ACIM NY, L.L.C. et al v. Nissan North America, Inc. et al
Filing
462
MEMORANDUM AND OPINION re: 392 MOTION for Summary Judgment . filed by Nissan Motor Acceptance Corp. For the reasons set forth above, the Court GRANTS summary judgment to NMAC on Counts Four and Seven. The Court further ORDERS supplemental briefing on damages. The Clerk of Court shall terminate the motion at ECF No. 392. So Ordered. (Signed by Judge Katherine B. Forrest on 5/8/2018) (js)
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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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IN RE NISSAN LITIGATION
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USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: May 8, 2018
17-cv-729 (KBF)
OPINION & ORDER
KATHERINE B. FORREST, District Judge:
Since this case was removed from state court in January 2017, it has
generated countless motions, a mountain of briefing, protective orders, and 454
entries on the docket. At the end of the day, however, this case is a straightforward breach of contract claim.
The original complaint in this action was filed by Acim NY, LLC d/b/a Nissan
of Manhattan (“Acim”), Alim NY, LLC d/b/a Infiniti of Manhattan (“Alim”), and
Bicom NY, LLC, d/b/a Jaguar Land Rover Manhattan (“Bicom”), who brought suit
against Nissan North America, Inc. (“NNA”) and Nissan Motor Acceptance Corp.
(“NMAC”) (collectively, “Nissan”) for breach of contract in state court. The
dealerships claimed that Nissan had embarked on a pattern of bad faith, whereby
the dealerships were set up from the beginning to fail.
Nissan in turn filed counterclaims against Acim, Alim, and several thirdparty defendant dealerships and owners, claiming that the dealerships and their
guarantors were in default on certain loan obligations to Nissan—and due to a
Case 1:17-cv-00729-KBF Document 462 Filed 05/08/18 Page 2 of 21
series of cross-guaranties that the Dealerships and their owners had signed, in
default on all of their obligations.
NMAC has now moved for summary judgment on Counts Four, Six, and
Seven of its Amended Counterclaim—Breach of Guaranty, Damages, and
Foreclosure. 1
For the reasons set forth below, the Court GRANTS the motion.
I.
FACTUAL BACKGROUND
A. Factual Background
The following facts are materially undisputed and all inferences are drawn in
favor of the plaintiff. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
Helpful to the analysis that will follow is a brief introduction of the relevant
players and certain concepts specific to car dealerships and their financing methods.
1. Plaintiffs and Third-Party Defendants
Plaintiffs and third-party defendants are car dealerships and their owners,
managers, and guarantors. The dealerships are: Alim, Acim, White Plains Auto
Company, LLC, d/b/a White Plains Nissan (“WP”), and MTKN, LLC, d/b/a Nissan of
Mt. Kisco (“MTKN”) (collectively, “the Dealerships”). BNF Partners NY, LLC
(“BNF”) and BNF NY Realty, LLC (“BNF Realty”) are the umbrella partnerships
affiliated with all four dealerships. Bicom is another affiliated dealership, and was
also a Guarantor.
NMAC has also withdrawn as moot all other counts of the Amended Counterclaim; therefore, this
motion seeks to resolve all remaining claims.
1
2
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BNF is comprised of three partners: third-party defendants Gary Flom (the
principal owner), Veniamin Nilva, and Alexander Boyko (who hold minority
ownership interests).
2. Defendants
NNA sells both Nissan and Infiniti vehicles to franchised Nissan and Infiniti
dealers throughout the United States; NMAC operates as its captive finance arm.
NMAC provides “wholesale” or “floor plan financing,” whereby it establishes
wholesale credit lines and provides purchaser money financing to allow dealers to
acquire in-store inventory for retail sale to the public.
