Summary
finding that execution of agreement acknowledging indebtedness after guarantor was aware of fraud constituted a waiver of the defense of fraudulent inducement
Summary of this case from Inter-American Dev. Bank v. IIG Trade Opportunities Fund N.V.Opinion
May 9, 1991
Appeal from the Supreme Court, New York County (Myriam Altman, J.).
Plaintiff, a New York partnership engaged in the practice of law, commenced the underlying action against the defendants, general partners, shareholders and principals of HQZ Enterprises, Inc., HQZ Marketing, Inc., and other entities ("the HQZ Entities"), seeking to enforce a Guaranty and Promissory Note, executed by defendants Edelstein and Kazantzis on December 12, 1984, wherein they promised to pay the then-existing and future indebtedness of the HQZ Entities to the plaintiff law firm for outstanding legal fees and disbursements. Plaintiff also sought to recover legal fees and disbursements for services rendered by the plaintiff to defendant Kohlreiter personally.
Upon examination of the record, we find, as did the IAS court, that the affirmative defense of defendants Edelstein and Kazantzis that the Promissory Note and Guaranty were procured by fraud in the inducement was barred under New York law by the specific language of the instruments in question which expressly and unambiguously created an unconditional guarantee (Citibank v Plapinger, 66 N.Y.2d 90, 95).
Equally devoid of merit is the defendants' affirmative defense of duress since, in opposing summary judgment, they failed to proffer probative, admissible and evidentiary facts establishing that the defendants were compelled to execute the Promissory Note and Guaranty because of a wrongful threat by the plaintiff which precluded the exercise of the defendants' free will (805 Third Ave. Co. v M.W. Realty Assocs., 87 A.D.2d 544, 545, affd 58 N.Y.2d 447, 451); that the plaintiff, in demanding payment of its legal fees, seeking to be relieved as counsel and placing a retaining lien on the defendants' files, had made an illegal threat (Edison Stone Corp. v 42nd St. Dev. Corp., 145 A.D.2d 249, 254); and that the execution of the Promissory Note and Guaranty by the defendants was not merely the product of a reasonable business decision negotiated in good faith between the parties and their attorneys (Welford Realty v Brause, 93 A.D.2d 758, 759, affd 60 N.Y.2d 623).
In any event, we find that defendants Edelstein and Kazantzis have waived their present defenses and ratified their obligations under the Promissory Note and Guaranty by soliciting and accepting an extension of time to fulfill their obligations to the plaintiff and in executing a May 15, 1987 Agreement acknowledging their indebtedness to the plaintiff, at a time when the defendants were aware of the plaintiff's alleged antecedent fraud (Edison Stone Corp. v 42nd St. Dev. Corp., supra, at 251).
We have reviewed the defendants' remaining claims and find them to be without merit.
Concur — Murphy, P.J., Sullivan, Asch, Kassal and Rubin, JJ.