On February 13, 2025, Justice Cohen of the New York County Commercial Division issued a decision in Fundamental Partners III LP v. Voss, 2025 NY Slip Op. 30575(U), holding that a guaranty coupled with an indemnification agreement was not suitable for disposition on a motion for summary judgment in lieu of complaint, explaining:
It is well settled that a promissory note, as an instrument for the payment of money only, is entitled to the expedited procedure detailed in CPLR 3213. Likewise, a guarantee qualifies as an instrument for the payment of money only under CPLR 3213. Once the plaintiff submits evidence establishing its prima facie case, the burden then shifts to the defendant to submit evidence establishing the existence of a triable issue of fact with respect to a bona fide defense.
Here, Plaintiff has submitted that (i) on April 3, 2023, Plaintiff and non-party WindMass Capital, LLC (“WindMass”), as joint venturers, entered into a mortgage loan agreement with Mizuho Capital Markets LLC (“Mizuho”) for a loan in the aggregate principal amount of $115 million, secured by a guaranty executed by Plaintiff guaranteeing full, prompt, and complete payment when due of all obligations and liabilities, including debt service payments, in the event the properties failed to generate sufficient proceeds to cover their loan obligations; (ii) on April 3, 2023, Defendants (members of WindMass), in their individual capacity, executed a Guaranty for the payment of money to Fundamental; (iii) Fundamental has been required to pay $3,060,923 million pursuant to its Debt Service Obligation to date, (iv) WindMass is obligated to reimburse Fundamental for its pro rata share of the Debt Service Obligation, or $815,742.10; (v) Fundamental delivered written demands for payment on July 17, 2024 on August 12, 2024, as well as additional information and documentation in support in response to Guarantors’ requests; and (vi) Guarantors have failed to reimburse Fundamental for any amount due under the Guaranty to date.
In opposition, Defendants argue that the Guaranty is not an instrument for the payment of money only within the meaning of CPLR 3213 because it is a guaranty for payment and indemnification. The Guaranty, which is labeled the “Equity Funding and Indemnification Guaranty” provides: “[T]he term ‘Guaranteed Obligations’ shall mean . . . the full and timely payment and indemnification of Fundamental for any Mizuho Guaranty Losses (as defined in the JV Agreement) in accordance with and as required pursuant to Section 7.2 of the JV Agreement.”
The Amended JV Agreement provides: “[n]otwithstanding anything to the contrary in the LLC Agreement, the Windmass Member shall indemnify and hold harmless the Fundamental Member for losses, claims, damages, costs, expenses or liabilities incurred by Fundamental Member (“Mizuho Guaranty Losses”) under the Mizuho Guarantees as follows: . . . (iii) the Windmass Member’s pro rata share (in accordance with its respective Capital Sharing Ratio) of all Mizuho Guaranty Losses under the Mizuho Recourse and Debt Service Guaranty arising in connection with a Debt Service Obligation . . . .”
A guaranty and an indemnification are distinct legal concepts: An indemnification is a primary obligation: if a loss or event occurs within its scope, the indemnitors are primarily liable. A guaranty, by contrast, is a contract of secondary liability. Thus, a guarantor will be required to make payment only when the primary obligor has first defaulted.
Here, the Guaranty is not an instrument for the payment of money only as contemplated by the statute, because more than simple proof of nonpayment or a similar de minimis deviation from the face of the document is required to determine if Defendants are liable for payment and/or indemnification under the Guaranty, which appears to be contingent at least in part upon Plaintiff’s and/or Windmass’s obligations under their respective agreements.
(Internal quotations and citations omitted).