FILED: NEW YORK COUNTY CLERK 07/12/2011 INDEX NO. 603492/2009 NYSCEF DOC. NO. 34-15 RECEIVED NYSCEF: 07/12/2011 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK -----------------------------------------------------------------------X 1626 2nd AVENUE LLC, Index No. 603492/09 Plaintiff, - against - STEVEN SALSBERG and NICK CAMAJ, Defendants. -----------------------------------------------------------------------X MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF S MOTION FOR SUMMARY JUDGMENT Law Offices of Bruce Levinson Attorneys for Plaintiff 747 Third Avenue, Fourth Floor New York, New York 10017-2803 (212) 750-9898
TABLE OF CONTENTS TABLE OF AUTHORITIES... ii I. BACKGROUND...1 II. ARGUMENT...2 A. Standard of Review...2 B. Plaintiff Is Entitled to Recover the Amount of the Housing Court Judgment from Defendants...3 C. Plaintiff Is Entitled to Recover Rent and Additional Rent Through the Lease Expiration...6 D. Plaintiff is Entitled to Recover Interest and Attorneys Fees...7 E. Salsberg s Counterclaim Is Barred by the Doctrine of Collateral Estoppel...7 III. CONCLUSION...10 i
TABLE OF AUTHORITIES COURT OF APPEALS AG Capital Funding Partners, L.P. v. State Street Bank and Trust Co., 11 N.Y.3d 146 (2008)...3 Allied Chemical, an Operating Unit of Allied Corp. v. Niagara Mohawk Power Corp., 72 N.Y.2d 271 (1988)...8 Alvarez v. Prospect Hosp., 68 N.Y.2d 320 (1986)...3 Banco Popular North America v. Victory Taxi Management, Inc., 1 N.Y.3d 381 (2004)...5 Ehrlich v. American Moninger Greenhouse Mfg. Corp., 26 N.Y.2d 255 (1970)...8 Freedman v. Chemical Constr. Corp., 43 N.Y.2d 260 (1977)... 3 Green v. Santa Fe Industries, Inc., 70 N.Y.2d 244 (1987)...9 Holy Properties Ltd., L.P. v. Kenneth Cole Productions, Inc., 87 N.Y.2d 130 (1995)...6 International Publications v. Matchabelli, 260 N.Y. 451 (1933)...6 Phillips v. Joseph Kantor & Co., 31 N.Y.2d 307 (1972)...3 Sillman v. Twentieth Century-Fox Film Corp., 3 N.Y.2d 395 (1957)...3 TAG 380, LLC v. ComMet 380, Inc., 10 N.Y.3d 507 (2008)...7 Teitelbaum Holdings, Ltd. v. Gold, 48 N.Y.2d 51 (1979)...5 Winegrad v. New York University Medical Center, 64 N.Y.2d 851 (1985)...3 Zuckerman v. City of New York, 49 N.Y.2d 557 (1980)...3 APPELLATE DIVISION 114 West 26th Street Associates LP v. Fortunak, 22 A.D.3d 346 (1st Dept.2005)...9 Accurate Copy Service of America, Inc. v. Fisk Bldg. Associates L.L.C., 72 A.D.3d 456 (1st Dept.2010)...6 Behar v. Ordover, 92 A.D.2d 557 (2d Dept.1983)...3 Cash v. Titan Financial Services, Inc., 58 A.D.3d 785 (2d Dept.2009)...5 City of New York v. Clarose Cinema Corp., 256 A.D.2d 69 (1st Dept.1998)...4 Columbus Trust Co. v. Campolo, 110 A.D.2d 616 (2d Dept.1985)...5 Franklin Nat. Bank v. Skeist, 49 A.D.2d 215 (1st Dept.1975)...5 Gallery at Fulton Street, LLC v. Wendnew LLC, 30 A.D.3d 221 (1st Dept.2006)...6 Ginsberg v. Fairfield-Noble Corp., 81 A.D.2d 318 (1st Dept.1981)...5 Humble Oil & Refining Co. v. Jaybert Esso Service Station, Inc., 30 A.D.2d 952 (1st Dept.1968)...5 O'Brien v. O'Brien, 258 A.D.2d 446 (2d Dept.1999)...8 REP A8 LLC v. Aventura Technologies, Inc., 68 A.D.3d 1087 (2d Dept.2009)...6 Ring v. Printmaking Workshop, Inc., 70 A.D.3d 480 (1st Dept.2010)...6 Sehera Food Services Inc. v. Empire State Bldg. Co. L.L.C., 74 A.D.3d 542 (1st Dept.2010)...9 Sempra Energy Trading Corp. v. PG & E Texas VGM, L.P., 284 A.D.2d 253 (1st Dept.2001)...7 Skilled Investors, Inc. v. Bank Julius Baer & Co., Inc., 62 A.D.3d 424 (1 Dept.2009)...5 UA-Columbia Cablevision of Westchester, Inc. v. Fraken Builders, Inc., 96 A.D.2d 509 (2d Dept.1983)...9 ii
SUPREME COURT Broadway 36th Realty, LLC v. London, 29 Misc.3d 1238(A), 2010 WL 5156052 (Sup.Ct., N.Y.Cty.2010)...9 Runnerless Knits, Inc. v. Knitwork Productions Corp., 23 Misc.3d 1135(A), 2009 WL 1579004 (Sup.Ct., Qns.Cty.2009)...7 STATUTES CPLR 3212...2, 3 iii
