Opinion
15750/2010.
March 2, 2011.
By motion dated June 11, 2010, the plaintiff moves pursuant to CPLR 3213 for summary judgment in lieu of complaint with regard to four separate written promissory notes dated April 27, 2009; May 18, 2009; July 3, 2009, and September 4, 2009.
In support of the motion, the plaintiff, Andrew Lax, submits an affidavit dated June 11, 2010, in which he states that on four separate dates, Fred Hyman, as President of Greater New York Frozen Food Distribution Company (Greater New York), borrowed the sum of $50,000 from the plaintiff. The first date was on April 27, 2009. In connection with this loan, the defendant executed a promissory note entitled Promissory Note 001. Under the terms of the promissory note, the defendant agreed to repay the loan, with interest at the rate of 12 per cent per year, at the rate of $500 per month until April 26, 2010 at which time the loan was to be repaid in full or new renewal terms would be drafted.
A second loan of $50,000 was made by Mr. Lax to the defendant on May 18, 2009. The terms of Promissory Note 002, also executed by Mr. Hyman, as President of Greater New York, were similar to the first note. A third loan in the amount of $50,000 was made on July 3, 2009. The terms of Promissory Note 003 were similar to the first two promissory notes. A fourth loan of $50,000 was made by plaintiff to the defendant on September 4, 2009. The repayment terms of Promissory Note 004 were the same as the first three notes. Copies of plaintiff's four checks in the amount of $50,000 each, plus the four promissory notes were annexed as exhibits in support of the plaintiff's motion.
In his affidavit, dated June 11, 2010, Andrew Lax states that defendant made payments on the first note from May 2009 through September 2009 and then defaulted on all remaining payments. As to the second note, plaintiff states that the defendant made payments from June through September 2009 and then defaulted on all remaining payments. As to Promissory Note 3, the plaintiff states that defendant made payments from August 2009 through October 2009 and then defaulted on all remaining payments. As to Promissory Note 4, the plaintiff states that defendant defaulted on all payments. Plaintiff also states that the promissory notes provide for acceleration of the debt on default and that in the event the borrower fails to make any payment due under the terms of the note, the entire balance of the note plus any interest accrued thereon shall be immediately due and payable to the holder of the note. In total, the plaintiff states in his affidavit that as a result of defendant's default on all 4 notes, the principal balance of $50,000 is now due and owing on each note plus late charges in the amount of $300.00 on each note and interest arrears on each note in the sum of $3,000. In addition plaintiff states that attorney fees as, provided for in the notes are due in the amount of $5,000 for a total sum of $218,200. Plaintiff's attorney sent a demand to the defendant on May 3, 2010 advising of the default stating that the full amount was presently due and payable.
The defendant filed an affirmation in opposition to the motion as well as a cross-motion to consolidate this action with the action filed under Index No. 17411/2011, in which the plaintiff filed a summons and complaint naming both Greater New York and Fred Hyman individually as defendants. In the second action, plaintiff brought a cause of action for wages due and reimbursable expenses under an employee agreement between plaintiff and defendant in which plaintiff allegedly performed services for the defendant from September 2009 through March 2010 for which he was not compensated. In addition, plaintiff brought additional causes of action for monies due on five additional loans made by plaintiff to defendant for which defendant is alleged to be in default. Defendant alleges that the two actions present common questions of law and fact.
With respect to the four promissory notes for which the plaintiff seeks judgment in the instant action, the defendant Fred Hyman, the President of Greater New York, submits an affidavit dated October 14, 2010, in which he states that the four payments of $50,000 were made to him with the understanding that plaintiff would provide the defendant with managerial assistance and plaintiff promised that in consideration of the "partnership buy-in" he would spend 40 hours per week helping to implement new sales procedures. Defendant contends that the plaintiff never fulfilled his end of the bargain. Defendant also states that he stopped making payments of the four notes stating, "in complete accordance with plaintiff's instructions, defendant ceased making the monthly payments commencing in October 2009." Defendant claims that he did not default on the notes, but rather, "defendant and plaintiff were in agreement as to this stoppage of the monthly payments to the plaintiff." Defendant states that although the plaintiff sets forth the written terms of the promissory notes, "he neglected to advise the Court of the complete relationship between the parties which involved a partnership arrangement and investments of the funds as a buy-in for said partnership." Defendant states that there is a question of fact as to the basis for his default in that plaintiff voluntarily waived the monthly payments and earmarked the monies as a buy-in for the partnership the parties were negotiating. Defendant claims that he should be permitted to assert a counterclaim for breach of contract and fraud in the inducement relative to the "parties partnership agreement." Defendant claims that because plaintiff breached his partnership and service agreement with defendant, plaintiff forfeited the loan amounts which the defendant terms to be plaintiff's investments in the partnership.
The plaintiff states in an affidavit in reply, dated December 3, 2010, that although there was talk of a potential partnership, that the money was lent to the defendant, Greater New York, with the specific intent of having the loans repaid with 12 per cent rate of interest. Plaintiff also states that the defendant has not put forth any documents which reflect any other arrangement. Plaintiff's counsel, Michael V. Mason, Esq., contends that defendant has not disputed that he did not make payments on the notes only that a breach of a related contract for consulting/employment provides a defense. Counsel contends that a breach of a related contract will not defeat a motion for summary judgment based upon an instrument for the payment of money only unless the related contract and the promissory note are inextricably intertwined (citing Famolaro v Crest Offset, Inc., 24 AD3d 604 [2d Dept. 2005]; Neuhaus v McGovern, 293 AD2d 727 [2d Dept. 2002]).
