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Current Developments in the Commercial Divisions of the
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Posted: September 15, 2021

Guaranties For Payment And Performance Are Not Instruments For Payment Of Money Only And Therefore Do Not Provide A Basis For Summary Judgment In Lieu of Complaint Under CPLR § 3213

On September 3, 2021, in Bank of America, N.A. v. Filho et al., N.Y. Sup. Ct. Index No. 654603/2019, Justice Andrea Masley issued a Decision and Order granting the motion of certain defendants (“Guarantors”) to reargue and renew pursuant to CPLR 2221 and, upon reargument and renewal, denying Plaintiff’s motion for summary judgment in lieu of complaint.  (Schlam Stone & Dolan LLP was prior counsel for the moving defendants).  The Court explained:

Upon reexamination, the court agrees that the guaranties are not instruments for the payment of money only. Each guaranty provides:

“This Guaranty is a guaranty of payment and performance, and not a guaranty of collection, and Guarantor hereby undertakes and agrees, that if Customer or Guarantor is in Default (as defined below) hereunder for any reason, Guarantor shall (i) punctually pay any such Obligations requiring the payment of money, as an obligation for payment due and owing directly from Guarantor to Lessor and without any abatement, reduction, setoff, defense, counterclaim or recoupment, and (ii) punctually perform any and all Obligations not requiring the payment of money for the benefit of Lessor, as an obligation for performance due and owing directly from Guarantor to Lessor. Guarantor shall be deemed to be primarily liable for each Obligation and not merely as a surety thereof.” (NYSCEF10, Ellira Guaranty §1 at p.1; NYSCEF11, Sublease Guaranty §1 at p. 1.)

A guaranty of payment and performance is not an instrument for the payment of money only and therefore does not provide a basis for summary judgment under CPLR 3213…The court erred as a matter of law in finding otherwise. Accordingly, Guarantors’ motion to reargue is granted and upon reconsideration, BofA’s motion for summary judgment in lieu of complaint is denied.

The Court also granted Guarantors’ motion to renew based on a decision of the Brazilian tax authorities relating to the leases at issue, concluding:

… upon consideration of new evidence, BofA’s motion under CPLR 3213 is denied…

The Brazilian decision is a fact and not a theory. BofA is a party to both actions. It is undisputed that the Brazilian tax authority investigated all 24 aircrafts. There is a finding of fraud, deceit, and criminal activity against BofA for the way it structured the leases including the lease at issue here. Plainly, the Brazilian decision triggers viable defenses. The need for discovery precludes summary judgment in BofA’s favor. (See Pastor v DeGaetano, 128 AD3d 218, 227-28 [1st Dep’t 2015].) Therefore, Guarantors’ motion to renew is appropriate and is thus granted. Upon consideration of the Brazilian decision, BofA’s 3213 motion is denied.

The attorneys at Schlam Stone & Dolan frequently litigate disputes between creditors and guarantors.

Contact our attorneys at commercialdivisionblog@schlamstone.com if you or a client have questions regarding a dispute dealing with guaranties.

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