SCARLET KIM & CO., INC v. CLOCELL, INC. et al

Filing 27

OPINION/ORDER denying 24 Motion for Summary Judgment. Signed by Judge William H. Walls on 6/22/17. (DD, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

SCARLET KIM & CO., INC. and DONGJIN
SEMICHEM CO., INC.,
Plaintiffs,

OPINION AND ORDER

V.

CLOCELL, INC. and POLYCHEM ALLOY,
INC.,

Civ. No. 15-05664 (WHW)(CLW)

Defendants.

Walls, Senior District Judge

Defendant Polychem Alloy, Inc. (“Pollychem”) moves for summary judgment under Fed.
R. Civ. P. 56(c). ECF No. 24. Plaintiffs Scarlet Kim & Co. (“Scarlet Kim”) and Dongjin
Semichem Co., Inc. (“Dongjin”) oppose the motion and argue that the case should proceed to
trial. ECF No. 25. The Court decides this motion without oral argument under Fed. R. Civ. P.
78. Defendant’s motion is denied.
FACTUAL AND PROCEDURAL BACKGROUND

This is a civil action for breach of contract and collections on a “book account.” ECF No.
16

¶ 1. The facts of this case are largely undisputed. The parties agree that on July 7, 2014,

defendant Clocell, Inc. (“Clocell”) issued three purchase orders to Plaintiffs. Polychem’s
Statement Undisputed Facts, ECF No. 24-3

¶ 1. As a result of these purchase orders, plaintiff

Scarlet Kim issued three invoices to Clocell. Id.
the amount of $66,780. Id.
amount of $59,455. Id.

¶ 2. The first invoice was dated July 24, 2014 in

¶ 3. The second invoice was dated July 26, 2014 and issued in the

¶ 4. And, the third invoice was dated September 12, 2014 and issued in

the amount of$143,760. Id.

¶ 5. Finally, the parties agree that on August 13, 2014, Polychem
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wrote a letter which reads, in relevant part: “Polychem Alloy, Inc. shall cover the liabilities of
Clocell, Inc. in the 1 year of VENDOR specific relationship.” Id.

¶ 6.

From here, the parties’ understanding of the facts differs. Plaintiffs contend that
Polychem’s August 13, 2014 letter is an “unconditional guaranty to Plaintiffs” that Polychem
will cover all Clocell’s liabilities stemming from the purchase orders. Pl.’s Res. Polychem’s
Statement Undisputed Facts, ECF No. 25 at 4,

¶ 6.

Polychem disagrees, arguing that the letter

“can at best be considered an unenforceable gratuitous promise.” ECF No. 24-3 at 3.
On July 21, 2015, after neither Clocell nor Polychem had remitted payment for the
purchase orders, Plaintiffs filed suit against Clocell for breach of contract, ECF No. 1
and “book account,” id.

¶J 2 1—27,

¶J 28—35, and Polychem for breach of an unconditional guaranty, Id. ¶J

36—43. Plaintiffs filed an Amended Complaint by consent to add Dongjin as a plaintiff on June 1,
2016. ECF No. 16. On April 12, 2017, Polychem filed this motion for summary judgment. ECF
No. 24.
Polychem argues that summary judgment should be granted on Plaintiffs’ breach of
guaranty claim because the alleged guaranty is unenforceable as a matter of law for want of
consideration. ECF No. 24-3 at 2—3. Specifically, Polychem argues that “none of the parties
obtained any benefit or detriment for the guaranty” and that “plaintiff cannot utilize the mere
promise to pay the prior debt of Clocell as consideration for the guaranty.” Id. at 3. Plaintiffs
respond that summary judgment is inappropriate because “a genuine material factual dispute
exists surrounding whether there was consideration for the Guaranty.” ECF No. 25 at 11. In
support of their argument, Plaintiffs attach an affidavit from Tae Yong An, Vice President of
Scarlet Kim, ECF No. 25-1, which states that “Plaintiffs required the procurement of a Guaranty
from Defendant Polychem” in order to continue the business relationship with Clocell and to

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continue to ship Clocell product after it failed to pay the first two Scarlet Kim invoices. Id.

¶J 4—

9. The affidavit also states that Polychem benefitted financially from the Guaranty because
Polychem and Clocell are related entities and the Guaranty ensured continued shipment of
Plaintiffs’ product to Clocell. Id.

