Opinion
25657/09.
Decided April 22, 2010.
LaFleur A. David, Esq., Brooklyn, NY, Attorneys for Plaintiff.
Anthony J. Auciello, Esq., Brooklyn, NY, Attorney for Defendant.
Plaintiff Burke McBean ("Plaintiff" or "McBean") moves pursuant to CPLR § 3213 for an Order granting summary judgment in lieu of complaint for payment allegedly owed under the terms of a settlement agreement against Frank I. Goodman ("Defendant" or "Goodman"), as alleged guarantor on all payments arising under the agreement. For the reasons set forth below, Plaintiff's motion for summary judgment is denied.
BACKGROUND
This case arises out of a joint venture between the Plaintiff and his former business partner Chantell Chambers ("Chantell"), who as members of Top Choice Estates, LLC were owners of the premises located at 192 East 56th Street, Brooklyn, New York ("the Property"). At some point, the parties terminated their joint ownership of the Property. On January 24, 2008, the parties entered into an agreement ("the Agreement") by which Chantell agreed to pay Burke $650,000 in full settlement of all Burke's interest in the Property and any other property owned by Chantell at the time the Agreement was made. The Agreement also provided that Defendant Goodman was to guarantee all payments that Chantell was obligated to make in accordance with a specified payment schedule.
This payment schedule, found in paragraph 7 of the Agreement, required Chantell to make three payments within nine months. The first payment in the amount of $150,000 was to be paid from the proceeds of the refinancing of another property located at 1384-1386 Flatbush Avenue, Brooklyn, New York and was to be made at the closing for the refinance. The second payment, in the amount of $200,000, was to paid within six months after the initial payment of $150,000. The third and final payment, in the amount of $300,000, was to be paid within nine months of the initial payment of $150,000.
Chantell failed to pay the final installment of $300,000 pursuant to the Agreement. On October 5, 2009, a Judgment by Confession was entered by this Court against Chantell in the full amount of $300,000. Pursuant to the guarantee clause located in paragraph 2 of the Agreement, Plaintiff McBean requested that Goodman pay the remaining debt. Goodman refused.
On October 9, 2009, a summons with notice was filed, commencing this action. On January 11, 2010, Plaintiff made the instant motion for summary judgment in lieu of complaint on the ground that the action is based upon an instrument for the payment of money only which is now due and payable. Prior to the argument on the instant motion, an answer was served on March 25, 2010. In his opposition, the Defendant argues that: (1) a motion pursuant to CPLR § 3213 is procedurally barred given the method of service; (2) the parties did not effectuate a separate personal guaranty agreement required to enforce any alleged obligation; and (3) Plaintiff modified the payment schedule with Chantell without Defendant's notice or consent, thereby relieving the Defendant from any alleged obligation to pay.
DISCUSSION
A motion for summary judgment in lieu of complaint is appropriate where "an action is based upon an instrument for the payment of money only." CPLR § 3213. The usual standards for summary judgment apply to CPLR § 3213 motions. See Gateway State Bank v Shangri-La Private Club for Women, 113 AD2d 791 [2d Dept 1985]. In order to obtain summary judgment, the movant must establish its cause of action or defense sufficiently to warrant a court's directing judgment in its favor as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact. See Zuckerman v City of New York, 49 NY2d 557, 562; see also CPLR § 3212[b]. Where the proponent of the motion makes a prima facie showing of entitlement to summary judgment, the burden shifts to the party opposing the motion to demonstrate by admissible evidence the existence of a factual issue requiring a trial of the action. See Vermette v Kenworth Truck Co., 68 NY2d 714, 717.
As a procedural matter, Defendant contends that the instant motion for summary judgment in lieu of complaint is improper given that the notice of motion was not served until approximately three months after the summons with notice. CPLR § 3213 states that "when an action is based on an instrument for the payment of money only or upon any judgment, the plaintiff may serve with the summons a notice of motion for summary judgment and the supporting papers in lieu of a complaint." This rule was designed "to provide a speedy and effective means of securing a judgment on claims presumptively meritorious" where the use of formal pleadings, as in a conventional action, would be superfluous. ( See 4 Weinstein-Korn-Miller, NY Civ. Prac., par. 3213.01).
