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Abraham Leser v. U.S. Bank National Association

September 25, 2012


The opinion of the court was delivered by: Kiyo A. Matsumoto, United States District Judge:



Plaintiff/counterclaim defendant Abraham Leser ("Leser") seeks a declaratory judgment from this court that certain personal guaranties for two real estate loan development projects are not enforceable against him. (ECF No. 1, Complaint ("Compl.").) Defendant/counterclaim plaintiff U.S. Bank National Association ("USB") has counterclaimed, alleging two claims for breach of contract and one claim of unjust enrichment against Leser based on the same development projects. (ECF No. 11, Answer and Counterclaim ("A&C").)

Before the court are the parties' cross-motions for summary judgment pursuant to Federal Rule of Civil Procedure 56. Leser moves for summary judgment on the complaint and USB's counterclaims, arguing that the court should issue a declaratory judgment that the personal guaranties related to certain loans are unenforceable against Leser. (ECF No. 121, Leser's Motion for Summary Judgment ("Pl.'s Mot."); ECF No. 123, Affidavit of Mark Geisler, Esq. ("Geisler Aff."); ECF No. 124, Leser's Rule 56.1 Statement ("Pl.'s 56.1 Stmt."; ECF No. 125, Leser's Memorandum in Support ("Pl.'s Mem.").) USB moves for partial summary judgment regarding whether the personal guaranty for a certain Seattle real estate transaction is enforceable against Leser. (ECF No. 126, USB's Motion for Partial Summary Judgment ("Def.'s Mot."); ECF No. 126-1, USB's Memorandum in Support ("Def.'s Mem."); ECF No. 126-2, USB's Rule 56.1 Statement ("Def.'s 56.1 Stmt."); ECF No. 126-3, Affidavit of Steven Cooper, Esq. ("Cooper Aff.").) Both parties submitted opposition memoranda and Rule 56.1 counterstatements in opposition to each other's motions. (ECF No. 129, Leser's Memorandum in Opposition ("Pl.'s Opp."); ECF No. 130, Leser's Rule 56.1 Counterstatement ("Pl.'s 56.1 Counterstmt."); ECF No. 127, USB's Memorandum in Opposition ("Def.'s Opp."); ECF No. 127-1, USB's Rule 56.1 Counterstatement ("Def.'s 56.1 Counterstmt."); ECF No. 127-2, Affidavit of Michael DiCanio, Esq. ("DiCanio Aff.").) Likewise, they both submitted reply memoranda in support of their respective motions. (ECF No. 132, Leser's Reply Memorandum ("Pl.'s Reply"); ECF No. 131, Affidavit of Mark Geisler, Esq. ("Geisler Reply Aff."); ECF No. 133, Leser's Reply Rule 56.1 Statement*fn1 ("Pl.'s Reply 56.1 Stmt."); ECF No. 128, USB's Reply Memorandum ("Def.'s Reply").) USB initially requested oral argument on these motions but subsequently withdrew the request. (See generally ECF Nos. 136, 139.)

For the reasons stated below, the court DENIES both parties' motions for summary judgment.


The following relevant facts,*fn2 taken from the parties' statements pursuant to Local Civil Rule 56.1 and the record, are undisputed unless otherwise indicated. The court has considered whether the parties have proffered admissible evidence in support of their positions and has viewed the facts in the light most favorable to the nonmoving party when considering each motion. The paucity of undisputed facts illustrates the futility of the instant motions for summary judgment.

Leser is an individual working and residing in Brooklyn, New York. (Def.'s 56.1 Stmt. ¶¶ 1, 8; Pl.'s 56.1 Counterstmt. ¶¶ 1, 8.) He owns and/or controls several companies. (See Def.'s 56.1 Stmt. ¶ 5; Pl.'s 56.1 Counterstmt.

¶ 5; ECF No. 126, Ex. 1, Deposition of Abraham Leser ("Leser Dep.") at 42-45.) Leser's "basic business model" is for his companies to buy a property which they then develop and manage, ideally for a long period of time. (Leser Dep. at 109.) Approximately 90% of the properties purchased by Leser's companies are fully or at least partially developed, as opposed undeveloped properties that need development. (Id.; see also Def.'s 56.1 Stmt. ¶ 6; Pl.'s 56.1 Counterstmt. ¶ 6.)

