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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: December 4, 2018

Plaintiff Liable to Defendant on Defendant’s Counterclaim Based on Facts Pleaded in the Complaint

On November 26, 2018, Justice Sherwood of the New York County Commercial Division issued a decision in Tongyang, Inc. v. Tong Yang Am., Inc., 2018 NY Slip Op. 32959(U), holding that a plaintiff was liable on the defendant’s counterclaim based on facts pleaded in the Complaint, explaining:

TYA’s counterclaim for breach of contract arises out of plaintiffs failure to meet its obligations under the Guaranty. To sustain a cause of action for breach of contract, the proponent of the claim must prove the existence of a contract, plaintiffs performance, defendant’s breach, and damages. Absent evidence showing the existence of an enforceable agreement, a breach of contract claim shall be dismissed.

The statement in the complaint that plaintiff had “outstanding obligations” to TYA constitutes a judicial admission. It is well settled that facts appearing in the movant’s papers which the opposing party does not controvert, may be deemed admitted. In its response to the cross motion, plaintiff does not deny executing the Guaranty, nor does it dispute TY A’s contention that the TYI Debt has not been repaid.

To be sure, plaintiff argues granting summary judgment on TY A’s counterclaim and setoff defense would justify a fraudulent transfer. However, this argument relates to whether the doctrine of comity bars the counterclaim and setoff defense. As noted above, plaintiff offered no substantive defense to the assertion that it breached the Guaranty by failing to repay the TYI Debt. Plaintiff’s vague claim that it needs discovery on the circumstances surrounding TY A’s receipt of notice of the Rehabilitation Proceeding also fails to raise a triable issue.

(Internal quotations and citations omitted).

People sometimes forget that the facts they allege in a complaint will be taken as true, even if the plaintiff later finds those facts being used against them. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding whether and to what extent facts alleged in a pleading are binding on the pleader.

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