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FILED:
FILED : NEW
NEW YORK
YORK COUNTY
COUNTY CLERK
CLERK 11/22/2019
10/31/2019 10:23
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AM)
INDEX
INDEX NO.
NO. 150474/2015
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NO. 533
509 RECEIVED
RECEIVED NYSCEF:
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10/31/2019
SUPREME COURT OF THE STATE NEW YORK
COUNTY OF NEW YORK
x
BANK LEUMI USA,
Plaintiff,
MEMORANDUM OF LAW IN
SUPPORT OF DEFENDANT'S
MOTION TO VACATE
JUDGMENT
IAS Part 48
(Commercial Division)
Justice Oing
Index No.: 150474/2015
- against -
GM DIAMONDS, INC., GM IDEAL, INC.,
BARUCH GILAD MESICA, AMI MESIKA,
GEULA MESICA, VERED MESIKA, and JEREMY MEDDING,
Defendants,
x
MEIR MOZA, ESQ., an attorney duly admitted to practice in the Courts of
the State of New York, affirms the following, under penalties of perjury:
1. I am the attorney for Vered Mesika ("Defendant") and I am familiar
with the facts and proceedings heretofore had herein.
2. This respectfully submit this Memorandum of Law in Support of
Defendant's motion for an Order:
Why an Order should not be granted and entered by this Court pursuant to CPLR §5015
(a) 2, (a) 3, and (a) 4, vacating and setting aside (1) the Decision and Order of the Hon. Andrea
Masley, J.S.C dated March 16, 2018. In so far as the Court found good service of process,
although, the defendant Vered Mesika was not served by the plaintiff in compliance with The
Hague Convention. Which is mandatory when serving papers in one of its signatory nations.
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Defendant Vered Mesika is citizen of, and lives in Israel. Israel is a Hague Convention signatory
nation. Here, the plaintiff in lacks in personam jurisdiction over the defendant Vered Mesika due
to improper service of process by plaintiff's Israeli counsel, pursuant to The Hague Convention
it'
and CPLR 308. Due to a lack of required mailing by the plaintiff's process server upon
alleged in hand service on the defendant Vered Mesika; and, here, due to a lack of jurisdiction
and for numerous other reasons, (2) vacating the Decision and Order of the Hon. Jeffrey K. Oing
dated February 8, 2016, and entered February 9, 2016, insofar as it granted Summary Judgment
in favor of the plaintiff and against the defendant Vered Mesika; and (3) vacating the Stipulation
dated March 22, 2016, executed by Kinzler Law Group, PLLC., as purported attorney for the
defendant, Vered Mesika insofar as it consents to entry of Judgment against the defendant, Vered
Mesika; and for said reasons (4) vacating and setting aside the Money Judgement entered in this
action against the defendant, Vered Mesika and filed in the office of the County Clerk on July
14, 2016, in the amount of $2,530,757.83, all of the foregoing based upon the grounds that:
(1) CPLR §5015 (a) 2, newly-discovered evidence which, ifintroduced at the trial,
would have produced a different result and which could not have been discovered in
probably
time to move for a new trial under section 4404; and/or
(2) CPLR §5015 (a) 3. fraud, misrepresentation, or other misconduct of an adverse
party; and
(3) CPLR 5015 (a) 4 for lack of personam jurisdiction over the defendant Vered
Mesika, due to improper service of process by plaintiff's Israeli counsel, pursuant to The Hague
ConventionandCPLR308.
3. Here, for the above and below said reasons itis respectfully requested that this
honorable Court grant an Order on motion pursuant to CPLR 5015 (a) 2, (a) 3 and (a) 4, in
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favor ofthe defendant Vered Mesika and against the plaintiff, of which renders the judgments in
this case against defendant Vered Mesika vacated or an order which relieves the defendant
Vered Mesika from said judgment upon such terms as may be just.
PLEASE TAKE NOTE, that pursuant to CPLR 2217(a) no prior relief has been requested in this
case.
