Suit on Guaranty Could Not be Made Under CPLR 3213 Because Extrinsic Evidence Needed to Show Amount Owed

On March 17, 2023, the Fourth Department issued a decision in Counsel Fin. II LLC v. Bortnick, 2023 NY Slip Op. 01441, holding that a suit on a guaranty could not be made under CPLR 3213 because extrinsic evidence was needed to show the amount owed, explaining:

We agree with defendant, however, that the action is not based upon an instrument for the payment of money only because defendant’s liability cannot be ascertained without resort to impermissible extrinsic evidence outside the financial instrument. Pursuant to CPLR 3213, when an action is based upon 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. The statute thus recognizes that some claims have greater presumptive merit than others and should have easier access to the courts than an ordinary plenary action gets. It singles out these claims and permits them to be brought on by a summary judgment motion at the outset. Indeed, CPLR 3213 was enacted to provide quick relief on documentary claims so presumptively meritorious that a formal complaint is superfluous, and even the delay incident upon waiting for an answer and then moving for summary judgment is needless. Under the stringent requirement that the action be based upon an instrument for the payment of money only, a document comes within CPLR 3213 if a prima facie case would be made out by the instrument and a failure to make the payments called for by its terms. Conversely, the instrument does not qualify if outside proof is needed, other than simple proof of nonpayment or a similar de minimis deviation from the face of the document.

An unconditional guaranty is typically an instrument for the payment of money only within the meaning of CPLR 3213 and a plaintiff seeking to recover on an unconditional guaranty of a note that extended a line of credit is entitled to rely upon de minimis extrinsic evidence such as a line of credit statement to establish the amount of the underlying debt. Here, however, plaintiff’s action is not based on defendant’s capped liability under the guaranty as modified by the allonges to the note with simple evidence such as a line of credit statement that the total underlying debt exceeded that amount. Instead, plaintiff seeks to recover the amount of defendant’s capped liability as reduced by the amount of two contingency fees that defendant arranged to have paid to plaintiff for which the parties separately agreed, upon defendant’s offer and plaintiff’s acceptance, that defendant would receive a dollar-for-dollar offset against his liability under the guaranty. As proof of the agreement to reduce defendant’s liability under the guaranty and the amount of that reduction, plaintiff relies on evidence extrinsic to the instrument consisting of representations in the affidavit of its chief operating officer, deposit receipt printouts from the online system of plaintiff’s bank, and a guaranty balance chart apparently generated by plaintiff showing the calculation of defendant’s revised liability.

In our view, going that far afield from the financial instrument itself does not appear to comport with the simple standards embodied in the statute and related case law. Indeed, inasmuch as plaintiff’s moving papers demonstrate that outside evidence beyond simple proof of nonpayment or a similar de minimis deviation from the face of the documents is needed to determine the amount due, we conclude that plaintiff’s action falls far short of satisfying the CPLR 3213 threshold requirement. The reduction of defendant’s liability by the amount of two contingency fees effectively represents a separate offset or credit agreement requiring outside proof beyond de minimis extrinsic evidence to establish the amount due, thereby rendering resort to CPLR 3213 inappropriate.

Based on the foregoing, we conclude that Supreme Court erred in granting plaintiff’s motion for summary judgment in lieu of complaint pursuant to CPLR 3213, and we therefore reverse and, in accordance with CPLR 3213, the moving and answering papers shall be deemed the complaint and answer, respectively.

(Internal quotations and citations omitted) (emphasis added).

Stay informed!
Sign up for email alerts and notifications here.
Read more about our Complex Commercial Litigation practice.