Plaintiff General Electric Capital Corporation ("GECC") moves pursuant to CPLR 3212 for summary judgment on its complaint and for dismissal of the counterclaim alleged by defendant Guilderland Center Rehabilitation & Extended Care Facility Operating Company, LLC ("Guilderland-New" or "Buyer"). Defendant opposes the motion.

On August 20, 2008, Guilderland LTC Management, LLC ("Debtor") filed a petition for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Northern District of New York. GECC was the Debtor's senior lender and held a first priority lien on the Debtor's assets. Watchhill Consultants, LLC ("Watchhill") agreed to purchase the bulk of these assets — an operating nursing-home facility — pursuant to an Asset Purchase Agreement ("APA") dated January 5, 2010. The Bankruptcy Court entered a "Sale Order" on February 2, 2010 approving the terms and conditions of the APA and the transactions contemplated therein. Watchhill then assigned its rights and obligations under the APA to defendant on January 17, 2012 (see APA ¶ 24).

A closing on the sale ("Closing") was held on April 9, 2012. Substantially all of the Debtor's assets were conveyed to Guilderland-New free of GECC's liens. The proceeds of the sale, except for a $50,000 "carve out" ordered by the Bankruptcy Court for unsecured creditors, was paid to GECC, in accordance with the terms of the Sale Order.

The APA further provided that defendant would pay GECC the sum of $75,000 in the form of monthly payments of $15,000, beginning two months after the Closing (¶ 4.1). However, the parties and the Debtor entered into a certain stipulation ("Stipulation") at the Closing that gave defendant an additional four months in which to commence these payment and GECC the right to recover reasonable attorney's fees in the event of a default. The Stipulation was approved by the Bankruptcy Court on April 13, 2012. Also at the Closing, Guilderland-New executed and delivered the following release ("Release") in favor of GECC:

Under the APA, it was the parties' intention that the Debtor bear the expenses of ownership and operation of the nursing home and receive the income accruing therefrom up and until the day prior to the Closing, and for the Buyer to bear all such expenses and receive all such income accruing thereafter (¶ 3.2). In the event of an error or dispute concerning the Closing Adjustments, the complaining party was obliged to send a Correction Notice to its counter-party. In the event that an agreement could not be reached, a designated accounting firm was selected to make a binding determination regarding the adjustment.

Defendant contends that GECC failed to leave sufficient funds at the Closing for the Debtor to pay outstanding obligations to the nursing home's employees ("Employee Obligations"). This [*2]alleged shortfall, consisting primarily of wages and employee benefits, totals $236,657. On September 12, 2012, defendant filed a motion in Bankruptcy Court for an order: permitting it the right to offset the alleged overpayment against the monies becoming due to GECC under paragraph 4.1 of the APA; allowing an administrative claim against the Debtor in the amount of the difference; and delaying the closing of the Chapter 11 case in order to allow an adversary proceeding to be commenced against GECC for the balance of the alleged overpayment. However, in an order dated January 13, 2013, the Bankruptcy Court "decline[d] to rule on the . . . relief requested . . . as such would be more appropriately dealt with in another jurisdiction should the parties be unable to resolve their differences."

GECC commenced this action in January 2013, alleging that it had not received the $75,000 called for in the APA, as amended by the Stipulation. In addition to pursuing recovery of this sum on a contractual theory, GECC also seeks a declaration that defendant is not entitled to any offset pertaining to Closing Adjustments. In its answer, defendant counterclaims for $161,657, representing the alleged unpaid Employee Obligations reduced by the $75,000 admittedly owed to GECC. In reply, GECC denies defendant's allegations and raises the affirmative defenses of release, lack of privity and lack of compliance with the dispute resolution procedures established by paragraph 3.2 of the APA.

Summary judgment is a drastic remedy and should only be granted if there are no material issues of disputed fact (Sillman v Twentieth-Century Fox Film Corp., 3 NY2d 395 [1957]). In evaluating a motion for summary judgment, a court should simply determine whether material issues of disputed fact preclude the grant of judgment as a matter of law (S. J. Capelin Assoc. v Globe Mfg Corp., 34 NY2d 338 [1974]). The party moving for summary judgment has the initial burden of coming forward with admissible evidence to support the motion, so as to warrant the Court directing judgment in movant's favor; the burden then shifts to the opposing party to demonstrate, by admissible evidence, the existence of any factual issue requiring a trial (see Zuckerman v City of New York, 49 NY2d 557 [1980]).