3. Floor Plan Financing/Sales “Out of Trust”
In order to keep inventory in their dealerships, car dealers typically enter
into Floor Plan Financing agreements with the captive finance arms of the
manufacturers—in this case, with NMAC. Under such agreements, funds are
advanced from time to time and must be repaid at certain intervals. Anytime
property is sold, however, the dealer is required to pay the manufacturer whatever
amount is associated with that property. In this case, NMAC’s agreements with the
dealers required the following: “Upon any Disposition of Property, Dealer shall
promptly pay NMAC the amount due related to the item sold, together with
interest, in accordance with NMAC’s Wholesale Floor Plan Payoff Policy.” (See, e.g.,
ECF No. 394-22 § 2.32.)
When a dealer sells a vehicle without prompt payment as agreed under their
Floor Plan Financing Agreement, it is known as selling a vehicle “out of trust.”
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4. Formation of the Dealerships
In November 2015, Nissan and plaintiffs entered into a series of agreements
to establish and build new Nissan and Infiniti dealerships in Manhattan—these
agreements included wholesale finance and security agreements with NMAC
(WSAs) that provided floorplan financing. (ECF Nos. 394-2, 394-10.) 2
In December 2015, Nissan and MTKN partnered to open a dealership in
Mount Kisco, New York. NMAC and MTKN subsequently entered into another
WSA. (ECF No. 394-17.)
The WSAs all provide as follows:
•
Section 2.3.2 requires the dealer to repay NMAC’s floorplan loan upon the
retail sale of a vehicle.
•
Section 5.1.1 states that the failure to comply with Section 2.3.2—or, as it is
commonly known, selling a vehicle “out of trust”—constitutes an act of
default under the WSAs.
•
Section 5.2 states that “whenever a default occurs, or at any time after a
default has occurred, NMAC at its option and without demand or notice of
any kind, may suspend Dealer’s financing of one or more lines under this
Agreement and/or terminate this Agreement and declare the Indebtedness to
be immediately due and payable.”
(ECF Nos. 394-2, 394-10, 394-17, 394-22.)
Nissan had already entered into a similar agreement with White Plains in October 2014. (ECF No.
394-22.)
2
4
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In addition to the WSAs, NMAC and plaintiffs entered into various working
capital and mortgage loans and revolving lines of credit in order to construct the
new premises. The Court will quickly detail the various arrangements below.
First, NMAC extended three Revolving Credit and Security Agreements
(“RLOCs”)—a $2 million line of credit to Acim dated December 4, 2015, a $6 million
line of credit also to Acim also dated December 4, 2015, and a $7 million line of
credit to Alim dated October 7, 2016. (ECF Nos. 394-3, 394-11, 394-12.) For all
three RLOCs, events of default included, inter alia, Borrower’s failure to perform
under any Loan Document, or termination of wholesale financing under the WSA.
(Id. §§ 7.1(b), 7.1(l).)
Second, NMAC granted Alim a $3 million term loan by means of a Capital
Loan and Security Agreement dated July 20, 2016. (ECF No. 394-4.) The loan was
secured by the Dealers’ collateral. Events of default included, inter alia, default of
any guarantor under any credit agreement with NMAC, and/or termination of
Wholesale Financing Agreement. (Id. §§ VI(A)(7), VI(A)(10).)
Third, NMAC granted BNF Realty a $12,188,500 loan for WP. In exchange,
BNF Realty gave NMAC a Promissory Note dated October 7, 2016 (ECF No. 394-28)
and secured by a mortgage on a property in Tarrytown, New York. Events of
default included, inter alia, an occurrence of an event of default under the Mortgage
or any other Loan Document, termination of the Wholesale Financing Agreement,
and/or failure of the Guarantor to perform any obligation under any Guaranty. (Id.
§§ 3.1(e), 3.1(l), 3.1(n).)
5
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In addition, Flom, Nilva, Boyko, and BNF Partners (collectively, “the
Guarantors”) signed Continuing Guaranty agreements to induce NMAC to extend
credit to the Dealerships, guaranteeing the “full and prompt performance and
payment of all present and future liabilities of Dealer to Lender irrespective of their
nature or the time they arise.” (ECF Nos. 394-5, 394-6, 394-7, 394-9, 394-13, 39414, 394-15, 394-18, 394-19, 394-20, 394-24, 394-25, 394-26.) In relevant part, the
guaranties all state as follows:
The obligations of Guarantor under this Guaranty shall be continuing,
absolute and unconditional under any and all circumstances and shall
be paid by Guarantor regardless of . . . any defense, offset, or
counterclaim which may at any time be available to or be asserted by
Dealer or Guarantor . . . .
