Nissan Motor Acceptance Corporation v. Five Towns Nissan, LLC et al

Filing 83

MEMORANDUM & ORDER denying 76 Motion for Summary Judgment; For the stated reasons, Plaintiff's motion for summary judgment (D.E. 76) is DENIED. To the extent needed, the Court refers the parties to Judge Lindsay to set a schedule for Plainti ff to discover any additional information from Defendant regarding its claims of forgery and the execution of the Promissory Note (see supra, Note 9). Within thirty (30) days of the date of this Order, the parties are to submit a joint letter (1) cla rifying all remaining claims, crossclaims, and counterclaims, (2) whether there are any outstanding substantive or scheduling issues to address, and (3) whether they wish to schedule a settlement and/or discovery conference with Judge Lindsay. So Ordered by Judge Joanna Seybert on 5/29/2020. C/ECF (Valle, Christine)

Case 2:16-cv-07028-JS-ARL Document 83 Filed 05/29/20 Page 1 of 26 PageID #: 1568

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
-----------------------------------X
NISSAN MOTOR ACCEPTANCE CORPORATION,
Plaintiff,
MEMORANDUM & ORDER
16-CV-7028(JS)(ARL)

-againstFIVE TOWNS NISSAN, LLC,
SHMUEL WOLF, NEIL BARBAGALLO,
And ALEX KORCHMAR,

Defendants.
-----------------------------------X
APPEARANCES
For Plaintiff:
Richard A. Braden, Esq.
Goldberg Segalla LLP
711 Third Avenue, Suite 1900
New York, New York 10017
Louis Arnold Russo, Esq.
Russo Law LLC
276 Fifth Avenue, Suite 704
New York, New York 10001
For Defendant
Shmuel Wolf:

Annie P. Kubic, Esq.
Philip Joseph Campisi, Jr., Esq.
Westerman Bail Ederer Miller Zucker &
Sharfstein, LLP
1201 RXR Plaza
Uniondale, New York 10601

SEYBERT, District Judge:
Plaintiff

Nissan

Motor

Acceptance

Corporation

(“Plaintiff”) commenced this diversity action against defendant
Shmuel Wolf (“Defendant”), among others,1 for breach of contract.

As discussed in Procedural History, infra, Shmuel Wolf is the
sole remaining defendant.
1

Case 2:16-cv-07028-JS-ARL Document 83 Filed 05/29/20 Page 2 of 26 PageID #: 1569

Plaintiff

seeks

to

enforce

personal

guaranties

purportedly

executed by Defendant in favor of Plaintiff for all “obligations
and liabilities” incurred by Five Towns Nissan, LLC (the “Nissan
Dealership”)

and

Five

Towns

Dealership,”

and

together

Automotive,

with

the

LLC

Nissan

(the

“Chrysler

Dealership,

the

“Dealerships”), after the Dealerships defaulted on payments under
a

Promissory

Note.

Currently

pending

Plaintiff’s motion for summary judgment.

before

the

Court

is

(Mot., D.E. 76; Pl. Br.,

D.E. 76-1; Def. Opp., D.E. 80; Pl. Reply, D.E. 82.)

For the

following reasons, Plaintiff’s motion is DENIED.
BACKGROUND2
Plaintiff, a California corporation, provides, among
other things, secured wholesale inventory floor plan financing for
automobile dealerships throughout the United States.
Stmt. ¶ 1.)

(Pl. 56.1

The Dealerships operated new and used motor vehicle

dealerships in Inwood, New York.

(Am. Compl., D.E. 33, ¶¶ 9-10.)3

Defendant and Neil Barbagallo (“Barbagallo”), who is no longer a
defendant in this action, were members of both dealerships.

(Pl.

The facts are drawn from the parties’ Local Civil Rule 56.1
Statement and Counterstatement. (Pl. 56.1 Stmt., D.E. 76-16;
Def. 56.1 Stmt., D.E. 81; Def. 56.1 Counterstmt., D.E. 81, at
11-19.) The Court notes any relevant factual disputes.
2

As discussed in Procedural History, infra, on August 13, 2018,
Magistrate Judge Arlene R. Lindsay issued an Order deeming the
First Amended Complaint the operative complaint. (See Aug. 13,
2018 Order, D.E. 48.)
3

2

Case 2:16-cv-07028-JS-ARL Document 83 Filed 05/29/20 Page 3 of 26 PageID #: 1570

56.1 Stmt. ¶ 1.)

Defendant states that he was a “passive owner

with no operational involvement” while Alex Korchmar (“Korchmar”),
who

was

previously

a

defendant

Dealerships’ operations.

in

this

action,

oversaw

the

(Wolf Decl., D.E. 79, ¶ 4; Def. 56.1

Counterstmt. ¶ 3.)
I.

The Nissan Agreement and the Nissan Guaranty Agreement
On May 19, 2011, Plaintiff and the Nissan Dealership

entered

into

an

Automotive

Wholesale

Financing

and

Security

Agreement (the “Nissan Agreement”) pursuant to which Plaintiff
“agreed to provide secured wholesale inventory financing to the
Nissan Dealership [to] acquire motor vehicles for sale and lease
to consumers.”

(Pl. 56.1 Stmt. ¶ 4; Nissan Agmt., Brooks. Aff.,

Ex. A, D.E. 76-3.)

The Nissan Agreement governed “the terms and

conditions of [Plaintiff’s] agreement to establish and maintain
for [the Nissan Dealership] a wholesale line of credit” to finance
its

purchases

merchandise.

of

new

and

used

vehicles,

parts,

and

other

(Nissan Agmt. at 1; Brooks. Aff., D.E. 76-3, ¶ 13.)

