Legal Question in Business Law in New York

What is the responsibility of an assigner of a lease if the assignee defaults

I sold a travel agency in August of 1998. The new owner took over a lease agreement of a software package, monthly payments $192. This lease agreement was made with Orix while the software package was sold by Date Share, Dallas. The lease was signed over to the new owner who accepted it. The new owner stopped payments a year later, saying that the system does not work. It was too difficult to use. Supposedly, there are others with similar complaints. I am being sued by Orix. I am being addressed as doing business as agency owner although I have nothing to do with this agency. Because of this, I have returned all papers to Orix asking them to make corrections. I have today received a summons from a New York attorney (Supreme Court) to appear or to answer. Do I have any recourse. The product was definitely not very workable. By involving Orix as a leasing company, the product is of no consequence. Is that correct. The new owner appears also on the summons. My preferance would be not to sue anyone. I find it difficult to understand that one should pay for something that has no value. I hope to hear from you. Margrid


Asked on 7/28/00, 11:20 pm

2 Answers from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: What is the responsibility of an assigner of a lease if the assignee default

Since New York law seems to apply, I will just make a couple of very general comments.

1. In New York, the "Supreme Court" is not a high-level appellate court, just a trial court.

2. Never disregard legal correspondence, especially anything styled as a complaint or a summons. A response in proper legal format may, and as to the latter two is, required to protect your rights and avoid default.

3. In an ordinary commercial assignment, the assignor remains obligated to the creditor. If the assignee defaults, the creditor can go after either the assignor or the assignee.

4. The original obligor/debtor can get off the hook for a contract or lease by entering into a three-way deal with the creditor and the new party, whereby instead of an assignment, there is a replacement of the original party by the new party. This requires participation and agreement by the creditor, and is called a novation (instead of an assignment). However, it's apparently too late now, once the assignment has been made.

5. You have a right to recover from the assignee, however, for your damages. If you are both named as defendants, you do this by filing a cross-claim.

6. See an attorney who practices in the state where the lawsuit is brought.

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Answered on 9/12/00, 8:14 pm
John Hayes The John Hayes Law Offices

Re: What is the responsibility of an assigner of a lease if the assignee default

Your defense is of little concern at this point. If you have been served with a Summons and Complaint you must file a proper and legal answer with the Court within 30 days of receiving the Summons. Failure to do so will result in a default judgment against you for the original debt due and any costs incurred. If you have failed to file an answer and a default has been entered you have up to six months to file a motion to set aside the default. This is relatively easy and once you set aside the default you can file a cross complaint against the real debtor. If you need help filing an answer please let me know. My toll free number is 877-546-9918. I hope you have already sought legal help, if not I hope you do.

Sincerely,

John Hayes, Esq.

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Answered on 9/12/00, 11:01 pm


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