Email
Joel Cohen

Articles

SUMMARY JUDGMENT IN A COMMERCIAL COLLECTION LAWSUIT

PART I

Under the Uniform Commercial Code, "[t]he obligation of the seller is to transfer and deliver and that of the buyer is to accept and pay in accordance with the contract." U.C.C. § 2-301. [FN1]

FN1 The buyer's obligation to make payment is considered so important that even anti-trust statutes may not be pleaded in defense of an action for goods sold and delivered or services rendered, TKD Elecs. Corp. v. M & A Enters., 172 A.D.2d 603, 568 N.Y.S.2d 424 (1991). The rationale is expressed in X.L.O. Concrete Corp. v. Rivergate Corp., 83 N.Y.2d 513, 517-18, 611 N.Y.S.2d 786, 789 (1994):

"The interposition of antitrust defenses in contract actions is not favored (see, Kelly v. Kosuga, 358 U.S. 516, 518, 79 S.Ct. 429, 430-431, 3L.Ed.2d 475). The concern is that "successful interposition of antitrust defenses is too likely to enrich parties who reap the benefits of a contract and then seek to avoid the corresponding burdens" (Viacom Intl. v. Tandem Prods., 526 F.2d 593, 599). Nevertheless, antitrust defenses will be upheld in cases where a court's judgment would result in enforcement of the "precise conduct made unlawful by the Act" (Kelly v. Kosuga, 358 U.S. 516, 520, 79 S.Ct. 429, 432, supra; see, Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 79, 102 S.Ct. 851, 857, 70 L.Ed.2d 833). Beyond that point, however, "courts are to be guided by the overriding general policy * * * 'of preventing people from getting other people's property for nothing when they purport to be buying it' " (Kelly, 358 U.S., at 520-521, 79 Sect., at 432, supra [quoting Continental Wall Paper Co. v. Voight & Sons Co., 212 U.S. 227, 271, 29 S.Ct. 280, 296, 53 L.Ed. 486] [Holmes, J., dissenting]).). Thus, a contract which is legal on its face and does not call for unlawful conduct in its performance is not voidable simply because it resulted from an antitrust conspiracy (see, Kelly, 358 U.S., at 521, 79 S.Ct., at 432, supra Connolly v. Union Sewer Pipe Co., 184 U.S. 540, 547-550, 22 S.Ct. 431, 434- 436, 46 L.Ed. 679; Viacom, 526 F.2d at 598, supra; but see, Continental Wall Paper, 212 U.S. 227, 29 S.Ct. 280, supra)."

In an action for goods sold and accepted, the practitioner can expect that the defendant-buyer will generally deny the allegations of the complaint. The defendant will raise various defenses and interpose counterclaims for breaches of warranties and damages. The defendant may demand a bill of particulars or propound interrogatories and request the production of documents. The defendant may also serve a notice to examine the plaintiff-seller before trial (EBT).

A motion for summary judgment allows the plaintiff-seller to obtain a judgment expeditiously and to avoid an appearance for an EBT or a trial. Summary judgment enables the Court "to deal with issues quickly; to get at the real substance of facts, about which there is no controversy which a judge would take seriously." [County Transp. Co. v. Maltbie, 191 Misc. 391, 393, 77 N.Y.S.2d 746, 747 (N.Y.Sup.Ct. 1948).] In Curry v. Mackenzie, 239 N.Y. 267, 270 (1925), Justice Benjamin Cardozo stated that, for the plaintiff to prevail on a summary judgment motion, "the court must be convinced that the issue is not genuine, but feigned, and that there is in truth nothing to be tried." Summary judgment prevents the defendant from utilizing its general denial, even in a verified answer, for the "mere purpose of delay frequently disastrous to honest creditors." [See General Inv. Co. v. Interborough R.T. Co., 235 N.Y. 133, 138 (1923)] "The purpose of…[summary judgment] was to enable a creditor speedily to obtain a judgment by preventing the interposition of unmeritorious defenses for purposes of delay." [Applebaum v. Gross, 117 Misc. 140, 148, 191 N.Y.S. 710, 715 (N.Y.Sup.Ct. 1921), aff'd, 200 A.D. 914, 192 N.Y.S. 913.]

A motion for summary judgment offers three distinct possibilities: (a) the defendant will not oppose the motion and it will be granted by default, or (b) the defendant's attorney will settle the action, usually on the eve of the motion for summary judgment;

Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853, 487 N.Y.S.2d 316 (1985), states the first rule of a summary judgment motion:

"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 eliminate any material issues of fact from the case (see, Zuckerman v City of New York, 49 NY2d 557, 562; Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395, 404). Failure to make such showing requires denial of the motion, regardless of the sufficiency of the opposing papers (Matter of Redemption Church of Christ v Williams, 84 AD2d 648, 649; Greenberg v Manlon Realty, 43 AD2d 968, 969)."

The granting of a summary judgment motion "is the procedural equivalent of a trial." [Falk v. Goodman, 7 N.Y.2d 87, 91, 195 N.Y.S.2d 645, 647 (1959)] In order to grant the drastic remedy of summary judgment 'it must clearly appear that no material and triable issue of fact is presented…[since] issue-finding, rather than issue-determination, is the key…." [Sillman v. Twentieth Century-Fox Film Corp., 3 N.Y.2d 395, 404, 165 N.Y.S.2d 498, 505 (1957)] The testimony of the non-moving party must be accepted as true and a decision on the motion must be made on the version of the facts most favorable to that party, Strychalski v. Mekus, 54 A.D.2d 1068, 1069, 388 N.Y.S.2d 969, 971 (1976).

The memorandum of law that accompanies a motion for summary judgment in a goods sold and accepted case with only one defense would state the facts and law, as follows: [FN2]

FN2 All of the footnotes contained in the quoted affidavits and memoranda of law, infra, are shown by letters of the alphabet in parenthesis for clarity, but any exhibits that were annexed to these affidavits are not included in this article.

FACTS

Plaintiff moves for summary judgment in this action to recover $7,908.60 for goods sold and accepted.

THE LAW

POINT

PLAINTIFF IS ENTITLED TO SUMMARY JUDGMENT AS A MATTER OF LAW

Plaintiff moves for summary judgment on its cause of action for goods sold in the sum of $7,908.60.

The defendant's answer consists of a general denial and an affirmative defense.

Between July 22, 1999, and August 26, 1999, plaintiff made thirty-four (34) sales of grocery products to defendant totaling $8,160.75. Exhibit "A" [FN(a)] are plaintiff's thirty-four (34) in-voices/delivery receipts. After credits of $252.15 are deducted (Exhibit "B"), the balance due is $7,908.60 (Exhibit "C"). The moving affidavit and the documentary evidence is the necessary proof in admissible form sufficient to establish plaintiff's prima facie case, Friends of Animals v. Associated Fur Mfrs., 46 N.Y.2d 1065, 1067 (1979)

FN(a) All exhibit references are to the plaintiff's moving affidavit.

To defeat a summary judgment motion, defendant must produce evidentiary proof in admissible form, Id. at 1067, 1068; or as Di Sabato v. Soffes, 9 A.D.2d 297, 301 (1959), held, a defendant who opposes a motion for summary judgment must assemble, lay bare and reveal its proofs, in order to show that it can establish its defense at trial.

The defendant cannot defeat this summary judgment motion by the general denial contained in its answer, Iandoli v. Lange, 35 A.D.2d 793 (1970); nor can the defendant defeat this summary judgment motion by repeating the allegations contained in its answer, verified or unverified, Indig v. Finkelstein, 23 N.Y.2d 728, 729 (1968); nor can the defendant defeat this summary judgment motion by bald conclusory assertions, even if believable, Capri Jewelry, Inc. v. Chayavi, 117 A.D.2d 464, 467-68 (1986). [FN(b)]

FN(b) The first defense is that the complaint fails to state a cause of action. The complaint in this action states an adequate cause of action for an endorsed complaint for goods sold in the Civil Court, City Civ.Ct.Act §§ 902, 903.

A summary judgment memorandum of law in an action based upon checks given in payment for goods sold and accepted, where there are multiple defenses, would state the facts and law, as follows:

FACTS

Plaintiff sued the defendant to recover the sum of $70,000.00 pleading seven causes of action upon seven checks made by the defendant to the plaintiff. Each check is in the sum of $10,000.00 and dated between October 15, 1997, and November 28, 1997.

The seven checks were part of a series of eight checks of $10,000.00 each, totaling $80,000.00, given in payment for a shipment of $79,674,00 worth of feta cheese that was shipped by plaintiff in Greece to defendant in Queens, New York, and received by defendant on September 12, 1997.

The first $10,000.00 check cleared defendant's bank. The seven remaining checks of $10,000.00 each were returned by defendant's bank for insufficient funds after presentation on the due dates. [FN(a)]

FN(a) Defendant's transmittal letter and copies of the eight checks are annexed as Exhibits "D" and "E" respectively. All exhibit references are to the moving affidavit.

On February 12, 1998, plaintiff received a letter from defendant enclosing a new series of twenty checks, each in the sum of $3,000.00, for a total of $60,000.00. The letter stated that defendant was having a problem with the feta cheese and requested a deduction of $10,000.00 from the unpaid balance of due on the seven checks of $70,000.00. [FN(b)]

FN(b) See Exhibit "F."

THE LAW

POINT

PLAINTIFF IS ENTITLED TO SUMMARY JUDGMENT AS A MATTER OF LAW

Plaintiff has made out its prima facie case by submission of the seven unpaid checks and the supporting affidavit of the plaintiff, 812 Broadway Enters., Inc. v. Stephen Mallory Assocs., Inc., 210 A.D.2d 30, 620 N.Y.S.2d 939 (1994).

The defendant admits, in its amended answer, that it delivered the seven checks to the plaintiff [1]. Plaintiff's production of the seven checks entitles the plaintiff to recover on the checks, unless the defendant can establish a defense, Uniform Commercial Code (U.C.C.) §3-307(1)(2). [FN(c)]

FN(c) 3-307. Burden of Establishing Signatures, Defenses and Due Course.

(1) Unless specifically denied in the pleadings each signature on an instrument is admitted. When the effectiveness of a signature is put in issue.

(a) the burden of establishing it is on the party claiming under the signature; but

(b) the signature is presumed to be genuine or authorized except where the action is to enforce the obligation of a purported signer who has died or become incompetent before proof is required.

(2) When signatures are admitted or established, production of the instrument entitles a holder to recover on it unless the defendant establishes a defense. [Emphasis supplied.]

(3) After it is shown that a defense exists a person claiming the rights of a holder in due course has the burden of establishing that he or some person under whom he claims is in all respects a holder in due course.

The defendant raises four affirmative defenses in its amended answer.

The first defense is that $10,000.00 was paid towards the purchase price of the goods. This is true. This payment left $70,000.00 due upon the seven unpaid checks.

The second defense is that the defendant notified plaintiff in writing regarding $25,000.00 worth of unmerchantable cheese "after defendant's customers returned the products." [FN(d)]

FN(d) See 3 of the amended answer dated May 5, 1998. However, see 3 of the defendant's original answer dated May 4, 1998, which alleged damages of $10,000.00. Both answers are annexed as Exhibit "A."

The notice that plaintiff received was defendant's letter of dated February 9, 1998. It enclosed a new series of twenty $3,000.00 checks with a request for a $10,000.00 deduction for problems with the cheese from the $70,00.00 remaining unpaid. [FN(e)]

FN(e) See Exhibit "F."

