NSS v. LLC (2010)

MEMORANDUM OF DECISION

Plaintiff, NSS Restaurant Services, Inc., brings this action in two counts seeking payments from the defendants, West Main Pizza of Plainville, LLC (hereinafter West Main) and Agnes Kaleodis (hereinafter Agnes),¹ based primarily upon an Inter-Creditor Agreement (Exhibit C-1).

The defendants, West Main and Agnes, deny the material allegations of the complaint directed at them.   They also raise the special defense of failure of consideration for the note and creditor agreement in that there was no tangible benefit to the defendants Kaleodis and West Main Pizza in entering the agreement.

The material facts resulting in this complaint follow.

The defendant, Agnes Kaleodis, is the owner of improved real estate in which she and her husband, Peter Kaleodis, operated the West Main Pizza of Plainville, LLC restaurant.   On or about May 6, 2004, the defendants' West Main Pizza, restaurant business was purchased by the plaintiff, NSS Restaurant Services, Inc., for the sum of $205,000.00 which included a note for $155,000.00 payable from the plaintiff, NSS Restaurant Services, to the defendant, West Main.

On or about April 30, 2005 the plaintiff, NSS Restaurant Services, sold the West Main Pizza restaurant business for the sum of $205,000.00 to St. Pierre & Badal, LLC for the sum of $205,000.00.   Payment was partially funded by the buyer, St. Pierre & Badal, LLC, assuming the payment of the note dated May 6, 2004, given by NSS Restaurant Services to West Main Pizza at the prior sale/purchase of the restaurant.   Although the outstanding value of the note was now reduced to $134,000.00 from the prior valuation of $155,000.00.   NSS Restaurant Services also received a further note for $55,491.25 plus cash of $15,570.23 at the closing of the sale to St. Pierre & Badal, LLC on April 30, 2005.

At the time of this April 30, 2005 closing, a separate document prepared by NSS Restaurant was presented for signing to West Main Pizza of Plainville, LLC, NSS Restaurant Services, Inc., and Agnes Kaleodis, titled, Inter-Creditor Agreement dated April 30, 2005.

The plaintiff herein, NSS Restaurant Services, Inc., in this action, contends that the defendants West Main Pizza of Plainville, LLC and Agnes Kaleodis executed this Inter-Creditor Agreement document and became liable as security for payment of certain liabilities incurred by St. Pierre & Badal, LLC in the purchase of the assets and business from INSS Restaurant Services, Inc.

Subsequently, St. Pierre & Badal, LLC was not able to make the payments on the promissory notes given to NSS Restaurant in purchasing the restaurant and walked away from the business.   NSS Restaurant now seeks to recoup these unpaid debts by invoking the Inter-Creditor Agreement, paragraph 3b, contending that West Main Pizza and Agnes Kaleodis agreed to assume the balance of the obligations due NSS Restaurant from St. Pierre & Badal, LLC in the sum of $35,976.76.   Also, that West Main Pizza and Kaleodis have been unjustly enriched in the sum of $35,976.76.

The defendants, West Main Pizza and Agnes Kaleodis, raise the Special Defense of failure of consideration for the note and creditor agreement in that there was no tangible benefit to the defendant Kaleodis and West Main Pizza of Plainville, LLC.

The defendants point out that the restaurant sale closing was at Attorney Brian Silver's office and involved NSS Restaurant Services, Inc., as seller, and St. Pierre & Badal, LLC, as buyer.   NSS Restaurant was represented by a Rhode Island firm, Edwards & Angell, that had reviewed the documents and had drafted the Inter-Creditor Agreement but was not actually present at the closing.

West Main Pizza and Agnes Kaleodis were not involved in the sale except to the extent of signing the Inter-Creditor Agreement.

The plaintiff, NSS Restaurant, contends that the Inter-Creditor Agreement transfers the liability for payment of the balance of $134,000.00 on a note previously given by the seller herein, NSS Restaurant to West Main Pizza, when it purchased the assets of West Main Pizza and which it was now selling.   It further contends that liability was assumed by the new buyer, St. Pierre & Badal, LLC, and that NSS Restaurant was no longer liable on that note to West Main Pizza and Agnes Kaleodis.   No payment or benefit was provided to West Main Pizza and/or Agnes Kaleodis for this transfer.   Further, the plaintiff contends that there is a guarantee of payment by West Main Pizza and Agnes Kaleodis of the note from St. Pierre & Badal and of a payment of $15,000.00 as well as providing a security agreement covering the restaurant equipment.   No consideration of any kind was received by the defendant for the benefits received by the plaintiffs set out in the Inter-Creditor Agreement of the parties.

Further, the reasonable interpretation of the agreement is that West Main Pizza in this situation was to receive full payment of the NSS Restaurant note before any payments are due to it under the Inter-Credit Agreement.   West Main Pizza has a balance due to it in the sum of $134,000.00 on the NSS Restaurant note before any payment is due to the NSS Restaurant thus nothing is due to NSS Restaurant under the Inter-Credit Agreement at the present time.

Therefore, the court finds that the Inter-Creditor Agreement fails for lack of consideration provided on the plaintiff's part.

Judgment may enter for the defendants, West Main Pizza of Plainville, LLC and Agnes Kaleodis on both counts of the complaint together with court costs.

Kremski, J.T.R.

FOOTNOTES

FN1. The plaintiff has withdrawn its complaint against the defendants, St. Pierre and Badal, LLC, Shamshon Badal Kavsi and Amy M. St.Pierre..  FN1. The plaintiff has withdrawn its complaint against the defendants, St. Pierre and Badal, LLC, Shamshon Badal Kavsi and Amy M. St.Pierre.

Kremski, Julius J., J.T.R.