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THE SURETY BOND, A CONTRACT, WAS UNAMBIGUOUS AND MADE NO MENTION OF PREJUDGMENT INTEREST; THE SURETY THEREFORE WAS NOT OBLIGATED TO PAY PREJUDGMENT INTEREST; THE ARGUMENT THAT CPLR 5001 MAKES PAYMENT OF PREJUDGMENT INTEREST MANDATORY WAS REJECTED (THIRD DEPT).

The Third Department, modifying Supreme Court, determined that the terms of the surety bond governed whether the surety was obligated to pay prejudgment interest. Because the bond, a contract, did not mention prejudgment interest, the surety was not obligated to pay it. The argument that CPLR 5001 makes an award of prejudgment interest mandatory, regardless of the language of the surety bond, was rejected:

Here, the contract states that the surety will “pay for labor, materials, and equipment furnished for use in the performance of the [c]onstruction [c]ontract”; importantly to this case, there is no commitment to remit — or even mention of — prejudgment interest. “Surety bonds — like all contracts — are to be construed in accordance with their terms under established rules of contract construction. . . . [A] surety’s obligation upon its undertaking is defined solely by the language of the bond and cannot be extended by the court” … . In the matter before us, the damage claimed by plaintiff is the amount of prejudgment interest it did not receive in the judgment against the surety. However, under the clear and unambiguous terms of the payment bond, the surety had no obligation to remit same. Stone Cast, Inc. v Couch, Dale Marshall P.C., 2025 NY Slip Op 05860, Third Dept 10-23-25

Practice Point: CPLR 5001 does not make payment of prejudgment interest mandatory in breach of contract cases. The language of the surety bond, a contract, controls.​

 

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THE GUARANTY OF RENT DUE UNDER THE COMMERCIAL LEASE WAS A “GOOD GUY” GUARANTY; THE GUARANTOR’S LIABILITY ENDED WHEN THE TENANT VACATED THE PREMISES, NOT SUBSEQUENTLY WHEN THE LANDLORD ACCEPTED THE SURRENDER OF THE PREMISES (CT APP). ​

The Court of Appeals, reversing the Appellate Division, in a full-fledged opinion by Judge Wilson, over a two-judge dissent, determined Mr. Lieberman’s guaranty of the rent due under the commercial lease terminated when the tenant vacated the premises, not when the landlord subsequently accepted the surrender of the premises. The opinion turns on interpreting the language of the guaranty and the lease:

In the world of commercial leases, a “good guy” guaranty is a limited guaranty in which the guarantor’s obligation extends only up to the point that the tenant surrenders the premises to the landlord, leaving the tenant solely responsible for rent due from that point forward … . The question in this case is whether the guaranty at issue operates in that manner. The guarantor’s liability ended when the tenant vacated the premises and, under the terms of the guaranty in this agreement, was not conditioned on the landlord’s acceptance of that surrender. Accordingly, we reverse. * * *

It would be a simple matter for parties intending to enter into a “good guy” guaranty to say so explicitly, with clear language that does not require courts to resort to rules of construction regarding superfluity or canons that aid in determining the parties’ intent. Here, although the parties could have expressed their intent in a much simpler and clearer way and avoided this litigation entirely, we conclude that the guaranty in this case is limited, confining the guarantor’s liability to damages accruing prior to the date the tenant surrendered possession of the Premises. Under the terms of the guaranty, WSA [the tenant] surrendered possession of the Premises on or about November 30, 2020 when it provided 1995 CAM [the landlord] notice, completely vacated the Premises, and relinquished control of the Premises. 1995 CAM LLC v West Side Advisors, LLC, 2025 NY Slip Op 05782, CtApp 10-21-25

Practice Point: Consult this opinion for an analysis of a “good guy” guaranty of rent due under a commercial lease.

