United States District Court, Southern District of New York
July 12, 1991
FINNISH FUR SALES CO., LTD. AND OKOBANK OSUUSPANKKIEN KESKUSPANKKI OY, PLAINTIFFS,
JULIETTE SHULOF FURS, INC., GEORGE SHULOF AND JULIETTE SHULOF, DEFENDANTS.
The opinion of the court was delivered by: Leisure, District Judge.
OPINION AND ORDER
This is an action to collect sums allegedly owed in
connection with furs purchased at two auctions in Vantaa,
Finland. Plaintiff Finnish Fur Sales Co., Ltd. ("FFS"),
asserts its claim of failure to pay for and clear 2,469 fox
pelts against defendants Juliette Shulof Furs, Inc. ("JSF"),
and George Shulof. Plaintiff Okobank Osuuspankkien
Keskuspankki Oy ("Okobank") asserts its claim of failure to
honor a bill of exchange against defendants JSF and Juliette
Defendants George and Juliette Shulof now move the Court for
summary judgment dismissing the individual claims against each
of them. Plaintiffs oppose defendants' motion and cross-move
for summary judgment against all defendants.
FFS is a limited company organized under Finnish law, which
sells fur pelts raised by Finnish breeders at public auctions
held several times each year. The auctions are conducted under
certain Conditions of Sale ("Conditions"), which are listed in
the auction catalogue, a copy of which is given to each
prospective bidder in advance of the auction. A one-page
English translation of the Conditions appears on the inside
front cover of the catalogue.
JSF is a New York corporation that has conducted a fur
dealing business for approximately 15 years. George Shulof, an
officer of JSF, has been in the fur business since 1935. Mr.
Shulof attended the FFS auctions held in Vantaa, Finland, in
January and May 1987. He purchased over $500,000 worth of
skins at the January auction, and some $700,000 worth of skins
at the May auction. It is undisputed that at each auction he
was the actual bidder. JSF had not sent a bidder to the FFS
auctions during the twenty-five-year period from 1959 to 1984,
but Mr. Shulof had personally attended the FFS auction in
The parties apparently do not dispute the fact that JSF paid
for and cleared the majority of the skins purchased at the two
1987 auctions, with the exception of 2,469 fox pelts worth
$290,048.17. The parties also do not dispute that JSF made
certain payments against the uncleared skins, leaving an
unpaid balance of $202,416.85, plus interest.
Between December 1987 and December 1988, JSF gave FFS resale
instructions regarding a number of the uncleared skins. FFS
asserts that it was unable to sell the skins at the minimum
resale prices set by JSF. Thereafter, FFS decided to liquidate
JSF's account, to which JSF agreed in March 1989. FFS sold the
remaining uncleared skins at its May and September 1989
auctions. FFS alleges damages of $153,502.39.
FFS claims that, in addition to the liability of JSF, Mr.
Shulof is personally liable for this debt, based on Finnish
law, the custom and practice of the fur trade, and the
provisions of section 4 of the Conditions. Section 4 provides:
Any person biding at the auction shall stand
surety as for his own debt until full payment is
made for purchased merchandise. If he has made
the bid on behalf of another person, he is
jointly and severally liable with the person for
Conditions § 4 ¶ 2. George Shulof denies any personal liability
on the grounds, inter alia, that the provision is unenforceable
under both New York and Finnish law.
Okobank's claim arises from a line of credit arranged by FFS
in November 1988 to allow JSF to clear some of the remaining
skins. JSF made a cash down payment and accepted a bill of
exchange (the "Bill of Exchange") for $30,328.39, due February
7, 1989. JSF also executed an agreement entitled "Confirmation
in Case of Delayed Payment" ("Confirmation"), dated December
16, 1988, which called for interest at an annual rate of 16%
subsequent to the due date.
