Lau v. Mezei et al
Filing
57
OPINION AND ORDER: Laus motion for partial summary judgment is GRANTED inpart and DENIED in part. Laus motion for partial summary judgment against Defendant NF as to the breach of contract claim is granted. Laus motion for partial summary judgment ag ainst Defendant NHF as to the breach of contract claim is denied. Lau should submit a proposed order specifying the total amount due under the NF Note, statutory interest, and costs. If summary judgment is appropriate, the parties shall so notify the Court by October 5, 2011, andfile their 56.1 statements by October 10, 2011. If one party seeks summary judgment and the other believes it inappropriate, the proponent of summary judgment shall file its 56.1 statement on October 10, 2011; the 56.1 Counterstatement would due October 12, 2011. (Signed by Judge Kimba M. Wood on 9/29/2011) (rdz)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------------------------------x
STEVE LAU,
Plaintiff,
10 CV 4838
OPINION AND ORDER
-vsLEONARD MEZEI, HAROLD ZOREF,
NORTHERN FUNDING, LLC, and
NORTHERN HEALTHCARE
FUNDING, LLC,
Defendants,
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KIMBA M. WOOD, U.S.D.J.:
I. INTRODUCTION
On June 22, 2010, Steve Lau commenced an action against Harold Zoref, Leonard Mezei,
and Mezei’s companies, Northern Funding (“NF”) and Northern Healthcare Funding (“NHF”).
(Dkt. No. 1.) The Complaint alleges violations of federal securities laws, fraud, fraudulent
inducement, negligent misrepresentation, conversion, and breach of contract. On February 7,
2011, Lau moved for partial summary judgment on his breach of contract claim against
Defendants NF and NHF. (Dkt. No. 22.)
II. FACTS1
Zoref has worked as Lau’s accountant since 2006. (Compl. ¶¶ 6.) In 2008, Zoref
referred Lau to Mezei, who was seeking investors to provide financing for his companies,
including NF and NHF. (Id. ¶¶ 13-14.) Lau invested his retirement funds with NF and NHF.
(Id. ¶ 23.)
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Unless otherwise noted, the following facts are undisputed and are taken from the parties’ Local Rule 56.1
statements.
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On April 7, 2008, Lau loaned NF $150,000 in exchange for a promissory note (the “NF
Note”). (Pl.’s Rule 56.1 Statement (“Pl.’s 56.1”) ¶ 6; Defs.’ Rule 56.1 Statement (“Defs.’ 56.1”)
¶ 6.) Pursuant to the NF Note, NF agreed to pay Lau the $150,000 principal plus an annual
interest rate of 8.5 percent. (Pl.’s 56.1 ¶ 6; Defs.’ 56.1 ¶ 6.) Interest payments were to be paid
monthly from May 1, 2008 through April 1, 2009. (Pl.’s 56.1 ¶ 9; Defs.’ 56.1 ¶ 9.) Any unpaid
principal and accrued interest would be payable by NF to Lau on April 7, 2009. (Pl.’s 56.1 ¶ 10;
Defs.’ 56.1 ¶ 10.) NF did not pay Lau any of the principal or accrued interest due under the Note
on April 7, 2009. (Pl.’s 56.1 ¶ 14; Defs.’ 56.1 ¶ 14.)
From April through July of 2008, Lau loaned NHF a total of $330,000. (Pl.’s 56.1 ¶¶ 1618; Defs.’ 56.1 ¶¶ 16-18.) On September 1, 2008, NHF issued a term promissory note (the
“NHF Note”) to Lau in the amount of $336, 973.74 (the amount of Lau’s loans to NHF plus
accrued interest). (Pl.’s 56.1 ¶¶ 19-20; Defs.’ 56.1 ¶¶ 19-20.) Under the terms of the NHF Note,
NHF would pay Lau the principal amount of $336,973.74 plus an annual interest rate of 13
percent; pay interest to Lau on the first of every month from September 1, 2008 until the Note
expired on September 1, 2011; and pay Lau any unpaid principal on the expiration date. (Pl.’s
56.1 ¶¶ 22-24; Defs.’ 56.1 ¶¶ 22-24.) The NHF Note provides that its terms may not be modified
or discharged orally. (Pl.’s 56.1 ¶ 25; Defs.’ 56.1 ¶ 25.) NHF has not made any interest
payments to Lau since June 4, 2010, despite Lau’s demands for the amounts due. (Pl.’s 56.1 ¶¶
28, 32; Defs.’ 56.1 ¶¶ 28, 32.)
