JUDARL v. CYCLETECH INC (1998)

Appeal from an order of the Supreme Court (Teresi, J.), entered November 15, 1996 in Albany County, which, inter alia, denied plaintiff's motion for summary judgment in lieu of complaint.

Prior to its formation on February 28, 1996, plaintiff loaned defendant Cycletech Inc. $165,000, receiving in return three demand promissory notes from Cycletech that were guaranteed by the individual defendants.   A fourth note for $25,000, executed by Cycletech on March 15, 1996, was also guaranteed by the individual defendants.¹  On June 14, 1996, plaintiff issued a demand for payment to the individual defendants who did not respond.   Whereupon, plaintiff initiated this motion for summary judgment in lieu of complaint (CPLR 3213).   Supreme Court denied the motion, finding that plaintiff did not have the authority to bring suit to collect on the first three notes and, as to the fourth note, there was a triable issue of fact as to whether it arose out of a single agreement as asserted by the parties or two agreements as suggested by the record.   Plaintiff appeals.

 While Supreme Court correctly noted that a corporation that is neither de jure or de facto cannot acquire rights by contract or sue or be sued (see, Kiamesha Dev. Corp. v. Guild Props., 4 N.Y.2d 378, 389, 175 N.Y.S.2d 63, 151 N.E.2d 214), parties who deal with an entity holding itself out as a corporation and who receive performance from such entity are estopped from avoiding their obligations to it (see, Puma Indus. Consulting v. Daal Assocs., 808 F.2d 982, 986 (2nd Cir.1987);  Metered Appliances v. 75 Owners Corp., 225 A.D.2d 338, 638 N.Y.S.2d 631;  Lorisa Capital Corp. v. Gallo, 119 A.D.2d 99, 112, 506 N.Y.S.2d 62).   Thus, as it is undisputed that Cycletech received the loan proceeds and as plaintiff has filed its articles of organization and paid the appropriate fees, we find that it is not precluded from seeking to enforce the three promissory notes executed prior to its formation.

 The movant in a CPLR 3213 motion establishes a prima facie case by producing the promissory notes executed by the defendant and demonstrating that it failed to pay them (see, Gross v. Fruchter, 230 A.D.2d 710, 646 N.Y.S.2d 53).   Inasmuch as plaintiff has satisfied this burden, our focus is on whether defendants have come forward with evidentiary proof showing the existence of a triable issue of fact with respect to a bona fide defense of the note (see, Lavelle v. Urbach, Kahn & Werlin, 198 A.D.2d 751, 604 N.Y.S.2d 614).  Cycletech claims that it has a defense since plaintiff has failed to comply fully with a loan agreement requiring it to loan Cycletech $465,000.   This argument suffers from several deficiencies.   First, invocation of defenses based on facts extrinsic to an instrument for the payment of money only do not preclude CPLR 3213 consideration (see, Phillips v. Cioffi, 204 A.D.2d 94, 611 N.Y.S.2d 181, lv. denied 85 N.Y.2d 810, 629 N.Y.S.2d 724, 653 N.E.2d 620;  Woodbridge Vil. Assocs. v. Goren, 188 A.D.2d 293, 590 N.Y.S.2d 496;  Dresdner Bank AG. v. Morse/Diesel Inc., 115 A.D.2d 64, 68, 499 N.Y.S.2d 703).   Second, the record shows that what Cycletech claims is a loan agreement is merely a letter of intent authored by plaintiff which specifically states that it is not a binding commitment.   Moreover, even if viewed as a contract, it offers Cycletech no support as it provides that the decision to make the loan was within plaintiff's sole and complete discretion.   Therefore, since we find this defense unsubstantiated and, at best, separate and severable from plaintiff's claim, we conclude that Cycletech did not meet its burden on this motion (see, Mitsubishi Trust & Banking Corp. v. Housing Servs. Assocs., 227 A.D.2d 305, 642 N.Y.S.2d 887).

 The individual defendants seek to escape liability by claiming that plaintiff cannot bring this motion against them because of its failure to first demand payment from Cycletech.   We disagree since the language contained in the subject guarantees evinces an unconditional guarantee of payment (see, Milliken & Co. v. Stewart, 182 A.D.2d 385, 582 N.Y.S.2d 127;  see also, 63 N.Y. Jur. 2d, Guaranty and Suretyship, § 81, at 121-122).

Lastly, we have not considered defendants' argument premised upon Limited Liability Company Law § 206 as it was not raised before Supreme Court (see, Matter of Alcott Staff Leasing v. New York Compensation Ins. Rating Bd., 224 A.D.2d 54, 58, 648 N.Y.S.2d 792).

For these reasons, we reverse Supreme Court's order and grant plaintiff's motion.

ORDERED that the order is reversed, on the law, with costs, motion granted, plaintiff is awarded judgment in the sum of $190,000 with interest, and matter remitted to the Supreme Court to ascertain plaintiff's reasonable counsel fees.

FOOTNOTES

1.   There was also an undocumented loan of $15,000 which plaintiff recognizes cannot be the subject of a CPLR 3213 motion.

WHITE, Justice.

CARDONA, P.J., and CREW, YESAWICH and CARPINELLO, JJ., concur.