the primary place of
business of the plaintiff. New York is the primary place of business of
Nice Skate and the residence of one of the defendant guarantors. In
addition, the trade finance agreements, (see, e.g., Pl. Ex. A ¶ 13),
the guaranties, (see, e.g., Pl. Ex. D ¶ 9), and the assignment,
(Def. Ex. 4), all explicitly provide for the governance of New York law.
These clauses evince the parties' intention to be subject to New York
law. Moreover, choice of law clauses in contracts and loan documents are
generally honored in New York. See Village on Canon v. Bankers Trust
Company, 920 F. Supp. 520, 526 (S.D.N.Y. 1996) (Koeltl, J.). Therefore,
the balance of interest tips in favor of the application of New York law
to the assignment, guaranties, and promissory notes.
As a threshold matter, the court must address plaintiff's status as
assignee of the promissory notes and guaranties in question. Under New
York law, "any claim or demand can be transferred," N.Y. Gen. Oblig.
§ 13-101 (McKinney 1989), unless there is an express provision in the
instruments prohibiting assignment.*fn7 See, e.g., Backman v. Hibernia
Holdings Inc., 1998 WL 427675, at *5 (S.D.N.Y. 1998) (Preska, J.)
(holding that guaranties are assignable unless applicable instruments
expressly state otherwise). Any act or words are sufficient which show an
intention to transfer all rights to the assignee, see Miller v. Wells
Fargo Bank, 540 F.2d 548, 557 (2d Cir. 1976), and no consideration is
required where the assignment is in writing and signed by the assignor.
See N.Y. Gen. Oblig. § 5-1107. The assignee stands in the shoes of
the assignor and is subject to the "equities between the original
parties." See Cadle Company v. Nickelson, 1996 WL 724740, at *3 (S.D.N.Y.
1996) (Cote, J.) (citing Dryoln Corp. v. Zwicke, 17 N.Y.S.2d 974, 975
Here the assignment was in writing, signed by TSI, granting all
rights, title and interests in the aforementioned promissory notes and
guaranties to CTL. Moreover, both the underlying trade finance
agreements, (see, e.g, Pl. Ex. A ¶ 12), and the guaranties, See
e.g., Pl. Ex. C ¶ 9), explicitly reserve to TSI the right to assign
all of Nice Skate's obligations. Therefore, CTL may enforce the
promissory notes and guaranties in its own name, subject to all defenses
existing against TSI.
To establish a prima facie case of default on a promissory note under
New York law, a plaintiff must provide proof of the valid note and of
defendant's failure, despite proper demand, to make payment. See Gateway
State Bank v. Shangri-La Private Club for Women, Inc., 113 A.D.2d 791,
493 N.Y.S.2d 226 (1985), aff'd, 67 N.Y.2d 627 (1986). In the instant
case, plaintiff has produced copies of the notes in its possession,*fn8
and Nice Skate, by the terms of these notes, has waived its right to
demand and notice of nonpayment. (Pl. Exs. B, E, H). Such waivers are
enforceable. See Lakhaney, 788 F. Supp at 164.
