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Court Listens to Hearing For Bank to Recover Monies Via Default Judgment

In this action by plaintiff JP Bank, to recover monies based upon the default of defendants S.I. Wood Furniture Corp. (Wood), Ikram Said, and Amal Said, a/k/a Amal E. Said, defendants, under a commercial line of credit and a concurrently executed personal guaranty, JP Bank moves, pursuant to CPLR 3212, for summary judgment in its favor as against defendants in the amount of $249,770, with accrued interest in the sum of $5,049.94, interest on $249,770 at its prime rate plus .50%, plus late fees in the sum of $1,935.25, and reasonable attorneys’ fees and expenses.

By a Business Credit Application dated October 17, 2005, Wood applied to JP Bank for a Business Revolving Credit Line in the sum of $250,000. The Business Credit Application set forth the business information of Wood and the personal financial information of Ikram and Amal, as Wood’s president and vice-president, respectively.

A New York Estate Lawyer said that under the section, entitled Authorizing Resolution, Ikram, as the president of Wood, stated that at a corporate meeting. it was resolved that Wood could complete the Business Credit Application and that Wood would then “be obliged to fulfill all of the terms and conditions of the respective note and Credit Account Agreement which it shall thereafter receive. This section of the Business Credit Application was executed by both Ikram and Amal on October 17, 2005.

On or about December 1, 2005, Wood’s application was approved by JP Bank for a line of credit in the sum of $250,000. The terms and conditions of the Business Revolving Credit Line are set forth in the Business Revolving Credit Account Agreement (Credit Account Agreement).
In addition, paragraph 3 of the Credit Account Agreement provided for the recovery of attorneys’ fees and expenses by stating: In addition to all principal, interest and fees owing under this Agreement, [Wood] and each guarantor agrees to pay upon demand (a) all reasonable costs and expenses incurred by [Chase] and all owners and holders of the indebtedness evidenced by this Agreement in collecting the amount owing under this Agreement through probate, reorganization, bankruptcy or any other proceeding, and (b) costs, expenses and reasonable attorneys’ fees if and when this Agreement is placed in the hands of an attorney for collection or enforcement.

Mood made all payments due through August 1, 2010. It is undisputed that Wood then failed to make the payment due on September 1, 2010, or to pay any subsequent installments that have now become due, and that such failure of Wood to make such payment due on September 1, 2010 constituted an act of default under the Credit Account Agreement. As a result, JP Bank, pursuant to paragraph 7 of the Credit Account Agreement, elected to accelerate the balance due and to declare all amounts due immediately due and payable to it. JP Bank also demanded that Ikram and Amal honor the guarantees given by them under the Personal Guarantee and Collateral Agreement section of the Business Credit Application (the Guaranties) and perform the obligations of Wood, but they ignored this demand and refused to do so.

Consequently, on February 8, 2011, JP Bank filed this action against defendants. JP Bank’s complaint seeks recovery from Wood for the accelerated balance due, plus interest, late fees, and reasonable attorneys’ fees based on the Credit Account Agreement, and also seeks to recover this sum from Ikram and Amal, individually, based on the Guaranties. Defendants interposed a verified answer, which contains general denials and 22 affirmative defenses.
In support of its instant motion for summary judgment, JP Bank has annexed the Business Credit Application, the Credit Account Agreement, and the sworn affidavit of Karl Reed, an assistant vice-president of its Portfolio Management Center. Mr. Reed, in his affidavit, attests that he has access to JP Bank’s business records, maintained in the ordinary course of regularly conducted business activity, including the business records for and relating to Wood. He asserts that he has made his affidavit based upon his review of those records relating to Wood’s loan and from his own personal knowledge of how they are kept and maintained. He explains that the loan records for Wood are maintained by JP Bank in the course of its regularly conducted business activities and are made at or near the time of the event, by or from information transmitted by a person with knowledge. He further sets forth that as to JP Bank’s business records that consist of documents created by third parties, JP Bank relies on the accuracy of such records in conducting its business and collecting loans.

