Bank of Am., N.A. v Friedman Furs & Fashion, LLC

[*1] Bank of Am., N.A. v Friedman Furs & Fashion, LLC 2012 NY Slip Op 52306(U) Decided on December 18, 2012 Supreme Court, Kings County Schmidt, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 18, 2012
Supreme Court, Kings County

Bank of America, N.A., Plaintiffs,

against

Friedman Furs & Fashion, LLC, Defendants.



17329/10



Plaintiff Attorney: Buchanan Ingersoll & Rooney, PC, 50 Fountain Plaza, Suite 1230, Buffalo, NY 14202-2330

Defendant Attorney: Schlanger & Schlanger, LLP, 1025 Westchester Ave., Ste. 108, White Plains, NY 10604

David Schmidt, J.

The following papers numbered 1 to 13 read on this motion:Papers Numbered

Notice of Motion/Order to Show Cause/

Petition/Cross Motion and

Affidavits (Affirmations) Annexed1 - 3

Opposing Affidavits (Affirmations)4 - 10

Reply Affidavits (Affirmations)

Other Papers Rule 19-A Statements of Material Facts11, 12

Proposed Order and Judgment13

Upon the foregoing papers, plaintiff Bank of America, N.A. (the Bank), moves for an order: (1) pursuant to CPLR 3212, granting it summary judgment against defendants Friedman Furs & Fashion, LLC (Friedman Furs), Morris Friedman, Miriam Friedman and The Fur & Leather Outlet, Inc. (the Fur Outlet), on all causes of action, and the entry of a judgment in the amount of $482,436.77 against Friedman Furs, the Fur Outlet and Mr. Friedman, and $537,256.91 against Mrs. Friedman, plus reasonable attorneys' fees, costs and per diem interest until the date of the judgments; (2) striking defendants' affirmative defenses; and (3) dismissing defendants' counterclaims.

[*2]Facts and Procedural Background

The Bank commenced this action on July 14, 2010 seeking to recover money allegedly due under a line of credit and a credit card agreement, plus attorneys' fees and costs.

Defendants and the Bank began their business relationship in 2005. On June 28, 2006, Friedman Furs and the Fur Outlet (hereinafter collectively referred to as the Friedman Furs Defendants) executed the subject note and agreement in favor of the Bank in the principal amount of $1,000,000 (the Line Note or the Line of Credit). Mr. and Mrs. Friedman executed continuing and unconditional guaranties of these debts. As further security for the amounts due, the Friedman Furs Defendants executed a security agreement granting the Bank a lien on certain of their assets. The Line of Credit was subject to renewal on an annual basis. The Bank also issued a credit card line to VIP Fashion of NY, which was guaranteed by Mrs. Friedman (the VIP Loan).

The 2008-2009 extension of the Line Note was set to expire, by its terms, on June 15, 2009. By letter dated June 12, 2009, it was extended to August 18, 2009. Ultimately, the Bank's underwriters did not approve its renewal, citing to the deterioration of revenues, global cash flow and the businesses' risk rating. The Friedman Furs Defendants defaulted in making the payment of the full amount due and owing on the Line Note following the maturity date. Similarly, Mrs. Friedman defaulted in making the payment due for the VIP debt.

Defendants served an answer dated August 13, 2010 and an amended answer dated September 24, 2010. In the amended answer, defendants interpose the affirmative defenses of estoppel, unclean hands and unconscionability of the loan agreements. Defendants also interpose three counterclaims. In the first, they allege breach of contract in that the Bank failed to give them reasonable prior notice of its decision not to allow them to draw down the funds on the Line of Credit before its termination date, failed to convert the loan to a demand loan and failed to give them any reason for these actions. In the second, defendants allege that they relied upon a negligent misrepresentation made by Carmen Gomez, a Senior Vice President at the Bank and the relations manager responsible for the Line of Credit, that there would be no problem having the 2008-2009 Line of Credit renewed for an additional year. In the third, defendants allege that the Bank should be estopped from cutting off defendants' Line of Credit without notice and from refusing to renew it.

The Bank served an answer to defendants' counterclaims in which it denied the essential elements of each and interposed three affirmative defenses: that the defendants' counterclaims are precluded by documentary evidence, i.e., the loan documents; defendants' alleged reliance is unreasonable; and defendants' counterclaims fail to state a cause of action.

The Bank's Contentions

In reliance upon an affidavit from Ms. Gomez, the Bank asserts that the Friedman [*3]Furs Defendants' Line of Credit was not cut off two months prior to the termination date, as contended by defendants. She states that she knows this because, as defendants' relationship manager, she would have been advised of any termination and she was not. Ms. Gomez goes on to point out that the Friedman Furs Defendants received a written notice extending the Line of Credit at or after the alleged denial of access. She further avers that Mr. Friedman never mentioned to her that he had requested an advance of funds that had been denied prior to the cancellation of the Line of Credit. Ms. Gomez also contends that she did not induce Mr. Friedman to believe that the Line of Credit would be renewed for another year, particularly in view of the fact that underwriting, and not the relationship manager, was responsible for approving renewals. Moreover, Ms. Gomez alleges that she was in constant contact with Mr. Friedman regarding the obstacles for renewal of the loan, including the Friedman Furs Defendants' poor business performance, an unauthorized distribution to its principals' pension, the deteriorating financial position of the business and the fact that they were seeking a new lender before the approval process was complete.

