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SOUTHERN INDUSTRIES OF CLOVER, LTD. v. ZENEV TEXTILES

United States District Court, S.D. New York


January 30, 2004.

SOUTHERN INDUSTRIES OF CLOVER, LTD. Plaintiff -against- ZENEV TEXTILES S.A.; VENEZ TEXTILES USA INC.; RAMI KATTAN; and ABE KATTAN d/b/a ABRAHAM KATTAN Defendant

The opinion of the court was delivered by: HAROLD BAER, JR., District Judge

OPINION & ORDER

Plaintiff Southern Industries of Clover, Ltd. ("Southern") seeks to recover a debt alleged to be owed by defendant Zenev Textiles S.A. ("Zenev") in the amount of $276,472.97 plus interest. Although Southern has named Zenev and a second company, Venez Textiles USA Inc. ("Venez USA"), as defendants, the principal issue here is whether plaintiff can recover from the two individual defendants, Abe Kattan and Rami Kattan, whom plaintiff claims personally, guaranteed Zenev's debt. Abe Kattan and Rami Kattan contend that the guaranty they signed was signed on behalf of Venez USA, a corporation in which they are shareholders and officers. A bench trial was held on January 6, 2004. Following are the Court's findings of facts and conclusions of law. I conclude that defendants Abe Kattan and Rami Kattan individually and Venez USA guaranteed Zenev's debt.

I. BACKGROUND

  Southern is a wholesale seller of yarn incorporated in and with its principal place of business in New York. Southern's president, Lawrence Kryger, has more than 50 years of experience in the textile industry and has had a business relationship for more than 20 years with defendants Abe and Rami Kattan. (Tr. 85.) Abe and Rami Kattan are brothers and have been in the industry for more than 33 years and have owned in whole or in part several companies in the textile industry during that time. (Tr. 13.) They owned and operated Tropical Textiles, which Page 2 they eventually liquidated in the late 1970s or early 1980s due to the poor state of the market for the product it manufactured. (Tr. 19-20.) Tropical Textiles owed Southern approximately $250,000 when it was liquidated, which Southern eventually recovered in a lawsuit against Tropical Textile's bank.*fn1 (Tr. 18, 86.) In 1986, approximately four or five years after they liquidated Tropical Textiles, the Kattans started a new company, Sunlight Trading Co. Inc. ("Sunlight"). Southern and Sunlight transacted some $30 to $40 million in business over the course of the approximately 15 years Sunlight was in existence. Southern's Kryger testified that Sunlight was launched and operated on a "shoe-string" and that out of compassion he sold yarn to Sunlight on very favorable terms. (Tr. 87.) Despite their long-time relationship, Kryger forwarded to the Kattans in late April 1999 copies of Southern's standard guaranty, one for each of the brothers, as Sunlight's account "got deeper and deeper in debt and the ability to get paid got more difficult," Kryger sought personal guaranties if Southern was to continue to ship on open account. (Tr. 87 (testimony of Kryger); see also Tr. 22 (testimony of Abe Kattan).) Abe Kattan and Rami Kattan signed the respective personal guaranties on May 17, 1999. Both documents are entitled "Customer Guaranty" and include the signers name and home address below the signature — the name is typed in and the address is handwritten. In approximately the end of 2000, the Kattans shut down Sunlight's operations and sold its equipment, principally to Mexico and Venezuela. (Tr. 70.)

  In approximately 1998 or 1999, the Kattans were involved in the formation of Venez USA to sell spare parts and yarn to Venezuela and other countries. (Tr. 32.) The Kattans owned 25% of Venez USA, with the balance owned by two individuals, Arscnio Alfonso (25%) and Wilson Belaguera (50%).*fn2 (Tr. 32.) Abe Kattan was also Venez USA's president.*fn3 (Tr. 55.) Page 3 Venez USA, which is incorporated in and has its principal place of business in Florida, was located at the same address as Sunlight had been, 7249 Northwest 36th Court in Miami.*fn4 (Tr. 19, 32.) Zenev,*fn5 which is a Venezuelan corporation, was formed at approximately the same time as Venez USA — i.e., in 1998 or 1999. (Tr. 33.) In exchange for machinery which it sent to help establish Zenev, the Kattans' Sunlight owns 25% of Zenev; the balance is owned by Alfonso Arsenio and Wilson Belaguera — who both co-owned Venez USA with the Kattans — and several other individuals. (Tr. 33.)

