Halpern v. Rosenbloom

• Decision Date: 08 November 1978
• Docket Number: No. 76 Civ. 1704 (CES).,76 Civ. 1704 (CES).
• Citation: 459 F. Supp. 1346
• Parties: Daniel J. HALPERN and Nancy J. McDevitt, Plaintiffs, v. Philip M. ROSENBLOOM, Defendant.
• Court: U.S. District Court — Southern District of New York

459 F. Supp. 1346

Daniel J. HALPERN and Nancy J. McDevitt, Plaintiffs, v. Philip M. ROSENBLOOM, Defendant.

No. 76 Civ. 1704 (CES).

United States District Court, S. D. New York.

November 8, 1978.

COPYRIGHT MATERIAL OMITTED

Monroe J. Korn, New York City, for plaintiffs.

Robert P. Herzog, New York City, for defendant.

MEMORANDUM DECISION

STEWART, District Judge:

Plaintiffs, Halpern and McDevitt bring this action seeking contribution from defendant Rosenbloom in the amount of $35,265 plus interest. The suit was originally brought in the Supreme Court, County of New York in March, 1976, but was removed to this Court by defendant pursuant to 28 U.S.C. § 1332. We have diversity jurisdiction. In his answering papers, defendant generally denies the allegations of plaintiffs, and asserts a number of affirmative defenses and counterclaims. By Notice of Motion, filed March 22, 1978, defendant moves for summary judgment on the issue of contribution alone. Plaintiffs have responded with a cross-motion for summary judgment in the amount of $35,265 plus interest on the contribution issue or, in the alternative, dismissal of certain affirmative defenses and counterclaims raised by defendant.¹

I

We first address defendant's contention that plaintiffs' cross-motion should be dismissed without prejudice since it was served, not on May 18, 1978 as required, but on May 22, 1978, and their "Statement of Material Facts Under Local Rule 9(g)", which must accompany both a motion for and papers opposing summary judgment,² was not filed until May 26, 1978. Defendant neither requested that this Court grant him an extension of time in which to reply, which certainly would have been approved in light of plaintiffs' late service, nor does he explain why no such request was made. Moreover, defendant fails to show that he suffered any prejudice by reason of the late service, other than to say in conclusory fashion that he was not given "an appropriate time to respond".

We can find no convincing reason to further delay resolution of those matters which are ripe for consideration on motions to dismiss and for summary judgment. Certainly a small delay which caused no prejudice and which could have been easily remedied by a request for an extension is not enough to warrant dismissal of plaintiffs' cross-motion. We will, therefore, reach the issues presented.

II

The undisputed facts which relate to defendant's motion for summary judgment and plaintiffs' cross-motion for similar relief are as follows. Halpern-McDevitt and Associates, Inc., formerly known as Halpern-McDevitt, Inc. (referred to herein as the "Corporation"), was a New York corporation engaged in the advertising business. Both plaintiffs, Halpern and McDevitt, were officers and directors of the Corporation from its inception until on or about September 9, 1974. Halpern and McDevitt each executed and delivered to Chemical Bank separate agreements in writing dated June 21, 1971, guaranteeing the payment of all liabilities of the Corporation, then existing or thereafter incurred. Defendant, Rosenbloom, an employee of the Corporation, on or about November 19, 1973, also executed and delivered to Chemical Bank an agreement in writing guaranteeing payment of all liabilities of the Corporation, then existing or thereafter incurred. On August 27, 1974, the Corporation executed and delivered to Chemical Bank its promissory note in writing wherein it promised to pay to Chemical Bank on November 26, 1974, the sum of $100,000. This note was signed on behalf of the Corporation by Halpern, as president, and McDevitt, as secretary. On September 9, 1974, the Corporation made an assignment for the benefit of creditors, ceased doing business, and was unable to pay all or any part of the loan obligation of $100,000. On December 9, 1974, Chemical Bank, as plaintiff, filed an action against Halpern, McDevitt and Rosenbloom seeking judgment against them, based on their guaranties, for the sum due Chemical Bank on the note together with interest, attorneys' fees and costs. On March 5, 1975, the Supreme Court, New York County, entered an order permitting Chemical Bank to enter judgment against Halpern and McDevitt as upon a default and severing the action against Rosenbloom, who resided in New Jersey and had not received service. On September 11, 1975, Chemical Bank, as plaintiff, and Halpern and McDevitt, as defendants, executed a stipulation discontinuing the bank's action against Halpern and McDevitt as having been compromised and settled. This stipulation was filed with the Office of the Clerk of New York County on September 19, 1975. On September 16, 1975, a stipulation of discontinuance of the action between Chemical Bank, as plaintiff, and Rosenbloom, as defendant, was entered into. No judgment was ever obtained by Chemical Bank against either Halpern, McDevitt or Rosenbloom.