Under Article 3 of the New York Codification of the Uniform Commercial
Code ("N.Y. U.C.C.") (McKinney 1991), promissory notes constitute valid
negotiable instruments if they contain an unconditional promise to pay a
sum certain, are signed by the maker, and are payable to order or bearer
on demand or at a definite time. See N.Y. U.C.C. § 3-104(1). Here,
the notes designate that they are payable
"to the order of Trade
Solutions Incorporated," the assignor. (Pl. Exs. B, E, H). The sums
payable, ranging from $17,515.61 to $95,013.07, and the due dates, are
identified with certainty on each of the nine notes. The interest rate on
delinquent principal is identified with certainty in the underlying trade
finance agreements as four percent over the U.S. dollar prime rate,
accruing from the date of stated maturity to the date of payment in
full. (See, e.g., Pl. Ex. A ¶ 4. (d).)*fn9 Therefore, interest
payments on the delinquent payments may also be awarded on summary
judgement. See Lakhaney, 788 F. Supp. at 163 (holding that interest may
be awarded if it meets the requirement that its sum be certain.) On the
other hand, although the promissory notes provide that "upon default, the
maker agrees to pay all reasonable collection costs and attorney fees for
making such collection," (see, e.g., Pl. Ex. B.), such fees and costs are
not sums certain, and may not be awarded on summary judgement. See Borg
v. Belair Ridge Development Corp. et al., 270 A.D.2d 377, 378,
705 N.Y.S.2d 260 (2000).
The promissory notes contain no conditions on payment and are signed by
Ann in his capacity as president of Nice Skate. (Pl. Exs. B, E, H.) See
N.Y. U.C.C. § 3-403(1),(3). Signatures are presumed to be valid
unless specifically contested in the pleadings. See N.Y. U.C.C. §
3-307(1). In this case, none of the defendants have contested the
validity of Arm's signature. Promissory notes must also be supported by
consideration, see N.Y. U.C.C. § 3-408, and there is a common law
requirement of delivery. See Lakhaney 788 F. Supp. at 164. Both the
absence of consideration and delivery are defenses, and it is the
defendants' burden to establish these defenses once the signature on the
instrument has been proven genuine. See N.Y. U.C.C. § 3-307(2). None
of the defendants have raised these defenses and therefore the notes are
presumed to be valid in these respects.
As with a promissory note, a prima facie case of default on a guaranty
is made out by proof of a valid guaranty and proof of the defendant's
failure, despite proper demand, to make payment. See Brookman &
Brookman, P.C. v. Schiavoni, 245 A.D.2d 93, 665 N.Y.S.2d 419 at 420. CTL
has submitted copies of the guaranties, (Pl. Exs. C, F, I), and has made
demand on the guarantors for each of the three transactions. (Pl. 56.1
Stint. ¶¶ 8, 15, 20.)
Under New York law, guaranties are governed by the rules of contracts.
See Lakhaney, 788 F. Supp. at 163. A valid guaranty must be a written
instrument guaranteeing payment of another's debt, describing with
precision the obligation to which the person is bound. See id.
Consideration for the guaranty must be expressly or impliedly stated in
the instrument, and the instrument must be delivered to, and accepted
by, the guarantor. See id.
In the instant case the plaintiff has produced copies of the written
guaranties, each of which describes by date, parties and amount, the
underlying trade finance agreements, sales agreements and promissory
notes being guaranteed. (See e.g., Pl. Ex. C. ¶ 1.) The guaranties
clearly state that the obligations of the guarantors are joint and
several. See e.g., Pl. Ex. D. ¶ 2.) The consideration is described as
inducement to TSI and CTL to enter into the sales and trade finance
agreements. It is well settled that a guaranty executed in exchange for,
and as a condition of, a promise to advance funds to a third party in the
future, coupled with an actual advance at a later date, is supported by
ample consideration. See First American
Bank of New York v. Builders
Funding Corporation, et. al., 200 A.D.2d 946, 948, 607 N.Y.S.2d 460
(1994)*fn10 Delivery and acceptance are not contested here.
The New York statute of frauds further requires that promises to answer
for the debt of another must be signed by the party against whom
enforcement is sought. See N.Y. Gen. Oblig. Law § 5-701, subd. a,
par. 2. Plaintiff's assertions that all four of the defendant guarantors
signed the guaranty relating to the June 23, 1997 agreement, that Ann,
Connor and Raffa signed the guaranty relating to the July 10, 1997
agreement, and that Ann and Raffa signed the guaranty relating to the
July 12, 1997 agreement, (Pl. 56.1 Stmt. ¶¶ 3, 11, 18), are not
contested by the defendants, and therefore will be deemed to be
admitted. See Local Rule 56.1(c).
Since the promissory notes appear to be valid negotiable instruments
and no defenses to enforcement of the notes or the guaranties have been
established by Nice Skate, Ann, Connor and Raffa, plaintiff is entitled
to enforce them against these defendants. See N.Y. U.C.C. § 3-301.
