Affirmative Defenses are Barred by Guaranty's Express Waiver Provision: J. Remora Maintenance LLC v Efromovich
In a January 4, 2012 decision by Justice Fried, the court granted the plaintiff’s motion for summary judgment to enforce a guaranty executed by the defendant in connection with the plaintiff’s sale of its interest in a company to a third party. The court found that because the two express conditions set forth in the guaranty for its enforcement were met, the plaintiff established entitlement to summary judgment as a matter of law. The court then determined that the defendant failed to raise an issue of fact through its affirmative defenses of fraudulent inducement and lack of consideration. Based on the Court of Appeal’s decision in Citibank v Plapinger, the court concluded that an express waiver contained in the guaranty barred the defendant from asserting the substantive defenses. The court rejected the defendant’s argument that the waiver did not apply to the two affirmative defenses at issue because it did not contain the words “absolutely and unconditional”, finding that such language was unnecessary under New York law for a waiver to effectively waive substantive defenses. The court also granted the plaintiff’s motion to dismiss the defendant’s fraudulent inducement counterclaim under CPLR § 3016(b) on the grounds that the circumstances surrounding the alleged fraudulent inducement were not alleged in sufficient detail.
J. Remora Maintenance LLC v Efromovich, Sup Ct New York County, January 4, 2012, Fried, J, Index No. 650943/11
General Electric Capital Corp. v. Ocean Marine Inc.
In a November 28, 2011 decision by Justice Driscoll, the court granted plaintiff lender’s motion for judgment of foreclosure and sale and an order of reference. In 2005, the lender, GE Capital Corp., loaned $1 million to defendant, a marina located in Freeport, NY. The loan was secured by a mortgage on three properties. In addition, the individual defendants each signed a commercial guaranty. The Note required defendants to pay all real estate taxes associated with the property, and contained an acceleration clause in the event of default by the borrower.
Defendants failed to pay the 2009 and 2010 real estate taxes, and ultimately the lender accelerated the payments due under the Note which, by the time of acceleration, amounted to $988,736.
On the motion, the defendants did not contest the signing of the Note or that the they intended to mortgage the three lots, but rather that the mortgage recording was defective because of improper indexing by the office of the County Clerk. As such, foreclosure should be denied.
In granting the judgment of foreclosure, the court held that the lender established a prima facie right to entitlement to a judgment of foreclosure. Such right, held the court, is not defeated by an indexing error by the County Clerk. Accordingly, the court directed entry of judgment of foreclosure, and directed the County Clerk to amend the records to re-index the mortgage as it was intended.
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Contract Guaranty Signed in Massachusetts is Subject to New York Long-Arm Jurisdiction: Summit Const. Servs. Group, Inc. v Act Abatement, LLC
In a December 16, 2011 decision by Justice Scheinkman, the court examined whether a contract guaranty to be performed in New York constituted a contract for services to be performed in New York thereby permitting the court to exercise long-arm jurisdiction over the guarantying party. It concluded that it did and dismissed the defendant’s motion to dismiss the complaint grounded on the lack of personal jurisdiction. The plaintiff alleged that the defendant Act Abatement was required under a contract setting forth a New York choice of forum to provide labor and material to a construction project in New York City. The plaintiff asserted several causes of action against the company and against defendant Jeter, a Massachusetts resident, who personally guaranteed the Act’s payment and performance obligations. The complaint alleged that the defendant provided the Jeter Guaranty, signed in Massachusetts, when it was unable to procure a performance bond as required under its contract with the plaintiff. Recognizing that the Second Department had not addressed the jurisdictional question and that the First and Third Departments rendered conflicting decisions, the court turned to the decisions from the federal courts sitting in diversity which virtually all found that a payment guaranty is within the scope of services in New York to confer personal jurisdiction under CPLR § 302(a)(1). Based on those authorities, the court found no reason to exclude financial services from services that fall under CPLR § 302(a)(1) or distinguish between a payment and performance guaranty.
Summit Constr. Servs. Group, Inc. v Act Abatement, LLC, Supt Ct Westchester County, December 16, 2011, Scheinkman, J, Index No. 54085/11
Court Finds "Bad Boy" Guaranty is Instrument for Payment of Money and Grants CPLR § 3213 Motion: UBS Commercial Mtge. Trsut 2007-FL1 v Garrison Special Opportunities Fund, LP
In a March 8, 2011 decision by Justice Schweitzer, the court granted the plaintiff’s motion for summary judgment in lieu of a complaint, pursuant to CPLR § 3213, which sought payment from the defendant under a guaranty. In opposing the motion, the defendant argued that the guaranty was not an instrument for the payment of money only because it contained performance obligations and payment obligations, and the court was required to consider additional documents to determine the sum owed. The court rejected those arguments, finding that precedent provided that the application of CPLR § 3213 is not affected if the instrument at issue is part of a larger transaction, so long as the instrument requires the defendant to make certain payments and nothing else. Moreover, the court found that the performance obligations contained in the guaranty did not bar CPLR 3213 relief because they did not condition the payment of money on that specific performance. The court also rejected the defendant’s argument that the guaranty was a penalty—a “bad boy” guaranty—which was unenforceable as a matter of law because the defendant, a sophisticated party, waived the right to assert that defense by an express contract provision.