 

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ALTHOUGH THE LEASE WAS ENTERED INTO BY THE LIMITED LIABILITY COMPANY (LLC) THE OWNERS OF THE LLC SIGNED A PARAGRAPH AGREEING TO GUARANTEE THE PAYMENT OF THE RENT; THE BREACH OF CONTRACT ACTION AGAINST THE INDIVIDUAL OWNERS SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that, although the lease was entered into by the limited liability company (LLC), the owners of the LLC signed as personal guarantors of the rent payments. Therefore the breach of contract action against the individual owners should not have been dismissed:

“An agent executing a contract on behalf of a disclosed principal ‘is not liable for a breach of the contract unless it clearly appears that he or she intended to bind himself or herself personally'” … . “[T]here [must be] clear and explicit evidence of the agent’s intention to substitute or superadd his [or her] personal liability for, or to, that of his [or her] principal” … . “There is great danger in allowing a single sentence in a long contract to bind individually a person who signs only as a corporate officer” … . A personal guaranty of a corporation’s obligation will be enforced against an individual where it “‘constitute[s] a deliberately stated, unambiguous, and separate expression personally obligating'” the individual under the contract … . * * *

Directly above the … signature lines was a paragraph stating that the parties agreed “[t]hat Roman and Solomon Davydov, are the owners of Tavak LLC, and they will act as personal guarantors for the payment of rent and any other[ ] costs, bills and fees and issues arising from the above enumerated items.” …

The clearly worded language of the guaranty clause made reference to Tavak and to each of the individual defendants by name, was contained in a short, two-page rider, and appeared directly above the rider’s signature lines, which the individual defendants signed without listing their corporate titles. 166-20 Union Turnpike, LLC v Tavak, LLC, 2025 NY Slip Op 05054, Second Dept 9-24-25

Practice Point: The owners of a limited liability company which enters a lease can agree to be personally liable for the debts of the LLC by guaranteeing the payment of rent.​

 

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A FOREIGN DEFAULT JUDGMENT MAY BE ACCORDED FULL FAITH AND CREDIT IN NEW YORK BY A PLENARY ACTION OR A MOTION FOR SUMMARY JUDGMENT IN LIEU OF COMPLAINT; THERE IS NO NEED FOR PERSONAL JURISDICTION OVER THE DEFENDANT (SECOND DEPT).

The Second Department, reversing Supreme Court, in a full-fledged opinion by Justice Braithwaite Nelson, determined New York need not have personal jurisdiction over a defendant to have a North Carolina money judgment recognized in New York. After obtaining a default judgment in North Carolina, the plaintiff moved for summary judgment in lieu of complaint pursuant to CPLR 3213:

To facilitate fulfilling this constitutional obligation and to assist in the enforcement of judgments entitled to full faith and credit, the New York Legislature adopted the Uniform Enforcement of Foreign Judgments Act (hereinafter the Foreign Judgments Act) (CPLR art 54), which provides a simple procedure by which a judgment creditor may file an authenticated copy of a judgment rendered by a court entitled to full faith and credit in New York … . Once filed, and after certain other conditions have been met … , the foreign judgment shall be treated in the same manner as a judgment of New York and may be enforced in like manner as a judgment rendered in New York … . There is no explicit requirement in the Foreign Judgments Act that New York have personal jurisdiction over the judgment debtor before the foreign judgment may be filed and treated as a New York judgment.

A judgment that was obtained by a default in appearance, however, is not eligible for the streamlined process afforded by the Foreign Judgments Act … . Where a judgment was entered on a default in appearance, full faith and credit may be accorded by the commencement of a plenary action or by a motion for summary judgment in lieu of complaint … . * * *

In seeking recognition and enforcement of an out-of-state judgment entitled to full faith and credit, “‘the judgment creditor does not seek any new relief against the judgment debtor, but instead merely asks the court to perform its ministerial function of recognizing the [out-of-state] money judgment and converting it into a New York judgment'” … . Here, the defendant does not contest the jurisdiction of the North Carolina court or otherwise contend that he was denied due process in that court. Cadlerock Joint Venture, L.P. v Simms, 2025 NY Slip Op 04541, Second Dept 8-6-25

Practice Point: A foreign default judgment may be accorded full faith and credit in New York by a plenary action or a motion for summary judgment in lieu of complaint. There is no need for personal jurisdiction over the defendant.

