This opinion is uncorrected and subject to revision before

publication in the New York Reports.

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No. 155 

Justinian Capital SPC &c.,

 Appellant,

 v.

WestLB AG, &c., et al.,

 Respondents.

James J. Sabella, for appellant.

Christopher M. Paparella, for respondents.

Burford Capital LLC, amicus curiae.

DiFIORE, Chief Judge:

The concept of champerty dates back to French feudal

times (Bluebird Partners v First Fid. Bank, 94 NY2d 726, 733-734

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[2000]). In the English legal system, the word "champart" was

used "as a metaphor to indicate a disapproval of lawsuits brought

'for part of the profits' of the action" (id. at 734 [internal

citations omitted]). As we have explained, the champerty

doctrine was developed "to prevent or curtail the

commercialization of or trading in litigation" (id. at 729). New

York's champerty doctrine is codified at Judiciary Law § 489 (1). 

As pertinent here, the statute prohibits the purchase of notes,

securities, or other instruments or claims with the intent and

for the primary purpose of bringing a lawsuit (see id. at 735-

736).

Justinian Capital SPC, a Cayman Islands company, brings

this action against WestLB AG, New York Branch and WestLB Asset

Management (US) LLC (collectively, WestLB), alleging that

WestLB's fraud (among other malfeasance) in managing two

investment vehicles caused a steep decline in the value of notes

purchased by nonparty Deutsche Pfandbriefbank AG (DPAG). 

Justinian acquired the notes from DPAG days before it commenced

this action.

In this appeal, we must first decide whether

Justinian's acquisition of the notes from DPAG is champertous as

a matter of law. If the answer is "yes," we must then decide

whether the acquisition falls within the champerty statute's safe

harbor provision codified at Judiciary Law § 489 (2). The safe

harbor provides that the champerty doctrine of section 489 (1) is

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inapplicable when the notes or other securities are acquired for

"an aggregate purchase price of at least five hundred thousand

dollars" (Judiciary Law § 489 [2]).

As set forth below, we hold that Justinian's

acquisition of the notes was champertous and, further, that

Justinian is not entitled to the protection of the safe harbor

provision. Therefore, the order of the Appellate Division should

be affirmed.

I.

In 2003, nonparty DPAG invested close to 180 million

euros (approximately $209 million) in notes (the Notes) issued by

two special purpose companies, Blue Heron VI Ltd. and Blue Heron

VII Ltd. (collectively, the Blue Heron Portfolios). The Blue

Heron Portfolios were sponsored and managed by defendants WestLB. 

By January 2008, the Notes had lost much (if not all) of their

value.

After the value of the Notes declined, DPAG considered

its options. In the summer of 2009, DPAG's board of directors

approved filing a direct lawsuit against WestLB. Both DPAG and

WestLB are German banks and, at the time, DPAG was receiving

substantial support from the German government and WestLB was

partly owned by the government. Because of these relationships

the DPAG board expressed concerns about pursuing a direct action

to vindicate its rights for fear that the government would

withdraw support from DPAG if it sued WestLB. This fear of

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repercussions from bringing a direct lawsuit led DPAG to consider

another option in which a third party would bring the lawsuit and

remit a portion of any proceeds to DPAG. In February 2010, DPAG

discussed this option with plaintiff Justinian, a Cayman Islands

shell company with little or no assets. A presentation submitted

by Justinian in this action described Justinian's business plan

as:

(1) purchase an investment that has suffered

a major loss from a company so that the

company does not need to report such loss on

its balance sheet; (2) commence litigation to

recover the loss on the investment; (3) remit

the recovery from such litigation to the

company, minus a cut taken by Justinian; and

(4) partner with specific law firms . . . to

conduct litigation.

 

Ultimately, the DPAG board approved the option of having

Justinian bring suit because it presented the "best risk return

profile" for DPAG. 

In April 2010, DPAG and Justinian entered into a sale

and purchase agreement (the Agreement). Pursuant to the

Agreement, DPAG would assign the Notes to Justinian and Justinian

would agree to pay DPAG a base purchase price of $1,000,000

(representing $500,000 for the Blue Heron VI notes and $500,000

for the Blue Heron VII notes). The Notes were assigned to

Justinian shortly after execution of the Agreement. The

assignment, however, was not contingent on Justinian's payment of

the $1,000,000. Nor did Justinian's failure to pay the

$1,000,000 constitute an Event of Default under section 9 of the

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Agreement. According to Justinian's principal and chief

negotiator of the Agreement, Thomas Lowe, Justinian's failure to

pay the $1,000,000 did not constitute a breach of the Agreement. 