UBS Commercial Mtge. Trust 2007-FL1 v Garrison Special Opportunities Fund LP, Sup Ct New York County, March 8, 2011, Schweitzer, J, Index No. 652412/10
Court Revisits Foreclosure Action and Grants Summary Judgment for Unlicensed Foreign Bank: Greystone Bank v 15 Hoover St., LLC
In a June 22, 2011, decision by Justice Driscoll, the court granted plaintiff-mortgagee’s motion for summary judgment for foreclosure on and possession of the property in question, as well as for foreclosure on plaintiff’s security interests in personal property and recovery of rental proceeds as provided by the mortgage documents. Finding that the mortgage documents and proof of default submitted by plaintiff on the motion were sufficient to establish a prima facie foreclosure case, in opposition to which defendant-mortgagor failed to raise a triable issue of fact, the court granted plaintiff’s motion and its related application for the appointment of a referee to compute sums due upon the foreclosure sale. Continuing the relief granted in an earlier decision staying the plaintiff’s prosecution of a deficiency judgment under the related promissory note, the court denied plaintiff’s motion for summary judgment as to its causes of action for a deficiency judgment and for a money judgment against the guarantor on the note.
Greystone Bank v 15 Hoover St., LLC, Sup Ct, Nassau County, June 22, 2011, Driscoll, J., Index No. 7223/2010
Attorney Affirmation in Opposition Utterly Fails To Raise an Issue of Fact or Otherwise Defeat Summary Judgment: General Elec. Capital Corp. v Miron Lbr. Co. Inc.
In a July 8, 2011, decision by Justice Ramos, the court granted plaintiff-lender’s motion for summary judgment on its claims for breach of contract and guaranty, as well as dismissed defendant-borrower’s counterclaim and affirmative defenses. Notably, the court began its analysis with a footnote admonishing both parties for violating a practice rule providing that “Memos of Law ARE REQUIRED on ALL motions” and that a failure to submit a separate memo of law “may result in the denial of the motion.” The court then rejected defendant’s argument that the loan was not personally guaranteed as “belied by the documentary evidence” – namely, the loan agreement and guaranty itself – and noted that the “fatal” attorney affirmation submitted on behalf of defendant failed to “make a representation that his clients deny signing the 2009 Guaranty . . . and offers nothing by way of documentary proof sufficient to raise an issue of fact or otherwise defeat summary judgment.” The court also found that the “unusually bare affirmation in opposition” effectively abandoned the affirmative defenses pleaded in defendant’s answer by failing to address plaintiff’s motion to strike them, and otherwise rejected defendant’s “new” defense that the guaranty was a contract of adhesion, raised for the first time on this motion, as “indiscernible, nonsensical, and unsubstantiated.” Specifically, the court held that unequal bargaining power and a lack of legal representation on one side of a contract, without more, does not render the contract one of adhesion, and that a contractual interest rate of 9.75% is hardly usurious given New York’s statutory maximum rate of 16%.
General Elec. Capital Corp. v Miron Lbr. Co. Inc., Sup Ct, New York County, July 8, 2011, Ramos, J., Index No. 650728/2011
Court Grants Summary Judgment in Lieu of Complaint on Personal Guarantee Based on Texas Default Judgment: Steves & Sons, Inc. v Pottish
In a May 11, 2011, decision by Justice Emerson, the court granted plaintiff-manufacturer’s motion for summary judgment in lieu of complaint against defendant-wholesaler in connection with a personal guarantee executed by defendant in favor of plaintiff. Defendant guaranteed his wholesale company’s purchase of doors manufactured by plaintiff in Texas under a sales credit agreement. After defendant became delinquent on its payments under the parties’ agreement, plaintiff sued and obtained a default judgment against defendant in Texas. Because defendant consented to personal jurisdiction in Texas by signing a guarantee that contained a forum-selection clause, the court recognized the default judgment as a basis for plaintiff’s motion. The court then rejected defendant’s argument that he was coerced into signing the guarantee based on his failure to establish that plaintiff’s alleged threat to withhold delivery precluded him from procuring doors from some other source and from suing plaintiff for breach of contract. The court also rejected defendant’s argument that the guarantee was unenforceable for lack of consideration based on evidence in the record reflecting that plaintiff continued to extend credit and provide doors to defendant’s company.