 

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IN A FORECLOSURE CONTEXT, THE BANK, WHEN MOVING FOR A DEFICIENCY JUDGMENT, GETS TWO CHANCES TO DEMONSTRATE THE VALUE OF THE PROPERTY; IF THE FIRST SUBMISSION IS DEEMED INADEQUATE, THE BANK MUST BE ALLOWED TO TRY AGAIN (FIRST DEPT).

The First Department, reversing Supreme Court, determined the bank in this foreclosure action should have been given a second opportunity to present evidence of the value of the property for purposes of a deficiency judgment:

A lender in a foreclosure action moving for a deficiency judgment “bears the initial burden of demonstrating, prima facie, the property’s fair market value as of the date of the auction sale” … . Upon a lender’s motion for a deficiency judgment, RPAPL 1371(2) provides, in part: “the court, whether or not the respondent appears, shall determine, upon affidavit or otherwise as it shall direct, the fair and reasonable market value of the mortgaged premises as of the date such premises were bid in at auction or such nearest earlier date as there shall have been any market value thereof and shall make an order directing the entry of a deficiency judgment.”

The Court of Appeals has interpreted this provision as “a directive that a court must determine the mortgaged property’s ‘fair and reasonable market value’ when a motion for a deficiency judgment is made. As such, when the court deems the lender’s proof insufficient in the first instance, it must give the lender an additional opportunity to submit sufficient proof, so as to enable the court to make a proper fair market value determination” … . Valley Natl. Bank v 252 W. 31 St. Corp., 2025 NY Slip Op 04528, First Dept 7-31-25

Practice Point: In a foreclosure action, if the bank is seeking a deficiency judgment it gets two shots at proving the value of the property.

 

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WHAT IS THE DIFFERENCE BETWEEN A REVENUE PURCHASE AGREEMENT AND A LOAN?

The Fourth Department, reversing Supreme Court, over a two-justice concurrence, determined the contract between plaintiff and defendants was a revenue purchase agreement, not a loan. Therefore defendants’ argument the agreement constituted a usurious loan was rejected. However, questions of fact about the extent of the damages precluded summary judgment in favor of plaintiff. The concurring justices agreed the contract was a revenue purchase agreement, but argued the analysis of the issue used by the majority, based upon a specific case, was wrong and suggested a different approach:

Under the agreement, plaintiff advanced a monetary amount to the entity defendants in exchange for 25% of the future revenues of their business, until the purchased amount, i.e., an agreed-upon amount that was greater than the advanced amount, was paid to plaintiff. There was no interest rate or payment schedule and no time period during which the purchased amount was to be collected by plaintiff. Indeed, the agreement specifically stated that it was not a loan and that the entity defendants were “not borrowing money from” plaintiff. The agreement contained a daily remittance amount, which constituted “a good faith estimate of” plaintiff’s share of the future revenue stream. The agreement also contained an acknowledgment from plaintiff that it was “entering this [a]greement knowing the risks that [the entity defendants’] business may slow down or fail, [that plaintiff] assumes these risks,” and that there would be no recourse for plaintiff in the event the entity defendants went bankrupt, went out of business, or experienced a slowdown in business, among other things. The agreement also contained two reconciliation provisions, whereby the daily remittance would be modified both retroactively and prospectively upon request and with proof of earned revenue amounts. * * *

In determining whether a transaction constitutes a loan, courts must determine whether the plaintiff ” ‘is absolutely entitled to repayment under all circumstances’ “; “[u]nless a principal sum advanced is repayable absolutely, the transaction is not a loan” … . “Usually, courts weigh three factors when determining whether repayment is absolute or contingent: (1) whether there is a reconciliation provision in the agreement; (2) whether the agreement has a finite term; and (3) whether there is any recourse should the merchant declare bankruptcy” (… see Samson MCA LLC, 219 AD3d at 1128 …). Bridge Funding Cap LLC v SimonExpress Pizza, LLC, 2025 NY Slip Op 04306, Fourth Dept 7-25-25

Practice Point: Consult this decision for a discussion of the nature of a revenue purchase agreement, as opposed to a loan. The majority used a Second Department case to structure its analysis. The two-justice concurrence agreed with the majority that the contract was a revenue purchase agreement, but suggested a different approach to the analysis.​

 