Under the terms of the Agreement, the only consequences of

Justinian's failure to pay by the selected due date appear to be

that interest would accrue on the $1,000,000 and that Justinian's

share of any proceeds recovered from the lawsuit would be reduced

from 20% to 15%. Justinian has not paid any portion of the

$1,000,000 base purchase price, and DPAG has not demanded

payment. 

Within days after the Agreement was executed and

shortly before the statute of limitations was to expire,

Justinian filed a summons with notice in Supreme Court commencing

this action against WestLB.1 The subsequent complaint alleged

causes of action in breach of contract, fraud, breach of

fiduciary duty, negligence, negligent misrepresentation, and

breach of the covenants of good faith and fair dealing, all in

connection with WestLB's alleged purchase of ineligible assets

for the Blue Heron Portfolios that caused the value of the Notes

to deteriorate. 

WestLB moved to dismiss, alleging that Justinian lacked

standing to bring this action. Justinian opposed the motion. In

reply, WestLB raised the affirmative defense of champerty,

1 Brightwater Capital Management LLC was also named as a

defendant, but was dismissed from the case by Supreme Court.

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arguing that Justinian's acquisition of the Notes was champertous

under Judiciary Law § 489. After oral argument, Supreme Court

issued a written decision concluding that there were "questions

of fact surrounding Justinian's actual purpose and intent in

purchasing [the Notes] that require further discovery to resolve"

(37 Misc 3d 518, 528 [Sup Ct, NY County 2012]). The court

ordered discovery limited to the issues related to champerty and

reserved judgment on the motion to dismiss.

After champerty-related discovery was complete, WestLB

renewed its motion to dismiss, which Supreme Court treated as a

motion for summary judgment. Supreme Court dismissed the

complaint, concluding that the Agreement was champertous because

Justinian had not made a bona fide purchase of the Notes and was,

therefore, suing on a debt it did not own. Supreme Court also

concluded that Justinian was not entitled to the protection of

the champerty safe harbor of Judiciary Law § 489 (2) because

Justinian had not made an actual payment of $500,000 or more (43

Misc 3d 598 [Sup Ct, NY County 2014]). On appeal, the Appellate

Division affirmed, largely adopting the rationale of Supreme

Court (128 AD3d 553 [1st Dept 2015]). This Court granted leave

to appeal (25 NY3d 914 [2015]). We affirm, although our

reasoning is somewhat different.

II.

Judiciary Law § 489 is New York's champerty statute. 

Section 489 (1) restricts individuals and companies from

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purchasing or taking an assignment of notes or other securities

"with the intent and for the purpose of bringing an action or

proceeding thereon" (Judiciary Law § 489 [1]).

In a prominent early champerty case, Moses v McDivitt

(88 NY 62, 65 [1882]), we concluded that the language "with the

intent and for the purpose" contained in a predecessor champerty

statute2 -- language which Judiciary Law § 489 (1) has retained --

was significant. We determined that simply intending to bring a

lawsuit on a purchased security is not champerty, but when the

purchase of a security was "made for the very purpose of bringing

such suit" that is champerty because "this implies an exclusion

of any other purpose" (88 NY at 65). Therefore, we held that

"[t]o constitute the offense [of champerty] the primary purpose

of the purchase must be to enable [one] to bring a suit, and the

intent to bring a suit must not be merely incidental and

contingent" (id. [emphasis added]). The primary purpose test

articulated in Moses has been echoed in our courts for well over

a century. In Trust for Certificate Holders of Merrill Lynch

Mtge. Invs., Inc. Mtge. Pass-Through Certificates, Series 1999-C1

v Love Funding Corp. (13 NY3d 190, 198-199 [2009]), we endorsed

the distinction in Moses "between acquiring a thing in action in

order to obtain costs and acquiring it in order to protect an

independent right of the assignee" and opined that "the purpose

2 Section 71 of art. 3, title 2, chap. 3, part III of the

Revised Statutes.

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behind [the plaintiff's] acquisition of rights" is the critical

issue in assessing whether such acquisition is champertous. 

