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FIRST NAT'L CITY BANK v. KLINE

November 2, 1977

FIRST NATIONAL CITY BANK, Plaintiff,
v.
S. ALLAN KLINE, Defendant



The opinion of the court was delivered by: LASKER

MEMORANDUM

 LASKER, D.J.

 First National City Bank ("Citibank") renews its motion for summary judgment, which was denied in part in an earlier memorandum of September 30, 1975. S. Allan Kline ("Kline") cross-moves for summary judgment. For the reasons stated below, Citibank's motion is granted and Kline's is denied.

 Since January 28, 1974, Citibank has been prosecuting this case in an attempt to recover from Kline on his guarantee of a $537,500. loan by Citibank to Vogue. Kline's liability as surety is limited to $237,500. Vogue was adjudicated a bankrupt, by order of the Hon. C. Alberte Parente, Bankruptcy Judge, December 21, 1976 (Exhibit 7 to Kline's 9(g) Statement).

 Citibank's earlier motion for summary judgment was denied because of the potential vitality of two of Kline's affirmative defenses: Citibank's alleged failure to pay promptly on its loan to Vogue, and Citibank's alleged disparagement of Vogue. Further discovery was ordered for the limited purpose of exploring the merits of the defenses. That discovery is now complete, and reveals that no genuine issue of fact exists as to Citibank's right to recover.

 Alleged Failure to Pay Promptly

 The deposition of Leslie Saferstein ("Saferstein"), President of Vogue, establishes that the loan agreement between Citibank and Vogue provided a line of credit in the latter's favor (Saferstein Deposition at 60; see also, Affidavit of Bart Ciocca, Assistant Vice President of Citibank, para. 7). That line of credit was made available immediately after the loan agreement was reached (Saferstein Deposition at 60), and each time Vogue sought to draw from its credit reservoir, the request was honored promptly, that is, within twenty-four hours (Saferstein Deposition at 69, 136-38). Herbert Herz, Chairman of the Board of Vogue, corroborates Saferstein's testimony as to the timely performance of Citibank.

 Kline offers nothing in direct rebuttal of the deposition testimony. Rather, he relies on his own affidavit, and those of Cunningham, a former director of Vogue, and Davidow, a stockbroker, to the effect that Messrs. Herz and Saferstein complained to several "interested persons" about Citibank's lack of promptness. Both Herz and Saferstein deny having made the complaints described in the various affidavits (Saferstein Deposition at 65-69; Herz Deposition at 21-22). Their testimony makes it clear that any talk by them of delays referred to the tardy production of matching funds, which, by the terms of the loan agreement, were to be furnished from sources other than Citibank.

 As indicated above, Herz' and Saferstein's testimony that Citibank performed its loan agreement promptly is uncontested. As for the affidavits offered by Kline, they would, if true, raise a question of fact not as to Citibank's dispatch, but only as to whether Herz and Saferstein ever complained about delays. The alleged complaints have only a peripheral probative value on whether Citibank was prompt, and that evidentiary value disappears when direct testimony as to promptness goes unchallenged. Herz and Saferstein have now testified that their complaints about promptness concerned the unavailability of the matching funds, and their testimony is both disinterested and uncontested. Accordingly, summary judgment is granted dismissing Kline's third affirmative defense, since it poses no genuine issue of fact that Citibank did not delay payments on its loan to Vogue.

 Disparagement of Vogue

 Saferstein's deposition discloses that to the best of his knowledge, neither Citibank nor any of its employees ever disparaged Vogue (Saferstein Deposition at 115-16). Herz corroborates Saferstein (para. 5, Herz Affidavit; see also, para. 10, Ciocca Affidavit). Rather than contest the record on this point, Kline suggests misbehavior by Exeter, a financial consultant hired by Vogue on the recommendation of Citibank, and attempts to attribute it to Citibank. This defense has already been rejected (see, Memorandum of September 30, 1975, at 5), and since Kline does not now raise an issue of fact as to Citibank's behavior, summary judgment is granted dismissing the fourth affirmative defense.

 Kline's Cross-Motion

 In opposition to Citibank's motion and in support of his own cross-motion, Kline asserts that: 1) the bankruptcy composition was intended to be in full settlement of the Vogue debts and therefore discharged Kline as guarantor, and 2) Citibank's acceptance, pursuant to the order of bankruptcy, of $711,353.80 more than reimburses Citibank for the $537,500. loan that was the subject of Kline's guarantee, and accordingly relieves Kline of liability.

 Kline argues that Citibank forfeited its right to proceed against him because it failed expressly to reserve that right in the course of the bankruptcy proceedings. Even if there were an issue of fact as to Citibank's explicit reservation of rights against Kline, his argument would nevertheless be meritless, because such a reservation exists "without express statement under the specific provisions of the Bankruptcy Act, § 16, 11 U.S.C.A. § 34." Kelby v. Manufacturers Trust Co., 162 F.2d 350, 351 (2d Cir. 1947); In Re North Church Street, 82 F.2d 186, 188 (2d Cir. 1936); United States v. George A. Fuller ...


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