III. STANDARD OF REVIEW
Summary judgment is appropriate when “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). “An issue of fact is genuine if the evidence is such that a reasonable jury could
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return a verdict for the nonmoving party. A fact is material if it might affect the outcome of the
suit under the governing law.” Fincher v. Depository Trust & Clearing Corp., 604 F.3d 712, 720
(2d Cir. 2010). The moving party must show the absence of a genuine issue of material fact.
Zalaski v. City of Bridgeport Police Dep’t, 613 F.3d 336, 340 (2d Cir. 2010). To defeat a motion
for summary judgment, the non-moving party must raise a genuine issue of material fact by
showing more than “some metaphysical doubt as to the material facts,” and by presenting more
than mere “conclusory allegations or unsubstantiated speculation.” Brown v. Eli Lilly & Co., –
F.3d – , 10 Civ. 512, 2011 WL 3625105, at *10 (2d Cir. Aug. 18, 2011) (internal citations
omitted).
In deciding a motion for summary judgment, a court must “construe the facts in the light
most favorable to the non-moving party and must resolve all ambiguities and draw all reasonable
inferences against the movant.” Brod v. Omya, Inc., – F.3d –, No. 09 Civ. 4551, 2011 WL
2750916, at *7 (2d Cir. July 18, 2011). However, “[c]redibility determinations, the weighing of
the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those
of a judge.” Kaytor v. Elec. Boat Corp., 609 F.3d 537, 545 (2d Cir. 2010) (quoting Reeves v.
Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000)) (emphasis omitted). “The role of
the court is not to resolve disputed issues of fact but to assess whether there are any factual issues
to be tried.” Brod, 2011 WL 2750916, at *7.
IV. DISCUSSION
A. Applicable Law
Defendants NF and NHF each issued Lau one promissory note. Both notes explicitly
state that they will be governed by and interpreted in accordance with New York law. (Pl.’s 56.1
¶¶ 11, 26; Defs.’ 56.1 ¶¶ 11, 26.) A promissory note is “an unconditional written promise,
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signed by the maker, to pay absolutely and in any event a certain sum of money either to, or to
the order of, the bearer or a designated person.” Black’s Law Dictionary (9th ed. 2009). As a
written contract for the payment of money, promissory notes are governed by the common law of
contracts. Imaginative Research Associates, Inc. v. Ramirez, 718 F. Supp. 2d 236, 257 (D. Conn.
2010).
Summary judgment is appropriate in an action on a promissory note “if there is no
material question concerning execution and default of the note.” United States v. Galarza, 2011
WL 256536, at *1 (E.D.N.Y. Jan. 26, 2011). “To establish a prima facie case of default on a
promissory note under New York law, [a plaintiff] must provide proof of the valid note and of
defendant’s failure, despite proper demand, to make payment.” Lehman Bros. Holdings Inc. v.
Walji, 2011 WL 1842838, at *3 (S.D.N.Y. May 11, 2011). See also Arrowood Indem. Co. v.
Gibson & Behman, P.C., 2011 WL 1796045, at *2 (S.D.N.Y. April 29, 2011); Novick v. AXA
Network, LLC, 2009 WL 2753201, at *1 (S.D.N.Y. Aug. 27, 2009).
B. Analysis
1. The NF Note
On April 7, 2008, NF issued a promissory note to Lau with a maturity date of April 7,
2009. (Pl.’s 56.1 ¶ 7; Defs.’ 56.1 ¶ 7.) Under the Note, NF promised to pay Lau the $150,000
principal plus interest at an annual rate of 8.5 percent. (Pl.’s 56.1 ¶ 8; Defs.’ 56.1 ¶ 8.) On April
7, 2009, the Note was due and payable; NF did not pay any of the principal or accrued interest.
(Pl.’s 56.1 ¶¶ 14, 15; Defs.’ 56.1 ¶¶ 14, 15.)
