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FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023
NYSCEF DOC. NO. 33 RECEIVED NYSCEF: 06/02/2023
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
- - - - - - -- -- -- -- -- -- -- -- -- -- -- -- -- - - - - - - X
BOARD OF MANAGERS OF THE 610 PARK :
AVENUE CONDOMINIUM,
:
Plaintiff,
:
v.
16EF APARTMENT, LLC, MARA :
ENTERPRISES, AND “JOHN DOE” No. 1
through “JOHN DOE” No. 15, the true name of :
said defendants being unknown to plaintiff, the
parties intended to be those persons having or Index Nos. 151261/23
claiming an interests in the mortgaged premises (Kahn, J.)
as described in the complaint by virtue of being
tenants, or occupants, or judgment-creditors, or
lienors of any type of nature in all or part of
said premises.
Defendants.
And
Banc of California, N.A.,
Proposed Intervenor
Plaintiff
- - - - - - -- -- -- -- -- -- -- -- -- -- -- -- -- - - - - - - X
AFFIDAVIT OF ZOILA PRICE
I, Zoila Price, declare as follows:
1. I am Managing Director of the Warehouse Lending Division at Banc of
California, N.A. (“Banc”). I am making this declaration based on my personal knowledge of the
facts set forth below and, if called as a witness, could and would testify competently thereto,
under oath.
Banc of California, N.A.’s Warehouse Lending Arrangements
2. My employer, Banc, is a national banking association headquartered in Santa
Ana, California.
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3. One of Banc’s business enterprises is warehouse lending, in which Banc provides
a short-term revolving line of credit to mortgage loan originators, which provides the initial
funding for loans an originator approves. The originator, in turn, repays Banc on the credit line
after selling the loan.
4. Separate from these lending arrangements, Banc also purchases loans directly
from mortgage originators, pursuant to repurchase agreements, in which the originator agrees to
buy a loan back after a specified length of time.
5. Until the repurchase date, the loan, as well as the rights under the mortgage lien,
belong to Banc.
6. Banc engaged in business with Michael J. Strauss (“Strauss”) and Sprout
Mortgage Corporation, Sprout Mortgage LLC, Sprout Mortgage Asset Trust, and Recovco
Mortgage Management (collectively, the “Sprout Entities”). Banc provided warehouse lending
to Sprout, and also purchased loans from the Sprout Entities pursuant to repurchase agreements,
until the Sprout Entities shut their business down as noted below.
Banc’s Guaranty from Michael J. Strauss
7. Strauss is the former principal (and in many cases the CEO) of the entities that
make up the Sprout Entities.
8. On November 24, 2021, Strauss executed a personal guaranty in Banc’s favor for
the Sprout Entities’ liabilities. A true and correct copy of the Guaranty is attached hereto as
Exhibit 1. The Guaranty defines “Guarantor” as Strauss, “Seller” as the Sprout Entities, and
“Buyer” as Banc.
9. In pertinent part, the Guaranty provides the following:
Guarantor jointly and severally and absolutely and unconditionally guarantees full
and punctual payment and satisfaction of the Obligations of Seller to Buyer, and
the performance and discharge of all Seller’s obligations under the [Master]
Repurchase Agreement and the other Repurchase Facility Documents. This is a
guaranty of payment and performance and not merely of collection, so Buyer can
enforce this Guaranty against Guarantor even when Buyer has not exhausted
Buyer’s remedies against anyone else obligated to pay the Obligations or against
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any collateral securing the Obligations, this Guaranty or any other guaranty of the
Obligations.
(See Exhibit 1 at 1.)
10. The Guaranty was a condition of Banc’s willingness to continue doing business
with the Sprout Entities. After Strauss executed the Guaranty, Banc continued to both purchase
loans from the Sprout Entities and provide a warehouse line to the Sprout Entities to fund loans.
Debt Owed by Strauss
11. Based on my review of Banc’s records, as of today, Strauss has incurred
$3,175,905 in unpaid debt owed to Banc under the Sprout Entities’ warehouse credit line and
various repurchase agreements they entered into with Banc.
12. Despite multiple requests, neither Strauss nor the Sprout Entities have sent Banc
the amounts it is owed.
13. Further, on or about October 6, 2022, PNC Bank, N.A. sued both Banc and Sprout
Mortgage LLC in an action entitled PNC Banc, N.A. v. Sprout Mortgage, LLC, et al., Docket No.
