EOMH1 LLC ABG3672IN LLC v. DB LLC (2026)

MEMORANDUM DECISION

[1] This appeal arises from a dispute over a $7.5 million loan that a borrower acknowledges was only partly repaid by the maturity date. The lender filed suit against all the parties potentially liable under the loan—namely the borrower, a pledgor who pledged its ownership interest in the borrower to secure the loan, and two limited guarantors of borrower's obligations. The lender then sought summary judgment against the borrower, pledgor, and guarantors, which the trial court granted. The court awarded the lender damages of nearly $6.2 million, plus continuing interest and costs, among other things.

[2] The borrower, pledgor, and guarantors jointly appeal. In their consolidated brief, they contend, among other things, that genuine issues of material fact exist as to whether the maturity date for the loan was extended, whether other defaults occurred that triggered the guarantors’ liability, and whether the 24% default interest rate was enforceable. We affirm, finding the lender was entitled to summary judgment because there was no genuine issue of material fact as to the borrower's default through non-payment of the loan balance by the maturity date, the propriety of the 24% default interest rate, and the triggering of the guarantors’ liability.

Facts

[3] In August 2021, ABG3672IN LLC (Indiana Borrower), an Indiana company, and ABG3672K LLC, a Kentucky company (Kentucky Borrower), executed a promissory note (Note) for $7.5 million, payable to EMG Transfer Agent LLC (Original Lender).¹ Indiana Borrower and Kentucky Borrower (collectively, Borrowers) used the Note proceeds to purchase two commercial properties, one in Franklin, Indiana (Indiana Property), and the other in Shelbyville, Kentucky (Kentucky Property). To secure the Note, Indiana Borrower executed a mortgage on the Indiana Property (Indiana Mortgage), and Kentucky Borrower executed a mortgage on the Kentucky Property (Kentucky Mortgage). At the time the Indiana Property was purchased, it had an existing tenant, Mobex Global Aluminum Technologies (Indiana), Inc., which had signed a 20-year lease in 2008.

[4] The Note provided for an annual interest rate equal to the London Interbank Offered Rate (LIBOR) 90-day rate but at least 8%, adjusted monthly. The interest on the loan was to be paid on the first of each month, with the outstanding balance of the loan due on the maturity date of April 1, 2023.

[5] The Note further specified:

During the first six (6) months of the term of this Loan, [Borrowers] shall remit all rents and proceeds derived from the Propert[ies] (as hereafter defined) (which base rents and proceeds are referred to herein as the “Net Cashflow”). [Borrowers’] failure to remit all such Net Cashflow for the Propert[ies] shall constitute an Event of Default hereunder. To the extent that the Net Cashflow is sufficient to cover interest payments required under this Note, the Net Cashflow each month shall first be used as such interest payments. In the event that the ․ Net Cashflow exceeds the interest payments required for the month, Lender shall hold such excess funds in suspense in a manner to be determined by Lender (the “Cashflow Reserve”). Lender shall hold the Cashflow Reserve until the Maturity Date of the Loan, at which point the Cashflow Reserve may be applied to amounts outstanding under the Loan in a manner determined by Lender in its sole discretion. The Cashflow Reserve shall not constitute a trust fund and may be commingled with other monies held by Lender. No earnings or interest on the Cashflow Reserve shall be payable to [Borrowers]. Except as otherwise provided herein below, funds held in the Cashflow Reserve shall not be available for use by the Borrower[s] to debt service the Loan.

During the term of the Loan, in the event any of the tenants vacate the Propert[ies], or in the event that [Borrowers stops] receiving rents from the Propert[ies] for any reason, then [Borrowers] shall, within five (5) business days, pay to Lender an amount sufficient to cause the Cashflow Reserve to equal to Two Hundred and Seventy Five Thousand Dollars ($275,000).

Appellants’ App. Vol. II, p. 68.

[6] The Note further provided that Borrowers’ default would occur upon failure to pay any installment of interest for a period of 10 days or by failing to perform any of the covenants or conditions of the Indiana and Kentucky Mortgages. Although the penalty for late monthly interest payments was 5% of the payment due, the Note provided for a higher interest rate if Borrowers defaulted by not paying the amounts still owed at the Note's maturity date. The Note defined the default interest rate as the lesser of 24% or the highest rate allowed by law. The Note also recognized the Indiana and Kentucky Mortgages, specifying:

Upon default in the payment of any of the terms and conditions of said Mortgage[s], and after the expiration of all applicable cure and grace periods, then, at the option of Lender, the entire principal sum remaining unpaid, together with accrued interest, shall become immediately due and payable, without further notice.

Id. at 69 (emphasis added).

[7] In addition to any payments and interest due, the Note specified that Borrowers would pay an “Exit Point” to Lender of $75,000 at the time of prepayment of principal on the loan or, absent that, on or before the maturity date. Because the Note was made and executed in New York, the Note specified that New York law governed its terms.

[8] The Indiana Mortgage specified a variety of available remedies to Original Lender and any successor lender upon Indiana Borrower's default, including “tak[ing] possession of, manag[ing] and operat[ing] the [Indiana Property.]” Id. at 116. It defined default as Indiana Borrower's “failure ․ to pay in full any payment required under the Note or on any other indebtedness to [Lender] or any payment required hereunder or under any other agreement securing the Note.” Id. at 114.

[9] The Indiana Mortgage specified that Indiana Borrower would maintain the condition of the Indiana Property, secure and pay appropriate insurance, and pay taxes on the Property until the Mortgage was extinguished by payment of the Note in full. It also allowed Original Lender and any successor lender to perform any of these obligations itself if Indiana Borrower failed to do so and then seek reimbursement from Borrower for those costs.

[10] Simultaneous to execution of the Note and Mortgages, EOMH1 LLC—a New Jersey company which owned a 100% membership interest in both Indiana Borrower and Kentucky Borrower—executed a “Pledge and Security Agreement” (Pledge) in favor of Original Lender. Under the Pledge, EOMH1 (Pledgor) pledged its membership interests in Indiana Borrower and Kentucky Borrower “[a]s security for the prompt and complete payment and performance when due of” the Note. Id. at 142.

