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
Nothing New to Say; Motion for Leave to Amend Complaint Denied: Verdeber v Commander Enters. Centerreach, LLC
In an October 18, 2011 decision by Justice Warshawsky, the court denied the plaintiffs’ motion to amend the complaint pursuant to CPLR 3025(b) to include claims for breach of contract and waiver with respect to defendant Benco LLC’s (“Benco”) alleged failure to consummate a closing to purchase the plaintiffs’ interest in the defendant Commander Enterprises Centereach, LLC (“CEC”). The defendants opposed the motion asserting that the new claims were without merit, and were based on transactions that were previously resolved by the court and affirmed by the Second Department. The individual plaintiffs were holders of a 20% interest in CEC; Benco owned the remaining 80%. The underlying dispute arose from the individual plaintiffs’ sale of their interests in CEC to the plaintiff company Verbenco, LLC (“Verbenco”). In a prior proceeding, the court held and the Second Department affirmed that an operating agreement from the year 2000 was controlling. Pursuant to the operating agreement, Benco alone was entitled to purchase the interests. Therefore, the court held that the plaintiffs’ attempted transfer to Verbenco terminated their membership in CEC and was an offer to sell their interest, which Benco accepted. In denying the current motion, the court held: 1) that the proposed amended complaint did not raise any “‘additional or subsequent transactions or occurrences’ as mandated by § 3025(b)”; and 2) that it was bound by the prior decision of the Second Department.
Verdeber v Commander Enters. Centereach, LLC, Sup Ct, Nassau County, October 18, 2011, Warshawsky, J, Index No. 00769/09.
Court Denies Motion to Compel Arbitration Due to Lack of Condition Precedent: Red Hook Meat Corp. v Bogopa-Columbia, Inc.
In a March 15, 2011 decision by Justice Demarest, the court denied the plaintiff’s motion for an order compelling arbitration because the plaintiff failed to comply with a condition precedent. The plaintiff sought arbitration to determine whether the defendant unreasonably withheld consent to a sublease under the parties’ lease agreement. The court found that the lease agreement provided that the plaintiff was required to give the defendant notice of its intent to submit to arbitration the question of whether such consent was unreasonable withheld within 10 days of receiving notice from the defendant of its refusal to consent, but did not give such timely notice. The court rejected the plaintiff’s argument that the defendant waived the 10-day notice requirement by its continued acceptance of rent payments, upon finding that such waiver was withdrawn.
Red Hook Meat Corp. v Bogopa-Columbia, Inc., Sup Ct, Kings County, March 15, 2011, Demarest, J, Index No. 28567/10
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
Lafarge Bldg. Materials, Inc. v. Pozament Corporation, Sup Ct, Albany County, August 24, 2010, Platkin, J., Index No. 3333/04
In an August 24, 2010, decision by Justice Platkin in connection with a breach-of-contract action between plaintiff-cement manufacturer and defendant-fly ash supplier, and on the parties’ cross-motions for summary judgment on the issue of plaintiff’s performance under the parties’ service agreement, the court granted plaintiff’s motion and dismissed defendant’s counterclaim, finding that plaintiff had performed its obligations under the agreement in all material respects. Specifically, the court found that defendant’s supply obligations were not limited by plaintiff’s obligation to provide defendant with consumption forecasts, which the court interpreted as a mere duty and not a condition precedent under the agreement, especially considering the fact that defendant was aware of future quantity increases from plaintiff, never raised a formal objection with plaintiff, and elected to continue to perform under the agreement and take advantage of its benefits. The court also found that the agreement’s exclusivity clause was not an unconditional right of first refusal but merely provided defendant with an opportunity to manage an alternate supplier and that, while plaintiff violated this clause by failing first to give notice to defendant of its intention to obtain fly ash from another supplier, the breach did not rise to the level of material breach and excuse defendant’s own performance under the agreement. Because defendant failed to demonstrate that it sustained monetary damages as a result of plaintiff’s violation of the exclusivity clause, the court dismissed defendant’s counterclaim.