Defendant and Barbagallo signed the Nissan Agreement in their
capacities as the “Operating Manager[s].”

(Nissan Agmt. at 6.)

In connection with the Nissan Agreement, Defendant and
Barbagallo

contemporaneously

executed

a

Continuing

Guaranty

Agreement “to induce [Plaintiff] to extend or continue to extend
credit to” the Nissan Dealership (the “Nissan Guaranty”).

(Pl.

56.1 Stmt. ¶ 6; Nissan Guaranty, Brooks. Aff., Ex. B, D.E. 76-4,
3

Case 2:16-cv-07028-JS-ARL Document 83 Filed 05/29/20 Page 4 of 26 PageID #: 1571

at ECF pp. 12-16, 17-21.)

As relevant here, Defendant admits that

he signed the Nissan Agreement and the Nissan Guaranty.

(Def.

56.1 Stmt. ¶ 6; Wolf Decl., D.E. 79, ¶¶ 2, 13, 17.)
As relevant here, the Nissan Guaranty Agreement provided
that Defendant (and Barbagallo) “unconditionally and irrevocably”
guaranteed:
(a) the full and prompt performance and payment of all
present
and
future
liabilities
of
[the
Nissan
Dealership] to [Plaintiff] irrespective of their nature
or the time they arise, and (b) the due and punctual
performance and observance of all agreements and
indemnities
of
[the
Nissan
Dealership]
to
[Plaintiff]. . . . It is contemplated that this is, and
it is intended to be, the personal guaranty of payment
and performance of each individual signing below in his
or her individual capacity. If any liability guaranteed
hereby is not paid when due, Guarantor hereby agrees to
and will immediately pay same, without resort by the
holder thereof to any other person or party.
(Nissan Guaranty at 1.)

“Liabilities” is defined to include:

[A]ll obligations and liabilities of [the Nissan
Dealership] (whether individually or jointly with
others, and whether direct, indirect, absolute or
contingent as maker, endorser, guarantor, surety or
otherwise) to [Plaintiff], now existing or hereafter
coming into existence and renewals or extensions in
whole or in part of any of said liabilities . . .
***
Guarantor acknowledges that there may be future advances
by [Plaintiff] to [the Nissan Dealership] . . . and that
the number and amount of the liabilities are unlimited
and may fluctuate from time to time hereafter. Guarantor
expressly agrees that Guarantor’s obligations hereunder
shall remain absolute, primary and unconditional
notwithstanding such future advances and fluctuations,
if any.

4

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(Nissan Guaranty at 1, 3.)

The Nissan Guaranty Agreement also

provided that Defendant’s obligations under the agreement:
[S]hall be continuing, absolute and unconditional under
any and all circumstances and shall be paid by Guarantor
regardless of (a) the validity, regularity, legality or
enforceability of any of the liabilities or any
collateral security or guaranty therefor; . . . or (c)
any other event or circumstance whatsoever which may
constitute, or might be construed to constitute, an
equitable or legal discharge of a surety or a guarantor,
it being the purpose and intent of the Guarantor that
this Guaranty and the Guarantor’s obligations hereunder
shall remain in full force and effect and be binding
upon Guarantor and Guarantor’s successors until the
liability and the obligations of Guarantor under this
Guaranty shall have been satisfied by payment in full.
This Guaranty is a continuing guaranty and shall remain
in force at all times hereafter, . . . until a written
notice of termination from Guarantor is received and
acknowledged by [Plaintiff] . . . .
(Nissan Guaranty at 2.)
II.

The Chrysler Agreement and the Chrysler Guaranty Agreements
On or around April 3, 2013, Plaintiff and the Chrysler

Dealership entered into an Automotive Wholesale Financing and
Security Agreement (the “Chrysler Agreement”) pursuant to which
Plaintiff agreed to provide secured wholesale inventory financing
to the Chrysler Dealership so it could acquire motor vehicles for
sale and lease to consumers.

(Pl. 56.1 Stmt. ¶¶ 12-13; Chrysler

Agmt., Brooks Aff., Ex. I, D.E. 76-11.)

The Chrysler Agreement

governed the terms under which Plaintiff would, in its discretion,
provide

a

vehicles.

wholesale

line

of

credit

to

(See generally Chrysler Agmt.)

5

finance

new

and

used

Defendant purportedly

Case 2:16-cv-07028-JS-ARL Document 83 Filed 05/29/20 Page 6 of 26 PageID #: 1573

signed the Chrysler Agreement in his capacity as a “Manager.”
(Chrysler Agmt. at 7.)
In connection with this Agreement, on April 3, 2013,
Defendant

purportedly

executed

notarized

Continuing

Guaranty

Agreements (the “Chrysler Guaranties”), individually and as a
“Manager,” wherein he guaranteed to pay the Chrysler Dealership’s
present and future liabilities.

(Chrysler Guaranties, Brooks

Aff., Ex. J, D.E. 76-12, at ECF pp. 7-11, 17-23.)

Unlike the

Nissan Agreement and Nissan Guaranty, Defendant denies signing the
Chrysler Agreement and the Chrysler Guaranties because he was not
in New York on the date these agreements were signed.

(Def. 56.1

Stmt. ¶¶ 12-13, 15; Def. 56.1 Counterstmt., at ECF p. 13, ¶¶ 1416.)
III. The Cross-Collateral Agreement
On April 4, 2013, one day after the purported execution
of the Chrysler Agreement and the Chrysler Guaranties, Plaintiff
and the Dealerships, Defendant, and Barbagallo entered into a
Cross-Guaranty, Cross-Collateral, and Cross-Default Agreement (the
“Cross-Collateral Agreement”) in which Defendant, and others,
agreed to “cross-guaranty, cross-default, and cross collateralize
all”

of

the

Dealerships’

present

and

future

obligations

and

liabilities to Plaintiff under the Nissan and Chrysler Agreements
and

respective

Guaranty

Agreements.

