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King v. Northway Agencies, Inc.

Appellate Division of the Supreme Court of New York, Third Department
Feb 26, 1987
127 A.D.2d 955 (N.Y. App. Div. 1987)

Opinion

February 26, 1987

Appeal from the Supreme Court, Saratoga County (Brown, J.).


In February 1982, plaintiffs commenced the instant action to recover the balance due on two promissory notes executed by defendant Northway Agencies, Inc. (Northway) and personally guaranteed by defendants Armand Garofalo and Edward J. Grogan, arising out of the purchase and sale of an insurance business. After the case was noticed for trial, Northway filed a petition for reorganization under Bankruptcy Act chapter 11, creating an automatic stay as against the corporation ( 11 U.S.C. § 362 [a]). Thereafter, plaintiffs' motion pursuant to CPLR 603 to sever the claims against Northway from the claims against the individual guarantors was granted, giving rise to this appeal.

Garofalo and Grogan essentially contend that since their liability is solely predicated on the liability of Northway, which issue is being contested before the Bankruptcy Court, severance was inappropriate. We disagree. As Supreme Court aptly recognized, the guarantee agreements specifically authorize plaintiffs to proceed against the guarantors without first pursuing their claims against Northway. Nor are the guarantors prejudiced in defending the severed action, for each may pursue the affirmative defense, also available to Northway in the bankruptcy proceeding, that plaintiffs breached the initial purchase and sale contract by misrepresenting the financial status of the business sold (see, Walcutt v. Clevite Corp., 13 N.Y.2d 48, 55-56; Banker's Trust Co. v. Steenburn, 95 Misc.2d 967, 983). Moreover, since this action was ascended to the forefront of Supreme Court's Trial Calendar, that court could readily determine that plaintiffs would be unduly prejudiced if required to await the outcome of Northway's bankruptcy proceedings (see, Lottes v. Slater, 114 A.D.2d 580, 581). In our view, Supreme Court acted well within its discretion in granting a severance (see, County of Broome v. Aetna Cas. Sur. Co., 126 A.D.2d 818; see also, Courtney v. Brooklyn Queens Allied Oil Burner Corp., 112 Misc.2d 89, 91-92).

Order affirmed, without costs. Mahoney, P.J., Kane, Main, Weiss and Mikoll, JJ., concur.


Summaries of

King v. Northway Agencies, Inc.

Appellate Division of the Supreme Court of New York, Third Department
Feb 26, 1987
127 A.D.2d 955 (N.Y. App. Div. 1987)
Case details for

King v. Northway Agencies, Inc.

Case Details

Full title:DAVID R. KING et al., Respondents, v. NORTHWAY AGENCIES, INC., et al.…

Court:Appellate Division of the Supreme Court of New York, Third Department

Date published: Feb 26, 1987

Citations

127 A.D.2d 955 (N.Y. App. Div. 1987)

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