Plaintiff 1626 Second Avenue LLC ( Second Avenue ) submits this memorandum of law in support of its motion for summary judgment against defendants, Steven Salsberg ( Salsberg ) and Nick Camaj ( Camaj ). I. BACKGROUND Plaintiff is the owner of the building located at 1626 Second Avenue, New York, New York. On or about September 1, 2007, plaintiff entered into a written lease agreement (the Lease ) with non-party Notte Restaurant Corp. ( Notte ) for the ground floor and basement of the building. The Lease was secured by a guaranty of payment (the Guaranty ) signed by Notte s principals, Salsberg and Camaj, which guaranteed to plaintiff the full[,] faithful and prompt performance of any and all obligations of Tenant under the lease, including without limitation the obligation to pay rent and additional rent as those terms are defined in the lease. By January, 2009, Notte had defaulted in its rent payment obligations under the Lease, and plaintiff brought a summary non-payment proceeding against Notte in the Housing Court to recover rent arrears and possession of the premises. After a trial at which Notte alleged, among other things, that it was entitled to a set-off because of plaintiff s alleged failure to provide a Letter of No Objection from the New York City Department of Buildings which Notte claimed it needed as part of its application for a liquor license, the Housing Court found in plaintiff s favor. A judgment was entered on July 21, 2009 restoring possession of the premises to plaintiff, and awarding Second Avenue a money judgment against Notte in the amount of $459,039.20. The decision and order of the Housing Court was affirmed by the Appellate Term and Notte was evicted. - 1 -
Plaintiff, unable to collect any portion of the money judgment from Notte, commenced the instant action against Salsberg and Camaj based on their liability under the Guaranty. Salsberg counterclaimed based on the previously litigated and rejected allegation that the failure to procure a Letter of No Objection entitled it to a set-off. The counterclaim is identical to the one that was found to have no merit by both the Housing Court and the Appellate Term. Defendants admit the existence of the money judgment against Notte and the accuracy of the Lease and Guaranty. While Salsberg admits signing the Guaranty, Camaj alleges that if he signed it, he signed it by mistake. In light of these material admissions, there is no reasonable dispute that defendants are liable to plaintiff for the full amount of the Housing Court judgment, $459,039.20. Defendants are also liable to plaintiff under the Lease s acceleration provision which entitles plaintiff to recover from Notte s legal representatives, all rent and additional rent due under the Lease through its date of expiration. As set forth more fully in the accompanying affidavit of Frank Pecora, this debt comes to $2,688,151.47. Accordingly, pursuant to the Guaranty, plaintiff is entitled to entry of a judgment against defendants, jointly and severally, in the total sum of $3,763,241.01, together with interest thereon from July 1, 2009. II. ARGUMENT A. Standard of Review Pursuant to CPLR 3212, a plaintiff moving for summary judgment must establish that there is no defense to the cause of action or that the defense has no merit sufficient to warrant the court as a matter of law directing judgment in [plaintiff s] favor. CPLR 3212(b). A plaintiff accomplishes this by the tender of evidentiary proof in admissible form, - 2 -
Zuckerman v. City of New York, 49 N.Y.2d 557, 562 (1980), such as affidavits of persons having knowledge of the facts, deposition testimony and written admissions. See, CPLR 3212(b). Having submitted such evidence, 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 v. Prospect Hosp., 68 N.Y.2d 320, 324 (1986). Mere allegations with nothing more, AG Capital Funding Partners, L.P. v. State Street Bank and Trust Co., 11 N.Y.3d 146, 158 (2008), and conclusory assertions will not defeat summary judgment. Freedman v. Chemical Constr. Corp., 43 N.Y.2d 260, 264 (1977). The Court must devote itself to issue-finding, rather than issue-determination, Sillman v. Twentieth Century-Fox Film Corp., 3 N.Y.2d 395, 404 (1957), and it must ascertain whether any genuine issues of material fact exist in the proofs laid bare by the parties submissions. Behar v. Ordover, 92 A.D.2d 557, 558 (2d Dept.1983). See also, Phillips v. Joseph Kantor & Co., 31 N.Y.2d 307, 315 (1972) ( [I]t is the earmark of summary judgment that the court is confined to determining whether an issue of fact exists as a matter of law. ) If the defendants are unable to demonstrate that there is a single fact in controversy, the court must grant plaintiff s motion. Based on the pleadings submitted in this action, the accompanying affidavit, the statement of undisputed facts, and all of the exhibits submitted therewith, plaintiff has carried its burden of making a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact. Winegrad v. New York University Medical Center, 64 N.Y.2d 851, 853 (1985). As set forth more fully below, - 3 -