(Pl.

56.1

Stmt.

¶

7;

Apr. 4, 2013 Cross-Collateral Agmt., Brooks Aff., Ex. C, D.E. 766

Case 2:16-cv-07028-JS-ARL Document 83 Filed 05/29/20 Page 7 of 26 PageID #: 1574

5, at 1.)
Collateral

Defendant and Barbagallo purportedly signed the CrossAgreement

as

guarantors

Manager/Member” of the Dealerships.
5.)

and

as

“Operating

(Cross-Collateral Agmt. at

Defendant denies executing the Cross-Collateral Agreement and

states that his signature “materially differs from that which
appears on the” Nissan Guaranty Agreement.4

(Def. 56.1 Stmt. ¶ 7;

Def. 56.1 Counterstmt. ¶ 11.)
IV.

The Capital Loan Agreement
On August 12, 2013, Plaintiff and the Nissan Dealership

entered into a Capital Loan and Security Agreement (the “Capital
Loan Agreement”), pursuant to which Plaintiff loaned the Nissan
Dealership $1,129,937.23, to be repaid in monthly installments
with interest.

(Pl. 56.1 Stmt. ¶ 8; Capital Loan Agmt., Brooks

Aff., Ex. F, D.E. 76-8.)

Defendant allegedly signed the Capital

Loan Agreement on behalf of the Nissan Dealership.
Agmt. at ECF pp. 3, 14.)

(Capital Loan

In connection with the Capital Loan

Agreement, Defendant, in his individual capacity and as a member
of the Chrysler Dealership, purportedly executed a document titled
“Reaffirmation of Guarantors” wherein he consented to the terms of
the Capital Loan Agreement and acknowledged that he and the
Chrysler

Dealership

“guaranteed

all

present

and

future

indebtedness of [the Nissan Dealership] to [Plaintiff] pursuant to

Plaintiff submitted exhibits of all agreements but redacted
every signature.
4

7

Case 2:16-cv-07028-JS-ARL Document 83 Filed 05/29/20 Page 8 of 26 PageID #: 1575

their respective guaranties,” and reaffirmed their guaranties.
(Reaffirmation of Guarantors, Brooks Aff., Ex. G, D.E. 76-9.)
Defendant denies signing the Capital Loan Agreement and
the Reaffirmation of Guarantors, arguing that he was in Atlanta,
Georgia on the day the Agreements were allegedly signed, and
because his signature “materially differs” from his signature on
the Nissan Guaranty. (Def. 56.1 Stmt. ¶ 8; Def. 56.1 Counterstmt.,
¶¶ 21-23.)
V.

The Alleged Defaults under the Agreements
On February 18, 2014, Plaintiff sent the Dealerships a

letter (the “Letter”) referencing a Forbearance Agreement, dated
December 18, 2013 (the “Forbearance Agreement”).5
Ltr., Brooks Aff., Ex. D, D.E. 76-6.)

(Feb. 18, 2014

The Letter states that the

“Dealerships have failed to comply with the terms and conditions
of

the

Forbearance

Agreement”

and

that

Plaintiff

decided

to

“immediately institute an orderly termination of its wholesale
lending relationships with your Dealerships.”
at 1.)

(Feb. 18, 2014 Ltr.

The Letter further stated:

[E]ffective as of May 30, 2014, [Plaintiff] will
terminate its Wholesale Agreements with each of your
Dealerships, pursuant to their terms, at which date all
financing obligations under those Wholesale Agreements
and all other Loan Documents, including the Capital Loan
Agreement between [Plaintiff] and the Nissan Dealership
dated August 12, 2013, must be paid in full. . .
.
[E]ffective the date of this Notice, the Nissan
Neither party attached the Forbearance Agreement as an exhibit
nor did they explain its significance.
5

8

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Dealership’s
Used
Non-Nissan
Demo
and
Used-Demo
wholesale credit lines have been suspended, and the
outstanding balances on those lines, as stated in
Exhibit “A”, must be paid in full on or before March 14,
2014.
(Feb. 18, 2014 Ltr. at 1.)

Exhibit “A” to the letter indicated

that the balance on the Nissan Dealership’s Used Non-Nissan Demo
and

Used

Demo

was

$551,367.10

(Feb. 18, 2014 Ltr. at 3.)
Chrysler

Dealership

and

$207,208.04,

respectively.

Plaintiff also alleges that the

defaulted

on

its

obligations

under

the

Chrysler Agreement by, among other things, failing to timely pay
sums due and owing for wholesale interest obligations and failing
to maintain minimum capitalization amounts.

(Brooks. Aff. ¶ 35.)

By letter dated July 2, 2014, Plaintiff conditionally
agreed to extend the date of termination on condition that, among
other things, (1) on July 15, 2014 and July 31, 2014, the Nissan
Dealership make two separate payments of $125,000 towards the
Capital Loan and (2) the Chrysler Dealership provide a copy of a
written

lending

commitment

from

refinance the Chrysler Agreement.
Aff., Ex. E, D.E. 76-7, at 1.)

another

lender

agreeing

to

(July 2, 2014 Ltr., Brooks

The Dealerships did not sign or

agree to the conditional extension.

(Pl. 56.1 Stmt. ¶ 20.)

