STATE OF NEW YORK
SUPREME COURT: CHAUTAUQUA COUNTY
GENERAL ELECTRIC CAPITAL COMMERCIAL
AUTOMOTIVE FINANCE, INC.,
-vs- Index #H-09137
VOLKSWAGEN OF JAMESTOWN, INC.,
JAMES R. STACK, AND
RUTH W. STACK,
PENNY, MAIER, WALLACH
& CROWE (William R.
Crowe, Esq. of Counsel)
ERICKSON, WEBB & SCOLTON
(Paul V. Webb, Jr., Esq.
of Counsel) for Defendant
DECISION AND ORDER
Plaintiff sues Volkswagen for $124,208.66 for its default on a floor plan and sues Stacks for their personal guaranty, and, seeks summary judgment against all defendants. Defendants claim they are entitled to depose plaintiff and its predecessor before summary judgment is considered.
Although defendants raise a hailstorm of reasons against summary judgment which the Court will address, the main issue for this Court is whether summary judgment should be granted on a guaranty written in such small font as to be difficult to read by someone with normal vision, especially when it is part of a complicated closing.
The Stacks were sole officers, directors and shareholders of Volkswagen of Jamestown, Inc., an automobile dealership.
Volkswagen entered into a Floor Plan Financing Agreement with
Borg Warner Acceptance Corporation for the purchase of vehicles and parts for resale at the dealership.
Stacks executed a personal guaranty to Borg-Warner.
Later, the dealer floor plan was assigned to plaintiff.
Defendants continued to borrow money from plaintiff pursuant to the financing arrangement. When the dealership closed, there was an outstanding debt to plaintiff.
The Court rejects Defendants' claim that plaintiffs should have credited them with a stated retail value of $67,704.00 on vehicles it repossessed rather than the net proceeds from an auction. Not only did Mr. Stack as president of Volkswagen sign a specific authorization of the auction, but, paragraph 15 of the agreement authorizes plaintiff to sell at "public auction or private sale" and to deduct expenses in connection with the repossession and sale.
If retail value was the basis, a borrower who simply wanted to get out of business could, by defaulting, compel the lender to "buy" his inventory at stated retail value.
Regarding the guaranty, Stacks raise several issues. They
acknowledge their signatures appear on the document but claim
they do not recall signing; never read the guaranty nor were
they advised of its legal impact; did not have counsel; did not know what they were signing; that the guaranty was signed with Borg-Warner for a debt with Borg-Warner that has been paid in full.
It is long established law that one can not get out of an
obligation merely by claiming lack of an attorney.
The burden is upon the signor to read what is being signed. In the absence of fraud or other wrongful act, a guarantor is bound by his guaranty even if he/she does not read the document before (or after) signing it. HUMBLE OIL AND REFINING COMPANY V. JAYBERT ESSO SERVICE STATION, INC., ET AL, 30 AD2d 952; COLUMBUS TRUST CO V. CAMPOLO, 110 AD2d 616, affirmed 66 NY2d 701.
It is clear that the guaranty was a continuing one and was properly assigned to plaintiff. Defendants rely on ROSS V. WORTH ELECTRIC SUPPLY CO., 100 Misc2d 1058, but, in that case, the guarantor had died and payment in full was made by an insurance policy ending the debtor relationship.
Defendants argue that any substantial alteration of the
contract terms when made without the surety's consent, releases them from the surety. HALL & CO. V CONTINENTAL CASUALTY CO., 34 AD2d 1028, affd 30 NY2d 517. However, assigning the guaranty to a new creditor is not an alteration of terms under the language cited above.
As for the guaranty, the Court has grave concerns about
guarantees and indemnity agreements where the font is so small as to challenge anyone without a magnifying glass. See KULPA v GBP INDUSTRIES, INC. d/b/a CHEMICAL PROCESS SYSTEMS/SERVICE, SUPREME COURT, CHAUTAUQUA COUNTY, INDEX H03487 where this Court held:
"While there may not be any specific statutory
requirement as to the size of print in an
indemnity clause, the print in this case is so
small that it cannot support a motion for
"The Court notes that recently the CPLR was
amended to require minimum size print for a summons.
This suggests that any indemnity clause should
contain print no smaller than a summons. Appeals
briefs must be in clear type of no less than elite in
size. CPLR 5529."
