Chester Airport, Inc. v. Aeroflex Corp.

• Decision Date: 13 November 1962
• Parties: CHESTER AIRPORT, INC., Plaintiff, v. AEROFLEX CORPORATION, Defendant.
• Court: New York Supreme Court

Page 752

237 N.Y.S.2d 752

37 Misc.2d 145

CHESTER AIRPORT, INC., Plaintiff, v. AEROFLEX CORPORATION, Defendant.

Supreme Court, Special Term, New York County.

Nov. 13, 1962.

Order Modified March 26, 1963. See 238 N.Y.S.2d 715.

Hahn, Hessen, Margolis & Ryan, New York City (Melvin Beinart and James C. Slaughter, New York City, of counsel), for plaintiff.

Monroe E. Stein, New York City, for defendant.

VINCENT A. LUPIANO, Justice.

Plaintiff moves for summary judgment on the first and second cause of action. The defendant, in a companion motion, moves to dismiss the first two causes of action for legal insufficiency and for summary judgment in its favor on the third cause of action. The latter is for work, labor and services, and it is conceded by plaintiff that since the commencement of the action, defendant has paid plaintiff the claim represented by this cause and consequently same is moot.

The remaining two causes of action are to recover under a written guarantee of lease.

The first cause of action is based on a written guarantee executed by defendant on November 23, 1960, in connection with a written lease dated November 17, 1960, for a term of 10 years between plaintiff as lessor and Kenyon Laboratories, Inc., as lessee. In this cause of action plaintiff seeks to recover from defendant, as the guarantor of the said lease, the balance of the past due and unpaid rentals due and owing to it under said lease; or, in the alternative, to recover on the second cause of action, based on said written guarantee, arising out of Kenyon's total breach of the 10-year lease wherein plaintiff seeks to recover total damages for such breach, representing the difference between the total rent for the said 10-year lease less the total reasonable market rental value of the premises for the 10-year term.

The answer denies certain of the allegations of the complaint, but expressly admits the execution and delivery by defendant of the written guarantee; and it affirmatively alleges a first defense that the said guarantee agreement was executed and delivered by defendant to plaintiff on or about November 23, 1960, subsequent to the execution and delivery of the lease agreement on November 17, 1960; and that the guarntee agreement was made without any consideration flowing from plaintiff to defendant; and the second defense recites that it did not comply with certain of the provisions of section 19 of the Stock Corporation Law and that its alleged guarantee is accordingly ultra vires and unenforcible against it.

Previously, on March 31, 1959, plaintiff and Kenyon had entered into a lease by reason of which plaintiff agreed to and did construct on its land a certain building for Kenyon's use, and the latter agreed to pay rent as provided for therein. The building was continuously occupied by Kenyon from September 22, 1959.

Subsequently, plaintiff constructed an addition to said building, with respect to which building and addition plaintiff and Kenyon entered into a further lease in Connecticut, dated November 17, 1960 . It is to this lease that defendant's written guarantee, dated November 23, 1960, was made, executed by defendant's president in New York, and upon which was embossed defendant's corporate seal. The larger structure, to wit, the building and addition, was occupied continuously by Kenyon from October 17, 1960. Thereafter, Kenyon failed and refused, despite demand, to pay any rent owing, or to become owing, under the said lease, and it was adjudicated a bankrupt in the United State District Court of Connecticut on April 5, 1961. No rent has been paid for said premises since October 1, 1960.

There cannot be any dispute as to the default in payment of rent, the making of the lease, and the execution and delivery of the guarantee.

The defense of lack of consideration cannot stand. The fact that the lease was executed between the parties thereto in Connecticut on November 17, 1960, and the guarantee was executed thereafter in New York on November 23, 1960, does not constitute a lack of consideration. Those instruments so executed, although on different dates, can be considered to have been made contemporaneously. Even if the guarantee was based on a past consideration (which defendant contends renders its agreement ineffective), such contention is repudiated by subdivision 3 of section 33 of the Personal Property Law.

Nor is the defense of ultra vires a sufficient challenge to the motion. Subdivision (a) of section 19 of the Stock Corporation Law, authorizes the guarantee of any obligation for the payment of money 'when the guaranty is made in connection with, and incidental to, the exercise by such corporation of its corporate rights, powers, purposes, privileges and franchises'. The making of the guarantee falls within the scope of the above statutory provision, since the demonstrated facts show that the guarantee was made by defendant in behalf of and in furtherance of its financial and business interest in Kenyon, which company was affiliated and related to defendant in various ways. In this connection, the proof shows that Kenyon was a subsidiary of defendant, which owned 51% of its stock; that Kenyon was a supplier of gyros to defendant for many years; that it was a customer...