The two USB financial transactions*fn3 at issue in this litigation are a draw-down loan made to VTE, Philadelphia L.P. (the "VTE Borrower") and a draw-down loan made to (1) Reuben Corporation; (2) Bronx AL LLC; (3) Bronx RMT LLC; and (4) JJ Lyons Associates, Inc. (collectively, the "Seattle Borrowers"). (Leser Dep. at 32-33.) Leser is affiliated with the VTE Borrower and Seattle Borrowers, which each owned about 20% of the properties that were the subject of the VTE and Seattle loans, respectively. (Id. at 62-64.)

Specifically, on or about July 27, 2007, USB entered into certain loan agreements with the VTE Borrower which granted the VTE Borrower the right to draw down $17,500,000 in proceeds (the "VTE loan"). (Def.'s 56.1 Counterstmt. ¶ 2.) On or about November 21, 2007, USB entered into certain loan agreements with the Seattle Borrowers which granted the Seattle Borrowers the right to draw down $21,000,000 in proceeds (the "Seattle loan"). (Def.'s 56.1 Counterstmt. ¶ 3.) Leser, as an individual, is not a borrower on either the VTE or Seattle loans. (Pl.'s 56.1 Stmt.

¶¶ 6-7; Def.'s 56.1 Counterstmt. ¶¶ 6-7.)

Eli Verschleiser and his company, Multi-Capital Group, a real estate investment banking firm, served as a broker for both the VTE and Seattle Loans. (Pl.'s 56.1 Stmt. ¶ 13; Def.'s 56.1 Counterstmt. ¶ 13.) In connection with the Seattle loan, Verschleiser prepared a Memorandum intended to market the Seattle project, which was provided to USB. (Def.'s 56.1 Stmt. ¶¶ 13-14; Pl.'s 56.1 Counterstmt. ¶¶ 13-14.) This Memorandum identified Leser as the "sponsor" of the Seattle loan. (Def.'s 56.1 Stmt. ¶ 19; Pl.'s 56.1 Counterstmt. ¶ 19.) Nonetheless, Leser denies that he ever approved the content of the Memorandum and denies that he served as the "sponsor" of the Seattle project. (Pl.'s 56.1 Counterstmt. ¶¶ 17-19.)

As part of both the VTE and Seattle loan transactions, notarized personal guaranties*fn4 purporting to bear Leser's signature were provided to USB (collectively, the "Guaranties"). (Def.'s 56.1 Stmt. ¶ 51; Pl.'s 56.1 Stmt. ¶¶ 85-87; Def.'s 56.1 Counterstmt. ¶¶ 85-87; Pl.'s Reply 56.1 Stmt. ¶¶ 85-87.) Thereafter, the Seattle loan proceeds*fn5 were drawn upon by the borrower entities. (See Def.'s 56.1 Stmt. ¶¶ 76-83 (describing draw requests and receipt of the Seattle loan proceeds); Pl.'s 56.1 Counterstmt. ¶¶ 76-83.)

On February 17, 2009, USB notified the Seattle

Borrowers that the Seattle loan was in default, and that, if the default was not cured within 30 days, it would constitute an Event of Default under the terms of the Seattle loan. (Def.'s 56.1 Stmt. ¶ 91; Pl.'s 56.1 Counterstmt. ¶ 91; ECF No. 126, Ex. 51.) Consequently, USB sought payment on the outstanding amounts from Leser, the purported personal guarantor. (Pl.'s 56.1 Stmt. ¶ 83; Def.'s 56.1 Counterstmt. ¶ 83.) On or about

February 25, 2009, USB's representatives met with Leser, Eli Verschleiser and Chaim Miller at Leser's office, and discussed the need to bring the interest current on the loans. (Id.) The purported existence of the Guaranties was discussed as well, and, according to Leser, this was the first time he learned that USB believed he had executed the Guaranties. (Pl.'s 56.1 Stmt. ¶ 87; Def.'s 56.1 Stmt. ¶ 97; Pl.'s 56.1 Counterstmt. ¶ 97.) Leser did not make any statements at the meeting as to the validity or existence of the Guaranties. (Def.'s 56.1 Stmt. ¶ 98; Pl.'s 56.1 Counterstmt. ¶ 98; see also Leser Dep. at 160.) Subsequently, Leser denied that he ever signed the Guaranties and stated that the notarized signatures purporting to be his on the Guaranties were not genuine. (See, e.g., Pl.'s 56.1 Stmt. ¶ 1; Leser Dep. at 155, 204, and October 2010 Vol. at 192; Compl. ¶¶ 9-10, 16-17.)

