The opinion of the court was delivered by: LORETTA A. PRESKA
LORETTA A. PRESKA, U.S.D.J.
Plaintiff, Port Distributing Corp. ("Port"), brought this action to compel payment of $ 560,000.00, together with 19% interest from October 1, 1991 based upon a guaranty executed by the defendant, William Pflaumer ("Pflaumer"). Port has moved for summary judgment. Defendant opposes this motion and has cross-moved for summary judgment, arguing that Port impaired the collateral that secured the guaranteed obligation, thereby discharging the guarantor. Upon reviewing the record and the parties' submissions, I find defendant's arguments persuasive and conclude that Port's actions, in fact, have discharged Pflaumer. Plaintiff's motion for summary judgment, therefore, is denied; defendant's cross-motion is granted.
Port, a New York corporation, is a wholesale beer distributor. As of October 3, 1989, Port possessed certain distribution rights in the distribution of malt beverages made by the G. Heileman Brewing Co., Inc. ("Heileman") in the New York metropolitan area. It had acquired these rights pursuant to an earlier agreement with Heileman. On October 3, 1989, Port entered into a Purchase and Sale Agreement with Heileman essentially to sell back these distribution rights. The price of the distribution rights was $ 500,000.00.
The Purchase and Sale Agreement directed that the $ 500,000.00 purchase price be paid as follows:
(a) On the Closing Date, Purchaser shall deliver the following . . . :
(ii)(A) a non-interest bearing promissory note to the order of Seller in the aggregate amount of $ 500,000.00 in the form set forth in Exhibit A representing the Purchase Price in respect of the Distribution Rights and (B) a non-interest bearing note to the order of H. Dieter Holterbosch in the aggregate amount of $ 200,000.00 in the form set forth in Exhibit B representing the amounts due in respect of the Non-Compete Agreement (collectively the "Deferred Payment Notes").
(Affidavit of Gregg J. Borri in Opposition to Plaintiff's Motion for Summary Judgment ("Borri Aff."), Exh. A.)
On October 3, 1989, Heileman duly signed two non-interest-bearing promissory notes in accordance with this provision. The first, in the amount of $ 500,000.00, carries on its face the following guaranty:
The undersigned, William P. Pflaumer, individually, and Midway Beverage Corp., jointly and severally, hereby unconditionally and irrevocably guarantee the obligations of G. Heileman Brewing Co., Inc. under this Note.
(Borri Aff., Exh. A.) The second promissory note in the amount of $ 200,000.00 carries an identical guaranty. (Id.)
Contemporaneously with the Purchase and Sale Agreement and the Notes, Port and Heileman executed a Security Agreement, under which Heileman granted Port a first priority security interest in the distribution rights that Heileman was acquiring. This interest secured Heileman's obligations under the Deferred Payment Notes.
On November 2, 1989, Holterbosch and Port filed a UCC-1 financing statement with the City Register - Kings County, claiming a security interest in "All of Debtor's right, title and interest in and to the Assets and Distribution Rights described in the Purchase and Sale Agreement dated October 3, 1989 among Debtor and Secured Parties." On November 13, 1989, Port and Holterbosch filed a substantially identical UCC-1 with the Nassau County Clerk.
Approximately fourteen months later, on January 24, 1991, Heileman petitioned for protection under Chapter 11 of the Bankruptcy Code. On January 28, 1991, the United States Trustee's Office sent a letter to all of Heileman's known creditors, including Port and Pflaumer, advising of the formation of a creditors' committee. Port filed proofs of claim in the amount of $ 500,000.00; Holterbosch filed a proof of claim in the amount of $ 60,000.00
Both documents alleged that the claims were "secured," "priority" claims. Pflaumer evidently did not file a proof of claim in the Bankruptcy proceeding.
On or about October 1, 1991, the attorneys for Heileman sent Port notice of a security agreement between Heileman and First National Bank of Boston ("First National") dated June 30, 1988. Counsel claimed that this security agreement constituted a pre-existing lien covering the distribution rights. Thereafter, because of First National's priority, Port and Holterbosch stipulated to a reduction in their claims and treatment as unsecured creditors in the bankruptcy proceedings. These stipulations were "So Ordered" by the Bankruptcy Court on ...