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  • Ny 2015 Boat Llc v. 2435 Kingsland Llc, Eric Shapiro, Steven J. Shapiro, City Of New York Department Of Finance, City Of New York Environmental Control BoardReal Property - Mortgage Foreclosure - Commercial document preview
  • Ny 2015 Boat Llc v. 2435 Kingsland Llc, Eric Shapiro, Steven J. Shapiro, City Of New York Department Of Finance, City Of New York Environmental Control BoardReal Property - Mortgage Foreclosure - Commercial document preview
  • Ny 2015 Boat Llc v. 2435 Kingsland Llc, Eric Shapiro, Steven J. Shapiro, City Of New York Department Of Finance, City Of New York Environmental Control BoardReal Property - Mortgage Foreclosure - Commercial document preview
  • Ny 2015 Boat Llc v. 2435 Kingsland Llc, Eric Shapiro, Steven J. Shapiro, City Of New York Department Of Finance, City Of New York Environmental Control BoardReal Property - Mortgage Foreclosure - Commercial document preview
  • Ny 2015 Boat Llc v. 2435 Kingsland Llc, Eric Shapiro, Steven J. Shapiro, City Of New York Department Of Finance, City Of New York Environmental Control BoardReal Property - Mortgage Foreclosure - Commercial document preview
  • Ny 2015 Boat Llc v. 2435 Kingsland Llc, Eric Shapiro, Steven J. Shapiro, City Of New York Department Of Finance, City Of New York Environmental Control BoardReal Property - Mortgage Foreclosure - Commercial document preview
  • Ny 2015 Boat Llc v. 2435 Kingsland Llc, Eric Shapiro, Steven J. Shapiro, City Of New York Department Of Finance, City Of New York Environmental Control BoardReal Property - Mortgage Foreclosure - Commercial document preview
  • Ny 2015 Boat Llc v. 2435 Kingsland Llc, Eric Shapiro, Steven J. Shapiro, City Of New York Department Of Finance, City Of New York Environmental Control BoardReal Property - Mortgage Foreclosure - Commercial document preview
						
                                

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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 1 of 11 INDEX NO. 806264/2022E NYSCEF DOC. NO. 183 RECEIVED NYSCEF: 02/28/2024 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: 2 of 10 INDEX NO. 806264/2022E NYSCEF DOC. NO. 183 RECEIVED NYSCEF: 02/28/2024 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, -l- 2 of 10 INDEX NO. 806264/2022E NYSCEF DOC. NO. 183 RECEIVED NYSCEF: 02/28/2024 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 -2- 3 of 10 INDEX NO. 806264/2022E NYSCEF DOC. NO. 183 RECEIVED NYSCEF: 02/28/2024 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 3- 5 of 10 INDEX NO. 806264/2022E NYSCEF DOC. NO. 183 RECEIVED NYSCEF: 02/28/2024 [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 -4- 5 of 1a INDEX NO. 806264/2022E NYSCEF DOC. NO. 183 RECEIVED NYSCEF: 02/28/2024 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. @ of 10 INDEX NO. 806264/2022E NYSCEF DOC. NO. 183 RECEIVED NYSCEF: 02/28/2024 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. -6- 8 of 10 INDEX NO. 806264/2022E NYSCEF DOC. NO. 183 RECEIVED NYSCEF: 02/28/2024 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 -7- 9 of 1a INDEX NO. 806264/2022E NYSCEF DOC. NO. 183 RECEIVED NYSCEF: 02/28/2024 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 -8- BD of INDEX NO. 806264/2022E NYSCEF DOC. NO. 183 RECEIVED NYSCEF: 02/28/2024 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. _ -9- 10 of 10