CPLR 3213 Unavailable Where Personal Guaranty Agreement Did Not Incorporate All Necessary Terms and Conditions by Reference

On March 8, 2022, in Sanghvi Diamonds LLC v. Agadjani, Index No. 652445/2021, Justice Joel M. Cohen of the New York County Commercial Division denied the award of summary judgment in lieu of complaint because the unconditional right to payment was not clear from the face of a document. Further, even though defendant acknowledged owing about 80% of the amount plaintiff sought, because each transaction represented a distinct contract for sale, the question of damages was tied up with the question of liability and the motion under CPLR 3213 was deemed a complaint. The Court explained:

To demonstrate entitlement to summary judgment in lieu of complaint based on a personal guaranty, the plaintiff must show (1) the existence of a guaranty, (2) the underlying debt, and (3) the guarantor’s failure to perform under the guaranty (see, e.g., Davimos v Halle, 35 AD3d 270, 272, 826 N.Y.S.2d 61 [1st Dept 2006]; SCP (Bermuda) Inc. v Bermudatel Ltd., 224 AD2d 214, 216, 638 N.Y.S.2d 2 [1st Dept 1996]). Once the plaintiff has done so, “the burden shifts to the defendant to establish, by admissible evidence, the existence of a triable issue with respect to a bona fide defense” (Cutter Bayview Cleaners, Inc. v Spotless Shirts, Inc., 57 AD3d 708, 710, 870 N.Y.S.2d 395 [2d Dept 2008] [internal quotations and citations omitted]; SCP (Bermuda) Inc., 224 AD2d at 216).

Here, Plaintiff fails to make a prima facie case under CPLR 3213 because the amount of the underlying debt cannot be established without resorting to evidence outside of the Guaranty and the underlying documentation (Kerin, 296 AD2d at 337; Oak Rock Fin., 148 AD3d at 103940). To begin with, Plaintiff is correct that the Guaranty represents an absolute and unconditional promise to pay TraxNYC's debts (NYSCEF 4 at 1 [Defendant “unconditionally guarantees” payment to Plaintiff and agrees that “[t]he liability hereunder . . . shall be direct, immediate and absolute”]). But the Guaranty, on its face, does not establish the amount of Defendant’s indebtedness. Nor does the Guaranty refer to any underlying agreement that would conclusively establish Defendant's — or TraxNYC”s — obligations to Plaintiff (Weissman, 88 NY2d at 444 [“Plaintiffs action falls far short of satisfying the 3213 threshold requirement” where “[t]here is no written instrument by which the individual shareholders explicitly obligated themselves to make a required payment of a sum certain”]; compare with, e.g., Embraer Fin. Ltd. v Servicios Aereos Profesionales, S.A., 42 AD3d 380, 381, 839 N.Y.S.2d 756 [1st Dept 2007] [instrument for payment of money only “establishes as a matter of law defendant's absolute, unconditional obligation to pay the sum . . . and incorporates by reference the terms and conditions of the companion sale agreement”]).

Plaintiff seeks to establish the amount due under the Guaranty by submitting approximately 1,000 pages of “Memorandums” and “Invoices” dating back to 2018 (see NYSCEF 5-6), along with some evidence about the parties “course of dealing” (NYSCEF 12 at 11 [Pl.’s mem. of law]). That is not the kind of simple, direct proof of indebtedness conducive to CPLR 3213 treatment. The Memorandums, for example, do not set out terms for payment, or even for sale. As Defendant points out, the reverse side of the Memorandums (which Plaintiff omitted) indicate they are consignment agreements (NYSCEF 27 [“The merchandise described on the reverse side is received by you, the Consignee . . . only for examination and inspection by prospective purchasers”]). As for the Invoices, there is a fact dispute over whether Defendant received them (see Agadjani aff. ¶ 4; Stanescu aff. ¶ 6), and since the Invoices are not signed, there are further disputes over whether the Invoices are enforceable under the Statute of Frauds and, if so, whether for each transaction an oral or implied contract for sale existed. Again, this is hardly the kind of “de minimis” undertaking for establishing indebtedness envisioned by CPLR 3213.

The attorneys at Schlam Stone & Dolan frequently litigate claims for recovery of guaranties and promissory notes. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.