In July and August 2014, the Nissan Dealership breached
the Nissan Agreement because it defaulted on the Capital Loan
Agreement

by,

installments.

among

other

reasons,

failing

to

pay

monthly

(Pl. 56.1 Stmt. ¶ 8; Brooks Aff., D.E. 76-2, ¶¶ 269

Case 2:16-cv-07028-JS-ARL Document 83 Filed 05/29/20 Page 10 of 26 PageID #: 1577

27.)

By letter dated August 28, 2014, Plaintiff notified the

Nissan Dealership that it accelerated all indebtedness under the
Capital Loan Agreement and declared all principal and interest
immediately

due,

totaling

$883,495.25

as

of

July 31,

(Aug. 28, 2014 Ltr., Brooks Aff., Ex. H, D.E. 76-10.)
Dealership never paid the amount due.
As

a

result

of

the

2014.

The Nissan

(Pl. 56. Stmt. ¶ 11.)

Dealerships’

ongoing

defaults,

Plaintiff exercised its rights under Sections 5.2 of the Nissan
and Chrysler Agreements to accelerate the remainder of payments
due for financing the vehicle inventory and, with respect to the
Nissan

Agreement,

suspended

all

financing

effective

August 1, 2014. (Brooks Aff. ¶¶ 21, 40.) Plaintiff did not submit
a copy its notice of acceleration and suspension.
By

letter

dated

August 5, 2014,

Plaintiff

demanded

$60,809.70 from the Nissan Dealership, the amount owed for vehicles
it

sold.

(Brooks

August 5, 2014,

Aff.

Plaintiff

¶

20.)

also

By

demanded

another

letter

$168,932.72

dated

from

the

Chrysler Dealership, the amount owed for vehicles it sold. (Brooks
Aff. ¶ 39.)

According to Plaintiff, the Dealerships’ failure to

turn over those funds resulted in a “sales out of trust” (“SOT”)
and constituted a breach of the Nissan and Chrysler Agreements
because

Plaintiff

“lost

its

vehicle

collateral

and

the

[ ]

Dealership[s] received the proceeds for the sales and used the
money

for

other

purposes–-effectively
10

reducing

[Plaintiff’s

Case 2:16-cv-07028-JS-ARL Document 83 Filed 05/29/20 Page 11 of 26 PageID #: 1578

collateral that secures its loans of money to the [ ] Dealerships.”
(Brooks Aff. ¶¶ 20, 39.)

Plaintiff did not submit copies of the

August 5, 2014 letters.
VI.

The Replevin Action, the Promissory Note, and the Confession
of Judgment
On

action

August

against

29,

2014,

Defendant,

Plaintiff

the

initiated

Dealerships,

a

separate

Barbagallo,

and

Korchmar seeking, among other things, an order of seizure of
Plaintiff’s collateral (the “Replevin Action”) arising out of the
Dealerships’ refusal to pay the amounts owed to Plaintiff.

(Pl.

56. Stmt. ¶ 11; see Replevin Action, No. 14-CV-5144 (E.D.N.Y. 2014)
(Wexler, J.).)
On

September

29,

2014,

the

Court

so-ordered

a

Stipulation permitting the Replevin Action defendants “to arrange
for one or more executed asset purchase agreements involving the
sale of assets of [the Dealerships]” by the close of business on
October 3, 2014.6

(No. 14-CV-5144, D.E. 17.)

On January 5, 2015,

during the Replevin Action, Korchmar, in his individual capacity,
and the Dealerships, by Defendant, executed a Promissory Note

“Judicial notice of public records . . . is clearly
appropriate.” In re Enron Corp., 379 B.R. 425, 431 n.18
(S.D.N.Y. 2007) (citing Kramer v. Time Warner Inc., 937 F.2d
767, 774 (2d Cir. 1991)). However, a court may take judicial
notice of a public record “not for the truth of the matters
asserted” in the document “but rather to establish the fact”
that the document exists. Liberty Mut. Ins. Co. v. Rotches Pork
Packers, Inc., 969 F.2d 1384, 1388 (2d Cir. 1992) (internal
quotation marks and citation omitted).
6

11

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promising to pay Plaintiff $2,830,797.00 in monthly installments.
(Promissory Note, Brooks Aff., Ex. K, D.E. 76-13.)

The Promissory

Note was secured by an Affidavit of Confession of Judgment, signed
by Korchmar, in his individual capacity, and the Dealerships, by
Defendant.

(Aff. Confession of J., Brooks Aff., Ex. L, D.E. 76-

14, ¶ 5.)

The Affidavit of Confession of Judgment provided that

the Dealerships and Korchmar “jointly and severally confess[ed]
judgment

and

authoriz[ed]

the

entry

thereof

against

[the

Dealerships and Korchmar] in the same of $2,830,797.00 or for such
lesser amount as may be due pursuant to the terms of certain
Promissory Note they executed in favor of plaintiff in January
2015.”

(Aff. Confession of J. ¶ 5.)

