Bunton v. Houze
| Decision Date | 03 July 2013 |
| Docket Number | Index No. 651362/10 |
| Parties | GARY BUNTON, Plaintiff, v. PHILIPPE HOUZE, MARIE HOUZE, and LEPICERIEDOTCOM INC., Defendants. |
| Court | New York Supreme Court |
Mot. seq. nos: 004, 005
Subm.: 2/13/13
For plaintiff:
Samuel Fieldman, Esq.
The Fieldman Firm, LLP
For defendants:
Matthew A. Kaplan, Esq.
Cowan, Debaets et al.
By notice of motion dated July 10, 2012, plaintiff moves pursuant to CPLR 3211 for an order dismissing defendants' counterclaims and affirmative defenses. Defendants oppose and, by notice of cross motion dated August 31, 2012, move pursuant to CPLR 3211 for an order dismissing the complaint.
By notice of motion dated January 28, 2013, plaintiff moves pursuant to CPLR 3211 and/or 3212 for an order granting summary judgment against defendants. Defendants oppose.
The motions are consolidated for disposition, and, as no discovery has yet been taken, all motions are deemed motions to dismiss.
The following facts are undisputed:
In early 2008, plaintiff and defendant Philippe Houze discussed an agreement by whichplaintiff would purchase a stake in L'Epicerie, a New York corporation (the corporation), and perform certain services for it in return for compensation. Three drafts were exchanged by the parties, including the last one dated May 12, 2008, which is entitled "Partnership Agreement," and provides as follows, as pertinent here: (1) plaintiff would purchase 100 of the corporation's shares at $1,000 each, a 10 percent stake; (2) plaintiff would receive a share in the corporation's earnings, defined as revenues after expenses, per his share in the corporation, which would be paid as stock for 2008 and 2009, and thereafter in stock or cash at plaintiff's election; (3) Philippe remained in charge of the corporation; (4) plaintiff would be responsible for national marketing and sales, establishing a publishing business, and managerial input; and (5) plaintiff would receive a commission on new accounts and additional orders and would be reimbursed for his expenses, and after January 1, 2010, would be entitled to a salary based on the corporation's performance. The May 2008 draft further provides that it "constitutes the [parties'] full understanding and consideration," Like the other two drafts, was never signed. (Affirmation of Samuel L. Fieldman, Esq., dated July 10, 2012 [Fieldman Aff.]).
By equal checks dated May 16, 2008 and May 28, 2008, respectively, plaintiff paid Philippe $100,000. The memo of each check reflects that it constitutes a "stock purchase" in the corporation, Plaintiff then began working for the corporation.
After disputes arose between the parties, on or about July 27, 2008, Philippe and his wife, defendant Marie Houze, drafted a "L'Epiceriedotcom Loan Agreement," and signed it in their personal capacities. Philippe also signed it as the corporation's CEO. The agreement "sets forth the complete Terms . . . between L'Epiceriedotcom, Philippe Houze, Marie Houze (Obligors) and Gary Bunton (Lender)," and provides for: (1) $50,000 plus interest at seven percent fromJune 1, 2008 to be repaid on June 1, 2009, and (2) $50,000 plus seven percent interest from June 1, 2009 to be repaid on June 1, 2010. Security for the loan is set forth as "an unconditional promise and guarantee by the Obligor to the Lender to pay the principal and interest when due under the terms of this Loan Agreement." (Id.).
On or about March 11, 2009, Philippe advised plaintiff that he would be unable to pay the loan when due. On or about February 4, 2010, plaintiff asked Philippe to confirm that he would repay the full balance by the second due date of June 1, 2010. By letter dated February 24, 2010, Philippe replied that he would repay the loan in full but beyond the deadline, and wrote, as pertinent here, that:
To date, defendants have not repaid any of the loan. (Id.).
On or about August 18, 2010, plaintiff commenced the instant action, seeking $116,618 as damages for defendants' failure to repay the loan.
On or about July 23, 2012, defendants served their amended verified answer, including as affirmative defenses: (1) a failure to state a claim; (2) claims barred by plaintiff's unclean hands; (3) claims barred by waiver, estoppel, acquiescence and/or assumption of risk; (4) claims barred by failure to mitigate; (5) plaintiff's damages were not caused by defendants' acts or omissions but by plaintiff's conduct; (6) claims barred by laches and/or statute of limitations; (7) claimsagainst the individual defendants fail for lack of consideration; and (8) claims barred as plaintiff breached his implied covenant of good faith and fair dealing.
Defendants also assert that plaintiff failed to act on his responsibilities to the corporation, that he demanded that his investment be turned into a loan, that defendants signed the loan agreement in order that they not exacerbate the damage already done to their 20-year relationship, and that due to the recession and plaintiff's bad business decisions, defendants were unable to repay the loan timely. They thus allege as a first counterclaim that the parties entered into an implied partnership agreement, that plaintiff owed a fiduciary duty to the corporation, and that plaintiff breached his duty by failing to perform his duties and responsibilities under the partnership agreement, abandoning his position at the corporation, and refusing to take responsibility for any losses incurred by the corporation.
As a second counterclaim, defendants assert that as an employee of the corporation, plaintiff owed it a duty of good faith and loyalty in the performance of his duties and an affirmative duty to act in the corporation's best interests, and that he breached those duties in various ways, including working on a different business venture while employed by the corporation. Defendants claim that plaintiff's breaches caused them to sustain damages in an amount to be determined at trial.
Plaintiff contends that he is entitled to judgment on his complaint as the parties' loan agreement is a non-negotiable instrument enforceable under Article III of the Uniform Commercial Code (UCC), that it is also a contract that meets the requirements of GeneralObligations Law (GOL) 5-1105 as it states past consideration in the title or provides for contemporary consideration and as defendants received the proceeds for the loan as consideration, and that the loan agreement is enforceable as a later promise to pay an existing moral obligation. (Mem. of Law, dated Jan. 28, 2013).
Defendants argue that summary judgment is inappropriate as plaintiff submits no admissible evidence and as no discovery has yet been exchanged. To the extent that the loan agreement is a non-negotiable instrument, defendants argue that they have raised valid defenses to its enforcement, including that there was no consideration for it absent any prior obligation or debt or any contemporary consideration, and that there was no consideration given for or by Philippe and Marie personally. They also deny that a moral obligation may constitute valid consideration. (Mem. of Law, dated Feb. 6, 2013).
By submitting proof of the loan agreement and defendants' default thereon, plaintiff met his burden of establishing entitlement to recovery on the agreement. (Carlin v Jemal, 68 AD3d 655 [1st Dept 2009]). It was not plaintiff's burden to establish that the existence of adequate consideration for the loan; rather, the burden shifted to defendants to establish their defense of lack of consideration. (Id.).
Here, plaintiff originally paid defendants $100,000 in a contemplated exchange for stock in the corporation. After the parties' relationship deteriorated, the $100,000 was converted into a loan, which amount was reflected in the agreement. Both parties received a benefit from this arrangement in that defendants retained the $100,000 for a certain time period until they could repay it, and plaintiff agreed to hold off on recouping his money in exchange for receiving interest thereon. Defendants have thus failed to establish that their defense of lack ofconsideration has merit. (See eg Holt v Feigenbaum, 52 NY2d 291 [1981] []; Korea First Bank of N.Y. v Noah Enter., Ltd., 12 AD3d 321 [1st Dept 2004], lv denied 4 NY3d 710 [2005] []; see also In re Thomson McKinnon Securities Inc., 139 BR 267 [SD NY 1992] [...
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