• Guaranty’s Lack of a Limit on Initial Guarantor’s Liability Renders it Liable for Unpaid Remainder of Judgment: Medical Arts-Huntington v Meltzer Rosenberg Dev. LLC.
  • August 13, 2012 | Author: Adam M. Rafsky
  • Law Firm: Farrell Fritz, P.C. - Uniondale Office
  • In a July 5, 2012 decision by Justice Pines, the court denied the moving defendants’ motion to dismiss the complaint, and granted the plaintiff’s (“Medical Arts”) cross motion for partial summary judgment against the defendant Meltzer Rosenberg Development LLC (“MRD”). The motions related to a Survival Agreement and related guaranties. The Survival Agreement was entered into by Medical Arts and the individual defendants, each of whom was a member of an entity (“214 Wall”) that constructed a building for Medical Arts, so that each side could reserve the right to make claims against the other related to the construction. The guaranties were made by MRD, as the initial guarantor, and by the members of 214. A trial of the prior action between 214 Wall and Medical Arts resulted in a money judgment and award of attorneys’ fees in favor of Medical Arts. As of the time of the motions, more than half of the total amount remained unpaid.

    The moving defendants argued that they paid their respective shares of the judgment and attorneys’ fees and so any claim against them should be dismissed. Medical Arts argued that the moving defendants fraudulently rendered 214 Wall judgment proof, and that MRD was still liable because it accepted its position as guarantor of the entire debt because it did not set forth its position that it was only severally liable in the relevant attachment to the Guaranty. Medical Arts further argued that there was nothing in the Guaranty that limited its rights as a potential judgment creditor based upon a fraudulent conveyance.

    The court granted Medical Art’s motion and awarded it $143,358.96, holding that the Survival Agreement and Guaranty established that there was no limitation as to MRD’s liability as initial guarantor and so it remained liable for the entire judgment minus those amounts already paid. The court further held that the documents “specifically prohibited any release of the individual guarantors until...all of the obligations under the judgment” were paid, and since amounts were still outstanding, the court denied the moving defendants’ motion for summary judgment.

    (Medical Arts-Huntington v Meltzer Rosenberg Dev. LLC., Sup Ct, Suffolk County, July 5, 2012, Pines, E., Index No. 41852/10)