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.