5995 FORT CRE 2022-FL3 ISSUER LLC, et al. v. Mark Karasick, et al.
Attorneys and Parties
Brief Summary
Commercial real estate finance—enforcement of absolute and unconditional payment guaranties while a related foreclosure action proceeds in another jurisdiction.
Stayed the New York guaranty enforcement action under CPLR 2201 [court’s power to stay proceedings] pending resolution of a related Minnesota foreclosure action.
The stay of the New York action; the motion to stay was denied and the stay vacated.
The guaranties are absolute and unconditional guaranties of payment, not collection, with broad waivers eliminating defenses and any requirement to exhaust remedies against the borrower or collateral. Defenses in the Minnesota foreclosure are irrelevant, and the “actual losses, actual damages” language in §1.2 does not convert the guaranty into a conditional collection guaranty and, in any event, applies to §1.2(b) rather than §1.2(a), the provision sued upon.
Background
Plaintiffs sued in New York to enforce payment guaranties executed by defendants, who guaranteed a commercial loan that is the subject of a pending Minnesota foreclosure action. Defendants sought to pause the New York action until the Minnesota court addressed foreclosure-related defenses. The Supreme Court, New York County granted a stay under CPLR 2201 [court’s power to stay proceedings]. On appeal, plaintiffs argued the guaranties are absolute and unconditional guaranties of payment that permit immediate enforcement without first pursuing the borrower or collateral, and that Real Property Actions and Proceedings Law § 1301(3) [bar on maintaining a separate action on the mortgage debt while a foreclosure is pending without leave of court] did not preclude this action.
Lower Court Decision
The Supreme Court (New York County) granted defendants’ motion to stay the New York guaranty enforcement case under CPLR 2201 pending the outcome of the Minnesota foreclosure action.
Appellate Division Reversal
The Appellate Division unanimously reversed, denied the motion, and vacated the stay. The court held that the guaranties are absolute and unconditional guaranties of payment, not collection; they waive defenses and do not require exhaustion of remedies against the borrower or collateral. The guaranties expressly provide that the guarantor remains liable even if the borrower is not liable and that any offsets, claims, or defenses are waived. The court found that the 'actual losses, actual damages' clause in a freestanding paragraph of §1.2 does not transform the guaranty into a conditional collection guaranty and, in any event, applies to §1.2(b), not §1.2(a) relied upon by plaintiffs. Because the guaranties controlled, the court did not reach arguments about party identity, prejudice, or Real Property Actions and Proceedings Law § 1301(3).
Legal Significance
Reaffirms New York’s strong enforcement of absolute and unconditional payment guaranties: lenders may sue guarantors immediately without awaiting foreclosure outcomes or exhausting collateral remedies, and broad waiver language forecloses defenses, including those premised on alleged post-execution lender misconduct.
Where a guaranty is an absolute and unconditional guaranty of payment with broad waivers, New York courts will allow immediate enforcement and will not stay the action pending related foreclosure proceedings; 'collection' or 'exhaustion' prerequisites will not be implied, and limiting language like 'actual losses' will not override the operative payment-guaranty provisions.