CPLR 3213 enables litigants to efficiently and quickly enforce instruments for the payment of money only or a previously rendered judgment. The rule is a powerful tool for resolving business disputes. But as one Westchester County litigant recently learned (the hard way), it is limited in scope.

In Newman v. Poekler, Index No. 70790/2017, the plaintiff loaned money in connection with a real estate deal. The loan documents included an “Agreement” (which, oddly, the lender did not attach to his motion), a promissory note, personal guarantees and an escrow agreement. When the borrowers defaulted, the lender moved for summary judgment in lieu of complaint under CPLR 3213. The lender argued that the guarantees were “unconditional” which, he claimed, obviated the need to examine additional evidence to establish the borrowers’ obligation. But the lender was wrong because, although the guarantees purported to be “irrevocable, absolute, continuing, unconditional, and general without any limitation,” they were not “unconditional.” Rather, they were qualified by “the sole and limited exception … that Guarantor shall not be obligated to pay Lender under this Guaranty unless and until, in accordance with paragraph 5 of the Agreement, there is an adjudication that prevents for any reason the Note and/or the Agreement from being enforced as against Borrower ….”

In analyzing the issues, Justice Jamieson cited the First Department’s decision in PDL Biopharma, Inc. v. Wohlstadter, 147 A.D.3d 494, 47 N.Y.S.3d 25 (1st Dep’t 2017). In that case, the Court held that:

  • “[t]he prototypical example of an instrument within the ambit of CPLR 3213 is of course a negotiable instrument for the payment of money – an unconditional promise to pay a sum certain, signed by the maker and due on demand or at a definite time”; and
  • “an unconditional guaranty qualifies as an instrument amenable to CPLR 3213 treatment,” but not if “determination of preliminary legal issues, and reference to additional documents, was necessary before the motion court could address the question of whether the relied-on guaranties continued to be enforceable and whether they had come due.”

This, Justice Jamieson found, was “precisely the same situation in this case” as the guarantees required the Court to refer to the Agreement (which the lender did not submit) to determine if “in accordance with paragraph 5 of the Agreement, there is an adjudication that prevents for any reason the Note and/or the Agreement from being enforced as against Borrower ….”

Further, the borrowers argued that there was no such “adjudication” as required and that the Agreement defined an “Adjudicated Event” as “an adjudication that prevents the settlement from being enforced as against the Company (and any owner of the Subject Real Property and any parcel therein)” – an issue not addressed in the motions. Thus, Justice Jamieson denied the lender’s motion as “the Court [could not] interpret the guaranties without recourse to the Agreement.”

Takeaway: Before filing a CPLR 3213 motion, make sure:

  • A lender’s right to repayment is truly unconditional and not dependent upon terms in other related agreements.
  • All relevant loan documents are submitted to the Court. The failure to do so is grounds for denial of the motion and will undermine the movant’s credibility with the Court.

To learn more about new developments in the Westchester Commercial Division, please subscribe to the Westchester Commercial Division Blog.

Photo of Brian Cohen Brian Cohen

Brian Cohen is a founding partner of the firm. An accomplished litigator practicing in federal and state courts throughout the country, he has extensive experience in all phases of litigation. Brian has successfully represented a diverse clientele in a broad range of complex business and real estate litigation and class action litigation. Brian is a 1997 graduate of the St. John’s University School of Law, where he was a member of the St. John’s Law Review.

Brian is admitted to practice law in New York, Connecticut, the United States Supreme Court, United States Courts of Appeals for the Second Circuit, and the United States District Courts for the Southern and Eastern Districts of New York and the District of Connecticut. He is a member of the Westchester County Bar Association and its Corporate and Commercial Law Committee.