Preview
INDEX NO. 806264/2022E
NYSCEF DOC. NO. 185 RECEIVED NYSCEF: 03/13/2024
SUPREME COURT OF THE STATE OF
NEW YORK COUNTY OF BRONX
--.
NY 2015 BOAT LLC,
INDEX NO. 806264/2022E
Plaintiff,
-against-
NOTICE OF ENTRY OF COURT’S
2435 KINGSLAND LLC, et al., FEBRUARY 21, 2024 ORDER
DENYING DEFENDANT’S MOTION
Defendant(s). TO REARGUE
wane ene n enn en ene,
TO ALL PARTIES IN THE ABOVE-CAPTIONED MATTER AND THEIR
COUNSEL OF RECORD, PLEASE TAKE NOTICE THAT:
On February 21, 2024, the Court denied Defendants’ Motion to Reargue. The decision
and order were entered by the Clerk of the Supreme Court of the State of New York, County of
Bronx on February 26, 2024, (NYSCEF No. 183). A copy of the Court’s decision and order is
enclosed herewith.
Dated: New York, New York
March 13, 2024
/s/ Paula Ajumobi
Paula Ajumobi
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NEW YORK SUPREME COURT - COUNTY OF BRONX
PART 32
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF THE BRONX
a=. --X
NY 2015 BOAT LLC,
Index No. 806264/2022E
Plaintiff,
Hon. FIDEL E. GOMEZ
- against - Justice
2435 KINGSLAND LLC, ET AL.,
Defendants.
a=. --X
The following papers numbered | to 1, Read on this Motion noticed of 01/03/24, and duly
submitted as no. 7 on the Motion Calendar of 1/03/24.
PAPERS NUMBERED
Notice of Motion - Order to Show Cause — 1
Exhibits and Affidavits Annexed
Answering Affidavit and Exhibits
Replying Affidavit and Exhibits
Notice of Cross-Motion - Affidavits and Exhibits
Pleadings - Exhibit
Stipulation(s) - Referee’s Report - Minutes
Filed Papers- Order of Reference
Memorandum of Law
Defendants’ motion is decided in accordance with the Decision and Order annexed hereto.
Dated:
2/21/24 Hon,
IDEL E. GOMEZ, JSC
1.CHECK ONE O CASE DISPOSED X NON-FINAL DISPOSITION
2. MOTION/CROSS-MOTION IS. 1 GRANTED (MOTION) O DENIED (MOTION)
X GRANTED IN PART O OTHER
3. CHECK IF APPROPRIATE. O SETTLE ORDER O FIDUCIARYAPPOINTMENT
O SUBMIT ORDER (REFEREE APPOINTMENT
O DO NOT POST CO NEXT APPEARANCE DATE:
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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF THE BRONX
X
NY 2015 BOAT LLC,
Plaintiff,
-against- DECISION AND ORDER
Index No. 806264/2022E
2435 KINGSLAND LLC, ERIC SHAPIRO, STEVEN
J. SHAPIRO, CITY OF NEW YORK
DEPARTMENT OF FINANCE, CITY OF NEW
YORK ENVIRONMENTAL CONTROL BOARD
AND “JOHN DOE NO. 1 THROUGH JOHN DOE
NO. 99,” SAID NAMES BEING FICTITIOUS,
PARTIES INTENDED BEING POSSIBLE TENANTS
OR OCCUPANTS OF PREMISES, AND
CORPORATIONS, OTHER ENTITIES OR
PERSONS WHO CLAIM, OR MAY CLAIM, A
LIEN AGAINST THE PREMISES,
Defendants.
ween ene eee eee een en enenen ene,
Defendants Eric Shapiro (Eric) and Steven J. Shapiro (Steven) move by Order to Show
Cause (OSC) for an Order, pursuant to CPLR § 2221, granting them leave to reargue this Court’s
Decision and Order, dated November 3, 2023 (the prior decision), which granted plaintiff's
summary judgment motion; and upon leave, denying said motion; or, alternatively, pursuant to
CPLR § 5519(c), an Order staying all pending proceedings to enforce the Decision and Order
pending resolution of defendants’ appeal by the Appellate Division, First Department.