(Id. at 2) (eI’mphasis added).
The Continuing Guaranties further state that:
Guarantor’s execution of this guaranty was not based upon any facts or
materials provide by lender nor was guarantor induced to execute this
guaranty by any representation, statement or analysis made by lender.
(Id. at 5.)
On October 7, 2016, the Guarantors also executed a Guaranty Agreement to
induce NMAC to extend the $12.1 million loan to BNF Realty. (ECF No. 394-30.)
Section 4 of that agreement provided that Guarantor waived all defenses and
counterclaims. In Section 5, the Guarantor “authorizes Lender, at its sole option,
without notice or demand and without affecting liability of Guarantor under this
Guaranty, to foreclose any or all of the mortgages and interests in real property
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secured thereby by nonjudicial sale, or to exercise any right or remedy with respect
to the Mortgage or the property covered thereby.”
Finally, the Dealers and Guarantors entered into a series of Cross-Guaranty
Agreements between December 4, 2015, and October 7, 2016, each of which
amended the previous agreement. (ECF Nos. 395-32, 395-33, 395-34, 395-35, 39436.) The final such Cross-Guaranty was executed by the following Borrowers: BNF
Realty, WP, Acim, Alim, and MTKN, and the following Guarantors: Bicom, BNF
Partners, WP, Flom, Nilva, and Boyko. 3 (ECF No. 394-36.)
Attached to the cross-guaranties were schedules detailing plaintiffs’ debt to
defendants. The cross-guaranties contain the following relevant provisions:
•
Section 1 (Acknowledgement of Debt): Borrowers and Guarantors hereby
acknowledge, confirm and declare that on the date hereof, all amounts owing,
as such amounts may be increased or modified from time to time, under all of
the Loan Documents identified on Schedule A attached hereto, are
unconditionally due and owing by each Borrower to Lender without any set
off, deduction, counterclaim or defense of any kind or nature to the payment
thereof. 4
The fourth amended and restated cross-guaranty, cross-collateral, and cross-default agreement was
not signed by Alexander Boyko. Boyko’s signature, however, appears on all previous crossguaranties. In response to this motion, he argues that he was often given blank signature pages
unattached to the cross-guaranties. This argument is unavailing. Under New York law, “one who
signs a note with obvious blanks is liable to a holder in due course of the note, according to the terms
of the note after the blanks have been filled.” Indem. Ins. Co. of N. America v. Am. Deseret Ltd.
P’ship, 887 F. Supp. 521, 530 (S.D.N.Y. 1993).
4 There was a Schedule A attached to each cross-guaranty. The Schedule A attached to the Fourth
Amended (most recent) guaranty, detailed the debt as follows:
A. WHITE PLAINS AUTO COMPANY, LLC
3
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B.
C.
D.
E.
1. Automotive Wholesale Financing and Security Agreement between WHITE PLAINS
AUTO COMPANY, LLC and Lender, dated October 9, 2014.
2. Continuing Guaranty Agreement of GARY B. FLOM in favor of Lender, dated as October
9, 2014.
3. Continuing Guaranty Agreement of VENIAMIN NILVA in favor of Lender, dated as
October 9, 2014.
4. Continuing Guaranty Agreement of ALEXANDER BOYKO in favor of Lender, dated as
October 9, 2014.
5. $100,000 Lease Plan Financing and Security Agreement between WHITE PLAINS
AUTO COMPANY, LLC, and Lender, dated October 9, 2014.
ACIM NY, LLC
1. Automotive Wholesale Financing and Security Agreement between ACIM NY, LLC and
Lender, dated December 4, 2015.
