SUPREME COURT - STATE OF NEW YORK IAS TERM PART 19 NASSAU COUNTY. Justice. LEONARD B. AUSTIN Motion RID:. 20- a/kla. Defendants.

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1 JJ()VV SUPREME COURT - STATE OF NEW YORK IAS TERM PART 19 NASSAU COUNTY INDEX NO PRESENT: HONORABLE Justice LEONARD B. AUSTIN Motion RID:. 20- Submission' Date: Motion Sequence No. 001/002/MOT JPMORGAN CHASE BANK Plaintiff, - against - KRONA CHEMICAL INC., JOSEPH CORONADO, LlNNETTE CORONADO LEON, DENISE CORONADO-CHAN and LlNNETTE CORONADO LEON, AS ADMINISTRATRIX OF THE ESTATE OF JUAN ALBERTO CORONADO a/kla JUAN ALBERTO CORONADO a/kla JOHN ALBERTO CORONADO, Defendants. COUNSEL FOR PLAINTIFF Pittoni, Bonchonsky & Zaino, LLP 226 Seventh Avenue - Suite 200 Garden City, New York COUNSEL FOR DEFENDANT Margaret Ann Bomba, Esq. 14 Wall Stre t - 28 Floor New York, New York ORDER The following papers were read on Plaintiffs motion for summary judgment and Defendants' cross-motion to dismiss this action as to Defendants Krona Chemical, Inc. and Estate of Juan Alberto Cornado or stay this action: Summons dated March ; Notice of Motion dated March 27, 2003; Affidavit of Richard Grabelsky sworn to on March 27, 2003; Notice of Cross-motion dated May 22, 2003; Affidavit of Linnette Coronado Leon sworn to on May 23, 2003; Affdavit of Joseph Coronado sworn to on May 23, 2003; Affdavit of Denise Coronado-Chan sworn to on May ; Affrmation of Margaret Ann Bomba, Esq. dated May 21, 2003;

2 JPMORGAN CHASE BANK v. KRONA CHEMICAL INC. at al. Defendant' s Memorandum of Law; Affdavit of Richard Grabelsky sworn to on June 17, 2003; Plaintiffs Reply Memorandum of Law; Affdavit of Linnette Coronado Leon sworn to on June 25, 2003; Affrmation of Margaret Ann Bomba, Esq. dated June 25, Plaintiff, JP Morgan Chase Bank, ("Chase ) moves for an order pursuant to CPLR 3213 granting it summary judgment in lieu of a complaint. Defendants crossmove to dismiss this action as to Defendants Krona Chemical Inc. and Estate of Juan Alberto Coronado. Procedural History BACKGROUND This action was commenced in March 2003 when Chase moved for an order pursuant to CPLR 3213 granting it summary judgment in lieu of a complaint. Chase alleged that Defendant Krona Chemical Inc. ("Krona ) was in default under the provisions of a promissory note ("Note ) dated October The other Defendants personally guaranteed Krona s obligations under the Note. Krona and the individual Defendants opposed the motion on the grounds that the action was stayed as a result of Krona having filed for bankruptcy. By order of this Court dated September 29, 2003, the motion was denied without prejudice and the action was stayed as a result as a result of Krona being in bankruptcy. Chase then moved to sever the action against Krona and to vacate the stay as to the remaining Defendants. That motion was granted to the extent of severing the action against Krona, vacating the stay as regards the remaining Defendants and restoring

3 JPMORGAN CHASE BANK v. KRONA CHEMICAL INC. at al. Chase s motion for summary judgment in lieu of complaint to the motion calendar of the Court for April 2, See JP Morgan Chase v. Krona Chemical Inc., N. L.J. 3/16/04, p. 19, co!. 1. Factual Background This action arises from a Note between Chase and Krona dated October in the sum of $ The Note bore interest at the rate of Prime plus 50%. 1 In the event of default, the rate of interest increased to the agreed rate plus 4% or Prime plus 4.5%. However, the default rate is not fixed. As with the stated rate of interest, it varies with the established Prime rate. Interest on the Note was payable monthly with the first payment of interest being due on November 29, The principal balance and any unpaid or accrued interest on the Note was due and payable on Janaury 30, The Note was executed on behalf of Krona by Nydia Felix, its Vice President and SecretaryfTreasurer. Juan Coronado was the President of Krona. Juan Coronado and his wife, Gladys Coronado died tragically on November 12, 2001 in the crash of American Airlines Flight 587. Defendants Linnette Coronado Leon ("Leon ), Denise Coronado-Chan ("Chan and Joseph Coronado ("Joseph") are the surviving children of Juan and Gladys Coronado. Letters of Administration of the Estate of Juan Coronado have been issued Prime is defined in the Note as the rate of interest as is publicly announced by the Bank as its Prime Rate.

