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September 30, 1993

TUCKER LEASING CAPITAL CORP., a Connecticut corporation, Plaintiff,
MARIN MEDICAL MANAGEMENT, INC., a California corporation, GENE FARBER and HENRY GRAUSZ, Defendants.


The opinion of the court was delivered by: ARTHUR D. SPATT

SPATT, District Judge.

 This diversity action was commenced by the plaintiff in April, 1992 to recover on a written equipment lease and personal guaranty signed by the named individual defendants. The plaintiff claims that the corporate defendant Mann Medical Management, Inc. ("Marin Medical") has defaulted on the lease by failing to make any payment since February, 1992. Neither of the Guarantors has cured Marin's default nor made any payments under the guaranty.

 Shortly after the plaintiff initiated this lawsuit, the corporate defendant Marin Medical filed a Chapter 11 petition in bankruptcy on April 24, 1992, and is now subject to the jurisdiction of the United States Bankruptcy Court for the Northern District of California The Chapter 11 filing was made in response to the creditors of Marin Medical filing a Chapter 7 petition against the corporation on April 2, 1992.

 Defendants Grausz and Farber, the principals of Marin, shortly thereafter filed a Notice of Removal, attempting to remove this case to the United States Bankruptcy Court upon the advice of their bankruptcy counsel, on the belief that this matter was a related or core proceeding to the case against Marin Medical. By letter dated June 30, 1992, Tucker's counsel requested that the defendants withdraw or modify the Notice of Removal to properly reflect protection only of the corporate debtor Marin Medical. When the defendants declined, Tucker applied to the Bankruptcy Court for remand as to the Guarantors Grausz and Farber. On August 13, 1992, the United States Bankruptcy Court for the Eastern District of New York (Duberstein, J.), granted the remand, but declined to award attorney's fees to Tucker.

 In light of the Bankruptcy Court action and the accompanying automatic stay provision of 11 U.S.C. § 362, the plaintiff cannot proceed at this time against the corporate defendant.

 The plaintiff-lessor now moves for summary judgment, pursuant to Fed. R. Civ. P. 56(c), with respect to the third cause of action set forth in the complaint against the individual Guarantors.


 A. The Parties

 The plaintiff Tucker Leasing Capital Corp. ("Tucker") is a Connecticut corporation with its principal place of business located in Port Washington, New York. Tucker is in the business of providing financing for the purchase or lease of computers in a variety of production, manufacturing, medical and office equipment throughout the United States.

 The defendant Marin Medical is a corporation organized and existing under the laws of the State of California with its principal place of business located at 2200 Larkspur Landing Circle, Larkspur, California 94939. Marin Medical is a medical management service organization.

 The defendant Henry Grausz is a resident and citizen of Ross, California, and is one of the two principals, officers and directors of Marin Medical.

 The defendant Gene Farber is also a resident and citizen of Ross, California, as well as a principal, officer and director of Marin Medical. Farber is also a partner in the law firm of Evans, Farber & Cipinko, counsel for the defendants in this action.

 Although not a party to this action, Cycare Systems, Inc. contracted with Marin Medical to provide certain computer system hardware and software.

 On March 26, 1991, Marin Medical purchased certain medical and office equipment from its manufacturer, Cycare Systems, Inc. ("Cycare"), pursuant to a written agreement. Tucker was not a party to this purchase agreement between Marin Medical and Cycare, and the plaintiff corporation is not mentioned anywhere in the agreement.

 In order to finance its acquisition of the equipment, Mar in Medical entered in a written equipment lease agreement with the plaintiff Tucker, also dated March 26, 1991. Tucker subsequently filed with the California Secretary of State the necessary Form UCC-1 Financing Statements covering the Marin Medical equipment.