Similarly, in Bluebird Partners v First Fid. Bank (94 NY2d 726,

736 [2000]), we held that "in order to constitute champertous

conduct in the acquisition of rights . . . the foundational

intent to sue on that claim must at least have been the primary

purpose for, if not the sole motivation behind, entering into the

transaction."3

Here, the impetus for the assignment of the Notes to

Justinian was DPAG's desire to sue WestLB for causing the Notes'

decline in value and not be named as the plaintiff in the

lawsuit. Justinian's business plan, in turn, was acquiring

investments that suffered major losses in order to sue on them,

3 We reject Justinian's contention that Judiciary Law § 489

has no application unless the underlying claim is frivolous or

was brought by Justinian to secure "costs." Justinian's

contention is based on certain language in Love Funding. 

However, nothing in Love Funding or any of our previous cases

stands for the proposition that champerty turns on whether the

underlying claim is frivolous, nor does Judiciary Law § 489

require the claim to be frivolous for the prohibition against

champerty to apply. Indeed, we make no such finding as to the

merits of this lawsuit. The reference in Love Funding to

litigation being "'stirred up . . . in [an] effort to secure

costs,'" (Love Funding, 13 NY3d at 201, quoting Wightman v

Catlin, 113 App Div 24, 28 [2d Dept 1906]), harks back to earlier

cases, from before 1907, when "the prohibition of champerty was

limited in scope and largely directed toward preventing attorneys

from filing suit merely as a vehicle for obtaining costs, which,

at the time, included attorneys' fees" (Bluebird Partners, 94

NY2d at 734 [emphasis added]). Thus, the reference to champerty

as a vehicle to obtain costs has no application to a company such

as Justinian, which is not a law firm and would not obtain

attorneys' fees by virtue of bringing the lawsuit.

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and it did so here within days after it was assigned the Notes. 

Contrary to the suggestion by the dissent, there was no evidence,

even following completion of champerty-related discovery, that

Justinian's acquisition of the Notes was for any purpose other

than the lawsuit it commenced almost immediately after acquiring

the Notes (dissenting op. at 3-4). Justinian's principal

speculated at his deposition as to other possible sources of

recovery on the Notes -- for example, that there "might have

been" an insolvency or that there "might have been" a

restructuring or distribution between the time of acquisition and

2047 when the Notes were due. Such speculation does not suffice

to defeat summary judgment. We have long held that "'[m]ere

conclusions, expressions of hope or unsubstantiated allegations

or assertions are insufficient'" to defeat summary judgment

(Gilbert Frank Corp. v Federal Ins. Co., 70 NY2d 966, 967 [1988],

quoting Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). 

Indeed, "[t]he moving party need not specifically disprove every

remotely possible state of facts on which its opponent might win"

to defeat summary judgment, particularly when the opponent's

"theorizing" is "farfetched" (Ferluckaj v Goldman Sachs & Co., 12

NY3d 316, 320 [2009]). Here, the lawsuit was not merely an

incidental or secondary purpose of the assignment, but its very

essence. Justinian's sole purpose in acquiring the Notes was to

bring this action and hence, its acquisition was champertous.

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III.

Conduct that is champertous under Judiciary Law § 489

(1) is nonetheless permissible if it falls within the safe harbor

provision of Judiciary Law § 489 (2). Section 489 (2) exempts

the purchase or assignment of notes or other securities from the

restrictions of section 489 (1) when the notes or other

securities "hav[e] an aggregate purchase price of at least five

hundred thousand dollars" (Judiciary Law § 489 [2]). Here,

although the price listed in the Agreement, $1,000,000, satisfies

the threshold dollar amount for the safe harbor, Justinian has

not actually paid any portion of that price. Justinian argues

that a binding obligation to pay is sufficient to receive the

protection of the safe harbor. WestLB argues that in order to

come within the safe harbor an actual payment of at least

$500,000 must have been made. The courts below endorsed WestLB's

position. We do not agree. Actual payment of the purchase price

need not have occurred to receive the protection of the safe

harbor. Nonetheless, for the reasons set forth below, under the

circumstances presented here, Justinian is not entitled to the

protection of the safe harbor.

The parties disagree about whether the phrase "purchase

price" in section 489 (2) is ambiguous. Justinian argues that it

is unambiguous and means whatever amount is denominated the

"purchase price" in a purchase agreement. WestLB argues that

reading "purchase price" with "'absolute literalness'" would

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violate the safe harbor's "'purpose and intent'" (respondents'

brief at 14, quoting Matter of Long v Adirondack Park Agency, 76

NY2d 416, 420 [1990]). We agree with that statement.

