New York Commercial Bank v Sato Constr. Co., Inc.

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New York Commercial Bank v Sato Constr. Co., Inc. 2012 NY Slip Op 31465(U) May 25, 2012 Supreme Court, New York County Docket Number: 106484/2010 Judge: Judith J. Gische 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. SCANNED ON 61412012 [* 1] * SUPREME COURT OF THE STATE OF NEW YORK PRESENT: - NEW YORK COUNTY HON. JUDITH J. GISCHE PART I= "1 /o Justice INDE N DATE MOT N SEQ. NO. MOT NEW YORK COMMERCIAL BANK NO. MOT Index Number 1 IO648412010 N CAL. NO. VS SAT0 CONSTRUCTION Sequonce Number : 001 SUMMARY JUDGMENT .- were read on this motic tolfor The following papers, numbered 1 to PAPER$ NUMBERED Notice of Motion/ Order to Show Cause - Affidavlta - Exhibits ... Answering Affldavlts - Exhibits Replying Affidavits Cross-Motion: fl Yes @ No Upon the foregoing papers, it is ordered that this motion motion (a) and crous-motfon declded In accordantx with the annexed deckidordear a?won date. Check one: a FINAL DISPOSITION Check if appropriate: fl HON. JUI J $(Noh DO NOT POST DISPOSITION REFERENCE .. . . [* 2] Supreme Court of the State of New York County of New York: Part 10 X _____l_____-_*r------------------------- ----------------------------------- NEW YORK COMMERCIAL BANK, successor in interest to ATLANTIC BANK OF NEW YORK, D&ision/C)rder No.: 106484/10 Plaintiff, -againstSAT0 CONSTRUCTION CO., INC. d/b/a FLAG WATERPROOFING & RESTORATION, ANTHONY E. COLA0 and JOSE MILLAN, Present: Hon. Judith J, Gische J.S.C. Defendants. Recitation, as required by CPLR 2219 [a], of the pap r n r @ i p Y e review of this (these) motion(s): Papers Numbered ............ 1 Pltf s nlm [3212] wl AJW affirm, EC affid, exhs. . . . . . . . Def s opp. w/ AC affid, exhs. . . . . . . . . . . . . . . . . . . . . . . 3UN.oa.2012. . . . . . . . . . . ............ 2 Pltf s reply wl AJW affirm. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .~. . . . . . . . . . . . . . . . . 3 ,,,,,-,---,--------------_---~--------------------------------------------COUNTY CLEVKS OFFICE Hon. Judith J. Gische, J.S.C.: I Upon the foregoing papers, the decision and order of the;court is as follows: This is an action by plaintiff New York Commercial Bank4 successor in interest to I Atlantic Bank of New York ( NYCB or plaintiff or Bank ) to recqver from the defendants Sato Construction Co., Inc. d/b/a Flag Waterproofing & Restoration ( Sato ), Anthony E. Ca Iao ( Co Ia0 ) a nd Jose MiIIa n ( MiIIa n ) (coI IectiveIy def e nda nt si ), outst a nd ing s ums d ue I under a line of credit and term note. Plaintiff makes this sum4ary judgment motion to dismiss the defendants counterclaim, claiming that there is no jhsticiable issue of fact to I be tried, and because the counterclaim is without legal merit. Issue has been joined on the counterclaim, the note of issue has been filed and the rnotiin is timely. Summary judgment relief is, therefore, available. CPLR § 3212; Mvuns Chun v. Nnrt;h Arne rican -page 1 o f 7 - [* 3] Mgrtqaqe Co., 285 A.D.2d 42 [Ist Dept. 20011. Summary of the Facts Initial Action Plaintiffs first cause of action arises from a September 30, 2008, Revolving Line of Credit Promissory Note ("2008 LOC Note") in the principal amoupt of $600,000.00. (Pltfs Exh. G). In the 2008 LOC Note, Sat0 covenanted, inter alia: (a) to repay the note by July I 3,2009; (b) that NYCB had no obligation to extend the 2008 LOd Note, even if no default or breach occurs (Pltfs Exh. G 7 5); (c) that no failure or delay of the bank in exercising any right, power or remedy shall operate as a waiver (Pltf's Exh. G 16); and (d) to a merger clause, in which the parties agreed that the note set forth the entire agreement between the borrower and the bank, and no amendment, modification, or waiver of any provision I I of the 2008 LOC Note, nor consent to any departure of the borrower therefrom would be effective, unless it was in writing and signed by the bank (Pltf's Exh. G 7 17). Even then the amendment, modification, or waiver would be effective only in the specific instance and the specific purpose for which it was given. (u.).Plaintiff allegqs that Sat0 defaulted on I the terms of the 2008 LOC Note. Plaintiff claims that Sat0 owes $600,000.00, with interest at the rate of 5.25% from November 6, 2009 to March 5, 2010 and interest at the default rate of 8.25% from March 6, 2010. Plaintiffs second cause of action arises from a Business Installment Loan Promissory Note ("2008 Term Note") in the