Commercial Division Blog
Past Consideration Received and Acknowledged Sufficient Consideration Under Contract
On February 28, 2017, the First Department issued a decision in Neo Universe Inc. v. Ito, 2017 NY Slip Op. 01491, holding that there had been sufficient consideration for a loan agreement and note, explaining:
Plaintiff Shinji Mitsunaga (plaintiff), principal of the corporate plaintiff, demonstrated his entitlement to judgment by the introduction of the Loan Agreement, the Promissory Note (Note), and plaintiff's own testimony that defendant had not paid any portion of the debt owed under the Loan Agreement and Note. It was then defendant's burden to demonstrate a lack of consideration, which he failed to do. Plaintiffs' alleged failure to provide any evidence of the loan disbursement to defendant does not demonstrate a lack of consideration, as plaintiffs were not required to demonstrate that there was adequate consideration for the note. Defendant also incorrectly asserts that the Basic Contract does not contain any obligation on the part of defendant to personally guarantee or repay these monies. In fact, the Basic Contract, pursuant to which plaintiff testified that he loaned the money to defendant through defendant's wife's company, unequivocally identifies defendant as "B" in the agreement, and states that the money which plaintiff must give to defendant company shall be considered as a loan to B.
The trial court improperly found that plaintiff's admission that he never gave any money to defendant in 2004 warranted dismissal of the complaint for lack of consideration for the Loan Agreement and Note, both executed in 2004. The Loan Agreement expressly states that plaintiff "is owed" the amount expressed in that agreement, clearly indicating that the debt owed was preexisting. This past consideration, the receipt and adequacy of which were both acknowledged by defendant in the Loan Agreement, is sufficient to enforce the debt instruments. Moreover, plaintiff's own testimony with regard to the payments pursuant to the Basic Contract, executed in 2003, and the checks in evidence, executed between 2003 and 2004, support the existence of past consideration.
(Internal quotations and citations omitted).