[11] This Pledge included “all equity rights, options, right to subscribe, dividends or distributions, distributions or dividends paid in equity, new securities or other properties or benefits [and any other proceeds] to which [Pledgor] is or may hereafter become entitled to receive on account of said property.” Id. Under the Pledge, Original Lender and any successor lender had the option upon Indiana Borrower's default to “elect to become a substituted member in Borrower, with respect to the Pledged Collateral and [Pledgor] shall execute ․ all documents necessary to evidence Lender so becoming a substituted member.” Id. at 148.

[12] Joseph Mendlowits is an officer of and agent for Pledgor. Mendlowits and Bezalel Gombo (collectively, Guarantors) executed a “Guaranty of Recourse Carve-outs” (Guaranty), personally guaranteeing to Original Lender and any successor lender certain obligations of Indiana Borrower under various circumstances. Id. at 165. Two of these circumstances were when “[Indiana] Borrower has failed to remit the Net Cashflow (as defined in the Note) to Lender as required under the Note” and when “[Indiana] Borrower has failed to cause sufficient funds to be paid to Lender, when required under the Note, to satisfy the requirements of the Cashflow Reserve (as defined in the Note).” Id. at 166-67. Under the Guaranty, Guarantors’ obligations were “irrevocable, absolute and unconditional and shall remain in full force and effect until the Guaranteed Obligations have been satisfied in full or the Loan has been paid in full and no Guaranteed Obligations then exist upon such satisfaction.” Id. at 167.

[13] Shortly after the Note, Mortgages, and related documents (collectively, Loan Documents) were executed, Original Lender transferred its interest in the Note to Elizon DB Transfer Agent LLC (Successor Lender), a Delaware limited liability company with a principal office in Connecticut. In February 2023, Successor Lender and Borrowers executed a “Note Modification and Extension Agreement” that extended the maturity date specified in the Note from April 1, 2023, to October 1, 2023. Guarantors and Pledgor also agreed to this modification. As part of it, Kentucky Borrower paid $2.5 million to satisfy the Kentucky Mortgage. That left the loan principal still owed under the Note at $5 million.

[14] Successor Lender and Indiana Borrower later executed a “Second Note Modification and Extension Agreement” (Second Modification), agreeing to extend the maturity date from October 1, 2023, to January 1, 2024. Guarantors and Pledgor also agreed to this modification. Less than three weeks later, the tenant of the Indiana Property (Tenant) made an unexpected double rent payment covering both November and December 2023. As Tenant had just undergone a merger in which the buyer acquired Tenant's assets but not its liabilities, Indiana Borrower investigated whether Tenant was intending to breach its lease.

[15] On December 6, 2023, Indiana Borrower wrote to Successor Lender to report Tenant's expected exit and to request another extension of the maturity date. After noting its efforts to find a new tenant and, alternatively, to sell the Indiana Property, Indiana Borrower requested that Successor Lender also “begin disbursing funds from the Cashflow Reserve to make the monthly debt service payments.” Appellants’ App. Vol. IV, p. 85. Indiana Borrower stated that “Lender is presently holding approximately $625,000 as a Cashflow Reserve for that purpose.” Id. Before Successor Lender responded, Borrowers filed a breach of lease suit against Tenant in Johnson County.

[16] Two weeks later, Successor Lender responded to Indiana Borrower in a letter, stating:

Lender has considered [Borrower's] request and is open to further discussions with respect to an extension of the Maturity Date[ ] but is not willing or able at this time to formally extend the Maturity Date until Lender has learned more of Borrower's plans to find a suitable tenant for the Property and maintain Cash Flows sufficient to pay debt service on the Loan.

Id. at 86. Disputing Indiana Borrower's claim that Successor Lender had $625,000 in the Cashflow Reserve, Successor Lender added the following:

Security Deposit. Pursuant to the Note, Lender is holding $582,221.58 in a Security Deposit reserve to secure Borrower's obligations under the Loan Documents. “Upon an Event of Default beyond any applicable notice and cure period, [Borrower] shall forfeit the Security Deposit to and for Lender's benefit, to be applied to the outstanding amounts due under the Loan Documents.” If Borrower is unable to make its regularly scheduled debt service payment to Lender as required under the Loan Documents on January 2, 2024, then Lender has the right to declare an Event of Default under the Loan Documents and apply the Security Deposit held by Lender in escrow as security for the Loan toward the unpaid principal balance of the Loan as contemplated by the Note.

Cash[f]low Reserve. The Note also requires Borrower ․ to “remit all rents and proceeds derived from the Property ․ (which base rents and proceeds are referred to herein as the ‘Net Cash[f]low’)” [internal definition omitted]. A Cash[f]low Reserve was only to be established in the event that Net Cash[f]low “exceed[ed] the interest payments required for the month”. Borrower never remitted payments from Net Cash[f]low to Lender for the payment into the Cash[f]low Reserve as required, and thus Lender presently holds no funds in the Cash[f]low Reserve. With respect to this Loan, Lender currently holds the Security Deposit in the amount of $582,221.58, and a Tax Reserve in the amount of $99,993.11.

Id. at 87. Successor Lender also demanded that, if Tenant vacated the Indiana Property on December 31, 2023, or stopped paying rent, “Borrower remit to Lender the amount of $275,000.00 which shall be paid into a Cash[f]low Reserve in accordance with the terms and conditions of the Note on or before January 8, 2024.” Id. at 87.

[17] Indiana Borrower failed to repay the Loan principal by the revised maturity date of January 1, 2024. It also did not tender the requested $275,000 to fund the Cashflow Reserve. By letter dated January 3, 2024, Successor Lender notified Indiana Borrower, Pledgor, and Guarantors that they were in default and that all sums then due under the Note were immediately payable in full. Those sums, according to Successor Lender, included “the sum of $275,000 due and payable under the Note to replenish the Cash[f]low Reserve as referenced and demanded in the December 19, 2023 correspondence from Lender's counsel to you.” Appellants’ App. Vol. V, p. 89. Neither Indiana Borrower nor Guarantors honored these requests for payment.