According to plaintiffs, in January 1989, Okobank became
holder in due course of the Bill of Exchange, which was
presented for collection on or about February 7, 1989, at Bank
Leumi in New York, but was dishonored. As of July 31, 1990,
Okobank claimed principal and interest due amounting to
The Bill of Exchange was signed "Juliette A. Shulof" above
the printed name "Juliette Shulof Furs Inc." Okobank contends,
and Mrs. Shulof denies, that this signature renders Mrs.
Shulof liable in her individual capacity.
In addition to defendants' argument that, as a matter of
law, George and Juliette Shulof cannot be held personally
liable in this action, defendants also contend that fact
issues concerning plaintiffs' alleged failure to mitigate
damages when selling the remaining uncleared skins preclude
the entry of summary judgment against JSF.
I. Standard for Summary Judgment
Federal Rule of Civil Procedure 56(c) provides that summary
judgment "shall be rendered forthwith if the pleadings,
depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there is
no genuine issue as to any material fact and that the moving
party is entitled to judgment as a matter of law." "Summary
judgment is appropriate if, 'after drawing all reasonable
inferences in favor of the party against whom summary judgment
is sought, no reasonable trier of fact could find in favor of
the non-moving party.'" United States v. All Right, Title &
Interest in Real Property, etc., 901 F.2d 288, 290 (2d Cir.
1990) (quoting Murray v. National Broadcasting Co.,
844 F.2d 988, 992 (2d Cir.), cert. denied, 488 U.S. 955, 109 S.Ct. 391,
102 L.Ed.2d 380 (1988)). Summary judgment may be granted
"against a party who fails to make a showing sufficient to
establish the existence of an element essential to that party's
case." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct.
2548, 2552, 91 L.Ed.2d 265 (1986).
The substantive law governing the case will identify the
facts that are material, and "[o]nly disputes over facts that
might affect the outcome of the suit under the governing law
will properly preclude the entry of summary judgment. . . .
While the materiality determination rests on the substantive
law, it is the substantive law's identification of which facts
are crucial and which facts are irrelevant that governs."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct.
2505, 2510, 91 L.Ed.2d 202 (1986). "[T]he judge's function is
not himself to weigh the evidence and determine the truth of
the matter but to determine whether there does indeed exist a
genuine issue for trial." Id. at 249, 106 S.Ct. at 2510; see
also R. C. Bigelow, Inc. v. Unilever N.V., 867 F.2d 102, 107
(2d Cir.), cert. denied, ___ U.S. ___, 110 S.Ct. 64, 107
L.Ed.2d 31 (1989). The party seeking summary judgment "always
bears the initial responsibility of informing the district
court of the basis for its motion" and identifying which
materials it believes "demonstrate the absence of a genuine
issue of material fact." Celotex, supra, 477 U.S. at 323, 106
S.Ct. at 2552; see also Trebor Sportswear Co. v. Limited
Stores, Inc., 865 F.2d 506, 511 (2d Cir. 1989). "[T]he burden
on the moving party may be discharged by 'showing' — that is,
pointing out to the district court — that there is an absence
of evidence to support the nonmoving party's case." Celotex,
supra, 477 U.S. at 325, 106 S.Ct. at 2554.
Once a motion for summary judgment is properly made, the
burden then shifts to the nonmoving party, which "'must set
forth facts showing that there is a genuine issue for trial.'"
Anderson, supra, 477 U.S. at 250, 106 S.Ct. at 2511 (quoting
Fed.R.Civ.P. 56(e)). "Conclusory allegations will not suffice
to create a genuine issue. There must be more than a 'scintilla
of evidence,' and more than 'some metaphysical doubt as to the
material facts.'" Delaware & H. Ry. v. Consolidated Rail Co.,
902 F.2d 174, 178 (2d Cir. 1990) (quoting Anderson, supra, 477
U.S. at 252, 106 S.Ct. at 2512, and Matsushita Elec. Indus. Co.
v. Zenith Radio Corp., 475 U.S. 574,
586, 106 S.Ct. 1348, 1355, 89 L.Ed.2d 538 (1986)).