The Affidavit of Confession

of Judgment recited that the debt arose from:
a. Beginning in or around May 19, 2011, plaintiff
entered into Automotive Wholesale Financing and
Security Agreements (the “WFA’s”) with [the
Dealerships] whereby plaintiff agreed to provide
secured wholesale inventory floor plan financing
to [the Dealerships] so that they could acquire
new and used motor vehicles for sale and lease
to consumers. At various times, and as required
by plaintiff, Alex Korchmar, Neil Barbagallo,
and Shmuel Wolf [Defendant] executed continuing
Guaranty Agreements whereby they each guaranteed
all
obligations
of
[the
Dealerships]
to
plaintiff.
Notwithstanding the foregoing,
Shmuel Wolf maintains that he only executed one
Continuing Guaranty Agreement with regard to
[the Nissan Dealership] on May 19, 2011.
b. [The Dealerships] thereafter defaulted in their
obligations under the [Nissan and Chrysler
Agreements] and ultimately sold substantially
all of their assets to a third party and applied
12

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a portion of the sale proceeds to debts owing to
plaintiff
arising
under
the
[Agreements].
Despite the payment of a portion of the asset
sale proceed to debts owing to plaintiff, there
was deficiency in the amount of $2,830,797.00.
c. Prior to the sale of substantially all of the
[Dealerships’] assets, plaintiff commenced [the
Replevin Action] . . . to recover judgment. . .
for damages well in excess of the deficiency
amount. In order to convince plaintiff to agree
to dismiss [the Replevin Action] as against [the
Dealerships and Korchmar], and to permit [the
Dealerships] to sell substantially all of their
assets to a third party despite the existence of
the deficiency amount, [the Dealerships and
Korchmar] executed the [Promissory] Note and
plaintiff is entitled to file this confession of
judgment against them for the amount due
thereunder in the event of a breach or default
under the terms of the note.
(Aff. Confession of J. ¶ 6.)
Korchmar
obligations

under

and
the

the

Dealerships

Promissory

Note

defaulted
and

on

on

their

July 21, 2015,

Plaintiff entered the Affidavit of Confession of Judgment to
recover $1,848,128.54 (the “Judgment”).
Brooks Aff., Ex. M, D.E. 76-15.)

(Pl. 56.1 Stmt. ¶ 27; J.,

The Judgment amount reflected a

$982,893.46 credit--consisting of $519,893.46, received from a NYS
Sales

Tax

Escrow

Account

payment,

$416,064.21

from

the

sale

proceeds of vehicles purchased by Rockaway Nissan (the buyer at
the December 2014 asset sale) and auction proceeds for vehicles
sold via public auctionand $225 in statutory costs.
¶ 46; J.)

(Brooks Aff.

Neither party submitted evidence surrounding the asset

sale or auction.

On September 2, 2015, the Court so-ordered a
13

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stipulation of dismissal dismissing claims against the Dealerships
and Korchmar, without prejudice.

(No. 14-CV-5144, D.E. 22.)

On

November 28, 2016, the court entered a so-ordered stipulation of
dismissal dismissing claims against Defendant and Barbagallo,
without prejudice, and closed the Replevin Action.

(No. 14-CV-

5144, D.E. 40.)
Defendant admits that he signed the Promissory Note and
the

Affidavit

of

Confession

of

Judgment

on

behalf

of

the

Dealerships as their “Operations Manager/Member,” but argues that
he did not “agree to confess to any judgment and/or Note or other
payment obligations to [Plaintiff], individually.”

(Def. 56.1

Stmt. ¶ 24; Def. 56.1 Counterstmt. ¶ 34; Wolf Decl. ¶ 39.)

Rather,

according to Defendant, the Promissory Note and the Confession of
Judgment were executed to settle the Replevin Action.

(Wolf Decl.

¶ 38.)
In a December 12, 2014 email chain outlining “Final [ ]
Conditions

for

Closing,”

Plaintiff

listed

certain

conditions

required “to release its security interest to the extent of any
collateral sold” by the Dealerships.
Aff. Ex. 9, D.E. 79-9, at 1.)

(Dec. 12, 2014 Email, Wolf

Plaintiff required, among other

things, the execution of the Promissory Note and Confession of
Judgment, with “all payments to be credited in the following order:
(1) first,

to

the

[Nissan

Dealership]

floor

plan

deficiency,

(2) second, to the Overpayment amount, (3) third, to the [Chrysler
14

Case 2:16-cv-07028-JS-ARL Document 83 Filed 05/29/20 Page 15 of 26 PageID #: 1582

Dealership] floor plan deficiency, and (4) finally, to the unpaid
Capital Loan (Loan # 3476-20001) amount as listed in [Plaintiff’s]
closing statement.”

(Dec. 12, 2014 Email at 1, ¶ 4.)

As expressed in that email, the parties agreed that the
Promissory Note and the Confession of Judgment would “not reference
[Defendant] in his individual capacity.”
¶ 4.)

(Dec. 12, 2014 at 1,

The email also states that Plaintiff required “written

acknowledgment

by

Guarantors

that,

by

releasing

its

security

interest, [Plaintiff] is not waiving or discharging any rights I
may have to enforce the Guaranty Agreements with respect to any
post-closing deficiencies or breaches.”
at 1,

¶ 5.)

Neither

party

submitted

(Dec. 12, 2014 Email
any

additional

details

surrounding the “Conditions for Closing” and whether the terms
were accepted, denied, or modified.
PROCEDURAL HISTORY
Plaintiff initiated this action on December 21, 2016.
(Compl.,

D.E.

1.)

On

February 14, 2018,

the

Court

adopted

Magistrate Judge Arlene R. Lindsay’s Report and Recommendation
(R&R, D.E. 28) and dismissed Plaintiff’s third cause of action for
money

had

Korchmar.
granted

and

received

against

Defendant,

Barbagallo,

(Feb. 14, 2018 Order, D.E. 31, at 5-6.)
Plaintiff

leave

(Feb. 14, 2018 Order at 6.)

to

file

an

and

The Court also

amended

complaint.

On April 16, 2018, Plaintiff filed an

15

Case 2:16-cv-07028-JS-ARL Document 83 Filed 05/29/20 Page 16 of 26 PageID #: 1583

Amended Complaint and on July 12, 2018, filed a Second Amended
Complaint.

