TRANSMEDIA REST v. 33 E REST

• Decision Date: 07 February 2000
• Citation: 710 N.Y.S.2d 756,184 Misc.2d 706
• Parties: TRANSMEDIA RESTAURANT CO., INC., Doing Business as TRANSMEDIA NETWORK, INC., Plaintiff,<BR>v.<BR>33 E. 61ST STREET RESTAURANT CORP., Doing Business as GERTRUDE'S, Defendant.
• Court: New York Supreme Court

184 Misc.2d 706

710 N.Y.S.2d 756

TRANSMEDIA RESTAURANT CO., INC., Doing Business as TRANSMEDIA NETWORK, INC., Plaintiff,

v.33 E. 61ST STREET RESTAURANT CORP., Doing Business as GERTRUDE'S, Defendant.

February 7, 2000.

Squadron, Ellenoff, Plesent & Sheinfeld, L. L. P., New York City (David M. Posner of counsel), for plaintiff.

Barry A. Wadler, New York City, for defendant.

OPINION OF THE COURT

BARRY A. COZIER, J.

Plaintiff Transmedia Restaurant Co., Inc., doing business as Transmedia Network, Inc. (Transmedia), moves for summary judgment, pursuant to CPLR 3212, on its first cause of action, in the amount of $161,731.38, together with interest from February 13, 1998; on its second cause of action for costs, expenses and reasonable attorneys' fees; and for dismissal of defendant's affirmative defenses and counterclaim.

FACTUAL ALLEGATIONS

Plaintiff is a food service network which makes cash advances to restaurants in exchange for food and beverage credits (Transmedia Credits). These credits are redeemed by Transmedia cardmembers who receive a 25% discount each time they dine at a participating restaurant. The full amount of the cardmember's restaurant check, less taxes and gratuities, is applied to the reduction of the outstanding Transmedia Credit balance of the participating restaurant.

In April 1995, Transmedia entered into a written agreement (the April Agreement) with 33 East 61st Street Restaurant Corp. (the Corporation), doing business as L'Orangerie. The April Agreement, executed by Sylvain Fareri, the Corporation's president, provided for a cash advance of $60,000 to the Corporation, which was to be repaid in $120,000 of food and beverage credits at the restaurant located at 33 East 61st Street, New York, New York (the subject premises).

In February 1997, the April Agreement was amended with the Corporation's new shareholders (the First Amendment), who intended to reopen the restaurant at the subject premises under the name Gertrude's. The First Amendment reflected the current outstanding balance of food and beverage credits to be $244,858.71. It also provided that all Transmedia charges would be processed, pursuant to the terms of the April Agreement, up to an aggregate amount of $10,000. For the first 12 months of Gertrude's operations, 65% of all Transmedia charges in excess of $10,000 per month were to be remitted to the restaurant. For the second 12-month period, the restaurant would receive 65% of all Transmedia charges in excess of $15,000 per month. The First Amendment was conditioned upon the commencement of restaurant operations at the subject premises on or prior to June 20, 1997.

On May 9, 1997, the parties executed another amendment to the April Agreement (the Second Amendment), which was identical to the First Amendment, except that the contingency contained therein was extended to August 1, 1997. Gertrude's opened in July 1997.

On February 6, 1998, a letter was sent, on behalf of Transmedia, to the Corporation advising that it was in default of the April Agreement (the Letter) due to its alleged failure to honor the Transmedia cards presented by Transmedia cardmembers. Pursuant to the terms of the agreement, Transmedia demanded immediate payment of $161,731.38, representing 75% of the Corporation's outstanding Transmedia Credits.

Since the Corporation did not pay any portion of the amount demanded in the Letter, Transmedia commenced this action to recover $161,731.38, together with costs, expenses, and counsel fees. The Corporation interposed an answer, which contained four affirmative defenses and three counterclaims.

