Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts
Posted: February 26, 2017

Discord Between LLC Members so Severe That it Justified LLC’s Dissolution

On February 16, 2017, Justice Dufficy of the Queens County Commercial Division issued a decision in Matter of 47th Rd. LLC, 2017 NY Slip Op. 50196(U), holding that the discord between an LLC’s members was so severe that it justified the LLC’s dissolution, explaining:

In determining applications for a judicial dissolution of a limited liability company, the court must first look to such company’s operating agreement to determine whether it is or is not reasonably practicable for the limited liability company to continue to carry on its business in conformity with the operating agreement. Considered a statutory default provision for judicial dissolution, LLCL § 702 is available whenever the court finds that it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement. Appellate case authorities have instructed that the court’s initial analysis is one that is contract-based because the statute mandates an examination of the articles and operating agreement to determine the reasonable practicability of carrying on the business in conformity with these governing documents.

Here, the general nature of the stated purpose in the Operating Agreement is vague; hence, it does not assist in determining the reasonable practicability of continuing the business. Normally, the LLCL would operate to fill in the voids. However, the evidence adduced at the hearing makes it clear that the purpose of the company is to operate an eight-unit residential apartment building in an up and coming area of Queens County.

To successfully petition for the dissolution of a limited liability company under the not reasonably practicable standard imposed by LLCL § 702, the petitioning member must demonstrate, in the context of the terms of the articles of incorporation of the operating agreement, the following: 1) the management of the entity is unable or unwilling to reasonably permit or promote the stated purpose of the entity to be realized or achieved; or 2) continuing the entity is financially unfeasible. Disputes between members are alone not sufficient to warrant the exercise of judicial discretion to dissolve an LLC that is operates in a manner within the contemplation of it purposes and objectives as defined in its articles of organization and/or operating agreement. It is only where discord and disputes by and among the members are shown to be inimical to achieving the purpose of the LLC will dissolution under the not reasonably practicable standard imposed by LLCL § 702 be considered by the court to be an available remedy to the petitioner.

In the case at bar, the dissension among the parties has driven the company’s only asset into foreclosure. There are numerous outstanding violations on the property, and the respondent has collected the rents without making repairs, paying the violations, or the mortgage. There are other lawsuits in this and other states between the protagonists. Due to the violent relationship between the two managers, the company will be unable to achieve its purpose of operating an apartment building. The parties seem willing to permit the building to be foreclosed rather than cooperate with each other in the decision-making process. In short, the Court finds that it is not reasonably practicable to carry on the business.

(Internal quotations and citations omitted) (emphasis added).

Posted: February 25, 2017

Insurer Adequately Pleads Reliance on RMBS Issuer’s Representations

On December 19, 2016, Justice Friedman of the New York County Commercial Division issued a decision in Ambac Assurance Corp. v. Countrywide Home Loans, Inc., 2016 NY Slip Op. 51864(U), holding that an insurer had adequately pled reliance on an RMBS issuer’s misrepresentations, explaining:

The general standards for pleading and proof of justifiable reliance have repeatedly been addressed by the Court of Appeals. In New York, sophisticated parties have an affirmative duty to protect themselves from misrepresentations made in arm’s length business transactions by undertaking a reasonable investigation of the details of the transactions. As the Court of Appeals has repeatedly reaffirmed:

If the facts represented are not matters peculiarly within the defendant’s knowledge, and the plaintiff has the means available to it of knowing, by the exercise of ordinary intelligence, the truth or the real quality of the subject of the representation, the plaintiff must make use of those means, or it will not be heard to complain that it was induced to enter into the transaction by misrepresentations.

Moreover, when the party to whom a misrepresentation is made has hints of its falsity, a heightened degree of diligence is required of it. It cannot reasonably rely on such representations without making additional inquiry to determine their accuracy. Thus, where a plaintiff is aware that it has not been provided with financial information to which it is entitled, its duty to perform a heightened degree of diligence is triggered. Absent hints of falsity, however, where a misrepresentation has been made on a matter as to which the plaintiff has inquired, the plaintiff may be entitled to rely on the representation without making further inquiry or obtaining a prophylactic provision.

As the Court of Appeals has emphasized, the question of what constitutes reasonable reliance is not generally a question to be resolved as a matter of law on a motion to dismiss.