U.C.C. § 2-607(1) requires the buyer to pay at the contract rate for any goods accepted; unless, pursuant to U.C.C. § 2-607(3)(a), the buyer notifies the seller of a breach within a reasonable time after he discovers or should have discovered any breach. U.C.C. § 2-607(4) places the burden on the buyer to establish any breach with respect to goods accepted. [FN(f)]

FN(f) UCC § 2-607 states:

(1) The buyer must pay at the contract rate for any goods accepted.

(2) Acceptance of goods by the buyer precludes rejection of the goods accepted and if made with knowledge of a non-conformity cannot be revoked because of it unless the acceptance was on the reasonable assumption that the non-conformity would be seasonably cured but acceptance does not of itself impair any other remedy provided by this Article for non-conformity.

(3) Where a tender has been accepted

(a) the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy; and

(b) if the claim is one for infringement or the like (subsection (3) of Section 2-312) and the buyer is sued as a result of such a breach he must so notify the seller within a reasonable time after he receives notice of the litigation or be barred from any remedy over for liability established by the litigation.

(4) The burden is on the buyer to establish any breach with respect to the goods accepted.

(2-608. Revocation of Acceptance in Whole or in Part

(1) The buyer may revoke his acceptance of a lot or commercial unit whose non- conformity substantially impairs its value to him if he has accepted it

(a) on the reasonable assumption that its non-conformity would be cured and it has not been seasonably cured; or

(b) without discovery of such non-conformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller's assurances.

(2) Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. It is not effective until the buyer notifies the seller of it.

(3) A buyer who so revokes has the same rights and duties with regard to the goods involved as if he had rejected them.

Cheese is a perishable commodity that can be inspected upon delivery and its quality ascertained immediately, Pease v. Copp, 67 Barb. 132 (1860), and Maggioros v. Edson Bros., 164 N.Y.S. 377, 379 (N.Y.Sup.Ct. 1917). The defendant in the instant action could have ascertained any alleged defect in the cheese immediately upon receipt on or about September 12, 1997, simply by opening up the barrels or cartons and examining the cheese, see DiDomenico Packaging Corp. v. Nails Again, Inc., 139 Misc. 2d 525, 526, 527 N.Y.S.2d 676, 677 (N.Y.Civ.Ct. 1988).

The defendant did nothing to notify the plaintiff of an alleged defect in the goods until February 8, 1998, five months after receipt of the cheese and two months after the last of the seven checks sued upon had been returned unpaid for insufficient funds. A five-month lapse of time is unreasonable, International Paper Co. v. Margrove Inc., 75 Misc. 2d 763, 765, 348 N.Y.S.2d 916, 919 (N.Y.Sup.Ct. 1973).

The defendant's delay in giving the plaintiff notice of the alleged defect in the cheese prevents the defendant from raising a defense of unmerchantability and bars the defendant from raising a triable issue of fact on this motion for summary judgment, see G. & D. Poultry Farms, Inc. v. Long Island Butter & Egg Co., 33 A.D.2d 685, 306 N.Y.S.2d 243 (1969), and Mount Vernon Mills, Inc. v. Murphy Textile Mills, 148 A.D.2d 389, 539 N.Y.S.2d 334 (1989).

The third affirmative defense that the plaintiff is an unauthorized foreign corporation and may not maintain this action is not tenable. There is a presumption that a foreign corporation conducts its business in the State of its organization, Ascher Corp. v. Horvath, 35 Misc. 2d 375, 377, 231 N.Y.S.2d 676, 678 (N.Y.Sup.Ct. 1962). This plaintiff does not maintain any offices or warehouses in New York; has no New York bank accounts and send no officers or employers regularly into the State to perform or oversee the sale of goods. The corporate activities must be more than the occasional visits of plaintiff's officer to New York City. The burden of proof is on defendant to show that the plaintiff is doing business in the State of New York, Dixie Dinettes, Inc. v. Schaller's Furniture, 71 Misc. 2d 102, 103, 335 N.Y.S.2d 632, 635 (N.Y.Civ.Ct. 1972).

The fourth defense is that the plaintiff agreed to credit the defendant with any returned cheese for which reason the defendant paid $10,000.00 on account. The plaintiff's President has denied this assertion. An offer to return goods must be made within a reasonable time. The undisputed facts are that the defendant received the cheese on September 12, 1997, but made no inspection of this perishable commodity at that time. This is not a case where actual use of the product is necessary to disclose a defect, or where the defendant would be dependent upon reports from its customers to ascertain a defect. Any defect could have been ascertained by inspection upon arrival of the cheese in September 1997. The defendant's failure to inspect the cheese immediately upon its receipt and to request a return at that time bars the defendant from revoking its acceptance of the cheese and relying upon an alleged offer of return, see House of Price v. Kliegman Bros., 126 N.Y.S.2d 764, 767-769 (N.Y.Sup.Ct. 1953), aff'd, 283 A.D. 1037, 131 N.Y.S.2d. 875 (1954).

To defeat a summary judgment motion, a defendant must assemble, lay bare and reveal its proofs, in order to show that it can establish its defense at trial, Di Sabato v. Soffes, 9 A.D.2d 297, 301, 193 N.Y.S.2d 184, 189 (1959).

The defendant cannot defeat this summary judgment motion by the general denial contained in its answer, Iandoli v. Lange, 35 A.D.2d 793, 315 N.Y.S.2d 752 (1970); nor by repeating the allegations contained in its answer, Indig v. Finkelstein, 23 N.Y.2d 728, 296 N.Y.S.2d 370 (1968); nor by bald conclusory assertions, even if believable, Capri Jewelry, Inc. v. Chayavi, 117 A.D.2d 464, 468, 503 N.Y.S.2d 370, 373 (1986).

The defenses raised by the defendant are neither genuine nor substantial and are insufficient to defeat plaintiff's motion for summary judgment, Hanrog Distributing Corp. v. Hanioti, 10 Misc. 2d 659, 54 N.Y.S.2d 500 (N.Y.Sup.Ct. 1945).

Back to Top

SUMMARY JUDGMENT IN A COMMERCIAL COLLECTION LAWSUIT

PART II

(c) the defendant will oppose the motion for summary judgment.

An example of a contested motion for summary judgment in a commercial action is Auriga Plasticos, S.A. De C.V. (AURIGA) v. Allison Video, Ltd. (ALLISON VIDEO) in which the plaintiff-seller, AURIGA, a Mexican corporation, sued the defendant-buyer, ALLISON VIDEO, a New York corporation, in the Supreme Court, County of Suffolk, (Index No. 10116/1997), for goods sold.

The amended complaint [FN3], served July 7, 1997, alleged that: [FN4]

FN3 The amended complaint and the other filed papers in this lawsuit are quoted in their original form except that, for the purpose of clarity, non-essential material such as wherefore clauses and paragraph numbers in the affidavits have been omitted and except that syntax, spelling and factual errors in the plaintiff's affidavits and memoranda of law have been corrected. Errors in the defendant's opposing papers have not been corrected and appear in their original form.

FN4 The original complaint did not include the first date of sale. The defendant moved to compel a more definite statement and withdrew the motion when plaintiff served its amended complaint.

1. At all the times hereinafter mentioned, plaintiff was and still is a foreign corporation.

2. At all the times hereinafter mentioned, defendant was and still is a New York corporation whose principal office is located in the County of Suffolk.

3. On or about and between November 15, 1995, and December 5, 1995, plaintiff, at the special instance and request of the defendant, sold and delivered to the defendant, and the defendant accepted, certain goods, wares and merchandise at the agreed price and reasonable value of $167,360.00.

4. No part thereof has been paid although duly demanded and there now remains due and owing to plaintiff from the defendant the sum of $167,360.00 with interest thereon from December 5, 1995.

The defendant's amended answer consisted of the usual DKI with respect to paragraph "1" of the complaint, an admission of paragraph "2" and the usual general denial of paragraph "3" and "4." A notice to take the deposition (EBT) of the plaintiff was served with the answer.

Plaintiff moved for summary judgment by the service of a notice of motion returnable March 23, 1998. [FN5]

FN5 The motion included a request to amend the plaintiff's name to correct a misnomer. Material relating to the amendment of the plaintiff's name has been omitted from the moving affidavit and from the memorandum of law, since that portion of the motion was unopposed and had no bearing on the summary judgment motion.

The moving affidavit of the plaintiff recited:

I am the Credit Manager of the plaintiff, a corporation organized under the laws of the Republic of Mexico, and I have personal knowledge of the facts of this matter.

Plaintiff's amended complaint seek to recover the sum of $167,360.00 from the defendant for goods sold to and accepted by defendant between November 15, 1995, and December 5, 1995.

The defendant appeared in this action and served its amended answer generally denying the allegations of the complaint, except admitting that the defendant is a new York corporation whose principal office is in Suffolk County.

Plaintiff's United States sales agent obtained an order on behalf of the plaintiff from the defendant to sell 4,536,000 cassette shells [FN(a)] to the defendant at a price of eight(8) cents for each.

FN(a) A cassette is a small, flat case containing two reels and a length of magnetic tape that winds between them, used in audio or video tape recorder or players. A shell is the cassette without the tape.

shell to be delivered to the defendant in seven (7) truckloads of 648,000 shells each on specified delivery dates. Exhibit "1" annexed is a November 6, 1995, fax from plaintiff's sales agent to defendant confirming the sale, the defendant's purchase order dated November 8, 1995, confirming the order, and plaintiff's confirming fax dated November 8, 1995, to defendant reconfirming the order.

The delivery schedule was changed by two faxes (Exhibit "2") from plaintiff's sales agent to defendant. The first fax, dated November 9, 1995, confirmed that the defendant would pick up the first shipment from a warehouse in Indianapolis, Indiana, on November 10, 1995. The second fax, dated November 10, 1995, again confirmed pick up of the first shipment on November 10, 1995, by the defendant and the changes in the delivery schedule.

The first shipment was picked up by the defendant on November 10, 1995, at the warehouse in Indianapolis, Indiana, and payment therefor was received by plaintiff by defendant's check dated February 8, 1996. Exhibit "3" annexed is plaintiff's invoice for the first delivery in the sum of $51,840.00, the signed delivery receipt and a copy of defendant's check.

The second shipment was delivered to a common carrier on November 13, 1995, received by defendant in Harrison, New Jersey, on November 16, 1995, and paid for by defendant's check dated January 25, 1996. Exhibit "4" annexed is plaintiff's invoice for the second delivery in the sum of $51,840.00, the signed delivery receipt and a copy of defendant's check.

The third shipment was delivered to a common carrier on November 16, 1995, received by defendant in Harrison, New Jersey, on November 20, 1995, and paid for by defendant's check dated March 13, 1996. Exhibit "5" annexed is plaintiff's invoice in the sum of $51,840.00 for the third delivery, the signed delivery receipt and a copy of defendant's check.

The fourth shipment was delivered to a common carrier on November 22, 1995, received by defendant in Harrison, New Jersey, on December 8, 1995, and partially paid for by defendant's two checks dated June 7, 1996, and July 3, 1996, each in the sum of $20,000.00. Exhibit "6" annexed is plaintiff's invoice in the sum of $51,840.00 for the fourth delivery, the signed delivery receipt and a copies of defendant's two checks totaling $40,000.00. A balance of $11,840.00 remains due and unpaid on the plaintiff's invoice #10895 dated November 21, 1995.