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A PARTY WHO IS NOT A OBLIGOR ON THE NOTE, BUT IS A SIGNATORY ON THE MORTGAGE, IS SUBJECT TO FORECLOSURE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that defendant (Lucy), who was not an obligor on the note, but who executed the mortgage, was subject to foreclosure:

A party who is not an obligor on a note but is a signatory on the corresponding mortgage, while not personally liable for the debt, is a mortgagor and has agreed to mortgage his or her interest in the property as security for the debt … . Here, although Lucy did not execute the Obligation to Pay and is not personally liable for the payment obligation, she executed the mortgage whereby she pledged her interest in the property as security for the obligations set forth in the co-ownership agreement and the Obligation to Pay, and thus, Lucy’s interest in the property is subject to foreclosure … . Deutsche Bank Trust Co. Ams. v Zzoha, 2025 NY Slip Op 03793, Second Dept 6-25-25

Practice Point: A party who is not on obligor on the note but is a signatory on the corresponding mortgage is subject to foreclosure.

 

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SUPREME COURT HAS SUBJECT MATTER JURISDICTION OVER THIS PROCEEDING UNDER CPLR ARTICLE 52 TO ENFORCE A MONEY JUDGMENT AGAINST THE STATE INSURANCE FUND TO THE EXTENT THE STATE IS A GARNISHEE (SECOND DEPT)

The Second Department, in a full-fledged opinion by Justice Dillon, determined Supreme Court had subject matter jurisdiction over this CPLR article 52 action to enforce a money judgment against New York State Insurance Fund. Ordinarily an action for money damages against a state agency is litigated in the Court of Claims:

In this proceeding, the State Insurance Fund is postured not as a judgment debtor but as a garnishee. As such, under CPLR 5207, all procedures for the enforcement of money judgments against other judgment debtors are applicable to it, as a garnishee, “except where otherwise prescribed by law” and except that an order “shall only provide for the payment of moneys not claimed by the [S]tate” and that no judgment may be entered against the State in such a procedure.

The State Insurance Fund has not shown that this proceeding is otherwise prescribed by law. To the contrary, CPLR 5221(a)(4) provides that the Supreme Court or a County Court has authority to hear enforcement proceedings “authorized by this article,” meaning the entirety of CPLR article 52, which, of course, includes CPLR 5207 garnishment proceedings against the State. … The petition seeks entry of an order, not a judgment. Thus, contrary to the State Insurance Fund’s contention, we hold that the Supreme Court possessed subject matter jurisdiction over this proceeding pursuant to CPLR article 52 to enforce a money judgment as against the State Insurance Fund to the extent that the State’s role in this instance is that of a garnishee. Matter of Doran Constr. Corp. v New York State Ins. Fund, 2025 NY Slip Op 03716, Second Dept 6-18-25

Practice Point: Here, under very complicated facts, Supreme Court was deemed to have subject matter jurisdiction over an action to enforce a money judgment against a state agency where the state’s role is that of a garnishee.

 

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PETITIONER JUDGMENT-CREDITOR WAS ENTITLED TO THE TURNOVER OF CERTAIN REAL PROPERTY WHICH HAD BEEN FRAUDULENTLY TRANSFERRED TO A TRUST BY THE RESPONDENT JUDGMENT-DEBTORS, AS WELL AS THE CONTENTS OF RESPONDENTS’ SAFETY DEPOSIT BOX (SECOND DEPT).

The Second Department, reversing Supreme Court, determined petitioner was entitled to real property which was fraudulently transferred by respondents to a trust, as well as to the contents of respondents’ safety deposit box, to satisfy a judgment against respondents in the approximate amount of $338,000:

… [P]etitioner commenced this proceeding pursuant to CPLR article 52, seeking … the turnover of a safety deposit box maintained by the respondents Zakhar Brener and Ninel Krepkina and of certain residential real property owned by the respondent B and K Trust. * * *

… [P]etitioner established her prima facie entitlement to judgment as a matter of law on the cause of action seeking relief pursuant to Debtor and Creditor Law former § 273 by submitting evidence that Brener was insolvent at the time of the conveyance of the property, which was made without fair consideration … .  * * *