As of the date of the motion, in reliance upon the affidavit from Ms. Gomez and a computer print out titled "A F S Loan History Report" (the Print Out), the Bank alleges that $482,426.77 is due on the Friedman Furs Defendants' Line of Credit, consisting of $444,811.86 in principal, $37,624.91 in interest and per diem interest in the a mount of $49.43. It further avers that $54,820.14 is due on the VIP debt, consisting of $45,338.91 in principal, $9,481.23 in interest and per diem interest in the amount of $12.11. Plaintiff accordingly seeks the entry of money judgments in these amounts against defendants. In further support of its demand for relief, the Bank contends that in response to its notice to admit, defendants admitted the validity of the loan documents, the amounts due thereunder and their default. Plaintiff also seeks to recover $27,620 in attorneys' fees and $1,561.32 in costs pursuant to the terms of the Line Note.

Finally, the Bank also seeks an order dismissing defendants' counterclaims.

Defendants' Contentions

In opposition to the motion, defendants first assert, in reliance upon an affidavit from Mr. Friedman, that they are united in interest. They then allege that the Bank blocked the Line of Credit in May 2009, while $550,000 of the funds were available, without any notice and in violation of the terms of the Line Note (the Cut Off). Mr. Friedman goes on to explain the nature of his business: he purchased skins from suppliers; the skins were shipped directly to the manufacturing facility overseas to be sewn into finished garments; the garments were sent to him in New York and sent to his customers for the fall/winter selling season; and after the garments were sold, he got paid. That this was the practice in the business is reflected in the requirement in the Line Note that the Friedman Furs Defendants pay down the Line of Credit to $0 for a thirty day period during each year. Mr. Friedman accordingly contends that because of the Cut Off, he was unable to continue his business, i.e., his suppliers would not ship and release skins [*4]and finished garments to him without getting paid and he would not get paid by his wholesale customers in time to pay his suppliers because he was denied access to the funds that should have been available under the Line of Credit. Thus, since he knew that he could not pay his suppliers, he did not solicit any business, which resulted in his orders declining. These allegations are substantiated by affidavits from two of his suppliers and two of his customers.

Mr. Friedman also alleges that when he telephoned the Bank in May 2009, he was told that there was a "hold" on the Line of Credit, that he could not access any funds and that he should contact his loan officer. When he spoke with Ms. Gomez, she told him that the account was being reviewed for its annual renewal and that he could not get any money during the review process. Mr. Friedman attaches a copy of his telephone activity to support his allegation that these telephone calls were made on May 19, 2009. Mr. Friedman also contends that his continued communications with Ms. Gomez throughout the summer of 2009, as is evidenced by emails, copies of which are annexed to his papers, and his procurement of accounts receivable insurance, evidence defendants' efforts to convince the Bank to extend the Line of Credit through the end of the year. In this regard, the affidavit of Mr. Mordechai Ehrenreich, defendants' accountant, further supports Mr. Friedman's claim that the Bank told him in May that he could not access the Line of Credit, since Mr. Ehrenreich alleges that he arranged meetings with Mr. Friedman and several banks in an attempt to procure alternative financing; no other bank was interested. Mr. Friedman thus concludes that these communications and actions raise an issue of fact as to whether the Line of Credit remained available to the Friedman Furs Defendants through August 18, 2009, as now claimed by plaintiff.

Mr. Friedman also asserts that during early 2009, Ms. Gomez assured him that she did not see any problem with his loan being approved. Mr. Friedman argues that the affidavit submitted by Ms. Gomez states only that she would have known if the Line of Credit had been cut off. Thus, it is not an affidavit from a person having personal knowledge with regard to whether or not access to the Line of Credit had been blocked.

Mr. Friedman also argues that an internal memo from the Bank, written by Senior Account Officer, Salvatore Fioravante, dated June 5, 2009, which was provided in discovery, establishes that the Bank had already determined not to extend the Line of Credit as of that date. Thus, this memo is inconsistent with the Bank's current assertion that access to the Line of Credit remained available until August 18, 2009. Moreover, although a letter dated June 12, 2009 states that the Line of Credit had been extended through August 18, 2009, the Friedman Furs Defendants had already been denied access to the money. Mr. Friedman further argues that the Print Out offered to demonstrate that the Line of Credit was not cut off is wrong with regard to the entries made after May 7, 2009, the date that the Friedman Furs Defendants received $100,000, their last disbursement under the Line of Credit; he avers that the accounting and adjusting entries on the document support his claim. Moreover, the document is dated December 31, 2009 [*5]and would not have been available to the Bank's representative when he requested funds from the Line of Credit in May. Mr. Friedman concludes that the document is not in admissible form and is accordingly legally insufficient to support the Bank's motion for summary judgment.

