This is an appeal from an order of the United States District Court for the Southern District of New York (Chin, J.), finding Defendant Surinder Chabra liable to Plaintiffs for debts owed them by AMC Computer Corp. pursuant to Chabra’s guaranty of those debts. Because the case raises unsettled questions of New York State contract law that implicate a significant state interest, we certify a question to the Court of Appeals of the State of New York. To facilitate that court’s review, we note that the issue prompting certification is discussed in detail infra at 99 to 102, and the certified question itself is noted infra at 102.
BACKGROUND
This dispute arises out of a bonus promised to Plaintiffs-Appellees Michael and Steven Israel (“Plaintiffs” or “the Israels”) by AMC Computer Corp. (“AMC”) as compensation for past services rendered, the
I. The Contracts and Chabra’s Guaranty
On May 1, 2000, the Israels entered into separate employment agreements with AMC. At around the same time, AMC, the Israels, Chabra, and AMC Investors LLC also signed a Letter of Intent. In the Letter, Chabra promised to pay each of the Israels a two million dollar bonus for past services if the LLC completed a planned investment in AMC. Chabra signed the Letter both individually and as an officer of AMC.
The parties modified these agreements on July 31, 2000 through two documents that the parties collectively refer to as the “First Amendment.” The First Amendment changed the terms of the bonus payment in several ways. AMC assumed primary responsibility for paying the bonus, the bonus amount was reduced to $1.75 million for each of the Israels, and the bonus would be due upon completion of a planned merger. Payment was to be in twelve equal quarterly installments spread over three years, the first of which would be due three months after the planned merger. The merger occurred on August 30, 2000, and thus the payments were to commence on November 30, 2000 and end on August 30, 2003.
Beyond these changes to the terms of the bonus itself, the First Amendment added an additional component critical to this case. It stated that Chabra “shall guaranty the [bonus] payments” and “shall deliver a guaranty ... to each of Steven and Michael Israel.” Consequently, on August 25, 2000, Chabra signed an identical guaranty (“the Guaranty”) for each of the Israels’ bonuses. Because the precise meaning of the Guaranty is dispositive of this action, we quote it at length:
Surinder (Sonny) Chabra (“Guarantor”) hereby absolutely, unconditionally and irrevocably guarantees to Israel (i) the full, due and punctual payment, whether at stated payment dates, by acceleration or otherwise, of any amounts owed under Section 3.4 of the Employment Agreement (including interest as described therein), and (ii) the prompt reimbursement of or payment for any and all ... expenses and liabilities (including reasonable attorneys’ fees) incurred by Israel in enforcing any rights under this Guaranty (collectively, the “Obligations”), and further guarantee that any such amounts shall be paid when due without presentation, demand, notice or protest of any kind with the same effect as though the Guarantor was AMC in and for the purposes of Section 3.4 of the Employment Agreement; provided, however, that Israel has given Guarantor written notice (“Notice”) of AMC’s failure to pay any Obligation within 60 days of the occurrence of each failure. Guarantor will then have 30 days to make such payments (or to cause AMC to make such payments).
... The liability of the Guarantor under this Guaranty shall be absolute and unconditional irrespective of ... any change in the time, manner or place of payment of, or in any other term of, all or any of such provisions or the Obligations....
... The Guarantor hereby waives promptness, diligence, dishonor, default, forbearance, notice of acceptance and any other notice with respect to any of the Obligations and this Guaranty, except the Notice.
... References to the Employment Agreement shall mean the Employment Agreement immediately after the execution of Amendment No. 1 and shall not be affected by subsequent amendments to the Employment Agreement unless Guarantor has agreed in writing to such amendments.
(App. at 171, 174 (underscore in original).)
Over the next two and one-half years, AMC failed to make all of the scheduled installment payments. On February 26, 2003, March 5, 2003, and March 17, 2003, Plaintiffs sent notices of default to AMC and copied Chabra in his individual and corporate capacities.
Israel v. Chabra (Israel I),
AMC made its last payment on February 15, 2004. 1 The Israels sent both AMC and Chabra several notices of default starting on March 31. When Chabra failed to respond to these notices, the Israels brought legal actions against AMC and Chabra.