The fifth shipment was delivered to a common carrier on November 30, 1995, and received by defendant in Harrison, New Jersey, on December 4, 1995. Exhibit "7" annexed is plaintiff's invoice #10938 in the sum of $51,840.00 for the fifth delivery and the signed delivery receipt. The entire amount of invoice #10939 in the sum of $51,40.00 remains unpaid.

The sixth shipment was delivered to a common carrier on December 4, 1995, and received by defendant in Harrison, New Jersey, on December 7, 1995. Exhibit "8" annexed is plaintiff's invoice #10970 in the sum of $51,840.00 for the sixth delivery and the signed delivery receipt. The entire amount of invoice #10970 in the sum of $51,40.00 remains unpaid.

The seventh shipment was delivered to a common carrier on December 7, 1995, and received by defendant in Harrison, New Jersey, on December 11, 1995. Exhibit "9" annexed is plaintiff's invoice #11056 in the sum of $51,840.00 for the seventh delivery and the signed delivery receipt. The entire amount of invoice #11056 in the sum of $51,40.00 remains unpaid.

The defendant is indebted to the plaintiff, as follows:

Invoice No. Exhibit No. Amount $
#10895 #6 $ 11,840.00
#10939 #7 $ 51,840.00
#10970 #8 $ 51,840.00
#11056 #9 $ 51,840.00

for a total of $167,360.00. No part of the said sum of $167,360.00 has been paid despite repeated demand for payment.

Deponent believes that the cause of action is established sufficiently to warrant the Court, as a matter of law, to direct judgment in plaintiff's favor and that there is no defense to the cause of action set forth in the plaintiff's amended complaint herein.

The motion for summary judgment was supported by plaintiff's memorandum of law that set forth the facts and the law:

FACTS

Pursuant to a written order, between November 10, 1995, and December 11, 1995, plaintiff sold and delivered to defendant 4,536,000 cassette shells. Defendant paid for the first three shipments. Defendant did not pay the balance due on the fourth shipment nor did the defendant pay the amounts due on the fifth, sixth and seventh shipments. The plaintiff's amended complaint seeks to recover from defendant the sum of $167,360.00, the unpaid amount due for the cassette shells that were sold and delivered to the defendant and accepted by it. Defendant's answer generally denies the sale, delivery and acceptance of the cassette shells.

THE LAW

POINT I

PLAINTIFF IS ENTITLED TO SUMMARY JUDGMENT AS A MATTER OF LAW

Defendant, a buyer of goods from plaintiff, must pay the contract price of the goods it accepted, U.C.C.§2-607(1).

The documentary evidence consists of the written purchase order and plaintiff's confirmations (Exhibit "1"), [FN(a)] faxes from plaintiff to defendant changing the delivery dates (Exhibit "2") and the invoices and proofs of delivery for each of the seven shipments of cassette shells (Exhibits "3" through "9") with copies of defendant's checks given in payment of the first three shipments and partial payment of the fourth shipment.

FN(a) All exhibit references are to the moving papers.

The moving affidavit and the documentary evidence is the necessary proof in admissible form sufficient to establish plaintiff's prima facie case, Friends of Animals v. Associated Fur Mfrs., 46 N.Y.2d 1065, 1067 (1979).

To defeat a summary judgment motion, defendant must produce evidentiary proof in admissible form, Id. at 1067, 1068; or as Di Sabato v. Soffes, 9 A.D.2d 297, 301 (1959), held, a defendant who opposes a motion for summary judgment must assemble, lay bare and reveal its proofs, in order to show that it can establish its defense at trial.

The defendant cannot defeat this summary judgment motion by the general denial contained in its answer, Iandoli v. Lange, 35 A.D.2d 793 (1970); nor can the defendant defeat this summary judgment motion by repeating the allegations contained in its answer, verified or unverified, Indig v. Finkelstein, 23 N.Y.2d 728, 729 (1968); nor can the defendant defeat this summary judgment motion by bald conclusory assertions, even if believable, Capri Jewelry, Inc. v. Chayavi, 117 A.D.2d 464, 467-68 (1986).

The defendant served an affidavit opposing the motion for summary judgment with a cross-motion to amend its answer to include a counterclaim. The ground for the cross-motion was "that defendant's amended counterclaim is so closely related to plaintiff's claims that it would be counter productive of judicial economy to require defendant to commence a separate action…." The defendant's attorney also served his own opposing affirmation noting the plaintiff's failure to appear for the EBT noticed by the defendant despite numerous adjournments obtained by plaintiff's attorney warranted denial of the summary judgment motion. [FN6]

FN6 CPLR 3214(b) reads: "Service of a notice of motion under rule 3211, 3212, or section 3213 stays disclosure until determination of the motion unless the court orders otherwise."

The opposing affidavit of the defendant recited:

I am the President of Allison Video, Ltd. (hereafter "Allison"), a corporation organized under the laws of the State of New York. I have personal knowledge of the facts of this matter. I submit this affidavit in opposition to plaintiff's motion for summary judgment and in support of Allison's cross-motion to amend its answer to add a counterclaim for breach of contract.

Plaintiff's motion for summary judgment must be denied. Although Allison did enter a sales agreement to purchase cassette shells from plaintiff, plaintiff's continual breaching of the purchase agreement by performing the sales order in a nonconforming manner caused Allison to incur substantial costs which significantly diminish and negate plaintiff's claim. When Allison agreed to purchase the cassette shells, plaintiff promised to ship the shells in plain packaging in seven shipments to be completed by November 27, 1995. However, plaintiff failed to meet these requirements. Instead, plaintiff sent a large number of the cassettes in the wrong packaging and continually made its deliveries late, even after it unilaterally revised the delivery dates. These breaches of the sales agreement caused Allison to incur substantial costs and damages as Allison had to repackage the cassettes and make extraordinary efforts to meet its customers' demands for the cassettes despite plaintiff's failure to deliver the cassettes in a timely manner. Accordingly, plaintiff's motion for summary judgment should be denied.

Allison is engaged, inter alia, in the business of manufacturing, selling and distributing cassette shells. When Allison cannot meet customer demand through its own manufacturing efforts it purchases the necessary cassette shells from other manufacturers.

On or about November 6, 1995, Allison, in order to meet increased customer demand, contacted plaintiff's sales agent, Auriga Aurex, Inc., to arrange the purchase of 4,536,000 cassette shells at eight cents per shell. During negotiations with Auriga Aurex's sales representative, Dennis Schleich, I stressed that Allison needed the cassette shells by November 27, 1995, in order to meet contracts it had with its customers. Moreover, I stated that since Allison would upon receipt of the cassettes immediately re-ship the cassettes to its customers the cassettes had to be in plain packaging. Schleich promised that plaintiff could meet these requirements. Based upon these assurances, Allison agreed to purchase the 4,536,000 cassette shells pursuant to the following delivery terms: the cassettes would be shipped in brick-pak or white boxes, not Auriga packaging, and the deliveries to Allison's warehouse in Harrison, New Jersey would take place on November 10, 13, 15, 17, 20, 22 and 27. This agreement was memorialized in the purchase order Allison issued to Auriga Aurex on November 8, 1995. (See Exhibit A: Purchase Order).

Almost immediately, plaintiff began to breach the terms of the sales agreement causing Allison to incur increased costs. First, on or about November 9, 1995, less than twenty-four hours before the first shipment was to be delivered, plaintiff informed me that it would not be able to deliver the first shipment to Allison's warehouse as it had promised. Despite my protests that the missed shipment would cause Allison to lose substantial sales and damage its relationships with its customers, plaintiff's representatives stated that plaintiff could not and would not meet the terms of the initial sales agreement, but that the necessary number of cassette shells were located in Indiana if Allison wanted to pick them up itself.

If Allison did not obtain the cassette shells it would have sustained substantial damages because it would have breached its own contracts with its customers. Moreover, there was no other means for obtaining the cassettes on the less than twenty-four hours notice provided by the plaintiff. Thus, in order to mitigate the damages Allison would incur as a result of plaintiff's first breach of the sales contract, I arranged to have Allison pick up the cassettes in Indiana. This cost Allison approximately $2,500.00.

After Allison arranged and paid for picking up the first shipment in Indiana, plaintiff continued to breach the terms of the purchase agreement by delivering the next six shipments late. Despite my protests, plaintiff unilaterally revised the delivery dates of the subsequent six shipments from commencing November 13 and ending November 27, 1995, to six shipments commencing on November 20 and ending December 8, 1995.

Moreover, plaintiff did not even meet its own unilaterally revised delivery dates. Allison did not receive the fourth shipment until December 8, 1995, approximately 21 days after the originally agreed upon delivery date of November 17, 1995, and approximately 11 days after plaintiff's unilaterally revised delivery date of November 27, 1995. The fifth shipment was not received until December 4, 1995, approximately 14 days after the originally agreed upon delivery date of November 20, 1995, and approximately 4 days after plaintiff's unilaterally revised delivery date of November 30, 1995. The sixth shipment was not received until December 7, 1994, approximately 15 days after the originally agreed upon delivery date of November 22, 1995, and approximately 3 days after the plaintiff's unilaterally revised delivery date of December 4, 1995. Finally, the seventh shipment was not received until December 11, 1995, approximately 14 days after the originally agreed upon delivery date of November 27, 1995, and approximately 3 days after the plaintiff's unilaterally revised delivery date of December 8, 1995.

As a result of these late shipments, Allison incurred substantial costs as it attempted to mitigate the damages it would sustain as a result of plaintiff's breach. Plaintiff's delayed deliveries caused Allison to breach some of its contracts with its customers and to nearly breach a large number of its other contracts. In order to decrease the number of lost customers, Allison employed various methods to satisfy its customers--despite plaintiff's breach--all of which cost Allison substantial sums of money. Allison had to offer discounts to many of its customers in return for them accepting smaller or delayed shipments of cassettes. Moreover, I also scrambled to obtain cassettes from other sources to make up for the shortfall caused by plaintiff's delayed shipments. For example, I contacted Allison customers which had recently received large shipments of Allison cassettes and repurchased a large number of cassettes from their inventories so that I could then have then delivered to the customers who were supposed to receive the cassettes Allison was purchasing from plaintiff. Finally, Allison also paid increased shipping and handling costs in order to decrease the amount of turn around time between the time Allison received plaintiff's delayed deliveries and when the cassettes were shipped to Allison's customers. These efforts to mitigate the effect of plaintiff's delayed performance costs Allison approximately $20,000.00.

Despite these efforts to fulfill customer demand, many customers simply canceled their orders with Allison when Allison could not fulfill the orders in a timely manner as a result of plaintiff's delayed performance. Allison lost approximately $250,000.00 to $500,000.00 in sales orders, and profits of approximately $40,000.00 to $80,000.00.

Plaintiff also failed to ship the second and third deliveries in plain packaging as originally agreed. Since Allison was purchasing these cassettes for immediate resale the original purchase order called for plaintiff to ship the cassettes in brick-pak or white boxes, not Auriga packaging. However, in the same facsimile in which plaintiff unilaterally revised the delivery dates, it unilaterally informed us that the second and third deliveries of the cassettes would bear Auriga markings. As a result, Allison had to spend approximately $8,000.00 to open and repackage the cassettes upon receiving them from plaintiff.

