Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: June 1, 2014

Motion for Summary Judgment in Lieu of Complaint Denied Because Right to Payment Not Ascertainable from Document

On May 20, 2014, Justice Sherwood of the New York County Commercial Division issued a decision in Goddard Investors II, LLC v. Goddard Development Partners II, LLC, 2014 NY Slip Op. 31335(U), denying a motion for summary judgment in lieu of complaint based on a guaranty because the plaintiff’s right to payment could not be ascertained from the face of the guaranty.

In Goddard Investors II, the plaintiff “move[d] pursuant to CPLR 3213 for summary judgment in lieu of complaint on a note and guaranty.” The court denied the motion with respect to the guaranty, explaining:

A claim on an instrument for the payment of money is established by proof of the instrument and a failure to make the payments called for by its terms. Proof of the fulfillment of the condition precedent to the obligation to repay, comes within this limited category of elements of proof which may be established by extrinsic evidence without rendering accelerated treatment unavailable.

The fact that defenses may be asserted against the instrument sued upon does not preclude the use of CPLR § 3213 as long as the right to payment can be ascertained from the face of the document without regard to extrinsic evidence, other than simple proof of nonpayment or a similar de minimis deviation from the face of the document. Determining the amount to be paid under the guaranty by reference to a note or a mortgage to which the Guaranty relates is a de minimis deviation in CPLR § 3213 actions for payment.

An unconditional guaranty is an instrument for the payment of money only. A guaranty is not an instrument for the payment of money only when it is relates to a stock purchase agreement which did not specify a sum certain or a series of purchase orders with separately issued invoices. The same result is reached when the guaranty is conditioned upon creditor refraining from disparaging comments about her former employer, because it requires investigation into whether the condition was respected or not.

The Note [is not] an instrument for the payment of money only because the right to payment cannot be ascertained from the face of the document. Although the Note reads that the GDP promises to pay the principal amount of $500,000 with an annual 8% interest, the payment is expressly conditional on the acquisition and sale of property. This is not the sort of de minimus deviation from the face of document that CPLR 3213 contemplates.

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

CPLR 3213 is a powerful tool for resolving commercial disputes. As this decision shows, however, its scope is limited.

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