There is a famous quote by H.L. Mencken that "when somebody says it's not about the money, it's about the money." Of course, it is. It's always about the money! People want it, people need it, people lend it but only if they get back more than they lent. And on and on it goes. But the hard part is getting paid back.

New York State Civil Practice Law and Rule 3213 has been used as a vehicle for litigants to reach a speedy judgment when suing under a note or guaranty.[1]

Historically, the Appellate Division, First Department, split from the Second Department regarding one's ability to use CPLR 3213 to sue when a guaranty or note promises both monetary and nonmonetary obligations. Indeed, the First Department precedent stated that the holder of a guaranty or note could not use CPLR 3213 if the guaranteed responsibilities included both monetary and nonmonetary obligations.

On the other hand, the Second Department took a broader view, which provides that one can move for summary judgment pursuant to CPLR 3213 so long as the payment obligation is unconditional regardless of any nonmonetary obligations.

In recent years, there have been a growing number of First Department decisions that exhibit a shift in the First Department thinking to a broader view in line with the Second Department.

This article explores the recent developments in the First Department, which indicate that one may now sue under a guaranty or note that has both monetary and nonmonetary obligations so long as the monetary obligations are unconditional, separated and distinct.

CPLR 3213

By way of reminder, pursuant to CPLR 3213, a party may commence an action by serving a motion for summary judgment in lieu of complaint "when the action is based upon an instrument for the payment of money." This procedure allows a litigant to streamline litigation by eliminating discovery and immediately seek judgment based on documentary evidence.

Indeed, this has proven to be an attractive mechanism to both lenders and landlords to enforce payment obligations under a note and/or guaranty. The tricky part was often figuring out if the subject note or guaranty qualify for CPLR 3213 in the First Department.

As explained herein, the First Department has recently provided guidance on this topic and, in doing so, has broadened its view to the benefit of practitioners seeking to hold a borrower or guarantor liable.

The First Department Provides Guidance

In iPayment Inc. v. Silverman in 2021, the First Department offered litigants insight into what it considers to be an "instrument for the payment of money only," even where there are other obligations in an agreement.[2]

Therein, the First Department reversed denial of a landlord's motion pursuant to CPLR 3213 on a guaranty containing both payment and performance obligations.

In doing so, the First Department clarified:

While a guarantee of both payment and performance does not qualify as an instrument for the payment of money only under CPLR 3213, paragraph 1 of the guaranty signed by defendants includes an unconditional obligation to pay all rent and additional rent owed under the sublease, and therefore does so qualify; "it required no additional performance by plaintiff[ ] as a condition precedent to payment or otherwise made defendant[s'] promise to pay something other than unconditional."[3]

This holding is not a surprise. There had been a growing shift away from the First Department's prior rigid holding in Times Square Associates v. Grayson in 1972, which prevented use of CPLR 3213 if the note or guaranty contained any nonmonetary obligations.[4]

Nevertheless, the holding and moment call for attention because it has long been recognized that the "question of what constitutes an 'instrument for the payment of money only'" is a vexing problem, according to the New York Court of Appeals' 1975 decision Interman Industrial Products Ltd. v. R.S.M. Electron Power.[5] Now, in the First Department, things just got a bit clearer.

Following the decision in iPayment, trial courts in the First Department took turns applying the somewhat new standard.

For instance, in Rockfeld Group One Madison LLC v. Sticky's Holdings LLC in 2021, the New York Supreme Court, County of New York, denied a landlord's unopposed motion for summary judgment in lieu of complaint against a commercial guarantor.[6]

The subject guaranty unconditionally guaranteed the tenant's prompt and complete payment and, in the same provision, also guaranteed the observance, fulfillment and performance of all of the tenant's obligations, including nonmonetary obligations. Thus, the trial court found that the agreement did not qualify as an "instrument for the payment of money only."

Relying on iPayment, the court reasoned that "[u]nlike the guaranty at issue in iPayment Inc. v Silverman, 192 AD3d 586 (1st Dept. 2021), the guaranty here does not separate [the] non-monetary obligations out from monetary obligations so as to create a distinct obligation for the payment of money that does not involve performance."[7]

Similarly, in 29th Street Associates LLC v. Syed in March,[8] the same court denied a landlord's unopposed 3213 motion against a commercial guarantor.

The court noted that the guaranty in question expressly provided that "it guaranteed the payment of all of tenant's obligations under the lease, and any damages stemming from tenant's breach of those obligations (whether monetary or no [sic])" and was therefore a guaranty of performance, not money only.

In discussing the holding of iPayment, the court noted that the guaranty in iPayment qualified for CPLR 3213 treatment because it "specifically broke out in a separate sentence the guarantor's unconditional payment obligation — thus, in effect, treating that obligation as divisible from the rest."[9]

Indeed, one can easily surmise that the First Department acknowledged this distinction in its decision Bank of America v. Filho last year.[10]

In affirming denial of a CPLR 3213 motion, the First Department noted that the subject guaranties stated that they were for the "guaranty of payment and performance" and in the event of a default, the guarantor would be required to pay obligations.

The First Department further noted that the term "obligations" grouped both monetary and nonmonetary performance obligations together and therefore did not qualify as an "instrument for the payment of money only."[11]

In BBM3 LLC v. Vosotas in May, the First Department affirmed a decision awarding a lender summary judgment in lieu of complaint pursuant to CPLR 3213.[12]

The First Department found that "CPLR 3213 relief was appropriate despite the completion guaranty's provision requiring some additional obligations by the borrower, as the guaranty 'include[d] an unconditional obligation to pay' that 'required no additional performance by plaintiff as a condition precedent to payment'."

The First Department noted that nothing in the guaranty "rendered [the] defendant's promise to pay anything but unconditional."[13]

Conclusion

The decisions in iPayment and Bank of America provide practitioners with valuable guidance as to what is required in the First Department for an agreement with both monetary and nonmonetary obligations to qualify for CPLR 3213 treatment.

The holdings in these decisions demonstrate that the First Department takes into consideration whether the payment obligation is unconditional, separated and distinct from other obligations contained in the agreement in determining whether such agreements qualify as an "instrument for the payment of money only."

Practitioners would be wise to clearly separate unconditional payment obligations in notes and guaranties from other obligations therein. In addition, it may be beneficial to explicitly state that the payment obligations are independent of the other obligations in the agreement. Doing so should clear the path for practitioners to utilize the expedited procedure afforded by CPLR 3213 in the First Department.

[1] ("Show You the Money … How Will Depend on Your Note or Guaranty," NYLJ 12262019-430377).

[2] iPayment Inc. v. Silverman , 192 A.D.3d 586, 587 (1st Dept. 2021).

[3] Id.

[4] Times Square Associates v. Grayson, 39 A.D.2d 845 (1st Dept. 1972).

[5] Interman Indus. Products Ltd. v. R.S.M. Electron Power , 37 N.Y.2d 151, 154 (1975).

[6] Rockfeld Group One Madison LLC v. Sticky's Holdings LLC, 2021 WL 4239237 (Sup. Ct. NY Co. 2021).

[7] Id. at *2.

[8] 29th Street Associates LLC v. Syed et. al , 187 N.Y.S.3d 525, 526 (Sup. Ct. NY Co. 2023).

[9] Id.

[10] Bank of America, N.A. v. Filho , 203 A.D.3d 594 (1st Dept. 2022).

[11] Id.

[12] BBM3, LLC v. Vosotas , 188 N.Y.S.3d 39 (1st Dept. 2023).

[13] Id.

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