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TABLE OF EXHIBITS
"A"
Exhibit Court's decision on Summary Judgment, dated, February 8, 2016;
"B"
Exhibit Security Agreement, dated, April 30, 2008;
"C"
Exhibit UCC-1 financing statements;
"D"
Exhibit Guarantees;
"E"
Exhibit Letter Agreement;
"F"
Exhibit 2013 Promissory Note;
"G"
Exhibit Forbearance Agreement;
"H"
Exhibit Summons and Complaint;
"I"
Exhibit Ami Mesika interposed Answer on behalf of Vered Mesika without her knowledge or
consent;
"J"
Exhibit So Ordered Transcript of Traverse Hearing on Service of Process;
"K"
Exhibit Vered Mesika Affidavit, dated September 1, 2019;
"L"
Exhibit Vered Mesika Affidavits, dated November 2017;
Exhibit "M", Hand Writing Expert Affidavit of Dr. Mordechai Vardi, dated November 13, 2017;
"N"
Exhibit "Stipula'tion Consenting to Amount;
"O"
Exhibit Entry of Judgement;
"P" Ordered"
Exhibit Judgment So by the Court on April 6, 2016;
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Factual Background
4. It isalleged therein the Court's decision on summary judgment, that, GMD was formed
in 1993 Baruch Gilad and Ami Mesika--each of whom owns a percent interest in GMD -
by fifty
- "basic"
for the purpose of selling diamonds and jewelry at wholesale pricing.
5. It isfurther alleged that around 2000, GMD began borrowing funds
"A"
from Bank Leumi, secured by the assets of GMD; (See Exhibit Court's decision on
Summary Judgment, dated, February 8, 2016);
6. It isfurther alleged that, on or about April 30, 2008, GMD and Bank Leumi entered into a
Agreement" Agreement"
security agreement (the "Security Agreement") pursuant to which
Bank Leumi obtained a security interest in allof GMD's tangible and intangible assets (the
"B"
"Security"); (See Exhibit Security Agreement, dated, April 30, 2008).
7. It isfurther alleged that, in the Security Agreement, GMD agreed that itcould not "sell,
lease, assign, or otherwise dispose of any of the Security without the prior written consent of the
Bank"
except in the ordinary course of its regular business. The Security Agreement stated that if
Default"
certain "Events of occurred, Bank Leumi was entitled to take possession of the Security
and sell it.
8. It isfurther alleged that one such Event of Default was GMD's failure to pay any debt to
Bank Leumi when such debt became due Bank Leumi subsequently filed three UCC-1
statements -- the required continuation statements -- in connection with
financing and, thereafter,
"C"
the Security; (Exhibit UCC-1 financing statements).
9. It isfurther alleged that, on April 30, 2008, each of the Guarantors executed an
Unlimited Guaranty (the "Unlimited Guarantees"), in which they allegedly agreed to
"irrevocably and unconditionally guarantee to the Bank, payment when due ...of any and all
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liabilities of the Borrower to the Bank, in the aggregate at any one-time outstanding plus all
attorneys'
interest thereon and all fees, costs and expenses of collection incurred by the Bank in
(See" "D"
enforcing any of such liabilities; Exhibit Guarantees).
"irrevocable"
10. It isfurther alleged that, these unlimited Guarantees were and
"unconditional" Guarantors'
and waived the right to "interpose any defense ...setoff or claim,
description"
deduction or counterclaim of any nature or in any action or proceeding instituted by
Bank Leumi with respect to the unlimited Guarantees.
11. It isfurther alleged that, the Guarantors also agreed to "pay allcosts and expenses of
attorneys'
every kind for collection [of GMD's liabilities by Bank Leumi], including reasonable
fees.
12. It isfurther alleged that, in an August 17, 2012 letter agreement between GMD and Bank
Leumi (the "Letter Agreement"), Bank Leumi offered GMD a $2,500,000 line of credit,
"E"
which GMD accepted; (See Exhibit Letter Agreement).
13. It isfurther alleged that, in the Letter Agreement, GMD agreed that. itwould maintain
services"
"all traditional banking with Bank Leumi.
14. It isfurther alleged that, in addition, the Guarantors "acknowledged and
consented"
to the terms of the Letter Agreement and agreed that they would be jointly and
severally liable for the repayment of the $2,500,000.
15. It isfurther alleged that, on August 21, 2013, GMD executed a Promissory Note in the
"F"
principal amount of $2,500,000 (the "2013 Note") (See Exhibit 2013 Promissory Note).