In reliance upon these facts and the affidavit from an accountant, Donald M. May, Mr. Friedman contends that if he had been able to access the money sought from the Line of Credit, the businesses would have been able to maintain orders at the same level as in previous years. After reviewing defendants' prior expenses and sales, Mr. May calculates lost profits for 2009 to be $479,173, which defendants seek to recover as damages on their counterclaims. In this regard, Mr. Friedman further avers that Ms. Gomez and the Bank were aware of how his business functioned, so that they were aware that the Cut Off would result in lost income and profit. Mr. Friedman argues that to refute this conclusion, the Bank's conclusory assertion that the decline in defendants' businesses was due to the recession in 2009, without any supporting evidence, is insufficient to defeat the counterclaims and to entitle it to summary judgment.

In their memorandum of law, defendants also argue that this motion is premature in that plaintiff has refused to produce duly noticed deponents for deposition, to answer any interrogatories or to produce demanded documents.

Summary Judgment

It is well established that summary judgment may be granted only when it is clear that no triable issues of fact exist (Alvarez v Prospect Hosp., 68 NY2d 320 [1986]). The party moving for summary judgment "bears the initial burden of making a prima facie showing of its entitlement to judgment as a matter of law" (Holtz v Niagara Mohawk Power, 147 AD2d 857, 858 [1989]). Failure to make such a showing requires denial of the motion, regardless of the sufficiency of the opposing papers (see e.g. Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]; Dat v City of New York, 271 AD2d 635, 635 [2000]).

Once such a showing has been established, "the burden shifts to the party opposing the motion for summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action" (Alvarez, 68 NY2d at 324, citing Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). It is equally well settled that in making the determination of whether a movant has satisfied the requisite burden of proof, the nonmovant is entitled to the benefit of every favorable inference (see e.g. Negri v Stop & Shop, 65 NY2d 625 [1985]; Louniakov v M.R.O.D. Realty, 282 AD2d 657 [2001]). Further, "the motion should not be granted where the facts are in dispute, where conflicting inferences may be drawn from the evidence, or where there are issues of credibility" (Scott v Long Is. Power Auth., 294 AD2d 348, 348 [2002], citing Dolitsky v Bay Isle Oil Co., 111 AD2d 366 [1985]). Finally, on such a motion, the court is not to determine credibility, but whether a factual issue exists (Capelin Assoc. v Globe Mfg., 34 NY2d 338 [1973]).

[*6]Summary Judgment on the Complaint

The plaintiff establishes its prima facie entitlement to judgment as a matter of law by submitting proof of the note and guaranty, and of the defendants' failure to make the payments provided for by their terms (see Northport Car Wash v Northport Car Care, 52 AD3d 794, 794-795 [2008], citing Governor & Co. of Bank of Ireland v Dromoland Castle, 212 AD2d 759 [1995]). In fact, defendants do not deny that money is owed on the Line of Credit and VIP Loan at issue in their responses to plaintiff's notices to admit, in their papers in opposition to the motion or in their Rule 19-A Statement of Material Facts.

Since the Bank satisfied its initial burden, "[t]he burden then shift[s] to the defendant[s] to establish by admissible evidence the existence of a triable issue of fact with respect to a bona fide defense" (Gullery v Imburgio, 74 AD3d 1022, 1022 [2010]). In opposition, defendants argue that they possess meritorious affirmative defenses and counterclaims, apparently seeking to establish entitlement to a money judgment in their favor that would offset the judgments sought by the Bank. Defendants also argue that while they admit that the sums sought by the Bank were received by them, they are not in default in repayment.

First Affirmative Defense

Estoppel

" "The elements of a cause of action based upon promissory estoppel are a clear and unambiguous promise, reasonable and foreseeable reliance by the party to whom the promise is made, and an injury sustained in reliance on that promise"'" (Schwartz v Miltz, 77 AD3d 723, 724-725 [2010], lv denied 16 NY3d 701 [2001], quoting Agress v Clarkstown Cent. School Dist., 69 AD3d 769, 771, [2010], quoting Williams v Eason, 49 AD3d 866, 868 [2008]).