2. Continuing Guaranty Agreement of GARY B. FLOM in favor of Lender, dated as
December 4, 2015.
3. Continuing Guaranty Agreement of VENIAMIN NILVA in favor of Lender, dated as
December 4, 2015.
4. Continuing Guaranty Agreement of ALEXANDER BOYKO in favor of Lender, dated as
December 4, 2015.
5. $8,000,000 Revolving Credit and Security Agreement between ACIM NY, LLC, and
Lender, dated December 4, 2015.
ALIM NY, LLC
1. Automotive Wholesale Financing and Security Agreement between ALIM NY, LLC and
Lender, dated December 4, 2015.
2. Continuing Guaranty Agreement of GARY B. FLOM in favor of Lender, dated as
December 4, 2015.
3. Continuing Guaranty Agreement of VENIAMIN NILVA in favor of Lender, dated as
December 4, 2015.
4. Continuing Guaranty Agreement of ALEXANDER BOYKO in favor of Lender, dated as
December 4, 2015.
5. $3,000,000 Capital Loan and Security Agreement between ALIM NY, LLC, and Lender,
dated as of July 20, 2016.
6. $7,000,000 Revolving Credit and Security Agreement between ALIM NY, LLC, and
Lender dated _______________, 2016.
7. Continuing Guaranty Agreement of BICOM NY, LLC in favor of Lender, dated as
____________, 2016.
8. Continuing Guaranty Agreement of BNF PARTNERS NY, LLC in favor of Lender, dates
as _________, 2016.
MTKN, LLC
1. Automotive Wholesale Financing and Security Agreement between MTKN, LLC and
Lender, dated December 17, 2015.
2. Continuing Guaranty Agreement of GARY B. FLOM in favor of Lender, dated as
December 17, 2015.
3. Continuing Guaranty Agreement of VENIAMIN NILVA in favor of Lender, dated as
December 17, 2015.
4. Continuing Guaranty Agreement of ALEXANDER BOYKO in favor of Lender, dated as
December 17, 2015.
BNF NY REALTY, LLC
1. $12,188,500.00 Promissory Note executed by BNF NY REALTY, LLC in favor of Lender,
dated October 7, 2016.
2. Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing
executed by BNF NY REALTY, LLC in favor Lender, dated October 7, 2016.
8
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•
Section 4 (Cross Collateralization): Each Borrower hereby agrees that the
Loan Documents to which it is a party and the collateral security described
therein shall secure the obligations of the other Borrowers under the Loan
Documents and under this Agreement . . .
•
Section 5 (Cross Default): The occurrence of one default under any one of the
Loan Documents shall constitute a default under each other Loan Document,
entitling Lender to exercise any of its rights and remedies under any or all of
the Loan Documents . . .
In addition, in Section 7, the “Guarantors expressly reaffirm all of their
obligations under their Guaranties and agree that their Guaranties include each
provision set forth in Schedule B attached to this Agreement.” 5 Included among
those provisions was that “[t]he obligations of Guarantor under the Guaranties
shall be continuing, absolute, and unconditional under any and all circumstances.”
Finally, in Section 8, the Borrowers and Guarantors represented that they had
“voluntarily and without coercion or duress of any kind entered into this Agreement
and the documents executed in connection with this Agreement.”
3. Guaranty of WHITE PLAINS AUTO COMPANY, LLC, GARY B. FLOM, an individual,
VENIAMIN NILVA, ALEXANDER BOYKO, jointly and severally, in favor of Lender,
dated October 7, 2016.
4. Guaranty of BICOM NY, LLC, and BNF PARTNERS NY, LLC, jointly and severally, in
favor of Lender, dated October 7, 2016.
5
Attached as the Schedule B are all continuing Guaranty provisions.
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5. Default
In 2016, the dealerships went into default by selling vehicles “out of trust.” 6
NMAC issued notices of default and allowed an opportunity to cure the default.
(ECF Nos. 395-5 and 395-6). When the defaults were not cured pursuant to Section
5.2 of the WSAs, NMAC terminated its wholesale financing agreements.
