Court Opinion

ID: 5811026
Source: CourtListenerOpinion
Date Created: 2022-01-12 18:46:54.131087+00
Date Added: 2024-06-11T08:42:51.457286
License: Public Domain

Suozzi, J. (dissenting).
I dissent and vote to (1) modify the order appealed from by denying plaintiffs’ motion for summary judgment and (2) reverse the judgment.
I would have no difficulty in holding the defendants personally liable on their guarantee for the full amount awarded by the arbitrators, but only after an appropriate judicial determination has been made, following a full trial, as to the issues of whether the surety agreement was entered into without consideration and whether the surety agreement was a result of economic duress applied by the plaintiffs, as alleged by the defendants in their papers submitted in opposition to the motion for summary judgment.
While the defendants’ papers in opposition to the plaintiffs’ motion lack some degree of specificity, which may not augur well for their chances of prevailing at a trial, nevertheless, I am of the view that they sufficiently framed issues of fact which should not be determined summarily.
The majority opinion concedes that the defendants, as guarantors, were not parties to the construction contract, entered into between the plaintiffs and the contractor on February 15, 1968, which contained the arbitration provision. The defendants’ agreement to personally guarantee the contractor’s performance was not made simultaneously with the execution of the construction contract. Rather, it was made pursuant to a letter dated May 28, 1968, more than three months later, and at a time when the work had progressed to a point that the contractor was entitled to certain moneys. During this three-month period, the plaintiffs allowed the contractor to proceed with the work without insisting that it furnish a surety company performance bond. The defendants alleged that, at the conclusion of the three-month period, the plaintiffs withheld the moneys due to the contractor until the defendants agreed to become personal guarantors of the construction contract. These allegations, and the circumstances upon which they are based, raise issues of fact as to the questions of duress and lack of consideration in the making of the surety *367agreement. Therefore, the circumstances under which the guarantee was obtained is a proper issue to be determined at a trial.
Notwithstanding this fact, it can be argued, as the majority opinion has done most persuasively, that the defendants were in privity with the contractor by virtue of the fact that they were its sole stockholders and principals, and that they should not be permitted to use the corporate veil to shield themselves from liability under an arbitration award made in a proceeding which they in fact instituted and participated in fully (see Matter of Shea, 309 NY 605; Warren v County of Monroe, 51 Misc 2d 292; see, also, Heller & Co. v Cox, 343 F Supp 519, affd 486 F2d 1398).
Nevertheless, a determination that the defendants herein were in privity with the contractor does not immediately serve to invoke the doctrine of collateral estoppel so as to bar them from a full trial on the issues relating to the validity of the surety agreement. As the Court of Appeals held in Schwartz v Public Administrator of County of Bronx (24 NY2d 65, 71, 73):
New York Law has now reached the point where there are but two necessary requirements for the invocation of the doctrine of collateral estoppel. There must be an identity of issue which has necessarily been decided in the prior action and is decisive of the present action, and, second, there must have been a full and fair opportunity to contest the decision now said to be controlling. * * *
"[T]he burden of showing that the issue was identical and necessarily decided rests upon the moving party.”
In rendering their determination, the arbitrators stated, in their award: "No determination can be made with respect to the liability of Seymour Schorr a/k/a Sy Schorr, Ted Schorr and Harold Schorr * * * due to the fact that the above mentioned are not named parties to the contract dated February 15, 1968.”
Accordingly, it is clear that the arbitrators did not decide or even reach the issues raised by the defendants relating to the validity of the suretyship agreement.
Consequently, the plaintiffs’ motion for summary judgment should have been denied.
Hopkins, Acting P. J., and Cohalan, J., concur with'Shapiro, J.; Suozzi, J., dissents and votes to (1) reverse the judgment and (2) modify the order by deleting therefrom the *368provision which granted the plaintiffs’ motion for summary judgment and substituting therefor a provision denying the said motion, with an opinion.
Order of the Supreme Court, Kings County, dated December 2, 1975, and judgment of the same court, entered December 4, 1975, affirmed, with one bill of $50 costs and disbursements.