Braten v. Bankers Trust Co.

• Decision Date: 01 November 1983
• Parties: , 456 N.E.2d 802 Milton BRATEN, Appellant, v. BANKERS TRUST COMPANY, Respondent. (And a Third-Party Action.) WILLIAMSTON PANTS CO., INC., et al., Appellants, v. BANKERS TRUST COMPANY, Respondent. Erwin L. KLINEMAN, Appellant, v. BANKERS TRUST COMPANY, Respondent. (And a Third-Party Action.) William J. KLINEMAN et al., as Executors of Emery E. Klineman, Deceased, Appellants, v. BANKERS TRUST COMPANY, Respondent. (And a Third-Party Action.)
• Court: New York Court of Appeals Court of Appeals

Page 861

468 N.Y.S.2d 861

60 N.Y.2d 155, 456 N.E.2d 802

Milton BRATEN, Appellant, v. BANKERS TRUST COMPANY, Respondent. (And a Third-Party Action.)

WILLIAMSTON PANTS CO., INC., et al., Appellants, v. BANKERS TRUST COMPANY, Respondent.

Erwin L. KLINEMAN, Appellant, v. BANKERS TRUST COMPANY, Respondent. (And a Third-Party Action.)

William J. KLINEMAN et al., as Executors of Emery E.

Klineman, Deceased, Appellants, v. BANKERS TRUST COMPANY, Respondent. (And a Third-Party Action.)

Court of Appeals of New York.

Nov. 1, 1983.

Archibald A. Patterson and Daniel Rhoades, New York City, for appellant in the first above-entitled action.

Robert Feldman and Steven Troup, New York City, for appellants in the second, third and fourth above-entitled actions.

David B. Eizenman and Arnold A. Jaffe, New York City, for respondent in all of the above-entitled actions.

OPINION OF THE COURT

KAYE, Judge.

The breach of contract actions before us, remnants of a web of litigation growing out of the commercial misfortunes of Braten Apparel Corporation (BAC), are based on an alleged oral promise of May, 1974 that, in exchange for an additional guarantee and pledge of services, Bankers Trust Company (the Bank) would continue BAC's credit until at least September 30, 1974. Plaintiffs are Milton Braten, BAC's president, individually; Erwin and Emery Klineman, Braten's father-in-law and his brother; and three companies who were suppliers to BAC. A claim by BAC against the Bank based on this same oral promise was dismissed on the Bank's summary judgment motion, the promise having been found unenforceable in light of the Bank's integrated written loan agreement with BAC. (Braten Apparel Corp. v. Bankers Trust Co., 80 A.D.2d 786, 438 N.Y.S.2d 232, mot. for lv. to app. den. 54 N.Y.2d 604, 443 N.Y.S.2d 1027, 427 N.E.2d 512.) The question presented is whether summary judgment dismissing plaintiffs' separate claims is also appropriate, as the lower courts held.

Underlying the relationship among the parties is a revolving credit agreement between BAC and the Bank, dated March 31, 1971 (the 1971 Agreement). All loans by the Bank to BAC pursuant to the 1971 Agreement were evidenced by demand notes providing that, in the event of BAC's changed financial circumstances, or at such time as the Bank felt itself insecure, the Bank could call the loan in full and proceed against the collateral. The 1971 Agreement specified further that it could not be changed orally.

By spring, 1974, the ratio of BAC's accounts receivable to debt set forth in the 1971 Agreement had been exceeded. The Bank felt itself insecure and sought additional collateral from BAC. At that point the events giving rise to the present actions took place. Plaintiffs assert that, at a dinner meeting in May attended by Milton Braten, Erwin Klineman and representatives of the Bank, the Bank promised it would continue financial accommodations to BAC and would not exercise its rights under the 1971 Agreement until at least September 30, 1974, if both Klinemans would provide their personal guarantees and Emery Klineman would return to active participation in the business. This arrangement, however, was not concluded on the spot. Negotiations looking toward a writing ensued, each side represented by counsel. The Bank refused to renew letters of credit for BAC until there was a signed guarantee.