Herein, defendants' claim of estoppel must be dismissed because they fail to establish the existence of a clear promise made by Ms. Gomez to them that the Line Note would be renewed. In this regard, given defendants long relationship with the Bank, they must be presumed to know that the decision to renew the Line Note would not be made by Ms. Gomez, but by the underwriters. Thus, defendants fail to establish the manner in which they detrimentally relied on any alleged promise made by the Bank (see generally Kennedy v Leibowitz, 303 AD2d 375, 376 [2003]; Ripple's of Clearview v Le Havre Assoc., 88 AD2d 120 [1982], lv denied 57 NY2d 609 [1982]). Finally, since this claim is not supported by the terms of the Line Note, as is more fully addressed hereinafter, defendants could not have reasonably relied upon any representation made by Ms. Gomez with regard to whether the Line of Credit would be renewed.

Unclean Hands

It is well settled that the doctrine of "unclean hands" does not apply to an action at law (see generally Board of Educ. v Rettaliata, 78 NY2d 128 [1991]; Rocks & Jeans v Lakeview Auto Sales & Serv., 184 AD2d 502, 503 [1992]). Accordingly, it is not [*7]properly interposed in this breach of contract action (see generally Pecorella v Greater Buffalo Press, 107 AD2d 1064, 1066 [1985]).

In the alternative, even if the doctrine was applicable, the facts as alleged by defendants do not support the defense. "To charge a party with unclean hands, it must be shown that said party was guilty of immoral or unconscionable conduct directly related to the subject matter'" (Citibank v American Banana Co., 50 AD3d 593, 594 [2008], quoting Frymer v Bell, 99 AD2d 91, 96 [1984]). Although this court finds that defendants may prevail on their breach of contract claim, the conduct of the Bank does not rise to the level of being immoral or unconscionable, as is more fully addressed in discussing defendants' second affirmative defense.

Second Affirmative Defense: Unconscionability

It has been held that:

" It is well settled that an unconscionable contract is generally defined as one which is so grossly unreasonable as to be [unenforceable according to its literal terms] because of an absence of meaningful choice on the part of one of the parties ["procedural unconscionability"] together with contract terms which are unreasonably favorable to the other party ["substantive unconscionability"]' (King v Fox, 7 NY3d 181, 191 [2006]; see Gillman v Chase Manhattan Bank, 73 NY2d 1, 10-11 [1988])."

(Lawrence v Miller, 11 NY3d 588, 597 [2008]). More specifically,

" The procedural element of unconscionability concerns the contract formation process and the alleged lack of meaningful choice; the substantive element looks to the content of the contract, per se' (State of New York v Wolowitz, 96 AD2d 47, 67 [1983]; see Lawrence v Graubard Miller, 11 NY3d 588, 595 [2008]; Gillman v Chase Manhattan Bank, 73 NY2d 1, 10-11). Examples of procedural unconscionability include, but are certainly not limited to, high pressure commercial tactics, inequality of bargaining power, deceptive practices and language in the contract, and an imbalance in the understanding and acumen of the parties' (State of New York v Wolowitz, 96 AD2d at 67). Examples of unreasonably favorable contractual provisions are virtually limitless but include inflated prices, unfair termination clauses, unfair limitations on consequential damages and improper disclaimers of warranty' (id. at 67-68)."

(Simar Holding v GSC, 87 AD3d 688, 689-690 [2011]). " [I]n general, it can be said that procedural and substantive unconscionability operate on a "sliding scale"; the more questionable the meaningfulness of choice, the less imbalance in a contract's terms should be tolerated and vice versa'" (Emigrant Mtge. Co. v Fitzpatrick, 95 AD3d 1169, 1170 [2012], quoting State of New York, 96 AD2d at 68, quoting Eddy, On the "Essential" Purposes of Limited Remedies: The Metaphysics of UCC Section 2-719[2], 65 Cal L Rev 28, 41-42, n 56 [1977]).

As is also relevant to the facts of this case, an unconscionable contract is one [*8]which is so grossly unreasonable or unconscionable in the light of the mores and business practices of the time and place as to be unenforceable according to its literal terms (see e.g. Sablosky v Gordon Co., 73 NY2d 133, 138 [1989]; Gillman, 73 NY2d at 10; Mandel v Liebman, 303 NY 88, 94 [1951]). Further, in "a commercial transaction by business people in a commercial setting, under terms that are standard in the trade, [the] factual predicate gives rise to a presumption of lack of unconscionability" (Chrysler Credit v Kosal, 132 AD2d 686, 686-687 [1987], citing Cayuga Harvester v Allis-Chalmers, 95 AD2d 5, 20 [1983]; 2 Anderson, Uniform Commercial Code § 2-302:39, at 444 [3d ed], citing Earman Oil Co. v Burroughs, 625 F2d 1291, 1300 [5th Cir 1980]; Lister Elec. v Incorporated Vil. of Cedarhurst, 108 AD2d 731, 733 [1985]). " The determination of unconscionability is a matter of law for the court to decide'" (Emigrant Mtge. Co., 95 AD3d at 1170, citing Simar Holding v GSC, 87 AD3d at 690, quoting Industralease Automated & Scientific Equip. v R. M. E. Enters., 58 AD2d 482, 488 [1977]).