16. It isfurther alleged that, the 2013 Note was payable on demand but, if no demand was
made, payment was due by February 3, 2014.
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17. It isfurther alleged that, the 2013 Note stated that if Bank Leumi retained an to
attorney
enforce or collect the 2013 Note due to GMD's non-payment, GMD would pay reasonable
attorney's fee in addition to the owed under the 2013 Note.
money
18. It isfurther alleged that, March 2014, GMD had opened several accounts at
by operating
various banks, including Valley National Bank and Wells Fargo.
19. It isfurther alleged that, on March 24, 2014, Bank Leumi and GMD executed an
Agreement"
agreement (the "Forbearance Agreement") which referenced two notes
promissory
between the parties, the 2013 Note and a separate note dated 3, 2014, in the amount of
February
Note"
$1,500,000 (the "February 3, .2014 and the 2013 Note referred to as the
collectively
"Notes" "G"
(Forbearance Agreemeñt); (See Exhibit Forbearañce Agreement).
20. It isfurther alleged that, in the Forbearance Agreement, GMD acknowledged that itwas
in default under the 2013 Note and February 3, 2014 Note due to:
GMD'
(i) its failure to make principal payments totaling $900,000 under the Notes by
February 3, 2014; and
(ii)itsestablishment of a bank account outside of Bank Leumi that was not subject to
Bank Leumi's security interest. As a result of these defaults, the total principal amount due as of
March 7, 2014 was $2,400,000.
21. It isfurther alleged that, Under the Forbearance Agreement, Bank Leumi agreed to
forbear from exercising itsrights and remedies under the Security Agreement, Letter Agreement,
or the Notes before December 31, 2014 in consideration of, inter alia, GMD's agreement to make
ten monthly payments set forth in the Forbearance Agreement with a final payment on December
31, 2014, and conduct all of its banking with Bank Leumi.
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22. It isfurther alleged that, in addition, the Guarantors ratified and reconfirmed the
Unlimited Guarantees, and GMD and the Guarantors waived any defenses, setoffs or
counterclaims against Bank Leumi regarding all prior notes and the Unlimited Guarantees.
23. It isfurther alleged that, Contemporaneous with the execution of the Forbearance
Agreement, GMD executed an Installment Promissory Note (the "Installment Note") which
provided that GMD was to pay Bank Leumi $2,300,000 in nine installments, with a final
"F"
payment on December 31, 2014; (See Exhibit 2013 Promissory Note).
24. It isfurther alleged that, GMD made payments under the Payment Schedule set forth in
the Forbearance Agreement and Installment Note up to June 13, 2014, but made no further
payments after that date.
"cover"
25. It isfurther alleged that defendants concede that they were unable to the
payments set forth in the Payment Schedule.
26. It isfurther alleged that, the Installment Note provided that GMD would "reimburse the
Bank for all costs and expenses incurred by itand shall pay the reasonable fees and
disbursements of counsel to the Bank in connection with enforcement of the Bank's rights
hereunder (Installment Note).
27. It isfurther alleged that, in October 2014, GMD opened a secondary operating account at
Wells Fargo Bank and closed the valley Bank account.
28. It isfurther alleged that, according to defendamts, two of Bank Leumi's officers were
informed that GMD needed these alternate operating accounts to conduct business after Bank
Leumi froze GMD's operating accounts.
29. It isfurther alleged that defendants claim that the officers of GMD acknowledged
GMD's actions, and did not demand that GMD close these accounts
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30. It isfurther alleged that, in November 2014, GM Ideal Corp. ("Ideal"), by itsprincipal,
Jeremy Medding, approached GMD with a proposal to purchase a portion of GMD's inventory
for $335,000 to be paid in five installments couünencing in December 2014.
31. It isfurther alleged that, the Ideal Offer was presented to Bank Leumi, which rejected it.
32. Itis further alleged that at some point in time before December 29, 2014, Gilad and
Medding transferred the business and assets of GMD to GM Ideal without fair consideration by,
inter alia, making Gilad a partner of GM Ideal, transferring. Possession or titleto some or all of
GMD's inventory to GM Ideal, causing GMD's principal clients to transfer their supplier
identification numbers from GMD to GM Ideal, having GM Ideal move its business
in GMD's premises, and replacing GMD's website with GM Ideal's website.