[18] In March 2024, Successor Lender filed a “Complaint to Enforce Promissory Note and Commercial Guaranty and to Foreclose Commercial Mortgage” (Complaint) against Indiana Borrower, Guarantors, Pledgor, and Tenant. Id. at 120. Successor Lender sought a judgment of more than $4.7 million, plus continuing interest and costs, foreclosure on the Indiana Property, substitution of Pledgor with Successor Lender as a member of Borrowers, and enforcement of the Guaranty against Guarantors.

[19] Successor Lender eventually filed two motions for summary judgment—one as to Indiana Borrower and Pledgor and one as to Guarantors. The first summary judgment motion sought judgment on three counts of the Complaint: Count I (alleged breach of Note by Indiana Borrower), Count IV (foreclosure of the Indiana Mortgage), and Count V (foreclosure of Pledgor's interests in Indiana Borrower and Kentucky Borrower). On May 15, 2025, the court entered summary judgment for Successor Lender and against Indiana Borrower and Pledgor on those counts.

[20] As to Count I, the court determined that “[Indiana] Borrower defaulted under the terms of the [Note] ․ which matured on January 1, 2024” and that “[t]his default is also a default under the associated Loan Documents, including the [Indiana] Mortgage and the Pledge Agreement signed by Pledgor.” Appellants’ App. Vol. II, p. 24. The court concluded that Successor Lender “is entitled to the default remedies in the Note, [Indiana] Mortgage and Pledge Agreement and that the remedies are cumulative under the foregoing documents and that the Lender's rights may be exercised singly or concurrently.” Id. The court awarded judgment to Successor Lender and against Indiana Borrower and Pledgor in the amount of nearly $6.2 million, as follows:

Judgment is entered against [Indiana Borrower] for the following amounts, which were due and owing as of March 31, 2025:

Unpaid Principal Balance of Loan $5,000,000.00 Regular Interest through 12/31/24 $57,498.20 Default Interest from 1/1/24-3/31/25 $1,516,666.66 Exit Point $75,000.00 Legal, Administrative, Misc. Expenses $128,388.76 through 3/31/25 Property Protection Advances $3,557.39 Release Fee $250.00 Less security deposit $582,221.58 Total $6,199,139.43

․ These amounts will increase until the principal amount is paid through daily default interest of $3,333.33, attorneys’ fees, Lender's costs to sell the [Indiana] Property, advances made to protect the Property, and any other costs recoverable under the Loan Documents.

Id. at 25.

[21] As to count IV, the court entered a judgment of foreclosure on the Indiana Property and granted Successor Lender the option of an immediate sheriff's sale of the Property, at which Successor Lender would have the right to bid. Finally, as to count V, the court entered a judgment of foreclosure on Pledgor's interest in Indiana Borrower and Kentucky Borrower. The court ordered Pledgor to substitute Successor Lender or its designee as the sole member in both limited liability companies. The court also authorized Successor Lender or its designee to exercise all rights and voting powers of Pledgor and to exercise all remedies available to it under the terms of “Pledge Agreement and/or operating agreement of [Kentucky Borrower],” including selling Pledgor's membership interest in both Kentucky Borrower and Indiana Borrower.

[22] Five days later, Indiana Borrower and Pledgor filed two motions: (1) an emergency motion to reconsider and set aside the judgment under Indiana Trial Rule 60(B); and (2) an emergency motion for stay. The trial court set those matters for hearing on June 4, 2025, when the court already was scheduled to hear argument on Successor Lender's second motion for summary judgment.

[23] After that hearing, the court on July 1, 2025, denied both of Indiana Borrower's and Pledgor's emergency motions. Although the order specified that it was a final appealable order, the order did not contain the other operative language in Indiana Trial Rule 54(B) necessary to convert an order disposing of fewer than all the claims and all the parties into a final judgment. The trial court granted a writ of execution on August 18, 2025, requiring Indiana Borrower and Pledgor to turn over the Indiana Property and all equipment, personal property, and improvements to the Johnson County Sheriff for a sheriff's sale.

[24] As to the second motion for summary judgment, the court, by order dated August 22, 2025, granted summary judgment against both Guarantors on Counts II and III, the only remaining undisposed counts in Successor Lender's complaint. Those counts sought enforcement of the Guaranty against Guarantors.

[25] The court ruled that Indiana Borrower defaulted under the Note by failing to pay the Net Cashflow and Cashflow Reserve payments when due. This default also was a default under the Guaranty, according to the court, because those agreements specified that Guarantors “unconditionally, absolutely, and irrevocably” guaranteed the obligations of Indiana Borrower to the Successor Lender.

[26] The court also found that Successor Lender “is entitled to the default remedies for Full Recourse Events in the Guaranty Agreement and that the remedies are cumulative under the Loan Documents such that the lender's rights may be exercised against any judgment defendant singly or concurrently.” Id. at 37. The court entered judgment against Guarantors in the same amount for which Indiana Borrower and Pledgor had been found liable—$6,199,139.43 plus interest, attorney fees, “[Successor] Lender's costs to sell the [Indiana] Property, advances made to protect the Property, and any other costs recoverable under the Loan Documents.” Id. at 36-37.

[27] On September 22, 2025, Indiana Borrower and Pledgor filed their notice of appeal. Guarantors initiated a separate appeal by filing their own notice of appeal on the same date. Successor Lender moved to dismiss Indiana Borrower and Pledgor's appeal as untimely, but this Court denied the motion and consolidated their appeal with Guarantors’ appeal.

[28] On November 25, 2025, a sheriff's sale of the Indiana Property resulted in title reverting to Successor Lender as the mortgagee for a value of $1 million. Successor Lender calculated the deficiency judgment at $7.5 million as of November 25, 2025, due largely to the accruing daily interest. Indiana Borrower, Pledgor, and Guarantors (collectively, Debtors) challenged that figure, contending in post-auction motions that the judgment had been satisfied because the Indiana Property was worth $8.3 million. The trial court set a hearing on the issue of the amount, if any, of the deficiency judgment but ultimately vacated it by agreement of the parties.

