Crotona 1967 Corp. v. Vidu Bros. Corp.

• Decision Date: 14 February 2013
• Docket Number: No. 10–CV–6004 (SMG).,10–CV–6004 (SMG).
• Citation: 925 F.Supp.2d 298
• Parties: CROTONA 1967 CORP., Plaintiff, v. VIDU BROTHERS CORP. and Harshad Patel, Defendants.
• Court: U.S. District Court — Eastern District of New York

925 F.Supp.2d 298

CROTONA 1967 CORP., Plaintiff,

v.VIDU BROTHERS CORP. and Harshad Patel, Defendants.

No. 10–CV–6004 (SMG).

United States District Court,

E.D. New York.

Feb. 14, 2013.

Christopher Edward Finger, Christopher E. Finger, Peter R. Shipman, Codelia & Socorro, PC, Bronx, NY, for Plaintiff.

Perry Ian Tischler, Bayside, NY, for Defendants.

Memorandum & Order

GOLD, S., United States Magistrate Judge.

INTRODUCTION

Plaintiff moves for summary judgment to enforce payment under a promissory note executed by defendant Vidu Brother and made payable to plaintiff's predecessor-in-interest. Plaintiff further seeks interest and attorney's fees as provided for in the note and to enforce a personal guaranty made by defendant Harshad Patel. Defendants do not dispute that the sum due under the note has not been paid, but assert that they were fraudulently induced to execute the note and related agreements. Defendant Patel further contends that his guaranty was of limited duration and had already expired when the note became due.

The parties have consented to my jurisdiction for all purposes in this case. Docket Entry 36. For the reasons stated below, plaintiff's summary judgment motion is granted as to the liability of corporate defendant Vidu Brother but denied as to the guaranty of individual defendant Harshad Patel and attorney's fees.

FACTS

The following facts are drawn primarily from the parties' statements of material facts, submitted pursuant to Local Civil Rule 56.1. See Pl. R. 56.1, Docket Entry 45–2; Defs. R. 56.1, Docket Entry 56.¹ It is undisputed that individual defendant Harshad Patel, on behalf of his corporation, defendant Vidu Brother Corp.,² executed a promissory note for $800,000 on October 12, 2007, payable to a limited liability company called Ace Hotels Holding (“Ace Hotels”). See Pl. R. 56.1 ¶ 3; Pl. Ex. C, Docket Entry 45–5 at 2 (copy of the note); Defs. R. 56.1 ¶ 3.³ According to the operative complaint, the sole principal of Ace Hotels was Sanford Cohen, until he conveyed ownership of the company to Frank Santora on October 12, the date of the note. Amend. Compl. ¶¶ 3–4, Docket Entry 8. The note provides for payment of $800,000, plus 10% interest per annum, on October 12, 2009, two years from the date of execution. The note further provides for 15% interest, as well as reasonable attorney's fees expended to enforce the note, in the event of default. Pl. R. 56.1 ¶¶ 7–9; Pl. Ex. C; Defs. R. 56.1 ¶¶ 7–9.

At the same time it made the promissory note at issue, Vidu Brother executed a second note with Ace Hotels for $800,000, with the option for Ace Hotels to cancel the note by “buy[ing] back ... a 16% interest in 282–292 Meeker Avenue, Brooklyn New York.” Pl. Ex. C., Docket Entry 45–5 at 4. This note appears to have been canceled or otherwise settled by the parties. See Pl. Mem. at 2.

Also on October 12, 2007, individual defendant Patel signed a personal guaranty for payment of the two notes, with attendant interest, should the corporate defendant default. See Pl. R. 56.1 ¶ 4; Pl. Ex. E. A handwritten note at the top of the guaranty appears to state “Interim [word illegible] sec. agreement provided.” Pl. Ex. E. Defendants contend that the guaranty “was intended as temporary security” that was “to be replaced by a secured interest in [Patel's] hotel in Waynesboro, P.A.” Defs. R. 56.1 ¶ 5. Defendants' former counsel further avers that he added the notation at the top of the guaranty and later informed a representative of plaintiff that he understood the guaranty to expire in January 2008. Curran Aff. ¶¶ 29–30; see also Curran Aff., Ex. 8, Docket Entry 48 at 74 (letter dated November 20, 2007 from Curran to Frank Castiglione, attorney for Ace Hotels, stating that Castiglione had committed to accept a replacement security agreement and to void Patel's personal guaranty, and asserting a deadline of January 12, 2008 for doing so); Patel Aff. ¶ 8.E (stating that Patel understood the guaranty would be temporary and be replaced by a secured interest in a hotel owned by Patel, but that plaintiff then refused to accept a substitution of security).⁴ Plaintiff, on the other hand, states that the guaranty was, by its terms, “absolute and unconditional,” Pl. R. 56.1 ¶ 5, and that the handwriting on the document was a unilateral modification made by defendants. See Pl. Reply ¶ 48. Plaintiff, however, has not submitted a copy of the guaranty without this handwritten notation.