Mr. Reed recounts Wood’s entry into the Credit Account Agreement and Ikram and Amal’s execution of the Guaranties on October 17, 2005. He attests that Wood has failed to pay the sums due under the terms of the Credit Account Agreement and is in default. He annexes a copy of the payment history for the Credit Account Agreement, confirming that Wood has not made any payments on the Credit Account Agreement since August 1, 2010. The attached payment history reflects payments made, advances taken under the Credit Account Agreement, and the assessment of fees. He asserts that Ikram and Amal have failed to cure the default of Wood pursuant to the Guaranties and that they are in default under the Guaranties.

Mr. Reed sets forth that as of January 25, 2011, there is due and owing from Wood to JP Bank the principal balance of $249,770, interest of $5,049.94, which continues to accrue at the annual rate of JP Bank’s prime rate plus .50%, and late fees and costs of $1,935.25. He further asserts that JP Bank has incurred attorneys’ fees and legal expenses to enforce the terms of the Credit Account Agreement.

On a motion for summary judgment, the movant must make a prima facie showing, by tendering evidentiary proof in admissible form, of its entitlement to judgment as a matter of law. After the movant has made this prima facie showing, the burden shifts to the opposing party to demonstrate the existence of a genuine material triable issue of fact.

In opposition to JP Bank’s motion, defendants argue that JP Bank, by its submissions, has failed to make a prima facie showing of entitlement to judgment as a matter of law, and that they also have raised defenses which give rise to material issues of disputed facts, making summary judgment inappropriate.

Defendants assert that Mr. Reed’s affidavit may not be admitted into evidence because the certificate of conformity by Ms. Medina, Esq. is defective. Specifically, they maintain that the certificate of conformity failed to state the qualification of C. Hake, and show whether he/she is qualified and authorized to make such certification. They also state that JP Bank has not established that Ms. Medina, Esq. is qualified to make a certificate pursuant to Real Property Law ยง 239 and that she is fully acquainted with the laws of Arizona. They argue that Mr. Reed’s affidavit is, therefore, inadmissible into evidence, and the remaining evidence is insufficient to establish that there is no triable issue of material fact or that JP Bank is entitled to summary judgment as a matter of law.

Defendants’ argument is without merit. It is well established that an affidavit which lacks the certificate authenticating the authority of the notary who administered the oath, as required by CPLR 2309 (c), may be considered on a summary judgment motion despite this technical defect since it is not a fatal defect, but a mere defect in form which can be given nunc pro tunc effect once properly acknowledged. Moreover, it has been specifically held that when the person administering the oath for an out-of state affidavit is a notary, the affidavit does not require a certificate authenticating the notary’s authority.

Here, as noted above, Mr. Reed’s affidavit was, in fact, notarized, and it contains the signature and stamp of the notary public. Furthermore, the certificate of conformity by Ms. Medina, Esq. substantially complies with the requirements of CPLR 2309 (c).

In any event, defendants have not disputed the authority of the notary public or the truthfulness and accuracy of any of the statements made in Mr. Reed’s affidavit, nor have they demonstrated any prejudice whatsoever resulting from the purported technical defect alleged by them.

Moreover, inasmuch as the content of the documents submitted, as opposed to their form, is what is critical to the determination of this motion, defendants cannot be permitted to seize upon any technical requirement of CPLR 2309 (c) to create delay and avoid summary judgment.
Defendants also argue that Mr. Reed’s affidavit does not demonstrate his personal knowledge of the matters asserted. Defendants state that Mr. Reed does not state that he has such personal knowledge. Defendants also claim that JP Bank should have produced Shirley Herring’s affidavit since she signed the Credit Account Agreement. They also state that Mr. Reed’s affidavit is deficient because he has not attached or described any of the books and records that he may have reviewed, or rendered any such books and records which he may have reviewed admissible as evidence.

Defendants’ argument is rejected. The affidavit of a custodian of the records based on records maintained by a corporation in the ordinary course of business may constitute admissible evidence. Furthermore, it is well settled that a business entity may admit a business record through a person without personal knowledge of the document, its history or its specific contents where that person is sufficiently familiar with the corporate records to aver that the record is what it purports to be and that it came out of the entity’s files.