defendants are unable to point to any factual evidence that would preclude plaintiff from prevailing. B. Plaintiff Is Entitled to Recover the Amount of the Housing Court Judgment from Defendants Defendants each admit the existence of the Housing Court judgment, a copy of which has been submitted herewith, and there can be no reasonable dispute that plaintiff is entitled to recover the sum of $459,039.20 from Notte. However, the Lease specifically contemplates that, at the very least, defendant Salsberg has personal liability to plaintiff for all payments and obligations of Notte under the Lease. (See paragraph 81 of the Lease, submitted herewith as Exhibit A.) In addition, it was specifically contemplated that all signatories to the Guaranty have liability for Notte s debts. Accordingly, defendant Camaj also has liability to plaintiff under the Guaranty. 1 On a motion for summary judgment to enforce a guaranty all that the creditor need prove is an absolute and unconditional guaranty, the underlying debt, and the guarantor s failure to perform under the guaranty. City of New York v. Clarose Cinema Corp., 256 A.D.2d 69, 71 (1st Dept.1998). In the instant case, Second Avenue has submitted a copy of the Lease, Guaranty, and Housing Court judgment. It has also submitted the sworn testimony of plaintiff s representative that no portion of the judgment has been paid. Salsberg admits signing the Guaranty, so his liability is beyond reasonable debate. Camaj has indicated his intention to challenge the Guaranty s applicability to him. However, there is not legitimate dispute that as shareholders of Notte, both Camaj and Salsberg received a benefit from the Lease, and therefore received some consideration in exchange for their guaranty of payment. The Guaranty is clear and unambiguous, imposing liability on the 1 Plaintiff does not rely solely on paragraph 81 of the Lease to impose liability on Salsberg since the same obligations are reiterated in the Guaranty. Salsberg is an obligor under either document. - 4 -
undersigned for the obligations of Notte to pay rent and additional rent to plaintiff. When reviewing such plain language, evidence of the circumstances surrounding the execution and delivery of the guaranty may not be received. Franklin Nat. Bank v. Skeist, 49 A.D.2d 215, 219 (1st Dept.1975); see generally, Teitelbaum Holdings, Ltd. v. Gold, 48 N.Y.2d 51 (1979). Critically, Camaj does not admit or deny executing the Guaranty. Rather, he argues that if he did sign, his doing so was a mistake. Camaj s suggestion that he should not be bound by the Guaranty because he signed it by mistake is unavailing. The law is well-settled that an individual may be bound by a guaranty even though he failed to read it. Humble Oil & Refining Co. v. Jaybert Esso Service Station, Inc., 30 A.D.2d 952 (1st Dept.1968); see also Cash v. Titan Financial Services, Inc., 58 A.D.3d 785 (2d Dept.2009); Ginsberg v. Fairfield-Noble Corp., 81 A.D.2d 318 (1st Dept.1981). In addition, any claim by Camaj that his signature on the Guaranty is a forgery has no merit, since it is well-established that [s]omething more than a bald assertion of forgery is required to create an issue of fact contesting the authenticity of a signature. Banco Popular North America v. Victory Taxi Management, Inc., 1 N.Y.3d 381, 384 (2004); see also, Skilled Investors, Inc. v. Bank Julius Baer & Co., Inc., 62 A.D.3d 424 (1 Dept.2009). Similarly, Camaj s assertion that the guaranty was not properly notarized, and that this somehow supports his forgery allegation, is a red-herring since a notary s acknowledgment is not required for a guaranty to be binding on a signatory. Columbus Trust Co. v. Campolo, 110 A.D.2d 616 (2d Dept.1985). Even absent a different and arguably more formal acknowledgment, the Guaranty would still be binding on him by virtue of his signature alone. Based on the foregoing legal arguments, and the absence of any dispute as to the actual entry of a judgment against Notte in the Housing Court, or the amount thereof, there can be no - 5 -
