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Mackay v. Massad

United States District Court, S.D. New York

May 31, 2017

LORETTA C. MACKAY, Plaintiff,
v.
MARK I. MASSAD, REGINA L. MASSAD, KELLY MASSAD INVESTMENT CO., and HERMES GROUP LLP, Defendants.

          OPINION & ORDER

          PAUL A. ENGELMAYER, District Judge.

         In this diversity action, plaintiff Loretta C. Mackay seeks to recover under a secured promissory note (the "Note") entered into between herself and defendants Mark I. Massad and Regina L. Massad (collectively, the "Massads"). Mackay also sues Kelly Massad Investment Co. ("KMI"), a guarantor on the Note, and The Hermes Group LLP ("The Hermes Group"), a partnership in which Mark Massad was once a member, but neither of these corporate entities has appeared in this action. Before the Court are cross-motions for summary judgment on Mackay's sole claim of default under the Note. The sole issue in dispute, and the focus of the parties' mirror-image summary judgment motions, is whether Mackay's claim was brought outside the six-year statute of limitations.

         For the reasons that follow, each party's motion for summary judgment is denied.

         I. Background [1]

A. The Parties

         Mackay is the obligee under the Note. Pl. 56.1 ¶ 1; L. Mackay Decl., Ex. C (“Note”), at 1. Mackay's late husband Thomas C. Mackay (with Mackay, the “Mackays”) was a party to some of the agreements relevant to this action. L. Mackay Decl. ¶ 21. Scott Mackay, a non-party, is Mackay's son and submitted a declaration on her behalf. See S. Mackay Opp. Decl. ¶¶ 1-2.

         The Massads are the obligors under the Note. Pl. 56.1 ¶ 2; Note at 1.

         The Hermes Group, which was previously known as Kelly Massad LLP and which has not appeared in this action, filed a Notice of Withdrawal with the New York State Department of State, Division of Corporations, on June 20, 2013 and is currently in “inactive” status. L. Mackay Decl., Ex. B. The Division of Corporations' records indicate that The Hermes Group operated at 233 Broadway, Suite 2708, in New York, New York. Id. Mark Massad was at one time a partner of The Hermes Group, but his “ownership interest and professional affiliation” was terminated on December 31, 2007. Def. 56.1 ¶ 8. Ronald J. Sacco was a general partner of The Hermes Group with Mark Massad. L. Mackay Opp. Decl. ¶ 6. Mark Massad and Sacco were The Hermes Group's only partners. L. Mackay Decl., Ex. F at 2. As discussed below, interest payments were made under the Note by both The Hermes Group and RJSacco & Company LLP (“RJSacco & Company”). Def. 56.1 ¶¶ 8-9. The Court takes judicial notice, see Fed. R. Evid. 201, of the publicly available “entity information” on file with the Division of Corporations, which shows that RJSacco & Company is currently registered at 233 Broadway, Suite 2708.[2]

         Defendant KMI also has not filed an appearance in this action and was, at least in 1998, a New Jersey general partnership with Sacco and Mark Massad as general partners. L. Mackay Decl., Ex. E, at 5. Massads' counsel has represented that both KMI and The Hermes Group “were dissolved some time ago, and prior to the commencement of the pending action.” See Dkt. 21 (court order quoting an email to chambers).

         B. The Agreements

         On June 8, 1998, Mackay and the Massads entered into three agreements.

         First, Mackay and the Massads entered into the Note for $400, 000, with the Massads' repayment due no later than December 7, 1999. Pl. 56.1 ¶ 3. The interest rate on the principal balance was 8.5% per year from June 8, 1998 to June 7, 1999, and then 10.5% per year from June 8, 1999 to December 7, 1999. Pl. 56.1 ¶ 6. In the event of an “Event of Default, ” the interest rate on the principal balance would become 16% per year until the Note was paid in full. Note at 1. An Event of Default occurs when, inter alia, the Massads “fail to pay in full any installment of principal of, or interest on, this Note when due.” Id. When an Event of Default occurs, the unpaid principal and all accrued interest may, at Mackay's option and upon written notice to the Massads, become due immediately. Id. After an Event of Default, Mackay also may seek costs of collection, including attorneys' fees and court costs. Id. at 2. The Note was “secured by the pledge of certain collateral.” Id. The Note is governed by New York law. Id. Mark and Regina Massad each signed the Note. Id.

         Second, the Massads, KMI, and the Mackays entered into a “Security Agreement” dated June 8, 1998. L. Mackay Decl., Ex. D. The collateral under the Security Agreement is listed in an exhibit. It lists equity and member interests in a variety of corporate entities affiliated with the Massads, including: The Hermes Group, LLC; Hermes Investment Group I, LLC; DDS Partners, LLC; KMI; and Kelly Massad LLP. Id., Ex. A.

         Third, the Mackays entered into a “Guaranty Agreement” with KMI. L. Mackay Decl., Ex. E. The agreement was signed by Mark Massad and Sacco as general partners of KMI. Id. at 5. KMI unconditionally guaranteed the payments of the Note. Id. at 1.

         On March 1, 2004, the Massads, KMI, The Hermes Group, and the Mackays entered into an agreement (the “March 1 Agreement”) to substitute one life insurance policy on Mark Massad's life, which The Hermes Group had earlier delivered to Mackay as additional security for the Note, for a different life insurance policy. L. Mackay Decl., Ex. F. The March 1 Agreement acknowledged that “[t]he principal sum of the Note was to be paid in full, together with all accrued interest, no later than December 7, 1999 (the ‘Due Date')” and that the Note “was not paid by the Due Date.” Id. at 1. However, the March 1 ...


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