 On March 28 and March 29, 1991, specifically to induce Tucker to enter into the lease, the defendants Grausz and Farber executed separate guarantees, each by their terms "irrevocably and unconditionally" guaranteeing payment and performance of Marin Medical's obligations under the lease (Levy Affidavit, Exhibits I and J). Defendant Grausz executed a Delivery and Acceptance Receipt on behalf of Marin Medical on March 28, 1991. The receipt expressly accepts delivery of all equipment contemplated by the lease, "fully installed and in good working condition," and acknowledges receipt of that Equipment "after full inspection thereof as satisfactory for all purposes of the above-referenced Lease."

 The equipment lease required Marin Medical to make sixty (60) monthly rental payments to Tucker in the amount of $ 4,417.61, plus applicable taxes, commencing March 28, 1991, with an initial payment of $ 4,682.67 (Levy Affidavit, P 1). The lease was amended by letter agreement dated April 25, 1991, to reflect that the last 59 payments were to be $ 5,624.59 per month, with "all other terms and conditions of the [Lease] [to] continue in full force and effect" (Levy Affidavit, Exhibit L).

 Each of the Guarantors "jointly and severally" guaranteed both payment and performance of all Marin Medical obligations under the lease to Tucker, as obligee. Each guaranty also designates New York law as controlling its interpretation and enforcement, and includes consent to the jurisdiction of all state and federal courts sitting within New York State. Each guaranty granted Tucker, as obligee, "the right to proceed against the Guarantors, or any of them, immediately upon any default by the obligor in payment or performance of any obligations . . . [under the Lease]" (Plaintiff's Rule 3(g) Statement, citing Levy Affidavit, Exhibits I and J, p. 1, P 1).

 The complaint is based on the lease and guaranty pursuant to which payments are due and owing by the defendants. The complaint alleges the following causes of action: (1) against Marin Medical, based on its default, for the amount due and owing under the lease, in the sum of $ 252,202.44, plus applicable property taxes, costs, expenses, and attorney's fees; (2) for immediate repossession of the equipment based on the default; and (3) by reason of Marin Medical's default, liability of the Guarantors in the amount of $ 252,202.44, together with personal property taxes, costs and attorney's fees.

 C. The Answer

 The defendants filed an "Answer of Defendants Henry Grausz and Gene Farber to Plaintiff's Complaint; Cross-Complaint; Counterclaim." For the most part, the defendants stated that they were "without information sufficient to form a belief as to the matters asserted." The defendants claimed that the Court lacks jurisdiction and that venue in this District is improper.

 No other defenses were asserted in the Answer.

 The cross-complaint consists of a single cause of action for fraudulent misrepresentation against CYCARE. The defendants contend that at all times during the negotiations for the purchase and sale of the equipment, CYCARE represented to the defendants that the equipment was worth at least $ 194,254.00. In the Fall of 1991, Mann Medical went out of business and sold its major assets. It consulted a computer broker to attempt to sell the equipment. The broker appraised the value of the equipment at $ 10,000 and indicated that the purchase price paid by the defendants was completely overvalued at the time of the purchase. In fact, the broker purportedly advised the defendants that the equipment was not worth much more than $ 10,000 when it was purchased. The individual defendants state that they executed the guarantees based upon the assumption that the equipment had a certain value, "so if it were necessary, we could sell it without a substantial loss. We assumed and relied on the sales price" (Farber Affidavit, PP 6, 7).

 The defendants also assert a counterclaim against Tucker for what appears to be a claim of "fraud in the inducement," alleging that "due to Tucker's close business relationship with CYCARE on this and other equipment leasing matters, Tucker was aware of and actively suppressed its knowledge that the Equipment was below the value represented by CYCARE and suppression of these facts was likely to mislead Cross-complainants and did in fact mislead Cross-complainants in the light of other representations made by Cross-defendant CYCARE" (Answer, P 34).