Here, as discussed above, Mr. Reed, is the assistant vice-president of the Portfolio Management Center of JP Bank, and he attests that he has personal knowledge of how JP Bank’s business records are kept, and that his affidavit is based upon his review of JP Bank’s business records which are maintained in the ordinary course of its business. He, thus, has demonstrated that he is sufficiently familiar with the business records submitted to aver that they are what they purport to be and that they came out of JP Bank’s files, thereby supporting the validity and authenticity of these documents.

While defendants rely upon the case of JP Morgan JP Bank Bank, N.A. v Moto-Tex, Inc. in support of their assertion that Mr. Reed’s affidavit should be rejected, such reliance is misplaced. Unlike in that case, where the affiant did not even refer to the transaction history or attach any of the records reviewed, Mr. Reed refers to the attached payment history and the attached Business Credit Application, Credit Account Agreement, and Guaranties.

Defendants additionally argue that the Business Credit Application, the Credit Account Agreement, and the Guarantee provision contained within the body of the Credit Account Agreement are not authenticated and cannot be rendered admissible as evidence. Defendants contend that they fail to contain a certificate of acknowledgment that raise a presumption of due execution. Defendants further state that CPLR 3015 (d), which provides that unless specifically denied in the pleadings each signature on a negotiable instrument is admitted, does not allow the admission of the signatures of Ikram and Amal on the Guaranties and also does not establish their signatures as that of the borrower, Wood.

This argument is unavailing. No certificate of acknowledgment is necessary to authenticate Ikram and Amal’s signatures or their signatures on behalf of Wood. Neither Ikram or Amal deny signing the Business Credit Application or that they were authorized to execute it on behalf of Wood. Moreover, it has been held that even a naked denial of execution of a guarantee is insufficient to raise an issue of fact.

Therefore, defendants have failed to raise any genuine issue of fact with respect to the authenticity of the documents submitted.

Consequently, since the court thus finds that JP Bank, by its submissions, has made a prima facie showing of its entitlement to judgment as a matter of law, the burden shifted to defendants to raise a triable issue of fact with respect to their alleged defenses. A party opposing a motion for summary judgment must assemble, lay bare, and reveal its proof, and demonstrate the existence of a genuine issue of fact that requires a trial of the action. In doing so, the party must produce evidentiary proof in admissible form sufficient to require a trial of material questions of fact on which it rests its defense or it must demonstrate an acceptable excuse for its failure to meet this requirement. Mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient for this purpose. Bare unsupported denials or averments merely stating conclusions of fact or law are insufficient to defeat a motion for summary judgment.
In attempting to raise a triable issue of fact, Ikram and Amal have submitted their own affidavits, in which they each claim that they, on behalf of Wood, completed the Business Credit Application only for the purpose of determining Wood’s eligibility for a loan, but that they never agreed to personally guarantee any corporate loan. They state that they chose the loan in question on the understanding that a personal guarantee was not involved. They further state that the Business Credit Application was typed in fine print, and contained complex terms which they did not fully understand, and that they, therefore, relied on JP Bank to properly administer any resulting loan.

Such a claim by Ikram and Amal, however, is specifically belied by the express terms of the Business Credit Application, which explicitly stated that they individually and personally unconditionally guaranteed the loan to Wood by JP Bank, and that this personal guarantee was an individual personal liability.

While Ikram and Amal claim that the terms of the Business Credit Application were in fine print, this does not provide an excuse for them not to read it prior to signing it and agreeing to be bound by its terms. A defendant cannot invalidate a contract based merely on his or her failure to accurately, sufficiently, or comprehensively read its terms. Thus, any negligence by Ikram and Amal in failing to read the Business Credit Application does not relieve them of the obligations which they undertook in signing the Guaranties, which induced JP Bank to advance the sums loaned

Notably, the Court of Appeals has observed that where individual responsibility is demanded the nearly universal practice is that the officer signs twice- once as an officer and again as an individual. Here, Ikram and Amal executed the Business Credit Application twice, once in their corporate capacity and again in their individual capacities. This is consistent with their intention to be held liable as guarantors in their personal capacities as set forth in the explicit terms of the Business Credit Application. Moreover, as set forth above, and Ikram and Amal’s two signatures are contained in different sections of the Business Credit Application, differentiating the corporate and individual capacities in which they signed.