Discussion and Decision

[29] Debtors appeal the summary judgments entered against them. Summary judgment proceedings brought in Indiana “are governed by Indiana summary judgment procedure and jurisprudence” under Indiana Trial Rule 56, regardless of which forum's substantive law controls the dispute. Gaff v. Ind.-Purdue Univ. of Fort Wayne, 51 N.E.3d 1163, 1166 (Ind. 2016). But Indiana's choice-of-law doctrine favors contractual stipulations as to governing law. Champlain Cap. Partners, L.P. v. Elway Co., LLP, 58 N.E.3d 180, 190 (Ind. Ct. App. 2016) (citing Allen v. Great Am. Reserve Ins. Co., 766 N.E.2d 1157, 1162 (Ind. 2002)). As the Loan Documents specify that New York law controls the interpretation of the contract, we apply New York substantive law but Indiana procedure when reviewing the judgments.

[30] In New York, as in Indiana, contract interpretation is a question of law reviewed de novo. Duane Reade, Inc. v. Cardtronics, LP, 863 N.Y.S.2d 14, 16 (N.Y. App. Div. 1st Dep't. 2008); King v. Conley, 87 N.E.3d 1146, 1152 (Ind. Ct. App. 2017). Neither party alleges any ambiguities in the Loan Documents. We therefore “apply the meaning intended by the parties” and accord the contract's terms their fair and reasonable meaning. Duane Reade, 863 N.Y.S.2d at 16. This rule is applied with even greater force in the context of real property transactions when commercial certainty is a paramount concern and the instrument was negotiated at arm's length by sophisticated, counseled businesspeople. Wallace v. 600 Partners Co., 86 N.Y.2d 543, 548 (1995). Finally, as the Loan Documents are interrelated, they must be read together. Id.

[31] We likewise review a summary judgment ruling de novo, applying the same standard as the trial court. Riggs v. NCAA, 279 N.E.3d 924, 930 (Ind. Ct. App. 2026). “Summary judgment is proper only if ‘the designated evidentiary matter shows that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.’ ” Id. (quoting Ind. Trial Rule 56(C)).

[32] In their combined appellants’ brief, Debtors raise three issues, which we consolidate into two. First, Borrower and Pledgor contend that summary judgment was improper because: (a) the Note required Successor Lender to offer an opportunity to cure the maturity default and factual disputes surround that cure period; and (b) the 24% default interest rate is an unenforceable penalty or, at least, was inflated by Successor Lender's delay in issuing a payoff statement. Second, Guarantors argue that Successor Lender failed to establish the lack of any genuine issue of material fact as to the existence of the predicate breach—a Full Recourse Event under the Cashflow Reserve or Net Cashflow covenants—needed to trigger their liability under the Guaranty.

[33] We affirm the trial court's entries of summary judgment against Debtors. Indiana Borrower's default based on its nonpayment of the balance of the loan at maturity (Maturity Default) is undisputed, and no opportunity to cure was agreed to or required under the Note. We also conclude that the 24% default rate is enforceable under New York law, and that the payoff-statement theory does not defeat the contractually fixed default interest.

[34] Pledgor's liability attaches under circumstances similar to Indiana Borrower's, but Guarantors’ liability accrues under more limited conditions. However, because Indiana Borrower did not fund the Cashflow Reserve as required under the Note, no genuine issue of material fact exists as to whether a Full Recourse Event occurred. Guarantors are therefore liable under the Guaranty for Indiana Borrower's obligations.

I. Indiana Borrower's Liability on the Note

[35] Indiana Borrower concedes that it did not pay the loan balance by the January 1, 2024 Maturity Date. A holder of a promissory note meets its initial burden on summary judgment by designating the note and evidence showing payments were not made in accordance with the note's terms. Sheppard v. Stanich, 749 N.E.2d 609, 610-11 (Ind. Ct. App. 2001). The burden then shifts to the borrower to demonstrate that summary judgment was unwarranted due to a genuine issue of material fact as to the promissory note holder's right to recover. Id. A party opposing summary judgment “may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial.” Ind. Trial Rule 56(E).

A. The Note Did Not Mandate an Opportunity to Cure

[36] In its summary judgment filings, Successor Lender alleged Indiana Borrower defaulted through nonpayment of the remaining balance on the Note by January 1, 2024, and through its non-payment of the Net Cashflow and the Cashflow Reserve. Successor Lender's designated evidence included the Note and accompanying Loan Documents, as well as a sworn affidavit of nonpayment from an executive with the entity that manages Successor Lender. The Note, as amended, required that the Note balance be paid by the amended maturity date of January 1, 2024. Successor Lender therefore met its initial burden on summary judgment. See id.; Sheppard, 749 N.E.2d at 610-11.

[37] The burden then shifted to Indiana Borrower and Pledgor to refute this evidence by establishing the existence of a triable issue of fact. See Ind. T.R. 56(E); Sheppard, 749 N.E.2d at 610-11. Indiana Borrower and Pledgor attempted to do so by seemingly arguing that the Note obligated Successor Lender to afford an opportunity to cure before the nonpayment at the Note's maturity could be classified as a default. In their response to Successor Lender's summary judgment motion, Indiana Borrower and Pledgor specifically argued:

As stated in the Note, upon the occurrence of an Event of Default, [Successor Lender] had the option to declare the unpaid principal and accrued interests accelerated and immediately payable but could only do so “after the expiration of all applicable cure and grace periods.” [Note, at 6 (emphasis added).] While the Note does not state a specific cure or grace period by which an Event of Default must be cured, [see generally, Note], [Successor Lender] testified that it intended to and did provide [Indiana] Borrower with an opportunity to cure until January 8, 2024 in its December 19 Letter. [Meagher Tr., 73:10-77:16.]

However, the December 19 Letter is insufficient to serve as a notice of an opportunity for [Indiana] Borrower to cure a default because none of the alleged defaults on the Note took place before December 19, 2023.

Appellants’ App. Vol. III, p. 197 (brackets in original).

[38] Through such allegations, Indiana Borrower and Pledgor failed to establish a genuine issue of material fact for several reasons. First, their argument misapprehends the Note. A Maturity Default is not the optional acceleration of a pre-maturity breach referenced in the December 19 letter. Instead, a Maturity Default under the Note arises when the Note balance is unpaid on or before the maturity date.