principal amount of $400,000.00. In the 2008 Term Note, Sato covenanted, inter alia: (a) that the failure to make any payment when due on the 2008 LOC Note would result in a default under the 2008 Term Note; (b) that in the -page 2 o f 7 - [* 4] case of default, interest would accrue at a per annum rate of interest equal to the sum of the rate of interest then in effect plus 5%; (c) to pay a late chargF in the amount of 5% of any payment made more than 5 days after the due date; (d) to a +erger clause (Pltfs Exh. H r[ D.4.); and (e) to a non-waiver clause. (Pltfs Exh. H 7 D.2.). Plaintiff alleges that Sat0 defaulted in its obligations under the 2008 Term Note as a result of the default under the 2008 LOC Note on July 3,2009. Plaintiff claims that the principal sum of $324,553.51, with interest at the rate of 6.75% from February 1,2010 to March 5,2QI 0 and at the default rate I of 11.75% from March 6, 2010, together with late charges is duel on the 2008 Term Note. I Defendants Counterclaim I 1 Sat0 alleges that it had a banking relationship with NYCBifrom 1988 through 2009 during which Sato borrowed various sums of money on term noJes and credit lines from NYCB (and its predecessor). After 2006, Sat0 claims that each liability was either paid, I I modified or extended on the basis of oral approval from plaintiff$ loan officer, which was then followed by a formal written approval a couple of months/ later. Sat0 claims that during the periods between the oral approval and the written confjirmation of the extension or modification, no new written loan documents existed, even though Sato continued to make all payments due, as orally agreed. Sato, a construction business, claims that it requires linesiof credit and loans to be in place in order to qualify for performance bonds necessary to bid on jobs and that this requirement was known by plaintiffs employees who dealt with th$ Sat0 loan and credit line I accounts. Defendants claim that the 2008 LOC Note and the 2098 Term Note were orally extended by the plaintiff, and that Sato, in reliance on their past practices, continued to -page 3 o f 7 - [* 5] make payments. However, after being assured that new loan documents were being prepared, Sat0 claims that, subsequently, in November 2009, plaintiff orally notified Sato that the 2008 Term Note and 2008 LOC Note were being called due and were not being extended. Sat0 received the same information in writing, on Decdmber IO, 2009, over four months after the due dates of the credit line and promissory n o t p In its counterclaim, Sato argues that Plaintiffs failure tq act in a timely manner I resulted in Sato being denied bonding on any job it sought after December of 2009, through the time of filing of the counterclaim. Sat0 further claims that due to plaintiffs inaction from July 2009 to November 2009, Sat0 was unable to obtain any credit necessary I to continue bidding on new jobs, which resulted in a 40% drop irp gross revenue. Due to the foregoing, defendants claim that the plaintiffs act of renegidg on it s oral promise to renew the 2008 Term Note and 2008 LOC Note caused lQst profits in excess of $1,000,000.00. Discussion When deciding whether the plaintiff is entitled to the grantlof summary judgment in I its favor against a defendants counterclaim, the court considerslwhether the plaintiff has tendered sufficient evidence to eliminate any material issues of fhct from this case I Wineqrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853 [1985]; Zuckerman v, Citv af New York, 49 N.Y. 2d 557, 562 [1980]. If met, the burden then shifts to defendants who must then demonstrate the existence of a triable issue of fact jn order to defeat these motions. Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324 [1986]; duckerman v. Citv of New I York, supra. When an issue of law is raised in connection with a motion for summary -page 4 of 7 - [* 6] judgment, the court may and should resolve it without the need for a testimonial hearing. See Hindes v. Vveisz, 303 A.D.2d 459 [2d Dept. 20031. The public policy of the State of New York mandates that a person signing an instrument for the accommodation of a bank which, in its form, is a binding obligation, is estopped from enforcing an alleged oral agreement to forebear from enforcing the instrument according to its terms. First Nat. C itv Bank v Cooper, 60 A.D.2d 518 [lst Dept. 19751; Manufacturers HanQver Trust Co. v Trans Nat. Cgmmunications. Inc,, 36 A.D.2d 709, 710 [lst Dept. 19711; see also, General