In this case, it is beyond dispute that defendants are sophisticated business people. This presumption is supported by the fact that defendants had been operating profitable businesses for many years. From this it follows that they cannot claim that they are commercially illiterate (see generally Equitable Lumber v IPA Land Development, 38 NY2d 516, 523 [1976]). Further, since defendants first established a business relationship with the Bank in 2005 and obtained a Line of Credit that was renewed annually thereafter, there is no showing that there was an inequality in bargaining power between the Bank and defendants; that they had no choice but to enter into a banking relationship with plaintiff, instead of any other bank or financial institution; or that any high pressure tactics were used. In addition, having renewed the Line Note several times, defendants will also be presumed to have understood the terms of their agreements with the Bank. Finally, defendants fail to allege or to establish that the terms of the Line of Credit or of the agreement that resulted in the VIP Debt were unreasonably favorable to the Bank.

First Counterclaim: Breach of Contract

In support of this counterclaim, defendants allege that the Bank breached its contract with defendants in improperly cutting off the Line of Credit, without prior notice, which caused their businesses to sustain damages in the amount of $479,173 resulting from lost profits and the enterprise value of the business. The court finds that this counterclaim raises issues of fact that cannot be decided on the papers now before and accordingly requires that plaintiff's motion for summary judgment must be denied.

As a threshold issue, the court finds that the demand for money damages for this alleged breach is adequately pleaded in the amended complaint, since the facts upon which the counterclaim is based are set forth in detail and a money judgment is requested. The amount of the money judgment sought is now set forth in more detail in the affidavit submitted by Mr. May, as substantiated by the affidavits from two of defendants' suppliers and two of their customers. [*9]

Further, defendants' claim of breach of contract finds support in the language of the Line Note itself. In addressing this claim, it must be recognized that it is well established that "it is a court's task to enforce a clear and complete written agreement according to the plain meaning of its terms, without looking to extrinsic evidence to create ambiguities not present on the face of the document'" (New York City Off-Track Betting v Safe Factory Outlet, 28 AD3d 175, 177 [2006], rearg denied 2006 NY AppDiv LEXIS 11351 [2006], quoting 150 Broadway NY Assoc. v Bodner, 14 AD3d 1, 6 [2004]). A contract is unambiguous if on its face, it is reasonably susceptible of only one meaning (Greenfield v Philles Records, 98 NY2d 562, 570 [2002]). "Conversely, [a] contract is ambiguous if the provisions in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings'" (Geothermal Energy v Caithness Corp., 34 AD3d 420, 423 [2006], lv denied 100 NY2d 505 [2003], quoting Feldman v National Westminster Bank, 303 AD2d 271 [2003], lv denied 100 NY2d 505 [2003] [internal quotation marks and citation omitted]).

It must also be recognized that it is clear that "[w]hether a contract is ambiguous is a question of law, and extrinsic evidence may not be considered unless the document itself is ambiguous" (Savoy Mgt. v Leviev Fulton Club, 51 AD3d 520, 521 [2008], citing South Rd. Assoc. v International Bus. Machs., 4 NY3d 272, 278 [2005]). Further, "[c]onstruction of an unambiguous contract is a matter of law, and the intention of the parties may be gathered from the four corners of the instrument and should be enforced according to its terms" (Beal Sav. Bank v Sommer, 8 NY3d 318, 324 [2007], rearg denied 8 NY3d 993 [2007], citing Vermont Teddy Bear Co. v 538 Madison Realty Co., 1 NY3d 470, 475 [2004]; W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162 [1990]). Parol evidence cannot be used to create an ambiguity where the words of the parties' agreement are otherwise clear and unambiguous (see e.g. Madison Ave. Leasehold v Madison Bentley Assoc., 8 NY3d 59, 66, rearg den 8 NY3d 59 [2007]; Pavarini McGovern v Tag Ct. Sq., 62 AD3d 680, 680 [2009]).

Herein, the Line Note provides, as is relevant to the instant dispute, that:

"During the availability period prescribed below, the Bank will provide a line of credit to the Borrowers. The amount of the line of credit (the Commitment') is One Million and 00/100 Dollars ($1,000,000.00). The Bank may increase or decrease the Commitment at any time for any reason. The Bank will give the Borrowers notice of any change in the Commitment.

"Availability Period. The line of credit is available between the date of this Agreement [June 28, 2006] and June 30, 2007, or such earlier date as the availability may terminate as provided in the Agreement (the Expiration Date').

"The availability period for this line of credit will be considered renewed only if the Bank has sent to the Borrowers a written notice of renewal effective as of the Expiration Date for the line of credit (the Renewal Notice'). If this line of credit is renewed, it will continue to be subject to all the terms and conditions set forth in the Agreement except as modified by the Renewal Notice. If the line of credit is renewed, the term Expiration Date' shall mean the date set forth in the Renewal Notice as the Expiration Date . . . .

