PER CURIAM.
Defendants Gabo Industries, LLC (Gabo), LMT Global, LLC (LMT), and Hak Y. Lim, also known as James H. Lim, (collectively referred to as defendants) appeal the August 24, 2012 grant of summary judgment awarding $180,790.07, together with costs of $224 and pre-judgment interest in the amount of $16,295.86, to plaintiff J & D Textile, Inc. (J & D), doing business as M.S. Textile Company, Ltd. (M.S.). Defendants also appeal the dismissal with prejudice of their counterclaims. We affirm.
J & D filed this lawsuit to collect balances they alleged were due for fabric delivered to defendants, who used the goods in manufacturing clothing. J & D is a New York corporation owned by Yeong Shim, who also owns M.S., an enterprise headquartered in Korea in the business of selling fabric. Lim owns Gabo, while Martin Terzian owns LMT. LMT and Gabo operate as a business partnership.
On May 21, 2009, Lim issued two fabric purchase orders from Gabo to J & D. The delivery date section stated: "[s]tart [shipping?]-on or before 6/13/09 & balance 7/13/09. Will advise detail of what needs to be shipped by 6/13/09 with Mr. Shim in NYC. Cancel date-7/13/09/." The parties agreed that J & D would ship the material to K.R. Intercorp (KR), a factory located in Vietnam, for the production of finished garments. The garments would then be shipped to LMT's warehouse in California for the fulfillment of a contract with K-Mart. J & D accepted Gabo's order on May 28, 2009, by issuing two invoices. Shim issued the invoices from M.S. because he was in Korea at the time. The total invoiced amount was $316,989.98.
Payments were structured as follows: a ten percent deposit prior to shipment with the designation "T/T 60 days," meaning payment by wire transfer within sixty days. The shipment dates were specified in print, but Shim accelerated some to June 14 by handwritten amendment. J & D also requested a letter of credit as a condition for the contract, which Lim refused to provide. Instead he agreed to pay the invoices within ten days of issuance, or within ten days of shipment of the finished garments to K-Mart.
By June 12, 2009, two days prior to the first scheduled delivery of fabric, Gabo had not paid the ten percent deposit. That day, Shim visited Lim at Lim's office, and Lim executed and signed a personal guarantee to M.S. on his letterhead. The personal guarantee referenced the following contracts:
The guarantee stated, "In case any default payment or payments from Gabo Industries, LLC to MS Textile Co., LTD for above mentioned cont[r]acts, I (James H Lim) will [be] personally responsible and will personally take care [of] the payments."
When deposed, Lim claimed he felt pressured into issuing the personal guarantee because he did not want to default on his commitment to LMT. Shim, however, claimed the personal guarantee was freely and willingly signed by Lim. Shim explained that he requested the guarantee because there had been no payments towards the outstanding sums due, and he knew that Gabo had been created only a month before placement of that first order.
Shim also claimed he had asked Lim for a letter of credit, but was refused. Shim said he ordinarily required a letter of credit for these types of transactions, but that he had not informed Lim or LMT that one was necessary before he accepted the orders.
Lim testified that at the time he signed the personal guarantee, he had already been advised by Norma Leaderman, the employee responsible for quality control of the garments delivered to K-Mart, that some of the orders were late. The invoices, however, indicate that the earliest deliveries were scheduled for June 14, 2009, two days after Lim and Shim met. Only one entry indicated a delivery date of June 11, 2009, but did so as one delivery option of two. The other option was June 14, 2009, two days after Lim signed the personal guarantee.
By July 2, 2009, J & D had shipped 187,658.07 yards of fabric to K.R. in Vietnam. J & D shipped an additional 900 yards of fabric on August 2, 2009. Invoices were generated as the fabric was delivered, totaling $330,421.66.
LMT and Gabo alleged, in defense of the claim, that in addition to the delay in delivery, the fabric did not pass inspection either as to weight or colorfastness. Leaderman, however, who was independently associated with another defendant, the Atlantic Pacific Group, eventually issued revised instructions and specifications, and accepted all the finished goods on behalf of LMT as "commercially acceptable."