(Am. Compl., D.E. 33; Second Am. Compl., D.E. 41.)
On

August 13, 2018,

Judge

Lindsay

issued

an

Order

dismissing claims against the Nissan Dealership and Korchmar and
deeming

the

First

Amended

Complaint

(Aug. 13, 2018 Order, D.E. 48.)

the

operative

complaint.

On April 17, 2019, the Court

entered a So-Ordered stipulation dismissing claims by and against
Neil Barbagallo with prejudice.
On
asserted

August

30,

(Apr. 17, 2019 Order, D.E. 67.)

2019,

(1) cross-claims

Defendant

against

filed

Korchmar

and

an

answer

and

Plaintiff

for

contribution and indemnification, against Korchmar for fraud and
breach of fiduciary duty and (2) counterclaims against Plaintiff
for declaratory and injunctive relief.

(Answer, D.E. 74.)

Plaintiff now seeks summary judgment on its remaining
claims against Defendant for (1) breach of continuing guaranties
(Count I) and (2) attorneys’ fees, costs, and expenses (Count II).
ANALYSIS
I.

Legal Standards
Summary

judgment

will

be

granted

where

the

movant

demonstrates 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 genuine factual issue exists where “the

evidence is such that a reasonable jury could return a verdict for
the nonmoving party.”

Anderson v. Liberty Lobby, Inc., 477 U.S.

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242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed 2d 202 (1986).

In

determining whether summary judgment is appropriate, the Court
considers

the

“pleadings,

deposition

testimony,

answers

to

interrogatories and admissions on file, together with any other
firsthand information including but not limited to affidavits.”
Nnebe v. Daus, 644 F.3d 147, 156 (2d Cir. 2011).
The movant bears the burden of establishing that there
are no genuine issues of material fact.

Gallo v. Prudential

Residential Servs., L.P., 22 F.3d 1219, 1223 (2d Cir. 1994).

Once

the movant makes such a showing, the non-movant must proffer
specific facts demonstrating “a genuine issue for trial.”

Giglio

v. Buonnadonna Shoprite LLC, No. 06-CV-5191, 2009 WL 3150431, at
*4 (E.D.N.Y. Sept. 25, 2009) (internal quotation marks and citation
omitted).

Conclusory allegations or denials will not defeat

summary judgment.

Id.

However, in reviewing the summary judgment

record, “‘the court is required to resolve all ambiguities and
draw all permissible factual inferences in favor of the party
against whom summary judgment is sought.’”

Sheet Metal Workers’

Nat’l Pension Fund v. Vadaris Tech. Inc., No. 13-CV-5286, 2015 WL
6449420, at *2 (E.D.N.Y. Oct. 23, 2015) (quoting McLee v. Chrysler
Corp., 109 F.3d 130, 134 (2d Cir. 1997)).
II.

7

Discussion7

The parties do not dispute the application of New York law.
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Put simply, Plaintiff seeks to hold Defendant personally
liable for the Judgment by virtue of Defendant’s obligations under
the Nissan Guaranty, the Chrysler Guaranties, and the CrossCollateral Agreement.

(Pl. Br. at 8.)

Plaintiff further argues

that Defendant is liable regardless of whether his signatures on
the various agreements were forged because Defendant admits to
signing the Nissan Guaranty that “absolutely and unconditionally
guaranteed payment of all amounts due under [the] Promissory Note
that the Nissan Dealership executed in [Plaintiff’s] favor”
Br. at 13.)

(Pl.

Defendant responds that the Nissan Guaranty “relates

only to the Nissan Dealership’s debts” and he is therefore not
liable

for

“any

and

all

debt

ever

incurred

by

the

Nissan

Dealership,” such as the Confession of Judgment, and for the
Chrysler Dealership’s debts.
“To

obtain

(Def. Opp. at 6 (emphasis omitted).)

summary

judgment

to

enforce

a

written

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.’”

136 Field Point Circle

Holding Co., LLC v. Invar Int’l Holding, Inc., 644 F. App’x 10,
11–12 (2d Cir. 2016) (quoting City of N.Y. v. Clarose Cinema Corp.,
256 A.D.2d 69, 71 (N.Y. App. Div. 1998)).
A.

The Nissan Guaranty
Plaintiff

argues

that

at

least

the

Nissan

Guaranty

obligates Defendant to personally satisfy the Nissan Dealership’s
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debts under the Promissory Note and Judgment.

As to the Nissan

Guaranty’s enforceability, the Court has little doubt that its
unambiguous terms reflect that it is continuing in that it applies
to “all obligations and liabilities of [the Nissan Dealership]
(whether individually or jointly with others, and whether direct,
indirect, absolute or contingent as maker, endorser, guarantor,
surety or otherwise) to [Plaintiff], now existing or hereafter
coming into existence and renewals or extensions in whole or in
part of any of said liabilities.”

(Nissan Guaranty at 1.)

However, the Court finds that an issue of material fact
exists as to whether the parties intended for Defendant to maintain
responsibility for the Nissan Dealership’s obligations through the
negotiation of the Promissory Note secured by the Affidavit and
Confession of Judgment.8

See, e.g., Vinmar, Inc. v. Vaswani, No.

94-CV-2841, 1997 WL 1068668, at *2 (E.D.N.Y. May 30, 1997).
“As a general principal of New York law, any alteration
of the terms of an underlying contract, for whose performance a
guarantor is bound, and without the guarantor’s consent, will
release the guarantor from his or her obligations.” United Natural
Foods, Inc. v. Burgess, 488 F. Supp. 2d 384, 390–91 (S.D.N.Y. 2007)

Indeed, if the Promissory Note discharged Defendant’s
obligations under the other agreements and guaranties, there is
no need to determine their authenticity. Thus, the Court’s
analysis is limited to the Nissan Guaranty because there is no
dispute as to its authenticity.
8

19

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(citations omitted).