II. Procedural History
Because the original employment agreement contained an arbitration clause, on May 18, 2004 Plaintiffs commenced arbitration proceedings against AMC to recover the unpaid portion of the bonus.
Israel I,
Plaintiffs thereafter commenced arbitration proceedings against Chabra in which they sought to enforce the Guaranty. Chabra then filed a petition in the New York Supreme Court, New York County, seeking to disqualify Plaintiffs’ counsel from the arbitration proceeding and to stay the arbitration pending resolution of the disqualification petition. Id. at 515. The state court denied the disqualification petition in June 2005, noting that Chabra had waited over one year after arbitration began to challenge opposing counsel’s qualifications. Id. Chabra and AMC then refused to pay their share of the arbitration fees and expenses, and the arbitration panel therefore dismissed the proceedings in October 2005. Id. at 515-16. After Plaintiffs notified the district court of that dismissal, the district court reinstated the instant action. Id. at 516. Jurisdiction lay in diversity, id. at 511; New York law controlled by operation of choice of law clauses in the Employment Agreements and the Guaranty, id. at 518 n. 9.
Plaintiffs moved for summary judgment in December 2005, and the district court granted summary judgment in their favor in February 2006. Id. at 516. In granting summary judgment, the district court held that Chabra remained bound by the Guaranty despite the subsequent modifications in the payment schedule contained in the Second Amendment. The court first found that Chabra had consented to the Second Amendment by signing it. It dismissed Chabra’s argument that he had signed the Second Amendment only in his corporate capacity because it found that argument “elevate[d] form over substance.” Id. at 528.
The court also held that even if Chabra had not consented to the Second Amendment, the payment schedule did not discharge the Guaranty because the Guaranty contained a clause stating that it was “unconditional irrespective of ... any change in the time, manner or place of payment.”
Id.
With regard to this latter interpretation of the Guaranty, Chabra had pointed to the Notice provision, which followed the Guaranty’s declaration that it was unconditional and stated
“provided, however,
that Israel has given Guarantor written notice (‘Notice’) of AMC’s failure to pay any Obligation within 60 days of the occurrence of each failure,” (App. at 171,174 (underscore in original)). This, Chabra asserted, constituted a condition precedent to his obligations, and the condition had failed because Plaintiffs had not notified him of AMC’s default until March 31, 2004 — more than 60 days after December 5, 2003, the last payment date under the Second Amendment.
Israel I,
DISCUSSION
On appeal, Chabra raises several defenses to enforcement of the Guaranty. First, he argues that Plaintiffs failed to give him notice of AMC’s default within sixty days of each missed payment, thereby violating the Notice, which he claims is a condition precedent to his obligations under the Guaranty. Second, he contends that the Second Amendment altered the underlying bonus agreement, thereby discharging the Guaranty thereof. We address the issues in this case in that order.
I. The Notice Requirement
On this rare occasion, we must begin before the beginning; for if the Notice was, as Chabra claims, a condition precedent to his obligations under the Guaranty such that any failure to satisfy its terms vitiates his liability in its entirety, our inquiry will end there.
A. Whether the Notice Was a Condition Precedent
The Notice concluded the first paragraph of the Guaranty and followed the provisions establishing Chabra’s guarantee of the bonus payments:
In order to induce [the Israels] to enter into Amendment No. 1 ... Chabra (“Guarantor”) hereby absolutely, unconditionally and irrevocably guarantees to Israel (i) the full, due and punctual payment ... of any amounts owed under Section 3.4 of the Employment Agreement ... and (ii) the prompt reimbursement of or payment for any and all losses, costs, damages, claims, expenses and liabilities ... incurred by Israel in enforcing any rights under this Guaranty (collectively, the “Obligations”) ...; provided, however, that Israel has given Guarantor written notice (“Notice”) of AMC’s failure to pay any Obligation within 60 days of the occurrence of each failure. Guarantor will then have 30 days to make such payments (or to cause AMC to make such payments).
(App. at 171, 174 (underscore in original).) Later in the Guaranty, Chabra “waives promptness, diligence, dishonor, default, forbearance, notice of acceptance and any other notice with respect to any of the Obligations and this Guaranty, except the Notice.”
