Commercial Litigation and Arbitration

Contractual Warranties under New York Law — Reliance on Warranty Despite Knowledge of Falsity of Warranted Information Permitted

From Wells Fargo Bank, N.A. v. LaSalle Bank N.A., 2009 U.S. Dist. LEXIS 57812 (S.D. Ohio July 7, 2009):

Although both parties have moved for summary judgment, these are not true cross-motions. See Wright, Miller & Kane, Federal Practice and Procedure: Civil 3d §2720 (1998), on the situation where parties make cross-motions for summary judgment, but do not concede the facts are truly undisputed from the opposing party's perspective as well as their own.

[A warranty is]

an assurance by one party to a contract of the existence of a fact upon which the other party may rely. It is intended precisely to relieve the promisee of any duty to ascertain the fact for himself; it amounts to a promise to indemnify the promisee for any loss if the fact warranted proves untrue, for obviously the promisor cannot control what is already in the past.

Metro. Coal Co. v. Howard, 155 F.2d 780, 784 (2d Cir. 1946) (L. Hand, J.). This definition has since been adopted for the most part by the New York Court of Appeals, which views "express warranties as bargained-for contractual terms." CBS Inc. v. Ziff-Davis Publ'g Co., 75 N.Y.2d 496, 553 N.E.2d 997, 1001, 554 N.Y.S.2d 449 (N.Y. 1990). Consequently, [o]nce the express warranty is shown to have been relied on as part of the contract, the right to be indemnified in damages for its breach does not depend on proof that the buyer thereafter believed that the assurances of fact made in the warranty would be fulfilled. The right to indemnification depends only on establishing that the warranty was breached. Id. at 1000; see also Bank of Am. Corp. v. Lemgruber, 385 F. Supp. 2d 200, 229 (S.D.N.Y. 2005) (following Ziff-Davis to support the proposition that, under New York law, "it is not reliance on the truth of the warranted information but reliance only on the existence of the warranty as part of the sales contract that is necessary to establish a breach of express warranty claim").

LaSalle Bank Nat'l Ass'n v. Merrill Lynch Mortg. Lending, Inc., 2007 U.S. Dist. LEXIS 59303 (S.D.N.Y. Aug. 13, 2007)

Upon a showing that: (1) plaintiff and defendant entered into a contract; (2) containing an express warranty by the defendant with respect to a material fact; (3) which warranty was part of the basis of the bargain; and (4) the express warranty was breached by defendant, a plaintiff is entitled to recover thereon. Promuto v. Waste Mgmt., Inc., 44 F.Supp.2d 628, 642 (S.D.N.Y. 1999), citing, CBS, Inc. v. Ziff-Davis Publishing Co., 75 N.Y.2d 496, 501-06 (1990) and Ainger v. Michigan Gen. Corp., 476 F.Supp. 1209 (S.D.N.Y. 1979), aff'd, 632 F.2d 1025 (2d Cir. 1980).

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