0653697/2022, in the Supreme Court of the State of New York, New York County (the “PNC
Action”).
14. As a part of the PNC Action, Sprout Mortgage LLC is obligated to indemnify and
defend Banc in the PNC Action. On October 19, 2022, Banc’s counsel in the PNC Action sent
an indemnification tender to Sprout Mortgage LLC, demanding that it indemnify Banc in its
defense of the PNC Action.
15. To date, Sprout Mortgage LLC has refused to indemnify Banc. Because of
Sprout Mortgage LLC’s refusal, Banc has incurred fees and expenses in its defense of the PNC
Action. To date, Banc has incurred at least $26,845 in its defense of the PNC Action —raising
the total amount owed to Banc by Strauss to at least $3,202,750 (exclusive of attorney’s fees
incurred in this case and the Banc Action discussed in the present motion) — and is likely to
incur further fees in the future.
3
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The Sprout Entities’ Shutdown
16. In mid-2022, Banc learned that the Sprout Entities abruptly shut down, laying off
approximately 400 employees. The Sprout Entities’ shutdown was covered prominently in the
financial press.
17. To Banc’s knowledge, it is the only plaintiff in the various cases against the
Sprout Entities in whose favor Strauss has executed a personal guaranty.
18. Banc is aware that Strauss has attempted to start a new mortgage company called
Smart Rate Mortgage, and that his and Smart Rate Mortgage’s mortgage loan origination
licenses have been suspended in Illinois. These license suspensions, combined with the bad
publicity relating to the Sprout Entities’ abrupt shutdown, will likely hinder Strauss’ ability to
reenter the mortgage and real estate finance industry.
Strauss’ Intent to Sell His Park Avenue Penthouse
19. Strauss’ current financial situation puts at great risk Banc’s financial recovery on
the obligations owed by the Sprout Entities and Strauss.
20. Banc’s investigation to date, along with contemporary press coverage, indicates
that Strauss is the ultimate owner of a penthouse condominium located at 610 Park Avenue in
New York City (the “Park Avenue Penthouse”). Banc understands that this is Strauss’ primary
asset.
21. Banc understands that Strauss has recently put the Park Avenue Penthouse on the
market, with an asking price of over $22.5 million.
22. Although a sale at this price would be sufficient to satisfy all the amounts owed to
Banc, Banc understands that Strauss, through communications with him after the Sprout Entities
shut down, has liabilities in excess of the value of his assets.
23. Moreover, I understand appears that other creditors, including the Board of
Managers of the 610 Park Avenue Condominium, have commenced proceedings against the Park
Avenue Penthouse.
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24. If Strauss uses the funds from the sale of the Park Avenue Penthouse to pay off
his other debts and creditors, he may leave nothing from which Banc can recover. Accordingly,
there is a substantial risk that if Strauss were to sell the Park Avenue Penthouse, he would
dissipate the proceeds in a manner that would leave no funds to satisfy the amounts he owes
Banc under the Guaranty, the purpose of which was to ensure that Banc had some level of
assurance of payment if the Sprout Entities could not cover their obligations.
Strauss'
25. dissipation of assets would thus undermine the entire basis behind Banc's
agreement to continue to engage in business with Strauss and the Sprout Entities in 2021.
I declare under penalty of perjury under the law of the State of New York that the
foregoing is true and correct.
Executed on the 31st of May, 2023 at Santa Ana, Ca rni
Zoila rice
Subscribed and sworn before me
this 3 l a day of May, 2023
Notary Public
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NYSCEF DOC. NO. 33 RECEIVED NYSCEF: 06/02/2023
CALIFORNIA ACKNOWLEDGMENT CIVIL CODE § 1189
.------.-----------------------------.-.-----------.------.
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document
to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
State of California
County of Ofc
On before m .. t C
appeared O G.
personally
Name(s) of Signer(s)
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed
to the within instrument and acknowledged to me that he/she/they executed the same in Ns/her/their
authorized capacity(les), and that by IA/her/their signature(s) on the instrument the person(s), or the entity
upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the
THERESA
M. GREENFIELD laws of the State of California that the foregoing
Nota u c - CaWornia
paragraph is true and correct.
3
Commission# 2354470
my Comm.ExpiresApr 15, 2025 WITNESS my and official seal.
Signat e
Place Notary Seal and/or Stamp Above ignature of Notary Public
OPTIONAL
Completing this information can deter alteration of the document or
fraudulent reattachment of this form to an unintended document.