¶ 10.
LEGAL STANDARD

Summary judgment is appropriate where “the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” fed. R.
Civ. P. 56(a). A factual dispute between the parties must be both genuine and material to defeat a
motion for summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247—48 (1986). A
disputed fact is material where it would affect the outcome of the suit under the relevant
substantive law. Scott v. Harris, 550 U.S. 372, 380 (2007). A dispute is genuine where a rational
trier of fact could return a verdict for the non-movant. Id.
The movant bears the initial burden to demonstrate the absence of a genuine issue of
material fact for trial. Beard v. Banks, 548 U.S. 521, 529 (2006). Once the movant has carried
this burden, the non-movant “must do more than simply show that there is some metaphysical
doubt as to the material facts” in question. Scott, 550 U.S. at 380 (citing Matsushita Elec. Indus.
Co. v. Zenith Radio Corp., 475 U.S. 574, 586—87 (1986)). Each party must support its position
by “citing to particular parts of materials in the record.

.

.

or showing that the materials cited do

not establish the absence or presence of a genuine dispute, or that an adverse party cannot
produce admissible evidence to support the fact.” Fed. R. Civ. P. 56(c)(1). facts must be viewed
in the light most favorable to the nonmoving party only if there is a genuine dispute as to those
facts. Scott, 550 U.S. at 380. At this stage, “the judge’s function is not.

.

.

to weigh the evidence

and determine the truth of the matter.” Anderson, 477 U.S. at 249. “[W]here the nonmoving

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party bears the burden of proof, it must by affidavits, or by the depositions and admissions on
file make a showing sufficient to establish the existence of every element essential to that party’s
case.” Childers v. Joseph, 842 F.2d 689, 694 (3d Cir. 198$) (quoting Equimark Commercial Fin.
Co. v. C.I.T Fin. Servs. Corp., 812 f.2d 141, 142 (3d Cir. 1987) (quoting Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986))) (internal quotation marks omitted).
DISCUSSION
Like any other contract, a guaranty must be supported by consideration to be enforceable.
Great Falls Bank v. Pardo, 263 N.J. Super. 38$, 400 (Ch. Div. 1993) affd, 273 N.J.Super. 542
(App. Div. 1994). “A mere promise to pay an antecedent debt of another is not generally
regarded as consideration for a guaranty. However, either a slight benefit to the promisor or a
trifling inconvenience to the promisee suffices. Importantly, it is unnecessary that any
consideration pass directly from the guarantee to the guarantor, and any consideration moving
from the original obligors to the guarantor is sufficient to support the guaranty contract.” Id. at
401 (internal citations omitted). A guaranty can be supported by the same consideration that
supported the original contract on which it is based only if the guaranty and the original contract
were executed simultaneously. Sapta Glob., Inc. v. Cilicorp, LLC, No. CIV. 13-3698 KM MAR,
2015 WL 1469600, at *6 n.5 (D.N.J. Mar. 30, 2015).
Polychem argues that its August 13, 2014 letter is unenforceable for lack of consideration
because “none of the parties obtained any benefit or detriment from the guaranty beyond the
antecedent debt,” which accrued before the Guaranty was executed. ECF No. 24-3. Plaintiffs
respond that there was consideration for the Guaranty because it induced Plaintiffs “to continue
the business relationship with Defendant Clocell, Inc. and to continue to ship product to
Defendant Clocell, Inc. ECF No. 25 at 9. Plaintiffs offer the An affidavit to support their

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argument that absent the Guaranty, Plaintiffs would have ceased shipment to Clocell. An Aff.,
ECF No. 25-1 ¶9. Defendant Polychem contends that the An affidavit should be disregarded
because it is not based on personal knowledge as required by Fed. R. Civ. P. 56(c)(4), and that
Plaintiff’s affidavit “from a non-deposed individual alleging consideration without documentary
proof of same” is insufficient to survive summary judgment. ECF No. 26 at 4—6.
The Court finds that the An affidavit is based on sufficient personal knowledge and
credits its statements regarding the purpose and circumstances of the Guaranty. See, e.g., An Aff.

¶J 4—7, 9. The affidavit establishes that Plaintiffs required the Guaranty from Polychem to
continue to ship product to Clocell because Clocell had not paid its outstanding invoices and
Plaintiffs doubted the continued viability of Clocell. Id. Because the parties clash on whether the
Guaranty was executed to induce Plaintiffs to make further deliveries to Clocell, there is a
genuine issue of material fact in dispute. SeeM Spiegel & Sons Oil Corp. v. Amiel, No. A-365714T3, 2016 WL 3327126, at *4 (N.J. Super. Ct. App. Div. June 16, 2016) (reversing grant of
summary judgment on a written guarantee because the evidence demonstrated the existence of a
material fact in dispute where the parties offered competing certifications about whether the
guarantee was issued to induce performance on a separate contract). Resolution of the fact issue
is required for the Court to decide whether there was consideration to support the Polychem
Guaranty as a matter of law. It follows that summary judgment is inappropriate at this point. It is
hereby ORDERED that Defendant Polychem’s motion for summary judgment, ECF No. 24, is

iiam
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Sen r United States District Court Judge
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