In accordance with CPLR 3213, a party may commence an action in lieu of complaint when the action is "based upon an instrument for the payment of money only or upon any judgment." A promissory note is an instrument for the payment of money only, provided that it contains an unconditional promise by the borrower to pay the lender over a stated period of time (see Lugli v Johnston, 2010, 78 ad3d 1133[2d Dept. 2010]; Comforce Telecom, Inc. v Spears Holding Co., Inc. , 42 AD3d 557 [2d Dept. 2007]).
To establish a prima facie entitlement to judgment as a matter of law with respect to a promissory note, a plaintiff must show the existence of a promissory note, executed by the defendant, containing an unequivocal and unconditional obligation to repay, and the failure by the defendant to pay in accordance with the note's terms (see Signature Bank v Galit Props., Inc., 80 AD3d 689 [2d Dept. 2011]; Lugli v Johnston , 78 AD3d 1133 [2d Dept. 2010]; Gullery v Imburgio , 74 AD3d 1022 [2d Dept. 2010]; Superior Fid. Assur., Ltd. v Schwartz , 69 AD3d 924 [2d Dept. 2010]; Verela v Citrus Lake Dev., Inc. , 53 AD3d 574 [2d Dept. 2008]; Levien v Allen , 52 AD3d 578 [2d Dept. 2008]).
Here, the plaintiff established his prima facie entitlement to judgment as a matter of law by submitting the four promissory notes signed by the defendant, as President of Greater New York, coupled with his own affidavit asserting that the defendant failed to repay each of the loans in accordance with the terms of the respective promissory note (see HSBC Bank USA v Laniado, 72 ADd 645 [2d Dept. 2010]; Pennsylvania Higher Educ. Assistance Agency v Musheyev , 68 AD3d 736 [2d Dept. 2009]; Verela v Citrus Lake Dev. Inc., 53 AD3d at 575 [2d Dept. 2008]; North Fork Bank v ABC Merchant Servs., Inc. , 49 AD3d 701 [2d Dept. 2008]; Suffolk County Natl. Bank v Columbia Telecom. Group, Inc. , 38 AD3d 644 [2d Dept. 2007]).
The burden then shifted to the defendant to establish by admissible evidence the existence of a triable issue of fact with respect to a bona fide defense (see Sce v. Ach , 56 AD3d 457 [2d Dept. 2008]; Quest Commercial, LLC v Rovner , 35 AD3d 576 [2d Dept. 2006]; Bank of NY v Vega Tech. USA, LLC , 18 AD3d 678 [2d Dept. 2005]).This Court finds that the defendant failed to meet this burden.
Defendant's self-serving affidavit in which he states that the plaintiff loans were in actuality payments for a buy-in of a partnership and that the plaintiff instructed defendant to cease making payments on the loans is not supported by the evidence. The defendant failed to substantiate by way of documentary evidence, his assertion that the monies were lent in exchange for a buy-in for a partnership, that there was an employment/consulting agreement under which plaintiff was to provide managerial assistance, or that plaintiff waived the monthly payments as of September 2009. The notes themselves do not indicate that payment was conditioned in any way upon plaintiff fulfilling any obligation. Further, the law is clear that where, as is the situation here, there is an unconditional written promise to pay, the parol evidence rule operates, absent fraud or mutual mistake, to exclude proof of all prior or contemporaneous negotiations between the parties, as well as of any extraneous oral agreement, which is intended to contradict or modify the terms of the instrument (see Manufacturers Hanover Trust Co. v Margolis, 115 AD2d 406 [2d Dept. 1985]; Solomon v Langer 66 AD3d 508 [2d Dept. 2009] [it is settled that "invocation of defenses based on facts extrinsic to an instrument for the payment of money only do not preclude CPLR 3213 consideration"]).
Further, each of the four notes contains a provision entitled, "MODIFICATION," which states that "no modification or waiver of any of the terms of this Agreement shall be allowed unless by written agreement signed by both parties. No waiver of any breach or default hereunder shall be deemed a waiver of any subsequent breach or default of the same or similar nature."
Although the defendant claims that the monies loaned to the plaintiff were in consideration of a partnership agreement and that the plaintiff instructed him to cease making payments, the defendant failed to provide any written agreement to that effect (see Extebank v. Ziegler, 207 AD2d 327 [2d Dept. 1994]; Bank of New York v Kranis, 189 AD2d 741 [2d Dept. 1993]["it is well-settled that a continuing guarantee with a no-oral-modification clause is not amenable to oral termination. Parol evidence cannot be used to vary or contradict the express terms of the writing, and no triable issues of fact are created by an alleged oral termination of the guarantee"]).
Therefore, since the defendant failed to demonstrate, by admissible evidence, the existence of a triable issue of fact with respect to a bona fide defense, the plaintiff's motion for summary judgment in lieu of complaint is granted (see Webster v Murray , 70 AD3d 674 [2d Dept. 2010]; Colonial Commercial Corp. v Breskel Assocs., 238 AD2d 539 [2d Dept. 1997]).
In view of the disposition of this action, the defendant's motion to consolidate this action with a separate action pending under Index No. 17411/2010 is denied. Consolidation would not foster judicial economy and would further delay the disposition of this matter (see Ahmed v C.D. Kobsons, Inc , 73 AD3d 440 [1st Dept. 2010]. Moreover, this court finds that the two actions do not present common questions of law and facts. The claims made by plaintiff in the second action have not been shown to be related to the four promissory notes in question in this action.
Accordingly, it is hereby
ORDERED, that the plaintiff's motion for Judgement in amount of $218,200 which includes counsel fees, late charges, and interest arrears is granted and it is further,
ORDERED, that defendant's cross-motion for consolidation is denied.