When deposed, Leaderman nonetheless stated that there were problems fulfilling the K-Mart order on time because some of the fabric was either delivered late, or did not meet the original specifications, which resulted in a delay. Leaderman also stated that while K-Mart accepted delivery of the finished goods, pursuant to standard industry practice, it imposed a chargeback
On October 7, 2009, Gabo paid $100,000 on account of the billed total of $330,421.66. In February 2010, Lim, Shim, and Terzian met and agreed that Gabo and LMT would make $10,000 monthly payments towards the balance commencing March 2010 through September 2010, at which time a new payment schedule would be agreed upon. This arrangement was confirmed in a February 25, 2010 email from Lim to J & D. The record includes a "reconciliation" spreadsheet prepared by Lim dated July 2010, including the four $10,000 installments by Gabo and LMT. The starting column on the spreadsheet indicates $165,788.39 is due to J & D.
On July 7, 2010, Lim emailed J & D to the effect that he would make two payments of $12,500 each. Those sums were never paid either. As a result, J & D has received a total of only $140,000.
Lim insisted during his deposition that the figure shown on the reconciliation spreadsheet was inaccurate; it did not reflect additional trucking and freight costs incurred by Gabo and LMT as a result of J & D's alleged delay in shipping the goods. Additionally, Lim claimed that M.S. shipped less fabric than was initially ordered, and shipped merchandise that did not conform to the initial weight and colorfastness specifications. This nonconformity resulted in testing and examination, causing added delays. To ensure timely production and delivery of the garments, increased shipping costs were paid. Lim claimed the cost of air freight alone came to $37,000.
Finally, defendants allege that K-Mart imposed a chargeback totaling $245,435.19, as a result of production issues, a possibility Leaderman had explained to J & D. Lim took the position, simply stated, that he did not pay J & D because he did not get paid by K-Mart.
In its decision, the trial court noted that despite defendants' assertion that the goods failed to meet fabric weight, quality specifications, and the contract delivery date, they never produced documentation supporting the contention, including the initial order from K-Mart. The court also noted that pursuant to the Uniform Commercial Code, when a buyer fails to pay the price as agreed upon, the seller may recover the full price of the goods which were accepted.
Furthermore, the trial court found that Lim had not established, pursuant to relevant precedent, the necessary elements for economic duress such as would invalidate his personal guarantee. He reached that conclusion because Lim was unable to show he was the victim of any wrongful or unlawful act which deprived him of his unfettered will. Additionally defendants did not produce an affidavit from Lim in opposition to the motion. And in any event, J & D's demand for a personal guarantee was not onerous because no payment had been advanced towards the purchase of the fabric. Therefore duress was not established.
Lastly, as to the legal sufficiency of defendants' counterclaims, the trial court concluded that defendants failed to establish a causal connection between any damages and J & D's alleged defalcations. In fact, the court found to the contrary, that J & D fully met its contractual obligations. Thus defendants' counterclaims were dismissed as well.
On appeal, defendants raise the following points:
In reviewing the grant or denial of summary judgment, we apply the same standard which governs the trial court under
"`Bare conclusions in the pleadings, without factual support in tendered affidavits, will not defeat a meritorious application for summary judgment[,]'"
Pursuant to the Uniform Commercial Code, the buyer's acceptance of goods occurs when:
Where goods are accepted, the buyer is obliged to pay the purchase price at the contract rate. In fact, where the goods have been accepted, the buyer must within a reasonable time after he discovers or should have discovered a breach, notify the seller or be barred from any remedy.
In this case, it is clear that defendants' alleged concerns regarding delivery dates, colorfastness, and weight of the fabrics did not become an issue between seller and buyer until long after the goods had been accepted. Moreover, it does not appear that any of the defendants provided actual notice to plaintiff. In fact, the only proofs which can be credited, even giving defendants all favorable inferences, are that J & D delivered the goods, they were accepted, and when invoiced, Gabo paid $100,000 toward the balance due. When Gabo thereafter met with Shim to negotiate a payment plan, as a result of which it paid another $40,000, the discussions were not over defendants' complaints, but problems with payment.
Although Leaderman testified that J & D was informed at the very beginning that the fabrics did not meet the specifications nor delivery dates, when pressed, she acknowledged that she had not personally informed anyone of the problems. Neither did she know with certainty if the chargeback in this case was related solely to this order or if it included prior orders on which one of Terzian's other companies may have been late. The proofs regarding the chargeback came solely from Leaderman, who never produced a document corroborating her testimony. She could not recall when she was notified of the chargeback, or even the specific reasons given for it.