The district court held that the Notice “was not a condition precedent to Chabra’s liability.”
Israel II,
Nos. 04 Civ. 4599, 04 Civ. 5859,
Under New York law, a creditor’s failure to satisfy a guaranty’s notice requirement does not discharge the guarantor’s obligation unless the requirement is a condition precedent to that obligation. 63 N.Y. Jur. Guaranty & Suretyship § 134 (2008) (“[E]ven where a surety is entitled to notice of the default of the principal, unless notice is a condition precedent to liability, the consequence of not giving such notice may be to relieve or exonerate the surety only to the extent of the damage sustained by reason of the omission. ...”). New York courts are cautious when interpreting a contractual clause as a condition precedent, and they will “interpret doubtful language as embodying a .promise or constructive condition rather than an express condition,”
Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co.,
Over time, the law has come to recognize and enforce the use of linguistic conventions to create conditions precedent. For example, the Appellate Division recently observed that the word “provided,” placed immediately before a contractual requirement, “indicates the creation of a condition.”
Nat’l Fuel Gas Dist. Corp. v. Hartford Fire Ins. Co.,
Plaintiffs attempt to distinguish
Hartford Fire
and argue that it does not control here. They point out that unlike
Hartford Fire,
where the contract there listed several conditions under a separate heading labeled “PROVIDED, however,”
Nat’l Fuel Gas Dist. Corp. v. Hartford Fire Ins. Co.,
We find these arguments unpersuasive. The language used to introduce the Notice, “provided that,” suggests a condition, and our conclusion in that regard is consistent with the punctuation and grammatical construction of the Guaranty’s first paragraph.
Wirth & Hamid Fair Booking, Inc. v. Wirth,
Looking beyond the Notice itself only serves to confirm this interpretation. Later in the Guaranty, Chabra “hereby waives promptness, diligence, dishonor, default, forbearance, notice of acceptance and any other notice with respect to any of the Obligations and this Guaranty,
except the Notice.”
This language identifies the Notice as an exception to the various defenses to enforcement of the Guaranty that Cha-bra waives, thus suggesting that a failure to satisfy the Notice requirement would also constitute a defense to enforcement of the Guaranty. Chabra’s clear refusal to waive the Notice distinguishes the instant contract from cases on which Plaintiffs rely, such as
Phoenix Acquisition Corp.,
The district court erred, therefore, in holding that the Notice was not a condition precedent. It was a condition precedent to performance of Chabra’s obligations, and we must ask if it was satisfied and, if not, what effect any failure 'on Plaintiffs’ part to give proper Notice has on Chabra’s obligations.
B. Whether the Notice Requirement Was Satisfied
If the Notice requirement was a condition precedent to Chabra’s obligations, the question becomes whether Plaintiffs satisfied its terms. Answering that question requires a preliminary determination of which payment schedule controls.
We first consider Plaintiffs’ argument that the Notice only required them to notify Chabra within 60 days of AMC’s final default, which they believe occurred on February 20, 2004, when AMC made its last payment under an alleged Revised Payment Schedule drafted in July 2003. Plaintiffs’ reliance on the “Revised Payment Schedule” is misplaced. The only evidence of any such agreement they introduced with their motion for summary judgment was an unsigned chart entitled “Revised Payment Schedule: Individual Payments — Michael and Steve Israel.” This chart, which shows payment dates extending from July 2003 through August 2004, is unsigned and does not indicate its origin. We find no error in the district court’s refusal to consider the Revised Payment Schedule because Chabra did not acknowledge it,
Israel I,
The relevant payment schedule, therefore, was either the original payment schedule established by the First Amendment or the modified payment schedule established by the Second Amendment. Under either schedule, Plaintiffs did not satisfy the Notice requirement with respect to at least some missed payments. According to the First Amendment sched
The district court, however, found that because AMC made payments through February 15, 2004,
3
AMC did not default on the bonus payments until that date.
Israel I,
We find little support for this conclusion in the text of the Guaranty. Contrary to the district court, we interpret the Guaranty as obliging Chabra to satisfy any failure on AMC’s part to make specific payments. In the Guaranty, Chabra guarantees the “due and punctual payment” of the bonus “amounts.” (App. at 171, 174.) The Notice requires Plaintiffs to give Cha-bra written notice “of AMC’s failure to pay
any
Obligation within 60 days of the occurrence of
each failure.” Id.