[39] New York recognizes the distinction. Where a note becomes “due and payable, whether at maturity or ․ otherwise,” and the borrower does not pay, an event of default is established without any “declaration of default.” De Briey v. Roi Land Invs. Ltd., 204 N.Y.S.3d 500, 501 (N.Y. App. Div. 1st Dep't. 2024). A permissive acceleration provision therefore “has no bearing” because a matured note is not a candidate for acceleration. Id.

[40] The provisions Indiana Borrower cites confirm this point. The Note's cure-and-grace language qualifies Successor Lender's optional remedies, including acceleration of the unpaid balance “at the option of Lender” upon a Mortgage default. App. Vol. II, p. 69. This language does not impact the Indiana Borrower's freestanding obligation to pay the balance when the Note matured. To read an affirmative duty to grant a cure period into that language would require us to “add or excise terms ․ and thereby make a new contract for the parties under the guise of interpreting the writing”—an action that New York law forbids. Vermont Teddy Bear Co., Inc. v. 538 Madison Realty Co., 807 N.E.2d 876, 879 (N.Y. 2004) (quoting Reiss v. Financial Performance Corp., 764 N.E.2d 958, 961 (N.Y. 2001)).

[41] Indiana Borrower's related contention—that Successor Lender's letter dated December 19, 2023, extended the payoff deadline to January 8, 2024—fares no better. The January 8 date had nothing to do with repayment of principal. It was the deadline to fund the separate Cashflow Reserve with the $275,000 payment as required by the Note, which specified such payment “within five (5) business days” of a triggering event. App. Vol. II, p. 68 (“During the term of the Loan, in the event any of the tenants vacate the Property, or in the event that [Borrower] stops receiving rents from the Property for any reason, then [Borrower] shall, within five (5) business days, pay to Lender an amount sufficient to cause the Cashflow Reserve to equal to Two Hundred and Seventy Five Thousand Dollars ($275,000)”).

[42] The December 19 letter demanded this reserve payment “in accordance with the terms and conditions of the Note.” Appellants’ App. Vol. IV, p. 87. The January 8th date is the fifth business day after a December 31/January 1 trigger—that is, the cessation of Indiana Borrower's receipt of rents from the Indiana Property.

[43] Separate provisions within the Note govern the repayment of principal and the funding of the Cashflow Reserve, and New York allows each to be given independent effect. Admittedly, a contract is “read as a whole” so that no term is rendered superfluous. South Road Associates, LLC v. Int'l. Bus. Machs. Corp., 826 N.E.2d 806, 809 (N.Y. 2005). However, a provision that deals “exclusively” with one obligation in an unambiguous contract may be construed separately from another. See, e.g., Vermont Teddy Bear Co., Inc., 807 N.E.2d at 880 (finding notice provision in one term of the contract did not apply to separate provision in that contract). Indiana Borrower itself concedes that the January 8 date “relates only to the Cashflow Reserve obligations under the Note and does not provide any cure or grace period for ․ maturity of the Note.” Appellants’ Reply Brief, p. 9 n.2.

[44] In any event, the Maturity Date could be extended only in writing. The Note provided that it could “not be changed orally, but only by an agreement in writing, signed by the party against whom enforcement of any waiver, change, modification[,] or discharge is sought.” Appellants’ App. Vol. II, p. 73. New York enforces such a clause. See Paramount Leasehold, L.P. v. 43rd Street Deli, Inc., 26 N.Y.S.3d 258, 263 (N.Y. App. Div. 1st Dep't. 2016) (ruling that an agreement “providing that no waiver of a term shall be inferred absent a writing to that effect is enforceable”); see also N.Y. Gen. Oblig. Law § 15-301(1).

[45] Having twice extended the Maturity Date by signed modifications, the parties knew how to do so. The December 19 letter did not extend the maturity date. In fact, it reinforced the existing January 1 deadline, stating that Successor Lender was “not willing or able at this time to formally extend the Maturity Date.” Appellants’ App. Vol. IV, p. 86. A communication declining an extension cannot supply one.² The trial court correctly held Indiana Borrower liable on the matured Note for the Maturity Default.

B. The 24% Default Interest Rate Was Not Unenforceable

[46] The Note fixed the Default Interest Rate at the lesser of 24% or the highest lawful rate. The Default Interest Rate applied to the unpaid principal upon “the maturity thereof, whether normal maturity or accelerated maturity and after the expiration of all applicable cure and grace periods,” according to the Note. Appellants’ App. Vol. II, p. 69.

[47] Indiana Borrower and Pledgor's threshold argument is that the Default Interest Rate could not begin until an applicable cure or grace period expired. As we found in Section I(A) of this opinion, however, no cure or grace period was required or applicable to Indiana Borrower's obligation to pay off the matured loan. This lack of a maturity cure or grace period is also reflected implicitly in the Note, which imposed the Default Interest Rate on any balances still outstanding as of the Maturity Date. Id. at 68-69. The Default Interest Rate thus attached to the outstanding loan balance from January 1, 2024, as a matter of law if that rate was not a penalty.

[48] Indiana Borrower and Pledgor claim a genuine issue of material fact exists as to whether the 24% Default Interest Rate is an unenforceable penalty under New York law. For more than a century, New York law generally has treated “an agreement to pay interest upon a loan from its date until its payment at a rate before and a differing rate after its maturity [a]s an agreement to pay interest and not a penalty as to the latter rate.” Union Ests. Co. v. Adlon Const. Co., 116 N.E. 984, 985 (N.Y. 1917) (enforcing 23% default interest rate in agreement between two commercial parties); 37-10 114th St. ML Funding LLC v. Chen, 177 N.Y.S.3d 237, 238 (N.Y. App. Div. 1st Dep't. 2022) (enforcing agreed commercial default interest rate of 10% above the note rate, compounded monthly). “[S]o long as an interest rate is not usurious and does not constitute a penalty, the parties are ․ free to agree that the contract rate of interest shall increase upon default.” Emery v. Fish Market Inn of Granite Springs, Inc., 570 N.Y.S.2d 821, 823 (N.Y. App. Div. 2d Dep't. 1991).

[49] Indiana Borrower and Pledgor do not claim that the 24% Default Interest Rate is usurious. They focus instead on their allegation that it is a penalty disguised as a routine contract provision. The parties agree that the standard of review applicable to this issue is found in AXA Inv. Managers UK Ltd. v. Endeavor Cap. Mgmt. LLC, 890 F. Supp. 2d 373, 388 (S.D.N.Y. 2012).