During Allison's dealings with plaintiff, I continually attempted to obtain redress from the plaintiff. I called plaintiff's representative Schleich numerous times to complain about the poor treatment Allison was receiving and about the increased costs Allison was sustaining as a result of plaintiff's unilateral revisions of the purchase order, mis-packaging and delayed deliveries. Many times Schleich would simply refuse to take or return my calls. The few times I was able to speak to him, he would simply inform me that there was nothing more that he or the plaintiff could or would do and I should take whatever action I felt was necessary.

Additionally, a large number of the cassette shells delivered by plaintiff were of inferior and substandard quality. A number of Allison's customers voiced complaints that the tape only "ran" through the cassette shells with difficulty. In fact, plaintiff had to eventually replace a large number of cassette shells which Allison had sold and delivered to Cinran. As a result of these customer complaints, Allison has suffered the loss of substantial good will with its customers.

Since Allison has incurred substantial costs as a result of plaintiff's non-conforming performance in delivering the cassettes, it has meritorious counterclaims which would significantly diminish or negate plaintiff's claim. Accordingly, an award of summary judgment in favor of plaintiff is not warranted and this court should grant Allison's request to amend its answer. (See Exhibit B: Proposed amended answer).

The proposed counterclaim alleged:

4. On or about November 6, 1998, defendant and plaintiff entered into a contract in which plaintiff agreed to deliver cassette shells at an agreed price by shipping the cassette shells in plain packaging in seven deliveries to defendant's warehouse in Harrison, New Jersey, with the seven shipments to be completed on November 10, 13, 15, 17, 20, 22 and 27, 1995.

5. Plaintiff failed to meet the requirements of the contract in that it performed in a nonconforming manner.

6. Plaintiff did not deliver the first shipment to defendant's warehouse in Harrison, New Jersey. Instead, defendant had to pick up the cassette shells itself from a warehouse in Indiana.

7. Plaintiff's mis-packaged the second and third shipments. Instead of being in plain packaging the cassette shells bore Auriga markings. Defendant had to open and repackage the cassette shells.

8. Plaintiff continually delivered the shipments late. The fourth shipment was not delivered until December 8, 1995. The fifth shipment was not delivered until December 4, 1995. The sixth shipment was not delivered until December 7, 1995. The seventh shipment was not delivered until December 11, 1995.

9. As a result of plaintiff's nonconforming performance, defendant lost customers and incurred substantial costs in attempting to mitigate the damages caused by plaintiff.

10. By reason of the foregoing, defendant has been incurred in an amount to be determined at trial, but estimated to be approximately $110,000.00, exclusive of interest and costs.

Back to Top

SUMMARY JUDGMENT IN A COMMERCIAL COLLECTION LAWSUIT

PART III

The defendant also served a memorandum of law in opposition to plaintiff's motion for summary judgment and in support of its cross-motion for summary judgment setting forth two points:

PLAINTIFF IS NOT ENTITLED TO SUMMARY JUDGMENT SINCE IT PERFORMED THE CONTRACT IN A NONCONFORMING MANNER

Plaintiff's motion for summary judgment should be denied. Although Allison did enter a sales agreement to purchase cassette shells from plaintiff, plaintiff's continual breaching of the purchase agreement by performing the sales order in a nonconforming matter caused Allison to incur substantial costs of approximately $110,000.00 which significantly diminishes and negates plaintiff's claim. When Allison agreed to purchase the cassette shells, plaintiff promised to ship the shells in plain packaging in seven shipments to be completed by November 27, 1995. However, plaintiff failed to meet these requirements. Instead, plaintiff sent a large number of the cassettes in the wrong packaging and continually made its deliveries late, even after it unilaterally revised the delivery dates. These breaches of the agreement caused Allison to incur substantial costs and damages as Allison had to repackage the cassettes and make extraordinary efforts to meet its customers' demands for the cassettes despite plaintiff's failure to delivery the cassettes in a timely manner. Accordingly, plaintiff's motion for summary judgment should be denied.

Summary judgment is a drastic remedy, the procedural equivalent of trial. Epstein v. Scully, 99 A.D.2nd 713 (1st Dept. 1989). To grant a motion for summary judgment, the court must determine that there exists no material and triable issue of fact. Suffolk County Department of Services v. James M., 83 N.Y.2d 178, 182, 608 N.Y.S.2d 940 (1994); Sillman v. Twentieth Century Fox Film Corp., 3 N.Y.2d 395, 404, 165 N.Y.S.2d 498 (1957), reh'g denied, 3 N.Y.2d 941 (1957). A motion for summary judgment involves a search of the record to determine the existence of material and triable issues of fact. The strength of either party's argument is not to be decided. Cross v. Cross, 112 A.D.2d 62, 64, 491 N.Y.S.2d 353 (1st Dept. 1985). If there is any doubt as to the existence of a genuine issue of fact, the summary judgment motion must be denied. Gale v. Kessler, 93 A.D.2d 744, 461 N.Y.S.2d 295 (1st Dept. 1983).

To this end, the court's function in a summary judgment proceeding is issue finding and not issue determination. Super v. Abdelazim, 108 A.D.2d 1040, 485 N.Y.S.2d 612 (3rd Dept. 1985); Sillman v. Twentieth Century Fox Film Corp., 3 N.Y.2d at 404. Thus, on a summary judgment issue, the court is not to determine credibility, but only determine whether there arguably exists a genuine issue of fact. Computer Strategies, Inc. v. Commodore Business Machines, Inc., 105 A.D.2d 167, 483 N.Y.S.2d 716 (2nd Dept. 1984); see also Glick & Dolleck, Inc. v. Tri-Pak Export Corp., 22 N.Y.2d 439, 293 N.Y.S.2d 93 (1968).

Moreover, summary judgment may not be granted on a seller's claim for goods sold and delivered when there are unresolved factual issues concerning whether the seller breached any of the terms of the underlying sale agreement. Created Gemstone, Inc. v. Union Carbide Corp., 47 N.Y.2d 250, 253, 417 N.Y.S.2d 905, 906 (1979). Although a buyer generally must pay for any goods accepted, such acceptance does not in and of itself impair any remedy the buyer may have against the seller for nonconforming performance, including the recovery of damages. See Flick Lumber Co., Inc. v. Breton Industries, Inc., 223 A.D.2d 779, 636 N.Y.S.2d 169 (3rd Dept. 1996); Sears, Roebuck & Co. v. Galloway, 195 A.D.2d 825, 827, 600 N.Y.S.2d 773, 775 (3rd Dept. 1993); 93 N.Y.Jur2d, Sales, §§142, 234.

Where the seller's performance is nonconforming, the buyer's right to be made whole can be exercised as a claim for damages, even if the claim is made in the buyer's pleadings by way of an answer or counterclaim. See 93 N.Y.Jur2d, Sales, §§ 142, 236. Indeed, "a buyer may defeat or diminish a seller's substantive action for goods sold and delivered by interposing a valid counterclaim for breach of the underlying sales agreement." Created Gemstones, Inc. v. Union Carbide Corp., 47 N.Y.2d 250, 255, 417 N.Y.S. 2d 905, 907 (1979). Thus, where the buyer raises questions regarding the seller's performance according to his obligations under the contract, a seller may not recover the full purchase price. See Karen v. Cane, 152 Misc.2d 639, 578 N.Y.S.2d 85 (Civ. Ct. Queens Co. 1991). Accordingly, summary judgment should not be granted.

For example, in Flick Lumber Co., Inc. v. Breton Industries, Inc., 223 A.D.2d 779, 636 N.Y.S.2d 169 (3rd Dept. 1996), the court denied the seller's motion for summary judgment for the price of goods sold and delivered. The buyer had agreed to purchase and pay the seller for wood boards cut to government specifications which the buyer needed to complete a government contract. Although the seller delivered the goods it did not receive full payment. When the seller commenced the action to recover the full price, the buyer counterclaimed stating that it had incurred substantial costs because the wood which the seller had delivered did not meet the specifications. The buyer had to sort through the delivered boards and re-cut them to match the government specifications. The court held that since the buyer had interposed a valid counterclaim, which could significantly diminish or negate the seller's action for the price of the accepted goods, the court could not grant the seller's motion for summary judgment. See also B. Milligan Contracting Inc. v. Andrew R. Mancini Associates Inc., 174 A.D.2d 136, 578 N.Y.S.2d 931 (3rd Dept. 1992)(in action by seller to recover the price of goods delivered and accepted, buyer's counterclaim alleging, inter alia, delivery of nonconforming wall panels raised questions of fact which precluded summary judgment).

Here, as demonstrated in the accompanying affidavit of Allison's President, Randy M. Ligator, plaintiff failed to comply with the delivery requirements of the sales agreement. Under the original agreement, plaintiff was obligated to deliver the cassette shells in plain packaging to Allison's warehouse in Harrison, New Jersey, by means of seven shipments which were to arrive on November 10, 13, 15, 17, 20, 22 and 27. However, plaintiff did not meet any of the delivery requirements. For example, less than twenty-four hours before the first shipment was to be delivered, plaintiff informed Allison that it would not deliver the first shipment to Allison's warehouse, but that Allison had to arrange to pick up the cassette shells from a warehouse in Indiana. This cost Allison approximately $2,500.00.

Plaintiff also failed to ship the second and third deliveries in plain packaging as originally agreed. Since Allison was purchasing these cassettes for immediate resale the original purchase order called for plaintiff to ship the cassettes in brick-pak or white boxes, not Auriga packaging. However, the plaintiff delivered the second and third shipments in Auriga packaging, causing Allison to open and repackage the cassettes. This cost Allison approximately $8,000.00.

Plaintiff also breached the terms of the purchase agreement by delivered the next four shipments late. Despite Allison's protests, plaintiff unilaterally revised its delivery dates, changing the last scheduled delivery date from November 27 to December 8, 1995. However, plaintiff could not even meet its own unilaterally revised delivery dates. Allison did not receive the fourth shipment until December 8, 1995, approximately 21 days after the originally agreed upon delivery date of November 17, 1995, and approximately 11 days after plaintiff's unilaterally revised delivery date of November 27, 1995. The fifth shipment was not was not received until December 4, 1995, approximately 14 days after the originally agreed upon delivery date of November 20, 1995, and approximately 4 days after plaintiff's unilaterally revised delivery date of November 30, 1995. The sixth shipment was not received until December 7, 1994, approximately 15 days after the originally agreed upon delivery date of November 22, 1995, and approximately 3 days after plaintiff's unilaterally revised delivery date December 4, 1995. Finally, the seventh shipment was not received until December 11, 1995, approximately 14 days after the originally agreed upon delivery date of November 27, 1995, and approximately 3 days after the plaintiff's unilaterally revised delivery date of December 8, 1995.

As a result of these late shipments, Allison incurred substantial costs as it attempted to mitigate the damages it would sustain as a result of plaintiff's breach. Plaintiff's delayed deliveries caused Allison to breach some of its contracts with its customers and to nearly breach a large number of its other contracts. In order to decrease the number of lost customers, Allison employed various methods to satisfy its customers-despite plaintiff's breach-such as offering many of its customers discounts to accept smaller to delayed shipments.

Allison also scrambled to obtain cassettes from other sources to make up for the shortfall caused by plaintiff's delayed shipments. For example, Allison contacted its customers which had previously received large shipments of Allison cassettes and repurchased a large number of cassettes from their inventories so that Allison could then have them delivered to the customers who were supposed to receive the cassettes Allison was purchasing from plaintiff. Allison also paid increased shipping and handling costs in order to decrease the amount of turn around time between the time Allison received plaintiff's delayed deliveries and when the cassettes were shipped to Allison' customers. These efforts to mitigate the effect of plaintiff's delayed performance caused Allison to incur increased costs of approximately $20,000.00.