(emphasis added). It further provides that Chabra will have thirty days “to make
such payments.” Id.
(emphasis added). By its terms, then, the Guaranty requires Chabra to compensate for any missed payments. His obligation to compensate for a specific missed payment only arises, however, upon Plaintiffs’ satisfaction of the condition precedent created by the Notice. Consequently, each of Chabra’s failures to compensate for a particular missed payment gives rise to a separate cause of action,
Phoenix Acquisition Corp.,
We have established that the Notice was a condition precedent to Chabra’s obligation to remedy any nonpayment by AMC and that Plaintiffs failed to satisfy that condition with respect to some payments due under either the First Amendment schedule or the Second Amendment schedule. We must now determine which of the two payment schedules governs Chabra’s liability. Chabra, of course, claims that the First Amendment schedule applies because he was not a party to the Second Amendment. Plaintiffs argue that in the Guaranty, Chabra agreed to comply with any future changes in the payment schedule, and further that in any event, Chabra signed the Second Amendment and is therefore bound by its terms.
In their opposing argument as to which payment schedule applies, the parties rely on two separate provisions of the Guaranty. Plaintiffs rely principally on what they term the “Consent Clause,” which states that Chabra’s obligations under the Guaranty are “absolute and unconditional irrespective of ... any change in the time, manner or place of payment of, or in any other term of, all or any of such provisions or the Obligations.” Chabra rests his claims on another provision, hereinafter referred to as the ‘Writing Requirement,” which states that “[r]eferences to the Employment Agreement shall mean the Employment Agreement immediately after the execution of Amendment No. 1 and shall not be affected by subsequent amendments to the Employment Agreement unless Guarantor has agreed in writing to such amendments.” Chabra argues that the Second Amendment constitutes a “material alteration of the terms” of the Guaranty without his consent in writing, in violation of the Writing Requirement. Plaintiffs counter that the Second Amendment, which modifies the payment schedule, effects only a “change in the time, manner or place of payment” and is within the scope of the Consent Clause.
The district court ruled that the Second Amendment fell within the terms of the Consent Clause and that even if it did not, by signing the Second Amendment Chabra had agreed to it in writing.
Israel I,
A. Chabra’s Signing of the Second Amendment
According to the district court, “[i]f Cha-bra had actually objected to the Second Amendment, he would not have signed it.... The argument that he signed it only in his corporate capacity and not in his individual capacity elevates form over substance.” Id.
New York law provides that “[a] written agreement or other written instrument which contains a provision to the effect that it cannot be changed orally, cannot be changed by an executory agreement unless such executory agreement is in writing and signed by the party against whom enforcement of the change is sought or by his agent.” N.Y. Gen. Oblig. Law § 15-301(l).
5
The Writing Requirement in the
Because § 15-301(1) controls here, the question is whether Chabra’s signing of the Second Amendment on behalf of AMC allows enforcement of its terms against him in his individual capacity, or if he otherwise intended to be personally bound by the Second Amendment. Unlike the district court, we find that this question cannot be answered by mere reference to the fact of the signature. “[A]n agent for a disclosed principal “will not be personally bound unless there is clear and explicit evidence of the agent’s intention to substitute or superadd his personal liability for, or to, that of his principal.’ ”
Savoy Record Co. v. Cardinal Export Corp.,
The most obvious indicator of intent is the form of the signature. As the Court of Appeals has observed, “where individual responsibility is demanded the nearly universal practice is that the officer signs twice — once as an officer and again as an individual.”
Salzman Sign Co. v. Beck,
The parties’ prior practice of having Chabra sign the First Amendment twice, in both his personal and corporate eapaci
We conclude that the district court erred in holding that Chabra had agreed to the Second Amendment in writing. Drawing fine distinctions between individual and corporate signatures may “elevate[] form over substance,”
Israel I,
B. Reconciling the Consent Clause with the Writing Requirement
Having found that Chabra did not agree to the Second Amendment by signing it, we consider whether the district court was correct in concluding that the Second Amendment was within the scope of the Consent Clause and therefore effected a change in the payment schedule that applied to Chabra. Plaintiffs argue that the Second Amendment binds Chabra because the Consent Clause is a form of anticipatory acceptance of modifications in the payment schedule. Chabra views the Second Amendment as a modification of the underlying contract that discharges his obligations under the Guaranty.