II. Liability of George Shulof
A. Choice of Law
Federal courts sitting in diversity must apply the choice of
law rules of the forum state. Klaxon Co. v. Stentor Elec. Mfg.
Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). In this
case, application of New York choice of law analysis is
Section 15 of the Conditions provides that "[t]hese
conditions are governed by Finnish law." Choice of law clauses
are routinely enforced by the courts of this Circuit, "if
there is a reasonable basis for the choice." Morgan Guaranty
Trust Co. v. Republic of Palau, 693 F. Supp. 1479, 1494
(S.D.N.Y. 1988) (citing Restatement (Second) of Conflict of
Laws § 187 (1971)), vacated on other grounds, 924 F.2d 1237 (2d
Cir. 1991). New York courts also generally defer to choice of
law clauses if the state or country whose law is thus selected
has sufficient contacts with the transaction. See, e.g., Zerman
v. Ball, 735 F.2d 15, 20 (2d Cir. 1984); Walter E. Heller & Co.
v. Video Innovations, Inc., 730 F.2d 50, 52 (2d Cir. 1984); 600
Grant St. Assocs. Ltd. Partnership v. Leon-Dielmann Inv.
Partnership, 681 F. Supp. 1062, 1064 (S.D.N.Y. 1988). Under
those circumstances, "New York law requires the court to honor
the parties' choice insofar as matters of substance are
concerned, so long as fundamental policies of New York law are
not thereby violated." Woodling v. Garrett Corp., 813 F.2d 543,
551 (2d Cir. 1987).
Finland's contacts with the transactions at issue are
substantial, rendering the choice of law clause enforceable
unless a strong public policy of New York is impaired by the
application of Finnish law. Plaintiff FFS is a Finnish
resident, which held auctions of Finnish-bred furs in Finland.
All bids were made in Finnish marks, with payment and delivery
to take place in Finland. Mr. Shulof voluntarily traveled to
Finland in order to partake in FFS's auctions. Thus, virtually
all of the significant events related to these transactions
took place in Finland. Finland also has an obvious interest in
applying its law to events taking place within its borders
relating to an important local industry, and in applying
uniform law to numerous transactions with bidders from foreign
Mr. Shulof argues that the choice of Finnish law provision
should be held invalid on a number of grounds, including New
York's contacts with this litigation and its interest in
applying its own law. According to Mr. Shulof, New York has
the following interests in this action: it is the place of
business and of incorporation of JSF; FFS has a representative
with a New York office who communicated with Mr. Shulof about
the fur auctions; and that New York is, allegedly, "the
economic and design center for the world's fur industry."
Defendants' Memorandum of Law ("Def. Mem.") at 11. Mr. Shulof
also argues that, under New York law, Section 4 of the
Conditions would be invalid as contravening New York's policy
against imposing personal liability on corporate officers, as
well as under the Statute of Frauds.
New York courts will decline to apply foreign law that would
otherwise govern if that law conflicts with a strong public
policy of the forum. See Ehrlich-Bober & Co. v. University of
Houston, 49 N.Y.2d 574, 580, 427 N.Y.S.2d 604, 608,
404 N.E.2d 726, 730 (1980); J. Zeevi & Sons, Ltd. v. Grindlays Bank
(Uganda), Ltd., 37 N.Y.2d 220, 227, 371 N.Y.S.2d 892, 899,
333 N.E.2d 168, 175 cert. denied, 423 U.S. 866, 96 S.Ct. 126, 46
L.Ed.2d 95 (1975). However, "[i]n search of the public policy
of the State, courts of course are not free to indulge in mere
individual notions of expediency and fairness but must look to
the law as expressed in statute and judicial decision. . . .
Nor . . . may it be said that in case of conflict New York's
policy will invariably prevail . . . in the face of a strong
assertion of interest by the other jurisdiction."
