Opinion ID: 1388000
Heading Depth: 2
Heading Rank: 3

Heading: Payment of the Senior Debt

Text: Section 2.4(a) of the Subordination Agreement provides: Until the Senior Creditor Repayment, no Junior Creditor shall be entitled to exercise any rights or remedies with respect to ... any Guarantor or any Junior Creditor Guaranty, including without limitation to the right to ... make demand under, sue under or otherwise seek payment under any Junior Creditor Guaranty.... Subordination Agreement, § 2.4(a). Under the terms of the Subordination Agreement, then, until full repayment has been made to the Senior Creditor, Junior Creditors, such as Summitbridge and its successor in interest SCR, cannot bring suit against the Guarantors, the Warshawskys, for the Junior Creditor Guaranty, i.e., the debt owed to the Junior Creditor by the Warshawskys. This lawsuit was brought for precisely that purpose: to collect on the debt allegedly owed to SCR by the Warshawskys. The Warshawskys assert that the Senior Creditor had not been paid in full at the time this action was begun, and that, therefore, this lawsuit is barred.
SCR argues that the remainder of section 2.4(a) [3] nonetheless permits it to bring this suit. But the proviso contained in that section applies only to the Citibank Carve-Out Note, the Summitbridge Carve-Out Note or the Citibank Short Fall Note, not the New Subordinated A Note or the New Subordinated B Note at issue. Section 2.6(b) of the Subordination Agreement provides that the rights and interests ... hereunder ... shall remain in full force and effect irrespective of ... any ... defense available to ... Borrower. Subordination Agreement, § 2.6(b) (emphasis added). SCR argues that this section permits it to assert its claim under the subordinated notes because it establishes that the Subordination Agreement does not provide a defense for the Warshawskys or limit the rights of SCR. Appellee Br. 20. But the provision refers only to the rights and interests under the Subordination Agreement. The Warshawskys are not asserting that the rights thereunder are not in full force and effect. They insist only that these rights not be expanded to permit collection of the junior debt before the senior debt has fully been paid. [4]
The district court found that while the Senior Creditor had to be repaid before SCR could bring suit for its debt, the Warshawskys had not submitted admissible evidence to establish that the Senior Creditor had not been paid in full. In their motion to reconsider, the Warshawskys pointed out that prior to the court's ruling on the summary judgment motion, they had submitted an affidavit by Jerome Warshawsky. It stated in pertinent part: To my knowledge, First Capital has not been paid in full. Affidavit of Jerome Warshawsky, dated February 9, 2007 (Warshawsky Aff.) ¶ 7. The district court nonetheless denied the motion to reconsider because it concluded that statements made `to my knowledge,' or similar statements made upon information and belief or upon speculation are generally insufficient to raise a triable issue of fact sufficient to defeat summary judgment. Order Denying Motion To Reconsider 6, SCR Joint Venture, L.P. v. Warshawsky, No. 06 Civ. 3532 (E.D.N.Y. Aug. 17, 2007) (Docket No. 52). We disagree. To be sure, for summary judgment purposes, [a] supporting or opposing affidavit must be made on personal knowledge. Fed.R.Civ.P. 56(e)(1). The Rule's requirement that affidavits be made on personal knowledge is not satisfied by assertions made `on information and belief.' Patterson v. County of Oneida, N.Y., 375 F.3d 206, 219 (2d Cir.2004). An affidavit making allegations on the basis of a party's personal knowledge, and not merely on information and belief, however, may be relied upon to oppose a motion for summary judgment. See id. Jerome Warshawsky's affidavit satisfies the requirements of Rule 56(e). He stated that he was a former Vice President of IW and fully familiar with the facts and circumstances set forth in the affidavit. Warshawsky Aff. ¶ 1. He testified, To my knowledge, First Capital has not been paid in full. Id. ¶ 7. It is perhaps unfortunate that the drafter of the affidavit, likely not Mr. Warshawsky himself, used the phrase [t]o my knowledge before asserting that First Capital had not been paid in full. He could have simply said, First Capital has not been paid in full, and thereby avoided the issue of the significance of the phrase [t]o my knowledge. In this context, though, we think that the phrase to my knowledge was redundantit clearly meant I know that.... It does not mean that the asserted fact was made only upon information and belief, the ordinary suggestion of which is: I have reason to believe this fact but do not have personal knowledge of it. [5] Insofar as there is confusion, it likely arises because the phrase to my knowledge is similar to the common expression to the best of my knowledge, which seems to inject a level of uncertainty into just how sure the declarer is of the truth of the asserted fact. We need not decide today, and therefore do not address, the extent to which a statement to the best of an affiant's knowledge is, in a particular context, made with personal knowledge sufficient to raise a genuine issue of material fact when opposing a motion for summary judgment. We conclude that Jerome Warshawsky's statement, based on his personal knowledge, that the Senior Creditor had not been paid raised a genuine issue as to whether the Senior Creditor has been paid in full, a fact, which, if established, would certainly be material. The district court therefore erred in granting summary judgment for SCR on this ground.