Description of Attached Document
Title or Type of Document:
Document Date: Number of Pages:
Signer(s) Other Than Named Above:
Capacity(ies) Claimed by Signer(s)
Signer's Name: Signer's Name:
O Corporate Officer - Title(s): O Corporate Officer - Title(s):
O Partner - o Limited O General O Partner - O Limited O General
O Individual o Attorney in Fact O Individual O Attorney in Fact
O Trustee O Guardian or Conservator o Trustee O Guardian or Conservator
O Other: O Other:
Signer is Representing: Signer is Representing:
.-------.--.~~~-----------.------------------------------------.
©2019 National Notary Association
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NYSCEF DOC. NO. 33 RECEIVED NYSCEF: 06/02/2023
CERTIFICATE OF COMPLIANCE
1. The following statement is made in accordance with N.Y.C.R.R § 202.8-b.
2. The foregoing affidavit was prepared in the processing system Microsoft Word,
with Times New Roman typeface, 12-point font.
3. Relying on the word count of the word-processing system, the total number of
words in this document, exclusive of caption and signature block, is 1,116 words.
Dated: June 2, 2023 s/ 0DUWLQ&*HDJDQ
New York, New York 0DUWLQ&*HDJDQ
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FILED: NEWID: 7D823D1A-20B7-49C2-A2EC-C650EC613EB5
YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023
DocuSign Envelope
NYSCEF DOC. NO. 33 RECEIVED NYSCEF: 06/02/2023
CERTIFICATE OF CONFORMITY
The undersigned does hereby certify that he is an attorney at law duly admitted to practice
in the state of California and is a resident of the state of Califomia; that he is a person duly qualified
to make this certificate of conformity pursuant to C.P.L.R. 2309(c); that he is fully acquainted with
the laws of Califomia; that the foregoing affidavit filed as the Affidavit of Zoila Price, dated May
31, 2023, taken before Theresa M. Greenfield, a notary in the state of California, was taken in the
manner prescribed by such laws of California, and that it duly conforms with such laws and is in
all respects valid and effective.
13Ul5
Dated: June 2, 2023 __ CdtÆ
San Pedro, California Gwsusy n. mua
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Preview
FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023 NYSCEF DOC. NO. 33 RECEIVED NYSCEF: 06/02/2023 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK - - - - - - -- -- -- -- -- -- -- -- -- -- -- -- -- - - - - - - X BOARD OF MANAGERS OF THE 610 PARK : AVENUE CONDOMINIUM, : Plaintiff, : v. 16EF APARTMENT, LLC, MARA : ENTERPRISES, AND “JOHN DOE” No. 1 through “JOHN DOE” No. 15, the true name of : said defendants being unknown to plaintiff, the parties intended to be those persons having or Index Nos. 151261/23 claiming an interests in the mortgaged premises (Kahn, J.) as described in the complaint by virtue of being tenants, or occupants, or judgment-creditors, or lienors of any type of nature in all or part of said premises. Defendants. And Banc of California, N.A., Proposed Intervenor Plaintiff - - - - - - -- -- -- -- -- -- -- -- -- -- -- -- -- - - - - - - X AFFIDAVIT OF ZOILA PRICE I, Zoila Price, declare as follows: 1. I am Managing Director of the Warehouse Lending Division at Banc of California, N.A. (“Banc”). I am making this declaration based on my personal knowledge of the facts set forth below and, if called as a witness, could and would testify competently thereto, under oath. Banc of California, N.A.’s Warehouse Lending Arrangements 2. My employer, Banc, is a national banking association headquartered in Santa Ana, California. 1 of 8 FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023 NYSCEF DOC. NO. 33 RECEIVED NYSCEF: 06/02/2023 3. One of Banc’s business enterprises is warehouse lending, in which Banc provides a short-term revolving line of credit to mortgage loan originators, which provides the initial funding for loans an originator approves. The originator, in turn, repays Banc on the credit line after selling the loan. 4. Separate from these lending arrangements, Banc also purchases loans directly from mortgage originators, pursuant to repurchase agreements, in which the originator agrees to buy a loan back after a specified length of time. 5. Until the repurchase date, the loan, as well as the rights under the mortgage lien, belong to Banc. 6. Banc engaged in business with Michael J. Strauss (“Strauss”) and Sprout Mortgage Corporation, Sprout Mortgage LLC, Sprout Mortgage Asset Trust, and Recovco Mortgage Management (collectively, the “Sprout Entities”). Banc provided warehouse lending to Sprout, and also purchased loans from the Sprout Entities pursuant to repurchase agreements, until the Sprout Entities shut their business down as noted below. Banc’s Guaranty from Michael J. Strauss 7. Strauss is the former principal (and in many cases the CEO) of the entities that make up the Sprout Entities. 