Ehrlich-Bober, 49 N.Y.2d at 580, 427 N.Y.S.2d at 608, 404
N.E.2d at 730. Thus, for New York law to displace foreign law
once the latter has been demonstrated
to apply, not only must a clear conflict with New York law be
shown, but New York's interest as reflected in the policy
underlying its law must outweigh the interest of the other
B. Result under Finnish Law
Under Federal Rule of Civil Procedure 44.1, a court, "in
determining foreign law, may consider any relevant material or
source, including testimony." Fed.R.Civ. Proc. 44.1; see also
Ackermann v. Levine, 788 F.2d 830, 838 n. 7 (2d Cir. 1986).
Both parties have submitted affidavits of Finnish attorneys on
the issue of Mr. Shulof's liability under Finnish law.
FFS's expert, Vesa Majamaa ("Majamaa"), a Doctor of Law and
Professor of the Faculty of Law at the University of Helsinki,
gives as his opinion that the provision of Section 4 of the
Conditions imposing personal liability upon the bidder,
regardless of whether he bids on behalf of another, is valid
both as a term of the particular auctions at issue and as a
general principle of Finnish and Scandinavian auction law.
See Declaration of Vesa Majamaa, dated June 19, 1990 (English
Translation), Exhibit B to Plaintiffs' Notice of Motion for
According to Majamaa, it is "commonly accepted in
Scandinavia that a bidder, by making a bid, accepts those
conditions which have been announced at the auction."
Id. ¶ 19. Further, he states:
According to the Finnish judicial system, no one
may use ignorance of the law as a defense. . . .
This same principle is also . . . applicable when
the matter in question concerns . . . terms of
trade. . . . If the buyer is not familiar with
the terms observed in an auction, he is obliged
to familiarize himself with them. In this
respect, failure to inquire will result in a loss
for the buyer. . . . If a businessman who has
been and is still active in the field falls back
on his ignorance in a case in which he has been
offered an actual opportunity to find out about
the terms of the auction, his conduct could be
considered to be contrary to equitable business
practices [and] the "Principle of Good Faith". .
Id. ¶¶ 22, 23, 25.
Majamaa also notes that under Danish law, which he maintains
would be applied by a Finnish court in the absence of Finnish
decisional or legislative law on point, "it is taken for
granted that someone who has bid on merchandise on someone
else's account is responsible for the transaction, as he would
be for his own obligation, together with his superior. . . .
Hence the auction buyer's responsibility is not secondary, as
is, for example, the responsibility of a guarantor."
Id. ¶ 27.
Majamaa asserts that the provisions of the Finnish Contract
Act allowing a court to disregard an overly harsh condition of
a contract "can be applied to mutual agreements between
traders only when one party is fully dependent on the other,"
id. ¶ 31, such as a private merchant that is forced to deal
with a central business monopoly. Thus, he submits, these
provisions are inapplicable to an arm's-length transaction
between a bidder and an auctioneer. Majamaa also opines that
the terms of Section 4 are neither unexpected nor harsh because
"the liability has been clearly presented in the terms of the
auction," id. ¶ 37, and because the same rule of liability
would apply under Finnish law in the absence of any provision.
Mr. Shulof submits the opinion of Christian Wik ("Wik"), an
attorney admitted to practice in Finland and associated with
a Helsinki law firm. Wik refers to little law specifically
concerning auctions, but contends that, under general
principles of Finnish contract law and equity, Section 4 might
be invalid as an adhesion contract or as an unreasonable
provision. However, Wik's opinion is less than conclusive as
to whether a Finnish court would release Mr. Shulof from any
liability, finding no more than a "possible outcome that
adjustment of [the terms of the Conditions by the court] would
avoid a finding of individual liability on the part of George
Shulof." Affidavit of Christian Wik, sworn to on May 22, 1990,
After reviewing the legal arguments presented by the parties
and the facts of the case, and in light of the fact that even
Mr. Shulof's expert can offer no firm opinion that Section 4
is unenforceable under Finnish law, the Court concludes that
a Finnish court would enforce the provisions of Section 4 and
impose personal responsibility upon George Shulof for his
auction bids on behalf of JSF.
