Chemical Bank New York Trust Co. v. Liebman

Capozzoli, J. Plaintiff-appellant is a New York corporation. The defendants were either officers, directors or active in the management and operations of the business of three affiliated corporations. On or about January 2, 1968 two of the corporations entered into factoring agreements with L. F. Dommerich & Co. Inc., the predecessor in interest to the plaintiff. The third corporation entered into a factoring agreement directly with the plaintiff on or about October 10, 1968. When the factoring agreements were entered into, the defendants duly executed and delivered their respective joint and several guarantees of payment of the indebtedness of the three afore-mentioned corporations. These guarantees were given in order to induce Dommerich and the plaintiff to enter into the factoring agreements above mentioned. Thereafter the three corporations encountered financial difficulties and failed to pay their indebtedness. The plaintiff [494] called upon the defendants to honor their guarantees, without success. This action was then brought by the plaintiff for the damages sustained. Following the bringing of the action one of the corporations, Creations by Aria, Inc. (Aria), filed a petition under chapter 11 of the Bankruptcy Act, in the United States District Court for the Southern District of New York. When the bankruptcy proceeding was instituted Aria raised a question as to the proper amount due to the plaintiff. This was followed by negotiations which resulted in an agreement and understanding between the parties, whereby the total indebtedness to the plaintiff was fixed at $600,000. This was arrived at, by agreement, by the consolidation of the accounts of Aria and the other two corporations. The understanding was evidenced by means of a written stipulation of settlement, executed on December 24, 1969, signed by the defendant, Liebman, on behalf of the three affiliated corporations, and also the attorneys who represent the three defendants in this action. Amongst other things, it was "agreed that its [plaintiff’s] claim shall be deemed in the amount of $600,000, to which the Debtor agrees”. It further provided "4. The claim of the creditor [plaintiff] shall be deemed to be and fixed in the amount of $600,000”. Following the execution of the stipulation of settlement Aria, through its president, the defendant, Liebman, applied to the court for an order approving the stipulation of settlement in its entirety. The application resulted in an order, issued by Hon. Asa S. Herzog, Referee in Bankruptcy, approving the settlement and providing amongst other things, as follows: "ORDERED, that the claim of Chemical Bank — Dommerich Division, a creditor herein, be and it is hereby fixed in the amount of $600,000 for the purpose of said creditor filing its consent to the modified Plan of Arrangement herein and for disbursement and payment thereunder to said creditor”. Thereafter the plaintiff received dividends in the bankruptcy proceeding totaling $150,000, which was 25% of the $600,000 agreed upon as the fixed indebtedness. No further payment was received by the plaintiff and none will be made. The balance due to the plaintiff is $450,000 and plaintiff has demanded from the three defendants payment of this amount under their guarantees. The defendants have refused to pay and this action is therefore prosecuted. [495] The defendants argue that the receipt by the plaintiff of the 25% dividend in the bankruptcy proceeding was an accord and satisfaction of the entire debt due the plaintiff and also a discharge of the liability of the defendants under their guarantees. It is admitted that, other than the stipulation of settlement mentioned above, there is no other writing on which the contention of defendants can be based. They claim that there was an oral agreement with plaintiff which effected the discharge of the defendants’ liability as guarantors. In this connection it is important to note the following provision in the guarantees: "Nothing shall discharge or satisfy the liability of the undersigned hereunder except the full performance and payment of the said obligation and indebtedness with interest.” "The undersigned further waive notice of and hereby consent to any agreement or arrangements whatever with the client or anyone else, including without limitation agreements and arrangements for payment, extension, subordination, composition, arrangement, discharge or release of the whole or any part of said obligations or of said indebtedness, contracts or agreements or other guarantors, or for the change or surrender of any or all security, or for compromise, whether by way of acceptance or part payment or of returns of merchandise or of dividends or in any other way whatsoever, and the same shall in no way impair the undersigned’s liability hereunder. ” (Emphasis added.) The guarantees also contain the following language: "This instrument cannot be changed or terminated orally”. Subdivision 1 of section 15-301 of the General Obligations Law states: "A written agreement or other written instrument which contains a provision to the effect that it cannot be changed orally, cannot be changed by an executory agreement unless such executory agreement is in writing and signed by the party against whom enforcement of the change is sought or by his agent.” At this point it is helpful to note the provision found in the Bankruptcy Act (US Code, tit 11, § 34): "The liability of a person who is a co-debtor with, or guarantor or in any manner a surety for, a bankrupt shall not be altered by the discharge of such bankrupt.” The reliance of the defendants on an alleged oral agreement is misplaced because, under the circumstances of this case, an oral agreement could not operate to discharge the defendants from their responsibility to honor the obligations which they [496] assumed when they executed and delivered their guarantees. (Chemical Bank v Wasserman, 45 AD2d 703, affd 37 NY2d 249; Manufacturers Hanover Trust Co. v Trans Nat. Communications, 36 AD2d 709.) In the last-cited case this court said (p 710): "respondents may not avoid their obligation to plaintiff bank, evidenced by a written instrument, by claiming that there was an oral representation or promise on the part of the bank not to enforce the guarantee according to its terms. [Citing cases.]” In Chemical Bank v Wasserman (supra) this court said that the "oral agreement, however, cannot operate to terminate [guarantor’s] obligation and does not create a triable issue of fact. (General Obligations Law, § 15-301 * * *.)” The contentions of the defendants defy reason. To argue that their concession of $600,000 being due from the corporations, which was made in the Bankruptcy Court, is to be limited strictly to the bankruptcy proceeding and in none other, is unbelievable. It is, in effect, to charge the Bankruptcy Court with permitting an excessive claim to be made by the plaintiff, to the prejudice of other creditors, simply to favor this plaintiff. It does not make sense. The reliance of the dissent on the conclusory allegations contained in the affidavit of Liebman is entirely misplaced because there is not a single evidentiary fact set forth therein. It is replete with conclusions. As correctly stated in the affidavit of David Rubin, vice-president of plaintiff: "there is a failure to set forth the dates, the places or other details which might otherwise lend verisimilitude to this otherwise bald and unconvincing tale.” It is concluded that the order below, insofar as it denied motion of plaintiff for summary judgment, should be reversed on the law and summary judgment should be directed in favor of the plaintiff, with costs. Settle order on notice.