"If the original contract -the one furnished to
Farrell-did not contain more legible or larger print
than appears in the copies given to this Court, the
question of indemnification will be left as a question of fact for the jury. Print 1/32nd to 1/16th of an inch in size is almost equivalent to no print at all."
However, in that case there was no signing of the indemnity clause; it was tucked away on the reverse side of a purchase order and in print even more challenging to read than the guarantee in this case.
Here, the heading of the guarantee page, in large print
reads: "THE FOLLOWING GUARANTY AND WAIVER IS TO BE SIGNED BY
INDIVIDUALS", so, it could be said defendants were on notice
they were signing a guaranty for the named lenders.
Just above the signatures these words appear:
"This guaranty shall, without further consent of or
notice to the undersigned, pass to, and may be relied upon
and enforced by any of your affiliated, associated, or
subsidiary companies or any successor or assignee of you
and any transferee or subsequent holder of any said
indebtedness, liability or obligations."
The problem for the Court is that this sentence covering
assignments appears at the end of the agreement in tiny,
"almost sand size print."
Federal cases have held or suggested that in these
situations that the defendant is to be protected. SILVESTRI
V ITALIA SOCIETA PER AZIONI DI NAVIGAZIONE, 388 F2d 11, LISI
V ATITALIA-LINEE AEREE ITALIANE, S.P.A., 370 F2d 508, 513-514
(2nd Cir. 1966).
In recent years, the New York legislature has taken
steps to protect consumers against illegible print and to
insure that summonses are clear on their face. In 1995, the
CPLR was amended to specify minimum type size requirements
for summons and other litigation papers. An OCA memo
supporting the legislation indicated a need due to the number
of litigants serving summons and other papers printed in
"such small or obscure type as to be barely legible".
CPLR 4544 provides that printed contracts or agreements
involving consumer transactions or leases for residential
purposes where print is not of a specifically defined size
may not be received in evidence at any trial, hearing or
proceeding on behalf of the party to printed or prepared the
contract. The statute was intended as protection to
individual consumers; the transaction here was obviously
Neither of these statutes is directly applicable here,
but, they do reflect a legislative intent to protect the
public from small print in legal documents.
Plaintiff says the Stacks cannot legitimately complain
about the fine print because they testified they did not read
the document. And, since failure to read a document does not
relieve one of liability, it is irrelevant what size print
the document contained.
That begs the question. If the print is small, isn't one
less apt to read it; less apt to know what it says?.
Under these facts, this Court cannot grant the assignee
of such a guarantee summary judgment without a hearing on the
question of what Stacks knew or did not know at the time of
On a motion for summary judgment or to dismiss, the CPLR
allows the Court to order to order an immediate trial of an
issue of fact that would resolve the entire case. See DAVID
D. SIEGEL, NEW YORK PRACTICE, Sec. 271, 284; CPLR 3211(c);
The Court will schedule a hearing without a jury, unless
any of the parties herein demand a trial by jury within 10
days from the date of this Decision and Order.
The issue for the Court (or a jury) is: Did the Stacks
agree to personally guarantee the loan? Should they have
known they were signing a guaranty? And, even if difficult to
read, was the document legible, readable in the context of a
business transaction? Even if it may not have been explained
to them, shouldn't Stacks have raised any questions about it
at the closing?
This does not mean Stacks will ultimately escape
responsibility. They may not be able to convince the Court
(or a Jury) they did not know what they were signing, even if
they did not read it. They were business people, not "babes
in the wilderness." They had an obligation to read any
document they signed and a right to consult counsel if they
chose. They also knew, or should have known that the Dealer
Floor Plan, by its terms, was freely assignable. They cannot blindly sign legal documents and then seek a judicial bailout for failure to read or question documents containing words in the nature of a warning flag.
The Court grants Plaintiff's motion for a partial summary
judgment against Volkswagen for the amount they claim, less
the alleged security fund balance, and the $19,000 relating
to the fifth vehicle plus interest, but, denies summary
judgment as against the Stacks pending a trial on the
THIS IS THE DECISION AND ORDER OF THIS COURT. NO FURTHER
ORDER SHALL BE NECESSARY.
Dated: August 1, 1995
Mayville, New York
Justice of Supreme Court