This is an action for breach of contract, arising from a promissory note and certain related agreements. Plaintiff Vladimir Gusinsky ("Gusinsky") moves, pursuant to CPLR 3212, for an order granting partial summary judgment on his third cause of action, for breach of contract. Defendant Sagi Genger ("Sagi") cross-moves, pursuant to CPLR 3212, for an order granting summary judgment dismissing plaintiff's third and fourth causes of action. For the reasons stated below, the motion is granted in part, and the cross motion is denied.

1. Background

In 2001, Gusinsky loaned $2.5 million to a Canadian company called A.G. Land No. 1 Company (AGL), which executed a promissory note dated July 24, 2001 (Note).^[FN1] Under the Note, repayment of the principal was to be made in three annual installments of 10% of the total, starting on July 24, 2008, with the balance due on July 24, 2011.

AGL had been formed by Sagi's father, non-party Arie Genger ("Arie"), to invest in Canadian real estate. AGL was wholly owned by AG Real Estate Partners, L.P. ("AGLP") and Arie was the [*2]sole shareholder of AGLP's general partner. AGL is currently known as AG Holdings Company ("AGH") and is still owned by AGLP.

On July 24, 2001, the day the Note was executed, AGLP executed a "Pledge Agreement" in favor of Gusinsky, which provided that Gusinsky was entitled to receive all distributions received by AGLP from AGH. The Pledge Agreement also gave Gusinsky a security interest in AGLP's shares in AGH.

On April 18, 2002, Gusinsky and Arie (on behalf of AGH), executed an agreement referred to as "Allonge to Promissory Note" ("Allonge"), pursuant to which the principal amount of the Note was converted to C$3,845,7508 and the first three principal payments were adjusted to C$384,575.

AGH owned 50% of a company called AG Properties Company ("AG Properties"), which was the sole owner of entities that held title to certain Canadian real estate. In 2004, Arie transferred part of his interests in AGLP and AG Properties to Sagi. Eventually, by September of 2005, Sagi had acquired complete control of AGLP, AG Properties and the underlying real estate.

Also in 2005, Sagi wrote an Assurance Letter (Assurance) to Arie in order to "memorialize" their "understanding" pertaining to the financing of the purchase of certain properties in Montreal, Canada.^[FN2] In the Assurance, Sagi acknowledged that AGH (originally AGL) had borrowed $2.5 million from Gusinsky, per the terms set forth in the Note, in order to finance the acquisition of the Montreal properties. The Assurance further states that those properties had been sold and that the proceeds were distributed to AG Properties, which then invested the funds in Riverside Properties (Canada) LP ("Riverside"). Riverside subsequently acquired a new property in Montreal ("New Property").

The Assurance also states that "all funds received" by AG Properties or Riverside s general partner, Riverside General Partner LP ("Riverside GP"), would be set aside for the full repayment of the Note.

Gusinsky alleges that, on November 19, 2007, he wrote to Sagi, through his counsel, requesting assurance that Sagi and AGLP were fulfilling their obligations under the various agreements to set aside funds for repayment of the Loan. He also requested that records be forwarded showing that the funds for repayment were being held in an account held separate from any general accounts. Gusinsky alleges that Sagi failed to provide the requested assurance.

Gusinsky commenced this action in February 2008 against Sagi and AGLP. AGH was added as a defendant in October 2008. The first cause of action in the complaint is for unpaid principal on [*3]the Note. The second cause of action is for interest. The third cause of action is for breach of the Pledge Agreement and the Assurance. The fourth cause of action is for anticipatory breach of contract in connection with those agreements.

In a decision dated August 12, 2009, this court granted Gusinsky's motion for summary judgment on the first and second causes of action to the extent of finding that he was entitled to judgment against AG Holdings Company in the principal amount of C$3,845,750, pursuant to the Note. See Gusinsky v Genger, 24 Misc 3d 1238(A) 2009 NY Slip Op 51798(U) (Sup Ct NY County 2009). This court also found, however, that Gusinsky had failed to establish Sagi's individual liability under the Note, or that AGLP was liable under the Note.

The court also granted Gusinsky's motion for a preliminary injunction, finding that he had established a likelihood of success on his cause of action to enforce the terms of the Pledge Agreement and the Assurance. Among other things, the court found that he had sufficiently demonstrated that he is a third-party beneficiary of the Assurance because it was intended to benefit him by ensuring that funds received by AG Properties or Riverside GP would be set aside for the repayment of the Note. The court also found that he demonstrated the prospect of irreparable injury if the New Property was sold and the net proceeds were not applied to repayment of the Note.

This court's decision was affirmed by the Appellate Division, First Department, in June 2010. See Gusinsky v Genger, 74 AD3d 539 (1st Dept 2010).

2. Analysis

Gusinsky now moves for partial summary judgment on his third cause of action, for breach of the Assurance. Sagi cross-moves for partial summary judgment dismissing this claim, as it pertains to the Assurance, and dismissing the fourth cause of action, to the extent that it asserts a claim for anticipatory breach of the Assurance.