8. On November 24, 2021, Strauss executed a personal guaranty in Banc’s favor for the Sprout Entities’ liabilities. A true and correct copy of the Guaranty is attached hereto as Exhibit 1. The Guaranty defines “Guarantor” as Strauss, “Seller” as the Sprout Entities, and “Buyer” as Banc. 9. In pertinent part, the Guaranty provides the following: Guarantor jointly and severally and absolutely and unconditionally guarantees full and punctual payment and satisfaction of the Obligations of Seller to Buyer, and the performance and discharge of all Seller’s obligations under the [Master] Repurchase Agreement and the other Repurchase Facility Documents. This is a guaranty of payment and performance and not merely of collection, so Buyer can enforce this Guaranty against Guarantor even when Buyer has not exhausted Buyer’s remedies against anyone else obligated to pay the Obligations or against 2 2 of 8 FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023 NYSCEF DOC. NO. 33 RECEIVED NYSCEF: 06/02/2023 any collateral securing the Obligations, this Guaranty or any other guaranty of the Obligations. (See Exhibit 1 at 1.) 10. The Guaranty was a condition of Banc’s willingness to continue doing business with the Sprout Entities. After Strauss executed the Guaranty, Banc continued to both purchase loans from the Sprout Entities and provide a warehouse line to the Sprout Entities to fund loans. Debt Owed by Strauss 11. Based on my review of Banc’s records, as of today, Strauss has incurred $3,175,905 in unpaid debt owed to Banc under the Sprout Entities’ warehouse credit line and various repurchase agreements they entered into with Banc. 12. Despite multiple requests, neither Strauss nor the Sprout Entities have sent Banc the amounts it is owed. 13. Further, on or about October 6, 2022, PNC Bank, N.A. sued both Banc and Sprout Mortgage LLC in an action entitled PNC Banc, N.A. v. Sprout Mortgage, LLC, et al., Docket No. 0653697/2022, in the Supreme Court of the State of New York, New York County (the “PNC Action”). 14. As a part of the PNC Action, Sprout Mortgage LLC is obligated to indemnify and defend Banc in the PNC Action. On October 19, 2022, Banc’s counsel in the PNC Action sent an indemnification tender to Sprout Mortgage LLC, demanding that it indemnify Banc in its defense of the PNC Action. 15. To date, Sprout Mortgage LLC has refused to indemnify Banc. Because of Sprout Mortgage LLC’s refusal, Banc has incurred fees and expenses in its defense of the PNC Action. To date, Banc has incurred at least $26,845 in its defense of the PNC Action —raising the total amount owed to Banc by Strauss to at least $3,202,750 (exclusive of attorney’s fees incurred in this case and the Banc Action discussed in the present motion) — and is likely to incur further fees in the future. 3 3 of 8 FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023 NYSCEF DOC. NO. 33 RECEIVED NYSCEF: 06/02/2023 The Sprout Entities’ Shutdown 16. In mid-2022, Banc learned that the Sprout Entities abruptly shut down, laying off approximately 400 employees. The Sprout Entities’ shutdown was covered prominently in the financial press. 17. To Banc’s knowledge, it is the only plaintiff in the various cases against the Sprout Entities in whose favor Strauss has executed a personal guaranty. 18. Banc is aware that Strauss has attempted to start a new mortgage company called Smart Rate Mortgage, and that his and Smart Rate Mortgage’s mortgage loan origination licenses have been suspended in Illinois. These license suspensions, combined with the bad publicity relating to the Sprout Entities’ abrupt shutdown, will likely hinder Strauss’ ability to reenter the mortgage and real estate finance industry. Strauss’ Intent to Sell His Park Avenue Penthouse 19. Strauss’ current financial situation puts at great risk Banc’s financial recovery on the obligations owed by the Sprout Entities and Strauss. 20. Banc’s investigation to date, along with contemporary press coverage, indicates that Strauss is the ultimate owner of a penthouse condominium located at 610 Park Avenue in New York City (the “Park Avenue Penthouse”). Banc understands that this is Strauss’ primary asset. 21. Banc understands that Strauss has recently put the Park Avenue Penthouse on the market, with an asking price of over $22.5 million. 