… [P]etitioner established her prima facie entitlement to judgment as a matter of law on the cause of action seeking relief pursuant to Debtor and Creditor Law former § 276. “Pursuant to Debtor and Creditor Law former § 276, every conveyance made with actual intent to hinder, delay, or defraud either present or future creditors is fraudulent. The requisite intent required by this section need not be proven by direct evidence, but may be inferred from the circumstances surrounding the allegedly fraudulent transfer” … . “In determining whether a conveyance was fraudulent, the courts consider the existence of certain common ‘badges of fraud,’ which include ‘a close relationship between the parties to the alleged fraudulent transaction; a questionable transfer not in the usual course of business; inadequacy of the consideration; the transferor’s knowledge of the creditor’s claim and the inability to pay it; and retention of control of the property by the transferor after the conveyance'” … . “A prime example of this type of fraud is where a debtor transfers his property to another while retaining the use thereof so as to continue . . . free from the claims of creditors” … . Here, the petitioner submitted, among other things, the Brener respondents’ answer, wherein they admitted that Brener continued to occupy and use the property with Krepkina. …

… [P]etitioner established her prima facie entitlement to judgment as a matter of law on the cause of action to direct Chase Bank to turn over of the contents of the safe deposit box maintained by Brener and Krepkina by submitting a letter establishing that Brener and Krepkina jointly held a safe deposit box at one of Chase Bank’s branches in Brooklyn … . Matter of Schiffman v Affordable Shoes, Ltd., 2025 NY Slip Op 02786, Second Dept 5-7-25

Practice Point: Consult this decision for a concise description of a CPLR Article 52 turnover proceeding by a judgment creditor against judgment debtors based in part upon respondents’ fraudulent transfer of real property to avoid creditors (Debtor and Creditor Law sections 273 and 276).

 

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WHETHER THE JUDGMENT DEBTOR IS ENTITLED TO RESTITUTION AFTER REVERSAL OF A RESTRAINING NOTICE AND WHETHER PLAINTIFF IS ENTITLED TO AN INSTALLMENT PAYMENT ORDER ARE DISCRETIONARY ISSUES TO BE DECIDED UPON REMAND; CRITERIA EXPLAINED (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Higgitt, reversing Supreme Court and remanding the matter, determined that whether the judgment debtor was entitled to restitution based on the reversal of a restraining notice and whether the plaintiff is entitled to an installment payment order were not decided by the reversal, but  rather were discretionary issues to be resolved on remand. The facts are too complex to fairly summarize here:

… CPLR 5015(d) provides that, “[w]here a judgment or order is set aside or vacated, the court may direct and enforce restitution in like manner and subject to the same conditions as where a judgment is reversed or modified on appeal.” … Thus, “CPLR 5015[d] empowers a court that has set aside a judgment or order to restore the parties to the position they were in prior to its rendition, consistent with the court’s general equitable powers” … . The essential inquiry for a court addressing a request for the equitable remedy of restitution is whether it is against equity and good conscious to permit a party to retain the money that is sought to be recovered … . The determination whether to award restitution is committed to the trial court’s discretion … . * * *

Contrary to defendant’s contention that an installment payment order cannot be directed at funds exempt from execution under CPLR 5231 (i.e., 90% of his monthly disability insurance payments), such an order is the expedient for accessing exempt income … . As Professor Siegel stated long ago, “[o]ne of [CPLR 5226’s] prime uses is in that situation . . . where it appears that the judgment debtor can afford more than the 10% to which the income execution is limited” … . Thus, “[t]he court on the [CPLR 5226] motion can direct the debtor to make regular payments to the judgment creditor in any sum it finds the debtor able to afford, not limited by the 10% that restricts the income execution of CPLR 5231” … . Hamway v Sutton, 2025 NY Slip Op 01062, First Dept 2-25-25

Practice Point: Although this opinion is fact-specific, it includes the criteria for some fundamental debtor-creditor issues, i.e., the amount of monthly disability insurance payments which is available to a judgment debtor, the income-sources which are available to a judgment debtor, whether a plaintiff is entitled to an installment payment order, the criteria for a court’s discretionary determination of the amount a judgment debtor can afford to pay every month, etc.

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