"Notices. Unless otherwise provided in this Agreement or another agreement between the Bank and Borrowers, all notices required under this Agreement shall be personally delivered or sent by first class mail, postage prepaid, or by overnight courier."

(Line Notes, paras 1.1[a], p 1; 1.2, p 1; 9.11, p 10).

The Line Note attached to the Bank's moving papers is dated June 28, 2006. No other agreements or renewal notices are annexed, which leads the court to conclude that the terms and conditions as set forth in the Agreement annexed to the Bank's moving papers still control. Further, the Bank asserts that the 2008-2009 extension of the Line Note was set to expire, by its terms, on June 15, 2009; this expiration date is not disputed by the defendants. Thus, applying the above language of the Line Note to the facts of this case, Mr. Friedman's assertion that the Bank refused to allow the Friedman Furs Defendants to access the money remaining available under the Line of Credit in May 2009, prior to the expiration date of June 15, 2009, if proven, constitutes a breach of contract.

In so holding, the court first notes that plaintiff's reliance upon the affidavit of Ms. Gomez is insufficient to establish that the Bank did not deny the Friedman Furs Defendants access to their Line of Credit after May of 2009. More specifically, Mr. Friedman alleges in his affidavit that he had numerous conversations with Ms. Gomez regarding the denial of access to funds. Thus, since Mr. Friedman alleges that he followed up on the denial of his request for an additional draw down on the Line of Credit after his telephonic request had been denied, as is evidenced by the emails annexed to the opposition papers, the Bank's assertion that the terms of the Line Note provide that the Bank may honor telephone instructions, but are not obligated to do so, is not relevant (see Line Note, para 4.1, p 3). In addition, the affidavit from defendants' accountant also raises an issue of fact with regard to whether the Line of Credit was cut off in May 2009, since Mr. Ehrenreich states that he arranged several meetings with other banks in an attempt to procure alternative financing.

The court further finds that the Bank fails to offer any admissible evidence to support its claim that access to the Line of Credit remained available after May 2009. In this regard, the only document relied upon by the Bank is the Print Out. Pursuant to [*10][*11]CPLR 4518(a),[FN1] CPLR 4539[FN2] and State Technology Law § 306,[FN3] a business record, [*12]including an electronic record, is admissible. In interpreting these provisions, it has been held that:

"A business record is admissible if it was made in the regular course of any business and . . . it was the regular course of such business to make it, at the time of the act, transaction, occurrence or event, or within a reasonable time thereafter' (CPLR 4518 [a]; see generally People v Kennedy, 68 NY2d 569, 579-580 [1986]). A proper foundation for the admission of a business record must be provided by someone with personal knowledge of the maker's business practices and procedures' (West Val. Fire Dist. No. 1 v Village of Springville, 294 AD2d 949, 950 [2002])."

(Palisades Collection v Kedik, 67 AD3d 1329, 1330-1331 [2009]).

In this case, the Print Out fails to comply with these requirements. In the first instance, there is no indication that the Print Out was made in the regular course of business, since the report was not generated until October 2010. Thus, it is not a record of the transactions on the Line of Credit as they occurred, but is instead a summary prepared for the purpose of this litigation. Moreover, the Print Out is not self explanatory, since the entries are confusing and the affidavit of Ms. Gomez offers no interpretation of the document. "Without an affidavit from an individual with personal knowledge of the care and maintenance' of plaintiff's electronic business records, plaintiff cannot satisfy its burden, under State Technology Law 306 and CPLR 4539(b), of laying a proper foundation for submitting the subject reproductions" (American Express Centurion Bank v Badalamenti, 30 Misc 3d 1201A [2010] [internal citations omitted]). Thus, the Print Out has no probative value. The court further notes that there are no documents before the court that would establish that any of the draw downs allegedly referred to in the Print Out, if advanced to defendants, were contemporaneously deposited into an account held by them.

The court similarly rejects the Bank's assertion that defendants cannot recover any damages because the amount of the damages sought could not have been foreseen. In this regard, it is well settled that:

"The party breaching the contract is liable for those risks foreseen or which should have been foreseen at the time the contract was made. The breaching party need not have foreseen the breach itself, however, or the particular way the loss came about. It is only necessary that loss from a breach is foreseeable and probable (see, Restatement [Second] of Contracts § 351; 3 Farnsworth, Contracts § 12.14 [2d ed 1990])."

(Ashland Management v Janien, 82 NY2d 395, 403 [1993]). It has also been held that:

"Where a contract is silent on the subject, courts, employing a commonsense' approach, must determine what the parties intended by considering the nature, purpose [*13]and particular circumstances of the contract known by the parties . . . as well as what liability the defendant fairly may be supposed to have assumed consciously, or to have warranted the plaintiff reasonably to suppose that it assumed, when the contract was made'(Kenford Co. v County of Erie, 73 NY2d 312, 319, 537 NE2d 176, 540 NYS2d 1 [1989] [citations omitted])."

