Chemical Bank v. Pic Motors Corp.
Supreme Court of New York, Appellate Division
452 N.Y.S.2d 41 (1982)
Pic Motors Corporation (Pic) (defendant) entered into an inventory-financing agreement with Chemical Bank (plaintiff), under which Chemical Bank agreed to periodically lend to Pic funds to purchase vehicles, with Pic’s inventory of vehicles used as collateral. Chemical Bank periodically inspected Pic’s inventory to ensure that Pic actually owned the vehicles that were being financed. Aaron Siegel was the director, president, and principal stockholder of Pic and personally guaranteed payment on the loans. This guarantee provided that Siegel’s consent was not necessary for security for the loans to be exchanged or released or for Pic’s obligation on the loan to be extended, waived, or released. Siegel sold his interest in Pic, but his personal guarantee continued. Chemical Bank discovered that more than half of the vehicles that had supposedly been financed by Chemical Bank’s loans were missing from Pic’s inventory. Siegel arranged for the sale of Pic’s inventory and used the proceeds to partially pay off the loan. Chemical Bank brought an action as a guarantor to recover the balance against Pic and Siegel. The trial court entered summary judgment in favor of Chemical Bank. Siegel appealed, arguing that the deficiency was caused by Chemical Bank’s failure to conduct a regular inspection of Pic’s inventory and that employees of Chemical Bank had falsified inventory reports and approved loans on nonexistent vehicles.
Rule of Law
Holding and Reasoning (Fein, J.)
Dissent (Milonas, J.)
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