Although the phrase "purchase price" may be unambiguous

in some contexts, here it is not, and we must look to the

legislative history to discern its meaning (see Matter of

Auerbach v Board of Educ. of City School Dist. of City of N.Y.,

86 NY2d 198, 204 [1995]). A review of draft versions of the safe

harbor legislation introduced during the legislative session

reveals that at least one version of the bill contemplated that

the safe harbor would protect a purchaser of notes or securities

if either the aggregate face amount of the notes or securities

sued upon totaled at least $1,000,000 or the purchaser had paid,

in the aggregate, at least $500,000 to acquire them (2003 NY

Senate Bill 2992-A). The statute as enacted contained different

language, requiring instead that the notes or securities have "an

aggregate purchase price" of at least $500,000 (Judiciary Law §

489 [2]). The "purchase price" language effectively falls

between the two earlier proposed safe harbor formulations --

strong indication that the Legislature did not intend either that

actual payment necessarily had to have been made or that face

value alone would suffice to obtain the protection of the safe

harbor. 

The legislative explanation of the safe harbor's

purpose further supports our reading. New York has long been a

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leading commercial center, and our statutes and jurisprudence

have, over many years, greatly enhanced New York's leadership as

the center of commercial litigation. The safe harbor was enacted

to exempt large-scale commercial transactions in New York's debttrading markets from the champerty statute in order to facilitate

the fluidity of transactions in these markets (see Assembly Mem

in Support, Bill Jacket, L 2004, ch 394). The participants in

commercial transactions and the debt markets are sophisticated

investors who structure complex transactions. Requiring that an

actual payment of at least $500,000 have been made for these

transactions to fall within the safe harbor would be overly

restrictive and hinder the legislative goal of market fluidity. 

The phrase "purchase price" in section 489 (2) is better

understood as requiring a binding and bona fide obligation to pay

$500,000 or more for notes or other securities, which is

satisfied by actual payment of at least $500,000 or the transfer

of financial value worth at least $500,000 in exchange for the

notes or other securities. Such understanding conforms with the

realities of these markets in which payment obligations may be

structured in various forms, whether by exchange of funds,

forgiveness of a debt, a promissory note, or transfer of other

collateral. We emphasize that we find no problem with parties

structuring their agreements to meet the safe harbor's

requirements, so long as the $500,000 threshold is met, as set

forth above. 

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However, as the dissent concedes, "[u]nquestionably, if

the obligation to pay [at least $500,000] [i]s entirely

contingent on a successful outcome in [the] litigation, it [does]

not constitute a binding and bona fide debt" (dissenting op. at

8). The legislative history reveals that a purchase price of at

least $500,000 was selected because the Legislature took comfort

that buyers of claims would "not invest large sums of money" to

pursue litigation unless the buyers believed in the value of

their investments (see Assembly Mem in Support, Bill Jacket, L

2004, ch 394). This comfort is lost when a purchaser of notes or

other securities structures an agreement to make payment of the

purchase price contingent on a successful recovery in the

lawsuit; such an arrangement permits purchasers to receive the

protection of the safe harbor without bearing any risk or having

any "skin in the game," as the Legislature intended. The

Legislature intended that those who benefit from the protections

of the safe harbor have a binding and bona fide obligation to pay

a purchase price of at least $500,000, irrespective of the

outcome of the lawsuit.

That is precisely what is lacking here. The record

establishes, and we conclude as a matter of law, that the

$1,000,000 base purchase price listed in the Agreement was not a

binding and bona fide obligation to pay the purchase price other

than from the proceeds of the lawsuit. The Agreement was

structured so that Justinian did not have to pay the purchase

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price unless the lawsuit was successful, in litigation or in

settlement. The due date listed for the purchase price was

artificial because failure to pay the purchase price by this date

did not constitute a default or a breach of the Agreement. The

Agreement permitted Justinian to exercise the option to let the

due date pass without consequence and simply deduct the

$1,000,000 (plus interest) from its share of any proceeds from

the lawsuit.

In sum, we hold that because the Notes were acquired

for the sole purpose of bringing litigation, the acquisition was

champertous. Further, because Justinian did not pay the purchase

price or have a binding and bona fide obligation to pay the

purchase price of the Notes independent of the successful outcome

of the lawsuit, Justinian is not entitled to the protection of

the safe harbor. In essence, the Agreement at issue here was a

sham transaction between the owner of a claim which did not want

to bring it (DPAG) and an undercapitalized assignee which did not

want to assume the $500,000 risk required to qualify for the safe

harbor protection of section 489 (2) (Justinian).