In March, 1976, Halpern and McDevitt, as plaintiffs, initiated this action against Rosenbloom alleging, inter alia, that on October 10, 1974, they paid to Chemical Bank the sum of $30,588.80 on the balance of the $100,000 loan, and on September 11, 1975, in connection with their stipulation of settlement, they paid to Chemical Bank the sum of $75,206.21. These two payments together discharged the $100,000 loan and the $5,795 interest accrued thereon. Plaintiffs alleged that these payments were made out of their personal property.³ They seek contribution from defendant Rosenbloom, based on his guaranty, for one third of the $105,795 allegedly paid by them to Chemical Bank, or $35,265, together with interest from September 11, 1975 and costs.

Rosenbloom answered, denying most of the allegations and in his "Seventh Affirmative Defense" alleged that since the action by Chemical Bank against Halpern and McDevitt was settled, instead of going to judgment, "said settlement and release prior to judgment has forever barred the plaintiffs in this action from exercising any right of contribution or indemnification against defendant. . . ." Answer, ¶ 28. It is on this issue alone that defendant moves for summary judgment. Thus we are faced with the concise legal issue: under New York law does a guarantor who settles an action based on his guaranty of another's indebtedness which is in default (rather than allows a judgment to be entered against him in that action), forfeit his right to seek contribution of a proportionate share from a co-guarantor of the same indebtedness? This issue has been briefed by both parties.

We have not found any New York cases directly on point. We therefore find it necessary to determine ourselves how the state courts would resolve this issue of first impression.

In New York, the right to contribution from a co-guarantor

. . . is founded upon the general principles of equity, that sureties in aequali jure must bear the common burden equally, under which the law implies a contract between them to contribute ratably toward discharging any liability which they may incur in behalf of their principal.⁴

Hard v. Mingle, 206 N.Y. 179, 99 N.E. 542, 544 (1912); see also: Asylum of St. Vincent de Paul v. McGuire, 239 N.Y. 375, 146 N.E. 632, 634 (1925); 10 N.Y.Jurisprudence, Contribution § 8 (1960). The right of action by one co-guarantor against another

. . . grows out of the original implied agreement, arising out of there being cosureties, that if one shall be compelled to pay the whole or a disproportionate part of the debt, for which both thus collaterally and provisionally stipulate to be liable, the other will pay such a sum as will make the common burden equal . . ..

Hard v. Mingle, 99 N.E. at 544. This disproportionate payment by one of the co-guarantors of the debt, however, must not be voluntary. Codling v. Paglia, 38 A.D.2d 154, 161-162, 327 N.Y.S.2d 978, 986 (A.D.3 1972), modified, 32 N.Y.2d 330, 345 N.Y.S.2d 461, 298 N.E.2d 622 (1973). There must exist a legal obligation to make the payment. Yawger v. American Surety Co., 212 N.Y. 292, 106 N.E. 64, 66 (1914); Pease v. Egan, 131 N.Y. 262, 30 N.E. 102, 104 (1892); N.Y.Jurisprudence, Contribution, supra § 8 at 469-470; 18 Am.Jur.2d, Contribution § 11 (1965) at 24-25. There is no authority for defendant's contention that a payment is to be considered voluntary unless a judgment has been entered against the co-guarantor who made the payment and now seeks contribution. There is, however, authority to the contrary:

A voluntary payment which an obligor is not under legal obligation to make does not give a right of action against his co-obligors for contribution; but it is sufficient if the payment is made under a legal and fixed obligation. A payment is deemed in law to be compulsory when the party making it cannot legally resist it. . . .

In general, a party to a common obligation is not, before an otherwise sufficient payment will entitle him to contribution, obliged to wait until his co-obligor requests payment to be made, nor is he obliged to wait until the obligee brings suit, secures judgment against him, procures an execution to issue, levies upon his goods, or otherwise extorts payment from him. A payment made for his own protection as soon as the obligation becomes due and the liability of the co-obligors is fixed is, in legal contemplation, compulsory and not voluntary.

Am.Jur.2d, Contribution, supra at 24-25. See also: N.Y.Jurisprudence, Contribution, supra at 470:

So long as one of the co-obligors remains liable for the principal debt, the liability of the other to contribute in the event he is compelled to pay continues, the only requirement being that the obligation at the time of payment be valid and subsisting as against the paying obligor.

We think that these rules are applicable to the present case and that they require the defendant to contribute his proportionate share of the liability discharged by plaintiffs. Defendant makes no argument that the plaintiffs' payment to Chemical Bank was voluntary, or otherwise less than a...