C. Result under New York Law
As a general rule, New York maintains a strong presumption
against imposing personal liability upon a corporate officer
"absent clear evidence of an intent to create individual
liability." Lerner v. Amalgamated Clothing & Textile Workers
Union, 938 F.2d 2, 5 (2d Cir. 1991). New York follows this rule
even when the officer is a signatory to a contract purporting
to bind him personally. The New York Court of Appeals has
pointed out the "great danger in allowing a single sentence in
a long contract to bind individually a person who signs only as
a corporate officer." Salzman Sign Co. v. Beck, 10 N.Y.2d 63,
67, 217 N.Y.S.2d 55, 57, 176 N.E.2d 74 (1961); see also Savoy
Record Co. v. Cardinal Export Corp., 15 N.Y.2d 1, 254 N.Y.S.2d
521, 203 N.E.2d 206 (1964).
Notwithstanding their reluctance to impose personal
liability, however, New York courts will do so under
appropriate circumstances. See, e.g., Gillman v. Chase
Manhattan Bank, N.A., 73 N.Y.2d 1, 537 N.Y.S.2d 787,
534 N.E.2d 824 (1988); Paribas Properties, Inc. v. Benson, 146 A.D.2d 522,
536 N.Y.S.2d 1007 (1st Dep't 1989).
It is also well-established under New York law, as under
Finnish law, that "[t]he owner of property offered for sale at
auction has the right to prescribe the manner, conditions and
terms of sale. . . . The conditions of a public sale,
announced by the auctioneer at the time and place of the sale,
are binding on the purchaser, whether or not he knew or heard
them." In re Premier Container Corp., 95 Misc.2d 859, 408
N YS.2d 725, 730 (Sup.Ct. 1978) (citations omitted); see also
United States v. Blair, 193 F.2d 557, 560 (10th Cir. 1952).
In the case at bar, George Shulof contends that the
provisions of Section 4 are unconscionable and would not be
enforced by a New York court. He argues that Section 4 is
printed in fine print, that the Conditions were unavailable to
him until he arrived in Finland the week of the auction, that
they differ from the conditions of other fur auctions, and
that no one specifically pointed out to him the personal
liability provision of Section 4.
Nevertheless, a perusal of the Conditions reveals that their
entire text is only a single page long, and that all of the
Conditions, including Section 4, are printed in the same size
print, which, although small, is legible. The catalogue was
made available to Mr. Shulof at the beginning of the four-day
period prior to the auction during which potential bidders
were allowed to inspect the furs. Although Mr. Shulof contends
that the urgent need to inspect large numbers of furs
prevented him from reading the one-page list of Conditions, he
admits that he knew where they were located in the catalogue
and that he did read some of the Conditions before bidding.
Further, Mr. Shulof does not dispute the fact that he was
given a copy of the same Conditions at the time of the 1986
auction he attended.
Under these circumstances, it seems unlikely that a New York
court would refuse to enforce Section 4 in an arm's-length
commercial transaction involving a sophisticated defendant
accustomed to bidding at fur auctions. Moreover, even if a New
York court would not enforce such a provision in a transaction
to which New York law clearly applied, this Court does not
find New York's interest in protecting one of its residents
against personal liability as a corporate officer to
constitute so fundamental a policy that New York courts would
refuse to enforce a contrary rule of foreign law. Indeed, the
New York Court of Appeals has held that "foreign-based rights
should be enforced unless the judicial enforcement of such a
contract would be the approval of a transaction which is
inherently vicious, wicked or immoral, and shocking to the
prevailing moral sense." Intercontinental Hotels Corp. v.
