Holt v. Feigenbaum

ant. Appeal (1) from an order of the Supreme Court at Special Term, entered December 22, 1978 in Broome County, which reaffirmed a prior order of the same court, entered September 27, 1978 in Broome County, granting summary judgment to plaintiffs, and (2) from the judgment entered thereon. The parties are stockholders in Mobile Modular Industries, Inc., a corporation which was in need of capital to continue its operations. In furtherance of that need, the First City National Bank of Binghamton, New York, agreed to establish a line of credit for the corporation in the sum of $100,000, provided the loan was secured by the individual guarantees of the stockholders. All of the stockholders except the defendant executed guarantees to the bank. Either contemporaneously therewith or shortly thereafter, all the stockholders, including the defendant, executed a "Cross-Indemnification Agreement” to limit their individual liability in the event of corporate default by agreeing to indemnify each other so that no one stockholder would have to pay an amount greater than the assigned proportionate share of each. In 1973 the corporation defaulted and the bank collected $86,420.65 from the stockholders who had executed individual guarantees. Upon defen 677 dant’s refusal to contribute the sum assigned to him in accordance with the cross-indemnification agreement, the plaintiffs commenced this action. Thereafter, Special Term denied defendant’s motion for summary judgment dismissing the complaint and granted plaintiffs’ cross motion requiring defendant to pay his agreed share of the loss. We reject defendant’s contention that he is not liable on the cross-indemnification agreement on the ground of lack of consideration. Although defendant was not liable as a guarantor to the bank for any loss sustained by the corporation’s default, he promised to indemnify the plaintiffs so that no stockholder, including himself, would pay more than his proportionate share specified in the agreement. Defendant benefited when the bank loaned the funds to the corporation and all the stockholders who signed the cross-indemnification agreement assumed potential liability to each other. Thus, defendant promised to indemnify plaintiffs for becoming guarantors for the corporation, and as the Court of Appeals explained in Jones v Bacon (145 NY 446, 449), the assumption of such a responsibility was "sufficient consideration” for the promise. Judgment and order affirmed, with costs. Greenblott, Mikoll and Herlihy, JJ., concur.