Wilmington Trust, National Association v. Hajjar

Background

Natixis Real Estate Capital LLC loaned $81.5 million to several companies owned or controlled by Hajjar that owned medical office buildings. Hajjar signed the loan documents for those companies and separately signed three guaranties: a Guaranty of Recourse Obligations, a Partial Payment Guaranty, and a Lease Guaranty. Wilmington Trust later became the holder of the three guaranties through an assignment from Natixis.

The Recourse Guaranty required Hajjar to guarantee payment of specified obligations, including the entire guaranteed debt if defined events occurred. Those events included a borrowing entity’s voluntary bankruptcy filing or the recording of a lien against an underlying property without the lender’s consent. The Partial Payment Guaranty covered an $8 million principal sum and other amounts that became due. The Lease Guaranty covered rent owed by affiliated tenants after a monetary default on the loan. The agreements described Hajjar’s obligations as irrevocable, absolute, and unconditional.

The borrowing entities filed for Chapter 11 bankruptcy in February 2020. Before that, four creditors had recorded liens against the properties beginning in May 2018 without the lender’s consent. During the bankruptcy proceeding, the borrowing entities disclosed that entities associated with Hajjar owed more than $2.3 million in rent. The opinion states that these events triggered Hajjar’s obligations, but that he had not paid the full amounts due under the guaranties.

Motion and legal standard

Wilmington Trust moved for summary judgment, a decision without a trial when there is no genuine dispute about a fact that could affect the result and the moving party is entitled to judgment under the law. The motion sought a ruling on Hajjar’s liability for breaching the three guaranties, not a ruling fixing the amount of damages.

The court applied New York law. It explained that guaranties are interpreted under ordinary contract principles and that, to obtain summary judgment on liability under a guaranty, a creditor must show the guaranty’s existence, the underlying debt, and the guarantor’s failure to perform. Absolute and unconditional guaranties can prevent a guarantor from asserting a broad range of defenses.

Analysis

Hajjar did not dispute the existence of the three guaranties, their absolute and unconditional terms, the underlying loan debt, or the events that made his obligations due. He also did not dispute that he failed to pay the amounts due after those events triggered his duties under the guaranties.

Hajjar’s only opposition was that summary judgment was improper because Wilmington Trust’s damages had not yet been determined and would need to be presented to a jury. The court rejected that objection because Wilmington Trust sought summary judgment only on liability.

Disposition

Judge Denise Cote granted Wilmington Trust’s November 20, 2020 motion for summary judgment on Hajjar’s liability. The opinion did not determine the amount of damages.