Court Dismisses Breach Of Contract Claim With Prejudice

On December 3, 2024, Justice Melissa A. Crane granted defendant’s motion to dismiss in Parque Solar Don Jose S.A. de C.V. v. Enel S.P.A., Index No. 656415/2024. The action concerned an effort to enforce a guaranty plaintiff and defendant entered into in connection with the construction of renewable energy plants in Mexico. The guaranty provided that it would expire at the end of a “Defects Notification Period” of 21 months from another defined date. The Court explained:

Defendant argues that the Plaintiff Facilities failed to demand payment prior to expiration of the "Defects Notification Period." Accordingly, the termination clause bars Plaintiffs' claims.

"The terms of a guaranty are to be strictly construed in favor of a private guarantor and a guarantor should not be bound beyond the express terms of his guarantee" (ROC-Lafayette Assoc., LLC v Sturm, -- AD3d --, 2024 NY Slip Op 06016 [1st Dept Dec. 3, 2024]) [internal citations omitted].

It is undisputed that the "Defects Notification Period" ended on June 24, 2020 for Villanueva Solar and Villanueva Tres, and June 28, 2020 for Don Jose (Amended Complaint , ¶46). However, Plaintiffs argue that the termination clause does not bar their claims under the Guaranty, because there was no amount "due and payable" under the EPC contract until the ICC arbitration was complete. This argument directly contravenes the parties' agreements.

Section 2 of the Guaranties states that the Guaranties are, "in no way contingent or conditioned upon any requirement that the Beneficiary first attempt to enforce any of the Obligations against the Company or any other person or entity, or resort to any other means of obtaining performance of the Obligations or upon any other event or condition whatsoever" (Guaranties ¶ 2). Therefore, Plaintiffs' excuse that they did not make a demand on the guarantor because they had to first fully arbitrate with the company, is plainly erroneous….

[P]laintiff argues that regardless of the termination clause, the Guaranty is nevertheless enforceable because the guaranteed obligations are stated to be "irrevocable and unconditional." This argument is equally, if not more, unavailing. It is commonplace for guaranties to include language that the guarantee is "irrevocable and unconditional." This does not mean that the guaranty could not have a termination date or provision. If, as plaintiff suggests, the "irrevocable and unconditional" language supersedes the termination clause, that clause would be rendered superfluous. There would be no end to the guaranty, which is contrary to the clear intent of the parties.

The attorneys at Schlam Stone & Dolan frequently handle motions to dismiss concerning guarantees. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such motions.