33. On January 15, 2015, Bank Leumi commenced this action asserting claims for: (i)
foreclosure of security interest; (ii)breach of contract (default); (iii) breach of contract
(exclusivity); (iv) enforcement of the Unlimited Guarantees; (v)successor liability;(vi)
fraudulent conveyance; and (vii) intentional interference with contract (against Medding); (See
"H"
Exhibit Summons and Complaint).
34. GMD, Baruch, Gilad, and Geula interposed an Answer asserting the following
affirmative defenses: (i)waiver; (ii) estoppel; (iii)unclean hands; (iv) failure to mitigate; (v)
failure to dispose of collateral in a commercially reasonable manner; (vi) misconduct by
plaintiff; (vii) violation of the Equal Credit Opportunity Act; (viii) and unconscionability.
35. Ami Mesika interposed an Answer on behalf of Vered Mesika without her knowledge or
consent asserting the following affirmative defenses: (i) unconscionability, (ii)failure to satisfy
CPLR 3016; (iii)payment in full; (iv) failure to state a claim; (v) that defendants were not proper
parties to the action; (vi) agreements were made by a corporation for which defendants were not
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responsible; (vii) laches; (viii).estoppel; (ix) unclean hands; and (x) failure to mitigate damages;
"I"
(See Exhibit Ami Mesika interposed Answer on behalf of Vered Mesika without her
knowledge or consent
36. On February 25, 2015, this Court entered a stipulated order of seizure in which GMD
agreed to turn over itsdiamond and diamond jewelry inventory (the "Diamond Security") to
Bank Leumi.
37. After taking possession of the Diamond Security, Bank Leumi retained a consultant in the
diamond jewelry industry who had audited GMD's inventory since 2009, to value the Diamond
Security and to determine the process for disposing of itin a "commercially reasonable manner.
38. After evaluating the Diamond Security, itwas estimated that Bank Leumi would be able
to recover approximately $275,000 to $310,000 for the Diamond Security.
39. At the request of Bank Leumi, a seller of distressed jewelry and diamond inventory,
examined the Diamond Security three times in April of 2015, and estimated that the Diamonds in
had a reserve price of $275,000 and would sell for between $325,000 and $360,000 if
Security
sold at a diamond and convention in Las Vegas in May 2015.
jewelry
40. After the Diamond Security available to four parties for examination and bidding,
making
the Diamond was sold to the highest bidder, Sparkling Jewelry Inc., for $318,
Security ultimately
600, in or around May 2015.
value"
41. GMD claims that the Diamond Security's "book (i.e., the original cost less any
"impairment cost") was $789,467.00.
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Enforcciscat of Guarantees
42. It isfurther alleged that and Bank Leumi seeks to hold the Guarantors liable for the
amounts owed by GMD under the Installment Note and Forbearance (Agreement.
43. The Court held that a party establishes itsentitlement to payment under a guaranty by
submitting evidence of the underlying debt, the absolute and unconditional guaranty, and the
guarantor's failure to perform thereunder.
44. The Court also held in error that, Bank Leumi satisfied itsprima facie case for summary
judgmeñt by submitting: (i) the 2013 Note and Installment Note; (ii) the Unlimited Guarantees;
and (iii) the Selove Affidavit, attesting to GMD's default.
45. Here, defendant Vered Mesika respectfully submits that summary judgment was
inappropriate and improper as to alleged Guarantor Vered Mesika because Vered Mesika was
never a shareholder, member, officer, director or employee of GM Diamonds, Inc.
