Partial Summary Judgment; CPLR 3212; Guarantee Agreement; Breach of Guarantees; Default of Obligation; Reinvestment
By: Christina Falco | Staff Writer
Defendants executed a Note Purchase Agreement (“Note Agreement”). Prior to execution, Mazzola, DiSanluciano, and Barkow (collectively, the Guarantors) each executed a Personal Guarantee Agreement to ensure that all obligations under the Note Agreement would be performed. Per the Note Agreement, Defendants were to invest in a membership interest of Facie Libre Associates II, LLC (“Facie”) using Note Agreement proceeds. Upon execution, Defendants delivered the Note to its purchaser, Saverin. Soon after, Saverin assigned all his rights, titles, and interest in the Note, Note Agreement, Collateral Assignment, and the Guarantees to Plaintiff. Pursuant to the assignment, in the event of liquidity, Plaintiff would be entitled to receive fifty (50) percent of the proceeds that Defendants received less the remaining principal amount of the Note plus all acquired unpaid interest. Both the maturity of the Note as well as a liquidity event were triggered when Defendants sold 18,012 shares of Facie to Mazzola who invested in Palantir Technologies, Inc. (“Palantir”). Eventually, Defendants sold one hundred percent of their membership interest. As stipulated in the Note Agreement, all outstanding amounts and the additional returns became due after thirty (30) days. Despite numerous efforts by Plaintiff to acquire full repayment, Defendants only partially repaid the outstanding balance of the Note. Plaintiff asserts that the Note Agreement was breached by the Guarantors and repayment is necessary to cure the breach of the guarantees associated with the Note. The Guarantors alleged the Guarantee was no longer relevant to the equation since the Note was fully repaid and Plaintiff subsequently and immediately reinvested a portion of the repayment with Mazzola in Palantir. However, Plaintiff alleged it did not agree to reinvest the proceeds of the Note with Mazzola in Palantir and that payment was due based upon the Note Agreement. Plaintiff moves for partial summary judgment seeking enforcement and repayment of the Note Agreement.
The Court held Plaintiff sufficiently established that the Note was not repaid and it did not agree to reinvest the proceeds of the Note with Mazzola in Palantir. Plaintiff offered numerous correspondences which explicitly showed that no consent was given for the proceeds to be reinvested in Palantir. Additionally, evidence failed to show that Plaintiff had an opportunity to be repaid. The Court also held the Guarantors failed to sufficiently establish their cause of action by submitting evidence that Plaintiff had agreed to the reinvestment in Palantir. Since Plaintiff never agreed to reinvest and the Guarantors failed to submit adequate evidence, the Guarantees remain in authority. Evidence submitted with the Court included documents that informed Plaintiff about the possibility of reinvestments but nowhere was Plaintiff’s consent indicated.
The Court granted Plaintiff’s motion for summary judgment as to liability. As to damages, the Court permitted Plaintiff to recover against Defendants and further referred the case to the Special Referee’s Part for a hearing.
Progresso Ventures, LLC v. Mazzola, Index No. 652730/2015, 3/15/2017, (Ramos, J).