Personal Guaranty Archives • The Law Office of Richard A. Klass, Esq.

She had to convalesce in a rehabilitation center for comprehensive (sub-acute) in-patient care following illness. Upon admission, the resident was presented with the facility’s admission agreement for her to sign. The agreement provided that, in exchange for payment through Medicaid, Medicare, insurance or direct pay, the facility would provide all of the patient’s basic and routine services, including lodging and boarding and professional nursing care.

The agreement specified that the resident anticipated paying the costs of care through her managed care organization (MCO) (which contracts through a network or group for the delivery of health care). However, the agreement left the section for private payment rates for daily charges blank.

Motion to Dismiss the Facility’s Case

Post-discharge, the rehabilitation facility brought an action against the former resident, alleging that she obligated herself to pay for the room, board, nursing and health care services but failed to made payment. To mount the best defense possible, the former resident retained Richard A. Klass, Esq., Your Court Street Lawyer, who immediately moved to dismiss the case.

In the Complaint, the facility alleged that it was a corporation duly organized and existing under and by virtue of the laws of the State of New York. Based upon a search of the New York State Department of State online records, there was no corporation with the plaintiff’s name registered to do business in New York State. Business Corporation Law § 301(a)(1) specifies that the name of a domestic or foreign corporation “shall contain the word ‘corporation’, ‘incorporated’ or ‘limited’, or an abbreviation of one of such words; or, in the case of a foreign corporation, it shall, for use in this state, add at the end of its name one of such words or an abbreviation thereof.” There was no such designation in its name in the Summons or Complaint. To the extent that the facility may have claimed it was suing under an assumed name, General Business Law § 130(1) provides that there are certain requirements to be met.

Consumer credit transaction

The pending motion to dismiss set up settlement discussions about the procedural and substantive defenses to the facility’s case. As to the procedural aspect, the next line of defense was to threaten dismissal of the lawsuit on jurisdictional grounds.

The Summons failed to prominently display at the top the words “Consumer Credit Transaction.” CPLR 305(a) specifies that the Summons must have those words on the top where the court held that the debt on an obligation of a consumer to pay money arising out of a transaction in which the services which are the subject of the transaction are primarily for personal, family or household purposes. In Jack Mailman & Leonard Flug DDS, PC v. Whaley, 2002 WL 31988623 [Civil Court, Richmond Co. 2002], the court held that medical debts were deemed consumer debts.

Residential Care Facilities – Residents’ Rights

Nursing facilities, including nursing homes and rehabilitation centers

Nursing facilities, including nursing homes and rehabilitation centers, that accept residents whose charges will be paid in whole or in part by Medicaid are governed by the federal Nursing Home Reform Act (42 USC §1396r) and federal and state regulations (42 CFR §483; and 10 NYCRR §415).

Through these enactments, there was the creation of a so-called residential care patient’s “Bill of Rights.” These “Rights” include the rights to freedom from abuse, mistreatment and neglect; privacy; accommodation for mental, physical, psychological and emotional needs; treatment with dignity; and being fully informed and participating in one’s care. (For more information, follow the link.)

Financial obligation rights

Among residents’ rights are those relating to financial obligations to the facility, including informing the resident of those services and items that the facility offers for which the resident may be charged. 10 NYCRR §415(h). These laws and regulations govern nursing facility admission agreements. See, Prospect Park Nursing Home v. Goutier, 824 NYS2d 770 [Civil Court, Kings Co. 2006].

The resident did not read or write in the English language. The admission agreement was not translated for her. The resident alleged that when she asked what she was signing, she was told that her MCO would be paying the costs, not her. The “Anticipated Payor” section indicated that an insurer would be paying. The “Private Payment” section (including costs per day) was left blank. The resident alleged that she was never informed of the rates or charges. It was claimed that the facility’s representatives engaged in wrongful conduct and misrepresentation concerning the execution of the agreement. See, Nerey v. Greenpoint Mortgage Funding, Inc., 144 AD3d 646 (2d Dept. 2016).

Rehabilitation Center

Quality of Life: The right to adequate and appropriate care

The regulations emphasize that a resident has the right to receive from the facility “the necessary care and services to attain or maintain the highest practicable physical, mental, and psychosocial well-being, consistent with the resident’s comprehensive assessment and plan of care.” 42 CFR §483.24.

The resident alleged she received inadequate care at the facility, including that she had to wait many hours for the bedpan to be changed; lack of bathing; unavailability of staff when needed and for necessary help and activities. In light of the vigorous defense advocated by Your Court Street Lawyer, the facility agreed to significantly reduce the bill for rehabilitation services and settle the case with the former resident on very favorable terms.

R. A. Klass
Your Court Street Lawyer

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keywords: Nursing facility, nursing home, rehabilitation center

In 1997, a landlord rented a commercial space to a tire company pursuant to a commercial lease agreement. The tenant defaulted in the payment of rent, owing the landlord the claimed arrearage sum of $157,000. To collect the rent arrears, the landlord came to Richard A. Klass, Your Court Street Lawyer to recover.