Accordingly, the order of the Appellate Division should

be affirmed, with costs.

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Justinian Capital SPC v WestLB AG

No. 155 

STEIN, J.(dissenting):

This case requires us to determine whether the transfer

of notes from nonparty Deutsche Pfandbriefbank AG (DPAG) to

plaintiff Justinian Capital SPC was champertous as a matter of

law and, if so, whether the statutory safe harbor provision

applies. Because the answer to each of these two questions

depends on the intent of one or both of the parties to that

transaction, and such intent is -- as in almost all cases -- a

factual issue, I cannot agree with the majority of this Court

that summary judgment is appropriate here. Therefore, I

respectfully dissent. 

I. Champerty

We need not travel back to feudal France or merry old

England to discuss champerty. When the New York State

Legislature enacted statutes prohibiting champerty, it intended

to abolish the common-law version of that doctrine and, thus, our

primary focus must be on the relevant statutory provisions (see

Sedgwick v Stanton, 14 NY 289, 299 [1856]). Judiciary Law § 489

(1) provides that no person or corporation may buy or take an

assignment of notes or other security instruments "with the

intent and for the purpose of bringing an action or proceeding

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thereon."1 This Court has stated that "the critical issue to

assessing the sufficiency of [a] champerty finding is . . . the

purpose behind [the assignee's] acquisition of rights that

allowed it to sue" (Trust for Certificate Holders of Merrill

Lynch Mtge. Invs., Inc. Mtge. Pass-Through Certificates, Series

1999-C1 v Love Funding Corp., 13 NY3d 190, 198 [2009] [internal

quotation marks and citation omitted]). "The bottom line is that

Judiciary Law § 489 requires that the acquisition be made with

the intent and for the purpose (as contrasted to a purpose) of

bringing an action or proceeding" (Bluebird Partners v First Fid.

Bank, 94 NY2d 726, 736 [2000] [citations omitted]; see Sprung v

Jaffe, 3 NY2d 539, 544 [1957]; Moses v McDivitt, 88 NY 62, 65

[1882]). 

"[W]hile this Court has been willing to find that an

action is not champertous as a matter of law, it has been

hesitant to find that an action is champertous as a matter of

law" (Bluebird Partners, 94 NY2d at 734-735 [internal citations

omitted]). Indeed, until today, we have never found summary

judgment appropriate to hold a transaction champertous as a

matter of law. This hesitation is understandable because the

intent and purpose of the purchaser or assignee is usually a

factual question that cannot be decided on summary judgment (see

Love Funding Corp., 13 NY3d at 200; Bluebird Partners, 94 NY2d at

1 Judiciary Law § 488 is similar, but applies only to

attorneys.

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738; Fairchild Hiller Corp. v McDonnell Douglas Corp., 28 NY2d

325, 330 [1971]). 

In deciding summary judgment motions, courts should

simply identify triable material issues of fact, and may not

invade the province of the jury by making credibility

determinations or weighing the probative force of the evidence

presented by each side (see Vega v Restani Constr. Corp., 18 NY3d

499, 505 [2012]). On such a motion, the facts must be viewed in

the light most favorable to the nonmoving party (here, plaintiff)

(see Jacobsen v New York City Health & Hosps. Corp., 22 NY3d 824,

833 [2014]). Because champerty is an affirmative defense (see

Bluebird Partners, 94 NY2d at 729; Fairchild Hiller Corp., 28

NY2d at 329), defendants bore the burden of demonstrating that

the assignment was champertous (see Kirschner v KPMG LLP, 15 NY3d

446, 478 [2010]). I believe that, in arriving at its definitive

conclusion regarding plaintiff's sole purpose in acquiring the

notes here, the majority has overlooked or disregarded these

basic principles. 

To be sure, the majority points to evidence in the

record that would support a finding that plaintiff was a

champertor, merely acting as a proxy to bring suit for DPAG. 