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Preview
FILED: FILED : NEW NEW YORK YORK COUNTY COUNTY CLERK CLERK 11/22/2019 10/31/2019 10:23 11: 42 AM AM) INDEX INDEX NO. NO. 150474/2015 15047 4/2015 NYSCEF NYSCEF DOC. DOC. NO. NO. 533 509 RECEIVED RECEIVED NYSCEF: NYSCEF: 11/22/2019 10/31/2019 SUPREME COURT OF THE STATE NEW YORK COUNTY OF NEW YORK x BANK LEUMI USA, Plaintiff, MEMORANDUM OF LAW IN SUPPORT OF DEFENDANT'S MOTION TO VACATE JUDGMENT IAS Part 48 (Commercial Division) Justice Oing Index No.: 150474/2015 - against - GM DIAMONDS, INC., GM IDEAL, INC., BARUCH GILAD MESICA, AMI MESIKA, GEULA MESICA, VERED MESIKA, and JEREMY MEDDING, Defendants, x MEIR MOZA, ESQ., an attorney duly admitted to practice in the Courts of the State of New York, affirms the following, under penalties of perjury: 1. I am the attorney for Vered Mesika ("Defendant") and I am familiar with the facts and proceedings heretofore had herein. 2. This respectfully submit this Memorandum of Law in Support of Defendant's motion for an Order: Why an Order should not be granted and entered by this Court pursuant to CPLR §5015 (a) 2, (a) 3, and (a) 4, vacating and setting aside (1) the Decision and Order of the Hon. Andrea Masley, J.S.C dated March 16, 2018. In so far as the Court found good service of process, although, the defendant Vered Mesika was not served by the plaintiff in compliance with The Hague Convention. Which is mandatory when serving papers in one of its signatory nations. 34 11 of of 50 50 FILED: FILED : NEW NEW YORK YORK COUNTY COUNTY CLERK CLERK 11/22/2019 10/31/2019 10:23 11: 42 AM AM| INDEX INDEX NO. NO. 150474/2015 15047 4/2015 NYSCEF NYSCEF DOC. DOC. NO. NO. 533 509 RECEIVED RECEIVED NYSCEF: NYSCEF: 11/22/2019 10/31/2019 Defendant Vered Mesika is citizen of, and lives in Israel. Israel is a Hague Convention signatory nation. Here, the plaintiff in lacks in personam jurisdiction over the defendant Vered Mesika due to improper service of process by plaintiff's Israeli counsel, pursuant to The Hague Convention it' and CPLR 308. Due to a lack of required mailing by the plaintiff's process server upon alleged in hand service on the defendant Vered Mesika; and, here, due to a lack of jurisdiction and for numerous other reasons, (2) vacating the Decision and Order of the Hon. Jeffrey K. Oing dated February 8, 2016, and entered February 9, 2016, insofar as it granted Summary Judgment in favor of the plaintiff and against the defendant Vered Mesika; and (3) vacating the Stipulation dated March 22, 2016, executed by Kinzler Law Group, PLLC., as purported attorney for the defendant, Vered Mesika insofar as it consents to entry of Judgment against the defendant, Vered Mesika; and for said reasons (4) vacating and setting aside the Money Judgement entered in this action against the defendant, Vered Mesika and filed in the office of the County Clerk on July 14, 2016, in the amount of $2,530,757.83, all of the foregoing based upon the grounds that: (1) CPLR §5015 (a) 2, newly-discovered evidence which, ifintroduced at the trial, would have produced a different result and which could not have been discovered in probably time to move for a new trial under section 4404; and/or (2) CPLR §5015 (a) 3. fraud, misrepresentation, or other misconduct of an adverse party; and (3) CPLR 5015 (a) 4 for lack of personam jurisdiction over the defendant Vered Mesika, due to improper service of process by plaintiff's Israeli counsel, pursuant to The Hague ConventionandCPLR308. 