When the lease was entered into, the president of the tenant executed the lease agreement both as president of the tenant and as personal guarantor of performance and payment of rent. The initial term of the lease agreement was for two years, and it provided for two-year renewal periods, with all of the terms and conditions of the original lease expressly reserved. The president of the tenant signed letter agreements extending the lease four times, the last time being December 20, 2004.

The landlord brought a motion for summary judgment against the personal guarantor of the lease, seeking payment of all outstanding arrears; the guarantor cross-moved for summary judgment, seeking to dismiss the case. The guarantor contended that he was not a proper party, claiming that he notified the landlord in February 2005 that the tenant was going out of business and all of its assets were being transferred to a different entity, effective March 2005. The landlord refuted receiving this notice from the guarantor.

Motion for Summary Judgment:

The term “summary judgment” means that a litigant is claiming that there is no reason to have a trial (either by judge or jury) because the case can be decided based upon application of the law. A “motion” is basically a request for a judge to take some sort of action.

Summary judgment is a drastic remedy, as it deprives a party of his day in court, and should be granted when it is clear that there are no triable issues of fact. See, Alvarez v. Prospect Hospital, 68 NY2d 320 [1986]. The burden is upon the moving party (the landlord in this case) to make a prima facie (Latin term for “by its first instance”) showing that the movant is entitled to summary judgment as a matter of law by presenting evidence in admissible form demonstrating the absence of any material facts. See, Giuffrida v. Citibank, 100 NY2d 72 [2003]. The failure to make that showing requires the denial of the motion regardless of the adequacy of the opposing papers. See, Ayotte v. Gervasio, 81 NY2d 1062 [1993]. Once a prima facie showing has been made, the burden of proof shifts to the opposing party (the tenant in this case) to produce evidentiary proof sufficient to establish the existence of material issues of fact which necessitate a trial.

In this case, the judge decided that the landlord laid out its case that the tenant owed rent arrears. This was based upon the evidence submitted with the motion, including the written lease agreement, the letters extending the lease for several additional terms, and the rent ledger. The judge dismissed the evidence presented by the guarantor, which amounted to his affidavit and the supposed notice that the tenant was ceasing business and a new company would be the tenant going forward.

Restriction on Assignment of Lease:

The argument that the tenant had given notice of assignment of the lease to a new company was refuted by the specific provisions of the lease. A provision in a lease which restricts assignment or subletting, and requires the consent of the landlord prior to doing so, is enforceable. See, Matter of Clason Management Co. v. Altman, 40 AD2d 635 [1 Dept. 1972]. The lease agreement at issue had such a restriction, which explicitly barred the tenant from assigning or transferring the lease or subletting the premises unless the tenant obtained the prior written consent of the landlord. Thus, even if the landlord did receive the letter from the guarantor in February 2005, there was no showing that the mandated consent was ever procured from the landlord.

Enforceability of Personal Guaranty:

It is no secret to landlords that, unless the incoming tenant is a large corporation, a commercial tenant is essentially a shell entity whose assets can disappear overnight (nowadays, even large corporations could qualify). So, landlords insist upon obtaining signed personal guaranties from the principals of the corporate tenants. Sometimes, the guaranty will be for all lease obligations through the end of the lease term, and sometimes, the guaranty will be effective through the date the tenant physically moves out of the premises – the proverbial “good guy clause.”

In this case, the landlord obtained the guaranty through the end of the lease term, but still expected the guarantor to be a “good guy” and pay the rent. Generally, a guaranty is to be interpreted in the strictest manner. See, White Rose Food v. Saleh, 99 NY2d 589 [2003]. But it is also the case that a personal guaranty which contains language of a continuing obligation is enforceable and survives payment of the original indebtedness. USI Capital and Leasing v. Chertock, 172 AD2d 235 [1 Dept. 1991]. Thus, termination of a continuing personal guaranty requires compliance with the provisions governing termination expressly set forth in the guaranty. In the absence of some writing which addresses termination, a guaranty which is silent on that issue remains in full force and effect. See, Chemical Bank v. Geronimo Auto Parts Corp., 224 AD2d 461 [1 Dept. 1996]. In this case, the personal guaranty could not be canceled merely by the president of the tenant sending a notice, indicating that the old company was going out and a new one was coming in.

In granting the landlord’s motion for summary judgment, the judge held that the personal guarantor is liable to the landlord, based upon his guarantee of the tenant’s lease obligations. Ribellino v. Fleet 2000, Inc. and Rosenfeld, Sup. Ct., Kings Co. Index No. 7501/2008 [Decision dated October 7, 2009].

Richard A. Klass, Esq.

copyr. 2011 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.comcreate new email with any questions.
Prior results do not guarantee a similar outcome.

R. A. Klass
Your Court Street Lawyer

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