The opinion of the court was delivered by: MIRIAM CEDARBAUM, Senior District Judge
The Travelers Insurance Company ("Travelers") filed this diversity
action against Mark Ross Services Corporation ("MRSC") and its president,
Mark E. Ross, to recover sums owed on a promissory note executed by MRSC
and personally guaranteed by Mark Ross. Travelers has moved for summary
judgment. For the
following reasons, the motion is granted in part and denied in part.
The following facts are undisputed.
Defendant Mark E. Ross and non-party Mark Ross & Company ("MRC")
are agents of Travelers. Defendant MRSC is an administrative corporation
whose sole function is to support Ross and MRC. It does not independently
generate income or sell insurance products.
In March 1998, MRSC executed a promissory note in favor of Travelers,
pursuant to which Travelers loaned MRSC $500,000. The note obligated MRSC
to make quarterly interest payments during the term of the loan. Any
installment that was more than thirty days overdue would incur a five
percent penalty. MRSC also agreed that Travelers could offset any overdue
installments, upon written notice to MRSC, by retaining commissions it
owed to Mark Ross and MRC. The principal and any unpaid interest and fees
were due and payable to Travelers on February 28, 2003. The note also
provided that if those amounts were not paid when due, MRSC was liable
for all of Travelers's costs of collection, including reasonable
Also in March 1998, defendant Mark Ross executed a guaranty
on the promissory note, in which he "absolutely and unconditionally
guarantee[d] . . . the full and complete payment" due under the note,
including any costs of collection. In May 1999 both the note and the
guaranty were amended to reflect an increase in the loan to $1 million.
MRSC failed to make interest payments from August 31, 2001 through
February 28, 2003. MRSC also failed to pay the principal, outstanding
interest, and late fees on February 28, 2003. Travelers then commenced
A motion for summary judgment shall be granted if the court determines
"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." Fed.R.Civ.P.
56(c). See also Celotex Corp. v. Catrett, 477 U.S. 317
, 322 (1986). A
genuine issue of material fact exists when the evidence is such that a
reasonable finder of fact could return a verdict for the nonmoving
party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242
, 250 (1986);
Richardson v. Coughlin, 763 F. Supp. 1228
, 1234 (S.D.N.Y. 1991). In
deciding whether a genuine issue exists, the court must "examine the
evidence in the light most favorable to the party opposing the motion,
and resolve ambiguities and draw reasonable
inferences against the moving party." In re Chateaugay Corp., 10 F.3d 944
957 (2d Cir. 1993). Rule 56 also provides that
the court at the hearing of the motion, by examining
the pleadings and the evidence before it and by
interrogating counsel, shall if practicable ascertain
what material facts exist without substantial
controversy and what material facts are actually and
in good faith controverted. It shall thereupon make an
order specifying the facts that appear without
substantial controversy, including the extent to which
the amount of damages or other relief is not in
controversy, and directing such further proceedings in
the action as are just. Upon the trial of the action
the facts so specified shall be deemed established,
and the trial shall be conducted accordingly.
Defendants' principal defense to summary judgment is that the contract
is unenforceable because it violates New York Insurance Law §
4228(e)(9)(B). That section states, in pertinent part:
[An insurance company] may make a loan to any of its
agents pursuant to a plan of agent compensation. The
maximum amount of any loan shall not exceed the
expected compensation of the agent over the next
twelve months. A company shall charge interest on
loans at a rate not less than a rate consistent with
current short-term borrowing rates.
Defendants concede that MRSC is not an agent of Travelers. Mark Ross is
a Travelers agent, but defendants do not contend that this section
prohibits an insurance company from obtaining a guaranty from one of its
agents. Furthermore, defendants do not explain how this loan was
"pursuant to a plan of agent compensation." Indeed, defendants explain in
papers that the loan was made in consideration of plans for a joint
venture between MRC and Travelers that never came to fruition.
Accordingly, the provision that defendants invoke does not invalidate
Defendants also argue that even if the note is valid, parol evidence
must be admitted to show that the promissory note was never intended to
be enforced standing alone, but that it was instead entered into as part
of a larger set of agreements related to the proposed joint venture.
Defendants seek to introduce parol evidence that contradicts the terms of
the written instruments. Section 7 of the promissory note indicates that
all liabilities become immediately due and payable at the sole option of
Travelers if MRSC fails to perform any agreement under the note or fails
to pay any obligation when due. That includes payment of the entire
principal and interest on February 28, 2003. Any promises by Travelers of
renegotiation or forbearance would contradict those provisions. Parol
evidence is inadmissible to contradict the terms of a written contract.
See Mitchill v. Lath, 247 N.Y. 377, 380 (1928).
Defendants do not dispute that if this contract and guarantee are
enforceable, they failed to make the scheduled interest payments and
failed to pay the full amount of the note on the date that it was due.
Defendants do dispute the amount due. Travelers exercised its right to
offset interest owed by
retaining commissions belonging to Ross and MRC. According to Travelers,
it retained $136,762.20. Defendants contend that Travelers withheld
$139,925.75. If defendants are correct, their calculation would reduce
the total amount now owed by $3,163.55. Since Travelers has not proffered
evidence to support the amount it seeks, ...