(Awards.com v Kinko's, 42 AD3d 178, 183-184 [2007]; appeal dismissed 9 NY3d 1025 [2008)], appeal dismissed, appeal granted 12 NY3d 847 [2009)], affd 14 NY3d 791 [2010]; accord Bi-Economy Mkt. v Harleysville Ins. Co., 10 NY3d 187, 193-194 [2008]). Thus, where an agreement does not clearly, explicitly and unambiguously express an exclusion of the recovery of lost profits as consequential damages, a factual issue exists as to whether such damages were fairly contemplated by the contracting parties in the event of a breach (see e.g. 1861 Capital Master Fund v Wachovia Capital Mkts., 95 AD3d 620, 621 [2012]).

In this case, Mr. Friedman's assertion that the Bank was fully aware of how the Friedman Furs Defendants' business operated, so that it was aware that cutting off the Line of Credit would result in damages, is sufficient to raise an issue of fact. More particularly, this finding is supported by Mr. Friedman's assertion that Ms. Gomez was fully familiar with the way that the business operated and its need for the Line of Credit to pay suppliers. The detail set forth in the June 5, 2009 memo from Mr. Fioravante also supports the finding that the Bank fully understood the nature and operation of defendants' businesses, and accordingly, the affect that a cut off of the Line of Credit would have. That the Bank had an understanding that the Cut Off would result in damages is also supported by the Bank's requirement that the Line Note be paid down to $0 for at least one month each year, after the Friedman Furs Defendants got paid, and the fact that the Bank had a security agreement that created a lien against certain of defendants' assets.

The court also finds the Bank's assertion that defendants' counterclaim for lost profits and/or enterprise value of the businesses should be dismissed as speculative to be unpersuasive. In this regard, it has been held that "[d]amages resulting from the loss of future profits are often an approximation. The law does not require that they be determined with mathematical precision. It requires only that damages be capable of measurement based upon known reliable factors without undue speculation" (Ashland Mgt., 82 NY2d at 403 [internal citations omitted]). Thus, since there is an issue of fact as to whether "[t]he damages [defendants allege] were foreseeable, and although [they] may not in the end be able to prove them with reasonable certainty, a determination to that effect at this juncture would be premature" (Morris v Putnam Berkley, 259 AD2d 425, 426 [1999], citing Ashland Mgt., 82 NY2d 395; see also SIGA Techs. v Fischetti, 6 AD3d 299, 300 [2004]; Red Oak Fund v MacKenzie Partners, 90 AD3d 527, 528-529 [2011]).

In so holding, the court also recognizes that "[a]n estimate of lost profits incurred [*14]through a breach of contract necessarily requires some improvisation, and the party who has caused the loss may not insist on theoretical perfection' [I]t is always the breaching party . . . who must shoulder the burden of the uncertainty regarding the amount of damages'" (Wathne Imports v PRL USA., ___ AD3d ___, 2012 NY Slip Op 7045 [2012] [internal citations omitted]; see generally In Fed. Dep. Ins. Corp. v Key Financial Services, 1999 US Dist LEXIS 23006 [D. Mass. 1999]). The court accordingly finds the Bank's conclusory assertion that the economic recession caused the Friedman Furs Defendants' loss of profits is insufficient to meet this burden, particularly in view of the affidavits submitted by the Mr. Mays and defendants' suppliers and customers contending that the Friedman Furs Defendants' sales would not have decreased but for the Cut Off.[FN4] From this it follows that the Bank's affirmative defenses that defendants' counterclaims are precluded by documentary evidence and that the counterclaims fail to state a cause of action are lacking in merit.

As alleged by the Bank, however, it appears that defendants no longer seek recovery on the ground that the Line Note should have been converted into a demand loan, since this issue is not mentioned in defendants' opposition papers. The court also finds that the above quoted language of the Line Note compels the conclusion that defendants are not entitled to recover damages premised upon the Bank's refusal to renew the Line of Credit for 2009-2010, since the Bank clearly had the right to increase or decrease the Commitment at any time, for any reason, upon notice (Line Note, para 1.1[a], p 1). Thus, since the Bank sent defendants written notice by letter dated June 12, 2009 that the Line of Credit would be extended only through August 18, 2009, and defendants do not contest that they were not properly notified of this extension, the Bank had the right to terminate the Line of Credit as of that date.

Second Counterclaim: Negligent Misrepresentation

It has been held that:

"It is well settled that a negligent statement may be the basis for recovery of damages where (1) the author is bound by some relation of duty, arising out of contract or otherwise, to act with care if he acts at all, (2) where there is a carelessness in imparting words, (3) upon which others are expected to rely, and (4) upon which they did act or failed to act, (5) to their damage. In order for one to obtain any kind of relief for a negligent misrepresentation, it is essential for the plaintiff to show reliance upon it and that the reliance was justified."