B. Procedural Background
On January 20, 2017, Acim, Alim, and Bicom filed suit in state court against
NNA and NMAC for breach of contract and seeking damages and temporary and
permanent injunctions enjoining and restraining NNA from terminating the Dealer
Agreements and Sublease that the plaintiffs and defendants had previously entered
into. (ECF No. 1.) At the same time, they filed a motion for a temporary
restraining order and preliminary injunction. Defendants removed the action to
this Court on January 31, 2017. (Id.)
On February 28, 2017, Judge Laura T. Swain denied plaintiff’s motion for a
temporary restraining order and preliminary injunction. She based her ruling on,
inter alia, a determination that plaintiffs, who were insolvent, lacked any means to
cure the default aside from vacating the premises. 7 (ECF No. 54.)
There is vigorous debate regarding the number of vehicles that were sold out of trust, whether
Dealerships sold out of trust at defendants’ request, and when defendants first became aware that
the vehicles were sold out of trust. It is, however, undisputed that by the fall of 2016 at least some
vehicles in WP were sold out of trust.
7 Judge Swain also found, as a matter of fact, that the dealerships had sold vehicles out of trust; the
Court does not here rely upon that finding, however, as the factual findings of law made by the
District Court granting a preliminary injunction are not binding in subsequent proceedings before
the Court. See, e.g., Irish Lesbian & Gay Org. v. Giuliani, 143 F.3d 638, 644 (2d Cir. 1988).
6
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On March 3, 2017, NMAC filed its answer and counterclaim, naming BNF
Realty, BNF, WP, Boyko, Flom, and Nilva as third-party defendants. (ECF No. 69.)
NNA filed its answer and counterclaim on March 8, 2017, also naming all of the
above as third-party defendants. (ECF No. 74.)
The Court will not here detail the complex procedural history of the case over
the next several months—except to note that what followed was a Byzantine series
of show cause hearings, interlocutory appeals, findings of contempt, and granting of
contempt sanctions.
The case was transferred to the undersigned on September 11, 2017. On
October 7, 2017 and October 8, 2017, respectively, NNA and NMAC filed amended
complaints and counterclaims, with leave from the Court. On December 1, 2017,
the Court held a status conference at which it granted NNA and NMAC’s motions to
strike plaintiffs’ amended counterclaims and answers (ECF Nos. 362 and 363),
finding both that they were untimely filed and also that they constituted an
impermissible attempt by plaintiffs to add significant new scope to the case. 8
Plaintiffs incorrectly assert that the Court struck only the new counterclaims at the December 1,
2017 conference. The Court struck ECF Nos. 362 and 363 in their entirety—rather than selectively
striking only some parts of those filings. While the Court acknowledges that it referred to the
“counterclaims or cross claims or however they are characterized,” it also took time to address the
untimely nature of the filing and it granted the motion as presented—which was to strike both
documents. Had the Court intended to strike only portions therein, it would certainly have
affirmatively indicated so.
8
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At that same status conference, the Court awarded defendants $201,947.03
in satisfaction of an Order of Contempt previously issued by Judge Swain. 9 (ECF
No. 193.)
II.
LEGAL PRINCIPLES
A. Summary Judgment
Summary Judgment may not be granted unless a movant shows, based on
admissible record evidence, “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).
The moving party bears the initial burden of demonstrating “the absence of a
genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
When the moving party does not bear the ultimate burden on a particular claim or
issue, it need only make a showing that the non-moving party lacks evidence from
which a reasonable jury could find in the non-moving party’s favor at trial. Id. at
322–23.
In making a determination on summary judgment, the court must “construe
all evidence in the light most favorable to the non-moving party, drawing all
inferences and resolving all ambiguities in its favor.” Dickerson v. Napolitano, 604
F.3d 732, 740 (2d Cir. 2010) (citing LaSalle Bank Nat’l Ass’n v. Nomura Asset
Capital Corp., 424 F.3d 195, 205 (2d Cir. 2005)). Once the moving party has
discharged its burden, the opposing party must set out specific facts showing a
Judge Swain found Alim, WP, and Flom to be in contempt of her Order of April 21, 2017, which
directed the Dealers to return a number of vehicles to NMAC, and further granted contempt
sanctions against Alim, WP, and Flom.
