for summary judgment on its claim against Primary Coal for $ 5,136,082 in freight charges, and dismissed Primary Coal's counterclaim, but, because Conrail failed to include its claim against Primary Industries as guarantor in its July 1993 summary judgment motion, denied summary judgment on Conrail's claim against Primary Industries. See Consol. Rail Corp. v. Primary Indus. Corp., 868 F. Supp. 566 (S.D.N.Y. 1994). Subsequently, in April 1995, Conrail moved for summary judgment on its claim against Primary Industries as guarantor. At this time, we grant Conrail's motion for summary judgment on its claim for $ 1,000,000 against Primary Industries under the guarantee of payment.
Summary Judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). A court may grant summary judgment "only if the evidence, viewed in the light most favorable to the party opposing the motion, presents no genuine issue of material fact." Cable Science Corp. v. Rochdale Village, Inc., 920 F.2d 147, 151 (2d Cir. 1990). On a motion for summary judgment, all evidence must be viewed and all inferences must be drawn in the light most favorable to the nonmoving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 8 L. Ed. 2d 176, 82 S. Ct. 993 (1962); City of Yonkers v. Otis Elevator Co., 844 F.2d 42, 45 (2d Cir. 1988). However, "summary judgment is proper when reasonable minds could not differ as to the import of the evidence before the court." Cable Science Corp., 920 F.2d at 151.
New York Law
Under New York law, the terms of a contract must be construed so as to give effect to the intent of the parties as indicated by the language of the contract. Seiden Assoc., Inc. v. ANC Holdings Inc., 959 F.2d 425 (2d Cir. 1992); Slatt v. Slatt, 64 N.Y.2d 966, 488 N.Y.S.2d 645, 646, 477 N.E.2d 1099 (N.Y. 1985). If a contract is unambiguous on its face, a court may not turn to extrinsic evidence of the contracting Parties' intent. Seiden Assoc., 959 F.2d at 429. Whether a contract term is ambiguous is a question of law. Consarc Corp. v. Marine Midland Bank, N.A., 996 F.2d 568, 573 (2d Cir. 1993); Seiden Assoc., 959 F.2d at 426; W.W.W. Assoc., Inc. v. Giancontieri, 77 N.Y.2d 157, 565 N.Y.S.2d 440, 443, 566 N.E.2d 639 (N.Y. 1990). The construction of a guarantee, under New York law, is governed by the same principles. See, e.g., Citibank, N.A. v. Plapinger, 66 N.Y.2d 90, 495 N.Y.S.2d 309, 485 N.E.2d 974 (N.Y. 1985); Chem. Bank v. Sepler, 60 N.Y.2d 289, 469 N.Y.S.2d 609, 457 N.E.2d 714 (N.Y. 1983); Nat'l Bank of N. Am. v. Paskow, 53 N.Y.2d 953, 441 N.Y.S.2d 443, 424 N.E.2d 277 (N.Y. 1981); Gen. Phoenix Corp. v. Cabot, 300 N.Y. 87, 89 N.E.2d 238 (N.Y. 1949); Leslie Fay, Inc. v. Rich, 478 F. Supp. 1109 (S.D.N.Y. 1979); Tucker Leasing Capital Corp. v. Marin Medical Management, Inc., 833 F. Supp. 948 (E.D.N.Y. 1993).
In order to recover under the terms of the guarantee, the obligee must establish a prima facie case by providing proof of (1) the underlying obligation, (2) the guarantee, and (3) the failure by the guarantor to make payment in accordance with its terms. Tucker Leasing Capital Corp. v. Marin Medical Management, Inc., 833 F. Supp. 948, 957 (E.D.N.Y. 1993); Key Bank of Long Island v. Burns, 162 A.D.2d 501, 556 N.Y.S.2d 829, 830 (App. Div. 1990). See also Kornfeld v. NRX Technologies, Inc., 93 A.D.2d 772, 461 N.Y.S.2d 342 (App. Div. 1983), aff'd 62 N.Y.2d 686, 476 N.Y.S.2d 523, 465 N.E.2d 30 (N.Y. 1984). We find that the plaintiff has established a prima facie case: (1) Proof of Primary Coal's outstanding and unpaid balance for freight charges incurred in 1991 is uncontroverted, (2) the March 1978 letter unambiguously establishes Primary Industries' promise to guarantee Primary Coal's payment up to $ 1,000,000, and (3) Primary Industries has not paid Conrail in satisfaction of its obligation as guarantor.