For the reasons set forth below, defendants’ motion for leave to reargue is granted and,
upon reargument, defendants’ motion is denied.
BACKGROUND
This is an action to foreclose a commercial mortgage which encumbers real property
located at 2435 Kingsland Avenue, Bronx, New York 10469. The complaint alleges, inter alia,
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as follows: On February 11, 2021, defendant 2435 Kingsland LLC (Kingsland) executed and
delivered a promissory note to plaintiff whereby it promised to pay the principal sum of
$300,000 plus interest. On that same date, defendants Eric and Steven executed a guaranty to
plaintiff guaranteeing Kingsland’s repayment of the note. As collateral security for repayment
of the note, Kingsland executed and delivered a mortgage in the principal sum of $300,000.
Plaintiff is the holder of the note and was in possession of the note and mortgage at the time this
action was commenced. Pursuant to the note, Kingsland promised to make consecutive monthly
payments of principal and/or interest on the first day of each month commencing on April 1,
2021 and on the first day of each succeeding month up to and including November 11, 2022, at
which time the remaining principal amount and accrued interest became due and payable.
Kingsland defaulted on its obligations under the terms of the note by failing and omitting to pay
plaintiff
the amounts due on April 1, 2021 and each and every month thereafter. By the filing of
the complaint, plaintiff has elected to declare the entire unpaid principal balance, unpaid interest
and other amounts due and payable.
In the prior decision, this Court granted plaintiff's motion for: (1) summary judgment on
its foreclosure claim against 2435 Kingsland LLC, Eric and Steven; (2) a default judgment
against all non-appearing defendants; (3) an order of reference; and (4) striking John Doe’s from
the caption and amending the complaint accordingly.
Notably, in opposition to plaintiff's summary judgment motion, defendants Eric and
Steven argued that: (1) there were triable issues of fact as to whether the mortgage at issue was
procured by fraud and whether plaintiff was on notice of and/or knowingly facilitated the fraud;
and as to whether defendants were fraudulently induced into signing the closing documents, both
of which would render the mortgage voidable and preclude plaintiff's foreclosure action; (2) the
note and underlying mortgage at issue were unenforceable because the terms are usurious; and
(3) summary judgment was premature because there has been no discovery.
In support of the instant motion, defendants contend that the Court overlooked and/or
misapprehended the following: (1) defendants have not waived the affirmative defenses of
fraudulent inducement and usury; (2) defendants have provided sufficient detail to state the
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defense of fraudulent inducement; (3) even a facially unconditional guaranty is void if the
underlying loan contains a usurious interest rate or if it was fraudulently induced; (4) summary
judgment should have been denied on the foreclosure and guaranty claims due to issues of fact
regarding the defenses of usury and fraud; and (5) defendants are entitled to take discovery to
prove the affirmative defenses of fraudulent inducement and usury.
Plaintiff opposes and asserts that: (1) defendants improperly attempt to argue, for the
first time, that their seventeenth affirmative defense, unconscionability, actually constitutes a
usury defense and that their guaranty is void ab initio because the underlying loan was
criminally usurious; (2) defendants’ fraudulent inducement claims fail to raise a triable issue of
fact as the defendants admitted to all the underlying facts, including the execution of all the
closing documents; (3) defendants fail to articulate what additional information or evidence they
would seek to uncover during discovery; and (4) defendants request for a stay must be denied as
they have failed to demonstrate a likelihood of success on the merits, irreparable harm, or that
equity warrants a stay.
HOR Ok
“A motion for leave to reargue is addressed to the sound discretion of the Supreme
Court” (Rides Unlimited of New York, Inc. v Engineered Energy Solutions, LLC, 184 AD3d 695,
695 [2d Dept 2020]; Bueno v Allam, 170 AD3d 939, 940 [2d Dept 2019]; Foley v Roche, 68
AD2d 558, 567 [Ist Dept 1979]).