In Valley Nat’l Bank v. Oxygen Unlimited, LLC, 2010 WL 5422508 (S.D.N.Y. Dec. 23,
2010), the court found that a plaintiff could meet its prima facie burden by presenting evidence
of execution of the note, and asserting, without dispute from the defendant, that the defendant
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failed to pay. Valley Nat’l, 2010 WL 5422508 at *3. Likewise, in Lehman, the court granted
the plaintiff’s motion for summary judgment on its breach of contract claim against the
defendant for defaulting on a promissory note when it was “undisputed that the Note is valid and
that [the defendant] has failed to make payment.” Lehman, 2011 WL 1842838 at *3. The court
held that, because the defendant did not pay the loan back in full on its expiration date, the
plaintiff was entitled to summary judgment as a matter of law on its breach of contract claim.
Id. at *4.
The Court finds that Lau has met his prima facie burden. Lau presented evidence of
execution of the Note by submitting a copy of it and an affidavit stating that NF has failed to pay
it. (Affidavit of Steve Lau dated Nov. 29, 2010 (“Lau Aff.”) ¶ 5.) Furthermore, NF, in its Rule
56.1 statement, does not dispute the valid execution of the Note and admits to default. (Defs.’
56.1 ¶¶ 6, 7, 14, 15.) Given this undisputed evidence of execution of and default on the Note,
the Court grants Lau summary judgment against NF for his breach of contract claim.
2. The NHF Note
In April 2008, Lau loaned NHF $150,000 in exchange for a promissory note with an
annual rate of return of 9.5 percent. (Pl.’s 56.1 ¶ 16; Defs.’ 56.1 ¶ 16.) The Note’s maturity date
was April 11, 2010. (Pl.’s 56.1 ¶ 17; Defs.’ 56.1 ¶ 17.) In August 2008, Lau loaned NHF an
additional $180,000. (Pl.’s 56.1 ¶ 18; Defs.’ 56.1 ¶ 18.) NHF issued a promissory Note to Lau
dated September 1, 2008, totaling $336,972.74 (the sum of Lau’s original investment of
$150,000, second investment of $180,000 and accrued interest of $6,972.72). (Pl.’s 56.1 ¶ 19;
Defs.’ 56.1 ¶ 19.) The September 1 Note (hereinafter “NHF Note”) provides that (1) September
1, 2011 is defined as the “Expiration Date,” (2) interest at a rate of 13 percent will be paid on the
first day of each month up to the Expiration Date, (3) the unpaid principal is due and payable on
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the Expiration Date, and (4) the Note cannot be modified or discharged orally. (Pl.’s 56.1 ¶¶ 2125; Defs.’ 56.1 ¶¶ 21-25.) NHF has not made any interest payments to Lau since June 4, 2010.
(Pl.’s 56.1 ¶ 28; Defs.’ 56.1 ¶ 28.) At the time this motion was submitted, however, the
expiration date on which the unpaid principal is due had not yet occurred. The NHF Note does
not provide for acceleration of payment of the principal in the event that interest payments are
not paid on time.
Lau argues that he is entitled to summary judgment against NHF on an anticipatory
repudiation theory. “Anticipatory repudiation occurs when a party, before the time for
performance under a contract, clearly and unequivocally manifests an intention not to fulfill a
contractual duty.” Wecare Holdings, LLC v. Bedminster Int’l Ltd., 2009 WL 604877, at *6
(W.D.N.Y. March 9, 2009). “To establish anticipatory repudiation under New York law, a
plaintiff must identify an ‘overt communication of intention not to perform.’” Stanford Square,
L.L.C. v. Nomura Asset Capital Corp., 228 F. Supp. 2d 293, 299 (S.D.N.Y. 2002) (citing
O'Shanter Res., Inc. v. Niagara Mohawk Power Corp., 915 F. Supp. 560, 567 (W.D.N.Y. 1996).
A clear manifestation of an intention not to perform, communicated in advance of the time for
performance, is critical to establishing that a party has anticipatorily repudiated its performance.
O'Shanter, 915 F. Supp. at 567 (emphasis added).
Lau states that, on or about January 28, 2010, Zoref told Lau that NHF would not pay the
principal due on the NHF Note on September 1, 2011. (Pl.’s 56.1 ¶ 30; Lau Aff. ¶ 15.) Lau also
states that on or about February 11, 2010, Mezei and Zoref, during a telephone conference call,
told Lau that NHF would not be able to pay the principal due under the NHF Note on September
1, 2011. (Pl.’s 56.1 ¶ 31; Lau Aff. ¶ 16; Compl. ¶ 59.) In their 56.1 response, the Defendants
state they do not have any direct knowledge of a conversation between Lau and Zoref. (Defs.’