On June 4, 2009, Leser filed a complaint seeking declaratory judgments that both the VTE and Seattle loan Guaranties are unenforceable against him. (Compl. ¶¶ 19-24.) On September 11, 2009, USB filed its answer, affirmative defenses, and counterclaims. (See generally A&C.) USB raised affirmative defenses of, among others, doctrines of waiver, estoppel, ratification, unclean hands, and fraudulent inducement. (A&C at 4-5.) USB also counterclaimed against Leser for breach of contract with respect to the VTE and Seattle Guaranties and alleged that Leser has been unjustly enriched by retaining the benefit of the loans and refusing to repay their combined total of $39,057,920.26. (A&C at 8-10.) Leser filed his answer to USB's counterclaims on October 1, 2009. (See generally ECF No. 12, Leser's Answer to Counterclaims.)

Although the parties have devoted vast amounts of money, time, and ink to these and many other ancillary facts in the case, the dispositive issue is whether Leser actually signed the VTE and Seattle loan Guaranties. If Leser signed the Guaranties, then he is personally liable for them. If he did not, then the question is whether: (i) an authorized representative signed on Leser's behalf; or (ii) estoppel or ratification prevents Leser from denying liability based on his conduct before and after the loan closings. If the answer to both is no, then the parties will be left to discover the person who actually signed the Guaranties*fn6 and determine if he or she is liable for fraud or other tortious conduct against Leser, USB, or both.

The clarity of the legal questions, however, stands in stark contrast to the parties' contradictory factual submissions and opposing expert reports. Summary judgment in favor of either party is thus inappropriate because there are genuine issues of material fact as to whether Leser signed the Guaranties or is otherwise liable through agency or estoppel principles. For the reasons explained below, both parties' motions for summary judgment are denied.


I. Summary Judgment Standard

A court may grant summary judgment only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S. Ct. 2505, 91 L.Ed.2d 202 (1986) (emphasis in original). "A fact is 'material' for these purposes when it 'might affect the outcome of the suit under the governing law.'" Jeffreys v. City of New York, 426 F.3d 549, 553 (2d Cir. 2005). "An issue of fact is 'genuine' if 'the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Id.

Moreover, no genuine issue of material fact exists "unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the evidence is merely colorable, . . . or is not significantly probative, . . . summary judgment may be granted." Anderson, 477 U.S. at 249-50, 106 S. Ct. 2505 (internal citations omitted).

In deciding a motion for summary judgment, the court's function is not to resolve disputed issues of fact, but only to determine whether there is a genuine issue to be tried. Anderson, 477 U.S. at 249, 106 S. Ct. 2505. The moving party carries the burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L.Ed.2d 265 (1986). The court must construe the facts in the light most favorable to the nonmoving party and all reasonable inferences and ambiguities must be resolved against the moving party. Flanigan v. Gen. Elec. Co., 242 F.3d 78, 83 (2d Cir. 2001). "'Assessments of credibility and choices between conflicting versions of the events are matters for the jury, not for the court on summary judgment.'" Globecon Group, LLC v. Hartford Fire Ins. Co., 434 F.3d 165, 174 (2d Cir. 2006) (quoting Rule v. Brine, Inc., 85 F.3d 1002, 1011 (2d Cir. 1996)); see also Hayes v. N.Y. City Dep't of Corr., 84 F.3d 614, 619 (2d Cir. 1996) ("In applying th[e] [summary judgment] standard, the court should not weigh evidence or assess the credibility of witnesses.").

Nevertheless, the nonmoving party cannot rest on "mere allegations or denials" but must instead "set forth specific facts showing there is a genuine issue for trial." Fed. R. Civ.

P. 56(e); see also Harlen Assocs. v. Incorporated Vill. of Mineola, 273 F.3d 494, 499 (2d Cir. 2001) ("[M]ere speculation and conjecture [are] insufficient to preclude the granting of the motion."); Nat'l Westminster Bank USA v. Ross, 676 F. Supp. 48, 51 (S.D.N.Y.1987) ("Speculation, conclusory allegations, and mere denials are not enough to raise genuine issues of fact."). Nor can the nonmoving party rest only on the pleadings. Celotex, 477 U.S. at 324, 106 S. Ct. 2548 (stating that Fed. R. Civ. P. 56(e) "requires the nonmoving party to go beyond the pleadings"); Davis v. New York, 316 F.3d 93, 100 (2d Cir. 2002). Instead, each statement of material fact by the movant or opponent must be followed by citation to evidence which would be admissible, as required by Fed. R. Civ. P. 56(e) and Local Civil Rule 56.1(d).