Moreover, despite these efforts many customers simply canceled their orders with Allison when Allison could not fulfill their orders in a timely manner as a result of plaintiff's delayed performance. Allison lost approximately $250,000.00 to $500,000.00 in sales orders and profits of approximately $40,000.00 to $80,000.00.

Additionally, Allison continuing attempts to obtain redress from the plaintiff were utterly unsuccessful. Allison's President Randy M. Ligator called plaintiff's sales representative numerous times to complaint about the poor treatment Allison was receiving and about the increased costs Allison was incurring as a result of plaintiff's mis-packaging and delayed deliveries. However, many of these calls were simply not accepted or returned. And, the few times Ligator was able to speak to plaintiff's representatives, they would simply state that there was nothing more that plaintiff could or would do and that Allison should take whatever action it felt was necessary.

Finally, this court should also deny plaintiff's motion for summary judgment because there has yet to be any discovery in this case due to plaintiff's repeated requests to adjourn its deposition scheduled by defendant. See Bingham v. Wells, Rich, Green Inc., 34 A.D.2d 924, 311 N.Y.S.2d 508 (1st Dept. 1970)(generally motion for summary judgment should not be granted prior to completion of discovery where facts necessary to oppose motion may exist and are within the exclusive control of the moving party). Defendant served a notice of deposition upon plaintiff requesting to examine plaintiff by the person most knowledgeable of plaintiff's dealings and communications with Allison. The deposition was originally scheduled for September 23, 1997. However, plaintiff has repeatedly requested that the deposition be adjourned so that it could prepare the documentation that would be necessary to defend itself at a deposition. Plaintiff requested that the deposition be adjourned from September 23, 1997, to November 13, 1997, to January 13, 1998, to February 9, 1998.

Since Allison has incurred substantial costs as a result of plaintiff's non-conforming performance in delivering the cassettes, it has a meritorious counterclaim which would significantly diminish or negate plaintiff's claim. Accordingly, an award of summary judgment in favor of plaintiff is not warranted.

DEFENDANT SHOULD BE PERMITTED TO AMEND ITS ANSWER

C.P.L.R. 3025(b) provides that a party may amend his pleading at any time by leave of the court or by stipulation of the parties. The rule clearly states that "leave shall be freely given." See C.P.L.R. R. 3025(b). Accordingly, the courts have construed the rule liberally and have freely granted parties leave to file amended pleadings absent surprise or prejudice to the other party. See Rahn v. Carkner, ___A.D.2d____, 659 N.Y.S.2d 143 (3rd Dept. 1997); Albany Crane Services Inc. v. Pettibone Mulliken Corp., 54 A.D.2d 794, 387 N.Y.S.2d 740 (3rd Dept. 1976); Leutloff v. Leutloff, 47 Misc.2d 458, 262 N.Y.S.2d 736 (Sup. Ct. Onondaga Co. 1965).

Defendant's motion to amend its answer and present a counterclaim should be granted on the ground that defendant's amended counterclaim is closely related to plaintiff's claim that it would be counter productive of judicial economy to require defendant to commence a separate action. See Pignataro v. Balsamo, 108 A.D.2d 1086, 485 N.Y.S.2d 656 (3rd Dept. 1985). The counterclaim alleges that plaintiff mis-packaged the goods its shipped and delivered the goods in an untimely fashion causing defendant to incur substantial damages. If established the counterclaim would significantly diminish or negate plaintiff's claim.

Additionally, such an amendment would neither prejudice nor surprise the plaintiff because no discovery has been conducted in this case and the grounds for defendant's counterclaim were known to plaintiff since the documentation it provided in support of its summary judgment motion show that plaintiff failed to deliver the cassette shells in the manner agreed upon by the parties. In its moving papers, plaintiff submits as exhibits the Allison purchase order showing the originally agreed upon delivery dates and that the destination for each delivery would be Harrison, New Jersey, the Auriga Plasticos order form stating that the customer would take the product in brick-pak or white boxes, the fax purportedly revising the delivery schedule, and the invoices for each shipment showing that each delivery was late, meeting neither the agreed upon delivery date nor plaintiff's unilaterally revised delivery date.

Plaintiff then served an affirmation in opposition to the cross-motion by its attorney. This affirmation simply stated that the counterclaim in the defendant's proposed amended answer failed to state a cause of action, as more fully described in the plaintiff's reply memorandum of law. The plaintiff's reply memorandum of law stated briefly the facts concerning the defendant's answer and proposed counterclaim:

When the defendant served its answer to the complaint in this action, it denied that it ordered and accepted the goods that the plaintiff sold to it and the unpaid balance of $167,000.00. The defendant did not raise any affirmative defenses or counterclaims when it served it answer on or about July 28, 1997. When the defendant served its affidavit opposing this motion for summary judgment eight (8) months later, the defendant admitted that it ordered and accepted the goods that remain unpaid in the sum of $167,360.00. Now defendant says that it wants to assert a counterclaim for damages for late delivery and wrong packaging estimated to be $110,000.00.[FN(a)]

FN(a) As set forth in 10 of the defendant's proposed counterclaim.

The reply memorandum of law in support of plaintiff's motion for summary judgment and in opposition to defendant's cross-motion argued that:

THE DEFENDANT'S OPPOSING AFFIDAVIT DOES NOT RAISE TRIABLE ISSUES OF FACT

We agree that issue finding, rather than issue determination, is the key to summary judgment, Sillman v. Twentieth Century-Fox Film Corp., 3 N.Y.2d 395, 404, 165 N.Y.S.2d 498, 505 (1957). The issues sought to be raised by the defendant must be genuine, not feigned, Curry v. Mackenzie, 239 N.Y. 267, 270, 146 N.E. 375, 376 (1925). Evidentiary facts must be presented by the defendant to show that there is support, in fact, for the issues its seeks to raise, Kruger Pulp & Paper Sales, Inc. v. Intact Containers, Inc., 100 A.D.2d 894, 895, 474 N.Y.S.2d 554, 555 (1984).

The defendant now admits that it ordered the cassette shells. It no longer denies that it accepted and received $167,000 worth of unpaid cassette shells by December 11, 1995. It does not deny that the purchase order consisted of plaintiff's fax of November 6, 1995, defendant's purchase order of November 8, 1995, and plaintiff's fax of November 8, 1995, (Exhibit "1") [FN(a)]. These uncontroverted facts are deemed admitted, Kuehne & Nagel, Inc. v. F.W. Baiden, 36 N.Y.2d 539, 544, 369 N.Y.S.2d 667, 671 (1975).

FN(a) All numbered exhibit references are to the moving papers.

The defendant tries to raise issues of late delivery and wrong packaging. The plaintiff, it says, unilaterally changed the delivery dates in plaintiff's November 10, 1995, fax (Exhibit "2") and changed the packaging for the cassette shells.

Defendant's asserts that the agreement of purchase required brick pack or plain packaging (4).[FN(b)] The defendant's purchase order does not mention packaging. Only the plaintiff's November 8, 1995, fax says the packaging will be brick-pack or white boxes and notes defendant's preference for brick-pack.

FN(b) Paragraph references are to the opposing affidavit of Randy M. Ligator.

Plaintiff's November 10, 1995, fax to defendant (Exhibit "2") sets forth the delivery dates and the packaging for each shipment. The packaging for the first shipment is not indicated. The packaging for the second and third shipments (November 20 and 21) is indicated as Auriga packing. The packaging for the fourth shipment (November 27) is indicated as ½ brick pack and ½ white box packaging. The packaging for the fifth, sixth and seventh shipments (November 30, December 4 and December 8) is indicated as White box packaging.

The packaging for the first three shipments appears to differ from the brick pack or white box packaging that the plaintiff indicated it would supply in its November 8, 1995, fax. The packaging for the fourth shipment matches the packaging that the plaintiff indicated it would supply in its November 8, 1995, fax, and that defendant says was agreed upon.

Even if the first three shipments were not correctly packaged and even if the second, third and fourth shipment were delivered later than originally agreed upon, the defendant's much delayed payments to the plaintiff in full for the first three shipments and partial payments for the fourth shipment means that the defendant accepted the shipments in full satisfaction of plaintiff's obligation, see Belmet Prods. v. Merit Enters., 37 Misc. 2d 368, 371, 236 N.Y.S.2d 254, 258 (N.Y. Civ. Ct. 1963). Once the goods were accepted by the defendant, it was required to pay for them at the contract price, Maggio Importato, Inc. v. Cimitron, Inc., 189 A.D.2d 654, 655, 592 N.Y.S.2d 325, 326, lv. denied, 82 N.Y.2d 652, 601 N.Y.S.2d 582 (1993).

The defendant paid for the first four shipments, as follows:

  1. Exhibit "3"-11/10/95 pick up Paid $51,840.00 2/8/96
  2. Exhibit "4"-11/13/95 ship 11/13/95 receipt Paid $51,840.00 1/25/96
  3. Exhibit "5"-11/16/95 ship 11/20/95 receipt Paid $51,840.00 3/13/96
  4. Exhibit "6"-11/22/95 ship 12/8/95 receipt Paid $20,000.00 6/7/96 Paid $20,000.00 7/3/96.

While the terms of defendant's own purchase order called for payment thirty (30) days after receipt, the defendant made its payment for the first shipment on 1/25/96, almost 90 days after receipt. The defendant made its payments for the second and third shipments from more than between sixty to ninety days after receipt and partial payment of $40,000 on the fourth shipment more than six and seven months after receipt.

Defendant's full payment for the first three shipments so long after receipt and the partial payment for the fourth shipment many months later leads to one inescapable conclusion: that the defendant's current claim of damages has been created solely to defeat plaintiff summary judgment motion and delay payment to plaintiff for the $167,360.00 of cassette shells that the defendant accepted.

Other than this defendant's claimed oral objections, nothing was done by the defendant to notify plaintiff of a claimed breach until service of the defendant's opposing affidavit eight months after the joinder of issue and more than two years after the final receipt of the cassette shells on December 5, 1995. Unlike International Paper Co. v. Margrove, Inc., 75 Misc. 2d 763, 765-66, 348 N.Y.S.2d 916, 919-20 (N.Y. Sup. Ct. 1973), there is no evidence presented on this summary judgment motion to support defendant's claim of oral complaints. This defendant's unreasonably long delay of over two years before it gave the plaintiff proper notice is insufficient to raise triable issues of fact, see Mount Vernon Mills v. Murphy Textile Mills, 148 A.D.2d 389, 390, 539 N.Y.S.2d 334, 335 (1989). Pursuant to Uniform Commercial Code, § 2-607, [FN(c)] the defendant-buyer must pay for the $167,360.00 of cassette shells that it accepted and the defendant is barred from any remedy, since it failed to notify the plaintiff-seller within a reasonable time of the claimed breach.

FN(c) The relevant portions of the cited section read:

(1) The buyer must pay at the contract rate for any goods accepted. * * * * * * * * * *

(3) Where a tender has been accepted

(a) the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy; and* * * * * * * * * * * *

(4) The burden is on the buyer to establish any breach with respect to the goods accepted.

The counterclaim in the defendant's proposed, amended answer does not even contain an allegation that notice of the claimed breach was given to the plaintiff. The proposed counterclaim fails to state a cause of action and amendment of defendant's answer must be denied.

