhadra R. S h a h , Darshan R. Shah and Kavita J. Gaglani, jointly and severally, is referred to a Special Referee to Hear and Decide andissue # judgment thereon; and it is further ORDERED that counsel f o r the plaintiff s h a l l , within 30 days from the date of this order serve a copy of this order with notice of entry, together with a completed information sheet, upon the Special Referees Clerk in the Motion Support Office Copies are available in Rm. 119M at 60 Centre Street and on the Court s website at www.nycourts.pw/supctmanh under the References section of the Courthouse Procedures link. 11 [* 13] (Room 119M), who is d i r e c t e d t o p l a c e t h i s m a t t e r on t h e c a l e n d a r of t h e S p e c i a l R e f e r e e s P a r t for t h e e a r l i e s t c o n v e n i e n t d a t e ; and i t i s f u r t h e r ORDERED t h a t t h e a c t i o n i s s e v e r e d a s t o d e f e n d a n t R i t a J . ENTER: LOUIS 0. YORK ----*a J.S.C. FILED 12 NEW YORK COUNTY CLERK'S OFFICE

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