“A motion for reargument, addressed to the discretion of the court, is designed to afford a
party an opportunity to establish that the court overlooked or misapprehended the relevant facts,
or misapplied any controlling principle of law. Its purpose is to serve as a vehicle to permit the
unsuccessful party to argue once again the very questions previously decided. However,
reargument may not serve to provide a party an opportunity to advance arguments different from
those tendered on the original application. Nor may it be employed as a device for the
unsuccessful party to assume a different position inconsistent with that taken on the original
motion. .. . ‘A motion for reargument is not an appropriate vehicle for raising new questions a9
(Foley at 567-568; see also DeSoignies v Cornasesk House Tenants’ Corp., 21 AD3d 715, 718
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[1st Dept 2005] [““Reargument is not available where the movant seeks only to argue ‘a new
theory of liability not previously advanced’”’]).
DISCUSSION
As discussed in the prior decision, plaintiff met its prima facie burden on its motion for
summary judgment by establishing the existence of the guaranty, the underlying debt and the
guarantor’s failure to perform under the guaranty (Cooperatieve Centrale Raiffeisen-
boerenleenbank, B.A. at 492; Davimos v Halle, 35 AD3d 270, 272 [1st Dept 2006]; City of New
York v Clarose Cinema Corp., 256 AD2d 69, 71 [lst Dept 1998]). In opposition, defendants
failed to raise a triable issue of fact.
On reargument, defendants claim that the Court overlooked or misapprehended the law in
finding that defendants waived their affirmative defenses of usury and fraudulent inducement,
and in granting summary judgment without permitting further discovery. Defendants also
contend that the Court erred in finding that the complaint failed to sufficiently allege a fraudulent
inducement affirmative defense. As to the latter, in the prior decision, that Court found that to
the extent that defendants’ fortieth affirmative defense can be construed as a fraudulent
inducement defense, the mere allegations that plaintiff engaged in conduct to transfer the
property from the individual defendants to an LLC without their knowledge, and that “it is
unknown who the members of the LLC are” was insufficient to state a fraudulent inducement
affirmative defense (CPLR § 3016[b] ; Friedman v Anderson, 23 AD3d 163, 166 [1st Dept.
2005][“a plaintiff seeking to recover for fraud and misrepresentations is required to set forth
specific and detailed factual allegations that the defendant personally participated in or had
knowledge of any alleged fraud.”]). In this regard, the Court correctly found that there were “
specific allegations that plaintiff had any involvement in either the creation of the LLC or the
transfer of the real property to the LLC.”' Significantly, the alleged misrepresentations
‘In their memorandum of law, through counsel, defendants correctly point out that in
footnote | of the prior decision, the Court misquotes the defendants in stating: “Indeed, in their
affidavits, Eric and Steven state that they are ‘unfamiliar with the lender NY 2015 Boat LLC.’”
That sentence should read: “Indeed, in paragraph 30 of his affidavit, Eric states ‘We have no
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defendants cite in support of the instant motion were allegedly made by nonparty Larry Jonathan
(Jonathan), the broker Eric states he found on the internet, not the plaintiff. Therefore, the Court
did not err in finding that defendants failed to plead the affirmative defense of fraudulent
inducement.
Waiver of Affirmative Defenses
Defendants contend that the Court misapprehended the law in finding that defendants had
waived their affirmative defenses of usury and fraudulent inducement by not pleading them in
their answer, and that defendants did not retract that waiver through their opposition to plaintiff's
motion for summary judgment.”
An affirmative defense, as defined by CPLR § 3015(b) is waived if not pleaded in an
answer (Butler v Catinella, 58 AD3d 145, 150 [2d Dept 2008] [Affirmative defenses, such as
those set forth in CPLR 3018(b), as a general rule, would be deemed waived if not raised in the
pleadings.”]); Surlak v Surlak, 95 AD2d 371, 383 [2d Dept 1983] [“The general rule is that an
affirmative defense is deemed waived if not raised in the pleadings.”]). In the prior decision, the
court stated:
However, when a defendant fails to plead an affirmative
defense, as required by CPLR § 3211(e) and CPLR § 3018(b), but
nevertheless asserts that defense in connection with a motion for
summary judgment, the waiver is said to be retracted and the court
can grant, when the defendant is the movant, or deny, when the
defendant is the opponent, summary judgment based upon the
unpleaded affirmative defense ( Lerwick v Kelsey, 24 AD3d 918,
919-920 [3d Dept 2005]; Allen v Matthews, 266 AD2d 782, 784
[3d Dept 1999]; Adsit v Quantum Chem. Corp.,199 AD2d 899, 900
[3d Dept 1993]). The threshold inquiry is whether in considering
the unpleaded defense, the opponent of the defense is prejudiced
thereby ( BMX Worldwide v Coppola, 287 AD2d 383, 384 [lst
Dept 2001]; Allan at 784; Seaboard Sur. Co. v Nigro, Bros., 222
idea who the actual lender is. All we know is that NY 2015 Boat LLC is listed as c/o Mavrides,
Moyal, Packman and Sadkin LLC.’”