Other than the defendant's numerous, conclusory assertions of damages caused by late deliveries and by wrong packaging, not one iota of proof is presented to support the defendant's alleged damages of $110,000.00. In the absence of proof of such damages, the claimed delays and wrong packaging do not serve as a bar to plaintiff's recovery of the unpaid balance of $167,360.00, see Belmet Prods. v. Merit Enters., 37 Misc. 2d 368, 371, 236 N.Y.S.2d 254, 258 (N.Y. Civ. Ct. 1963). Defendant's claim for damages, if any, is separate and apart from its indebtedness for the purchase price of $167,300.00, see Paul Conte Cadillac v. C.A.R.S. Purchasing Serv., Inc., 126 A.D.2d 621, 623, 511 N.Y.S.2d 58, 60 (1987). [FN(d)]

FN(d) In its memorandum of law, defendant cites Created Gemstones, Inc. v. Union Carbide Corp., 47 N.Y.2d 250, 255, 417 N.Y.S.2d 905, 907 (1979), and B. Milligan Contracting Inc. v. Andrew R. Mancini Assoc. Inc., 174 A.D.2d 136, 578 N.Y.S.2d 931 (1992), and Flick Lumber Co. v. Breton Indus., Inc., 223 A.D.2d 779, 636 N.Y.S.2d 169 (1996), for the proposition that a buyer may defeat or diminish a seller's substantive action for goods sold and delivered by interposing a valid counterclaim for breach of the underlying sales agreement. The key word in these cases is "valid." In the instant case, the defendant's counterclaim is not valid.

In Flick Lumber Co. v. Breton Indus., Inc., 223 A.D.2d at 780, 636 N.Y.S.2d at 170, the Court found a triable issue of fact when:

"[the opposing affidavit of defendant's chief executive officer]...was based upon alleged personal knowledge of the facts and circumstances and made numerous, detailed factual allegations pertaining to the counterclaim. In addition, the claims set forth in his affidavit are supported by documentary evidence which was attached to the affidavit; for example, a letter from one of plaintiff's employees acknowledging the problems Breton was experiencing with the boards***[and further found that the] affidavit sets forth a reasonably specific recitation of the claimed defects in the boards and the remedial measures Breton was required to undertake...." [Asterisks and bracketed material supplied.]

At first blush, the defendant's opposing affidavit paints a picture of a plaintiff-seller who made late deliveries in the wrong packaging and caused the defendant-buyer substantial damages. Closer scrutiny of the plaintiff's documentary evidence and the assertions of the defendant reveal that the defendant's version consists of nothing more than gross assertions of damages wholly lacking in any evidentiary support, See Kramer v. Harris, 9 A.D.2d 282, 283, 193 N.Y.S.2d 548, 550 (1959). The defendant's bald conclusory assertions of damages, even if believable, are not enough, to defeat the summary judgment motion especially where, as here, they are inconsistent with the pattern of events, id., and especially where, as here, this defendant does not claim that the facts are not within its control, S. J. Capelin Assoc., Inc. v. Globe Mfg. Corp., 34 N.Y.2d 338, 342, 357 N.Y.S.2d 478, 481 (1974)."

The defendant served a reply memorandum of law in support of its cross-motion to amend its answer and in further opposition to plaintiff's motion for summary judgment. The defendant's argument was that:

In its reply memorandum of law, plaintiff's principal argument, both in support of its motion for summary judgment and in opposition to defendant's cross-motion to amend its answer, is that defendant's oral objections were insufficient to constitute a valid notice of the claimed breaches of the sales contract to the plaintiff. However, both the Uniform Commercial Code and New York State case law permit oral objections to constitute a valid notice of breach.

Although U.C.C. § 2-607 requires a party who accepts tender of goods regarding which he claims defects to notify the seller of the breach, there is no requirement that the notice be in writing. See Computer Strategies, Inc. v. Commodore Business Machines, Inc., 105 A.D.2d 167, 483 N.Y.S.2d 716 (2d Dep't 1984); International Paper Co. v. Margrove, Inc., 75 Misc.2d 763, 348 N.Y.S.2d 916, 919 (Sup. Ct. Monroe Co. 1973) UCC § 1-201(26) provides that a "person 'notifies' or 'gives' notice or notification to another by taking such steps as may be reasonably required to inform the other in ordinary course whether or not such other actually comes to know of it." Moreover, "the notification need only alert the seller that the transaction is troublesome and does not need to include a claim for damages or threat of future litigation." Computer Strategies v. Commodore Business Machines, 105 A.D.2d 167, 483 N.Y.S.2d 716, 723 (2d Dep't 1984).

Here, as demonstrated in the original affidavit of Allison's President, Randy M. Ligator, defendant continually made its protestations about plaintiff's breaches of the sales contract known to plaintiff and its agents. For example, when plaintiff, with less than twenty-four hours notice, informed defendant that it would not deliver the first shipment to defendant's New Jersey warehouse, Ligator protested that the missed shipment would cause defendant to lose substantial sales and damage its relationships with its customers (See Ligator Affidavit 5). Ligator also states in his affidavit that he continually attempted to obtain redress from the plaintiff. He called plaintiff's representative numerous times to complain about the poor treatment Allison was receiving and the increased costs Allison was sustaining as a result of plaintiff's unilateral revisions of the purchase order, the mis-packaging of the shipments, and the delayed deliveries. (See Ligator Affidavit paragraph 12).

Accordingly, plaintiff's reliance on Mount Vernon Mills, Inc. v. Murphy Textile Mills, 148 A.D.2d 389, 539 N.Y.S.2d 334 (1st Dep't 1989) is misplaced. In Mount Vernon the buyer did not raise any complaints prior to the commencement of the suit while in this case defendant voiced numerous oral complaints prior to the commencement of the suit.

Plaintiff's reliance on Kruger Pulp & Paper Sales,Inc. v. Intact Containers, Inc., 100 A.D.2d 894,895, 474 N.Y.S.2d 554 (1984) is also misplaced. In Kruger, the seller submitted affidavits that established that the seller had never voiced any complaints about the merchandise and even admitted to the seller that his only reason for not paying was credit problems. Here, plaintiff does not deny or controvert any of Ligator's sworn allegations about the mis-packed shipments, the late deliveries or Ligator's oral protestations to the plaintiff. Indeed, plaintiff does not even bother to submit an affidavit from any person with actual knowledge of the facts. Instead, plaintiff merely submitted a one-page attorney's affidavit from one without person knowledge of the facts. See Matter of O'Hara, 85 A.D.2d 657, 445 N.Y.S.2d 201, 204 (2d Dep't 1981)("An affirmation by an attorney, without personal knowledge, will not suffice and should be entirely disregarded.").

Paul Conte Cadillac, Inc. v. C.A.R.S. Purchasing Serv., Inc., is also distinguishable. In Conte, the court held that the defendant's claim for damages was separate and apart from its indebtedness for the purchase price where defendant was attempting to assert its counterclaim as a reason for vacating a default judgment. Here, defendant has not defaulted. In fact, defendant is asserting its counterclaim prior to any discovery being conducted.

Finally, where the seller's performance is nonconforming, the buyer's right to be made whole can be exercised as a claim for damages, even if the claim is made in the buyer's pleadings by way of an answer or counterclaim. See 93 N.Y.Jur2d, Sales, §§ 142, 236. "[A] buyer may defeat or diminish a seller's substantive action for goods sold and delivered by interposing a valid counterclaim for breach of the underlying sales agreement." Created Gemstones, Inc. v. Union Carbide Corp., 47 N.Y.2d 250, 255, 417 N.Y.S.2d 905, 907 (1979). Thus, where the buyer raises questions regarding the seller's performance according to his obligations under the contract, a seller may not recover the full purchase price, see Karen v. Cane, 152 Misc.2d 639, 578 N.Y.S.2d 85 (Civ. Ct. Queens Co. 1991); and summary judgment should not be granted. See B. Milligan Contracting Inc. v. Andrew R. Mancini Associates Inc., 174 A.D.2d 136, 578 N.Y.S.2d 931 (3d Dep't 1992)(in action by seller to recover the price of goods delivered and accepted, buyer's counterclaim alleging, inter alia, delivery of nonconforming wall panels raised questions of fact which precluded summary judgment); see also Flick Lumber Co., Inc. v. Breton Industries, Inc., 223 A.D.2d 779, 636 N.Y.S.2d 169 (3d Dep't 1996).

On April 11, 1998, the motion and cross-motion were finally submitted to Justice James A. Gowan.

Back to Top

SUMMARY JUDGMENT IN A COMMERCIAL COLLECTION LAWSUIT

PART IV

On June 5, 1998, plaintiff's attorney received a telephone call from Court. The Court requested that the parties set forth the law on the issue of whether or not the plaintiff, AURIGA, was doing business in New York as an unauthorized foreign corporation in violation of Business Corporation Law (BCL) § 1312. [FN7]

FN7 BCL §1312(a) states:

A foreign corporation doing business in this state without authority shall not maintain any action or special proceeding in this state unless and until such corporation has been authorized to do business in this state and it has paid to the state all fees and taxes imposed under the tax law or any related statute, as defined in section eighteen hundred of such law, as well as penalties and interest charges related thereto, accrued against the corporation. This prohibition shall apply to any successor in interest of such foreign corporation

Plaintiff's attorneys faxed a letter to the Court on June 5, 1998, as follows:

"The issue, if raised, that the plaintiff is an unauthorized foreign corporation is not tenable. No evidence has been submitted to show that the plaintiff conducts any activity in the State of New York. The order for the cassette shells (Exhibit "1" of the summary judgment affidavit) were faxed to plaintiff's independent sales representative in Creston, Ohio. Except for one shipment that the defendant picked up in Indianapolis, Indiana, six shipments of cassette shells to defendant were made by a common carrier from Indianapolis, Indiana (see Paragraphs four of the moving affidavit and Exhibits "4" through "9" annexed thereto). No evidence has been submitted to show that the plaintiff maintains any offices or warehouses in New York; has any New York bank accounts or that it sends any officers or employ-ees regularly into the State to perform or oversee the sale of goods. There is a presumption that a foreign corporation conducts its business in the State of its organization (Ascher Corp. v. Horvath, 35 Misc. 2d 375, William L. Bonnell Co. v. Katz, 23 Misc. 2d 1028).

The burden of proof is on defendant to show that the plaintiff is doing business in the State of New York (Dixie Dinettes, Inc. v. Schaller's Furniture, 71 Misc. 2d 102). The defendant must show the plaintiff is conducting continuous activity within the State of New York. If a plaintiff does business in the State of its incorporation and only ships goods into New York State by common carrier, then the plaintiff is engaged in interstate commerce and need not qualify to do business in the State of New York (Von Arx, AG. v. Breitenstein, 52 A.D.2d 1049, aff'd, 41 N.Y.2d 958, 960). Solicitation of sales through an individual sales agent does not alter the result (See Koepke v. Bilnor Corp., 55 Misc. 2d 928, 931, 932).

The defendant's attorney faxed a letter to the Court on June 8, 1998:

I am writing this letter in response to the Court's inquiry concerning Auriga Plasticos, S.A. De C.V.'s (hereinafter "Auriga") capacity as a foreign corporation unauthorized to do business in New York to be granted summary judgment in this action against Allison Video, Ltd. (hereinafter "Allison"). Allison believes, that in light of the issue raised by Auriga's summary judgment papers and this Court, Auriga's motion for summary judgment should be denied, or, at minimum, not considered until either discovery has been completed or Auriga provides some evidentiary proof that they have not regularly conducted business activities within New York.