[50] Applying New York state law, the AXA court ruled that a default interest rate, as with liquidated damages provisions generally, is an unenforceable penalty when the rate is disproportionate to the probable loss and the amount of the actual loss from the default was capable of precise estimate at the time of execution of the agreement. Id. In determining whether the rate is a penalty, courts also consider whether the parties were “sophisticated” and represented by counsel, whether the contract was negotiated at arms-length between parties of equal bargaining power, and whether the provision was freely contracted. Id. The enforceability of a default interest rate ultimately is a question of law. Id.

[51] Indiana Borrower and Pledgor, as the parties seeking to avoid application of the Note's default interest rate, bear the burden of proof to establish the rate is a penalty. JMD Holding Corp. v. Congress Financial Corp., 828 N.E.2d 604, 609 (N.Y. 2005). The challengers meet their burden on summary judgment “by demonstrating either that (1) the damages that would result from a breach were capable of estimation at the time at which the contract was forged, or (2) showing that the prescribed damages stand in evident disproportion to this anticipable injury.” AXA, 890 F. Supp. 2d at 388. This evidence “must look to the anticipated loss discernible at the time of contracting and not the actual loss incurred by the breach.” Id. (quoting Vernitron Corp. v. CF 48 Assocs., 478 N.Y.S.2d 933, 934 (N.Y. App. Div. 2d Dep't. 1984)).

[52] Indiana Borrower and Pledgor did not meet this burden. They claim that the cost to Successor Lender of Indiana Borrower's breach was capable of estimation at the time of the Note's execution. However, Indiana Borrower and Pledgor specify no designated evidence and provide no argument establishing that assertion. Although they reference a post-Complaint deposition revealing the interest rate that Successor Lender paid its own financier to fund Indiana Borrower's loan, this evidence provides only minimal information about a single cost that Successor Lender might incur upon Indiana Borrower's breach. Such evidence does not show that the overall cost to Successor Lender of Indiana Borrower's breach was capable of estimation at the time of execution of the Note.

[53] Indiana Borrower and Pledgor's claim that the Default Interest Rate was disproportionate to Successor Lender's costs necessarily fails for the same reason. They note the Default Interest Rate is three times that of the non-default interest rate but fail to offer any basis for finding that to be disproportionate to the anticipated costs to Successor Lender of Indiana Borrower's breach. Nor do they cite any designated evidence showing Successor Lender's other anticipated costs of breach, which are an essential component of proving disproportionality. Imposing a higher interest rate upon default is a routine practice both in Successor Lender's contracts and generally. See, e.g., Coffey v. Tretola, 119 N.Y.S.3d 179, 180 (N.Y. App. Div. 2d Dep't. 2020) (enforcing a default rate of 24% per annum and ruling that “[a] loan agreement may provide for a higher rate of interest to apply in the event of a borrower's default,” and such increased post-default interest rates routinely are enforced).

[54] In any case, the summary judgment filings of Indiana Borrower and Pledgor, as well as their briefs on appeal, erroneously focus on actual costs of breach ascertained after this litigation began. Yet the relevant vantage point is “of the date of [the contract's] making and not as of the date of its breach.” Truck Rent-A-Center, Inc. v. Puritan Farms 2nd, Inc., 361 N.E.2d 1015, 1019 (N.Y. 1977). When the challenger presents no proof that, at contracting, the lender's prospective damages were readily calculable or that the charge at that time was grossly disproportionate to those anticipated costs, the challenger has not met its burden of establishing a penalty. JMD Holding Corp., 828 N.E.2d at 612-13. Given Indiana Borrower's failure to designate the required evidence, the 24% default rate specified in the Note therefore is not a penalty as a matter of New York law. See id.

[55] Indiana Borrower and Pledgor's other claims regarding the Default Interest Rate fare no better. They argue that Successor Lender is estopped from enforcing the Default Interest Rate because Successor Lender did not provide a payoff statement to Indiana Borrower for five months after Indiana Borrower first requested it in May 2024—months after the Maturity Default occurred.

[56] A debtor is bound by the terms of the agreement as made and cannot be relieved from default in the absence of waiver, or estoppel, or bad faith, fraud, oppressive or unconscionable conduct. Nassau Trust Co. v. Montrose Concrete Products Corp., 436 N.E.2d 1265, 1269 (N.Y. 1982) (mortgage foreclosure action); Fifty States Mgmt. Corp. v. Pioneer Auto Parts, Inc., 389 N.E.2d 113, 116 (N.Y. 1979) (commercial lease). An estoppel “ ‘rests upon the word or deed of one party upon which another rightfully relies and [in] so relying changes his position to his injury.’ ” Holm v. C.M.P. Sheet Metal, Inc., 455 N.Y.S.2d 429, 433 (N.Y. App. Div. 4th Dep't. 1982) (quoting Triple Cities Constr. Co. v. Maryland Cas. Co., 151 N.E.2d 856, 858 (N.Y. 1958)).

[57] Indiana Borrower and Pledgor have not met the requirement of a prejudicial change of position. They allege in their brief that Successor Lender's “failure to provide such necessary payoff information consequently precluded Indiana Borrower from obtaining financing necessary to resolve the subject loan.” Appellants’ Br., p. 50. However, the only designated evidence that they cite in this context does not support that statement. They point to an affidavit of one of the Guarantors—Mendlowits—stating that, since October 2024, “Borrower has continued efforts ․ to obtain financing to resolve the outstanding Note balance.” Appellants’ App. Vol. IV, p. 13. They also cite designated email exchanges between Mendlowits and Successor Lender about Indiana Borrower's request for a payoff statement. None of this designated evidence establishes that Successor Lender's five-month post-default delays in providing a payoff statement precipitated Indiana Borrower's failure to obtain financing. Even after Successor Lender provided the payoff statement, Indiana Borrower still did not obtain financing or pay the loan balance.³

II. Guarantors’ Liability

[58] The separate judgment against Guarantors requires separate analysis. “A guaranty is a promise to fulfill the obligations of another party, and is subject ‘to the ordinary principles of contract construction.’ ” Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A. v. Navarro, 36 N.E.3d 80, 85 (N.Y. 2015). Under these principles, a guaranty that is “complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.” Id. (quoting Greenfield v. Phillies Records, 780 N.E.2d 166, 170 (N.Y. 2002)). This approach applies with special force to real-property transactions negotiated between sophisticated, counseled parties at arm's length. 1995 CAM LLC v. W. Side Advisors, LLC, 277 N.E.3d 1040, 1042 (N.Y. 2025) (citation omitted).