Upon review of the undisputed facts submitted in this case, the court finds that the March 1978 guarantee agreement unambiguously obligates Primary Industries to pay Conrail $ 1,000,000 due to the default of Primary Coal. The guarantee agreement provides that Primary Industries "guarantees the payment of all bills and charges, for [transportation and related] services and shall pay . . . upon presentation, if accompanied by a written statement that the charges are correct and have not been paid." Primary Industries does not dispute that it guaranteed Primary Coal's payments and that Primary Coal has not paid. It does not deny receipt of the demand notice in January 1992 nor does it challenge the substantive sufficiency of the notice. Instead, Primary Industries dismisses the demand notice on the ground that it was delivered before, and not after, Conrail's claim against Primary Coal was reduced to judgment in November 1994 by this court in Consol. Rail Corp. v. Primary Indus. Corp., 868 F. Supp. 566 (S.D.N.Y. 1994). However, the guarantee agreement does not require Conrail to reduce to judgment its claim against Primary Coal before delivering a demand notice to Primary Industries and taking action to enforce its rights under the guarantee agreement. Because Conrail has demonstrated that there are no material facts genuinely in dispute, and Primary Industries has not set forth specific facts showing that there is a genuine issue for trial, Conrail is entitled to summary judgment. See Western World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d Cir. 1990).
Primary Industries' arguments to the contrary are meritless. Primary Industries argues that summary judgment is not appropriate because that there is a genuine issue of material fact as to the circumstances surrounding Primary Coal's default on its obligations to Conrail, and thus a question as to Primary Industries' obligations as guarantor: "What constitutes a default by the promisor . . . must be established by scrutinizing the facts particular to each case . . . ." Defendant's Mem. in Opp. at 2. However, Primary Industries does not identify any such factual issues regarding Primary Coal's default. There is no question that Primary Coal's payment is overdue. See Consol. Rail Corp., 868 F. Supp. 566 (granting Conrail summary judgment on its claim for freight charges against Primary Coal).
Nevertheless, Primary Industries' argument then continues that Conrail has not fulfilled the demand notice requirement because it did not send a notice after Primary Industries became obliged -- i.e., after this court's November 1994 judgment establishing that Primary Coal owes in excess of $ 5 million to Conrail for unpaid freight charges. Primary Industries ignores the fact that these freight charges were outstanding since the end of 1991 and that Conrail has been trying to collect under the guarantee since almost immediately thereafter, as evidenced by its January 1992 demand notice. Primary Industries urges that any notice sent between January 1992 and November 1994 fails to satisfy the demand notice requirement of the guarantee agreement. Primary Industries suggests that this court should discard the guarantee altogether because Conrail has not given the requisite notice since the time when the obligation became "due" to Primary Coal before attempting to collect on the guarantee.
Primary Industries provides no convincing reason for ignoring the January 1992 demand notice. The fact that Conrail's claim against Primary Coal was reduced to judgment in November 1994 does not vitiate the demand notice previously given.
Primary Industries cites no case law which supports its position. Primary Industries relies on Canterbury Realty and Equip. Corp. v. Poughkeepsie Say. Bank, 135 A.D.2d 102, 524 N.Y.S.2d 531 (App. Div. 1988), where summary judgment against guarantor was denied because genuine issues of material fact existed as to whether creditor had properly accelerated loans when guarantors only obligated themselves unconditionally to make payments on liabilities "when due." In that case, the creditor's right to accelerate the loans was conditional upon, inter alia, "an adverse change in [the borrower's] financial condition." 524 N.Y.S.2d at 533. Canterbury Realty is clearly distinguishable: The court denied summary judgment because the guarantor's obligation was contingent upon the underlying obligation, and there was an issue of fact as to whether the underlying obligation was properly due. There being no dispute in the case at hand that the amount owed by Primary Coal is properly due, the Canterbury Realty opinion fails to undermine Conrail's argument in favor of summary judgment.