The Business Corporation Law provides that foreign corporations doing business or conducting activities within New York without the authority to do so may not maintain any action or special proceeding in the state courts. Bus. Corp. Law § 1312(a), see also United Arab Shipping Co. v. Al Hashim, 176 A.D.2d 569, 574 N.Y.S.2d 743 (1st Dep't 1991); Interline Furniture, Inc. v. Hodor Industries Corp., 140 A.D.2d 307, 527 N.Y.S.2d 544 (2d Dep't. 1988); 15 N.Y.Jur.2d, Business Relationships, § 1074. Since this statute cannot be used to deny access to the state courts to those foreign corporations whose contacts with the state are solely incidental to their engagement in interstate or international commerce (see Alicento, S.A. v. Woolverton, 129 A.D.2d 601, 514 N.Y.S.2d 96 (2d Dep't 1987); Von Arx, A.G. v. Breitenstein, 52 A.D.2d 1049, 384 N.Y.S.2d 895 (4th Dep't 1976), aff'd, 41 N.Y.2d 958, 394 N.Y.S.2d 876 (1977); 15 N.Y.Jur2d, Business Relationships, §1078), a foreign corporation's contracts must be more than the solicitation and placement or orders. Bayonne Block Co., Inc. v. Porco, 171 Misc. 2d 684, 654 N.Y.S.2d 961, 963 (N.Y. City Civ. Ct. Bronx Co. 1996). The corporation's activities in the state must be systematic and regular. Interline Furniture, Inc. v. Hodor Industries Corp., 140 A.D.2d 307, 527 N.Y.S.2d 544 (2d Dep't 1988); Dixie Dinettes, Inv. v. Schaller's Furniture, Inc., 71 Misc. 2d 102, 335 N.Y.S.2d 632 (N.Y. City Civ. Ct. 1972).

Although compliance with Business Corporation Law § 1312(a) need not be initially alleged in the complaint, it can subsequently be raised by the defendant pleading it as a defense or by "plaintiff's proof establish[ing] the facts that bring the section into play." Empire Mutual Ins. Co. v. International Tramp-Po-Line Mnfrs. Inc., 39 Misc. 2d 810, 242 N.Y.S.2d 28, 32 (Sup. Ct. Nassau Co. 1963). Indeed, Business Corporation Law § 1312(a) imposes "a condition precedent to the brining of any action," (see American Can Co. v. Grassi Contracting Co., 102 Misc. 2d 230, 168 N.Y.S. 689 (1st Dep't App. Term 1918), which can be raised at any time prior to judgment, even it not raised as a defense or an issue in defendant's answer. Ac-tin-o-lyte Roofing Co. v. Werner, 209 A.D. 742, 204 N.Y.S.562(1st Dep't 1924); Paper Manufacturers Co. v. RIS Paper Co., Inc., 86 Misc. 2d 95, 381 N.Y.S.2d 959, 962 (N.Y. City Civ. Ct. 1976). In American Can the court specifically held that a foreign corporation "has not made out its cause of action until it has proven compliance with the condition precedent and that [a] complaint should, therefore, be dismissed even though the answer has not set up such a defense." American Can Co. v. Grassi Contracting Co., 102 Misc. 2d 230, 232-233, 168 N.Y.S. 689, 691 (1st Dep't App. Term 1918).

For example, in Ac-tin-o-lyte, plaintiff, a foreign corporation, commenced a suit to collect payment for goods sold and delivered to defendant. Defendant's answer only contained general denials. At trial, through the cross-examination of the plaintiff's president, it was established that plaintiff was a foreign corporation conducting business in New York without the authority to do so. Even though the defendant had never before raised the issue, the court granted defendant's motion to dismiss at the close of the plaintiff's case. Ac-tin-l-lyte Roofing Co. v. Werner, 209 A.D. 742, 204 N.Y.S. 562 (1st Dep't 1924); see also Eclipse Silk Manufacturing Co. v. Hiller, 145 A.D. 568, 129 N.Y.S. 879 (1st Dep't 1911)("If upon trial, it should be developed that the defendant is a foreign corporation doing business in New York…the objection that the complaint did not state facts sufficient to constitute a cause of action is open to the defendant."); 15 N.Y.Jur2d, Business Relationships, § 1078.

Moreover, a section 1312(a) defense is a defense that can be most effectively asserted only after discovery because information concerning plaintiff's business activities within the state are generally within the exclusive control of the plaintiff. In Tynon v. D.R. McClain & Son, 131 Misc. 2d 203, 499 N.Y.S.2d 354 (Sup. Ct. St. Lawrence Co. 1986), after completing depositions, third-party defendant moved to amend its answer to assert a section 1312 defense. The court held that although an inquiry to the Department of State would have disclosed whether the foreign corporation was authorized to do business in the state, the inquiry would not have disclosed whether the foreign corporation was doing business in the state within the meaning of Business Corporation Law § 1312, and that, therefore, the third-party defendant did not possess knowledge of the foreign corporation's substantial business activity in the state until after the examinations before trial were conducted. Accordingly, the court granted the third-party defendant's motion to amend its answer.

Here, although Auriga's amended complaint and motion for summary judgment states facts which could make the statute applicable, Auriga does not produce any evidence, such as sworn affidavits stating that Auriga has not conducted business activities in New York, besides those incidental to interstate and international commerce. Indeed, counsel's letter, even after this Court raised the issue, does not deny that Auriga has conducted business activities in New York. Instead, it just says that no such evidence has been submitted. Such a position is intolerable where, as here, the information concerning Auriga's business activities within the state is clearly within its exclusive control and knowledge (see Bingham v. Wells, Rich, Greene, Inc., 34 A.D.2d 924, 311 N.Y.S.2d 508 (1st Dep't 1970)(generally motion for summary judgment should not be granted prior to completion of discovery where facts necessary to oppose motion may exist and are within the exclusive control of the moving party), and where there has yet to be any discovery solely due to Auriga's repeated requests to adjourn its deposition (see Affirmation of Douglas Lutz in opposition to plaintiff's motion for summary judgment).

In the absence of any facts concerning the extent of Auriga's business activities in New York, its motion for summary judgment is simply premature. See Empire Mutual Ins. Co. v. International Tram-Po-Line Mnfrs., Inc., 39 Misc. 2d 810, 242 N.Y.S.2d 28 (Sup. Ct. Nassau Co. 1963)(in absence of undisputed facts with respect to foreign corporation's business activities in the state, court declined to grant defendant's motion to dismiss and held that issue of plaintiff's right to maintain its action without complying with the statute had to await trial).

Accordingly, Auriga's motion for summary judgment should be denied, or, at minimum, not considered until either discovery has been completed or Auriga provides some evidentiary proof that they have not regularly conducted business activities within New York or have complied with the statute.

Three days later, on June 11, 1998, Justice Gowan issued his decision/order, follows:

ORDERED that in this action to recover the cost of goods sold and delivered to defendant, the motion (#002) of plaintiff for an order granting plaintiff summary judgment against defendant pursuant to CPLR 3212 and amending the caption of the action pursuant to CPLR 305, § 2001 and 3025 to correct the name of plaintiff is considered together with the cross-motion of defendant (#003) for an order pursuant to CPLR 3025(b) granting defendant leave to amend the answer to assert a counterclaim, and the motion and cross-motion are determined as follows:

Plaintiff has submitted proof in admissible form to establish its prima facie entitlement to recover the sum of $167,360 from defendant for the cost of cassette shells contracted for, sold and delivered to defendant. Lighting Horizons, Inc. v. E.A. Kahn, Inc., 120 A.D.2d 648 (2d Dept. 1986). In its opposition to the motion and in support of its cross-motion, defendant does not deny the existence of the sales agreement or receipt of the goods, or dispute the amount of plaintiff's contract claim; however, defendant contends that plaintiff breached the agreement by supplying the wrong packaging for a large number of cassette shells and by making late deliveries, for which alleged breach it now seeks to assert a counterclaim. Defendant has not submitted any evidence to support its claim that it incurred substantial costs in order to mitigate the effects of plaintiff's alleged breach, or that plaintiff's alleged breach caused defendant to in turn breach contracts with some of its customers. It is well established that mere conclusory, unsubstantiated allegations are insufficient to defeat a motion for summary judgment. Lighting Horizons, supra, 120 A.D.2d at 649.

Accordingly, plaintiff's motion for summary judgment is granted; and the cross-motion is denied as moot.

The branch of plaintiff's motion that seeks leave to amend the caption to correct plaintiff's name to read Auriga Plasticos, S.A. De C.V. in place and stead of Auriga Plasticos, S.A. De C.V., d/b/a Auruga Aurex, Inc. is granted in the absence of any prejudice to defendant.

Authentic Models, Inc. v. Gigwear Company, Inc., (N.Y. Civ. Ct., N.Y.Cty, Index No. 2519/96), was a goods sold and accepted action where the defendant first raised the defense of defective goods in opposition to the plaintiff's motion for summary judgment. [FN8]

FN8 New York permits a defendant to defeat a motion for summary judgment with an unpleaded defense. This rule was established in Curry v. Mackenzie, 239 N.Y. 267, 272 (1925), and reaffirmed in Nassau Trust Co. v. Montrose Concrete Prods. Corp., 56 N.Y.2d 175, 182-83 (1982). Although an unpleaded defense may form the basis for denial of a motion for summary judgment, the defendant must still present evidentiary facts showing the existence of a bona fide issue requiring trial, Rera v. Rera 100 Misc. 2d 670, 673, 420 N.Y.S.2d 127, 128 (N.Y.Sup. Ct., Gowan, J. 1979).

In her decision of April 30, 1997, Judge Donna M. Mills rendered an unpublished decision in Authentic Models consistent with that of Justice Gowan in Auriga:

This is an action to recover money for goods sold and delivered. The plaintiff now moves this court for summary judgment.

It is well settled that the proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, rendering sufficient evidence to demonstrate the absence of any material issues of fact (Winegrad v. N.Y.U. Medical Center, 64 NY2d 851, 853). Once this showing has been made, the burden shifts to the party opposing the motion for summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action (Zuckerman v. City of New York, 49 NY2d 557, 562).

In support of their motion for summary judgment the plaintiff offers documentary evidence and an affidavit establishing the delivery of the goods in question and an outstanding invoice. In opposition the defendant maintains that the goods delivered were of substandard quality and was denied by plaintiff and opportunity to return these items. Defendant also alleges that they had to sell the nonconforming goods for a fraction of the cost. Defendant however, failed to annex any documentary evidence to support their claims.

UCC 2-607 (1) requires a buyer to pay at the contract rate for any goods accepted and subdivision (3) of the section provides that upon buyer's failure to notify the seller of the alleged breach within a reasonable time, he is "barred from any remedy". Likewise, a [r]evocation acceptance must occur within a reasonable time after the buyer discovers the ground for it" (UCC 2-608[2]). The fatal flaw in the defendant's argument is its failure to set forth the date when it first complained to the plaintiff of the alleged defects, who complained on behalf of the defendant and to whom the complaint was registered, and how the complaint was communicated to the plaintiff. The evidentiary details are missing.