While Ikram and Amal claim that they believed that they were signing the Guaranties contained in the Business Credit Applications as officers of Wood, in PNC Capital Recovery v Mechanical Parking Sys., the court noted that an interpretation that [an individual defendant] signed the Guaranty solely in his capacity as president of the corporation would compel the illogical conclusion that the purpose of the Guaranty was to provide that in case of the corporate defendant’s default, the company would guaranty its own indebtedness, rendering the entire Guaranty meaningless. Such reasoning applies equally to the case here.

Moreover, Ikram and Amal’s actual intent is irrelevant to the manifestation of their objective intent to enter into the Guaranties, which their signatures evidenced. A profession of contradictory personal intent is insufficient to override a physical manifestation of assent. Thus, Ikram and Amal’s claim that they thought they were was signing in their corporate capacity is without effect because their signatures are sufficient manifestation of their assent to the provisions of the Guaranties. Ikram and Amal’s assertion that they did not intend to personally guarantee the loan to Wood contradicts the explicit provisions of the Guaranties to which they agreed and cannot prevail over such express written agreement. Any other conclusion would countenance the retrospective invalidation of duly-executed agreements, thus undermining the integrity of all contractual agreements.

Upon executing the written Business Credit Application, defendants became conclusively bound by its terms and the terms of the Credit Account Agreement incorporated therein. Where the intention of the parties is fully determinable from the language of the agreement and an agreement is unambiguous, extrinsic evidence is inadmissible to vary its terms.

Defendants also argue that they should not be bound by the Credit Account Agreement because when they completed the Business Credit Application, it did not contain all of the terms as expected by them, and that after its submission, JP Bank supplemented it with the terms set forth within the Credit Account Agreement which was not signed by them. They point out that the Credit Account Agreement is only signed on behalf of JP Bank by the Shirley Herring, in her capacity as a first vice-president.

Defendants’ argument must be rejected since the Business Credit Application expressly provided that use of the proceeds of the loan constituted full acceptance of the terms specified in the Credit Account Agreement which they would receive, and it is undisputed that Wood used the proceeds of the loan pursuant to the Credit Account Agreement for nearly five years prior to its default. Thus, the fact that the Credit Account Agreement does not contain defendants’ signatures is of no moment since the Business Credit Application, which expressly incorporated and assented to the terms of the Credit Account Agreement, does contain their signatures.
Ikram and Amal further assert that they never received a letter from JP Bank notifying them in their alleged capacity as guarantors of any alleged defaults and that it would be accelerating the loan. They argue that they did not have a meaningful opportunity to cure Wood’s default. This argument is unavailing. As discussed above, Ikram and Amal, in the Business Credit Application, specifically agreed that upon Wood’s breach of any terms of the Credit Account Agreement, all obligations would become immediately due without notice or demand by JP Bank.

Defendants additionally argue that they never agreed that in the event of a default, JP Bank could accelerate the maturity of the loan. They assert that this was not a term within the Business Credit Application, and that even if this term was in the Credit Account Agreement, they never signed the Credit Account Agreement and were not bound by it.

This argument is rejected. As set forth above, paragraph 7 of the Credit Account Agreement specifically gave JP Bank the right to accelerate the loans without notice of acceleration and defendants expressly waived the right to such notice. While defendants claim that this right to accelerate was not contained in the Business Credit Application, as previously noted, the Business Credit Application expressly incorporated and assented to the terms of the Credit Account Agreement, does contain their signatures.

Ikram and Amal also assert that JP Bank extended credit to Wood even though Wood’s finances would render it unable to repay the loan. They state that JP Bank was not concerned about Wood’s financial ability to repay the loan since it intended to hold them liable as personal guarantors even though their intentions were clear that they did not desire to be guarantors. They contend that JP Bank knew or should have known that Wood was not financially sound. They argue that under these circumstances, Wood had an obligation not to extend the credit, and by extending such credit, it breached this obligation.

This argument is unavailing. Wood applied for and accepted the benefits of the loan by JP Bank for nearly five years. A challenge by defendants of their own creditworthiness is thus an improper basis for denial of JP Bank’s motion for summary judgment.

