Unconditional Guaranty is Instrument for Payment of Money Only Within the Meaning of CPLR 3213 Despite Indemnification Provision

On March 27, 2023, Justice Margaret A. Chan of the New York County Commercial Division issued a decision in HCC Insurance Holdings, Inc. v. Athenium Analytics LLC, 2023 N.Y. Misc. LEXIS 1317. The Court held that an unconditional guaranty on a note was an instrument for the payment of money only within the meaning of CPLR 3213, even where the guarantee, in the preamble and within a provision providing for indemnification, including the word “performance.” The Court explained:

The Defendant claims that CPLR 3213 is not applicable to this Guaranty Agreement because it has a performance component to it in that the word "performance" appears in the Obligations part of the preamble and because of the indemnification provision in the Credit Agreement (NYSCEF # 16 at 3). Further, defendant argues that the Guaranty should be read by including what is being guaranteed and points to the Obligations section: "Obligations mean every liability, now or hereafter, owing to Lender by Borrower, arising out of that certain Credit Agreement and Term Loan Note dated of even date herewith between Lender and Borrower" (tr. at 16 quoting the Guaranty's preamble). To defendant, this language shows that the guaranty is not just a guaranty of the Note as it guarantees "future unliquidated obligations under the Credit Agreement" (NYSCEF # 16 at 4).

An unconditional guaranty is an instrument for the payment of money only within the meaning of CPLR 3213 (Cooperatieve Centrale Raiffeisen- Boerenleenbank, B.A. v Navarro, 25 NY3d 485, 492, 15 N.Y.S.3d 277, 36 N.E.3d 80 [2015]). And the mere presence of the indemnification provision in the Obligations provision does not make the Guaranty an instrument for payment and performance, thus barring CPLR 3213 relief (see Weissman, 88 NY2d at 446). This is especially true when no additional performance is required before defendant may begin to repay the loan or otherwise alter defendant's promise of repayment (see Stevens v PHLO Corp., 288 AD2d 56,1 56, 733 N.Y.S.2d 11 [1st Dept 2001]). And defendant does not assert that the indemnification provision of the Credit Agreement requires additional performance before defendant is obligated to repay the loan.

The Court thus granted plaintiff’s motion for summary judgment in lieu of complaint, and further awarded plaintiff’s attorneys’ fees in an amount to be worked out by the parties.

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning motions for summary judgment in lieu of complaint or the enforcement of unpaid notes or guarantees.