The opinion of the court was delivered by: SPATT
On September 10, 1996, the corporate defendant, J & B, filed a petition under Chapter 7 of the Bankruptcy Code. Because of the Bankruptcy Court action and the automatic stay provision of 11 U.S.C. § 362(a), the plaintiff cannot proceed against the corporate defendant at this time.
Therefore, the only matter presently before the Court is the plaintiff's motion for summary judgment pursuant to Fed. R. Civ. P. 56(c) with regard to the fifth cause of action set forth in the complaint against the individual defendants as guarantors of the contract between Battery and J & B for the recovery of the sum of $ 345,122.59 plus interest, costs and disbursements related to this action and, reasonable attorneys' fees.
The plaintiff, Battery Associates, Inc., is a Delaware corporation engaged in the nationwide distribution of automotive products and accessories, including batteries, with its principal place of business in Memphis, Tennessee. The corporate defendant, J & B Battery Supply, Inc., is a New York corporation engaged in the business of selling automotive products and accessories with its primary place of business located in Farmingdale, New York. The individual defendants, Robert and Janet, are the sole shareholders of J & B and, at the inception of this suit, resided in East Norwich, New York. Subsequently, the Bachmans moved to Lilburn, Georgia.
Personal jurisdiction over the individual defendants was contested by the Bachmans in their memorandum of law submitted to the Court on July 22, 1996. Accordingly, the matter was referred to United States Magistrate Judge E. Thomas Boyle for a Report and Recommendation on the question of personal jurisdiction as well as an issue relating to the defendants' attempt to frustrate the collection of a potential judgment by Battery. Subsequently, J & B advised the Court that it did not object to the issuance of a preliminary injunction ordering the placement of all proceeds received by the corporate defendant from the sale, transfer, or other distribution of J & B's assets and inventory into an escrow account, provided that the corporate defendant is permitted to make expenditures for ordinary business expenses and to sell trucks and equipment located on Long Island as presently provided for in the Temporary Restraining Order dated August 23, 1996. The plaintiff agreed to this arrangement.
On September 16, 1996, Judge Boyle issued a Report and Recommendation, finding jurisdiction over Janet pursuant to New York CPLR § 308(4), but also finding that service on Robert was defective due to a lack of due diligence. Judge Boyle did, however, recommend that the plaintiff be granted an additional thirty days to effect proper personal service on Robert.
The plaintiff then properly reserved the summons and complaint pursuant to New York CPLR § 308(2) on Robert on September 20, 1996, within the thirty-day period. Therefore, this Court has personal jurisdiction over both Robert and Janet.
C. Relationship Between the Parties
For the period of April 1988 to April 1996, Battery and J & B have had a business relationship in which the plaintiff sold and delivered goods to the corporate defendant. The parties agreed that a finance charge would be imposed on any past due accounts in the amount of two percent over the prime rate announced from time to time by the First Tennessee Bank. On or about June 13, 1988, the Bachmans signed a guaranty under which they agreed to pay amounts due to Battery in the event of J & B's default in payment. The individual guaranty states:
In consideration of giving of credit to J & B Battery Supply, Inc. of Mineola, New York (referred hereinafter as the "Debtor"), and other good and sufficient consideration to the undersigned accruing, the undersigned hereby gives this Continuing Guaranty to BATTERY ASSOCIATES, INC., (referred to hereinafter as the "Creditor"), including residence located at 204 Radcliff Drive East Norwich, New York 11732 (this property has not been declared a homestead) for the payment in full, together with all interest, fees and charges of whatsoever nature and kind, of any and all indebtedness of the said Debtor to the said Creditor, whether on open account or evidenced by note, secured or unsecured, due and owing at the present time, or that may hereafter be due and owing by said Debtor to the said Creditor, and it is further agreed that is said bills are not paid when due, the undersigned will pay the same upon notice and demand.
It is specifically understood and agreed that the said Creditor shall not be required to exhaust its legal remedies for recovery and collection against the said Debtor before looking to the undersigned for payment of this account, but that if the account is not paid when due, said Creditor may, at once, notify the undersigned, and upon receipt of such notice that the said account is past due and unpaid, the undersigned assumes liability therefore and agrees to pay the same without delay or defalcation.
It is distinctly understood and agreed that said Creditor may enter suit against the undersigned for the recovery of the entire amount of said indebtedness hereby secured, and may recover judgment therefore against the undersigned. It is also understood and agreed that in that event the said Creditor commences such suit then and in that event the undersigned shall pay for the cost of suit and attorneys' commissions for collection in addition to the indebtedness hereby secured.
The undersigned hereby waives notice of the acceptance of this guaranty, notice of demand and maturity of payments to become due, notice of default in payment of said Debtor, and all such notices required or customarily given under like circumstances. It is also specifically understood and agreed that the undersigned expressly consents that the time of payment of any indebtedness hereby secured may be extended, and that the said Creditor may at any time require and accept other security of any nature whatsoever from said Debtor without notice to or consent from the undersigned.
The undersigned for himself, his estate, successors and assigns, agrees that he is financially interested in the said Debtor and agrees to be held responsible for said obligations, precisely as if the same had been contracted and due and owing by the undersigned himself, and agrees to pay said obligations on demand, for any balance that may be due and payable at any time for the goods sold and shall extend to and cover all ...