However, the record also contains evidence supporting plaintiff's

argument that it procured the notes with an intent to enforce its

rights in them in whatever way possible, not necessarily by way

of litigation. In fact, plaintiff affirmatively alleges that it

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acquired the notes for the lawful purpose of enforcing rights

under them and that, while litigation on the notes was a real

possibility when it took the assignment, litigation was not the

only option under consideration when it was negotiating for their

acquisition. For example, plaintiff's principal testified that

one possible avenue to recover on the notes was through

bankruptcy proceedings. In addition, the funds at issue could

potentially have been restructured with some amount paid to note

holders. Alternatively, a distribution could still be

forthcoming on the notes because they are not due until 2047,

leaving some possibility that the notes will regain value over

time. 

Contrary to the majority's assertion, discussion of

these options did not constitute mere after-the-fact speculation. 

As relevant to the question of plaintiff's intent when acquiring

the notes, plaintiff's principal testified that such options were

among those considered as possibilities at the time plaintiff was

negotiating with DPAG regarding the purchase of the notes. The

principal's use of the words "might have been" in connection with

several of the options did not necessarily indicate that their

pursuit was speculative; instead, such words appropriately

reflected his recognition that, as a practical matter, the

outcome under any option was also dependent on defendants'

responses to plaintiff's efforts. Thus, the record contains nonspeculative evidence that options other than litigation were

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under consideration before plaintiff acquired the notes,

notwithstanding any uncertainty about whether plaintiff would

actually be successful in obtaining a recovery by pursuing them. 

Such evidence was sufficient to create a question of fact

precluding summary judgment. 

Furthermore, litigation is a legitimate consideration

when acquiring any distressed debt instrument. Plaintiff

commenced this litigation soon after acquiring the notes, but

explained that a hasty commencement was necessary because the

statute of limitations was about to run shortly after the

purchase agreement was executed; this did not mean that

litigation was necessarily plaintiff's sole purpose or option. 

Indeed, due to the impending statute of limitations deadline,

commencement of this action was necessary to protect plaintiff's

rights while it explored its other options, in case its efforts

thereunder were not fruitful. The action was commenced by a

summons with notice, and there is evidence that plaintiff

unsuccessfully attempted to contact defendants, prior to filing

the complaint, to discuss options other than protracted

litigation. While defendants may dispute having received such

communications from plaintiff, the courts may not, for purposes

of defendants' summary judgment motion, make credibility

determinations and must view the evidence in plaintiff's favor. 

Nor does an agreement to receive a percentage share in

the recovery make a transaction champertous per se (see Fairchild

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Hiller Corp., 28 NY2d at 328, 330 [no champerty despite 75%

sharing agreement]). Here, plaintiff explained that the

agreement's adjustment to the purchase price -- adding 80% or 85%

of the recovery in litigation or settlement, on top of the base

purchase price of $1 million -- was a commercially reasonable way

of structuring the sale of distressed debt instruments that are

difficult to value. 

Thus, even if the majority is correct that the greater

weight of the evidence would support a finding of champerty,

because there is conflicting evidence regarding plaintiff's

purpose in purchasing the notes, and because intent is generally

a factual question, I believe it was error to grant summary

judgment to defendants, finding this transaction champertous as a

matter of law. I would, therefore, deny summary judgment on this

factual issue and permit the parties to proceed to trial to

resolve it. 

II. Safe Harbor

Regardless of whether the transaction is champertous as

a matter of law (as the majority has determined), or there is a

question of fact regarding its allegedly champertous nature (as I

have concluded), we must decide whether the safe harbor provision

of Judiciary Law § 489 (2) is applicable. That provision exempts

the purchase or assignment of notes or other securities from

being champertous under subdivision (1) when they have "an

aggregate purchase price of at least [$500,000]." I agree with

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the majority that this statutory language is ambiguous, and that

the "purchase price" in subdivision (2) can include either actual

payment of, or a binding and bona fide legal obligation to pay,

at least $500,000. However, I disagree with the majority's

application of that provision to find, as a matter of law, that

the purchase price set forth in the agreement here did not

constitute a binding and bona fide obligation on plaintiff's

part.

It is generally inadvisable for courts to look beyond

the four corners of a contract to ferret out whether the parties

actually intended to pay the purchase price set forth therein

(see Morlee Sales Corp. v Manufacturers Trust Co., 9 NY2d 16, 19-

20 [1961]; Hutchison v Ross, 262 NY 381, 398 [1933]). Otherwise,

courts could regularly become mired down in an attempt to discern

the parties' intent when entering a contract, rather than simply

applying the language employed in the contract. However, in

those circumstances in which a contract is ambiguous on its face

and it becomes necessary to determine the parties' intent by

resorting to extrinsic evidence, the issue becomes one for the

jury and summary judgment is inappropriate (see Hartford Acc. &

Indem. Co. v Wesolowski, 33 NY2d 169, 172 [1973]). Such is the

case here. 

