Fuchs v. MiCAD Systems, Inc.

138 A.D.2d 312, 526 N.Y.S.2d 445, 1988 N.Y. App. Div. LEXIS 3231

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: March 29, 1988
• Status: Published

Opinions

Order, Supreme Court, New York County (Irma Vidal Santaella, J.), entered May 7, 1987, which granted the motion of plaintiffs for summary judgment, is reversed, on the law, motion is denied, and judgment vacated, without costs.

Appeal from order of the same court and Justice, entered May 4, 1987, which denied the motion of defendant for renewal, is dismissed as moot, without costs.

On July 30, 1986, pursuant to an agreement of reorganization, DocuGraphix, Inc. (DocuGraphix) acquired MiCAD Systems, Inc. (MiCAD). While DocuGraphix is a California corporation, MiCAD is a New York corporation.

Prior to this acquisition, Mr. Ira Hayes Fuchs (Mr. Fuchs) was the president of MiCAD, and, after the acquisition, he continued in that post, until DocuGraphix terminated his employment on February 12, 1987 for alleged wrongdoing in office.

On the day following his dismissal, on February 13, 1987, Mr. Fuchs, together with Mr. Allen Hillman (Mr. Hillman), who is Mr. Fuch’s father-in-law, through counsel, presented to MiCAD four promissory notes, which totaled $61,000, and demanded repayment.

When MiCAD refused payment, Messrs. Fuchs and Hillman (plaintiffs) commenced action, by means of notice of motion for summary judgment in lieu of complaint (CPLR 3213), against MiCAD (defendant) for repayment of the subject notes. The notice of motion is dated February 16, 1987, and attached to it are copies of the notes.

Examination of these notes indicates, in substance, as follows: one note, dated May 22, 1986, in the amount of $6,000, is drawn to the order of Mr. Fuchs; the other three notes, all dated May 30, 1986, which are in the amounts of $20,000, $20,000, and $15,000, respectively, are drawn to the order of Mr. Hillman; while the note to Mr. Fuchs was executed on behalf of MiCAD by Mr. Stanleigh Morris (Mr. Morris), who was executive vice-president of MiCAD, the three notes to Mr. Hillman were executed on behalf of MiCAD by Mr. Fuchs, in his capacity as president of MiCAD; and, all four notes recite that they were issued "for value received.”

Based principally on an affidavit, dated March 12, 1987, and executed in California, by Mr. D. R. Taylor (Mr. Taylor), MiCAD opposed the motion. Mr. Taylor, who is the present chief executive officer of MiCAD, and the president and chief executive officer of DocuGraphix, contends in his affidavit, in substance, the notes may be fraudulent, and all of the facts underlying the making of those notes are in the sole possession of the plaintiffs, since, inter alia, Mr. Taylor’s personal examination of MiCAD’s records does not reflect that plaintiffs gave any consideration for the notes.

In reply to the affidavit of Mr. Taylor, the plaintiffs submitted the affidavit of Mr. Morris, who, as mentioned supra, was executive vice-president of MiCAD when Mr. Fuchs was president, and who still is a vice-president of MiCAD. Mr. Morris states in his affidavit, in pertinent part, that "I know from personal knowledge that [plaintiffs] loaned MiCAD the monies set forth in those notes and were [sic] reflected on the books of MiCAD”.

Thereafter, the IAS court granted the plaintiffs’ motion for summary judgment; and, subsequently, denied defendant’s motion for renewal.

After our review of the record, we find that the IAS court erred in granting summary judgment.

We held in Simpson v Term Indus. (126 AD2d 484, 487 [1st Dept 1987]) that "[b]earing in mind the function of the court [is] issue finding, not issue determination (Cruz v American Export Lines, 67 NY2d 1, 13; Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395, 404), summary judgment [is] inappropriate * * * where there is any doubt as to the existence of a triable issue (Moskowitz v Garlock, 23 AD2d 943, 944), or where the issue is even arguable (Barrett v Jacobs, 255 NY 520, 522), since [summary judgment] serves to deprive a party of his day in court”.

Our search of this record indicates that there are material triable issues of fact, such as: are the notes fraudulent, and is there any documentary evidence that reflects that the plaintiffs gave any consideration for the notes? We decided in Fopeco, Inc. v General Coatings Technologies (107 AD2d 609, 610 [1st Dept 1985]) that the "lack of consideration is a perfectly viable defense * * * [to] defeat * * * summary judgment”.

Furthermore, the record clearly indicates that the plaintiffs are in the sole possession of all of the facts underlying the making of these notes, such as: the notes, as mentioned supra, are dated prior to DocuGraphix’ acquisition of MiCAD; none of MiCAD’s management, which took office after the acquisition, has any knowledge regarding the circumstances of the issuance of these notes; the records of MiCAD do not, as mentioned supra, contain evidence that plaintiffs gave any consideration for the notes; and, while such consideration might not be necessary to validate the notes, it would at least authenticate them; and, the only persons with personal knowledge of the creation of the notes are Messrs. Fuchs, Hillman, and Morris, and, Mr. Morris, who as mentioned supra, is still employed by MiCAD, has refused to speak about the notes to counsel for defendant MiCAD, upon the advice of his own counsel "who is [also] attorney for the plaintiffs [Messrs. Fuchs and Hillman]”. We held in Integrated Logistics Consultants v Fidata Corp. (131 AD2d 338, 340 [1st Dept 1987]) that a motion for summary judgment should be denied "where, as here, there are salient facts within the knowledge and control of the movant [plaintiffs] which may be revealed through pretrial disclosure proceedings”.

Our dissenting colleague, in substance, contends that the fact that defendant had knowledge of the existence of the notes, when it was acquired, justifies the granting of plaintiffs’ motion for summary judgment. We disagree. Based upon our examination of the record, we find that this single fact of defendant’s knowledge of the existence of the notes does not resolve the material triable issues of fact, which we discussed supra, since there is no evidence that, at the time of acquisition, defendant had any knowledge of the circumstances concerning the creation of the notes.

Accordingly, we reverse, and deny the motion for summary judgment. Concur—Ross, Kassal and Rosenberger, JJ.