As a threshold matter, the court rejects Countrywide’s contention that the disclosures in the Offering Documents bar Ambac’s claim of justifiable reliance as a matter of law. The disclosures on which Countrywide relies were set forth in the Prospectuses and Prospectus Supplements for the Transactions. They included, among other things, representations that mortgage loans will generally be originated in accordance with underwriting guidelines but that exceptions will be made from time to time and in the ordinary course of business, or that exceptions to Countrywide’s underwriting guidelines may be made if compensating factors are demonstrated by a prospective borrower. Additional disclosures were made that a substantial percentage of the mortgage loans provided by Countrywide had been originated or reviewed pursuant to underwriting programs under which certain documentation requirements concerning income/employment and asset verification are reduced or excluded. The Offering Documents also warned of the possibility of inaccurate or inflated appraisals, borrower fraud, and inaccuracies in other data about the loans, including data about owner occupancy.

Consistent with the weight of authority, this court has held that substantially similar disclosures are ineffective to notify investors in RMBS securitizations of the systematic or wholesale abandonment of underwriting standards. The court holds—and Countrywide does not argue otherwise—that this authority is equally applicable in the monoline insurer context. The disclosures at issue do not bar Ambac’s claim that Countrywide completely abandoned its underwriting standards.
Countrywide’s disclosures as to the underwriting of the negative amortization loans, in particular, do not bar Ambac’s claim of justifiable reliance based on alleged misrepresentations with respect to such loans, because the disclosures do not relate with sufficient specificity to the misrepresented matters. For example, Countrywide disclosed in the Offering Documents that special features of such loans may or will affect the rate at which principal on these mortgage loans is paid or create a greater risk of default if the borrowers are unable to pay the monthly payments on the related increased principal balances. In the case of the Lehman Transactions, Countrywide also disclosed that the loans may have been originated according to underwriting guidelines that do not comply with Fannie Mae or Freddie Mac guidelines, and that a significant portion of the mortgage loans in the trust fund may have been classified in relatively low credit categories, such as subprime, with borrowers that may have imperfect credit histories.

These disclosures fall far short of informing Ambac of the extent of the risk associated with Countrywide’s negative amortization product, or that Countrywide purposefully off-loaded the negative amortization loans into RMBS securitizations in order to keep these “toxic” loans off its own books, as Ambac alleges here.

(Internal quotations and citations omitted).

Posted: February 24, 2017

Default Judgment Denied For Failure to Allege or Provide Facts Showing Liability

On February 10, 2017, Justice Kornreich of the New York County Commercial Division issued a decision in BMG Rights Management (US) LLC v. Radar Pictures, Inc., 2017 NY Slip Op. 30290(U), denying without prejudice a motion for default judgment for failure to allege or provide facts showing liability, explaining:

CPLR 3215(a) authorizes the court to enter a default judgment against a party who fails to appear. The moving party must submit proof of service of process and affidavits attesting to the default and the facts constituting the claim. The evidentiary effect of a default is that the defendant is deemed to admit the traversable allegations in the complaint, including liability. Here, BMG’s motion is denied without prejudice with leave to renew upon submission of copies of the joint venture agreement and the amendment to it. Although BMG seeks breach of contract damages, it has not provided a copy of the applicable contract. The court cannot determine the breach of contract claim without a copy of the applicable contract documents. The court notes that BMG must establish a contractual relationship with each of the corporate defendants to obtain a default judgment against them.

(Internal citations omitted).

Posted: February 23, 2017

Party Waived Right to Seek Objected-To Discovery By Not Making Timely Motion to Compel

On February 14, 2017, Justice Oing of the New York County Commercial Division issued a decision in New York University v. International Brain Research Foundation, Inc., 2017 NY Slip Op. 30291(U), holding that a party waived its right to seek discovery by not making a timely motion to compel its production, explaining:

Defendant now moves for an order, pursuant to CPLR 3402 and 22 NYCRR § 202.2l(c), striking the note of issue, and, pursuant to CPLR 3124, compelling plaintiffs to comply with discovery requests. In the alternative, defendant seeks an order, pursuant to CPLR 3126, for appropriate relief.

Defendant’s motion is denied in its entirety. As an initial matter, defendant’s motion is essentially one to compel plaintiffs to provide responsive documents to the December 2013 notice for discovery and inspection and it is therefore untimely. After resolution of plaintiffs’ motion to dismiss the second amended counterclaims, continued discovery in this action was permitted for the sole purpose of allowing defendant an opportunity to conduct an EBT of a principal of plaintiff or, if not conducted, defendant would be deemed to have waived such EBT. During the time period leading to Carna’s EBT, there was no indication from defendant that it was seeking documents from discovery demands made in December 2013.