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56.1 ¶¶ 30, 31; Declaration of Leonard Mezei dated Jan. 3, 2011 (“Mezei Decl.”) ¶ 2.) The
Defendants dispute what Mezei told Lau, but they acknowledge the existence of a conversation
about the NHF Note, wherein Mezei told Lau that the company was “having financial
difficulties” and was “hoping to restructure its debt.” (Mezei Decl. ¶ 2.)
The critical issue here is whether NHF, through Mezei and Zoref, made a clear,
unequivocal statement of an intent not to pay the NHF Note on its expiration date. Lau states
that over the course of two conversations, Mezei and Zoref told him that NHF would not pay the
Note on the due date; Mezei, in his declaration, says that he does not recall “specifics of the
conversation” he had with Lau, and he “do[es] not believe [he] told him the note would not be
paid.” (Mezei Decl. ¶ 2.)
When determining whether a genuine issue has been raised, “a court must resolve all
ambiguities and draw all reasonable inferences against the moving party. Therefore, not only
must there be no genuine issue as to the evidentiary facts, but there must also be no controversy
regarding the inferences to be drawn from them.” Donahue v. Windsor Locks Bd. of Fire
Comm’rs, 834 F.2d 54, 57 (2d Cir. 1987) (internal citations omitted). Here, the parties give
different accounts of what was said during the conversations among Mezei, Zoref, and Lau.
Lau’s anticipatory repudiation claim rests on NHF unequivocally stating that it will not perform.
Here, although NHF’s acknowledged statements that it is “having financial difficulties” and
“hoping to restructure its debt” may have implied it would not pay the Note when it became due,
these statements are not clear, unqualified proclamations of an intent not to pay the Note. See
SMF Realty Co. v. Consolini, 903 F.Supp. 656, 662 (S.D.N.Y. 1995) (denying plaintiff’s motion
for summary judgment because there were facts and circumstances that “leave doubt as to
whether [the defendant made] an unequivocal refusal.”).
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For the Court to decide that Lau’s characterization of the conversation is the more
believable one, it would have to engage in a credibility determination. Such “[c]redibility
determinations, the weighing of the evidence, and the drawing of legitimate inferences from the
facts are jury functions, not those of a judge.” Kaytor at 545. See also Floyd v. City of New
York, 2011 WL 3856515, at *18 (S.D.N.Y. Aug. 31, 2011) (“Ultimately, resolution of this issue
will turn on a credibility determination, which is beyond the purview of a court deciding a
summary judgment motion.”).
When there are conflicting versions of events, summary judgment is improper. See
Fischl v. Armitage, 128 F.3d 50, 55 (2d Cir. 1997) (articulating that “credibility assessments,
choices between conflicting versions of the events, and the weighing of evidence are matters for
the jury, not for the court on a motion for summary judgment.”). Because there are conflicting
accounts as to whether NHF clearly and unequivocally stated an intent not to pay the Note on its
expiration date, summary judgment against NHF on the breach of contract claim is denied.
3. Subordinated Rights of Lau
The Defendants argue that because the NHF Note is expressly subject to a subordination
agreement, this subordination creates an inherent factual issue as to whether Lau would ever be
paid under the Note. (Defs.’ Mem. In Opp’n to Partial Summ. J. at 3-4.) Because there are
contested issues of material fact that impact whether NHF did repudiate the NHF Note, the Court
need not address Defendants’ subordination arguments.
V. CONCLUSION
For the foregoing reasons, Lau’s motion for partial summary judgment is GRANTED in
part and DENIED in part. Lau’s motion for partial summary judgment against Defendant NF as
to the breach of contract claim is granted. Lau’s motion for partial summary judgment against
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Defendant NHF as to the breach of contract claim is denied. Lau should submit a proposed order
specifying the total amount due under the NF Note, statutory interest, and costs.
Now that the September 1,2011 maturity date for the NHF Note has passed, the parties
should meet and confer regarding whether summary judgment is appropriate or a trial is needed.
If summary judgment is appropriate, the parties shall so notify the Court by October 5, 2011, and
file their 56.1 statements by October 10, 2011. If one party seeks summary judgment and the
other believes it inappropriate, the proponent of summary judgment shall file its 56.1 statement
on October 10, 2011; the 56.1 Counterstatement would due October 12, 201 L
SO ORDERED.
DATED:
New York, New York
September 2-'( , 2011
~Yh~~
KIMBA M. WOOD
United States District Judge
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