(Rotanelli v Madden, 172 AD2d 815, 815 [1991], lv denied 79 NY2d 754 [1992] [internal [*15]citation omitted]). In addition, liability for negligent misrepresentation has been imposed only on those persons who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified (Kimmell v Schaefer, 89 NY2d 257, 263 [1996]). Thus, it follows that "an arm's length borrower-lender relationship . . . does not support a cause of action for negligent misrepresentation. This is true even if there is a long-standing relationship between the customer and a particular bank employee" (Greenberg, Trager & Herbst v HSBC Bank, 17 NY3d 565, 578 [2011] [internal citations omitted]; accord Sabre Intl. Sec. v Vulcan Capital Mgt., 95 AD3d 434, 439 [2012] [defendants may not be held liable because they are not professionals, and had a commercial, and not a special, relationship with plaintiff]).

The court therefore concludes that since the relationship between defendants and the Bank is an arm's length borrower-lender relationship, the conversations between them and Ms. Gomez cannot support a cause of action premised upon a negligent misrepresentation. Moreover, defendants cannot establish reasonable reliance upon the alleged representation by Ms. Gomez regarding the renewal of the Line Note, since the language of the Line Note clearly states that the Line of Credit can be increased or decreased at any time for any reason, upon proper notice (Line Note, para 1.1[a], p 1).

Third Counterclaim: Promissory Estoppel

This argument has been considered and rejected is addressing defendants' affirmative defenses.

The Bank's Demand for Attorneys' Fees and the Entry of a Money Judgment

While the Line Note provides that defendants shall reimburse the Bank for reasonable costs and attorneys' fees incurred in enforcing its rights under the Agreement, consideration of the right to recover such fees and costs would be premature until such time as it is determined whether the Bank breached the Agreement. Similarly, the entry of money judgment would be premature until such time as it is determined whether defendants are entitled to recover money damages for breach of contract and, if so, in what amount.

Conclusion

The Bank's motion is granted only to the extent of dismissing the affirmative defense of estoppel, unclean hands and unconscionability and dismissing defendants' counterclaims as they are premised upon the Bank's refusal to convert that Line Note into a demand loan, the refusal of the Bank to extend the Line of Credit, negligent misrepresentation and estoppel. The remaining claims and counterclaims are severed and shall continue. All further relief requested is denied.

The foregoing constitutes the decision and order of the court.

E N T E R, [*16]

J. S. C. Footnotes

Footnote 1: CPLR 4518(a) provides, in relevant part, that:

" Any writing or record, whether in the form of an entry in a book or otherwise, made as a memorandum or record of any act, transaction, occurrence or event, shall be admissible in evidence in proof of that act, transaction, occurrence or event, if the judge finds that it was made in the regular course of any business and that it was the regular course of such business to make it, at the time of the act, transaction, occurrence or event, or within a reasonable time thereafter. An electronic record, as defined in section three hundred two of the state technology law, used or stored as such a memorandum or record, shall be admissible in a tangible exhibit that is a true and accurate representation of such electronic record. The court may consider the method or manner by which the electronic record was stored, maintained or retrieved in determining whether the exhibit is a true and accurate representation of such electronic record. All other circumstances of the making of the memorandum or record, including lack of personal knowledge by the maker, may be proved to affect its weight, but they shall not affect its admissibility."

Footnote 2: CPLR 4539 provides that:

"(a) If any business, institution, or member of a profession or calling, in the regular course of business or activity has made, kept or recorded any writing, entry, print or representation and in the regular course of business has recorded, copied, or reproduced it by any process, including reproduction, which accurately reproduces or forms a durable medium for reproducing the original, such reproduction, when satisfactorily identified, is as admissible in evidence as the original, whether the original is in existence or not, and an enlargement or facsimile of such reproduction is admissible in evidence if the original reproduction is in existence and available for inspection under direction of the court. The introduction of a reproduction does not preclude admission of the original.

"(b) A reproduction created by any process which stores an image of any writing, entry, print or representation and which does not permit additions, deletions, or changes without leaving a record of such additions, deletions, or changes, when authenticated by competent testimony or affidavit which shall include the manner or method by which tampering or degradation of the reproduction is prevented, shall be as admissible in evidence as the original."

Footnote 3: State Technology Law § 306, which pertains to electronic records, provides that:

"In any legal proceeding where the provisions of the civil practice law and rules are applicable, an electronic record . . . may be admitted into evidence pursuant to the provisions of article forty-five of the civil practice law and rules including, but not limited to section four thousand five hundred thirty-nine of such law and rules."

Footnote 4: The court does not reach defendants' argument that the Bank's action in cancelling the Line of Credit without providing them with notice violates the covenant of good faith, since the Bank alleges that the Line of Credit was not terminated until August 18, 2009 and defendants received notice of the intention to decline renewal by letter dated June 12, 2009.