Accordingly, the court grants plaintiff's motion for summary judgement
against Nice Skate, Ann, and Raffa, jointly and severally, for the
principal amount of $208,854.04, and against Connor for the principal
amount of $204,112.88, plus interest at a rate of four percent per annum
over the U.S. dollar prime rate.*fn11
Next, the court turns to defendant Telford's cross-motion for summary
judgement. Telford contends that plaintiff's taking of the promissory
notes and guaranties is in contravention of Section 489 of the New York
Judiciary Law, which prohibits the acquisition of a debt "with intent and
for the purpose of bringing an action or proceeding thereon." N.Y. Jud.
Law § 489 (McKinney 1983). Defendant Telford supports this contention
by pointing to the fact that plaintiff filed this lawsuit a mere 23 days
after the assignment was executed, and that the assignment was executed
only after a period of failed negotiations, when "it became clear that
[Nice Skate was not] going to find a way to pay" TSI or CTL. (Cusac
The court finds this argument without merit. Early cases analyzing
Section 489's predecessor statutes reveal that its purpose was to curtail
the practice of attorneys purchasing and filing suit on small notes
merely to obtain costs, especially attorney fees. See, e.g., Baldwin v.
Latson, 2 Barb. Ch. 306, 308, 1847 WL 4161, at *2 (N.Y. Ch. 1847). New
York courts have since strictly construed the statute, holding unlawful
only those assignments purchased for the "very purpose" of bringing
suit, and this implies an exclusion for any other purpose." Moses v.
McDivitt, 88 N.Y. 62, 65, 1882 WL 12577 (1882). Indeed, the Second
Circuit has recently held that "the acquisition of a debt with intent to
bring suit against the debtor is not a violation of the statute where
. . . the primary purpose of the suit is the collection of the debt
acquired." Elliot Associates
v. Banco de la Nacion, 194 F.3d 363, 372 (2d
Here, there is no indication that plaintiff acquired the notes merely
for the purpose of stirring up litigation and profiting therefrom.
Rather, CTL acquired the promissory notes "for the honest purpose of
protecting some other important right of the assignee," namely, to obtain
payment in full of a valid debt. Baldwin, 1847 WL at *1. CTL is the party
that furnished the trade financing to Nice Skate, and is explicitly so
named in the underlying trade finance agreements and guaranties. (See,
e.g., Pl. Ex. A, C.) Moreover, the fact that CTL officially acquired the
promissory notes only after a failed period of negotiations does not
change the primary purpose of the acquisition. Moses makes clear that an
assignment is "not made illegal by the existence of the intent . . . at
the time of the purchase . . . to bring suit upon them if necessary for
their collection." Id. 88 N.Y. at 65. Plaintiff's primary goal remained
repayment on its loans.
Lastly, the court addresses Telford's assertion that there are a
"plethora of factual issues . . . which mandate denial of plaintiff's
application for summary judgement." (Baker Aff. § 18.) First, Telford
posits that there remain factual issues regarding the intent of the
plaintiff in taking on the assignment. Telford supports this claim by
citing to Sprung v. Jaffe, 3 N.Y.2d 539 (1957). In Sprung, the Second
Circuit reversed a grant of summary judgement to the plaintiff-assignee
of a debt instrument on the grounds that the debtor's claim that the
assignee had violated a predecessor statute of Section 489 presented a
genuine factual dispute as to the intent and purpose of the assignee, and
the plaintiff had failed to provide sufficient proof of a purpose for
acquiring the debt other than bringing suit. See id. at 544. However, the
facts of Sprung reveal that the assignee was an attorney who purchased
$3,000 in debt for a mere dollar, and the claim could have as readily
been brought in the name of the executor of the relevant estate. See id.
at 541-42, 544. Where, as here, the assignee is the company that has
outlaid over two hundred thousand dollars in financing, plaintiff has met
its burden to prove that the primary purpose of assignment was payment on
its obligations and not earning expenses related to litigation. Since
Telford has not set forth any additional facts showing that a genuine
issue regarding intent exists, the defendant's "mere allegation" that
such an issue exists will not suffice to defeat plaintiff's motion for
summary judgement. F.R. Civ. P. 56(e).
