IAS TERM, PART 28 NASSAU COUNTY

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1 INDEX NO SUPREME COURT - STATE OF NEW YORK IAS TERM, PART 28 NASSAU COUNTY PRESENT: HONORABLE LEONARD B. AUSTIN Justice THE CHASE MANHATTAN BANK, Plaintiff, - against - DECOR4MA INT., LTD a/k/a DECORAMA INTERNATIONAL LTD., and ROBERT MEHRAN, Defendant. x X Motion R/D: S Submission Date: S Motion Sequence No.: OOl/MOT D PLAINTIFF S ATTORNEY Pittoni, Bonchonsky & Zaino, LLP 226 Seventh Street - Suite 200 Garden City, New York DEFENDANT S ATTORNEY Ring & Streisfeld, Esqs. 300 Marcus Avenue - Suite lw7 Lake Success, New York Upon the following papers read on Plaintiffs motion seeking summary judgment: Plaintiffs Notice of Motion; Affidavit of Walter Rudzikewycz and supporting papers; Affidavit of Robert Mehran in Opposition; Reply Affidavit of Stephen E. Zaino, Esq. This motion by Plaintiff, The Chase Manhattan Bank, for an order pursuant to CPLR 3212 granting it summary judgment against the Defendants Decorama Int., Ltd. a/k/a Decorama International Ltd. ( Decorama ), and Defendant Robert Mehran, ( Mehran ) individually, on its complaint is granted. This is an action by Plaintiff to recover approximately $50,000 arising out of a

2 default by Decorama on two notes between Plaintiff and Decorama which are alleged to have been guaranteed by Mehran, its president. The guarantees are contained in the two line of credit applications signed by Mehran as president and signed again by him without any corporate title or indecia of his acting in a representative capacity on September 22, The credit application in question is a two page document. The first page primarily calls for information to be filled in by the applicant. The second page consists of three separate sections each of which is headed by a thick black line with bold white print. The first section isentitled personal guarantees and provides, in relevant part, If this application is approved, I/We individually and jointly, absolutely and unconditionally guarantee to The Chase Manhattan Bank...the prompt payment of each and every obligation and liability of every nature and description of the applicant to the bank, whether now existing or arising in the future...1 agree that all obligations will become immediately due...if the applicant at any time breaches any term or condition of the note or account agreement...this guarantee shall continue in effect unless and until I give written notice to the bank terminating my future liability under this guarantee, in which event I recognize that this guarantee shall continue in effect with respect to any and all obligations incurred prior to the time the bank receives such notice. 2

3 The second section of the second page is entitled Corporate Resolution and is signed on behalf of Decorama Int. Ltd. by Robert Mehran in his capacity as president. The third section is entitled is entitled Applicant Acknowledgment and contains the following language: During the review of this application, Chase may obtain a credit repot-t on the principals...[if the application is approved Chase may at any time in the future obtain additional credit reports on the principals... There then appears, in bold print, the following: l/we also individually agree to the terms of the guarantee which appear in the Personal Guarantee section (above). Below this bold print is the signature of Defendant Robert Mehran dated September 22, 1998 and below the signature line are printed the words Owner/Principal signature. Pursuant to the terms of the application, proceeds were deposited into the business account of Decorama and utilized. Decorama subsequently defaulted on its repayment obligation6 which is not contested by Defendants. Plaintiff contends that Mehran is personally liable for Decorama s debt to Chase. Mehran contends that he signed in his representative capacity only. Uniform Commercial Code (2)(b) provides as follows: An authorized representative who signs his own name to an instrument except as otherwise established between the immediate parties, is personally obligated if the instrument names the person represented but does not show that the representative signed in a representative capacity, or if the instrument does not name the person 3

4 represented but does show that the representative signed in a representative capacity. In the court s view the plain ianguage of the application and the manner in which it was signed demonstrate that Decorama s obligation was personally guaranteed by Mehran. See, Scullv v. Sun, 171 A.D. 2d 408, 566 N.Y.S. 2d 633 (lst Dept. 1991). On a motion for summary judgment, as here, the burden shifts to Mehran, in opposing the motion, to come forward with some evidence establishing an agreement, understanding or course of dealing that Plaintiff would only hold the corporate Defendant liable and avoid personal liability. To avail himself of the exception provided for in UCC 3-403(2)(b), Defendant s proof must amount to more than mere self serving declarations. He must establish an agreement, understanding or course of dealing which negates his liability. See, Rotuba Extruders v. Ceppos, 46 N.Y. 2d 223, 413 N.Y.S. 2d 141 (1978); Thunderball Marketinq, Inc. v. Riemer, - A.D. 2d -, 709 N.Y.S.2d 45 (lst Dept. 2000). Defendant has utterly failed to do this. The court also notes that the much more common practice involving loans to small businesses such as Mehran s furniture business is to require the personal guarantee of a principal. See, Rotuba Extruders v. Ceppos, supra; Thunderball Marketins, Inc. v. Riemer, supra. Thus, this transaction is consistent customary business practices. Accordingly, it is, ORDERED, that Plaintiff s motion for summary judgment on his complaint against all Defendants is granted; and it is further, 4

5 CHASE MANHATTAN BANK v. DECOFUMA INTERNATIONAL, LTD ORDERED, that the issue of Plaintiff s counsel fees is to Court Referee Elizabeth L. Rosenblum for hearing on December 1, 2000, at 9:30 a.m. who shall hear and determine reasonable counsel fees, if any, to be awarded herein. This constitutes the decision and Order of the Court. Dated: Mineola, NY October 18,200O Hon. LEONARD B. AUSTIN, J.S.C. 5