The opinion of the court was delivered by: John T. Curtin United States District Judge
By order of Chief United States District Judge William M. Skretny dated , 2011 (Item ), this matter has been reassigned to the undersigned for all further proceedings.
Plaintiff Private Capital Investments, Inc. ("PCI"), an Oregon corporation with its principal place of business in Grants Pass, Oregon, commenced this action in New York State Supreme Court, Erie County, on September 27, 2007, seeking damages against defendants Joseph V. Schollard and Jerome J. Schentag, both citizens of the State of New York residing within the Western District of New York, for breach of their obligations as private guarantors of payment on a promissory note. The case was removed to this court pursuant to 28 U.S.C. § 1446 on the basis of diversity of the citizenship of the parties, by notice of removal dated November 6, 2007 (Item 1).
Defendants have moved pursuant to Rule 56 of the Federal Rules of Civil Procedure for summary judgment dismissing the complaint (Item 20), and plaintiff has responded by cross-motion for summary judgment in its favor on the breach of guaranty claim asserted against each defendant (Item 23). For the reasons that follow, defendants' motion is denied, and plaintiff's motion is granted.
The following facts, adapted from the pleadings and submissions on file including the parties' statements submitted pursuant to Rule 56.1 of the Local Rules of Civil Procedure for the Western District of New York,*fn1 are not in dispute.
In late 2005, at the time of the events and transactions at issue in this action, defendants were associated with an entity known as Emerald Shares, LLC, which sought funding for the development of a marina and resort property in Destin, Florida. On November 29, 2005, Mr. Schollard executed an agreement on behalf of Emerald Shares to retain Trinity Capital Group, LLC, a Florida company that assists in placing lenders with borrowers, "for the limited purpose of procuring funding approval from a bona fide lender or investor or purchaser" to finance the development project. Item 23-7, at 2. Trinity Capital in turn utilized the loan brokering services of Network Funding, L.P., which contacted plaintiff as a potential source of funding. As a result, on December 1, 2005, plaintiff transferred $600,000.00 to a bank account maintained by Trinity Capital as agent for Emerald Shares, in accordance with the following documents executed by Mr. Schollard on November 30, 2005, in his capacity as "Partner/Manager" of Emerald Shares:
1. A promissory note (the "Note"), by which Emerald Shares promised to pay plaintiff the principal sum of $600,000.00, plus $150,000.00 interest, by January 14, 2006, as provided in the Note (see Item 23-12);
2. A written "Personal Guaranty," which provides: Emerald borrowed $600,000.00 from PCI in exchange for its promissory note (the "Note") dated of even date herewith. Guarantor has agreed, as an inducement to PCI to make the extension of credit to Emerald described in the Note, to guarantee Emerald's payment when due, and timely performance of its obligations under, the Note.
Therefore, in consideration of the premises, as a material inducement to PCI to accept the Note and to extend credit to Emerald, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, Guarantor agrees as follows:
. . . Guarantor absolutely and unconditionally guarantees full and punctual payment when due and the timely performance of Emerald's obligations under the Note, including all renewals, extensions and modifications thereof, and all fees or charges with respect to any renewals and modifications, together with all costs of collection that PCI incurs in collecting Emerald's obligations under the Note or in enforcing any of PCI's rights under this Guaranty . . . . Guarantor will, upon demand, pay to PCI the amount due or, as appropriate, perform the Obligations, when any of the Obligations becomes and remains due and unpaid or unperformed.
3. A document entitled "Unanimous Written Consent to Action" by which Mr. Schollard, as a member and manager of Emerald Shares, agreed to grant PCI a mortgage on real property owned by South Elmwood Realty Company and located at 100 S. Elmwood Avenue, Buffalo, New York, to secure the $600,000.00 loan (see Item 23-8).
Defendant Schentag executed separate, substantially identical Personal Guaranty and Unanimous Consent documents, signing as a "member" of Emerald Shares (Items 23-14 and 23-9). The record also contains copies of separate, substantially identical Personal Guaranty and Unanimous Consent documents executed by Michael J. Kujawa, a third member of Emerald Shares, who is not a party to this action (see Item 23-10).
Later on December 1, 2005, Trinity Capital transferred $500,000.00 of the amount received from plaintiff to a trust account held by the Florida law firm of Clark, Partington, Hart, Larry, Bond & Stackhouse, attorneys for the owner of the real property in Destin, to be held in escrow in furtherance of Emerald Shares' efforts to acquire an option to purchase the property. The remaining $100,000.00 was retained by Trinity Capital as payment of its brokerage fee for procuring the loan from plaintiff.
By letter dated January 26, 2006, PCI's attorney Kimberly A. Wingate advised Emerald Shares that the January 14 due date had passed without payment, and that as a result Emerald Shares was in default under the terms of the Note. Ms. Wingate further advised that unless she received a duly executed "allonge"*fn2 by the close of business that day extending the due date for payment of the amount owed, PCI intended to exercise all available remedies to enforce its rights under the Note, the Personal Guaranty agreements, and the mortgage on the 100 S. Elmwood Ave. property (see Item 23-18). The record contains two such allonges, one executed on January 26, 2006 by David R. Knoll as Manager of Emerald Shares (Item 23-29), and one executed on February 4, 2006, by defendant Schollard (Item 23-20), but no payment was forthcoming.
By letters dated February 16, April 5, May 5, and May 9 2006, plaintiff notified Emerald Shares and Mr. Schollard that all amounts then due under the Note and personal guarantees had become immediately due and payable, subject to appropriate adjustment of interest rates and waiver of accumulated late fees (see Items 23-21; 24; 24-2; and 24-3).
Despite these repeated demands and adjustments, Emerald Shares did not make any payment of ...