On October 16, 2022, Justice Masley of the New York County Commercial Division issued a decision in Rosenthal & Rosenthal, Inc. v. Lederman, 2022 NY Slip Op. 33550(U), rejecting defenses to an unconditional guaranty, explaining:
Here, summary judgment is warranted as plaintiff has sufficiently established its prima facie enforcement of the absolute and unconditional written Guaranty, the Company’s outstanding debt, and defendant’s nonpayment of his guarantee.
Moreover, defendant failed to establish the existence of a triable issue of fact. Defendant does not dispute the enforceability of the unconditional and absolute Guaranty, that the Company owes plaintiff nearly $6 million, and that defendant failed to perform under the Guaranty. Instead, defendant argues that plaintiff’s own malicious conduct, i.e., plaintiff’s purported collusion with LRA to terminate defendant’s employment so that plaintiff could sue defendant to recover under the Guaranty, precludes summary judgment. In doing so, defendant relies on the covenant not to sue in the Consent Agreement: “[Plaintiff] further covenants and agrees that it will not sue or seek to collect upon any liability owed by the [defendant] or under the Limited Guarantee of the Obligations for so long as the [defendant] is employed by the Initial Purchaser.”
Defendant relies on his allegedly wrongful termination and the covenant not to sue under the Consent Agreement, but it is unclear how the proprietary of this termination has any bearing on the Guaranty. The covenant prevents plaintiff from recovering against defendant under the Guaranty as long as the defendant is employed by the purchaser of the collateral. But the covenant does not except terminations and the court may not read a term into the agreement that is not there.
Guaranties that contain language obligating the guarantor to payment without recourse to any defense or counterclaims, i.e., guaranties that are absolute and unconditional, have been consistently upheld by New York courts. Therefore, defendant has failed to raise a triable issue of fact that defendant’s absolute and unconditional guaranty is not valid or enforceable.
Moreover, defendant relies on Cooperatieve for the proposition that an absolute and unconditional guaranty does not foreclose a guarantor’s challenge that the creditor’s wrongful post-execution conduct triggered the event that accelerates or causes the guarantor’s liability. However, defendant’s argument misses the mark and misapplies the exception stated in Canterbury. To illustrate, in Canterbury, the court determined that summary judgment was not warranted as there was an issue of fact as to whether the guarantee unfairly brought upon the occurrence of the very condition precedent (guarantor’s suspension of business) upon which it relied to accelerate the loan against the guarantors. The court opined that such conduct may serve to discharge the guarantors’ obligation. On the other hand, here, defendant does not contend that plaintiff caused, expedited, or otherwise facilitated defendant’s liability under the Guaranty. In fact, defendant admits that the Company was financially distressed prior to and after entering into the Factoring Agreement. Defendant admits that the Company continued to suffer financially, and, in trying to save his business from financial ruin, executed the Guaranty. The record amply shows that the Company’s financial problems were preexisting to the Factoring Agreement and Guaranty and continued to exist.
The case here is more akin to Cooperatieve, where the court held that the broad, sweeping, and unequivocal language of the guaranty forecloses any challenge to the enforceability and validity of the documents which establish defendant’s liability for payments arising under the purchase agreement, as well as to any other possible defense to his liability for the obligations. The Court of Appeals affirmed and relying on Plapinger, expounded: Were we to accept defendant’s argument, we would ignore this Court’s admonition in Plapinger, and in effect condone defendant’s own fraud in deliberately misrepresenting his true intention when putting his signature to his absolute and unconditional’ guarantee. The Guaranty in this action involves the same broad, sweeping, and unequivocal language. The same broad language also appears in the Waiver Clause. And, even if he could, defendant fails to explain how plaintiff’s alleged involvement or collusion to wrongfully terminate defendant, an issue raised in the Termination Action, would not fall within the ambit of the Guaranty’s Waiver Clause precluding defendant from bringing any counterclaim or defense against the Guaranty.
(Internal quotations and citations omitted).