The note at issue states that it is in consideration for “value received.” Pl. Ex. C.; see also Defs. R. 56.1 Statement ¶ 13 (admitting “that the promissory note bears, on its face, a representation by the obligor / payor on the note, defendant Vidu Brothers Corp., that Vidu made and delivered the note for value received”). Although the nature of the “value received” is not specified in the note, the note appears to have been executed in connection with a real estate transaction that was completed at the time of the note's issuance in October 2007. More specifically, a contract for certain real property in Williamsburg, Brooklyn was executed on September 7, 2007 by “Frank Santora and/or an entity to be formed which is owned entirely by seller (e.g. Ace Hotels Holding, LLC)” and “Vidu Brother Corp. and Harshad Patel.” Pl. R. 56.1 ¶¶ 14–15; Pl. Ex. F, Docket Entry 45–8 (copy of contract); Defs. R. 56.1 ¶¶ 14–15 (discussing the “contract of sale pursuant to which the said promissory note was made and delivered” and acknowledging that “Defendant Vidu Brothers Corp. executed the aforesaid contract”). The contract provides that defendants would pay $3,300,000 for a 66% interest in a lot located at “646 Lorimer Street, Brooklyn ... (a/k/a '270 Meeker Avenue')” as well as “all the available and necessary air rights over” several other lots “to the extent they are building on said lots necessary for building [ sic ] a minimum 75 room hotel consisting of 26,000 sq. ft.” Pl. Ex. F. §§ 1.01, 2.01, Docket Entry 45–8 at 2; “Final Rider” to the contract, Docket Entry 45–8 at 20 (reiterating that defendants were to own 66% of the lot, in addition to the necessary air rights to build a 26,000 square foot hotel). The rider to the contract further specifies that the purchase price was to be satisfied by a payment of $330,000 at the time the contract was signed, a further payment of $1,370,000 at the time of closing, and “a purchase money mortgage for $1,600,000.00 payable monthly at 10% per annum for two (2) years” secured by Patel's hotel in Waynesboro, Pennsylvania.^5,6Id. ¶¶ 2.1(b)-(c), 2.3, Docket Entry 45–8 at 9–10. Finally, the rider contains an integration clause, including the following language: “[a]ll prior verbal and written understandings and agreements, if any, between the parties hereto are merged into this Agreement, which alone fully and completely expresses their agreement.... There are no collateral Promises, nor any conditions precedent or subsequent to the effectiveness of this Agreement.” Id. ¶ 12.1, Docket Entry 45–8 at 15–16.

On October 12, 2007, the day the note was executed, Ace Hotels and defendants closed on the real estate transaction. Cohen Aff. ¶ 2; Santora Aff. ¶ 2 (affirming Cohen's account); Curran Aff. ¶¶ 24–26 (describing the closing and the presence of Patel, Cohen and Santora at this exchange).^7,8 Finally, Ace Hotels, Vidu Brother and Vidu's Sons, a limited liability company apparently consisting of Patel and Ace Hotels, executed a management agreement on February 12, 2008 detailing the responsibilities of those entities vis-à-vis the yet to be built hotel on the lot discussed above. See Management Agreement, Docket Entry 12–2; see also Curran Aff. ¶ 32 (describing the Vidu's Sons entity and characterizing the agreement as “one of the few actual embodiments of the [Ace Hotels and Vidu Brother] partnership in documentary form”). Although defendants also reference a “partnership or Joint Venture Agreement,” see Defs. Mem. at 7, this agreement does not appear to be included in the record or to be quoted by either party.

The parties' accounts diverge as to whether the real estate the parties closed on constituted the entire consideration for the note. Defendant Patel contends that the note “was intended to represent the balance of [his] equity investment” in both the property and a future venture to build a hotel on the site. Patel Aff. ¶ 5; see also id. ¶ 4 (stating that Santora, Cohen and Patel attributed a value of $3.3 million dollars to several lots near the one defendants purchased and a value of $1.7 million to a company that would be formed to manage the project). Plaintiff, by contrast, states that the sole consideration for the note was defendants' interest in the real property. See Cohen Aff. ¶ 7 (stating that “at no time did ACE Hotels and Holding LLC [ sic ] or its officer[s] ... make any representations or warranties to either defendant ... that defendant's securing financing to construct a hotel was a condition or pre-condition to defendants['] duty to pay the promissory note, [or] that ACE Hotels and Holdings LLC, myself or Frank Santoro [ sic ] were ‘partners' with the defendants”); see also Santora Aff. ¶ 10 (admitting that there were discussions between Ace Hotels and defendant Patel about future construction of a hotel but averring that this project was not a condition of the note's execution).

The note was transferred approximately two years later, on October 7, 2009, from Ace Hotels to plaintiff, Crotona 1967 Corporation. Pl. R. 56.1 ¶ 16; Pl. Ex. G, Docket Entry 45–9 (copy of assignment); see also Santora Aff. ¶ 3 (stating that he “and [his] nominee entity Ace Hotel LLC, duly assigned the Purchase Money Promissory Note ... over to present plaintiff Crotona 1967 Corp.”).⁹ Crotona's principal is Cohen, the former principal of Ace Hotels. Amend. Compl. ¶ 1.

When the note became due in October 2009, plaintiff made a demand for payment and interest. See Pl. Ex. H, Docket Entry 45–10. Defenda...