N Y2d 9, 13, 254 N.Y.S.2d 527, 529, 203 N.E.2d 210 (1964)
(enforcing foreign gambling debt); see also Loucks v. Standard
Oil Co., 224 N.Y. 99, 110, 120 N.E. 198, 201 (1918) (Cardozo,
J.) (foreign cause of action should be enforced unless it
"offend[s] our sense of justice or menace[s] the public
welfare"); Ackermann, supra, 788 F.2d at 841; Schultz v. Boy
Scouts of Am., Inc., 65 N.Y.2d 189, 197, 491 N.Y.S.2d 90,
480 N.E.2d 679 (1985).
Defendant also argues that the provision is invalid under
New York's Statute of Frauds as a special promise to answer
for the debt or default of another under New York General
Obligations Law § 5-701(a)(2) (McKinney 1989). However, the
status of Section 4 under New York law is not established on
the present record. Under similar circumstances, New York
courts have held that an agreement of a corporate officer to be
jointly and severally liable with the corporation is not a
guaranty or promise to answer for another's debt, but a primary
obligation. See Paribas Properties, supra, 536 N.Y.S.2d at
Moreover, regardless of the applicability of New York's
Statute of Frauds to Section 4, formal requirements such as
the Statute of Frauds do not constitute a "fundamental policy"
for the purpose of choice of law analysis, except in the case
of contracts relating to wills. See Restatement (Second) of
Conflicts of Laws § 187, comment g (1971); Nakhleh v. Chemical
Construction Corp., 359 F. Supp. 357, 360 (S.D.N.Y. 1973). Thus,
a violation of the Statute of Frauds in this instance would not
cause a New York court to disregard Finnish law.
Given the lack of a clear conflict with either New York law
or policy, this Court concludes that a New York court would
apply Finnish law to the issue before the Court. The Court
also notes that a similar result has often been reached under
New York conflicts rules even in the absence of a contractual
choice of law clause. See Transatlantic Cement, Inc. v. Lambert
Freres et Cie., 462 F. Supp. 363, 365 (S.D.N.Y. 1978) (under New
York conflicts rules, French law governed contract dispute
where defendants were French citizens, preliminary negotiations
occurred in France and the alleged agreement occurred in
France); Teledyne Indus. v. Eon Corp., 373 F. Supp. 191, 200
(S.D.N.Y. 1974) (under New York conflicts rules, California law
governed where contract between California plaintiff and New
York defendant with California division was negotiated and
signed in California).
Thus, Mr. Shulof must be held jointly and severally liable
with JSF for any damages owed to FFS for the furs purchased at
its 1987 auctions, and his motion for summary judgment is
III. Liability of Juliette Shulof
The parties agree that New York law governs the issue of the
liability of Juliette Shulof on the Bill of Exchange, which
was executed and payable in New York. The parties do not
dispute that the Bill of Exchange is a negotiable instrument,
and therefore subject to the provisions of Article 3 of the
Uniform Commercial Code, as adopted by the state of New York.
The relevant section of the Code is § 3-403, which governs
signatures by authorized representatives. Under subsection (2):
An authorized representative who signs his own
name to an instrument
(a) is personally obligated if the instrument
neither names the person represented nor shows
that the representative signed in a
(b) except as otherwise established between the
immediate parties, is personally obligated if
the instrument names the person represented but
does not show that the representative signed in
a representative capacity, or if the instrument
does not name the person represented but does
show that the representative signed in a
N YU.C.C. Law § 3-403(2) (McKinney 1991).
Official Comment 3 to this section offers examples of
signatures and the legal implication of each type of
signature. An authorized representative will not be personally
bound by the following: a signature in the name of the
represented party; "Peter Pringle by Arthur Adams, Agent"; or
"Arthur Adams, Agent" (assuming that the principal is named in
the instrument). In the case of a signature such as "Arthur
Adams, Agent," or "Peter Pringle Arthur Adams," parole
evidence may be offered in litigation between the immediate
parties to prove representative capacity.
