Proof of Borrower's Bankruptcy Filing Permitted on Motion for Summary Judgment in Lieu of Complaint Against Guarantor

On December 29, 2022, Justice Andrea Masley of the New York County Commercial Division issued a decision in ATX Braker LLC v. Paul, 2022 N.Y. Slip Op. 34427(U), granting a lender's motion for summary judgment in lieu of complaint on a guaranty that was triggered when the borrower filed for bankruptcy, explaining:

On February 28, 2019, WC Braker Portfolio B, LLC [*2 (Borrower) borrowed $29,000,000 from plaintiff's predecessor-in-interest, JP Morgan Chase Bank, National Association. (NYSCEF 6, Mezzanine Promissory Note at 1; NYSCEF 5, Loan Agreement at 21; NYSCEF 26, Paul Aff ¶3.) Defendant, the beneficial owner of the Borrower, guaranteed the loan (Guaranty). (NYSCEF 9, Guaranty.) Borrower defaulted when it failed to pay the amount due upon the loan's maturity on March 9, 2022. (NYSCEF 10, Default Notice.) When the borrower's related entity, WC Braker Portfolio, LLC, filed for Chapter 11 bankruptcy, defendant's obligation was triggered under the Guaranty. (NYSCEF 4, Moshtaghi Aff¶6.)

. . .

Defendant's cross motion to dismiss or stay this action in favor of the Texas bankruptcy is denied as the bankruptcy proceedings of the corporate debtor does not involve the guaranty. Moreover, defendant's requested dismissal or stay would be contrary to "the specific [*6] purpose of a guarantee [which] is to give the beneficiary recourse separate from any action against the principal debtor." (Congress Factors Corp. v Meinhard Corn. Corp., 129 Misc 2d 726, 728 [Sup Ct, NY County 1985].)

Summary judgment in lieu of complaint is an accelerated method reserved for cases in which the suit is based on an instrument for the payment of money only, and the only outside proof that is permitted is, as explained in this case, that of "nonpayment or a similar de minimis deviation from the face of the document." Here, without much analysis, the court easily concluded that proof of the filing of the bankruptcy, which triggered the guaranty, was permitted on this motion. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning a motion for summary judgment in lieu of complaint.