Posted: February 22, 2017

Court Erred in Vacating Undertaking Before Determining Damages Suffered From TRO

On February 16, 2017, the First Department issued a decision in Canales v. Finger, 2017 NY Slip Op. 01266, holding that it was error to vacate an undertaking before determining whether the defendants were damaged by entry of a temporary restraining order and ordering that the undertaking be posted again, explaining:

[T]he court erred in vacating the undertaking when it denied the preliminary injunction and dissolved the TRO. The purpose of the undertaking is to provide a source of recovery to the nonmovant for damages suffered from the pendency of the restraint. As such, the undertaking should be reinstated, in the amount of $250,000, pending a determination of defendants’ damages, if any, from the pendency of the TRO. Here, the court allowed plaintiff to use his personal condominium, which was co-owned with another person, as security. As defendants correctly note, if they established damages from the TRO and wanted to collect, they would have to foreclose on any lien that was filed, and bring another proceeding against plaintiff and the co-owner to force the sale of the real property. This defeats the purpose of the undertaking here, where the TRO has been vacated. Thus, under these circumstances, the undertaking of $250,000, shall be from a third-party surety, or funds placed in an escrow account. The undertaking, in this form, shall be posted within 15 days of the date of this order.

(Internal citation omitted).

Posted: February 21, 2017

Failure to Agree Does Not Violate Obligation in Term Sheet to Negotiate in Good Faith

On February 10, 2017, Justice Kornreich of the New York County Commercial Division issued a decision in GE Oil & Gas, Inc. v. Turbine Generation Services, L.L.C., 2017 NY Slip Op. 30275(U), holding that the failure to come to an agreement does not, by itself, establish a violation of an obligation to negotiate in good faith, explaining:

The TGS Parties have now pleaded a claim for breach of the GE Parties’ good faith negotiation obligations. They do not, however, explain how the GE Parties failed to negotiate in good faith or what they actually did that amounts to bad faith, other than claiming that the GE Parties repeatedly assured the TGS Parties that the proposed venture would go forward. Then, “on or about September 29, 2013, Moreno was informed that GE was not ‘comfortable’ about participating in the joint venture.” The TGS Parties admit that GE informed it that “Green Field’s ‘financial situation’ was the reason.” Indeed, Green Field filed for bankruptcy on October 27, 2013. It was only afterward that the GE Parties demanded repayment of the $25 million due on the Note and Guaranty.

The TGS Parties suggest that the Greenfield excuse was pretextual and that the GE Parties never intended to invest more than the first $25 million (this claim, as discussed below, also forms the basis of a fraudulent inducement claim). However, they do not allege any facts that permit a reasonable inference that the GE Parties acted in bad faith. The fact that the TGS Parties ultimately did not go forward with the joint venture after conveying a willingness to further invest, standing alone, is not sufficient to infer bad faith. The obligation to negotiate in good faith can come to an end without a breach by either party because not every good faith negotiation bears fruit. As discussed more fully below with respect to the fraud claim, the TGS Parties do not plead any non-conclusory allegations about the GE Parties supposedly lying about their intention to further invest (either before the Note was executed or afterward).

(Internal quotations and citations omitted) (emphasis added).

Posted: February 20, 2017

First-in-Time Analysis Under CPLR 3211(a)(4) Based on Filing of Summons With Notice

On January 12, 2017, Justice Rosenbaum of the Monroe County Commercial Division issued a decision in Quatro Consulting Group, LLC v. Buffalo Hotel Supply Co., Inc., 2017 NY Slip Op. 27032, holding that an action commenced by filing of a summons with notice was first-in-time for purposes of CPLR 3211(a)(4) even though the complaint in the later-filed action was filed first, explaining:

CPLR 304 states an action is commenced by filing the summons and complaint or summons with notice.

. . .

Here, BHS commenced its action by filing the summons with notice in Erie County at least six days prior to Quatro commencing its action in Monroe County. The belated verification and assignment of an Index Number by the Erie County Clerk through its efiling systems should not disrupt the first-in-time filing rule.

