Citibank, N.A. v. Vernikov, doing business as Interpage Co
Attorneys and Parties
Brief Summary
Commercial lending—bank’s contractual right to cancel a revolving line of credit after periodic credit review, enforcement of a personal guaranty, and replevin of collateral following borrower default; scope of implied covenant of good faith and fair dealing.
The Supreme Court, Kings County denied Citibank’s motion for summary judgment on its breach of contract, guaranty, and collateral claims, and denied dismissal of Vernikov’s affirmative defenses and counterclaims.
The Appellate Division reversed, granted summary judgment to Citibank on breach of contract, the personal guaranty, and recovery of collateral, and dismissed Vernikov’s affirmative defenses and counterclaims.
The agreement unambiguously allowed Citibank to cancel borrowing rights at any time upon written notice after periodic credit review, even if the annual fee had just been paid. Citibank made a prima facie showing of the debt and default; the defenses were conclusory or abandoned; and no triable issue of fact existed as to breach of contract, guaranty liability, or Citibank’s superior right to the collateral.
Background
In August 2018, Vernikov (d/b/a Interpage Co) obtained a $100,000 revolving commercial line of credit from Citibank, governed by an application, a terms letter, and terms and conditions. The agreement allowed Citibank to change terms and to increase, reduce, or cancel available credit at any time upon written notice, and to refuse further advances upon reasonable circumstances, including adverse changes in the borrower’s or guarantor’s financial condition. Vernikov executed a personal guaranty and granted Citibank a security interest in all personal property and fixtures (and proceeds). On August 27, 2019, Citibank confirmed the annual fee was paid and the account was renewed, while reiterating accounts remained subject to periodic review. On September 9, 2019, after reviewing Vernikov’s credit profile, Citibank canceled borrowing rights and required repayment in 48 monthly installments. After missed payments, Citibank issued default and acceleration notices in 2020 and 2021, then sued for breach of contract, to enforce the guaranty, and to recover the collateral. Vernikov answered with affirmative defenses and six counterclaims.
Lower Court Decision
The Supreme Court, Kings County (Montelione, J.) denied Citibank’s motion for summary judgment on breach of contract, guaranty, and collateral, and denied dismissal of Vernikov’s affirmative defenses and counterclaims.
Appellate Division Reversal
The Appellate Division reversed insofar as appealed from and granted summary judgment to Citibank on breach of contract, the guaranty, and recovery of collateral, and dismissed all affirmative defenses and counterclaims (finding several counterclaims abandoned for failure to oppose and other defenses/counterclaims conclusory or unsupported). The court held the agreement was unambiguous, Citibank properly exercised its contractual right to cancel the line notwithstanding acceptance of the annual fee, and Citibank established default and its superior right to possession of the collateral.
Legal Significance
Reaffirms that clear credit agreements allowing periodic review and cancellation upon notice are enforceable even after payment of renewal fees; acceptance of such fees does not waive a lender’s contractual right to cancel. Establishes that lenders can obtain summary judgment on debt and guaranty claims upon proof of the agreement, default, and amount due, and that conclusory defenses and unopposed counterclaims are subject to dismissal. Confirms replevin is available where a security agreement grants a lender immediate possession upon default and the lender shows a superior right to the collateral.
When a commercial line-of-credit agreement expressly permits cancellation after periodic credit review and upon written notice, a lender may cancel even shortly after accepting an annual fee; borrower default triggers enforcement of a personal guaranty and recovery of collateral, and unsupported defenses or unaddressed counterclaims will not defeat summary judgment.