New York Law Review

Tag: personal guarantee

  • National Bank of North America v. Paskow, 53 N.Y.2d 953 (1981): Enforceability of Personal Guarantees Despite Corporate Agency Claims

    53 N.Y.2d 953 (1981)

    A personal guarantee remains enforceable when the guarantor fails to provide the written notice of termination required by the guarantee agreement, and the corporate principal whose debt was guaranteed has been held liable for the underlying debt, even if the corporation acted as an agent.

    Summary

    In this case, the New York Court of Appeals affirmed the enforcement of a personal guarantee. Rosalee Paskow, the defendant, argued that her guarantee should be terminated because the overdrafts occurred after the guarantee should have been terminated based on the precedent set in *Bankers Trust Hudson Valley., N. A. v Christie*. She also argued that the corporation whose debts she guaranteed was acting as an agent, thus relieving her of personal responsibility. The Court of Appeals rejected both arguments, holding that Paskow did not provide written notice of termination as required by the guarantee agreement, and the corporation had already been held liable for the overdrafts in a prior action. The court found her personal guarantee enforceable.

    Facts

    Rosalee Paskow executed a personal guarantee for the debts of a corporation. The corporation incurred overdrafts with National Bank of North America (the Bank). Paskow did not provide written notice to terminate the guarantee, as required by the guarantee agreement. The Bank sought to enforce the guarantee against Paskow after the corporation failed to cover the overdrafts. The account title showed the corporation acting as agent.

    Procedural History

    The Bank brought an action to recover the overdrafts from the corporation and subsequently sought to enforce Paskow’s personal guarantee. The lower court ruled in favor of the Bank, finding Paskow liable under the guarantee. The Appellate Division affirmed the lower court’s decision. Paskow appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether Paskow’s personal guarantee was terminated despite her failure to provide written notice of termination as required by the guarantee agreement, based on the precedent of *Bankers Trust Hudson Valley., N. A. v Christie*.
    2. Whether Paskow could avoid liability under the personal guarantee based on the argument that the corporation, whose debts she guaranteed, was acting as a disclosed agent.

    Holding

    1. No, because Paskow failed to provide the written notice of termination required by the guarantee agreement and the factual predicate of the *Bankers Trust* case was missing from the record.
    2. No, because the corporation (the principal) had already been held liable for the overdrafts in a prior action.

    Court’s Reasoning

    The Court of Appeals reasoned that Paskow’s failure to provide written notice of termination, as explicitly required by the guarantee agreement, was fatal to her defense. The court distinguished the case from *Bankers Trust Hudson Val., N. A. v Christie*, stating that the factual circumstances necessary for applying the *Bankers Trust* precedent were not present in the record. The court did not elaborate on what factual differences were critical, leaving the precise holding of *Bankers Trust* somewhat ambiguous. The court also dismissed Paskow’s agency argument, emphasizing that the corporation had already been held liable for the overdrafts in a prior action. The court stated: “Defendant’s corporate principal having been held liable, defendant is, under the terms of her guarantee, also liable.” This highlights that a guarantor’s liability is derivative of the principal’s liability. The court focused strictly on the terms of the guarantee agreement and the prior determination of the corporation’s liability, declining to create exceptions based on equitable arguments absent explicit contractual provisions or compelling factual distinctions. This reinforces the importance of adhering to the specific requirements outlined in guarantee agreements and the principle that a guarantor is liable if the principal is liable. The decision emphasizes predictability and enforceability in commercial transactions.

  • Israel Discount Bank Ltd. v. Kestenbaum, 62 N.Y.2d 150 (1984): Sufficiency of Evidence to Defeat Summary Judgment

    Israel Discount Bank Ltd. v. Kestenbaum, 62 N.Y.2d 150 (1984)

    A party opposing summary judgment must present evidentiary facts sufficient to raise a triable issue of fact to defeat the motion.

    Summary

    This case concerns a dispute over a personal guarantee and a subsequent letter agreement. Israel Discount Bank sued Kestenbaum on a guarantee agreement. Kestenbaum argued the subsequent letter agreement released him from his guarantee and that the corporate officer lacked authority to enter the agreement. The Court of Appeals reversed the Appellate Division’s order, holding that Kestenbaum’s conclusory allegations lacked sufficient evidentiary support to defeat summary judgment. The court emphasized the necessity of presenting factual evidence to create a genuine issue for trial.

    Facts

    Israel Discount Bank Ltd. (plaintiff) sought to enforce a personal guarantee against Kestenbaum (defendant).
    The guarantee agreement was broad enough to encompass a subsequent letter agreement between the bank and Nu-Ka-Pool Apparel, Inc.
    Kestenbaum alleged that the corporate officer who signed the letter agreement on behalf of Nu-Ka-Pool lacked the authority to do so.
    Kestenbaum also argued the subsequent agreement released him from his personal guarantee.

    Procedural History

    The Supreme Court, New York County, granted summary judgment to the plaintiff and denied the defendant’s motion to serve an amended answer.
    The Appellate Division reversed.
    The Court of Appeals reversed the Appellate Division and reinstated the Supreme Court’s order and judgment.

    Issue(s)

    Whether Kestenbaum presented sufficient evidentiary facts to defeat the bank’s motion for summary judgment based on his personal guarantee.

    Holding

    Yes, because Kestenbaum’s allegations were conclusory and unsupported by evidentiary facts sufficient to raise a triable issue regarding the scope of the guarantee or the officer’s authority.

    Court’s Reasoning

    The Court of Appeals agreed with the dissenter in the Appellate Division that the guarantee agreement signed by Kestenbaum was broad enough to cover the subsequent letter agreement.
    The court found that Kestenbaum’s allegation that the corporate officer lacked authority was a “conclusory allegation” insufficient to create a question of fact.
    The court emphasized that none of Kestenbaum’s arguments were supported by “evidentiary facts sufficient to defeat a motion for summary judgment.”
    The court noted the affirmation of Kestenbaum upon which he relied was not in an authorized form, as only attorneys, physicians, osteopaths or dentists authorized to practice within the state can serve and file an affirmation bearing his signature alone in lieu of and with the same force and effect as an affidavit, and even those persons cannot do so when they are a party to an action. The court clarified that while anyone can make an affirmation instead of a sworn statement, to be effective, it must be made before a notary public or other authorized official, so the affirmant would be answerable for the crime of perjury should he make a false statement.
    In essence, the court reinforced the principle that to defeat a motion for summary judgment, the opposing party must come forward with concrete evidence demonstrating a genuine issue for trial, rather than relying on mere allegations or unsubstantiated claims.