Second, Telford disputes the validity of his signature on the guaranty
pursuant to the July 10, 1997 agreement. (Telford Res. ¶ 2.)*fn12 He
points to the guaranty agreement contained in Exhibit F of the Complaint,
as well as Exhibit H attached to the Cusac Affidavit, both of which do
not contain his signature. Plaintiff asserts that Telford signed the
guaranty and sent it via fascimile to Ann on July 18, 1997. (Cusac Aff.
Ex. H., Pl. Reply Aff. ¶ 8.) As this dispute raises a genuine issue
of material fact, the liability of Telford as to the guaranty made
pursuant to the July 10, 1997 trade finance agreement may not be resolved
on summary judgement. See Seoulbank v. D & J Export and Import Corp. et
al., 270 A.D.2d 193, 707 N.Y.S.2d 12, 14 (2000) (finding summary
judgement inappropriate where authenticity of signature on guaranty was
Finally, Telford asserts that he has insufficient knowledge, absent
discovery, to dispute plaintiff's allegations as to amounts owed. When
one party has yet to
exercise its opportunities for pretrial discovery,
summary judgement is inappropriate. See Rail Europe, Inc. v. Rail Pass
Express, Inc., 1996 WL 157503, at *9 (S.D.N.Y. 1996) (Leisure, J.). Under
Rule 56(f), F.R. Civ. P., the court may deny summary judgement or order a
continuance to permit additional discovery where the non-moving party has
submitted an affidavit showing "(1) what facts are sought [to resist the
motion] and how they are to be obtained, (2) how those facts are
reasonably expected to create a genuine issue of material fact, (3) what
effort affiant has made to obtain them, and (4) why the affiant was
unsuccessful in those efforts." Haran v. Dow Jones & Co., Inc., et. al,
216 F.3d 1072, 2000 WL 77 7982, at *3 (2d Cir. 2000) (citing Gurary v.
Winehouse, 190 F.3d 37, 43 (2d Cir. 1999)).
In a signed affidavit, Telford contends that as a product designer, he
had neither knowledge of, nor involvement in the finances of Nice Skate.
(Telford. Aff. ¶ 7.) He asserts that he was repeatedly told by Ann,
the person who allegedly "controlled" Nice Skate's finances, that the
debt was paid.*fn13 (Telford Aff. ¶ 9.) Moreover, he states that his
present relationship with the co-defendants is strained and that he has
been unable to obtain any discovery from them. (Telford Aff. ¶ 10.)
Based on these allegations, Telford has met his burden to prove his need
for further discovery. Plaintiff's motion for summary judgement on the
guaranty made pursuant to the June 23, 1997 agreement is denied as to
Telford, with leave to renew once discovery is complete.
Accordingly, plaintiff's motion for summary judgment is granted in
part, and denied in part. Defendants Nice Skate, Ann and Raffa are jointly
and severally liable for $208,854.04, together with interest at a rate of
four percent per annum over the U.S. dollar prime rate, attorney's fees,
and collection costs. Defendant Connor is jointly and severally liable
for $204,112.88, together with interest at a rate of four percent per
annum over the U.S. dollar prime rate, attorney's fees, and collection
Plaintiff is directed to present to the court a detailed statement of
attorney's fees, collection costs, and interest on delinquent principal.
Defendants may file opposing papers disputing these amounts.
The court denies plaintiff's motion for summary judgement as to
defendant Telford's liability on the July 10, 1997 notes. The court
dismisses without prejudice plaintiff's motion for summary judgement as
to defendant Telford's liability on the June 23, 1997 notes until further
discovery is conducted. Defendant Telford's cross-motion for summary
judgement is denied.
IT IS SO ORDERED.