Obligations Law, 5 15-301. A written agreement that is complete, clear and unambiguous on its lface must be enforced according to the plain meaning of its terms. Greenwich Capita1 Fin, Products, Inc. v I Neqrin, 74 A.D.3d 41 3, 41 5 [l st Dept 201 01; W.W.W. Assgciates, Inc. v. Giancontieri, 77 N.Y.2d 157, 162 [1990]. A line of credit is governed by the sameigeneral principles of law applying to all other written contracts. See, General Obligations ILaw, 5 15-301. I Plaintiff claims that over the course of many years of thA banking relationship, it 1 extended many revolving lines of credit ( revolving LOC ) to Satq. These revolving LOCs set out clear maturity dates, at which time plaintiff had reserved the contractual right to extend the notes, in its sole discretion, regardless of whether orlnot Sat0 had defaulted. I Pltf s Exh. G 7 5. These prior dealings between the parties had resulted gaps in coverage that were previously resolved into executed written extensions. These gaps included two months from June and July of 2007, three months from July to September of 2008, two months from November to December 2008, and, finally, five months from July to December 2008. Although defendants claim that these gaps created a pripr course of dealing and -page 5 of 7 - [* 7] expectations between the parties, it is clear that once new noteslwere executed, the prior course of conduct was not intended to create any future expectation or obligation. The I notes, in this case, executed after the last so called gap, explicitly contain a non-waiver clause (Pltf's Exh. G 7 16 and Exh. H 7 D.2.), a merger clause (Pltf's Exh. G 7 17 and Exh. H 7 D.4.) and they specifically state that the plaintiff is not under any obligation to renew or extend the note (Pltf's Exh. G 7 5 ) . The notes are fully integrated unambiguous contracts which by their terms could not I e be modified or varied by parol modification or by an alleged cours of conduct. See Julien J. Studlev. Inc. v. New York News, Inc., 70 N.Y. 628, 629 [1987]; Arner i c m Bank & Trust Co. v. lntermodulgx NDY GQrn 74 A.D.2d 21 8 [ I s t Dept. 19801; Garlin v. Jemal, 68 A.D.3d ~, , I 655 [ I st Dept. 20091). Neither the alleged prior course of condupt by the parties, nor the alleged oral promises by the bank's loan officer that the notes would be extended could modify the terms of the underlying note. See e.g. Chem. Bank,v PIC Motors Corp., 87 I AmD.2d447, [ I s t Dept. 19821affd, 58 N.Y.2d 1023 [1983]; Arne rican Bank &Trust Co, 450 v. lntermodulex NDH Corp., supra. Accordingly the court finds that defendants counterclaim is insufficient as a matter I of law. The court rejects defendants claim that there was an oral extension of the notes, as such alleged extensions are in contravention of the explicit terms of the notes. Nor could there have been any course of dealing that operated to modify the terms of the notes. Here, the notes that plaintiff entered into with defendant s/pecifically stated that all modifications of the original agreement contracted to had to be in writing, signed by the I Bank, to be effective. The court finds that the defendants counterclaim is not supported by - page 6 of 7 - [* 8] I i the long-established law of this state, partic ilarly where the comprehensive vritten agreement between the parties contains a merger clause and specific contract terms that contradict the very representations that defendant alleges were made. W.W.W. Associates, Inc. v. Giancgptieri, supra; Glenfed Financial Cornotat ion v, Aeroeautics and Astronautics Services, Inc,, 181 A.D.2d 575 [ I s t Dept. 19921. ~ ! I In view of the fact that there could be no oral modification of the 2008 LOC Note and 2008 Term Note, the court does not reach the further issue of lost profits raised on this motion. Conclusion In accordance with the foregoing, it is hereby, ORDERED that plaintiffs motion for summary judgment dismissing the defendants counterclaim is granted in its entirety; and it is further ORDERED that this case is ready for trial, plaintiff shall serve a copy of this decisiodorder on the office of Trial Support so that the case cad be scheduled; and it is further ORDERED that any relief not expressly addressed is hereby denied; and it is further ORDERED that this constitutes the decision and order of 'the court. Dated: New York, New York May&y2012 (9 So Ordered: FILED JUN 04 2012 HON. JU IT NEW YORK COUNTY CLERKS OFFICE -page 7 of 7 - . GISCHE, J.S.C.

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