reasonable challenge to plaintiff s entitlement to judgment herein against defendants pursuant to the Guaranty in the full amount awarded in Housing Court. C. Plaintiff Is Entitled to Recover Rent and Additional Rent Through the Lease Expiration The public policy in New York is to respect negotiated commercial leases, even if the lease is the result of a hard bargain. Accurate Copy Service of America, Inc. v. Fisk Bldg. Associates L.L.C., 72 A.D.3d 456 (1st Dept.2010). Therefore, when a lease so provides, a commercial landlord has no duty to mitigate damages to a defaulting tenant. Ring v. Printmaking Workshop, Inc., 70 A.D.3d 480 (1st Dept.2010) (tenant liable for rent after eviction when provided for in lease); REP A8 LLC v. Aventura Technologies, Inc., 68 A.D.3d 1087 (2d Dept.2009). Accordingly, if a tenant abandons the premises prior to the expiration of the lease, the landlord [i]s within its rights under New York law to do nothing and collect the full rent due under the lease. Holy Properties Ltd., L.P. v. Kenneth Cole Productions, Inc., 87 N.Y.2d 130, 134 (1995). This is true even after the landlord-tenant relationship is terminated by the issuance of a warrant of eviction. International Publications v. Matchabelli, 260 N.Y. 451 (1933); Gallery at Fulton Street, LLC v. Wendnew LLC, 30 A.D.3d 221 (1st Dept.2006). In the instant case, the standard form Lease entered into between the parties contained an acceleration provision of the type contemplated by the cases above, and which exists verbatim in an innumerable number of leases currently in effect throughout the City of New York. It explicitly absolved plaintiff of any obligation to mitigate damages, and made Notte liable, upon default, for rent and additional rent through the end of the Lease term. Accordingly, there can be no dispute that plaintiff is entitled to recover rent and additional rent through the Lease expiration. By virtue of their execution of the Guaranty, both defendants have personal liability to plaintiff under the Lease, including the accelerated rent provision. As set forth more fully in - 6 -
the accompanying affidavit, plaintiff s damages under the acceleration provision are $2,688,151.47. D. Plaintiff Is Entitled to Recover Interest and Attorneys Fees Notwithstanding the general rule that in a breach of contract case, a prevailing party may not collect attorneys fees from the nonprevailing party, TAG 380, LLC v. ComMet 380, Inc., 10 N.Y.3d 507, 515 (2008), such an award may be granted where it is authorized by agreement between the parties. Id., see also, Sempra Energy Trading Corp. v. PG & E Texas VGM, L.P., 284 A.D.2d 253 (1st Dept.2001); Runnerless Knits, Inc. v. Knitwork Productions Corp., 23 Misc.3d 1135(A), 2009 WL 1579004 (Sup.Ct., Qns.Cty.2009). In the instant case, paragraphs 19, 53 and 68 of the Lease entitle plaintiff to recover attorneys fees and court costs incurred by Second Avenue in the event of any default by Notte. Such fees are deemed additional rent, for which defendants have liability under the Guaranty. As set forth more fully in the accompanying affidavit of Frank Pecora, plaintiff was required to commence both a summary proceeding in the Housing Court to regain possession of the Premises, and the instant action to obtain a money judgment against defendants. In light of Notte s clear and previously adjudicated breach, and the great lengths plaintiff has been forced to go to obtain a recovery against defendants, an award of attorneys fees and costs is warranted. It is also required by the Lease given that Second Avenue must be the prevailing party. Accordingly, plaintiff requests an award of attorneys fees to be determined at a hearing after a decision on this motion. E. Salsberg s Counterclaim Is Barred by the Doctrine of Collateral Estoppel Salsberg s counterclaim merely rehashes the argument, rejected by the Housing Court and the Appellate Term, that he was induced to sign the Lease and Guaranty by an alleged - 7 -