A party moving for summary judgment is required to make a prima facie showing that it is entitled to judgment as a matter of law, by providing sufficient evidence to eliminate any material issues of fact from the case. Winegrad v New York Univ. Med. Ctr., 64 NY2d 851 (1985); Grob v Kings Realty Assoc., 4 AD3d 394 (2d Dept 2004). The party opposing must then demonstrate the existence of a factual issue requiring a trial of the action. Zuckerman v City of New York, 49 NY2d 557, 560 (1980).

A. Choice of Law

As a threshold matter, the parties disagree as to which law governs disputes arising from the Assurance. Gusinsky contends that the Assurance is governed by New York law because, among [*4]other things, it was negotiated and executed in New York. Sagi argues that the law of Nova Scotia applies because the underlying properties are in Canada and because the Note and the Pledge Agreement contain choice of law provisions stating that they are governed by the law of Nova Scotia.

"New York applies a grouping of contacts' or center of gravity' approach to choice of law questions in contract cases." Ackerman v Price Waterhouse, 252 AD2d 179, 192 (1st Dept 1998). "The five generally significant contacts in contract cases are: the place of contracting, negotiation and performance of the contract; the location of the subject matter of the contract; and the domicile of the parties." Id., citing Restatement [Second] of Conflict of Laws § 188 [2]. "A court considering these factors must focus on the contacts that are significant in the particular contract dispute." Id., (citations omitted); see Matter of Midland Ins. Co., 71 AD3d 221 (1st Dept 2010); Certain Underwriters at Lloyd's, London v Foster Wheeler Corp., 36 AD3d 17 (1st Dept 2006), aff'd 9 NY3d 928 (2007). Here, the court finds that New York law applies to disputes arising under the Assurance.

First, as this court has previously found, the place of negotiation and contracting is New York.^[FN3] According to Arie, the Assurance was drafted and negotiated in New York by lawyers on behalf of both parties. Arie Genger May 12, 2010 Affidavit, ¶ 6; Arie Genger May 6, 2008 Affidavit, ¶ 10. This is not disputed by Sagi. Moreover, the Assurance lists addresses in New York City for both Sagi and Arie.

The location of the parties also favors application of New York law rather than Nova Scotia law. Sagi is a resident of New York. Although Arie states that he is a Florida resident, he also states that he frequently travels to New York for business and has an office in New York. See Arie Genger May 6, 2008 Affidavit, ¶ 2; Arie Genger May 12, 2010 Affidavit, ¶ 6. Neither party resides in Nova Scotia.

Sagi argues that the location of the subject matter of the Assurance is Nova Scotia because the funds at issue would have been obtained in Nova Scotia. However, those funds were controlled by Sagi, who was in New York. Therefore, this factor does not require the application of Nova Scotia law.

Sagi argues that he and Arie intended that Nova Scotia law apply to the Assurance, because the Note and the Pledge Agreement both include choice of law clauses in favor of Nova Scotia. However, those agreements were executed several years before the Assurance and Sagi was not a party to either of those agreements. [*5]In any event, the failure to include a Nova Scotia choice of law clause in the Assurance, when it was specifically included in the other agreements, undermines Sagi's argument. Therefore, the court will apply New York law to disputes arising under the Assurance.

B. Third-Party Beneficiary

Gusinsky's third cause of action alleges that Sagi breached the Assurance by failing to segregate certain funds, including management fees received by Riverside GP from Riverside. This cause of action rests on Gusinsky's assertion that he is an intended third-party beneficiary of the Assurance.

In the August 12, 2009 decision, this court found that, for the purposes of the preliminary injunction motion, Gusinsky adequately demonstrated that he is a third-party beneficiary of the Assurance because the agreement was intended to benefit him by ensuring that funds received by AG Properties or Riverside GP would be set aside for the repayment of the Note.

In general, "[t]he granting or refusal of a temporary injunction does not constitute the law of the case or an adjudication on the merits, and the issues must be tried to the same extent as though no temporary injunction had been applied for." J.A. Preston Corp. v Fabrication Enterprises, Inc., 68 NY2d 397, 402 (1986); see Coinmach Corp. v Fordham Hill Owners Corp., 3 AD3d 312 (1st Dept 2004). However, the court is similarly persuaded on the instant motion that Gusinsky is an intended third-party beneficiary of the Assurance.

"One is an intended beneficiary if one's right to performance is appropriate to effectuate the intention of the parties' to the contract and either the performance will satisfy a money debt obligation of the promisee to the beneficiary or the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.'" Lake Placid Club Attached Lodges v Elizabethtown Bldrs., 131 AD2d 159, 161 (3d Dept 1987), quoting Restatement [Second] of Contracts § 302 [1] [a], [b].