When cross-motions for summary judgment are made, the standard is the same as that for individual motions for summary judgment. See Morales v. Quintel Entm't, Inc., 249 F.3d 115, 121 (2d Cir. 2001). Each motion must be considered independently of the other and, when evaluating each, the court must consider the facts in the light most favorable to the non-moving party. Id.

II. Choice-Of-Law Analysis

A federal district court sitting in diversity must apply the choice of law rules of the forum in which it sits. See Bakalar v. Vavra, 619 F.3d 136, 139 (2d Cir. 2010). Under New York law, where a case involves a contract with a clear choice-of-law provision, "[a]bsent fraud or violation of public policy, a court is to apply the law selected in the contract as long as the state selected has sufficient contacts with the transaction." Hartford Fire Ins. Co. v. Orient Overseas Containers Lines (UK) Ltd., 230 F.3d 549, 556 (2d Cir. 2000). As other courts have observed, however, this principle occasionally contradicts the general rule that where neither party raises the issue of choice-of-law and all parties cite exclusively to New York law, such "'implied consent' . . . is sufficient to establish choice of law'" in the Second Circuit. Med. Research Assoc., P.C. v. Medcon Fin. Servs., Inc., 253 F. Supp. 2d 643, 647 (S.D.N.Y. 2003) (quoting Krumme v. WestPoint Stevens, Inc., 238 F.3d 133, 138 (2d Cir. 2000)).

Here, both the VTE and Seattle Guaranties specify that Virginia law should apply in "matters of construction, validity and performance." (Def.'s Ex. 34A, 34B, 34C; Def.'s Opp. Ex. 84A-B.) Neither party addresses which state's laws should be applied to resolve the instant motions for summary judgment and both parties cite exclusively to New York law in their moving papers. Under these circumstances, courts in this circuit have applied the law of a state other than the one specified in a contract's choice-of-law provision where the parties have failed to address the issue and also cited exclusively to the alternative state's laws. See, e.g., Sunbelt Rentals, Inc. v. Charter Oak Fire Ins. Co., 839 F. Supp. 2d 680, 686 (S.D.N.Y. 2012) (applying New York law on motion for summary judgment where both sides relied almost exclusively on New York law, even though contract at issue specified that North Carolina law would apply); Prince of Peace Enters., Inc. v. Top Quality Food Mkt., LLC, 760 F. Supp. 2d 384, 396-97 (S.D.N.Y. 2011) (finding that parties "consented to application of New York law by briefing all issues under New York law," despite evidence that disputed contract was executed in California); Diesel Props S.r.L. v. Greystone Bus. Credit II LLC, No. 07-cv-9580, 2008 WL 4833001, at *7 (S.D.N.Y. Nov. 5, 2008) (applying federal common law to contract that contained Italian choice-of-law clause, in part because all parties cited to federal common law almost exclusively); see also Lehman v. Dow Jones & Co., 783 F.2d 285, 294 (2d Cir. 1986) (noting that court was not obliged to undertake an investigation of potential differences between New York and California law and instead apply New York law when that is the sole law cited by the parties). Because neither party has cited to anything other than New York law nor has either party addressed the issue, the court finds that the parties have consented to the application of New York law to this case, despite the Guaranties' Virginia choice-of-law provisions.

Additionally, although Leser (like USB) has not addressed the issue of which state's law should apply, Leser argues that he did not sign the Guaranties and his purported signatures are forgeries. (See Pl.'s 56.1 Stmt. ¶ 1; Leser Dep. at 155, 204, and October 2010 Vol. at 192; Compl. ¶¶ 9-10, 16-17.) Where, as here, there are allegations that a contract was procured by fraud, its choice-of-law provision is not automatically binding. See Hartford Fire, 230 F.3d at 556; see also Pegasus Aviation IV, Inc. v. Aerolineas Austral Chile, S.A., No. 08-cv-11371, 2012 WL 967301, at *5 (S.D.N.Y. Mar. 20, 2012) ("It would make little sense to resort to law simply because it was designated by a contract provision in order to determine whether that very contract is even operative."). Ordinarily, where there is no clear choice-of-law provision that governs, New York courts next undertake the traditional "grouping of contacts" analysis to determine which state has the most significant relationship to the transaction and the parties. Benicorp Ins. Co. v. Nat'l Med. Health Card Sys., Inc., 447 F. Supp. 2d 329, 336 (S.D.N.Y. 2006) (internal quotation marks omitted). In cases like this one, however, "such an analysis is unnecessary because the parties' briefs assume that New York law controls and 'such implied consent . . . is sufficient to establish ...

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