In support of its motion for summary judgment, Elliot Merberg, Transmedia's vice-president, submits, inter alia, the April Agreement, the First and Second Amendments, and defendant's answer to plaintiff's first set of interrogatories, dated August 10, 1998. Relying on the latter document, Merberg argues that the Corporation does not deny its execution of the April Agreement or the First Amendment, and thus cannot now object to the amount of Transmedia Credits which it acknowledged in the First Amendment.

Transmedia also contends that, contrary to the Corporation's allegations, the April Agreement was not usurious, pursuant to Penal Law § 190.40, since it does not require absolute repayment of the amount advanced by Transmedia. With respect to the Corporation's present objection to the calculation of Transmedia Credits set forth in the First Amendment, Transmedia notes that the Corporation, under the new ownership, had two separate opportunities to question the accuracy of the amount, i.e., upon the signing of the First and Second Amendments, and yet failed to do so. Therefore, Transmedia argues that the Corporation is now bound to the amount that it acknowledged in these agreements. Additionally, Transmedia maintains that it properly reduced the Corporation's Transmedia Credits in accordance with the language in the First and Second Amendments.

In opposition, Joel Seiden, the Corporation's vice-president, admits that after signing an agreement to purchase the Corporation, he negotiated the Corporation's outstanding debts, including that with Transmedia, and executed the First Agreement. He, however, maintains that his acknowledgment of the amount of Transmedia Credits owed by the Corporation was based on the balance shown on the monthly statements received from Transmedia. He now contends that the amount was erroneous, and seeks a modification of the amount based upon, inter alia, his alleged unilateral mistake of fact.

Seiden also argues that Transmedia's final computation of the Corporation's outstanding Transmedia Credits is inaccurate. He contends that, although the language in the First Amendment is silent as to what is to be done with the remaining 35% of all monthly Transmedia charges made in excess of the first $10,000, he understood it to mean that the remaining amount would be applied to reduce the balance, which Transmedia did not do. He also maintains that Transmedia did not reduce the Corporation's Transmedia Credits by any Transmedia charges submitted after October 1997.

Lastly, Seiden argues that the April Agreement was usurious, pursuant to Penal Law § 190.40, since the repayment of the $60,000 cash advancement in $120,000 in food and beverages essentially is a loan at 100% interest.

In reply, Transmedia argues that the April Agreement does not constitute a loan agreement, and thus that the usury laws do not apply. It further maintains that, even assuming, arguendo, that the April Agreement was considered a loan, it was not usurious, since the requisite intent to enter into a usurious agreement was not present, and also that Transmedia bore a substantial risk that it would not be repaid.

DISCUSSION

The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact. (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851 [1985].) Once a prima facie showing has been made, the burden then shifts to the opposing party, who must proffer evidence in admissible form establishing that an issue of fact exists, warranting a trial of the action. (Alvarez v Prospect Hosp., 68 NY2d 320 [1986].)

The Corporation acknowledges that it executed the April Agreement and the First Amendment. Generally, "the signer of a written agreement is conclusively bound by its terms unless there is a showing of fraud, duress or some other wrongful act on the part of any party to the contract," which the Corporation has failed to do. (Dunkin' Donuts v Liberatore, 138 AD2d 559, 560 [2d Dept 1988].) Notwithstanding, the Corporation seeks to be relieved of its obligation to pay the amount of Transmedia Credits acknowledged by it in the First Amendment, claiming that it was based upon Seiden's unilateral mistaken belief that the amount therein was the correct outstanding balance. As part of its burden in seeking to void the Corporation's liability under the First Amendment based on unilateral mistake of fact, the Corporation is required to show that, despite the exercise of ordinary care, it had no knowledge of the mistake. (See, Desiderato v N & A Taxi, 190 AD2d 250, 253 [1st Dept 1993].) However, while Seiden, the Corporation's vice-president, acknowledges that he entered into negotiations with Transmedia regarding the Corporation's outstanding debt, he argues that he relied on the monthly statements received by the Corporation from Transmedia. Prior to executing the First Amendment, Seiden could have exercised ordinary care by questioning the accuracy of the balance, which admittedly he did not do. His...