promise by plaintiff s former employee, Claudia Confrancesco, that plaintiff was in the process of obtaining a Letter of No Objection. As discussed in the accompanying affidavit, that argument has no basis in fact, and when Notte had an opportunity to litigate this issue in Housing Court, it was rejected as having no basis in fact or law. Accordingly, it has no place in this litigation and must be dismissed as a matter of law. Bald allegations of mistake or fraud in the inducement of the execution of a guaranty are insufficient to overcome a motion for summary judgment which seeks to impose liability under a guaranty. Ehrlich v. American Moninger Greenhouse Mfg. Corp., 26 N.Y.2d 255, 259 (1970); O'Brien v. O'Brien, 258 A.D.2d 446 (2d Dept.1999). Salsberg s inability to proffer a single piece of documentary evidence in support his allegation is fatal to his claim of fraud in the inducement. Even if Salsberg could muster some extrinsic proof of fraud in the inducement, the claim would still be barred by the doctrine of collateral estoppel. 2 That doctrine requires that an issue in the present proceeding be identical to that necessarily decided in a prior proceeding, and that in the prior proceeding the party against whom preclusion is sought was accorded a full and fair opportunity to contest the issue. Allied Chemical, an Operating Unit of Allied Corp. v. Niagara Mohawk Power Corp., 72 N.Y.2d 271, 276 (1988). Here, plaintiff raised the Letter of No Objection as the basis for seeking a set-off for the amount owed in rent arrears, but the issue was identical, and it was necessarily decided against defendant. Critically, when provided a full and fair opportunity to be heard on the fraud issue at trial on the merits, Salsberg failed to call his then-employee, Ms. Confrancesco. This is particularly remarkable because Cofrancesco was hired by Notte mere days after purportedly defrauding them, and was still in Notte s employ at the time of the Housing Court trial. 2 The claim is also barred by the doctrine of res judicata. - 8 -
The Housing Court and the Appellate Term have already decided the alleged fraud defense when raised by Notte, rejecting it in its entirety and denying any alleged set-off. Defendants are precluded from relitigating those allegations before this Court. 114 West 26th Street Associates LP v. Fortunak, 22 A.D.3d 346 (1st Dept.2005). The law is well-settled that defendant[s], as the tenant s principal, [are] precluded from raising this defense since a judgment in a prior action is binding not only on the parties to that action, but on those in privity with them. Broadway 36th Realty, LLC v. London, 29 Misc.3d 1238(A), 2010 WL 5156052 (Sup.Ct., N.Y.Cty.2010) citing Green v. Santa Fe Industries, Inc., 70 N.Y.2d 244 (1987). Assuming, arguendo, that this Court concludes that Salsberg s allegations concerning Confrancesco are not collaterally estopped, the counterclaim must be denied as a matter of law because the alleged representations made by Cofrancesco were made without plaintiff s knowledge or consent and were outside the scope of her authority as a mere leasing agent. See, e.g., UA-Columbia Cablevision of Westchester, Inc. v. Fraken Builders, Inc., 96 A.D.2d 509, 509 (2d Dept.1983) ( apparent authority can bind a principal only where there was some misleading conduct on the part of the principal ). Assuming the truth of Salsberg s allegations, it was unreasonable for Salsberg to rely on Cofrancesco s representations without showing that plaintiff cloaked her with authority. More importantly, there is no provision of the Lease which obligates plaintiff to provide Notte with a Letter of No Objection. Absent a specific lease provision regarding the Letter, or some documentary evidence establishing that plaintiff guaranteed such a document to Notte, defendants claim has no merit. Sehera Food Services Inc. v. Empire State Bldg. Co. L.L.C., 74 A.D.3d 542 (1st Dept.2010). On the contrary, paragraphs 48 and 66 of the Lease specifically absolve plaintiff of liability to tenant, with paragraph 66 providing that no inability or delay in - 9 -