In the case at bar, Mrs. Shulof signed as "Juliette A.
Shulof" above a typed name of "Juliette Shulof Furs Inc.,"
which had been typed in by the preparer of the instrument,
FFS. The cases interpreting signatures of this type
demonstrate the special treatment of negotiable instruments
under New York law. As reflected in the discussion in an
earlier section of this opinion, New York has, as a general
rule, a policy against imposing personal liability on
corporate officers if the circumstances are ambiguous.
However, this policy gives way before the policy
considerations underlying N.Y.U.C.C. § 3-403, which "aims to
foster certainty and definiteness in the law of commercial
paper, requirements deriving from the 'necessity for takers of
negotiable instruments to tell at a glance whose obligation
they hold.'" Rotuba Extruders, Inc. v. Ceppos, 46 N.Y.2d 223,
228, 413 N.Y.S.2d 141, 143, 385 N.E.2d 1068, 1070 (1978)
(quoting White & Summers, Uniform Commercial Code § 13-2, at
Construing Section 3-403(2), the New York Court of Appeals
held that "the basic law is that resort to extrinsic proof is
impermissible when the face of the instrument itself does not
serve to put its holder on notice of the limited liability of
a signer." Id. In Rotuba, a promissory note had been signed by
the chief executive officer of a corporation as "Kenneth
Ceppos," on a signature line directly below the printed name of
the corporation. The Court held that under Section 3-403(2)(b),
the note named the corporation but did not indicate that Ceppos
had signed in a representative capacity, and that only
sufficient evidence establishing an agreement between the
immediate parties that Ceppos would not be personally liable
would excuse him from such liability. In the absence of such
evidence, summary judgment against Ceppos was appropriate. Id.,
46 N.Y.2d at 228-231, 413 N.Y.S.2d at 143-45, 385 N.E.2d 1068.
In Bankers Trust Co. v. Javeri, 105 A.D.2d 638, 481 N.Y.S.2d
362 (1st Dep't 1984), the Appellate Division stated
unequivocally that in the case of a holder in due course, the
suit is not between the "immediate parties" to the negotiable
instrument, and that extrinsic evidence cannot be introduced to
release the signatory from his personal obligation. See id.,
481 N.Y.S.2d at 363-64; see also Tropical Ornamentals, Inc. v.
Visconti, 115 A.D.2d 537, 495 N.Y.S.2d 729 (2d Dep't 1985).
A court in this District has also held, under New York law,
that as to a holder in due course "the relevant inquiry is
limited to whether the face of the instrument put [the holder]
on notice that [the signatory] signed in his representative
capacity only. . . . This is true even though the check also
bears the [corporation's] imprint." Carador v. Sana Travel
Serv., Ltd., 700 F. Supp. 787, 791 (S.D.N.Y. 1988), aff'd
without opin., 876 F.2d 890 (2d Cir. 1989).
The Court finds the case at bar to be analogous to the
holdings in Javeri and Rotuba. It is undisputed that Okobank
never dealt with either of the Shulofs or JSF. Mrs. Shulof
offers no evidence sufficient to raise a triable issue of fact
as to either Okobank's status as a holder in due course or her
allegations of fraud in the inducement on the part of FFS.
Accordingly, the Court finds that Mrs. Shulof's signature on
the Bill of Exchange did not give notice that she signed in a
representative capacity only, and therefore she is personally
liable for the amount of the bill. Her motion for summary
judgment is denied, and the motion of Okobank for summary
judgment against Juliette Shulof is granted.
IV. Liability of Juliette Shulof Furs, Inc.
JSF's liability under the Bill of Exchange is not disputed,
and Okobank's motion for summary judgment against JSF is
JSF's failure to pay for and clear a number of the furs that
it purchased at auction is also uncontested. However,
defendants contend that material issues of fact exist
concerning FFS's alleged failure to mitigate damages by
reselling those furs in a commercially reasonable manner.
