Breach of Contract Inextricably Intertwined With Promissory Note Sufficient to Defeat Motion for Summary Judgment in Lieu of Complaint on the Note

On May 13, 2015, the Second Department issued a decision in Montecalvo v. Cat E., LLC, 2015 NY Slip Op. 04103, affirming the denial of a motion for summary judgment in lieu of complaint based on the breach of a related contract.

In Montecalvo, the plaintiff brought "an action to recover on a promissory note and personal guaranty," which it "commenced by motion for summary judgment in lieu of complaint." The Second Department affirmed the denial of the motion, explaining:

While, generally, the breach of a related contract cannot defeat a motion for summary judgment on an instrument for money only, that rule does not apply where the contract and the instrument are inextricably intertwined. The defendant Cat East, LLC, had previously commenced an action to recover damages against the plaintiff, alleging that the plaintiff breached an operating agreement. That action was inextricably intertwined with the instant action, which was commenced by the plaintiff to recover on a promissory note and personal guaranty. Indeed, the actions have already been joined for trial. Moreover, the promissory note refers to the operating agreement for the purpose of defining certain terms set forth in the note, and the promissory note and personal guaranty are referred to in, and appended as exhibits to, the operating agreement.

(Internal quotations and citations omitted) (emphasis added). A motion for summary judgment in lieu of complaint is a powerful tool, but as this decision shows, its scope is limited in a variety of ways.