Summary
In Caplan, the New York Supreme Court explained that a no recourse provision could limit remedies for non-payment under a contract.
Summary of this case from Lasalle Nat. Bank v. PerelmanOpinion
December 8, 1992
Appeal from the Supreme Court, New York County (Myriam J. Altman, J.).
The IAS Court correctly dismissed the complaint with respect to payment of Stated and Additional Interest under the Indenture. An alleged breach of the covenant of good faith does not give rise to a cause of action under UCC 1-203 (see, Quail Ridge Assocs. v Chemical Bank, 162 A.D.2d 917, 919, lv dismissed 76 N.Y.2d 936). Further, as plaintiffs received all the promised benefits under the Indenture upon redemption of the debenture, there is no common law cause of action for breach of an implied covenant of good faith and fair dealing (see, Metropolitan Life Ins. Co. v RJR Nabisco, 716 F. Supp. 1504, 1517). Nor have plaintiffs stated a claim under the Fraudulent Conveyance Act (Debtor and Creditor Law § 276), since the claims are asserted against defendant and not its subsidiary, which made the conveyances. Plaintiffs' argument that the corporate veil between defendant and its subsidiary should be pierced is raised for the first time on appeal and thus may not be considered (Unitron Graphics v Mergenthaler Linotype Co., 75 A.D.2d 783, 784).
The court also properly held that the Indenture specifically defined those who could seek a remedy for non-payment as holders of record, and that the express terms of the Indenture providing a limited release against all but defendant corporation is not violative of public policy (see, Cheatham v Cheatham, 93 Misc.2d 576, 581). However, the court properly retained the cause of action for Contingent Interest against defendant Unimax Holdings Corporation alone, since, although said defendant might prove the subsidiary still retained sufficient assets and was in business, it could not be determined, as a matter of law, whether said subsidiary had sold all or substantially all of its assets at the time of sale.
Concur — Murphy, P.J., Rosenberger, Kassal and Rubin, JJ.