NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH PA v. PACHNANDA (1999)

Order and judgment (one paper), Supreme Court, New York County (Alice Schlesinger, J.), entered November 24, 1997, which granted plaintiff's motion for summary judgment on a promissory note and indemnification agreement, and awarded plaintiff damages in the total amount of $199,588.75, unanimously affirmed, with costs.

Defendant failed to assert his current arguments before the IAS court, where they could have been contested by evidentiary showings, and they are therefore unpreserved for appellate review (see, First Intl. Bank of Israel, Ltd. v. Blankstein & Son, Inc., 59 N.Y.2d 436, 447, 465 N.Y.S.2d 888, 452 N.E.2d 1216).   Were we to reach those arguments, we would find them to be without merit.

 Assuming, arguendo, the securities at issue were required to be registered pursuant to Section 5(c) of the Securities Act of 1933 (15 U.S.C. § 77e), a violation of that statute would merely have rendered defendant's obligations voidable, not completely null and void (see, A.C. Frost & Co. v. Coeur D'Alene Mines Corp., 312 U.S. 38, 41-43, 61 S.Ct. 414, 85 L.Ed. 500;  A.D.M. Corp. v. Thomson, 707 F.2d 25, 27, cert. denied 464 U.S. 938, 104 S.Ct. 350, 78 L.Ed.2d 315), and therefore not “illegal” for purposes of UCC 3-305(2)(b), so as to deprive plaintiff of holder in due course status (see, UCC 3-305, Comment 6;  Bankers Trust Co. v. Litton Systems, Inc., 599 F.2d 488, 491-492).   Even if the note itself were unenforceable, plaintiff did not participate in its issuance or in the underlying investment, but was merely a guarantor of the note's payment under a financial guarantee bond, and the indemnity agreement between plaintiff and defendant was, under such circumstances, separate and apart from the note and enforceable regardless of any defenses to the note itself (see, National Union Fire Ins. Co. v. Allen, 232 A.D.2d 80, 88-89, 662 N.Y.S.2d 8;  National Union Fire Ins. Co. v. Clairmont, 231 A.D.2d 239, 243, 662 N.Y.S.2d 110, lv. denied 92 N.Y.2d 868, 677 N.Y.S.2d 773, 700 N.E.2d 312;  National Union Fire Ins. Co. v. Williams, 223 A.D.2d 395, 637 N.Y.S.2d 36).

MEMORANDUM DECISION.