 In view of the automatic stay provisions of the Bankruptcy Code as applied to the corporate defendant, the plaintiff at this time is able to proceed in this case only against the Guarantors. The plaintiff moves, pursuant to Fed. R. Civ. P. 56(c), for an order (1) granting summary judgment on Tucker Leasing's third claim for relief with respect to the written guaranty signed by defendants Farber and Grausz; (2) dismissing the defendant's counterclaim on the ground that it is barred by operation of law; and (3) imposing sanctions against counsel for the defendants for frivolous litigation tactics.

 In support of the motion, the plaintiff has submitted a statement pursuant to Local Civil Rule 3(g), claiming that there are no genuine issues to be tried. The plaintiff contends that the undisputed issues are as follows: (1) Tucker was not a party to the purchase agreement between Marin Medical and CYCARE and is not mentioned anywhere in that contract; (2) Marin Medical entered into a separate equipment lease agreement with the plaintiff on March 26, 1991 to finance its acquisition of the equipment; (3) on March 29, 1991, to induce the plaintiff to enter into the lease, the two individual defendants executed separate guarantees "irrevocably and unconditionally" securing payment and performance of Marin Medical's obligations under the lease; (4) the lease expressly provided that the plaintiff/lessor "makes no warranty to anyone as to any matter whatsoever"; (5) the lease could not be cancelled by the lessee during the term of the lease; (6) the lessee's failure to pay any monthly rental fee when due was an "Event of Default"; (7) the lease contained an integration clause; (8) one of the remedies prescribed is acceleration of rent for the full lease term; (9) the plaintiff has a right to proceed against the Guarantors in the event of default; (10) Tucker paid CYCARE for the equipment, but Marin Medical defaulted on the lease and has made no payment since February, 1992; and (11) neither Marin Medical nor the Guarantors have cured the default.

 In support of this motion, the plaintiff has submitted the affidavit of Peter Levy, a Vice-president of Tucker who supervises all collection matters concerning every lease transaction to which the plaintiff Tucker is a party. After reciting most of the facts contained in the plaintiff's Rule 3(g) statement, Levy adds that the lease also contains an integration clause providing that the written instrument "reflects the entire agreement between the parties and may not be altered, amended, modified, terminated or otherwise changed, except in writing and signed by an executive officer of Lessor and Lessee" (Levy Affidavit, P 14).

 Levy also claims that the defendants have asserted no affirmative defenses in their Answer and that the counterclaim is without merit and is legally barred by specific provisions of both the Lease and Receipt. In this regard, Levy states the following:

 1. the language in the lease expressly renders Marin Medical's obligation to pay rent under the lease "absolute and unconditional," and precludes the assertion of any counterclaim in purported contravention of that obligation;

 2. no viable affirmative defense has been raised which would establish a genuine, triable issue of fact with respect to either the lease or the guarantees;

 3. the defendants' counterclaim has been sufficiently probed through discovery, yielded no other pertinent documents or allegations, and in any event is barred by the underlying documents and applicable law;

 4. the plaintiff is therefore entitled to summary judgment on the guarantees as a matter of law.

 In responding to the motion, counsel for the defendants moves pursuant to Fed. R. Civ. P. 56(c) and 56(f), seeking "a continuance to allow discovery in order for defendants to present by affidavit the facts essential to justify defendants' opposition" to the plaintiff's motion (Defendants' Memorandum of Law at p. 2). Counsel adds that "defendant believes and herein asserts that a viable defense and counterclaim can be asserted as a matter of law but lacks sufficient facts to support the claim at this time" (id.). Essentially, the defendants argue that the facts necessary to oppose the motion for summary judgment are largely in the plaintiff's exclusive control.

 The only information supplied by a party with actual knowledge of the incidents at issue is the affidavit of Gene Farber, one of the principals of Marin Medical. Farber states that he and the other principal of Marin Medical, Henry Grausz, assumed and relied on the sales price set forth by CYCARE. According to Farber, Tucker made certain representations relating to the financing of the equipment which were a material consideration in the decision to enter into the Guarantees. Upon subsequently hearing the broker's ...

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