Gazza v. United California Bank Intern.

• Decision Date: 21 June 1982
• Citation: 88 A.D.2d 968,451 N.Y.S.2d 806
• Parties: Joseph A. GAZZA et al., Appellants-Respondents, v. UNITED CALIFORNIA BANK INTERNATIONAL, Respondent-Appellant, et al., Defendants. UNITED CALIFORNIA BANK INTERNATIONAL, Respondent-Appellant, v. Joseph A. GAZZA et al., Appellants-Respondents.
• Court: New York Supreme Court — Appellate Division

Page 806

451 N.Y.S.2d 806

88 A.D.2d 968

Joseph A. GAZZA et al., Appellants-Respondents,

v.

UNITED CALIFORNIA BANK INTERNATIONAL, Respondent-Appellant,

et al., Defendants.

UNITED CALIFORNIA BANK INTERNATIONAL, Respondent-Appellant, v. Joseph A. GAZZA et al., Appellants-Respondents.

Supreme Court, Appellate Division Second Department.

June 21, 1982.

Cahn, Wishod & Wishod, Melville (Richard C. Cahn, Melville, of counsel; Joseph H. Wishod, Melville, on the brief), for appellants-respondents.

Shearman & Sterling, New York City (Thomas M. Geisler, Jr. and John J. Madden, Jr., New York City, of counsel), for respondent-appellant.

Before LAZER, J. P., and MANGANO, BROWN and NIEHOFF, JJ.

MEMORANDUM BY THE COURT.

Appeal by Joseph and Margaret Gazza, as plaintiffs in Action No. 1 and as defendants in Action No. 2, from so much of an order of the Supreme Court, Suffolk County, dated January 21, 1981, as denied their cross motion for summary judgment and granted the branch of United California Bank International's motion which sought to consolidate the actions. Cross appeal by United California Bank International, as defendant in Action No. 1 and as plaintiff in Action No. 2, from so much of the same order as denied the branch of its motion which sought summary judgment.

Order modified, on the law, by (1) deleting the provision granting the branch of United California Bank International's motion which sought consolidation and substituting a provision denying that part of the motion, and (2) deleting the provision which denied the Gazzas' cross motion for summary judgment and substituting a provision granting the cross motion to the extent that summary judgment is granted to the Gazzas dismissing Action No. 2 without prejudice to United California Bank International's seeking leave to amend its answer in Action No. 1, and otherwise denying the cross motion. As so modified, order affirmed, without costs or disbursements.

In July, 1970, United California Bank International approved a revolving line of credit for Rocke International Corporation in the amount of $500,000. Pursuant to the loan agreement, on July 10, 1970, Joseph Gazza, an officer and director of Rocke, and his wife, Margaret, executed a personal guarantee of Rocke's indebtedness to the bank. Although the amount of the guarantee was left blank at the time of its delivery, the bank subsequently filled the blank space by inserting the amount of $1,000,000. After a series of loans had been made to Rocke, the bank agreed to raise the line of credit to a higher amount. In January, 1971, after more than $900,000 had been advanced, Rocke defaulted on its obligations and the bank demanded payment from the Gazzas pursuant to their guarantee. In April, 1971, Joseph Gazza executed a $365,000 mortgage on certain real property as security for the guarantee, but in the mortgage instrument the parties explicitly reserved all rights or defenses relating to the guarantee.

The Gazzas commenced the first of these actions in May, 1973, seeking a declaratory judgment annulling the guarantee and the mortgage on the ground, inter alia, that the allegedly fraudulent completion of the guarantee by the bank discharged their liability. In its answer, the bank asserted the defense that the Gazzas "authorized, consented to and ratified" the insertion of the $1,000,000 ceiling in the guarantee, but no counterclaim for recovery under the guarantee was interposed. In March, 1977, the bank finally commenced a separate action on the guarantee, but by then more than six years had elapsed since the default by Rocke and the Gazzas pleaded the Statute of Limitations. In August, 1980, the bank moved for an order (1) consolidating the two actions on the ground that they arose out of the same transactions and involved common questions of law and fact (CPLR 602, subd. ), and (2) granting it summary judgment in both actions. Annexed to the bank's moving papers was a portion of the deposition of a former bank officer who testified that the guarantee had been left blank to accommodate Rocke's efforts to increase its line of credit. In response, Joseph Gazza submitted an affidavit claiming that he had intended to guarantee Rocke's debts only up to $500,000 and denying that he ever authorized the bank to complete the guarantee with another sum. By cross motion, the Gazzas also sought summary judgment in both actions and contended that the action to enforce the guarantee was time-barred.

Special Term granted the bank's request to consolidate but denied each party's motion for summary judgment. The court rationalized its consolidation determination by treating the action to enforce the guarantee as a counterclaim in the declaratory judgment action, thereby tolling the Statute of Limitations pursuant to CPLR 203 (subds. ).

We agree with Special Term that summary judgment for either side is inappropriate to the declaratory judgment action and to the bank's motion on its own action as well. The fact that the amount of the guarantee was incomplete at its execution does not automatically render the instrument void (see Deering Milliken, Inc. v. Georgette Juniors, 17 A.D.2d 405, 235 N.Y.S.2d 72), for if the subsequent completion was authorized, the guarantee could be...