Commercial Division Blog

Posted: October 20, 2021 / Written by: Jeffrey M. Eilender, Thomas A. Kissane, Samuel L. Butt, Joshua Wurtzel, Channing J. Turner / Categories Commercial, Res Judicata/Collateral Estoppel/Entire Controversy Doctrine, Judgment and Collection

Prior Decision in Minnesota Court Against Borrower Precluded Guarantor From Raising Issue in New York

On September 30, 2021, the First Department issued a decision in Gamma Lending Omega LLC v. Kaminski, 2021 NY Slip Op 05165, unanimously affirming prior orders of Justice Andrew Borrok, denying defendants’ motion to compel production of certain documents related to a late charge assessed on the underlying loan and granting plaintiff’s motion for summary judgment. The Court explained that because there is privity between the borrower and the guarantor:

The court correctly decided these motions on the ground of collateral estoppel (see D'Arata v New York Cent. Mut. Fire Ins. Co., 76 NY2d 659, 664 [1990]). Defendants' issue, the validity of the late charge in the underlying loan documents, was squarely addressed both in the trial court in Minnesota and in a lengthy decision by the Minnesota Court of Appeals, and, as guarantors, defendants were in privity with the borrower (a party to the Minnesota action) on the underlying loan, whose obligations they guaranteed (see e.g. APF 286 Mad LLC v Chittur & Assoc. P.C., 132 AD3d 610 [1st Dept 2015], lv dismissed 27 NY3d 952 [2016]). Plaintiff did not waive the defense of collateral estoppel, because the defense appeared on the face of its pleading (CPLR 3018). Moreover, plaintiff asserted the preclusive effect of the Minnesota proceedings in its objections to defendants' document requests. Thus, there was no surprise or new factual issue raised by assertion of the defense, and it was not waived (Giraldo v Washington Intl. Ins. Co., 103 AD3d 775, 776 [2d Dept 2013]).

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