Commercial Division Blog

Posted: March 12, 2021 / Categories Commercial, Contracts, Judgment and Collection

Acknowledgement of Debt Can Be Valid Even if it Contains Ambiguities

On March 4, 2021, the First Department issued a decision in Hawk Mtn. LLC v. RAM Capital Group LLC, 2021 NY Slip Op. 01349, holding that an acknowledgement of a debt can be valid even if it contains ambiguities, explaining:

In opposition to defendant's initial showing that the time in which to commence this action to recover a debt owed on a promissory note has expired, plaintiffs raised an issue of fact as to whether a Separation and Distribution Agreement (SDA) executed by nonparties Gigi Jordan and Raymond A. Mirra, Jr. — plaintiffs' and defendant's agents, respectively — acknowledged the debt and defendant's obligation to pay it within the meaning of General Obligations Law § 17-101. The SDA provides, in pertinent part, that defendant "agrees to make full payment and satisfaction [of] all of the outstanding indebtedness plus accrued interest" that it owes plaintiffs, and one of the schedules annexed to the SDA includes the amount owed by defendant to plaintiffs on a note, as well as accrued interest on that amount. Although the SDA does not specify that the scheduled note is the note at issue in this action and the amounts listed in the schedule annexed to the SDA differ from those asserted in the complaint, plaintiffs allege that the scheduled note identified in the SDA refers to the note at issue here. On this motion to dismiss, we must accept the factual allegations in the complaint as true, accord plaintiffs the benefit of every favorable inference, and accept as true plaintiffs' submissions in opposition to the motion.

Moreover, even though the amount listed in the scheduled note annexed to the SDA differs from that asserted in the complaint, there is no requirement that an acknowledgement of a debt pursuant to General Obligations Law § 17-101 leave no room for doubt as to the nature and quantum of the debt to be acknowledged. Instead, an acknowledgement of a debt need only recognize an existing debt and contain nothing inconsistent with an intention on the part of the debtor to pay it. Here, plaintiffs have raised an issue of fact as to whether the SDA recognized defendant's existing debt, and was not inconsistent with defendant's intent to pay it.

(Internal citations omitted).

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