The agreement at issue contains arguably inconsistent

provisions, and it is unclear on its face as to whether the

parties ever intended that DPAG would be able to collect the $1

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million base purchase price from plaintiff absent recovery from

defendants in this action. Unquestionably, if the obligation to

pay was entirely contingent on a successful outcome in this

litigation, it would not constitute a binding and bona fide debt. 

However, the agreement requires plaintiff to pay the $1 million

base purchase price by a date certain, without regard to the

success of this action. Although that date was five months after

the execution of the agreement, the delay was arguably designed

to provide plaintiff with an opportunity to raise that sizeable

amount. The majority's reference to plaintiff as a "shell

company" with virtually no assets (majority op at 3-4; see 128

AD3d 553, 555 [1st Dept 2015]), ignores the possibility that

plaintiff was capable of raising capital, which it had apparently

succeeded in doing for other similar transactions. Moreover,

under the contract, plaintiff's failure to timely pay the base

purchase price carried consequences, including the accrual of

interest until full payment, and an increase in the purchase

price adjustment from 80% to 85% of any recovery. 

The majority correctly notes that the failure to timely

pay the base purchase price was not designated in the contract as

a default event. Contrary to the majority's conclusory

statement, however, neither this omission, nor any provision of

the contract -- nor even DPAG's failure to enforce plaintiff's

obligation to pay thus far -- necessarily means that the failure

to pay does not constitute a breach of the agreement. A failure

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to perform one's promise or contractual obligation -- such as the

payment of $1 million -- is the very definition of a breach of

contract (see Black's Law Dictionary [10th ed 2014], breach of

contract) and, therefore, need not be -- and rarely is --

explicitly identified as such in the contract, itself. The

deposition testimony cited by the majority, wherein one of DPAG's

principals indicated that he did not think plaintiff's failure to

timely pay would be a breach, is irrelevant unless the contract

language is ambiguous so as to require the courts to consider

extrinsic evidence to ascertain the parties' intent. If it is

necessary to review extrinsic evidence regarding intent, factual

questions exist that a jury must resolve. Even then, courts

interpreting the contract are not bound by that one individual's

personal opinion, but may consider it as merely some evidence of

DPAG's intent. 

Here, the contract's provision concerning the base

purchase price is susceptible to an interpretation that would

create an unqualified, bona fide obligation to pay $1 million. 

Nevertheless, as the majority points out, other provisions of the

contract, such as certain limitations on DPAG's remedies, raise

questions as to whether DPAG intended to enforce its rights in

the event of plaintiff's breach of the payment provision,

including whether DPAG is feasibly able to do so. In my view,

these factual questions, which stem from contractual provisions

that cannot fully be read in harmony, would permit the Court to

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look beyond the four corners of the agreement. However, I cannot

agree with the majority's conclusion that this was a "sham

transaction" as a matter of law (majority op at 12). 

Finally, the majority correctly notes this state's

leadership role in promoting and supporting large scale, complex

commercial markets and transactions, and recognizes that

participants in such transactions are "sophisticated investors"

(majority op at 10). However, in my view, the majority's

decision discourages transactions aimed at fostering

accountability in commercial dealings, generally, and, in this

particular case, successfully forecloses litigation against

parties that are alleged to have committed fraud against all of

the investors in more than one portfolio. 

In sum, resolution of the questions of whether the

transaction was champertous and, if so, whether the parties'

contract included a bona fide obligation for plaintiff to pay $1

million for the notes, such that the safe harbor provision would

apply, requires a factfinder to ascertain the parties' intent, a

determination that is inappropriate on a motion for summary

judgment (see Love Funding Corp., 13 NY3d at 200; Bluebird

Partners, 94 NY2d at 738; Fairchild Hiller Corp., 28 NY2d at

330). Accordingly, I would reverse the Appellate Division order

and deny summary judgment. 

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* * * * * * * * * * * * * * * * *

Order affirmed, with costs. Opinion by Chief Judge DiFiore. 

Judges Rivera, Abdus-Salaam, Fahey and Garcia concur. Judge

Stein dissents in an opinion in which Judge Pigott concurs. 

Decided October 27, 2016

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