Thus, defendants, in response to JP Bank’s motion, have submitted no evidence to dispute their entry into the Credit Account Agreement and the Guaranties, the validity of the documents submitted, the amount of the debt owed, and their failure to make payment of the amount claimed to be due. Facts appearing in the movant’s papers which the opposing party does not controvert, may be deemed to be admitted. No admissible competent evidence is submitted by defendants indicating that the allegations set forth in the verified complaint and Mr. Reed’s affidavit are incorrect.

Therefore, the court concludes that defendants have failed to raise any triable issue of fact refuting JP Bank’s prima facie showing of Wood’s default under the Credit Account Agreement and Ikram and Amal’s obligation to perform pursuant to the Guaranties. Defendants have completely failed to come forward with a single competent or admissible fact to support their conclusory denial that they are in default of the line of credit extended to JP Bank by Wood. Furthermore, while defendants’ answer alleges 22 affirmative defenses, defendant, in their opposition papers, do not attempt to support any of these alleged defenses other than the defenses discussed above, which the court has found to be completely lacking in merit.
Defendants do not dispute that Wood has defaulted under the terms of the Credit Account Agreement, which renders it liable to JP Bank for all amount due thereunder. In addition, where a creditor seeks summary judgment upon a written guaranty, the creditor need prove no more than an absolute and unconditional guaranty, the underlying debt, and the guarantor’s failure to perform under the guarantee. Here, the Guaranties are unconditional and explicit in their terms providing that Ikram and Amal are absolutely liable for the full performance of all monetary obligations incurred by Wood.

Thus, JP Bank is entitled to recover as against Wood, as the obligor, and Ikram and Amal, as guarantors, the amount of $249,770, plus accrued interest, late fees in the amount of $1,935.25, and its reasonable attorneys’ fees and expenses pursuant to paragraph 3 of the Credit Account Agreement. Summary judgment in JP Bank’s favor is, therefore, mandated.

The court notes that defendants also contend that JP Bank’s motion for summary judgment is premature because discovery is necessary to determine what financial documentation JP Bank demanded to determine whether to extend the loan and what JP Bank’s process was in monitoring and administering the loan. Defendants claim that discovery is also necessary to determine which books and records Mr. Reed may have reviewed and to determine which loan terms were agreed upon by the parties upon the execution of the Business Credit Application. They state that documents, such as statements, payment history, and recorded conversations should be produced by JP Bank. There is no claim, however, that JP Bank’s records are inaccurate or that defendants have made payments that are not accounted for.

CPLR 3212 (f) provides that if it appears from affidavits submitted in opposition to the motion for summary judgment that facts essential to justify opposition may exist but cannot be stated, the court may deny the motion or may order a continuance to permit affidavits to be obtained or disclosure to be had and may make such other order as may be just. However, mere hope and speculation that additional discovery might uncover evidence sufficient to raise a triable issue of fact is not sufficient to warrant denial of a motion for summary judgment. The granting of a summary judgment motion should not be postponed to allow for discovery where the proponent of the additional discovery has failed to demonstrate that the discovery sought would produce relevant evidence.

A grant of summary judgment cannot be avoided by a claimed need for discovery unless some evidentiary basis is offered to suggest that discovery may lead to relevant evidence. A party’s mere hope that further discovery will reveal the existence of triable issues of fact is insufficient to delay determination on the issue of summary judgment.

Here, defendants have failed to show how any such discovery could provide evidence relevant to any viable defense. Thus, postponement of JP Bank’s motion, pending discovery pursuant to CPLR 3212 (f) is not warranted.

Finally, defendants argue that JP Bank failed to serve them with the Request for Judicial Intervention along with its motion and that this warrants denial of JP Bank’s motion. While pursuant to Uniform Rules for Trial Courts (22 NYCRR) 202.6 (a), a request for judicial intervention must be submitted, in duplicate, on a form authorized by the Chief Administrator of the Courts, with proof of service on the other parties to the action except where the application is ex parte, such a technical defect, which has not prejudiced defendants in any way, does not preclude the granting of JP Bank’s motion for summary judgment.

Accordingly, JP Bank’s motion for summary judgment in its favor is granted for the principal amount of $249,770 and late fees in the amount of $1,935.25, plus accrued interest and reasonable attorneys’ fees and expenses incurred in this litigation, which amounts shall be determined by the court upon further affidavits and documentation, which are to be submitted by JP Bank on notice together with a proposed judgment.

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