[59] Once the guaranty is interpreted, the guarantor's obligation is construed “in the strictest manner.” White Rose Food v. Saleh, 788 N.E.2d 602, 603 (N.Y. 2003). Courts will not hold a guarantor responsible for a performance not specified in the guaranty, and the obligation cannot be altered or extended by the creditor or debtor without the guarantor's consent. Id.; PC 444, LLC v. Priority Pediatrics, PLLC, 21 N.Y.S.3d 76, 78 (N.Y. App. Div. 2d Dep't. 2015).

[60] The Guaranty specified that Guarantors would be liable only under certain circumstances, which did not include merely a Maturity Default by Indiana Borrower. We conclude that no genuine issue of material fact exists as to whether the triggering circumstances occurred and rendered Guarantors liable under the Guaranty.

A. An Enumerated Full Recourse Event Triggered the Guaranty

[61] The Guaranty here did not make the Guarantors liable for Indiana Borrower's entire debt whenever Indiana Borrower defaulted. Instead, the Guaranty identified two categories of triggering events: “Loss Liability Events” and “Full Recourse Events.” Appellants’ App. Vol. II, p. 166. A mere failure to repay the Note at maturity is not itself a triggering event under either category. Therefore, the Guaranty was never triggered when Indiana Borrower failed to pay the outstanding principal on the maturity date.

[62] The “Full Recourse Events” provision is the only category of triggering events at issue in this appeal. It imposes full Guarantor liability to Successor Lender for “all obligations of Borrower to Lender under the Mortgage and other Loan Documents” upon the occurrence of a Full Recourse Event, including the following:

(vii) Borrower has failed to cause sufficient funds to be paid to Lender, when required under the Note, to satisfy the requirements of the Cashflow Reserve (as defined in the Note).

Appellants’ App. Vol. II, pp. 166-67.

[63] The Note contained the following Cashflow Reserve provision:

During the term of the Loan, in the event any of the tenants vacate the Property, or in the event that [Borrower] stops receiving rents from the Property for any reason, then [Borrower] shall, within five (5) business days, pay to Lender an amount sufficient to cause the Cashflow Reserve to equal to Two Hundred and Seventy[-]Five Thousand Dollars ($275,000).

Id. at 68.

[64] Successor Lender grounds the Guarantors’ liability solely on Indiana Borrower's failure to fund the Cashflow Reserve. If the Note's Cashflow Reserve provision was not triggered, no Full Recourse Event occurred, and Guarantors would not be liable under the limited Guaranty.

B. Cashflow Reserve Arguments

[65] The Cashflow Reserve obligation arose only if, “[d]uring the term of the Loan,” a tenant “vacate[d] the Property” or the Borrower “stop[ped] receiving rents from the Property for any reason.” App. Vol. II, p. 68. Successor Lender, as the summary-judgment movant, had to establish that one of those triggering events occurred during the loan term. Successor Lender argued that both occurred, resulting in Indiana Borrower's duty to fund the Cashflow Reserve with $275,000 and Guarantors’ ultimate liability. In response, Guarantors claimed that rents did not cease “during the term of the Loan” and that a genuine issue of material fact exists as to whether Tenant vacated the Indiana Property during that same period. As we conclude Indiana Borrower “stop[ped] receiving rents” from Tenant “during the term of the Loan,” that is the only Cashflow Reserve triggering event that we need address.

C. Defining “During the Term of the Loan”

[66] The parties disagree as to the meaning of “during the Term of the Loan” as used in the Note. The Note does not expressly define this specific phrase. New York also provides no statutory definition for “term of the loan” within this context.

[67] Successor Lender maintains “Term of the Loan,” as used in the Note, includes a date beyond the Maturity Date when the loan remains unsatisfied at maturity. Successor Lender relies on the provision in the Guaranty specifying that Guarantors’ duties under that document are “irrevocable, absolute and unconditional and shall remain in full force and effect until the Guaranteed Obligations have been satisfied in full or the Loan has been paid in full and no Guaranteed Obligations then exist upon such satisfaction.” Appellants’ App. Vol. II, p. 167. Guarantors appear to claim that the term of the loan expired on December 31, 2023—the day before the Maturity Date.

[68] New York law makes clear that the term of the loan is dictated by the loan documents. See, e.g., Greenwich Capital Financial Products, Inc. v. Negrin, 903 N.Y.S.2d 346, 348 (N.Y. App. Div. 1st Dep't. 2010) (when interpreting the guarantor's obligations, court defined the term of the loan as extending beyond the maturity date based on language within the loan agreement). The Guaranty must be read in the context of the Note, which was executed simultaneously. See id. This construction must “accord[ ] the words their ‘fair and reasonable meaning,’ and achieve[ ] ‘a practical interpretation of the expressions of the parties.’ ” Id. (quoting Duane Reade, 863 N.Y.S.2d at 16).

[69] Here, the Note, as modified through the Second Modification, specified that “the Maturity Date [is] January 1, 2024, at which time a final payment of all principal, interests, and other amounts due under the Loan Documents shall be due and payable in full.” App. Vol. II, p. 86. As the Note contemplated that Indiana Borrower's final payment under the Note would be paid on January 1, 2024, “the Term of the Loan” necessarily could not have expired prior to that.

D. Cessation of Rents During the Term of the Loan

[70] Indiana Borrower contends the designated evidence does not establish that it “stop[ped] receiving rents” during the term of the loan so the Cashflow Reserve provision was never activated. We disagree.

[71] The designated evidence shows the following. Tenant paid its November and December rent jointly in November 2023. On December 6, 2023, Indiana Borrower informed Successor Lender of this payment and its belief that Tenant's default was imminent.