Although § 3213 is not explicit on this issue, a motion for summary judgment in lieu of complaint must be filed with the summons in order to be effective. See Weissman v Sinorm Deli, 88 NY2d 437, 443 (describing a § 3213 motion as a procedural reform that "melded pleading and motion practice into one step"); see also Chemical Bank — Eastern, N. A. v Love Lumber Co., 80 Misc 2d 415, 418 (finding that § 3213 requires that the motion papers be served with the summons); (4 Weinstein-Korn-Miller, NY Civ. Prac., par. 3213.02) ("the required papers include a summons, a notice of motion, and the supporting papers and proofs."). Given that the instant motion was not served until three months after the summons with notice, the instant motion must be denied. The Plaintiff chose to "chart a specific course of action permitted by the statutes and should be required to conform to its choice." Chemical Bank Eastern, 80 Misc 2d at 418.
In any event, Defendant has raised a triable issue of fact concerning whether or not he was relieved of his obligations as a guarantor. As a general principle, any alteration of the terms of an underlying contract, for whose performance a guarantor is bound, without the guarantor's consent, will release the guarantor from his or her obligations. See White Rose Food v. Saleh, 99 NY2d 589, 591. "An obligation is altered when the debtor is discharged from the original contract and a new contract is substituted in its place. The test is whether there is a new contract which will be enforced by the courts." Bier Pension Plan Trust v Estate of Schneierson, 74 NY2d 312, 315. In such a case, "the principal is no longer bound to perform the obligation guaranteed" so the guarantor likewise cannot be "held responsible for the failure of the principal to perform." Becker v Faber, 280 NY 146, 149 [1939]. The Court will not inquire into whether the alteration was material or not, and whether it worked injury on the guarantor. See Becker, 280 NY at 149. Such alterations may include the extension of time in which to pay a debt, if the extension is an enforceable agreement superceding the original debt ( see Bier Pension Plan Trust, 74 NY2d at 316) or a waiver of default ( see Mackler v Burke , 2 AD3d 505 [2nd Dept 2003]).
Not all alterations of an underlying contract relieve a guarantor of his obligations, however. "Indulgence or leniency in enforcing a debt when due is not an alteration of the contract . . . An unenforceable agreement to give time is merely revocable permission to defer performance. If the creditor retains the right to demand payment of the debt according to its original terms the surety is not discharged." Bier Pension Plan Trust, 74 NY2d at 316. "Any other rule would require a creditor to declare default and institute legal proceedings to collect the debt when the loan matures if payment is not made immediately. Even a delay of a day or two could risk loss of the surety's undertaking." Bier Pension Plan Trust, 74 NY2d at 317. Similarly, an alteration to the underlying contract, even if material and done without notice, will not release a guarantor where the language of the guaranty anticipates and consents to such modifications. See White Rose Food, 99 NY2d 589, 590-92.
In this case, Defendant has raised a triable issue of fact whether he was relieved from his obligations as a guarantor. Specifically, Defendant states in his affidavit: The agreement states in paragraph 7(c) that "$300,000.00 to be payable within nine (9) months from the date of the payment of the sum of $150,000.00 as set forth in paragraph (a) above, or from the proceeds of the sale of the Property, which ever date occurs first." Therefore, the payment of $300,000.00 was due in November 2008. Payments were not made in accordance with the schedule. Further, the payments due under paragraph 7(b) were paid well after the due date and after November 2008 (the deadline in paragraph (c)). The plaintiff and Ms. Chantell modified the payment scheduled and they agreed to additional time to make payment. As seen, the plaintiff filed the confession of judgment almost a year after the original due date. Defendant never consented to the modified schedule or the extension of time. Such a modification changed the underlying agreement.
In short, Defendant argues that Plaintiff extended the payment schedule without notice or consent. An issue of fact thus is raised as to whether this alleged extension was executed by a superceding agreement, which would relieve Defendant of his obligations, or whether the extension was simply leniency by the creditor, which would not. Such a determination cannot be made upon the undeveloped state of the record.
CONCLUSION
Accordingly, Plaintiff's motion for summary judgment in lieu of complaint is denied. The motion papers are deemed to satisfy the elements of a complaint to which Defendant has already served an answer dated March 25, 2010. Counsel shall appear for a Preliminary Conference on May 26, 2010.
The foregoing constitutes the Decision and Order of the Court.