With respect to GECC's first cause of action, defendant admits in its answer that it is obliged to pay GECC the sum of $75,000 under paragraph 4.1 of the APA and that it has not done so. Defendant's principal opposition to payment of the $75,000 rests upon its claim that GECC owes it $236,657 in Closing Adjustments pertaining to Employee Obligations, which must be offset against any contractual recovery obtained by GECC herein.^[FN2] Accordingly, the Court must consider defendant's counterclaim as well as GECC's second cause of action, which essentially seeks a declaration of non-liability for Closing Adjustments.

Defendant's counterclaim emphasizes the role of GECC with respect to the APA, citing the fact that GECC was to receive the proceeds of the sale as the Debtor's senior lender and claiming that "[t]he terms of the APA were negotiated and controlled by GECC". Relatedly, defendant alleges:

In support of its motion, GECC first contends that the counterclaim is barred by the Release. Generally, "a valid release constitutes a complete bar to an action on a claim which is the subject of the release" (Global Mins. & Metals Corp. v Holme, 35 AD3d 93, 98 [1st Dept 2006]). In interpreting the Release, the Court must be "guided by basic principles of contract interpretation which instruct that a contract should be construed to give effect to the parties' intent as gleaned from the four corners of the document itself, provided that its terms are clear and unambiguous" (Elmira Teachers' Assn. v Elmira City School Dist., 53 AD3d 757, 760 [3d Dept 2008]).

In maintaining that the Release does not bar its counterclaim, defendant submits the affirmation of Aaron Seligson, its Managing Member, who recites, in pertinent part:

The Court begins, as it must, with the plain text of the Release, which broadly and unqualifiedly releases GECC from two categories of liability to defendant: (a) any matter arising out of, or pertaining to, the Debtor's bankruptcy case, including GECC's actions and omissions concerning the use or treatment of funds; and (b) events occurring prior to the date of the Release. Clearly, GECC's alleged failure to disclose that the Debtor had not paid its normal operating expenses prior to the Closing and GECC's alleged receipt of funds at the Closing in excess of that to which it (or the Debtor) was entitled under the APA arise out of and pertain to the Debtor's bankruptcy case. Moreover, these events pre-date the Release, thereby implicating the second category of released claims. Moreover, GECC's alleged post-Closing failure to properly apply the sale proceeds to the Employee Obligations — an obligation that finds no support in the text of the APA ^[FN3] — arises out of and pertains to GECC's use and treatment of funds received in connection with the Sale Order issued by the Bankruptcy Court and the court-ordered APA. Indeed, while defendant claims that the Release is not broad, it then goes on to acknowledge that "everything any party did related to [the Debtor's bankruptcy]"

This conclusion follows even if the Court were to accept defendant's position that its counterclaim arises solely from GECC's post-Closing acts and omissions. The two categories of released claims, denominated as "(a)" and "(b)", are separated by the conjunction "and/or". Thus, matters pertaining to the Debtor's bankruptcy case fall within the scope of the Release, even if based upon events occurring subsequent to the Release.

Moreover, while defendant alleges that it was not aware of the Debtor's failure to fund the Employee Obligations and GECC's receipt of excess funds at the Closing, the Release broadly encompasses claims "known or unknown to Buyer" (see Centro Empresarial Compresa SA v America Movil S.A.B. de C.V., 17 NY3d 269, 276 [2011] ["release may encompass unknown claims . . . if the parties so intend and the agreement is fairly and knowingly made"]).^[FN4]

And while it appears that the impetus for the Release was GECC's agreement to temporarily "continue to accept funds under the Lockbox Agreement" and "to remit such funds to the Buyer", the Release extends far beyond such matters. And GECC's promises with respect to the lockbox constitute bargained-for consideration sufficient to support the broad Release given in exchange therefor. Further, the Release recites that it was given for other "good and valuable [*3]consideration, including GECC's consent to the sale described in the APA."^[FN5]

Finally, given the clear and unambiguous language of the Release, there is no basis to construe the instrument against GECC as its drafter, and if defendant failed to read the Release or conduct due diligence prior to its execution, it cannot now be heard to complain.

Based on the foregoing, the Court concludes that defendant's claim to an offset must be rejected, and its counterclaim must be dismissed.

Accordingly, it isORDERED that plaintiff's motion for summary judgment is granted; and it is further

ORDERED that defendant's counterclaim is dismissed; and it is further

This constitutes the Decision and Order of the Court. The original Decision and Order is being transmitted to counsel for the plaintiff; all other papers are being transmitted to the Albany County Clerk. The signing of this Decision and Order shall not constitute entry or filing under CPLR Rule 2220, and counsel is not relieved from the applicable provisions of that Rule.

June 27, 2014