4 JPMORGAN CHASE BANK v. KRONA CHEMICAL INC., at al. by the Surrogate s Court, Nassau County to Linnette Coronado Leon. Leon, Chan and Joseph claim that prior to their father s death that they were not involved in the operation of Krona. While this appears to be true as to Chan and Joseph, a corporate resolution submitted to Chase dated September 29, 1997 lists Leon as a Vice President of Krona. Despite their alleged unfamiliarity with Krona s operations, Leon, Chan and Joseph took over Krona s day-to-day operations after their father s death. The late Juan Coronado appears to have been the only person with full knowledge and understanding of Krona s day-to-day operations and its financial circumstances. Krona appears to have been in serious financial diffculty when Juan Coronado died. Juan Coronado executed a guarantee dated October 29, 1997 by which he personally guaranteed Krona s financial obligations to Chemical Bank. Chemical Bank and Chase Manhattan Bank merged after the Juan Coronado executed the guarantee. Chase then merged with JP Morgan. JPMorgan Chase Bank is therefore the successor in interest to the guarantee executed by Juan Coronado in favor of Chemical Bank. By separate guarantees each dated August 5, 2002, Leon, Chan and Joseph each personally guaranteed Krona s existing and future financial obligations to Chase. Chase seeks to obtain a judgment against the Estate of Juan Coronado, Leon Chan and Joseph on their guarantees.

5 JPMORGAN CHASE BANK v. KRONA CHEMICAL INC. et al. DISCUSSION CPLR 3213 permits the commencement of an action by summons with notice of motion in lieu of complaint when the action is based upon an instrument for the payment of money only. A guarantee is an instrument for the payment of money only for the purposes of CPLR European American Bank v. Lofrese, 182 A. 2d 187 (2 Dept., 1992); and Council Commerce Corp. v. Paschalides, 92 Ad.2d 579 (2 Dept. 1983). Plaintiff establishes a prima facie case on a guarantee by establishing the existence of the underlying promissory note, the guarantee and failure of the prime obligor to make payment as required by the promissory note. Royal Commercial Corp. v. Kotrulya, 304 A. 2d 742 (2 Dept., 2003); and E.D. S. Security Systems. Inc. v. Allyn, 262 AD.2d 351 (2 Dept., 1999). A guarantee must be in writing executed by the person to be charged. Schulman v. Westchester Mechanical Contractors. Inc., 56 AD.2d 625 (2 Dept., 1977); and General Obligations Law (a)(2). The intent of the guarantor to guarantee the obligations of the principal obligor must be clear and unambiguous. European American Bank v. Syosset Autorama. Inc., 204 AD.2d 266 (2 Dept., 1994); and North Fork Bank & Trust Co. v. Bernstein & Gershman, 201 AD.2d 472 (2 Dept., 1994). Plaintiff establishes that the guarantor clearly and explicitly intended to guaranty the obligation by having the guarantor sign as guarantor and by the language contained in the