“As a general rule, sureties and guarantors are bound by an anticipatory agreement for an extension or extensions of time for the performance of the principal’s obligation under a contract to which their undertaking relates.” 63 N.Y. Jur. Guaranty
&
Suretyship § 225;
see also Am. Bank & Trust Co. v. Koplik,
Although the Second Amendment’s payment schedule thus falls well within the scope of the Consent Clause and the modifications clause, our inquiry does not end there. Interpreted in this manner, the Consent Clause conflicts with the Writing Requirement. Where the Consent Clause and the expansive modifications clause both state that Chabra’s liability is unaffected by changes in the manner of payment or by any other changes or modifications in the Employment Agreement, the Writing Requirement requires Chabra’s agreement in writing before any “subsequent amendments to the Employment Agreement” affect his obligations. Thus, full effect cannot be given to the former without infringing upon the protection established by the latter. If we can construe the two provisions in a way that renders both operative and compatible, we must do so.
See Rentways, Inc. v. O’Neill Milk & Cream Co.,
Plaintiffs suggest that this interpretive dilemma is avoidable through invocation of the rule that where conflict arises between a general term and a specific term, the specific term controls.
Muzak Corp. v. Hotel Taft Corp.,
Try though we have, we cannot reconcile the Consent Clause and the Writing Requirement. New York law follows the majority rule that “if two clauses of an agreement are so totally repugnant to each other that they cannot stand together, the first of such clauses in the contract will be received and the subsequent one rejected.” 22 N.Y. Jur.2d Contracts § 250 (2008); see also 17A Am.Jur. Contracts § 385 (2008) (same). Applying this rule to the instant contract would require us to give effect to the Consent Clause and disregard the Writing Requirement. In that case, we would use the Second Amendment payment schedule to identify the payments for which Chabra is liable as a result of (1) AMC’s failure to make the payment, and (2) Plaintiffs’ satisfaction of the Notice requirement with respect to that payment.
Yet although the common law rule would require us to reject the Writing Requirement as inconsistent with the earlier-appearing Consent Clause, doing so would require us to disregard a private statute of frauds created pursuant to New York statutory law.
See
N.Y. Gen. Oblig. Law § 15-301(1). Standing behind each provision at issue is a binding rule of law, and to choose one provision over the other we must choose one decisional rule rather than the other. Ordinarily, where common law and statutory law conflict, statutory law controls. New York law, however, presumes that statutory law does not abrogate the common law unless it evinces “a clear and specific legislative intent” to do so.
Hechter v. N.Y. Life Ins. Co.,
III. Certification to the New York Court of Appeals
Under our rules, “this Court may certify to the highest court of a state an unsettled and significant question of state law that will control the outcome of a case pending before this Court” when the laws of that State permit us to do so. U.S. Ct. of Appeals for the Second Cir. R. § 0.27;
see also
N.Y. Comp.Codes R. & Regs. tit. 22, § 500.27 (permitting U.S. Courts of Appeal to certify questions of law to the New York Court of Appeals). When considering whether certification is appropriate, we are guided by several factors, including “(1) the absence of authoritative state court decisions; (2) the importance of the issue to the state; and (3) the capacity
New York state courts, and the New York Court of Appeals in particular, have not addressed the issue of state law on which our resolution of this case will depend. New York statutory law provides that when a contract contains a “no oral modifications” provision, it cannot be modified except by a written agreement signed by the party against whom the modification is being enforced. N.Y. Gen. Oblig. Law § 15-301(1). On the other hand, the New York common law of contracts establishes that upon finding that two contractual provisions are irreconcilable, a court must give effect to the provision that appears first in the contract and disregard those irreconcilable provisions that appear subsequently therein. If this latter rule is followed in this case, we must give effect to the Consent Clause of the Guaranty, and consequently to the Second Amendment as well. Chabra would then be liable to Plaintiffs for each payment due under the Second Amendment that AMC did not pay, and as to which Plaintiffs gave notice within 60 days of the failure to pay under the payment schedule established by the Second Amendment. If, instead, we give effect to the private statute of frauds that the parties created pursuant to New York General Obligations Law § 15-301(1), the Second Amendment has no effect as to Chabra because he did not agree to it in writing (his signing it in his corporate capacity having failed to bind him in his personal capacity). In that case, Chabra would be liable to Plaintiffs for any bonus payments not paid by AMC, and as to which Plaintiffs gave notice within 60 days of the failure to pay under the payment schedule established in the First Amendment. We have been unable to ascertain which of these paths to follow, given our uncertainty as to whether § 15-301(1), as statutory law, has displaced the common law such that provisions within its scope override irreconcilable contractual provisions notwithstanding their order of appearance within the contract. Answering this question will resolve the remaining contested issues in this litigation.
