Hotel 71 Mezz Lender LLC v. Falor

Jul 2, 2009
Versions:64 A.D.3d 430
882 N.Y.S.2d 414

Order, Supreme Court, New York County (Charles E. Ramos, J.), entered June 2, 2008, which granted plaintiff‘s motion for summary judgment to enforce a guaranty of payment and denied defendant Jennifer Falor‘s cross motion for summary judgment dismissing the complaint as against her, unanimously affirmed, with costs. Appeal from order, same court and Justice, entered May 7, 2008, unanimously dismissed, without costs, as superseded by the appeal from the June 2, 2008 order.

Defendant, an experienced investor in complex commercial real estate transactions such as the Chicago hotel acquisition and conversion that underlies this action, had an obligation to exercise ordinary diligence to inquire and, if necessary, to seek proper assistance in determining whether any additional lenders were involved and to ascertain and understand the terms of the mezzanine loan guarantee before signing it (see Chemical Bank v Geronimo Auto Parts Corp., 225 AD2d 461, 462 [1996]; Chemical Bank v Masters, 176 AD2d 591, 592 [1991]). Having failed to do so, she cannot now avoid her obligation as guarantor by claiming ignorance of the guaranty agreement‘s terms. Nor was defendant‘s duty to make inquiry and to read and understand the mezzanine loan guaranty diminished merely because she was provided with only a signature page before executing the agreement (see Friedman v Fife, 262 AD2d 167, 168 [1999]).

A typographical error on the guarantee‘s signature page did not induce defendant to enter the agreement, as the record shows that she only became aware of the error well after executing the signature page. We note also that, in conjunction with the underlying transaction‘s closing, defendant executed a closing legal opinion prepared by counsel, which affirmed her understanding that the guarantee of payment on the mezzanine loan was valid, legal and binding. Moreover, the understanding of her attorney that, despite the typographical error, the signature page pertained to the guaranty of payment on the mezzanine loan may be imputed to defendant as a matter of law (see Center v Hampton Affiliates, 66 NY2d 782, 784 [1985];Cromer Fin. Ltd. v Berger, 245 F Supp 2d 552, 560 [SD NY 2003]). Concur—Andrias, J.P., Sweeny, McGuire, Acosta and Richter, JJ.

Order, Supreme Court, New York County (Charles E. Ramos, J.), entered February 11, 2009, which, inter alia, granted petitioner judgment creditor‘s application to compel respondent former receiver to turn over $1.335 million in partial satisfaction of the judgment, unanimously affirmed, with costs.

On June 30, 2008, intervenor-respondent Guy T. Mitchell, having been held liable in an action to enforce a guaranty of payment for a judgment of $52,404,066.54 (see Hotel 71 Mezz Lender LLC v Mitchell, 63 AD3d 447 [2009]), made a wire transfer in the amount of $1.335 million from a Florida bank account held solely in his own name to a New York account maintained by the receiver in the guaranty action, who then held the funds while awaiting instructions from the court. Six months later, before any disbursal of the $1.335 million was made, this Court, among other things, modified the April 7, 2008 order and supplemental order of Supreme Court (the receivership order) granting the petitioner judgment creditor‘s motion for the appointment of a receiver so as to deny the motion and vacate the appointment of the receiver (Hotel 71 Mezz Lender LLC v Falor, 58 AD3d 270 [2008]). Two days after we vacated the attachment order and receivership, petitioner levied upon the $1.335 million being held by the receiver and commenced this special proceeding pursuant to CPLR 5225 (b), naming the receiver as respondent and seeking turnover of the funds in partial satisfaction of the outstanding $52,404,066.54 judgment. Intervenors-respondents contend that, pursuant to our decision in Falor, the former receiver is obligated to return the $1.335 million to Mitchell‘s personal account. We disagree.

Respondent received the $1.335 million at issue pursuant to the authority of the receivership order. Although this Court, by order dated April 24, 2008, granted a stay preventing respondent from selling or otherwise disposing of assets without prior leave of this Court, the receivership order was not otherwise stayed. Our subsequent decision vacating the receivership order did not purport to deprive respondent retroactively of the authority conferred by the order.