Su Nam Bu v. Sunset Park Deli of N.Y. Corp.
| Decision Date | 13 June 2012 |
| Docket Number | No. 356/12.,356/12. |
| Citation | 2012 N.Y. Slip Op. 51584,36 Misc.3d 1233,960 N.Y.S.2d 53 |
| Parties | SU NAM BU, Plaintiff, v. SUNSET PARK DELI OF N.Y. CORP. and In Suk Cho, Defendants. |
| Court | New York Supreme Court |
OPINION TEXT STARTS HERE
E. Peter Shin, Esq., Flushing, for Plaintiff.
Defendant Attorney: Pro Se.
The following papers numbered 1 to 7 read herein:
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¦Papers ¦Numbered ¦
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¦Notice of Motion/Order to Show Cause/Petition/Cross Motion and ¦1–5 ¦
¦Affidavits (Affirmations) Annexed ¦ ¦
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¦Opposing Affidavits (Affirmations) ¦6 ¦
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¦Reply Affidavits (Affirmations) ¦6 ¦
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¦Affidavit (Affirmation) ¦ ¦
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Other Papers
Upon the foregoing papers, plaintiff Su Nam Bu moves for an order, pursuant to CPLR 3212, striking defendants answer and granting summary judgment in favor of the plaintiff for the relief demanded in the complaint, less payments made.
The motion is denied.
Plaintiff commenced this action based on defendant In Suk Cho's default in making payments due on a promissary noted entered into between plaintiff and Cho on September 27, 2010. The promissary note was agreed to as part of Cho's purchase of a deli business from plaintiff for $220,000. Pursuant to the Stock Purchase Agreement (Agreement) governing the sale of the business, Cho was required to pay plaintiff $1,000 upon the execution of the agreement, $49,000 at the closing, and the remaining $170,000, as restated in the promissary note, was to be paid by way of a $50,000 lump sum payment on or before September 15, 2012, and 36 monthly installments commencing in March 2011. This promissary note was secured by a “Security Agreement” (also referred to as a “Chattel Mortgage”) placing a lien on the property, fixtures, inventory, equipment and accounts receivable of the deli. Although Cho made the first six installment payments, it is undisputed that Cho's checks submitted for the seventh and eighth installments were returned for insufficient funds. Other than a $1,000 payment made after the action was commenced, Cho has failed to make any further payment required by the promissary note.
Plaintiff commenced this action in January 2011. In their answer, dated February 17, 2012, defendants asserted that plaintiff fraudulently misrepresented the income of the deli prior to the sale to be $15,000 to $17,000 per week, but that after defendants took over the business, the sales only averaged $11,000 to $12,000 per week. Shortly thereafter, plaintiff made this motion for summary judgment.
Turning first to plaintiff's motion for summary judgment on the promissary note, plaintiff has demonstrated her prima entitlement to judgment as a matter of law by demonstrating the existence of the note, the terms of repayment, and defendants' default in repayment ( see Jin Sheng He v. Sing Huei Chang, 83 AD3d 788 [2011];Sce v. Ach, 56 AD3d 457, 458 [2008] ). The burden has thus shifted to defendants to come forward with sufficient evidence to raise a triable issue of fact (Jin Sheng He, 83 AD3d at 788;Sce, 56 AD3d at 458).
In addressing the fraudulent inducement defense, plaintiff and her husband, Yong Won Bu, submitted affidavits in which they asserted that, before the sale, that they had told Cho and her husband, Myung Won Bu, that, without accounting for lotto or ATM receipts, the deli's weekly gross sales ranged from $15,000 to $17,000 per week. Plaintiff, and her husband Yong Won Bu, whose affidavit is also before the court, both assert that the $15,000 to $17,000 figures represent a true and accurate accounting of the weekly gross business at the time shortly before the sale. Myung Won Bu also asserts that Cho and Kim did not raise the issue of the alleged misrepresentations until September 2011. Plaintiff has also submitted an affidavit from Michael Vazquez, an employee of the deli, who states that Cho and Kim fired him and two other deli employees around two weeks after they took over the operation of deli. Vazquez stated that around two weeks after he was fired, Kim rehired him, and that after he was rehired, he noticed that the new owners had difficulty operating the lotto machines, and that Kim lost business because of arguments he would get into with customers. Finally, plaintiff has submitted an affidavit from Hyun Chul Oh, who introduced the parties to the sale, and who asserted that he saw Kim at church around a month after sale, and Kim had told him that he had “introduced him to a very good store.' “
In opposition to the motion, Cho has submitted an affidavit from Kim, who asserts that he negotiated the purchase of the deli on his wife's behalf, and who claims that Yong Won Bu, plaintiff's husband (who negotiated the sale of the deli on the behalf of the plaintiff), represented that the deli's weekly sales ranged from $15,000 to $17,000. Although Kim concedes that he had an opportunity to observe the deli's operations before the purchase, he asserts that he was not allowed to inspect the cash register tapes or any books of the business. Further, Kim states that Yong Won Bu represented that the deli was a cash business, and that the books would not reflect its sales. In contrast to Yong Won Bu's claims, Kim asserts that the deli's sales for the first eighteen weeks after the sale averaged $11,000 to $12,000 per week.1 Contrary to Yong Won Bu's assertion that the sales volume issue was not raised until September 2011, Kim claims that he raised the issue in July 2011, when he proposed returning the business to plaintiff. With respect to Vazquez's assertions, Kim states that he had previous experience operating a deli, that he quickly learned how to operate the lotto machine, and that he only had occasional arguments with customers. Kim adds that he had only made positive statements regarding the deli to Hyun Chul Oh because he did not want to create a scene at church in front of other church members.
The facts presented by defendants are sufficient to demonstrate the existence of factual issues with respect to the fraud in the inducement defense that warrant denial of plaintiff's motion. Initially, fraudulent inducement may properly be raised as a defense to payment of a promissary note. As the court stated in Slavin v. Victor (168 A.D.2d 399 [1990] ), “[p]romissary notes given in exchange for purchase of a business cannot be viewed in a vacuum where genuine issues of fact exist as to whether the transaction was induced by misrepresentation, even where the obligation is termed unconditional” ( id. at 399 [internal quotation marks and citations omitted]; see also Sce, 56 AD3d at 459;Delmastro v. Rescue Carting Corp., 2011 N.Y. Slip Op 30725[U] [Sup Ct Suffolk County 2011] ).
Likewise, the language of the parties' Agreement does not bar Cho's defense premised on fraudulent inducement. The Agreement provides that (Agreement ¶ 8) and that “The parties acknowledge that there are no representations or warranties except as herein provided and that this agreement contains all the terms and conditions relating to the sale of the stock” (Agreement ¶ 10)....
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