The document ultimately executed by both Klinemans on July 9, 1974, consists of a nine-page "Guaranty", incorporating the 1971 Agreement as an exhibit. The "Guaranty" makes no reference to the Bank's alleged promise of forbearance until September 30, 1974. On the contrary, it states that, up to a maximum amount of $500,000 and until September 30, 1974, the Klinemans "irrevocably and unconditionally guarantee to the Bank when due, whether by acceleration or otherwise, a certain portion of [BAC's] liabilities to the Bank". The "Guaranty" recites that loans to BAC are secured by an assignment of accounts receivable, that the unpaid principal balance exceeds the aggregate face amounts of the genuine accounts, and that the Klinemans have requested the Bank to continue making advances to BAC even though such advances may exceed the value of the accounts. The "Guaranty" is given, so it says, "in consideration of financial accommodations given, or to be given or continued" to BAC. In fixing the Lkinemans' obligation, the terms of the 1971 Agreement are woven throughout the "Guaranty".

After execution of the "Guaranty", the Bank continued to extend credit to BAC. However, in late August, 1974, in response to financial statements indicating the insolvency of BAC, the Bank called the loan and proceeded against the collateral. Plaintiffs charge that the abrupt termination of BAC's credit a full five weeks before September 30, 1974 constituted a breach of the oral agreement of May, 1974, which damaged them. Milton Braten claims he lost the value of his investment in BAC; the Klinemans complain of the increased guarantee and uncompensated services for BAC; and the corporate plaintiffs, who say they knew of and relied on the Bank's oral promise, assert that they were induced to gear up their production facilities to supply BAC through September 30, 1974. Plaintiffs each state that the oral promise of forbearance was made directly to them, and also that each is the third-party beneficiary of the Bank's oral promise made to the others.

We affirm the decision below, which granted the Bank's motion for summary judgment dismissing plaintiffs' claims, but on different grounds. ¹

Before proceeding to a consideration of the three separate groups of claims, we point out that Millerton Agway Coop. v. Briarcliff Farms, 17 N.Y.2d 57, 268 N.Y.S.2d 18, 215 N.E.2d 341, relied on by all the plaintiffs, is inapposite. That was an action for fraud in the inducement. While plaintiffs have served more than a dozen complaints against the Bank, they do not assert fraud claims in the complaints before us. Nor is Nassau Trust Co. v. Montrose Concrete Prods. Corp., 56 N.Y.2d 175, 451 N.Y.S.2d 663, 436 N.E.2d 1265, applicable since the waiver plaintiffs seek to enforce is of the Bank's contractual rights with a third party, BAC.

the klinemans

The claims of the Klinemans based on an oral promise to them in May, 1974 to continue credit to BAC were appropriately dismissed. The principle which governs this result is simply stated: evidence of what may have been agreed orally between the parties prior to the execution of an integrated written instrument cannot be received to vary the terms of the writing. Here, the oral agreement the Klinemans seek to enforce fails because it contradicts the provisions of the "Guaranty" which they negotiated and signed subsequent to the alleged oral promise and because it is so clearly connected with the "Guaranty" that the parties could have been expected to embody it in that writing. (Mitchill v. Lath, 247 N.Y. 377, 380-381, 160 N.E. 646.) Such a collateral agreement cannot be separately enforced. (Sabo v. Delman, 3 N.Y.2d 155, 161, 164 N.Y.S.2d 714, 143 N.E.2d 906; Fogelson v. Rackfay Constr. Co., 300 N.Y. 334, 338, 90 N.E.2d 881.)

In their "Guaranty", the Klinemans undertake "irrevocably and unconditionally" to guarantee payments to the Bank when due, subject only to the conditions of maximum amount and termination date. The Klinemans would now impose yet a third condition, the extension of financial accommodations to BAC until at...