“‘An obligation is altered when the debtor

is discharged from the original contract and a new contract is
substituted in its place.

The test is whether there is a new

contract which will be enforced by the courts.’”

Id. at 391

(quoting Bier Pension Plan Tr. v. Estate of Schneierson, 74 N.Y.2d
312, 315, 545 N.E.2d 1212, 1214, 546 N.Y.S.2d 824 (1989)).

In

those circumstances, “‘the principal is no longer bound to perform
the obligation guaranteed,’ so the guarantor likewise cannot be
‘held responsible for the failure of the principal to perform.’”
Id. (quoting Becker v. Faber, 280 N.Y. 146, 148-49, 19 N.E.2d 997,
998 (1939)).
pay

a

debt,

Courts consider: “the extension of time in which to
if

the

extension

is

an

enforceable

agreement

superseding the original debt and not merely leniency by the
creditor; a change in the contract price; modification of the loan
terms, such as reducing loan collateral; or a change in the parties
to the principal contract.”

Id. (internal quotation marks and

citations omitted).
For the following reasons, the Court cannot as a matter
of law determine whether the Promissory Note and accompanying
Affidavit

of

Confession

of

Judgment

altered

the

Dealerships’

obligations under its prior agreements with Plaintiff.
488 F. Supp. 2d at 393-94.

See Id.,

Important in this analysis is the

December 14, 2014 email that details Plaintiff’s “Conditions for

20

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Closing,”9 wherein Plaintiff required that the Dealerships and
Korchmar execute the Promissory Note and Affidavit of Confession
of Judgment, among other conditions, to “release its security
interest to the extent of any collateral sold to buyer” by the
Dealership.

(Dec. 12, 2014 Email at 1.)

First,

the

Promissory

Note

and

the

Affidavit

of

Confession of Judgment state that the Dealerships and Korchmar,
jointly and severally, owe Plaintiff a “deficiency amount” of
$2,830.797.00 ($1,848,128.54 after credits).
to

follow

how

Plaintiff

“deficiency amount.”

calculated

The Court struggles

$2,830.797.00

as

the

The Court is left to query whether this is

a negotiated sum that, if paid, would satisfy both Dealerships’
prior

debts

or

whether

it

is

a

calculation

based

on

the

To the Court’s surprise, there are little facts surrounding the
negotiation and execution of the “Conditions for Closing” email,
the Promissory Note, and the Affidavit of Confession of
Judgment. Plaintiff dismisses the email as “unauthenticated.”
(Pl. Reply at 2.) The Court retains discretion to consider the
email because Defendant may be able to authenticate it at trial
and because Defendant disclosed it on February 28, 2019 as an
exhibit in its Rule 56.1 Statement. (Dec. 12, 2014 Emails, Def.
Feb. 28, 2019 56.1 Stmt., Ex. 9, D.E. 62-9); Purcell v. Navient
Sols., LLC, No. 18-CV-6045, 2019 WL 188693, at *6 n.11 (S.D.N.Y.
Jan. 14, 2019). Based on the record, the Court cannot determine
whether the “Conditions for Closing,” as reflected in the email,
were accepted, modified, or rejected, the parties should also
endeavor to discover additional information regarding the
“Conditions for Closing.”
9

21

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Dealerships’

individual

defaults

under

certain,

unspecified

agreements.10
Second,

there

is

evidence

that

payments

Plaintiff

received under the Promissory Note were to be first applied to the
Nissan Dealership’s floor plan deficiency.
at 1 ¶ 4; Brooks Dep., 60:7-20.)
for

Closing,”

Plaintiff

(Dec. 14, 2014 Email

Third, as part of the “Conditions

required

“written

acknowledgment

by

Guarantors that, by releasing its security interest, [Plaintiff]
is not waiving or discharging any rights that it may have to
enforce the Guaranty Agreements with respect to any post-closing
deficiencies or breaches.”

(Dec. 12, 2014 Email at 1 ¶ 5.)

Neither party points to evidence regarding the identity of the
referenced guarantors, whether those guaranty agreements included

Randal G. (Randy) Brooks, Plaintiff’s Inventory Control
Manager (see Brooks Aff. ¶ 1), testified that the $2.8 million
“was determined by the balances that were due based on inventory
and the cap[ital] loan and additional charges that were due” and
that Plaintiff would have “a breakdown of exactly what those
charges were.” (Brooks Dep., Wolf Aff., D.E. 79-4, 53:12-14,
55:15-16.) Without that information, however, in the former
scenario, if Defendant “continued to be liable on the original
obligation, [P]laintiff could in theory proceed against both
[Defendant] on the original obligation and the [Dealerships and
Korchmar] on the new obligation, potentially collecting twice.”
Burgess, 488 F. Supp. 2d at 394. While the Court is aware that
the Nissan Dealership is alone liable for the Judgment, in the
latter scenario, the Nissan Guaranty guaranteed only the Nissan
Dealership’s performance and payment so if the “deficiency
amount” includes debts owed by the Chrysler Dealership, it
arguably falls outside the scope of the Nissan Guaranty.
However, here, the Court cannot ascertain the source and amount
of the original debts that became the “deficiency amount”
reflected in the Promissory Note.
10

22

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the Nissan Guaranty, or whether those guarantors agreed to be bound
by the terms of the “Conditions for Closing.”