Steves & Sons, Inc. v Pottish, Sup Ct, Suffolk County, May 11, 2011, Emerson, J., Index No. 39918/10
Fraud Claim Based on Falsely Notarized Document Dismissed: Saleh Holdings Group, Inc. v Chernov
In a January 31, 2011 decision by Justice Fried, the court dismissed the plaintiff’s claims for fraud and aiding and abetting fraud which were based on allegations that the defendant notarized a signature on a guaranty knowing that the purported signatory did not sign the document because: (1) the plaintiff failed to satisfy the pleading requirements of CPLR § 3016; (2) the defendant’s notarization was not the proximate cause of the plaintiff’s damages where 11 years elapsed between when the guaranty was notarized, during which the plaintiff orally modified terms of the guaranty; and (3) the damages alleged were not out-of-pocket losses recoverable on a fraud claim and admittedly caused by other factors.
Saleh Holdings Group, Inc. v Chernov, Sup Ct NY County, January 31, 2011, Fried, J, Index No. 650177/10
Court Grants Motion for Summary Judgment in Lieu of Complaint Based on Guaranty: GSO RE Onshore LLC v Sapir
In a November 24, 2010, decision by Justice Fried in connection with an action by plaintiff-lender against defendant-guarantor to recover under a personal guaranty after a default on a construction loan, the court granted plaintiff’s motion for summary judgment in lieu of complaint and denied defendant’s cross-motion to dismiss for lack of personal jurisdiction. The court found that despite the fact that proper documentation was not filed with the county clerk as prescribed by CPLR 318, service of plaintiff’s motion on an agent designated in the guaranty was sufficient because “parties can contractually agree to other methods of service beyond those set forth in the CPLR, and a contract provision designating a party’s service agent is valid.” Because a motion for summary judgment in lieu of complaint may be based on a guaranty, and because the law recognizes waiver-of-defenses provisions in guaranties as valid and enforceable, the court found that plaintiff was entitled to summary judgment as a matter of law and granted the motion. The court also denied defendant’s motion to supplement the record with a medical report suggesting that defendant “lacked the requisite contractual capacity” to enter the guaranty for lack of good cause shown because the motion, initially proposed informally during oral argument, clearly was an afterthought motivated by defendant’s perception that plaintiff was going to prevail.
GSO RE Onshore LLC v Sapir, Sup Ct, New York County, November 24, 2010, Fried, J., Index No. 650367/10
Summary Judgment on a Corporate Guaranty Granted, But Denied as to Personal Guaranty: Colarossi v. Daly
In an August 3, 2010 decision by Justice Warshawsky the Court granted a motion for summary judgment on a corporate guaranty, but denied summary judgment as to a personal guaranty, stemming from the purchase of a truck with a cesspool vacuum tank.
In 2003, both the corporation and its principal guaranteed the monthly payments for the truck; under an agreement that contained an acceleration clause (i.e. if there was a default all of the remaining payments were immediately due). In 2005, the principal lost control over the business and all of its equipment, including the truck. The new business advised the financing company that it had purchase the assets of the old company and began making the monthly payments on the truck. After three years the new business stopped making the monthly payments for the truck and it was repossessed. The financing company then sued the old company and its principal, seeking the difference between the sale price on the repossession and the amount due on the loan (as well as its costs and attorneys’ fees).
The financing company moved for summary judgment on its claims against both the old company and its principal. The Court granted summary judgment against the old company, but denied summary judgment against its principal finding there was an issue of fact whether the transaction whereby the new company took possession of the truck and began making payment on the loan released the principal from his obligations under the guaranty.
Colarossi v. Daly, Sup Ct, Nassau County, August 3, 2010, Warshawsky, J, Index No. 3334/2008
Wells Fargo Bank NA v. Economic Realty Co., Sup. Ct., Queens County, July 29, 2010, Kitzes, J., Index No. 25597/08
In a July 29, 2010 decision by Justice Kitzes, plaintiff Wells Fargo sought summary judgment against the defendant LLC and a personal guarantor, arising out of the default in payment for credit charges and cash advances incurred on two credit card/business line of credit accounts. Plaintiff alleged causes of action for breach of contract, breach of guarantee and account stated. The court granted summary judgment in favor of plaintiff on the claims, and awarded attorney’s fees, amount to be determined later. The court rejected defendants’ belated attempt to claim improper service, since they have failed to make a motion to dismiss on service/jurisdictional grounds within sixty days of service of the Answer, and further did not allege any undue hardship warranting an extension of such time to do so.