3. Here, for the above and below said reasons itis respectfully requested that this honorable Court grant an Order on motion pursuant to CPLR 5015 (a) 2, (a) 3 and (a) 4, in 35 2 2 of of 50 50 FILED: FILED : NEW NEW YORK YORK COUNTY COUNTY CLERK CLERK 11/22/2019 10/31/2019 10:23 11: 42 AM AM| INDEX INDEX NO. NO. 150474/2015 15047 4/2015 NYSCEF NYSCEF DOC. DOC. NO. NO. 533 509 RECEIVED RECEIVED NYSCEF: NYSCEF: 11/22/2019 10/31/2019 favor ofthe defendant Vered Mesika and against the plaintiff, of which renders the judgments in this case against defendant Vered Mesika vacated or an order which relieves the defendant Vered Mesika from said judgment upon such terms as may be just. PLEASE TAKE NOTE, that pursuant to CPLR 2217(a) no prior relief has been requested in this case. 36 3 3 of of 50 50 FILED: FILED : NEW NEW YORK YORK COUNTY COUNTY CLERK CLERK 11/22/2019 10/31/2019 10:23 11: 42 AM AM| INDEX INDEX NO. NO. 150474/2015 15047 4/2015 NYSCEF NYSCEF DOC. DOC. NO. NO. 533 509 RECEIVED RECEIVED NYSCEF: NYSCEF: 11/22/2019 10/31/2019 TABLE OF EXHIBITS "A" Exhibit Court's decision on Summary Judgment, dated, February 8, 2016; "B" Exhibit Security Agreement, dated, April 30, 2008; "C" Exhibit UCC-1 financing statements; "D" Exhibit Guarantees; "E" Exhibit Letter Agreement; "F" Exhibit 2013 Promissory Note; "G" Exhibit Forbearance Agreement; "H" Exhibit Summons and Complaint; "I" Exhibit Ami Mesika interposed Answer on behalf of Vered Mesika without her knowledge or consent; "J" Exhibit So Ordered Transcript of Traverse Hearing on Service of Process; "K" Exhibit Vered Mesika Affidavit, dated September 1, 2019; "L" Exhibit Vered Mesika Affidavits, dated November 2017; Exhibit "M", Hand Writing Expert Affidavit of Dr. Mordechai Vardi, dated November 13, 2017; "N" Exhibit "Stipula'tion Consenting to Amount; "O" Exhibit Entry of Judgement; "P" Ordered" Exhibit Judgment So by the Court on April 6, 2016; 37 4 4 of of 50 50 FILED: FILED : NEW NEW YORK YORK COUNTY COUNTY CLERK CLERK 11/22/2019 10/31/2019 10:23 11: 42 AM AM| INDEX INDEX NO. NO. 150474/2015 15047 4/2015 NYSCEF NYSCEF DOC. DOC. NO. NO. 533 509 RECEIVED RECEIVED NYSCEF: NYSCEF: 11/22/2019 10/31/2019 Factual Background 4. It isalleged therein the Court's decision on summary judgment, that, GMD was formed in 1993 Baruch Gilad and Ami Mesika--each of whom owns a percent interest in GMD - by fifty - "basic" for the purpose of selling diamonds and jewelry at wholesale pricing. 5. It isfurther alleged that around 2000, GMD began borrowing funds "A" from Bank Leumi, secured by the assets of GMD; (See Exhibit Court's decision on Summary Judgment, dated, February 8, 2016); 6. It isfurther alleged that, on or about April 30, 2008, GMD and Bank Leumi entered into a Agreement" Agreement" security agreement (the "Security Agreement") pursuant to which Bank Leumi obtained a security interest in allof GMD's tangible and intangible assets (the "B" "Security"); (See Exhibit Security Agreement, dated, April 30, 2008). 7. It isfurther alleged that, in the Security Agreement, GMD agreed that itcould not "sell, lease, assign, or otherwise dispose of any of the Security without the prior written consent of the Bank" except in the ordinary course of its regular business. The Security Agreement stated that if Default" certain "Events of occurred, Bank Leumi was entitled to take possession of the Security and sell it. 8. It isfurther alleged that one such Event of Default was GMD's failure to pay any debt to Bank Leumi when such debt became due Bank Leumi subsequently filed three UCC-1 statements -- the required continuation statements -- in connection with financing and, thereafter, "C" the Security; (Exhibit UCC-1 financing statements). 9. It isfurther alleged that, on April 30, 2008, each of the Guarantors executed an Unlimited Guaranty (the "Unlimited Guarantees"), in which they allegedly agreed to "irrevocably and unconditionally guarantee to the Bank, payment when due ...of any and all 38 5 5 of of 50 50 FILED: FILED : NEW NEW YORK YORK COUNTY COUNTY CLERK CLERK 11/22/2019 10/31/2019 10:23 11: 42 AM AM| INDEX INDEX NO. NO. 150474/2015 15047 4 /2015 NYSCEF NYSCEF DOC. DOC. NO. NO. 533 509 RECEIVED RECEIVED NYSCEF: NYSCEF: 11/22/2019 10/31/2019 liabilities of the Borrower to the Bank, in the aggregate at any one-time outstanding plus all attorneys' interest thereon and all fees, costs and expenses of collection incurred by the Bank in (See" "D" enforcing any of such liabilities; Exhibit Guarantees). "irrevocable" 10. It isfurther alleged that, these unlimited Guarantees were and "unconditional" Guarantors' and waived the right to "interpose any defense ...setoff or claim, description" deduction or counterclaim of any nature or in any action or proceeding instituted by Bank Leumi with respect to the unlimited Guarantees. 