Fourth, the parties

do not dispute that the Promissory Note and the Affidavit of
Confession

of

Judgment

individual capacity.
unconditional

explicitly

excluded

Defendant

in

his

Fifth, the Promissory Note contains an

guaranty:

the

Dealerships

and

Korchmar

“acknlowedge[d] that the obligations hereunder are unconditional
and cannot be setoff, reduced or suspended as a result of any
obligations . . . under any circumstance.”
1.)

(Promissory Note at

Sixth, Korchmar testified to his understanding that the

Promissory Note and Confession of Judgment “extinguished the old
debt,” that he negotiated a resolution to take on the Promissory
Note “instead of [Defendant] and Mr. Barbagallo,” and that “there
would

be

no

more

claims

against

[Defendant]

or

Barbagallo.”

(Korchmar Dep., Wolf Decl., Ex. 13, D.E. 79-13, 18:6-10, 58:1159:6, 60:3-6.)

Finally, the Promissory Note extended the time for

the Dealerships and Korchmar to pay off the Dealerships’ individual
debts.
Thus, while the Nissan Guaranty contains an “advance
consent to modifications” clause, which is valid and enforceable
under New York Law (see CrossLand Fed. Sav. Bank by F.D.I.C. v. A.
Suna & Co., 935 F. Supp. 184, 200 (E.D.N.Y. 1996), the abovelisted

considerations

raise

questions

regarding

the

parties’

intentions in executing the Promissory Note and Affidavit of
23

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Confession of Judgment.

(Nissan Guaranty at 3.)

Consequently,

the Court cannot determine whether the Nissan Dealership’s debts
arising out of the Judgment fall within the scope of the Nissan
Guaranty because an issue exists as to whether the parties entered
into “a new enforceable obligation that superseded the Plaintiff’s
rights

under

the

past”

agreements

obligations under any guaranty.

and

discharged

Defendant’s

Burgess, 488 F. Supp. 2d at 392;

cf. HSH Nordbank AG N.Y. Branch v. St., 421 F. App’x 70, 75 (2d
Cir.

2011)

(finding

that

later

agreement

did

not

obviate

guarantor’s obligations under the “broad waiver provisions” of
guaranties where the later agreement included language that it was
not “intended (and shall not be deemed or construed) to effect an
amendment, modification, restructuring or reinstatement of the
[original agreement], which remains in default and accelerated.”)
(internal quotation marks omitted).

Accordingly, there are issues

of material fact and Plaintiff’s motion for summary judgment is
DENIED.11
B.

The Chrysler-Related Agreements, the Cross-Collateral
Agreement, the Capital Loan Agreement, and the
Reaffirmation of Guarantors
Defendant also argues that the Chrysler Agreement, the

Chrysler Guaranties, the Cross-Collateral Guaranty, the Capital

Accordingly, because the Court cannot determine whether the
Nissan Guaranty encompasses the Nissan Dealership’s debts under
the Promissory Note and Judgment, the Court does not analyze
damages.
11

24

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Loan Agreement, and the Reaffirmation of Guarantors were forged
and therefore are not enforceable as against him.
4-6.)

(Def. Opp. at

In response, Plaintiff faults Defendant for failing to

timely disclose all documents and witnesses and for failing to
respond to discovery requests.

(Pl. Reply at 4.)

Plaintiff asks

the Court to exclude all evidence Defendant submitted in opposition
because “such failures are not harmless.”

(Pl. Reply at 4; Braden

Aff., D.e. 82-1, ¶ 19.)
“Rule 37(c)(1) provides a basis for refusing to admit
evidence if it has not previously been submitted in compliance
with Rule 26(a).”

Orix Fin. Servs., Inc. v. Thunder Ridge Energy,

Inc., No. 01-CV-4788, 2006 WL 587483, at *4 (S.D.N.Y. Mar. 8,
2006).

“In considering whether to exclude evidence under this

standard, courts refer to a nonexclusive list of four factors:
(1) the party’s explanation for its failure to disclose, (2) the
importance of the evidence, (3) the prejudice suffered by the
opposing party, and (4) the possibility of a continuance.”

Agence

France Presse v. Morel, 293 F.R.D. 682, 685 (S.D.N.Y. 2013).
Here, there is no doubt that Plaintiff has been on notice
that Defendant denied signing the Chrysler Agreement, the Chrysler
Guaranties,

the

Cross-Collateral

Guaranty,

the

Capital

Loan

Agreement, and the Reaffirmation of Guarantors, as reflected in
the facts giving rise to the Affidavit of Confession of Judgment.
(See Aff. Confession of J. at ¶ 6.)
25

However, given that there is

Case 2:16-cv-07028-JS-ARL Document 83 Filed 05/29/20 Page 26 of 26 PageID #: 1593

a question as to whether the Promissory Note released Defendant
from the Nissan Guaranty, and any other guaranty, the Court cannot
now

determine

whether

the

Chrysler-related

guaranties

are

enforceable against Defendant and if so, whether they encompass
the Dealerships’ debts under the Judgement.
CONCLUSION
For the stated reasons, Plaintiff’s motion for summary
judgment (D.E. 76) is DENIED.

To the extent needed, the Court

refers the parties to Judge Lindsay to set a schedule for Plaintiff
to discover any additional information from Defendant regarding
its claims of forgery and the execution of the Promissory Note
(see supra, Note 9).

Within thirty (30) days of the date of this

Order, the parties are to submit a joint letter (1) clarifying all
remaining

claims,

crossclaims,

and

counterclaims,

(2) whether

there are any outstanding substantive or scheduling issues to
address, and (3) whether they wish to schedule a settlement and/or
discovery conference with Judge Lindsay.
SO ORDERED.

/s/_JOANNA SEYBERT
___
Joanna Seybert, U.S.D.J.
Dated: May
29 , 2020
Central Islip, New York

26