However, Jeremy Sher, Esq. counsel for Quatro Consulting in reply submits that the Erie County filing was actually not the “first-in-time” since the filing of a summons with notice only, and not the complaint does not constitute another action pending. Counsel cites several cases from the First and Second Departments which held that CPLR 304 does not mandate dismissal as a “prior action pending” where a complaint has not been served. In these two actions, the parties, unlike here, were seeking a divorce. In Wharton which cited to Graev, the husband sought dismissal under CPLR 3211(a)(4) defensively after the wife commenced an action seven years after he initially filed but did nothing. The Court dismissed the prior action pending argument. In Graev the Court stated, merely because defendant commenced his action first by serving and filing a summons with notice (CPLR 304) does not mandate dismissal as a prior action pending in the absence of service of a complaint. The Appellate Court did not find that the trial court abused its discretion in making its determination as CPLR 304 does not mandate dismissal. Rather, the Appellate Court stated that in the exercise of their discretion they were making the determination.

The other two cases, also from other Appellate Division, cited by Quatro held that the filing of a summons with notice, absent the service of the complaint does not constitute commencement under CPLR 3211(a)(4). In Security, the Court, following CPLR 304, held that in the Supreme Court, an action is commenced upon the filing of the summons and complaint not the service thereof.

In review of those cases, it is unclear why the Appellate Courts did not follow the clear statutory language, that an action is commenced by filing a summons and complaint or summons with notice. The statute is clear that commencement occurs with either the filing of the summons and complaint, or the filing of a summons with notice. The Fourth Department in a factually similar case and filing scenario made such a determination that the filing of a summons with notice was commencement. Although Counsel Sher in opposition points out that the Varney holding has not been cited in any subsequent reported Appellate Division cases, it has not been reversed either. Our Department’s holdings are binding on this Court. Moreover, this Department applied the literal language of CPLR 304 which provides that the filing of a summons with notice constitutes commencement.

Accordingly, pursuant to CPLR 304 and Varney BHS was first-in-time to commence its action in Erie County. The delay caused by the electronic filing should not hinder the first-in-time filing.

(Internal quotations and citations omitted).

Posted: February 19, 2017

Dismissal of Fraudulent Misrepresentation Claim Based on Respondeat Superior Theory Affirmed

On February 14, 2017, the First Department issued a decision in VFP Investments I LLC v. Foot Locker, Inc., 2017 NY Slip Op. 01148, affirming the dismissal of a fraudulent misrepresentation claim based on the theory of respondeat superior, explaining:

The fraudulent misrepresentation claim based on the theory of respondeat superior fails to state a cause of action. The allegations reasonably permit the inference that the verification of accounts receivable issued to Foot Locker by nonparty G3K, a provider of marketing materials, fell within the scope of defendant Smith’s employment as Foot Locker’s “Director of In-Store Marketing,” although they do not support a finding that verification was within the scope of defendant Rainier’s employment as “Divisional Vice President of Franchise Development.” However, nothing in the complaint permits the inference that Smith engaged in this fraudulent verification in furtherance of Foot Locker’s business, rather than solely for personal motives.

The fraudulent misrepresentation claim based on implied actual authority fails to state a cause of action. The allegation that Smith procured marketing materials directly from G3K permits the inference that Smith could reasonably have believed that she had implied authority to verify G3K’s accounts receivable. However, she could not reasonably have believed that she had the authority to verify receivables falsely, and Foot Locker is not bound by the conduct in which she engaged that exceeded her authority. The allegations do not support a finding that Rainier could reasonably have believed he had authority to verify G3K’s accounts receivables.

The fraudulent misrepresentation claim based on apparent authority also fails to state a cause of action. As the trial court correctly noted, Smith’s and Rainier’s job titles were insufficient, by themselves, to convey that they had authority over accounting matters. Moreover, the complaint fails to allege any misleading facts or words by Foot Locker. The fraudulent misrepresentation claim based on authority by estoppel fails to state a cause of action. The complaint does not allege that Foot Locker intentionally or carelessly caused plaintiff to believe that Smith or Rainier had the authority to verify receivables on its behalf. It alleges only that Foot Locker knew or should have known of Smith’s fraudulent acts but did not take reasonable steps to notify plaintiff of the acts, to plaintiff’s detriment. However, the allegations that Foot Locker knew or should have known of Smith’s fraudulent acts are conclusory. Nothing in the complaint shows that Foot Locker was aware of the communications between Smith and plaintiff.

(Internal quotations and citations omitted).

