New York City Debt Collection Defense Attorney

Guarantors Unable to Escape Liability for $250,000 Capital One Loan

Two guarantors of a $250,000 loan issued by Capital One failed to convince a Kings (Brooklyn, New York) Supreme Court judge that their signed guaranties were unenforceable.

Capital One moved by Summary Judgment in Lieu of Complaint (CPLR § 3213), a form of accelerated judgment "based upon an instrument for the payment of money only."

The Note, Modification, and Extension were introduced by affidavit sworn to by the bank's vice president.

The proof and the guaranty clause in the loan agreement seemed iron clad, but defendants adduced some interesting arguments:

  1. The supporting affidavit lacked certification of conformity as required under CPLR § 2309;
  2. Capital One could not prove the borrower's default;
  3. The guaranty clause is unenforceable because it obligates them to perform non-monetary obligations relating to a mortgaged property;
  4. Capital One failed to first make a monetary demand on the guarantors.
  5. The extension of the maturity date in effect discharged the terms of the loan thereby cutting off their liability.

The court rejected those arguments making the following rulings:

  1. CPLR 3123 generally permits recovery of loan debts secured by mortgages.
  2. The guaranty clause unconditionally guaranties payment.
  3. The parties' explicit intention was to preserve the balance of the loan agreement while only extending the maturity date of the loan.
  4. By signing the guaranties, defendants explicitly waived any right to require notice or demand regarding nonpayment by the debtor.
  5. Failure to include a certificate of conformity with an extra-state affidaivit is not a fatal defect and may be corrected nunc pro tunc, which Plaintiff did here in its Reply brief.
  6. Plaintiffs indeed established default via account statements introduced by affidavit.

The case, recently published in the New York Law Journal, is Capital One Bank, N.A. v. 4021 18 Ave., LLC, 2013 N.Y. Slip. Op. 50703(U).