A party opposing a motion for summary judgment must assemble, lay bare and reveal its proofs to show that it can establish its defenses upon a trial of the action (see, Di Sabato v. Soffes, 9 AD2d 297, 301). This defendant's bald, conclusory assertion that it notified the plaintiff of the defects, without revealing the details of the notice, is insufficient to raise a triable issue of fact (see, Kramer v. Harris, 9 AD2d 283). Mere allegations of delivery of defective materials, will not, without more preclude a court from granting a plaintiff's motion for summary judgment (see, GTE Sylvania v. Jupiter Supply Co., 51 AD2d 993, 994; General Building Supply Corp. v. Shapn, Inc., 35 AD2d 550, 551).

No question of fact exist involving defendant's acceptance of the goods shipped by plaintiff. Defendant's mere complaint about the goods does not constitute a clear and unequivocal act of rejection (see, Maggio Impotato v. Cimitron, Inc., 189 AD2d 654). Defendant's acceptance of the goods, even if the goods failed to conform to the contract, entitled plaintiff to recover the contract price (see, Sunny Side Up v. Agway, Inc., 40 A.D.2d 899).

Accordingly, plaintiff's motion for summary judgment is granted.

The decision in Authentic Models agreed with the plaintiff's argument in its reply memorandum of law, as follows:

POINT

THE OPPOSING AFFIDAVIT DOES NOT RAISE A TRIABLE ISSUE OF FACT

The defendant does not deny that, on March 28, 1995, Alan Hirsh, the President of the defendant, visited the plaintiff's Manhattan showroom and signed a purchase order (Exhibit "B") to purchase the models of musical instruments set forth on the purchase order at the prices and upon the terms set forth thereon. [FN(a)] The defendant does not deny it received the models at its place of business in Manhattan on June 19, 1995, (Exhibit "C"). The defendant does not deny the correctness of the invoice price of $5,549.20 including freight charges (Exhibit "D"). These uncontroverted facts must be deemed admitted by defendant, Kuehne & Nagel, Inc. v. Baiden, 36 N.Y.2d 539, 544, 369 N.Y.S.2d 667, 671 (1975).

FN(a) The handwritten signature on the purchase order clearly reads Alan Hirsh, President.

The defendant's President tries to raise an issue of fact by asserting that the models were of substandard quality upon receipt. The defendant wanted to return the goods. The plaintiff refused to accept their return because of the plaintiff's policy that no returns will be accepted without plaintiff's prior approval. The defendant says that it "never agreed to be bound by such an onerous provision."

When the defendant served its answer, it raised three affirmative defenses, none of which related to a claim of breach of warranty. [FN(b)] The defendant first raised the defense of defective goods in the defendant's opposing affidavit. The defendant's attempt to create a triable issue of fact runs afoul of the facts and of the law.

FN(b) The first affirmative defense was that the complaint fails to state a cause of action. City Civ. Ct. Act § 902 makes the requirements of formal pleading inapplicable to an indorsement pleading if the plaintiff's cause of action is for money only. The indorsed complaint in this action certainly satisfies the cited section. Defendant's second affirmative defense of improper service of process was obviated by reservice of the summons and complaint upon the Secretary of State as statutory designee of defendant corporation on December 18, 1996, (Exhibit "E"), and by giving notice of service thereof to defendant's attorney on December 27, 1996, (Exhibit "G"), Dashew v. Cantor, 85 A.D.2d 619, 445 N.Y.S.2d 24, 25 (1981). Plaintiff's name was amended by an order of the court filed October 15, 1996, a copy of which is annexed to the marked pleadings. Defendant's third affirmative defense that plaintiff is not authorized to do business in the State of New York became moot when the plaintiff became authorized to do business in New York State on May 24, 1996, (Exhibit "A").

These facts take the form of documentary evidence: the purchase order signed by the defendant's president (Exhibit "B"). The terms of the purchase order with respect to plaintiff's return policy state:

Return Policy: Inspect goods upon receipt. Report shortage, damage or defects within 14 days of receipt. No returns will be accepted without prior approval. Authorized return number must be displayed on packages. Returns may be subject to restocking fees.

Obviously the defendant did agree with the plaintiff's return policy when its President signed the purchase order. The current claim by the defendant's President that he did not consent to the plaintiff's return policy is patently false, Hanrog Distributing Corp. v. Hanioti, 10 Misc. 2d 659, 660, 54 N.Y.S.2d 500, 501 (Sup. Ct. 1945).

The defendant does admit that the alleged defects in the goods were known "upon receipt of the goods." [FN(c)] Where defects in goods are readily discoverable, a contractual term requiring notice of claim within ten days after receipt of the goods was found to be binding, Jessel v. Lockwood Textile Corp., 276 A.D. 378, 379, 95 N.Y.S.2d 77, 78 (1950). A contractual term requiring notice of defects within five days after receipt of the goods was found to be binding, Siegel Kahn Co. v. Knickerbocker Underwear Co., 81 N.Y.S.2d 541, 542 (N.Y. App. Term 1st Dept. 1948).

FN(c) See 5 of the opposing affidavit.

U.C.C. § 2-602(1) requires that rejection of goods must be made within a reasonable time after their delivery if "the buyer seasonably notifies the seller." U.C.C. § 2-607(1) requires the buyer to pay at the contract rate for any goods accepted, unless under U.C.C. § 2-607(3)(a) the buyer notifies the seller of the breach within a reasonable time after he discovers or should have discovered any breach. U.C.C. § 2-607(4) places the burden on the buyer to establish any breach with respect to goods accepted.

The fatal flaw in the defendant's argument is its failure to set forth the date when it first complained to the plaintiff of the alleged defects, who complained on behalf of the defendant and to whom the complaint was registered, and how the complaint was communicated to the plaintiff. The evidentiary details are missing.

A party opposing a motion for summary judgment must assemble, lay bare and reveal its proofs to show that it can establish its defenses upon a trial of the action, Di Sabato v. Soffes, 9 A.D.2d 297, 301, 193 N.Y.S.2d 184, 189 (1959). The defendant does not claim that these facts are not within its control, S.J. Capelin Assoc., Inc. v. Globe Mfg. Corp., 34 N.Y.2d 338, 342, 357 N.Y.S.2d 478, 481 (1974); and therefore this defendant is required to present its proof in detail to show that it did, in fact, communicate notice of the defective goods to the plaintiff. This defendant's bald, conclusory assertion that it notified the plaintiff of the defects, without revealing the details of the notice, is insufficient to raise a triable issue of fact, Kramer v. Harris, 9 A.D.2d 283, 283, 193 N.Y.S.2d 548, 550 (1959). The defendant's conclusory assertions do not meet the standard necessary to defeat the plaintiff's summary judgment motion, Kruger Pulp & Paper Sales, Inc. v. Intact Containers, Inc., 100 A.D.2d 894, 895, 474 N.Y.S.2d 554, 555 (1984).

Other cited cases have been decided upon the same grounds as Auriga and Authentic Gigwear.

Kohl Madden Printing Ink v. Goshen Litho, Inc., 94 A.D.2d 660, 462 N.Y.S.2d 462 (1983), granted plaintiff's motion for summary judgment holding:

That Goshen accepted and used K & M's inks without payment for a period of some four months with full awareness of their performance characteristics is clear (see UCC § 2- 607). Nor do we believe that the intermittent undated oral complaints to unidentified K & M personnel over the several years in which Goshen was receiving and using those inks constitute the kind of notice within a reasonable time after a buyer discovers or should have discovered any breach that preserves Goshen's right to avail itself of damages in regard to accepted goods. See UCC § 2-607(3)(a); §§ 2-714 and 2-715; see also Anderson, Uniform Commercial Code (2d ed) § 2-607:43.

In effect Goshen denies its obligation to pay for inks received and used over a period of four months, and seeks to recover damages for inks used over a period of years, on the basis of an alleged belated discovery that a chemist it employed for the purpose, using K & M's inks, was able to introduce modifications which improved the performance of the inks. Nothing in these studiously evasive allegations raises a factual question requiring a trial.

G & D Poultry Farms v. Long Is. Butter & Egg Co., 33 A.D.2d 685, 306 N.Y.S.2d 243 (1969), granted summary judgment to the plaintiff and dismissed defendant's counterclaim holding that:

in plaintiff's merchandise. Not only was the delay in asserting said claim unreasonable as a matter of law but, despite knowledge of alleged defects, defendant continued to order additional goods and pay for same without once indicating to plaintiff that it was dissatisfied with the quality of the merchandise or wished to raise a claim in setoff (Bangor Clothing Co. v. Superior Sportswear Corp., 22 A.D.2d 864, 254 N.Y.S.2d 415, affd. 16 N.Y.2d 1018, 265 N.Y.S.2d 901, 213 N.E.2d 312; Uniform Commercial Code, § 2--607, subd. (3), par. (a)). There being no bona fide triable issue presented as to the cause of action set forth in the complaint, plaintiff is entitled to summary judgment in full.

Sunkyong Am., Inc. v. Beta Sound of Music Corp., 199 A.D.2d 100, 605 N.Y.S.2d 62 (1993), in affirming a grant of summary judgment, expressed the rule:

The uncontroverted evidence established a sale and delivery of the goods in question, the defendant's acceptance of the goods and its failure either to pay the agreed upon price or raise any objection to the sale terms, as reflected in the invoices, when the goods were delivered or within a reasonable time thereafter (see, Avis Rent A Car Sys. v. McNamara Buick Pontiac, 90 A.D.2d 783, 455 N.Y.S.2d 643; Sunbeam Corp. v. Morris Distrib. Co., 55 A.D.2d 722, 723, 389 N.Y.S.2d 173).

The parol evidence rule embodied in UCC 2-202 bars the introduction by the defendant of proof of any alleged oral agreement between the parties which would vary the terms of the plaintiff's invoices, which were the final written expression of the parties' sales agreement (see, Battista v. Radesi, 112 A.D.2d 42, 491 N.Y.S.2d 81).

In addition, defendant's conduct, in reselling the goods to its retail customers, constituted acceptance under UCC 2-606(1)(c), which provides, in pertinent part, that goods are accepted when the buyer "does any act inconsistent with the seller's ownership", such as a resale (cf., Maggio Importato v. Cimitron, Inc., 189 A.D.2d 654, 592 N.Y.S.2d 325, lv. denied, 82 N.Y.2d 652, 601 N.Y.S.2d 582, 619 N.E.2d 660).

In Gem Source Int'l Ltd. v. Gem Works N.S. L.L.C., 258 A.D.2d 373, 685 N.Y.S.2d 682 (1999), lv. to appeal dismissed, 93 N.Y.2d 999, 695 N.Y.S.2d 745, reversed the trial court and granted a motion for summary judgment stating:

The parties negotiated a series of consignment contracts whereby plaintiff supplier would deliver diamonds to defendant jewelry manufacturer, on a "gentlemen's agreement" that payment need not be made until the jewelry was ultimately sold to a buyer. Admittedly, Tiffany & Co. was the ultimate wholesale purchaser of all of this jewelry from the defendant consignee.

Defendant's resale of the diamonds was inconsistent with the consignor's "ownership" of the goods, thus constituting acceptance under UCC 2-606(1)(c) (Sunkyong America v. Beta Sound of Music Corp., 199 A.D.2d 100, 101, 605 N.Y.S.2d 62). The act of resale extinguished any objection defendant might have had to its receipt of the diamonds based upon inferior quality (citations omitted).

Back to Top
Home | Firm Overview | Profile | Information
Claim Placement | For Clients Only | Frequently Asked Questions | Links | Map | Contact Us