9
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genuine issue of material fact for trial. Wright v. Goord, 554 F.3d 255, 266 (2d Cir.
2009). “A party may not rely on mere speculation or conjecture as to the true
nature of the facts to overcome a motion for summary judgment,” as “mere
conclusory allegations or denials cannot by themselves create a genuine issue of
material fact where none would otherwise exist.” Hicks v. Baines, 593 F.3d 159,
166 (2d Cir. 2010) (internal quotation marks, citations, and alterations omitted). In
addition, “only admissible evidence need be considered by the trial court in ruling
on a motion for summary judgment.” Porter v. Quarantillo, 722 F.3d 94, 97 (2d Cir.
2013) (internal quotation marks, citations, and alterations omitted).
B. Unconditional Guaranties
“To obtain 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 Fed App’x 10, 11–12 (2d Cir. 2016)
(quoting City of New York v. Clarose Cinema Corp., 256 A.D.2d 69, 71 (N.Y. App.
Div. 1998)).
“‘[B]road, sweeping and unequivocal language’ in an absolute and
unconditional guaranty generally ‘forecloses any challenge to the enforceability and
validity of the documents which establish defendant’s liability for payments arising
under the [underlying] agreement, as well as to any other possible defense to his
liability for the obligations.’” 136 Field Point Circle, 644 Fed App’x at 12 (quoting
Cooperative Centrale Raiffeisen-Boerenleenbank, B.A. v. Navarro, 36 N.E.3d 80, 86
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(N.Y. 2015). “Absolute and unconditional guaranties have in fact been found to
preclude guarantors from asserting a broad range of defenses under New York law.”
Compagnie Financiere de CIC et de L’Union Europeenne v. Merrill Lynch, Pierce,
Fenner & Smith Inc., 188 F.3d 31, 35 (2d Cir. 1999).
More specifically, where a guaranty provides that it is “‘absolute and
unconditional irrespective of . . . any lack of validity or enforceability of the
agreement . . . or . . . any other circumstance which might otherwise constitute a
defense,’ the guarantor is precluded from asserting a defense as to the ‘existence of
a valid underlying debt.’” 136 Field Point Holding, 644 Fed. App’x at 12 (quoting
Cooperatieve Centrale, 36 N.E.3d at 86–87). This has been specifically and
consistently applied to all defenses, including fraudulent inducement. See, e.g.,
Cooperatieve Centrale, 36 N.E.3d at 85 (“This Court has acknowledged the
application of these absolute guaranties even to claims of fraudulent inducement in
the execution of the guaranty.”); Citibank, N.A. v. Plapinger, 485 N.E.2d 974, 977
(N.Y. 1985) (holding same). This is particularly true when all parties to the
guaranty are “sophisticated business people” who have “hammered out . . . a
multimillion dollar personal guarantee.” Citibank, 485 N.E.2d at 977.
C. Right to Foreclosure at Summary Judgment
In New York, a plaintiff establishes a prima facie right to foreclosure by
producing: 1) the mortgage documents; and 2) undisputed evidence of nonpayment.
See United States v. Freidus, 769 F. Supp. 1266, 1277 (S.D.N.Y. 1991). Only an
affirmative showing by the defendant can overcome this presumption. See Regency
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Sav. Bank, F.S.B. v Merritt Park Lands Assocs., 139 F. Supp. 2d 462, 465–66
(S.D.N.Y. 2001).
III.
DISCUSSION
NMAC moves for summary judgment on Counts Four, Six, and Seven of its
Amended Complaint, arguing that the Borrowers and Guarantors breached both the
loan and guaranty agreements, and are therefore in default. NMAC further asserts
that all of plaintiffs’ affirmative defenses are waived by the “absolute and
unconditional” language in the guaranty. It thus maintains that it has established
a prima facie right to enforce the guaranty agreements, as well as to foreclosure. It
has presented evidence supporting damages in the amount of $37,099.207.20.
