Commercial Division Blog

Posted: December 1, 2015 / Categories Commercial, Contracts

Breach of Contract is Defense to Non-Payment of Note When Contract and Note Are Intertwined

On November 25, 2015, the Second Department issued a decision in Jason J. Weindorf, CPA, P.C. v. Wightman, 2015 NY Slip Op. 08708, holding that breach of a contract related to a note is a defense to an action for non-payment of the note when the contract and note are "intertwined."

In Jason J. Weindorf, CPA, the plaintiff commenced an action to recover on a promissory note "by motion for summary judgment in lieu of complaint pursuant to CPLR 3213." The IAS court denied the motion. The Second Department affirmed, explaining:

The plaintiff established its prima facie entitlement to judgment as a matter of law by submitting proof that the defendant executed a promissory note, which contained an unconditional promise to pay a sum certain by May 31, 2014, and failed to pay in accordance with the terms of the note. The general rule is that the breach of a related contract cannot defeat a motion for summary judgment on an instrument for money only unless it can be shown that the contract and the instrument are intertwined and that the defenses alleged to exist create material issues of triable fact. Here, in opposition to the motion, the defendant demonstrated the existence of a triable issue of fact as to whether the plaintiff breached an asset purchase agreement that was intertwined with the promissory note. Accordingly, the Supreme Court properly denied the motion.

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