[72] The lease agreement between Tenant and Indiana Borrower is not among the evidence designated by the parties. Although neither party specifies direct evidence that Tenant's last rent payment was the November double payment, this fact may be inferred from the designated evidence. For instance, Guarantor Mendlowits's affidavit specifies that Tenant was Indiana Borrower's tenant through December 2023. In addition, Successor Lender's affidavit alleged that Indiana Borrower filed suit against Tenant in December 2023—during the term of the Note—and that the complaint alleged “Borrower's sole tenant ․ [has] vacated the [Indiana Property and has] failed to pay the rent due.” Appellants’ App. Vol. IV, pp. 10-11. The evidence also shows that, after November 2023, Indiana Borrower never forwarded any rent payments from Tenant to Successor Lender as required by an assignment of rents agreement executed as part of the Loan Documents.

[73] This designated evidence establishes that Tenant stopped paying rent no later than December 31, 2023—the last possible date on which Tenant's double rent payment in November could have satisfied its rent obligation. Guarantors never disputed Successor Lender's ongoing contention that Tenant's double rent payment in November was the last payment of rent to Indiana Borrower other than to argue that Successor Lender's evidence was insufficient to show a cessation of rent.

[74] As rent ceased no later than December 31, 2023, and the loan's term extended at least to the next day, Indiana Borrower's Cashflow Reserve obligation in the Note was triggered by the cessation of rent “during the term of the Loan.” Guarantors reach a different conclusion by assuming without explanation or authority that the term of the Note ended December 31, 2023.

[75] Under the Note, the Cashflow Reserve payment of $275,000 was due five business days after rents ceased. As the Cashflow Reserve obligation arose no later than January 1, 2024, the latest date on which Cashflow Reserve payment was due was January 8, 2024. It is undisputed that Indiana Borrower did not satisfy this obligation.

E. Guarantors’ Liability Activated by Borrower's Failure to Fund the Cashflow Reserve

[76] The Guaranty rendered Guarantors liable for Indiana Borrower's unsatisfied obligations under the Note when a Full Recourse Event occurred. Appellants’ App. Vol. II, pp. 166-67. As no genuine issue of material fact exists as to whether a Full Recourse Event occurred when Indiana Borrower failed to fund the Cashflow Reserve, the Guaranty renders Guarantors liable for Indiana Borrower's obligations under the Loan Documents as a matter of law.

[77] That Indiana Borrower's due date for funding the Cashflow Reserve occurred after the Maturity Date did not relieve Indiana Borrower of that funding obligation or impact Guarantors’ liability. A guaranty applies to a borrower's payment obligations that became binding during the term of the note, although due to be paid after maturity, unless the guaranty expressly carves out post-term or later-maturing amounts. Russo v. Heller, 915 N.Y.S.2d 268, 269 (N.Y. App. Div. 1st Dep't. 2011). Moreover, the Guaranty specified that “[t]he obligations of Guarantor[s] under this Guaranty Agreement shall be irrevocable, absolute and unconditional and shall remain in full force and effect until the Guaranteed Obligations have been satisfied in full or the Loan has been paid in full and no Guaranteed Obligations then exist upon such satisfaction.” Appellants’ App. Vol. II, p. 167.

[78] As Guarantors are liable under the Guaranty for Indiana Borrower's obligations based on Indiana Borrower's failure to fund the Cashflow Reserve, we need not address Guarantors’ alternate claim that a genuine issue of material fact exists as to whether the Guarantors were liable as a matter of law because Tenant vacated the property during the term of the Note.

III. Security Deposit

[79] Indiana Borrower and Guarantors claim that there is a genuine issue of material fact as to whether Tenant's security deposit—which Indiana Borrower transferred to Original Lender when the Note was executed, and which Successor Lender later acquired—earned interest. They assert that such interest should have been credited to them in the judgment. The Note required that the security deposit be placed in an escrow account but did not require that the account be interest-bearing. There is no evidence in the record showing that, in fact, the security deposit earned any interest while in the hands of any lender. Thus, the evidence is not in dispute and does not justify a reversal of summary judgment.

Conclusion

[80] We affirm the trial court's summary judgment rulings. Indiana Borrower concedes it did not repay the Note by the January 1, 2024 Maturity Date. Under New York law, that undisputed nonpayment is a prima facie breach for which neither New York law nor the Note required an opportunity to cure. Indiana Borrower and Pledgor are liable as a matter of law under the Note and Pledge, respectively. The 24% Default Interest Rate is an enforceable contractual default rate, rather than an unlawful penalty, that attached to the outstanding principal from the Maturity Date. Because Indiana Borrower did not fund the Cashflow Reserve as required under the Note, the Guarantors are liable for Indiana Borrower's obligations under the Note as a matter of law.

[81] We affirm the trial court's judgment.

FOOTNOTES

1.   The Kentucky Borrower is not a party to this appeal.

2.   As part of their argument, Indiana Borrower and Pledgor rely on certain conflicting allegations in Successor Lender's complaint and in the attached affidavit of an executive associated with Successor Lender. Each of those documents stated that Successor Lender had offered Indiana Borrower an opportunity to cure. Even if we were to interpret those allegations as offering an opportunity to cure, the terms of the Note would still control our analysis. See, e.g., 805 Third Ave. Co. v. M.W. Realty Assocs., 448 N.E.2d 445, 447 (N.Y. 1983) (Where a party annexes a contract to its complaint, “it has made the contract a part of its pleading for all purposes,” and the contract's “provisions establish the rights of the parties and prevail over conclusory allegations of the complaint.”); Sterling Resources Int., LLC v. Leerink Swann, LLC, 939 N.Y.S.2d 349 (N.Y. App. Div. 1st Dep't. 2012) (“[T]he provisions of a contract prevail over conclusory allegations of the complaint”) (internal quotations omitted); Marosu Realty Corp. v. Community Preservation Corp., 808 N.Y.S.2d 628, 634 (N.Y. App. Div. 1st Dep't. 2005) (dismissing claims because based on its ruling that provisions of the contract delineating the rights of the parties prevailed over the allegations in the complaint).

3.   We do not address specifically the other claims of Indiana Borrower and Pledgor regarding estoppel as they have no merit.

Weissmann, Judge.

Tavitas, C.J., and Foley, J., concur