11. It isfurther alleged that, the Guarantors also agreed to "pay allcosts and expenses of attorneys' every kind for collection [of GMD's liabilities by Bank Leumi], including reasonable fees. 12. It isfurther alleged that, in an August 17, 2012 letter agreement between GMD and Bank Leumi (the "Letter Agreement"), Bank Leumi offered GMD a $2,500,000 line of credit, "E" which GMD accepted; (See Exhibit Letter Agreement). 13. It isfurther alleged that, in the Letter Agreement, GMD agreed that. itwould maintain services" "all traditional banking with Bank Leumi. 14. It isfurther alleged that, in addition, the Guarantors "acknowledged and consented" to the terms of the Letter Agreement and agreed that they would be jointly and severally liable for the repayment of the $2,500,000. 15. It isfurther alleged that, on August 21, 2013, GMD executed a Promissory Note in the "F" principal amount of $2,500,000 (the "2013 Note") (See Exhibit 2013 Promissory Note). 16. It isfurther alleged that, the 2013 Note was payable on demand but, if no demand was made, payment was due by February 3, 2014. 39 66 of of 50 50 FILED: FILED : NEW NEW YORK YORK COUNTY COUNTY CLERK CLERK 11/22/2019 10 /31/2019 10:23 11: 42 AM AM| INDEX INDEX NO. NO. 150474/2015 15047 4/2015 NYSCEF NYSCEF DOC. DOC. NO. NO. 533 509 RECEIVED RECEIVED NYSCEF: NYSCEF: 11/22/2019 10/31/2019 17. It isfurther alleged that, the 2013 Note stated that if Bank Leumi retained an to attorney enforce or collect the 2013 Note due to GMD's non-payment, GMD would pay reasonable attorney's fee in addition to the owed under the 2013 Note. money 18. It isfurther alleged that, March 2014, GMD had opened several accounts at by operating various banks, including Valley National Bank and Wells Fargo. 19. It isfurther alleged that, on March 24, 2014, Bank Leumi and GMD executed an Agreement" agreement (the "Forbearance Agreement") which referenced two notes promissory between the parties, the 2013 Note and a separate note dated 3, 2014, in the amount of February Note" $1,500,000 (the "February 3, .2014 and the 2013 Note referred to as the collectively "Notes" "G" (Forbearance Agreemeñt); (See Exhibit Forbearañce Agreement). 20. It isfurther alleged that, in the Forbearance Agreement, GMD acknowledged that itwas in default under the 2013 Note and February 3, 2014 Note due to: GMD' (i) its failure to make principal payments totaling $900,000 under the Notes by February 3, 2014; and (ii)itsestablishment of a bank account outside of Bank Leumi that was not subject to Bank Leumi's security interest. As a result of these defaults, the total principal amount due as of March 7, 2014 was $2,400,000. 21. It isfurther alleged that, Under the Forbearance Agreement, Bank Leumi agreed to forbear from exercising itsrights and remedies under the Security Agreement, Letter Agreement, or the Notes before December 31, 2014 in consideration of, inter alia, GMD's agreement to make ten monthly payments set forth in the Forbearance Agreement with a final payment on December 31, 2014, and conduct all of its banking with Bank Leumi. 40 7 7 of of 50 50 FILED: FILED : NEW NEW YORK YORK COUNTY COUNTY CLERK CLERK 11/22/2019 10/31/2019 10:23 11: 42 AM AM| INDEX INDEX NO. NO. 150474/2015 15047 4 /2015 NYSCEF NYSCEF DOC. DOC. NO. NO. 533 509 RECEIVED RECEIVED NYSCEF: NYSCEF: 11/22/2019 10/31/2019 22. It isfurther alleged that, in addition, the Guarantors ratified and reconfirmed the Unlimited Guarantees, and GMD and the Guarantors waived any defenses, setoffs or counterclaims against Bank Leumi regarding all prior notes and the Unlimited Guarantees. 