22. Although a sale at this price would be sufficient to satisfy all the amounts owed to Banc, Banc understands that Strauss, through communications with him after the Sprout Entities shut down, has liabilities in excess of the value of his assets. 23. Moreover, I understand appears that other creditors, including the Board of Managers of the 610 Park Avenue Condominium, have commenced proceedings against the Park Avenue Penthouse. 4 4 of 8 FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023 NYSCEF DOC. NO. 33 RECEIVED NYSCEF: 06/02/2023 24. If Strauss uses the funds from the sale of the Park Avenue Penthouse to pay off his other debts and creditors, he may leave nothing from which Banc can recover. Accordingly, there is a substantial risk that if Strauss were to sell the Park Avenue Penthouse, he would dissipate the proceeds in a manner that would leave no funds to satisfy the amounts he owes Banc under the Guaranty, the purpose of which was to ensure that Banc had some level of assurance of payment if the Sprout Entities could not cover their obligations. Strauss' 25. dissipation of assets would thus undermine the entire basis behind Banc's agreement to continue to engage in business with Strauss and the Sprout Entities in 2021. I declare under penalty of perjury under the law of the State of New York that the foregoing is true and correct. Executed on the 31st of May, 2023 at Santa Ana, Ca rni Zoila rice Subscribed and sworn before me this 3 l a day of May, 2023 Notary Public 5 5 of 8 FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023 NYSCEF DOC. NO. 33 RECEIVED NYSCEF: 06/02/2023 CALIFORNIA ACKNOWLEDGMENT CIVIL CODE § 1189 .------.-----------------------------.-.-----------.------. A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of Ofc On before m .. t C appeared O G. personally Name(s) of Signer(s) who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in Ns/her/their authorized capacity(les), and that by IA/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the THERESA M. GREENFIELD laws of the State of California that the foregoing Nota u c - CaWornia paragraph is true and correct. 3 Commission# 2354470 my Comm.ExpiresApr 15, 2025 WITNESS my and official seal. Signat e Place Notary Seal and/or Stamp Above ignature of Notary Public OPTIONAL Completing this information can deter alteration of the document or fraudulent reattachment of this form to an unintended document. Description of Attached Document Title or Type of Document: Document Date: Number of Pages: Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer(s) Signer's Name: Signer's Name: O Corporate Officer - Title(s): O Corporate Officer - Title(s): O Partner - o Limited O General O Partner - O Limited O General O Individual o Attorney in Fact O Individual O Attorney in Fact O Trustee O Guardian or Conservator o Trustee O Guardian or Conservator O Other: O Other: Signer is Representing: Signer is Representing: .-------.--.~~~-----------.------------------------------------. ©2019 National Notary Association 6 of 8 FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023 NYSCEF DOC. NO. 33 RECEIVED NYSCEF: 06/02/2023 CERTIFICATE OF COMPLIANCE 1. The following statement is made in accordance with N.Y.C.R.R § 202.8-b. 2. The foregoing affidavit was prepared in the processing system Microsoft Word, with Times New Roman typeface, 12-point font. 3. Relying on the word count of the word-processing system, the total number of words in this document, exclusive of caption and signature block, is 1,116 words. Dated: June 2, 2023 s/ 0DUWLQ&*HDJDQ New York, New York 0DUWLQ&*HDJDQ 7 of 8 FILED: NEWID: 7D823D1A-20B7-49C2-A2EC-C650EC613EB5 YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023 DocuSign Envelope NYSCEF DOC. NO. 33 RECEIVED NYSCEF: 06/02/2023 CERTIFICATE OF CONFORMITY The undersigned does hereby certify that he is an attorney at law duly admitted to practice in the state of California and is a resident of the state of Califomia; that he is a person duly qualified to make this certificate of conformity pursuant to C.P.L.R. 2309(c); that he is fully acquainted with the laws of Califomia; that the foregoing affidavit filed as the Affidavit of Zoila Price, dated May 31, 2023, taken before Theresa M. Greenfield, a notary in the state of California, was taken in the manner prescribed by such laws of California, and that it duly conforms with such laws and is in all respects valid and effective. 13Ul5 Dated: June 2, 2023 __ CdtÆ San Pedro, California Gwsusy n. mua 8 of 8