Citibank, N.A. v. Plapinger

• Decision Date: 22 October 1985
• Citation: 66 N.Y.2d 90,495 N.Y.S.2d 309,485 N.E.2d 974
• Parties: , 485 N.E.2d 974 CITIBANK, N.A., et al., Respondents, v. Allan R. PLAPINGER et al., Appellants.
• Court: New York Court of Appeals Court of Appeals

Page 309

495 N.Y.S.2d 309

66 N.Y.2d 90, 485 N.E.2d 974

CITIBANK, N.A., et al., Respondents, v. Allan R. PLAPINGER et al., Appellants.

Court of Appeals of New York Oct. 22, 1985.

Owen McGivern, George S. Leisure, Jr., Eric J. Lobenfeld and Robin Kaufman, New York City, for appellants.

George J. Wade and Stanley S. Arkin, New York City, for respondents.

OPINION OF THE COURT

MEYER, Judge.

Fraud in the inducement of a guarantee by corporate officers of the corporation's indebtedness is not a defense to an action on the guarantee when the guarantee recites that it is absolute and unconditional irrespective of any lack of validity or enforceability of the guarantee, or any other circumstance which might otherwise constitute a defense available to a guarantor in respect of the guarantee, those recitals being inconsistent with the guarantors' claim of reliance upon an oral representation that the lending banks were committed to extend to the corporation an additional line of credit. The order of the Appellate Division, 107 A.D.2d 627, 484 N.Y.S.2d 547 should, therefore, be affirmed, with costs.

I

Defendants are officers and directors of and own all the voting stock of United Department Stores, a holding company with a number of retail department store subsidiaries. Plaintiff, Citibank, N.A., and the other four plaintiff banks provided United with a $15,200,000 line of credit. After default by United, discussions took place concerning restructuring of the indebtedness as a term loan guaranteed by the defendants and the extension to United of an additional line of credit of $8,000,000. On August 10, 1981, the $15,200,000 term loan transaction closed, but the line of credit was never funded.

On January 25, 1982, United filed a voluntary petition in bankruptcy. Plaintiff banks then declared the term loan principal and interest due and brought the present action against defendants on the guarantee. Defendants' answer set up defenses of fraud in the inducement, negligent misrepresentation and failure of a condition precedent and asserted counterclaims based upon fraud, negligent misrepresentation and breach of contract. On motion of plaintiff banks, Special Term struck the affirmative defenses and counterclaims and directed entry of judgment in favor of plaintiffs, holding that by the specific language of the unconditional guarantee defendants waived their right to assert the defenses and counterclaims.

On appeal to the Appellate Division, that court affirmed, the Presiding Justice dissenting. The majority found the evidence of fraud in the inducement contained in defendants' affidavits to consist of "shadowy and conclusory statements," but, also, as evidenced by its citation to page 138 of its own decision in Seaman-Andwall Corp. v. Wright Mach. Corp., 31 A.D.2d 136, 295 N.Y.S.2d 752, affd. 29 N.Y.2d 617, 324 N.Y.S.2d 410, 273 N.E.2d 138, apparently held the disclaimer in the guarantee sufficiently specific to bar consideration of the defenses in any event. The Presiding Justice disagreed on both points. We agree with him that defendants' affidavits contained evidence, uncontradicted by plaintiffs, sufficient to raise a triable issue concerning fraud in the inducement, but also agree with Special Term and the Appellate Division majority that the language of disclaimer in the guarantee is sufficiently specific to foreclose as a matter of law the defenses and counterclaims ^* based on fraud, negligence or failure to perform a condition precedent asserted against plaintiff banks, under the rule of Danann Realty Corp. v. Harris, 5 N.Y.2d 317, 184 N.Y.S.2d 599, 157 N.E.2d 597. We therefore affirm.

II

Defendants' papers on the summary judgment motion contain evidence in admissible form which, with the inferences that could reasonably be drawn therefrom, was sufficient to raise a triable issue of fact. The affidavit of Allan R. Plapinger states that before the commitment letter for the term loan was signed, he advised Froehler, the Citibank officer who was negotiating on behalf of all the banks, that neither he nor the other stockholders would sign the letter until the line of credit was agreed to and that "Froehler promised that we had the line," that the line of credit would be funded half by Citibank and half by National Bank of Detroit, that National Bank prepared papers for its share of the line of credit including a note which was signed on behalf of United by one of the defendants, that the Citibank officer who then took over the negotiations imposed additional conditions as to the line of credit which were accepted by United and defendants that defendants relied on those representations and would not have entered into the guarantee had they not been made, and that the representations were false when made or were recklessly made. In an unverified reply, Citibank, National Bank of Detroit and Equibank deny that they entered into the oral contract for the line of credit alleged in defendants' answer but filed no affidavit in support of that denial. People's Trust and Broad Street National, in a verified reply, likewise deny the allegations of the counterclaims and in an attorney's affidavit point out that their representatives are not alleged to have made any representations or been present when representations were made as to the line of credit, nor did defendants allege that they were to be participants in the line of credit. The undenied statement that defendants were told that they had the line of credit was a representation of present fact, not of future intent (Sabo v. Delman, 3 N.Y.2d 155, 164 N.Y.S.2d 714, 143 N.E.2d 906), the falsity of which, in the absence of explanation, can reasonably be inferred from the refusal to extend the promised credit, and the attorney's affidavit submitted on behalf of People's Trust and Broad Street National does no more than raise a fact question concerning whether, in making the representation he is alleged to have made in order to obtain defendants' guarantee, the Citibank officer was acting in behalf of those banks. Summary judgment should not have been granted plaintiffs, therefore, based upon the insufficiency of defendants' evidence in opposition.

III

Summary judgment was properly granted plaintiffs, however,...