6 JPMORGAN CHASE BANK v. KRONA CHEMICAL INC., et al. guarantee. Salzman Sign Co. V. Beck, 10 N. 2d 63 (1961); and Harrison Court Assocs. V. 220 Westchester Ave. Assocs., 203 AD.2d 244 (2 Dept., 1994). Chase has made a prima facie showing of entitlement to judgment as a matter of law on Defendants' guarantees. It has established the existence of the underlying promissory note and Krona s default in payment. It has also established the existence of guarantees signed by the guarantors in that capacity. The late Juan Coronado unconditionally and absolutely guaranteed payment of all of Krona s obligations to the bank whether existing at the time of the execution of the guarantee or incurred thereafter. Such language clear and unequivocally demonstrates the intent of the party executing the guarantee to personally guarantee the obligations of the corporation. See PNC Capital Recovery V. Mechanical Parking Systems. Inc., 283 AD.2d 268 (1 Dept., 2001), app. dism. 98 N. 2d 763 (2002). By the guarantees executed by Leon, Chan and Joseph each " guarantees, absolutely and unconditionally, to the bank the payment of all liabilities of the Borrower to the Bank of whatever nature, whether now existing or hereafter incurred. " This language clearly and unequivocally establishes that Leon, Chan and Joseph intended to personally guarantee any of Krona s future financial obligations to Chase, including those incurred under the Note. See, European American Bank V. Lofrese supra. Once Plaintiff establishes its prima facie entitlement to judgment as a matter of law on the guarantee, the Defendants must establish through admissible evidence the existence of triable issues of fact or the existence of a valid defense to the action on the

7 JPMORGAN CHASE BANK v. KRONA CHEMICAL INC. et al. guarantee. See, Federal Deposit Ins. Co. v. Jacobs, 185 AD. 2d 913 (2 Dept., 1992) Defendants have failed to establish the existence of any triable issues of fact or any valid defenses to the action on the guarantees. There are clearly no triable issues of fact or valid defenses to the action on the guarantee signed by the late Juan Coronado. Thus, summary judgment against the Linnette Coronado as Administratrix of the Estate of Juan Coronado must be granted. Leon, Chan and Joseph all assert that Chase misled them into signing the guarantees and that they signed the guarantees while stil under the stress and trauma of their parents untimely and tragic deaths. However, the guarantees were signed on August 5, 2002 which is nearly 10 months after the deaths of Juan and Gladys Coronado. Certainly, Leon, Chan and Joseph had overcome the trauma of their parents death suffciently by January 2002 to undertake the management of Krona s day-to-day operations. A part is under an obligation to read a document before signing it and cannot avoid the. effect of the document by asserting they he or she did not read or understand the contents of the document. Pimpinello v. Swift & Co., 253 N. Y. 159 (1930); Saxony Ice Co.. Division of Springdale Ice Co.. Inc v. Little Mary s American Bistro, 243 AD. 700 (2 Dept., 1997); and Martino V. Kaschak, 208 AD.2d 698 (2 Dept., 1994). A part who signs a document without having a valid excuse for failing to read it is conclusively bound by its terms. Morby V. De Siena Associates. LPA, 291 A. 2d 604 (3rd Dept. 2002); and Shklovskiy V. Khan, 273 AD.2d 371 (2 Dept., 2000).

8 JPMORGAN CHASE BANK v. KRONA CHEMICAL INC. et al. In this case, Leon, Chan and Joseph have failed to provide the Court with a valid excuse for their having failed to read their guarantees before they signed them. All are of legal age. None has asserted that they suffer from any mental or physical defect which prevent them from reading or understanding the guarantee. None assert that they cannot read or understand English. They claim that Chase tricked them into signing the guarantees by downplaying the nature and importance of the guarantees. In essence, Leon, Chan and Joseph are asserting a defense of misrepresentation or fraudulent concealment. However, a part cannot claim to have been misled where the misrepresentation could have been discovered through the exercise of due diligence. Danann Realty Corp. V. Harris, 5 2d 317 (1959); Cohen v. Cerier, 243 AD.2d 670 (2 Dept., 1997); and Pappas v. Harrows Stores. Inc., 140 AD.2d 501 (2 Dept., 1988). In this case, any misinformation about the nature and extent of the obligations being undertaken by Leon, Chan and Joseph pursuant to the terms of the guarantee could and should have been discovered by reading it. In order to establish the defense of fraudulent concealment, a defendant must establish the elements of fraud and must further establish the plaintiff had an affrmative duty to disclose information. See Swerskv v. Dreyer and Traub, 219 AD.2d 321 (2 Dept., 1996); and George Cohen Agency Inc. v. Donald S. Perlman Agency. Inc., 114 2d 930 (2 Dept., 1985). An affrmative duty to disclose arises in the absence of a fiduciary relationship where ones superior knowledge of the facts renders a transaction