°To the extent that defendants now argue that their unconscionability defense sufficiently
states an affirmative defense of usury, since the defendants failed to raise that argument in
opposition to plaintiff's summary judgment motion, it is improperly raised on reargument.
5.
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AD2d 574, 574 -575 [2d Dept 1995]; Rogoff v San Juan Racing
Assn. Inc., 77 AD2d 831, 832 [1st Dept 1980, affd, 54 NY2d 883
[1981]). Such prejudice, however, is ameliorated when the
defense was previously raised on a prior motion or during
discovery (id.), or when the opponent of the motion, where
defendant seeks summary judgment based upon said defense, is
given an opportunity to fully respond to the motion for summary
judgment (Sheils v County of Fulton, 14 AD3d 919, 921 [3d Dept
2005], /v denied 4 NY3d 711[2005]; Kirilescu v American Home
Prods. Corp., 278 AD2d 457, 457-458 [2d Dept 2000], /v denied
96 NY2d 933 [2001]; McSorley v Philip Morris, Inc. , 170 AD2d
440, 441 [2d Dept 1991], appeal dismissed 77 NY2d 990 [1991];
International Fid. Ins. Co. v Robb, 159 AD2d 687, 689 [2d Dept
1990).
In the prior decision, the Court found that Eric and Steven had not retracted their waiver
in failing to plead fraud and usury as affirmative defenses because they did not seek affirmative
relief, but rather, merely opposed the motion for summary judgment. However, under the
caselaw cited by the Court, an affirmative defense is not waived by a defendant who fails to raise
the defense in its answer if that defendant raises it in opposition to summary judgment and the
opposing party has an opportunity to fully respond. Here, defendants raised the fraud and usury
defenses in opposition to plaintiff's summary judgment motion, and plaintiff
had an opportunity,
and did, respond to those defenses in its reply papers. As such, defendants have not waived
those defenses by failing to raise them as affirmative defenses in their answer. Nevertheless, for
the reasons set forth below, defendants may not avail themselves of either of those defenses.
The Guaranty
As plaintiff notes, defendants now raise, for the first time, the argument that even a
facially unconditional guaranty is void if the underlying loan contains a usurious interest rate or
if it was fraudulently induced. Defendants also, for the first time, assert that the guaranty is void
ab initio because Steven’s signature was forged. Significantly, defendants did not address the
guaranty in opposition to plaintiff's summary judgment motion. Rather, their arguments were
limited to the underlying loan. As such, defendants’ arguments concerning the guaranty are
improperly raised in support of the instant motion.
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In the prior decision, the Court found that Eric and Steven were precluded from raising
fraud as a defense based on the absolute and unconditional language in the guaranty that “no set-
off, counterclaim, reduction or diminution of any obligation, or any defense of any kind or
nature which Guarantor has or may have against Lender . . . shall be available hereunder to
Guarantor in respect of any matter arising out of this Guaranty, except payment in full of all
obligations of Borrower under the Loan Documents.” Indeed, as the Court noted, guaranties
containing such language have been consistently upheld by New York courts (Cooperative
Centrale Raiffeisen-Boerenleenbank, B.A. v Navarro, 25 NY3d 485, 492-493 [2015]; Citibank v
Plapinger, 66 NY2d 90 [1985]; Chemical Bank v Sepler, 60 NY2d 289 [1983]; United Orient
Bank v Bao Lee, 233 AD2d 500 [1st Dept 1996]). And, contrary to defendants’ contention, a
fraudulent inducement defense can be waived in a guaranty agreement (Cooperatieve Centrale
Raiffeisen-Boerenleenbank, B.A. v Navarro, 25 NY3d 485 [2015] Citibank v Plapinger, 66
NY2d 90, 93-95 [1985]). As such, the Court did not err in finding that defendants waived their
fraudulent inducement defense.