Defendants argue that
FFS did not act reasonably but instead "dumped"
furs, including the furs bid upon by JSF, on the
market resulting in a depression of the worldwide
price of furs. For example, by conducting an
auction in December of 1987 FFS irretrievably
depressed the market for fox fur by offering
goods at a time when there were no buyers.
Reply Affidavit of George Shulof, sworn to on July 10, 1990,
FFS contends that its sale of the remaining furs bid upon by
JSF was commercially reasonable as a matter of law. The
Director of Auction Services for FFS has testified that FFS
faithfully followed Mr. Shulof's resale
instructions throughout 1988, and during that
period, never sold a skin for less than his
minimum price. [FFS] did not start liquidating
the account until the middle of 1989, eighteen
months after [FFS] supposedly "dumped" foxes on
the market. Mr. Shulof does not even speculate on
how the 1987 "dumping" affected the 1989 market.
Reply Declaration of Pirkko RantanenKervinen, dated Sept. 20,
1990, ¶¶ 5-6.
George Shulof admits that FFS followed his resale
instructions until December 1988. He also admitted at his
deposition that, aside from his and JSF's affirmative
defenses, the figures put forward by FFS concerning the amount
owed by JSF were properly calculated. See Deposition of George
Shulof, dated Dec. 19, 1989, at 153-60. Mr. Shulof further
admitted that every aspect of FFS's resales of the JSF furs was
commercially reasonable with the exception of the timing. Id.
Defendants cite no law concerning the scope of FFS's duty to
mitigate, while FFS assumes for the purposes of argument that
the standards of the Uniform Commercial Code apply to this
sale of goods. See Plaintiff's Reply Memorandum of Law at 18 n.
10. Under U.C.C. § 2-706(1), a seller's remedies for breach
include "the difference between the resale price and the
contract price together with any incidental damages," as long
as the goods concerned were resold "in good faith and in a
commercially reasonable manner."
FFS also points to the provisions for resale of collateral
by secured creditors of Article 9 of the U.C.C., noting that
FFS retained a security interest in the furs in its
possession. Section 9-507(2) of the U.C.C. states, in
The fact that a better price could have been
obtained by a sale at a different time or in a
different method from that selected by the
secured party is not of itself sufficient to
establish that the sale was not made in a
commercially reasonable manner. If the secured
party either sells the collateral in the usual
manner in any recognized market therefore or if
he sells at the price current in such market at
the time of his sale . . . he has sold in a
commercially reasonable manner.
U.C.C. § 9-507(2).
Defendants submit no evidence demonstrating that FFS
disposed of their furs in any manner other than at regularly
scheduled auctions, at the currently prevailing price. Rather,
defendants argue that because world prices for fox furs
declined in late 1987, FFS should have withheld its furs, and
that in continuing to hold regular auctions, FFS depressed the
price of furs sufficiently to constitute a failure to mitigate
damages when FFS resold the furs bid upon by JSF in 1989. This
argument is unsupported by anything more than the opinion of
Mr. Shulof, who is admittedly not an expert on world fur
prices or the effects of "dumping." Furthermore, it would
impose entirely unreasonable conditions
on FFS, requiring it to suspend the bulk of its operations,
possibly for years, until fur prices rose, simply in order to
mitigate its damages on a relatively small number of furs,
regarding which JSF and not FFS breached its obligations.
Accordingly, the Court finds that the resale by FFS of the
furs bid upon but not cleared by JSF was commercially
reasonable as a matter of law. Because none of the defendants
have contested FFS's calculations of damages except for its
alleged failure to mitigate, FFS's motion for summary judgment
is granted both as to liability and to damages.
The motion of defendants George and Juliette Shulof for
summary judgment is denied.
Plaintiffs' motion for summary judgment against all
defendants is granted. Plaintiffs' motion for costs is denied.
Plaintiffs are directed to submit to the Court a form of
judgment in accordance with this opinion.
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