Posted: February 18, 2017

Court Rejects Claim Based on Term Sheet for Later-Memorialized Agremeent

On February 6, 2017, Justice Singh of the New York County Commercial Division issued a decision in Pate v. BNY Mellon-Alcentra Mezzanine III, L.P., 2017 NY Slip Op. 30256(U), rejecting a breach of contract claim based on the terms sheet for a later-memorialized agreement, explaining:

The amended complaint alleges that: 1) the Term Sheet is a written agreement, and the participation provision is included in the Term Sheet; 2) plaintiff paid millions of dollars to DRC and transferred his holdings interest to Alcentra and United; 3) plaintiff performed all of his other obligations under both the Term Sheet and the release agreement, but defendants did not cause Holdings to provide him with a 10% economic interest in that partnership, as required by the Term Sheet; and 4) defendants’ failure to transfer that interest to him constitutes a material breach of the participation provision in the Term Sheet.

Defendants contend that plaintiff’s breach of contract claim is expressly barred by the merger clause in the release agreement. In opposition, plaintiff maintains that the parol evidence rule does not bar him from introducing or relying on the Term Sheet. Arguing that the parol evidence rule applies only where a party is seeking to challenge the terms of an agreement based on a prior inconsistent agreement or representation, plaintiff contends that he is not using the Term Sheet to challenge the terms of the subsequent release agreement; rather, he is seeking to enforce the Term Sheet itself, and specifically a provision of the Term Sheet that is not referable to the subject matter of the release agreement and, therefore, cannot be inconsistent with it.

Plaintiff maintains that the parties entered into two separate, enforceable, written contracts. Acknowledging that the subject matter of the two contracts overlapped in parts, plaintiff asserts that the second agreement (the release agreement) was – by design – narrower in scope than the first (the Term Sheet). To prove his point, plaintiff relies upon the statement made by Echausse during the telephone call on November 1, 2013, when Echausse said:

Any document I send to you is going to be a very simple 5-page document. It says you get a full release, we indemnify you for the bonds, you put 2 1/2 in, we pay X for the 90% of your LLP interest, and then over the next 30 days we will negotiate a 10% participating interest in DRC going forward.

Accordingly, plaintiff asserts that the participation provision is not “inconsistent” with any provision in the release agreement.

The Court finds that the Term Sheet is unenforceable for several reasons. First, the merger clause states expressly and unambiguously that the release agreement supercedes any prior term sheet. If the Court were to find that the provisions in the Term Sheet were enforceable notwithstanding such language, the Court would render the clause meaningless. An interpretation of a contract that would leave one of its clauses without meaning or effect should be avoided. It is well settled that where the parties have clearly expressed or manifested their intention that a subsequent agreement supercede or substitute for an old agreement, the subsequent agreement extinguishes the old one and the remedy for any breach is to sue on the superseding agreement. It is equally well settled that the construction of a plain and unambiguous contract is a matter for the court to pass upon without recourse to circumstances extrinsic to the agreement.

Second, the Term Sheet was not intended to be the final agreement; rather, it is an agreement to agree. The Term Sheet states plainly, The parties hereby agree to enter into a forbearance agreement (the “Definitive Agreement”) A term sheet that constitutes nothing more than an agreement to agree is not an enforceable agreement between the parties.

Third, plaintiff cannot rely on any telephone conversations or e-mails with the defendants, for the merger clause states unambiguously that the release agreement set forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements (written or oral). The Court of Appeals summarized the purpose of merger clauses in contracts in Matter of Primax Int. Corp. v. Wal-Mart Stores. The Court wrote:

Courts and commentators addressing the substantive and procedural aspects of New York commercial litigation agree that the purpose of a general merger provision, typically containing the language found in the clause of the parties’ agreement that it represents the entire understanding between the parties, is to require full application of the parol evidence rule in order to bar the introduction of extrinsic evidence to vary or contradict the terms of the writing. The merger clause accomplishes the objective by establishing the parties’ intent that the agreement is to be considered a completely integrated writing. A completely integrated contract precludes extrinsic proof to add to or vary its terms.

When parties set down their agreement in a clear complete document, their writing should be enforced according to its terms and evidence outside the four comers of the document as to what was really intended but unstated or misstated is generally inadmissible to add to or vary the writing. Likewise, evidence of what may have been orally agreed by the parties prior to the execution of an integrated written document cannot be used to vary the temis of the writing.