In the prior decision, the Court found that Eric and Steven were also precluded from
raising usury as a defense under the broad and unconditional language of the guaranty. In this
regard, significantly, a limited liability company, such as the borrower here, may only assert a
defense of criminal usury, that is, an interest rate in excess of 25% (Limited Liability Law §
1104[a]; Penal Law § 190.40). And, the Court acknowledges that a criminal usury defense may
not be waived as it is contrary to public policy (Hammelburger v Foursome Inn Corp., 76 AD2d
646, 649-650 [2d Dept 1980]. Thus, the guaranty does not preclude defendants from raising a
criminal usury defense. To successfully raise the defense of usury, a debtor must allege and
prove by clear and convincing evidence that a loan requiring interest in violation of a usury
statute was charged by the holder or payee with the intent to take interest in excess of the legal
rate (Blue Wolf Capital Fund II, L.P. v American Stevedoring Inc., 105 AD3d 178, 183 [1st Dept
2013]). Here, defendants assert in conclusory fashion that the “effective interest rate” for the
subject loan is “at least 18%” and the default rate is “at least 36%.” Notably, in New York, the
default interest rate is not considered in determining whether a loan is usurious (72" Ninth LLC v
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753 Ninth Ave Realty LLC, 168 AD3d 597, 598 [1st Dept 2019]; Bryan L. Salamone, P.C. v
Russo, 129 AD3d 879, 881 [2d Dept 2015]; Kraus v Mendelsohn, 97 AD3d 641, 641 [2d Dept
2015]). As such, by defendants’ own account, the loan is not criminally usurious.
Discovery
Defendants contend that the Court overlooked and misapprehended matters of fact and
law in ruling that defendants failed to proffer any reason to suggest that additional discovery
may lead to relevant evidence. In this regard, defendants point to their opposition to plaintiff's
summary judgment motion, wherein they stated that they will seek discovery as to
communications demonstrating that plaintiff and Jonathan had a business relationship and
worked in concert to defraud defendants, documents demonstrating that plaintiff was aware that
the property was residential and owner-occupied and not commercial, and communications
demonstrating that plaintiffs attorneys had knowledge of and facilitated the fraud on the Shapiro
bothers. Significantly, as discussed above, defendants waived a fraudulent inducement defense.
As such, the foregoing discovery will serve no purpose.
Stay Pending Appeal - CPLR § 5519(c)
Alternatively, defendants seek a stay of all proceedings in this case, pursuant to CPLR §
5519(c), pending defendants’ appeal to the First Department. CPLR § 5519(c) provides that
“Tt]he court from or to which an appeal is taken or the court of original instance may stay all
proceedings to enforce the judgment or order appealed from pending an appeal.” Under CPLR §
5519(c), “there is no entitlement to a stay and, indeed, the court considering the stay application
may consider the merits of the appeal” (Da Silva v Musso, 76 NY2d 436, 443 n4 [1990]; 64B
Venture v American Realty Co., 179 AD2d 374, 375-376 [1st Dept 1992][“Likewise, it was
within the IAS court’s discretion to deny a stay pending appeal of the prior action, if, in its view,
which was borne out by our subsequent decision, respondents failed to show sufficient merit to
that appeal.”]; Wilkinson v Sukiennik, 120 AD2d 989, 989 [4th Dept 1986][“Plaintiff
has
demonstrated that his appeal from Justice Joslin’s order may have merit . . . Thus, plaintiff is
entitled to a stay of enforcement of the order of Justice Joslin entered April 24, 1986, pending
appeal.”]). Here, for the reasons stated herein and in the prior decision, defendants have not
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shown sufficient merit to their appeal to warrant a stay. As such, defendants motion for a stay of
all proceedings in this action pending an appeal, pursuant to CPLR § 5519(c), is denied.
Accordingly, it is hereby
ORDERED that defendants shall serve a copy of this Decision and Order upon all
parties, with Notice of Entry, within thirty (30) days of the date hereof.
This constitutes the Decision and Order of this Court.
Dated: Bronx, New York
February 21, 2024
Hon.
LE. GOMEZ, J.S.C. _
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