Moreover, the legal question at issue raises important questions of state policy. The relationship between § 15-301(1) and the common law implicates deeper questions about how two branches of New York State Government — the Legislature and the Judiciary — relate to each other in their articulation and modification of decisional rules in areas traditionally governed by the common law. The task of marking the boundaries between the two branches is one best left, in the first instance, to the New York Court of Appeals, the State institution charged with attending to such matters.
CONCLUSION
Accordingly, out of respect for the autonomous development of state law and the recognition that our addressing this question would make any precedent that of a federal court rather than the State of New York, we respectfully certify the following question to the New York Court of Appeals: Does New York General Obligations Law § 15-301(1) abrogate, in the case of a contract where the second of two irreconcilable provisions requires that any modifications to the agreement be made in writing, the common law rule that where two contractual provisions are irreconcilable, the one appearing first in the contract is to be given effect rather than the one appearing subsequent?
It is hereby ORDERED that the Clerk of the Court transmit to the Clerk of the New York State Court of Appeals a Certificate in the form attached, together with a copy of this opinion and a complete set of the briefs, appendices, and record filed by the parties in this Court. This panel will retain jurisdiction to decide the case once we have had the benefit of the views of the New York Court of Appeals, or once that Court declines certification. Finally, we order the parties to bear equally any fees and costs that may be requested by the New York Court of Appeals.
CERTIFICATION
The following question is hereby certified to the New York Court of Appeals pursuant to Second Circuit Local Rule § 0.27 and Title 22, § 500.27 of the New York Compilation of Codes, Rules & Regulations, as ordered by the United States Court of Appeals for the Second Circuit: Does New York General Obligations Law § 15-301(1) abrogate, in the case of a contract where the second of two irreconcilable provisions requires that any modifications to the agreement be made in writing, the common law rule that where two contractual provisions are irreconcilable, the one appearing first in the contract is to be given effect rather than the one appearing subsequent?
Notes
. The Israels characterize the February 20, 2004 payment as an on-time payment under a "Revised Payment Schedule” established in July 2003. The district court refused to consider the alleged July 2003 revision, however, because Chabra "[did] not acknowledge it.”
Israel v. Chabra (Israel I),
. Plaintiffs also brought a veil-piercing claim against Paran Realty Corp. in these actions based on an alter-ego theory, but that claim has not yet been resolved.
Israel I,
. The district court gave the date of February 15, 2004, but on appeal Plaintiffs state that the AMC's last payment was on February 20, 2004. Because the five-day difference has no effect on our analysis, we ignore this inconsistency and adopt the district court's date for the sake of convenience.
. Plaintiffs have not raised the question of whether Chabra, as AMC’s president, had actual notice of AMC’s defaults on its payment
. We note that neither party discussed or even cited to § 15-301, a striking omission given its manifest relevance to the dispute. In fact, Plaintiffs' brief not only ignores § 15-301, it suggests that no statute requires a signature under these circumstances.
. Plaintiffs correctly note that the Statute of Frauds does not apply here. What they fail to recognize is that § 15-301, which allows parties contractually to adopt what amounts to a private statute of frauds, does. Case law exploring when an agent's signature on behalf of a principal satisfies the requirement of a signed writing under the Statute of Frauds is therefore relevant here.