9 CHEMICAL INC., JPMORGAN CHASE BANK v. KRONA et al. inherently unfair if those facts are not disclosed. Swerskv v. Dreyer and Traub, Id. defense of fraud in the inducement is not sustainable where the information is readily available to the person claiming to have been defrauded. See, Reale v. Sotheby s. Inc. 278 AD.2d 119 (1 Dept., 2000). In this case, the information regarding the obligations that Leon, Chan and Joseph were assuming were readily available to them. They could and should have read the guaranty they were signing. They could and should have spoken with someone at Chase regarding why they were being requested to execute the guaranty and what obligations they assuming by signing the document. If they did not obtain a satisfactory response from Chase, they could and should have had the documents reviewed by counsel. They failed to take any of these steps. In view of this, Defendants have failed to raise any issues of fact or establish the existence of any valid defenses. Finally, Leon, Chan and Joseph assert that Nydia Felix was not authorized to sign the Note on behalf of Krona. In support of this assertion, they rely upon a corporate resolution dated October 17, However, Chase did not rely upon this resolution. The October 17, 1997 corporate resolution is not on a Chase form and was never provided to Chase. Chase relied upon a corporate resolution dated September, 1997 by which Nydia Felix was authorized to sign notes such as the one at issue here On behalf of Krona. Chase has established that it is now due the principal sum of $2 483,205.

10 JPMORGAN CHASE BANK v. KRONA CHEMICAL INC. et al. together with interest at the rate of Prime plus 4.5% from the date on which payment was due, January 30, However, the Prime rate fluctuates. Thus, at the hearing to be set herein, the applicable interest rate to which the 4. 5% is added must be established. The guarantee provides that the guarantors shall be liable for any expenses incurred by Chase in connection with the enforcement of guarantors ' obligations under the guaranty including reasonable attorney s fees. Such provisions in an agreement are valid and wil be enforced. Arent. Fox. Kinter. Plotkin & Kahn. PLLC v. Lurzer GmbH 297 AD.2d 590 (1 Dept., 2002). Legal fees are awarded on a quantum meruit basis. See, Simoni v. Time-Line. Ltd. 272 AD.2d 537 (2 Dept., 2000); and Bora v. Belair Ridge Development Corp., 270 A. 2d 377 (2 Dept., 2000). See also, 7 NY Jur2d Attorneys-at-Law 216. The action is thus referred to a Special Referee to hear and determine the amount of legal fees to which Plaintiff is entitle in connection with the prosecution of this action. Accordingly, it is, ORDERED, that Plaintiffs motion for an order pursuant to CPLR 3213 seeking summary judgment in lieu of complaint is granted; and it is further ORDERED, that the matter is respectfully referred to Special Referee Thomas V. Dana on September 14, 2004 at 10:00 a.m. to hear and determine all issues relating to establishing the amount of interest due to the date of entry of the judgment and the award of reasonable attorney s fees for Plaintiffs attorney; and it is further,

11 JPMORGAN CHASE BANK v. KRONA CHEMICAL INC., ORDERED, et al. that Plaintiffs counsel shall serve upon the attorney for the Defendants and file with the Clerk of the Court a copy of this order, a Notice of Inquest and a Note of Issue and shall pay the appropriate filing fees on or before August 25, 2004; and it is further ORDERED, that upon the Special Referee determining the fair and reasonable value of the counsel fees to be awarded herein that the County Clerk, Nassau County is directed to enter a judgment in favor of the Plaintiff and against the Defendants, Joseph Coronado, Linnette Coronado Leon, Denise Coronado-Chan and Linnette Coronado Leon as Administratrix of the Estate of Juan Alberto Coronado alkla Juan Alberto Coronado Polanco alkla John Alberto Coronado in the sum of $ together with interest from January 31, 2003 to the date of the entry of the judgment in the amount to be established by the Special Referee and reasonable attorney s fees as determined by the Special Referee and costs and disbursements as taxed by the Clerk. This constitutes the decision and Order of the Dated: Mineola July 14, 2004 Ft'!TFRED JUL 1 9 lol N1'..:-.-..-vJ.NTY COPf CLK' OFFiCe