In opposition, plaintiffs make four arguments: 1) that NMAC’s motion is
premature; 2) that there is a material question of fact as to whether plaintiffs were
in breach; 3) that NMAC’s damages estimate is not based on admissible evidence;
and 4) that it has various affirmative defenses—including, inter alia, fraudulent
inducement.
Because the Court finds no material question of fact as to plaintiffs’ breach,
and because the language of the guaranties is unambiguous, binding, and absolute,
the Court agrees with defendant. The Court does, however, require supplemental
briefing as to the quantum of damages.
A. The Guaranties
As discussed above, defendant must make a three-pronged showing in order
to obtain summary judgment to enforce a written guaranty. First, it must prove
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and absolute and unconditional guaranty. Second, it must prove the underlying
debt. Third, it must show that guarantor has failed to perform under the guaranty.
136 Field Point Circle, 644 Fed. App’x at 11–12. The Court discusses each in turn.
1. Absolute and Unconditional
Each of the continuing guaranties contains the following provision: “The
obligations of Guarantor under this Guaranty shall be continuing, absolute, and
unconditional under any and all circumstances and shall be paid by Guarantor
regardless of . . . any defense, offset or counterclaim . . . .”
Under New York state law, the inclusion of this provision bars plaintiffs from
asserting, as they attempt to do here, any affirmative defenses. 136 Field Point
Circle, 644 Fed. App’x at 12; Cooperative Centrale, 36 N.E.3d at 86. Plaintiffs’
assertions that, for example, “BNF Partners and White Plains never would have
executed the October 2017 Cross-Agreement and Mortgage if not for the promise
that a $3 million loan was forthcoming” are therefore unavailing.
The cases cited by plaintiffs are inapposite; indeed, they refer to guaranties
that are neither continuing nor incorporate the “absolute and unconditional”
language employed here and regularly interpreted under New York law as barring
affirmative defenses. 10
Flexi-Van Leasing. Inc. v. Isaias, 23 F. Supp. 2d 419 (S.D.N.Y. 1998), for example, is cited for the
proposition that boilerplate waivers in guaranties are limited to the agreement containing them.
However, the Flexi-Van Court in fact states that whether a guaranty shall be considered
“continuing” will depend upon whether the plain meaning of the guaranty “clearly imports a
continuing liability.” Id. at 423. As the plain language of the guaranties at issue here state clearly
the continuing liability, Flexi-Van and the other cases cited are easily distinguishable.
10
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The cross-guaranties each incorporate, via the Schedule B attached, each and
every provision of the continuing guaranties, including, importantly, the “absolute
and unconditional” clause. Accordingly, plaintiffs’ affirmative defenses fail as a
matter of law.
2. Underlying Debt
Attached to each cross-guaranty is a Schedule A, which details plaintiffs’
debts to Nissan—including the WSAs, Flom, Nilva, and Boyko’s continuing
guaranties, the revolving credit lines, the capital loans, the promissory note, and
the mortgage. Thus, plaintiffs’ debt is repeatedly acknowledged by all parties by
virtue of the signatures attached to the cross-guaranties. (ECF Nos. 395-32, 395-33.
395-34, 395-95, 394-96.) There is no triable issue, therefore, as to the existence of
the underlying debt.
3. Guarantor’s Failure to Perform
The parties’ principal argument as to whether there was a breach revolves
around: 1) which set of pleadings is operative; and therefore 2) whether judicial
admissions were made in plaintiffs’ and third-party defendants’ answers admitting
the breach. Plaintiffs and third party-defendants maintain that they amended their
answers so as to make any earlier admissions inadmissible, and furthermore argue
that they were taken out of context. For its part, defendant points to plaintiffs’ and
third-party defendants’ answers at ECF No. 169–178, noting that each contains
numerous admissions that, for example, “ACIM and ALIM sold certain vehicles out
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of trust.” (See, e.g., ECF No. 169 ¶ 34.) The Court agrees with defendant—there is
no triable issue as to breach of the WSAs.