  At some point in late 1999, Southern started to sell yarn to Zenev. However, before Southern sold this yarn to Zenev, Kryger, based, in part, on his previous experiences (Tr. 87-88), required that the Kattans sign the guaranty at issue in this dispute. Kryger testified that it was his company's policy not to extend credit to non-U.S. companies without either a guaranty or letter of credit, and that this was especially so since the country where Zenev was located was in political turmoil. (Tr. 89, 126.) Abe Kattan denied that Kryger told him that Kryger insisted on a personal guaranty before he would ship any yarn to Zenev. (Tr. 54.) Kryger testified that he instructed Doreen Squiteri, Southern's long-time comptroller, to send one of Southern's form guaranties, modified at Abe Kattan's request to include both a personal and corporate guaranty. (Tr. 93.) Despite Kryger's ultimatum, it required many telephone calls and several visits before the executed guaranty was returned to Southern. (Tr. 91, 93 (testimony of Kryger); see also Tr. 48 (testimony of Abe Kattan).) On October 21, 1999, the Kattans signed the document, along with a third person, Arsenio Alfonso, who is not named in this lawsuit. The document is entitled "Cross Corporate Customer Guaranty," and it notes two customers to which the guaranty refers: "Zenev Textiles, Zona Industrial El Paso, Tinaquillo, Estado Cojedes, Venezuela" and "Venez Page 4 Textiles USA Inc., 7249 NW 36 Court, Miami, FL 33147."*fn6 The guarantee was sent to Southern with a cover letter dated November 12, 1999 and signed by Abe Kattan that stated: "Enclosed herewith the Cross Corporate Guarantee dated October 21, 1999 duly signed by Venez Textiles USA and guaranteed by Abraham Kattan, Rami Kattan and Arsenio Alfonso, who are the principals of the company." Kryger testified that when he received the guaranty in the mail, his only concern was to see that the Kattans had signed it and that they had not abridged their personal guaranty in any way — i.e., by including their corporate title such that they were binding the corporation rather than themselves.

  Over the course of the next few years, Zenev failed to pay eight invoices sent by Southern which totaled $276,472.97. Kryger testified that he made many demands over the telephone, in person, and by letter for payment of this debt to the Kattans. (Tr. 102-03.) Kryger testified that he often reminded the Kattans of their personal guaranty when he made these demands, and that the Kattans never denied or argued with the assertion. (Tr. 103.) Southern presented as evidence three letters that it claims were sent to the Kattans and that referred specifically to the Kattans' personal guaranty.*fn7 First, Southern introduced a letter from Kryger to Abe Kattan dated April 22, 2002 which stated "Zenev Textiles received open account credit from Southern Industries based Page 5 only on the fact that you were a principal owner and that you personally guaranteed that we would not be damaged" and "I look to you and your personal guarantee of the situation to resolve this matter forthwith." On June 19, 2002, Kryger sent a fax to Miguel at Zenev Textiles, with a copy to Abe Kattan, that noted the amount owed was $236,526.97 (of which $208,037.47 was past due).*fn8 The fax went on to say, "[P]romised payments that do not come will lead to our being compelled to call upon the personal guarantees of Zenev Textiles that are in our possession issued by Abe Kattan and Rami Kattan to induce us to ship overseas open account without a [letter of credit]."*fn9 The third letter Southern introduced was dated July 31, 2002 to Abe Kattan which stated, "The only way that Zenev Textiles got merchandise from out of the country without a letter of credit is your personal guarantee and even more important, your personal assurance that we would get paid" and "unless, through your intervention we start getting a pay down systematically, I will execute on the personal guarantee that I have from you and Ramie [sic]. . . ." Abe Kattan testified that he never received these letters.*fn10 (Tr. 61.)

  II. DISCUSSION

  Defendants Abe and Rami Kattan contend that the guaranty at issue is unambiguously a corporate guaranty by Venez USA. The Kattans take the fall-back position that if it is necessary to look beyond the four corners of the document, the extrinsic evidence confirms that Venez USA is the guarantor. In particular, they juxtapose the Zenev guaranty at issue here with the prototypically personal guaranties they signed in May 1999 with respect to Sunlight. The Kattans also argue that they would not personally guaranty a Venezuelan company that they have no real control over. Southern contends that the document is ambiguous, parole is appropriate, and that the extrinsic evidence shows that the parties' intent was for this to be a personal guaranty. Southern points primarily to the parties' course of dealings, including their conduct Page 6 both before and after the guaranty, as well as to the letters Kryger sent to Zenev and to the Kattans in the summer of 2002 seeking payment of the debt, which by then was more than $200,000.

  Wth respect to the threshold question about the need to look beyond the four corners of this document, the Kattans made this same argument in an unsuccessful motion to dismiss. As in that motion, the Kattans contend that the parties intended that Venez USA was the guarantor and the proof is in the title of the document: "Cross Corporate Customer Guaranty." Further proof, the defendants contend, is in the language below each signature where we read "Venez Textiles USA/" with the name of each signatory after the slash.*fn11 Although I agree that these features suggest that Venez USA is the guarantor, I do not agree that the document is unambiguous. As plaintiff points out, absent are any corporate titles, which as Abe Kattan conceded at trial, is generally a key indicia that the signer is executing the document in his or her official capacity.*fn12

  With respect to extrinsic evidence, the Kattans argue that certain differences between the Zenev guaranty and the Sunlight guaranties, which were signed six months apart, reveal the parties' intent that the shipments to Zenev were guaranteed by Venez USA — not the Kattans personally. First, in contrast to the Zenev guaranty, which as noted above is entitled "Cross Corporate Customer Guaranty," the Sunlight guaranties are simply entitled "Customer Guaranty." Second, typed-in below the signature line in each of the Southern guaranties are, respectively, "Mr. Abe Kattan" and "Mr. Rami Kattan" and the word "home," next to which each hand-wrote his home address. The Zenev guaranty by contrast, includes "Venez USA" before each of the names and does not indicate any place for a home address.*fn13 I agree with the Kattans Page 7 that the Sunlight guaranty shows that the parties knew how to draft a personal guaranty and that these differences indicate that the parties had a different intent with respect to the Zenev guaranty at issue here. I disagree, however, that these differences indicate that the parties intended Venez USA to be the sole guarantor for Zenev.