Where there is a conflict between an express provision in a written contract and an alleged oral agreement, the oral agreement is unenforceable. Similarly, where an
agreement contains a merger clause that evinces the parties’ intent that the agreement is to be considered a completely integrated writing, extrinsic evidence that adds to or varies the agreement’s terms should be precluded.

(Internal quotations and citations omitted).

Posted: February 17, 2017

Guarantee of Borrower’s Obligations Under Agreement Not Document Amenable to CPLR 3213 Action

On February 14, 2017, the First Department issued a decision in PDL Biopharma, Inc. v. Wohlstadter, 2017 NY Slip Op. 01151, holding that a guarantee of a borrower’s contractual obligations was not an instrument amenable to summary judgment in lieu of complaint under CPLR 3213, explaining:

The prototypical example of an instrument within the ambit of CPLR 3213 is of course a negotiable instrument for the payment of money—an unconditional promise to pay a sum certain, signed by the maker and due on demand or at a definite time. CPLR 3213 is generally used to enforce some variety of commercial paper in which the party to be charged has formally and explicitly acknowledged an indebtedness, so that a prima facie case would be made out by the instrument and a failure to make the payments called for by its terms. A document does not qualify for CPLR 3213 treatment if the court must consult other materials besides the bare document and proof of nonpayment, or if it must make a more than de minimis deviation from the face of the document.

Defendants Samuel Wohlstadter and Nadine Wohlstadter own non party Wellstat Diagnostics, LLC (Diagnostics), the diagnostic systems company that received the loan underlying the guaranties at issue in this motion. On November 2, 2012, Diagnostics borrowed $40 million from plaintiff PDL Biopharma to finance certain FDA development trials. The terms of the loan were memorialized in a Credit Agreement, a term note, a security agreement, and a patent security agreement, all dated November 2, 2012. Thereafter, following a default, PDL, Diagnostics and the Wohlstadters entered into a Forbearance Agreement dated February 28, 2013. The two guaranties that accompanied this Forbearance Agreement, one executed by the Wohlstadters, the other by the remaining defendants (entities owned by the Wohlstadters), are the subject of the present motion.

It is true that generally, an unconditional guaranty qualifies as an instrument amenable to CPLR 3213 treatment. However, here, it is unclear whether that is the case. For one thing, the documents guarantee not only “payment” but also “performance” of the borrower’s “obligations.” The term “obligations” is not defined in either of the guaranties, although it is defined in the Credit Agreement as

all liabilities, indebtedness and obligations (including interest accrued at the rate provided in the applicable Loan Document after the commencement of a bankruptcy proceeding whether or not a claim for such interest is allowed) of any Loan Party under this Agreement, or the [Wohlstadters] or any Loan Party under any other Loan Document, any Collateral Document or any other document or instrument executed in connection herewith or therewith, in each case howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due, including the Applicable IRR Amount.

Notably, in addition, in the note documents, Diagnostics, as the borrower, warranted to provide certain information to PDL, including annual and quarterly reports until all obligations are paid in full.

The guaranties at issue also include a provision that unless new loan documents become effective under Section 21 of the Forbearance Agreement, the guarantee contained in this Section 2 shall remain in full force and effect until all the obligations shall have been fully satisfied. This provision may be interpreted to mean that if new loan documents are entered into, the referred-to guaranties would no longer remain in full force and effect. Since PDL and Diagnostics entered into an Amended and Restated Credit Agreement on August 15, 2013, there is a question as to whether the guaranties remain in effect at this time.

Moreover, we note that determination of preliminary legal issues, and reference to additional documents, was necessary before the motion court could address the question of whether the relied-on guaranties continued to be enforceable and whether they had come due. For instance, it was necessary for the motion court to construe the documents to decide whether the cash contribution required under the Amended and Restated Credit Agreement could be satisfied by the loan defendants obtained from White Oak, or whether the use of the loan funds constituted a default under that Agreement, and if so whether PDL accepted tender of that payment as performance of defendants’ contractual obligation. The motion court also had to construe the Forbearance Agreement and refer to the Restated Credit Agreement to determine that the guaranties remained effective despite the execution of new loan documents. Similarly, the motion court had to refer to the Joinder Agreement to establish some defendants’ purported awareness that the guaranties continued to be in effect. This extent of reference to extrinsic evidence exceeds any permissible limited reference to outside sources allowable under CPLR 3213.

(Internal quotations and citations omitted).