On December 1, 2017, the Court granted defendants’ motions to strike
plaintiffs’ amended counterclaims and answers at ECF No. 362 and 363. Thus, the
former answers stand; in each of these answers, plaintiffs admitted to selling
vehicles out of trust. (ECF Nos. 169–78.)
In addition, in Flom’s affidavit in opposition to summary judgment, he states
that dealerships were selling vehicles out of trust. That he asserts that the
numbers are “grossly inflated,” and/or that White Plains sold out of trust based on
capital needs at the other dealerships does not remedy the fact that the dealership
sold out of trust—a clear breach of the WSAs.
Thus, this Court finds no triable issue as to whether plaintiffs breached the
terms of the contract.
NMAC has made the required three-pronged showing to enforce the
guaranties; plaintiffs, for their part, have not raised any triable issues in response.
Therefore, defendant has established its right to recover under the guaranties and
the underlying loans. 11 Accordingly, the Court GRANTS summary judgment to
NMAC on Count Four.
Plaintiffs’ argument that defendants’ motion is premature is similarly unavailing. As the Court
finds a breach based merely on the answers and affidavits, and interprets the language of the
guarantees to bar plaintiffs’ affirmative defenses, no further discovery is necessary.
11
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B. The Mortgage
In order to show a right to foreclosure under New York state law, the movant
must produce: 1) the mortgage documents; and 2) undisputed evidence of
nonpayment. Freidus, 769 F. Supp. at 1277.
NMAC has easily met this standard and plaintiffs have not produced
evidence to the contrary. NMAC has produced the mortgage documents—the Note
and Mortgage—and evidence of nonpayment in the demands for payment and
notices of default. As the Promissory Note and Mortgage are both included in the
cross-guaranties, they, too were in default at the time plaintiffs defaulted on the
WSAs. Therefore, plaintiffs’ argument that issues of fact remain on the mortgage is
plainly wrong. Any affirmative defenses are foreclosed by the absolute and
unconditional guaranties. The Court therefore GRANTS summary judgment to
NMAC on Count Seven.
C. Damages
Plaintiffs assert that defendant has failed to satisfy its burden of
demonstrating the quantum of damages. In support of its motion, defendant has
proffered an affidavit from Randy Brooks, NMAC’s Inventory Manager. (ECF No.
395.) Plaintiffs argue that the Brooks affidavit is inadmissible for a host of reasons,
including, inter alia, that it is not based on personal knowledge, and that it is
lacking in detail. Plaintiffs do not, however, challenge particular numbers or assert
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an alternate amount of damages. Defendants maintain that the affidavit is
admissible and based on business records.
The Brooks affidavit merely states, however, that he “instructed NMAC
personnel to advise [him] of the outstanding amounts owed by Obligors (principal
and interest) on the loans extended and unpaid.” (Id. ¶ 24.) He further states that
he “instructed NMAC personnel to inform [him] of the amounts expended in
enforcing the Loan and Guaranty Agreements.” (Id.) He then lists costs totaling
$37,099.207.20. (Id.) However, he attaches no underlying documents—for example
bills from attorneys, or payments to security companies—but merely recites the
totals. The Court agrees with plaintiffs that damages cannot be awarded on such a
cursory showing.
The Court therefore ORDERS defendant to submit supplemental briefing and
documentation as to the damages requested not later than Wednesday, May 16,
2018. Plaintiffs shall have until Wednesday, May 23, 2018 to file any opposition.
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IV.
CONCLUSION
For the reasons set forth above, the Court GRANTS summary judgment to
NMAC on Counts Four and Seven. The Court further ORDERS supplemental
briefing on damages. The Clerk of Court shall terminate the motion at ECF No.
392.
SO ORDERED.
Dated:
New York, New York
May 8, 2018
______________________________________
KATHERINE B. FORREST
United States District Judge
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