Here, the terms of the Assurance indicate that Gusinsky was an intended beneficiary. The Assurance specifically requires funds to be set aside for full repayment of the loan, which had been made by Gusinsky. Moreover, Arie states in his May 6, 2008 affidavit that "Gusinsky was the direct beneficiary of [the] Assurance Agreement." Arie Genger May 6, 2008 Affidavit, ¶ 19. In his affidavit of May 12, 2010, he states that "I entered into the Assurance for Mr. Gusinsky's benefit in order to protect Mr. Gusinsky's security interest in the loan." Based on these factors, the court finds that Gusinsky has made a prima facie demonstration that he is an intended third-party beneficiary [*6]under the Assurance.

The court also finds that Sagi has not demonstrated the existence of any factual issues as to whether, under New York law, Gusinsky was an intended third-party beneficiary under the Assurance. Sagi argues that, under Nova Scotia law, Gusinsky cannot be considered a third-party beneficiary. However, the court has already determined that Nova Scotia law does not govern interpretation of the Assurance.

C. Breach of the Assurance

1. Segregation of Funds

Gusinsky's third cause of action alleges that, under the terms of the Assurance, Sagi was required to set aside all funds received by AG Properties and Riverside GP, but failed to do so. Among other things, Gusinsky alleges that, in January of 2007, Riverside GP began collecting management fees from Riverside and did not set such funds aside for repayment of the Note, in violation of the Assurance.

The Assurance specifically states that "all funds received" by AG Properties or Riverside GP would be set aside for the full repayment of the Note. At his March 18, 2010 deposition, Sagi acknowledged that Riverside GP had received management fees in 2007, although he was not clear as to the amount of such funds. He also stated that he did not create a separate account for such funds but used Riverside GP's account. Based on these factors, the court finds that Gusinsky has made a prima facie demonstration that he is entitled to judgment as a matter of law in connection with his claim that Sagi breached the terms of the Assurance.

The court further finds that Sagi has failed to demonstrate that any material issues of fact exist in connection with this cause of action. Sagi opposes Gusinsky's motion on the ground that the Assurance did not specifically require him to put the funds into a separate bank account. However, although a separate bank account was not specified in the Assurance, Sagi does not offer anything to demonstrate that he took any actions to set aside the funds, as required by the Assurance. Therefore, since Gusinsky has adequately demonstrated that funds were received but not set aside, Gusinsky is entitled to summary judgment on the issue of liability. The only remaining issue for trial is a determination of the amount of damages, for which a pre-trial conference is scheduled below.

2. Enforceability of the Assurance

Sagi argues that, in any event, the Assurance is unenforceable on several grounds. First, he contends that he was fraudulently induced to enter into the agreement by Arie. [*7]Specifically, Sagi asserts that Arie induced him to enter into the Assurance by stating that Arie would resign as director of AG Holdings and AG Properties, when, in fact, he had already resigned such positions and appointed Sagi to be the director without Sagi's knowledge.

This is unpersuasive. First, Arie states in his affidavit that Sagi was aware of Arie's resignation and Sagi's appointment as director at the time the Assurance was executed. Arie Genger May 12, 2010 Affidavit, ¶ 8. In opposition, Sagi has not set forth any evidence to demonstrate that he was fraudulently induced to enter into the agreement.

As set forth above, by the time the Assurance was executed, substantial control of the various entities had already been transferred from Arie to Sagi. Moreover, the obligation to repay the Note pre-existed the execution of the Assurance, as did the obligations set forth in the Pledge Agreement. Based on these factors, the court finds that Sagi has not demonstrated that he was fraudulently induced to enter into the Assurance.

Sagi also argues that the Assurance is unenforceable because Arie failed to sign certain sales instruments to Sagi, as required by the Assurance. As such, Sagi contends that he is not obligated to perform his own obligations under the agreement.

This also is unpersuasive. First, Arie states in his affidavit that he signed the sales instruments at issue in 2005. Arie Genger May 12, 2010 Affidavit, ¶ 8. Moreover, Sagi has not identified any specific sales instruments that were not signed or put forth any other evidence to demonstrate that factual questions exist as to this issue. Therefore, the cross motion to dismiss the third cause of action is denied.

D. Anticipatory Breach of Contract

Sagi argues that the fourth cause of action, for anticipatory breach of the Assurance, should be dismissed for the same reasons that he asserted for dismissal of the third cause of action. However, in light of the denial of his cross motion to dismiss the third cause of action, the court also finds that Sagi is not entitled to summary judgment dismissing the fourth cause of action. Therefore, that portion of the cross motion is denied.

Accordingly, it is

ORDERED that plaintiff's motion for summary judgment is granted as to liability on the third cause of action and the motion is otherwise denied; and it is further

ORDERED that defendants' cross-motion for summary judgment is denied; and it further is

ORDERED that counsel shall appear in Part 55 for a pre-trial conference on November 8, 2010, at 2 PM. [*8]

DATED: October 5, 2010

ENTER:

___________________

J.S.C.