  The most persuasive evidence of the parties' intent is the parties' course of dealings. Kryger, in advance of the agreement, repeatedly demanded that the Kattans personally guaranty payment on shipments to Zenev and that the Kattans repeatedly assured Kryger they would. Abe Kattan admitted that Kryger called repeatedly about the guaranty and that no goods were shipped before Southern received the guaranty. The evidence also showed that Venez USA was a relatively new company with little by way of a track record and that Venez USA did not send any documents to Southern about its financial condition. Given the fact that Kryger only a Tew months before had required the Kattans to personally guaranty Sunlight's debts, a U.S. — based company with which Southern had dealt for years, Kryger's assertion that he would not ship to a Venezuelan company that he otherwise knew little or nothing about without a personal guaranty from the Kattans is the more plausible account of the parties' intent. In short, given that Southern had required the Kattans to guaranty Sunlight, it is incredible that Kryger would have accepted a guaranty solely from Venez USA for Zenev's obligations.*fn14

  The Kattans' argument that they would not have guaranteed a corporation over which they had no control has some superficial appeal. However, on the particular facts of this case, it further bolsters the interpretation that Southern first and foremost sought the personal guaranties of the Kattans. For example, it was clear from the testimony that Abe Kattan was the instigator Page 8 and agitator for Southern to ship its yarn to Zenev and that Southern's Kryger was quite reticent. It was only after Kryger obtained the guaranty, after considerable haranguing, that Southern shipped any yarn to Zenev. If it is unlikely that the Kattans would guaranty the debt of a corporation over which they had no control, it is even less likely that Kryger would have accepted a corporate guaranty where the corporation had no track record and with which he had little or no prior dealings and which was linked to the Kattans, whose other textile business appears to have failed. Moreover, Kryger credibly testified that he perceived no difference between Zenev and Venez USA — given, for example, the similarity of the names and the fact that the Kattans were involved with both — and thus a guaranty from Venez USA on behalf of Zenev was meaningless to him.

  The letters that Kryger sent in April, June and July of 2002 add further proof that the Kattans personally guaranteed Zenev's debt. Although Abe Kattan testified (it should be noted that the Court found his testimony on this score less than credible) that he never saw these letters and that he was away from the office throughout most of this period, Kryger testified that he spoke with Rami Kattan about the letters and that Rami Kattan admitted that he received them and would pass them on to Abe Kattan. (Tr. 108.) While there is no documentary evidence that the Kattans — and Abe Kattan in particular — ever read these letters, it is clear that at least one letter was sent and received. Abe Kattan testified at his deposition that he found the version of the June 19 letter with the footnote in his files,*fn15 and this letter includes a date-stamp that notes it was faxed on June 20, 2002 from Southern Industries. Even if Rami Kattan was not familiar with the "administrative" side of the business, the importance of these letters could not have been lost on him. It is interesting too that the defense failed to produce Rami Kattan as a witness on its case in chief. Thus, although the circumstances surrounding the receipt of the letters may lessen somewhat their evidentiary value to show the Kattans' failure to dispute Kryger's assertions in the letters was tantamount to acquiescence, at the very least they prove Kryger's belief that he had bargained for the Kattans' personal guaranty.

  Finally, Abe Kattan's own words strongly suggest that he and his brother agreed to Page 9 personally guaranty Zenev's debt. First, in his description at his deposition of the process that led up to the execution of the guaranty by him, his brother, and Arsenio Alfonso he stated: "I don't remember, but I guess I called Arsenio to my office, and called by brother Rami, and told them, `Here. You will sign, because otherwise I don't want to be responsible.'" He knew and indeed conceded that his personal responsibility did not depend on there being more signers; clearly one officer of a corporation binds that corporation. Second, in the letter dated November 12, 1999 that accompanied the guaranty, Abe Kattan stated that the guarantee was "duly signed by Venez Textiles USA" and that it was "guaranteed by Abraham Kattan, Rami Kattan and Arsenio Alfonso, who are the principals of the company "*fn16

  III. CONCLUSION

  For the foregoing reasons, defendants Abe and Rami Kattan and Venez USA are liable for the debt owed by Zenev to Southern, interest and reasonable attorneys' fees, to be resolved on papers fully submitted within 30 days from the date hereof, as per the guaranty. With respect to any attorneys' fees applications, timesheets and notice to the defendant will be required.

 THIS CONSTITUTES THE DECISION AND ORDER OF THE COURT.


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