Primary Industries cites Pergament v. Herrick Credit Corp., 200 N.Y.S.2d 535 (Sup. Ct. 1960), and Phoenix Acquisition Corp. v. Campcore, Inc., 81 N.Y.2d 138, 596 N.Y.S.2d 752, 612 N.E.2d 1219 (App. Div. 1993), in support of the proposition that notification is a condition precedent to enforcement of the guarantee. Failure of this condition, Primary Industries claims, will release the guarantor from liability. In Pergament, the court denied summary judgment to creditors because, inter alia, the guarantee provision required the creditor to notify the guarantor of the borrower's default on payments before accelerating the entire loan. Notice prior to acceleration -- which triggered guarantor's obligation -- was an essential precondition of the guarantee because, if the guarantor had been notified that payments were delinquent or overdue, the guarantor could have prevented triggering its obligation by making payments for the borrower. The guarantee agreement read as follows:
Before we shall have the right to proceed against you with respect to your endorsement of the notes . . . we shall be required to notify you in writing . . . of any default and you shall have a period of five days within which to cure such default, and if you shall make such defaulted payment within said period of five days, then the acceleration provision contained in any instrument which has been executed in connection with such transaction shall not operate as against you.
Pergament, 200 N.Y.S.2d at 538. In this case, Primary Industries did have notice of Primary Coal's obligation. Furthermore, even if Conrail had delivered another demand notice after the November 1994 judgment of this court, unlike the guarantor in Pergament, there is nothing that Primary Industries could have done to avoid its already triggered obligation as guarantor. In short, the facts of Pergament are quite different from the circumstances of this case.
As for Phoenix Acquisition Corp., supra, Primary Industries seems to be relying on the fact that the trial court below had decided the issue of whether the parties intended notice to be a condition precedent, implying that this court should allow the issue of intent to go to trial. Primary Industries' reliance is misplaced. Even conceding for the sake of argument that the parties intended that notice be a condition precedent, there is no dispute that Conrail did in fact deliver a demand notice in January 1992. Delivery of this demand letter renders moot any factual issue as to whether the parties intended notice to be a precondition.
Primary Industries knew about the unpaid and outstanding balance at the very latest by January 1992. Requiring Conrail to renew its notice after the November 1994 judgment serves no legitimate purpose. Primary Industries also takes issue with Conrail's purported lack of effort in collecting directly from Primary Coal. However, nothing in the guarantee requires Conrail to wait in line with other creditors to collect from Primary Coal. The desire to avoid having to do so is precisely the reason why guarantees are sought in the first place. Conrail had the foresight to obtain this guarantee from Primary Industries, and Primary Industries may not demand that Conrail first exhaust all its legal remedies against Primary Coal.
Finally, Primary Industries contends cursorily that "Conrail is obliged -- Pursuant to indisputable language contained in the Transportation Contracts that were before the Court in Conrail's motion for summary judgment as to Primary Coal -- to give a refund of approximately $ 1,400,000 of the amount owing to Conrail." Defendant's Mem. in Opp. at 5. This effort to create a factual issue as to the amount owed by Primary Coal is of no avail. Primary Industries may not have this court revisit the issue of Primary Coal's liability to Conrail under the 1991 freight contracts, already established by this court in Consol. Rail Corp. v. Primary Indus. Corp., 868 F. Supp. 566 (S.D.N.Y. 1994). Furthermore, even if Primary Industries were correct that $ 1,400,000 should be deducted from Primary Coal's obligation to Conrail, Primary Coal would still owe in excess of $ 1,000,000, thus having no effect whatsoever on Primary Industries' obligation under the guarantee. Only disputes over facts that night affect the outcome of the suit under the governing law will properly exclude the entry of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986).
There can be no dispute that Primary Coal defaulted under its payment obligations to Conrail. Primary Industries received a demand notice in January 1992 from Conrail as per the guarantee agreement. Primary Industries is therefore bound pursuant to its obligation under the guarantee. Accordingly, Conrail is entitled to summary judgment against Primary Industries in the amount of $ 1,000,000.
For the foregoing reasons, Conrail's motion for summary judgment on its claim against Primary Industries is granted. We direct Conrail to submit a judgment order on 10 days' notice. SO ORDERED.
October 18, 1995
White Plains, New York
William C. Conner
Senior U.S. District Judge