The chargeback, however, was against the entire contract for $1.2 million, not just the portion for which J & D was responsible. Even the amount of the chargeback is unclear, as although Leaderman said she believed it was $200,000 or $250,000, in their counterclaim, defendants alleged Gabo lost $600,000 as a result of problems with this order.
Defendants also alleged that as a result of the late delivery by J & D on a portion of the orders, approximately $1,050,000 to $1,500,000 in sales was lost. Yet K-Mart, from the record supplied to the court, appears to have accepted the clothing. Throughout the discussions between the parties, after the fabric was produced, defendants appear to acknowledge the amounts that were due to J & D, including but not limited on the reconciliation sheet. Additionally, defendants did not substantiate their own claims of loss. As there were no material issues in dispute, summary judgment was properly granted.
We apply the same standard as the trial court in respect of the same motion record.
Insofar as Lim's claim of economic coercion, a party alleging economic duress must show that he has been the victim of a wrongful or unlawful act or threat, and the act or threat must be one which deprives the victim of his unfettered will.
"Where there is adequacy of consideration, there is generally no duress.... Merely taking advantage of another's financial difficulty is not duress. Rather, the person alleging financial difficulty must allege that it was contributed to or caused by the one accused of coercion."
In
The Supreme Court reversed because it found that the bank had not acted wrongfully in demanding that mortgage: first, there was valid consideration for it, and secondly, the bank was itself not the cause of the company's financial woes.
Here, it is undisputed that Shim requested Lim sign a personal guarantee to secure payment of the fabric. Shim sought the personal guarantee because neither Gabo or LMT had given him anything towards the cost of the goods, not even the required deposit. Lim had refused that condition and instead offered payment within ten days of shipment to K-Mart. Shim asked for a letter of credit, but Lim responded that he "couldn't open" the letter of credit and that though LMT could, he did not want Shim to use it. Shim did not know LMT, and only knew Lim casually, none of which was enough for him to "trust their company."
Thus Shim's request of a personal guarantee was not improper, and he gave valid consideration for it by commencing delivery. His request was reasonable in the face of Gabo and LMT's persistent refusal to advance any payment, or to reassure J & D of their ability to pay through a letter of credit. Both parties anticipated a benefit from the agreement at the time it was made. Even Lim stated that at the time he signed the personal guarantee on June 12, he "never thought that this order [was] going to go bad," and that if he knew that the "order would go bad, [he] [would] never give him a personal guarantee."
Defendants repeatedly assert that the request for a personal guarantee was coercive because it was made only two days before the first shipment was due for delivery. However, they had been made aware of J & D's need for some assurance of payment multiple times before Shim's June 12 request, through the terms of the invoice and then through J & D's demand for a letter of credit.
Lim alleged that he felt pressured to sign the personal guarantee because on June 12, delivery on certain orders was already late. According to the invoices certain shipments were to be delivered on June 11, a date which had already passed. However, that claim is only partially corroborated. While one of the invoices lists the expected delivery date for one small portion of the order as "6/11" or June 11, 2009, the same invoice also gives an alternate delivery date of "6/14" or June 14, 2009, for the same portion of the order.
Accordingly, defendants' claim of economic duress is unpersuasive and lacks factual support. No affidavit from Lim asserted wrongful coercion. If anything, Lim's allegations of coercion are undermined by other documentary evidence in the record.
Lastly, defendants assert that summary judgment against Lim must be reversed because it is not clear that J & D is the proper party to enforce Lim's personal guarantee. We do not agree.
Although Lim's guarantee named M.S. as the beneficiary, the references were clearly to the J & D contracts. Shim engaged in the negotiations resulting in the issuance of that guarantee, and he owns both corporations. The reconciliation sheet named J & D as the entity to whom payments were made.
J & D and M.S., owned by one individual, are virtually the same entity but in different countries. As Shim explained, the only reason the invoices were generated by M.S. was because, coincidentally, he was in Korea when the deal was negotiated. Defendants' partial payments were made to J & D. Even Lim acknowledged that he issued the personal guarantee with regard to money owed to J & D. Hence Lim made himself personally responsible for payment to J & D. In our view, there was no error at all in the issuance of a judgment to that effect.
Affirmed.