23. It isfurther alleged that, Contemporaneous with the execution of the Forbearance Agreement, GMD executed an Installment Promissory Note (the "Installment Note") which provided that GMD was to pay Bank Leumi $2,300,000 in nine installments, with a final "F" payment on December 31, 2014; (See Exhibit 2013 Promissory Note). 24. It isfurther alleged that, GMD made payments under the Payment Schedule set forth in the Forbearance Agreement and Installment Note up to June 13, 2014, but made no further payments after that date. "cover" 25. It isfurther alleged that defendants concede that they were unable to the payments set forth in the Payment Schedule. 26. It isfurther alleged that, the Installment Note provided that GMD would "reimburse the Bank for all costs and expenses incurred by itand shall pay the reasonable fees and disbursements of counsel to the Bank in connection with enforcement of the Bank's rights hereunder (Installment Note). 27. It isfurther alleged that, in October 2014, GMD opened a secondary operating account at Wells Fargo Bank and closed the valley Bank account. 28. It isfurther alleged that, according to defendamts, two of Bank Leumi's officers were informed that GMD needed these alternate operating accounts to conduct business after Bank Leumi froze GMD's operating accounts. 29. It isfurther alleged that defendants claim that the officers of GMD acknowledged GMD's actions, and did not demand that GMD close these accounts 41 88 of of 50 50 FILED: FILED : NEW NEW YORK YORK COUNTY COUNTY CLERK CLERK 11/22/2019 10/31/2019 10:23 11: 42 AM AM| INDEX INDEX NO. NO. 150474/2015 15047 4 /2015 NYSCEF NYSCEF DOC. DOC. NO. NO. 533 509 RECEIVED RECEIVED NYSCEF: NYSCEF: 11/22/2019 10/31/2019 30. It isfurther alleged that, in November 2014, GM Ideal Corp. ("Ideal"), by itsprincipal, Jeremy Medding, approached GMD with a proposal to purchase a portion of GMD's inventory for $335,000 to be paid in five installments couünencing in December 2014. 31. It isfurther alleged that, the Ideal Offer was presented to Bank Leumi, which rejected it. 32. Itis further alleged that at some point in time before December 29, 2014, Gilad and Medding transferred the business and assets of GMD to GM Ideal without fair consideration by, inter alia, making Gilad a partner of GM Ideal, transferring. Possession or titleto some or all of GMD's inventory to GM Ideal, causing GMD's principal clients to transfer their supplier identification numbers from GMD to GM Ideal, having GM Ideal move its business in GMD's premises, and replacing GMD's website with GM Ideal's website. 33. On January 15, 2015, Bank Leumi commenced this action asserting claims for: (i) foreclosure of security interest; (ii)breach of contract (default); (iii) breach of contract (exclusivity); (iv) enforcement of the Unlimited Guarantees; (v)successor liability;(vi) fraudulent conveyance; and (vii) intentional interference with contract (against Medding); (See "H" Exhibit Summons and Complaint). 34. GMD, Baruch, Gilad, and Geula interposed an Answer asserting the following affirmative defenses: (i)waiver; (ii) estoppel; (iii)unclean hands; (iv) failure to mitigate; (v) failure to dispose of collateral in a commercially reasonable manner; (vi) misconduct by plaintiff; (vii) violation of the Equal Credit Opportunity Act; (viii) and unconscionability. 35. Ami Mesika interposed an Answer on behalf of Vered Mesika without her knowledge or consent asserting the following affirmative defenses: (i) unconscionability, (ii)failure to satisfy CPLR 3016; (iii)payment in full; (iv) failure to state a claim; (v) that defendants were not proper parties to the action; (vi) agreements were made by a corporation for which defendants were not 42 99 of of 50 50 FILED: FILED : NEW NEW YORK YORK COUNTY COUNTY CLERK CLERK 11/22/2019 10 /31/2019 10:23 11: 42 AM AM| INDEX INDEX NO. NO. 150474/2015 15047 4/2015 NYSCEF NYSCEF DOC. DOC. NO. NO. 533 509 RECEIVED RECEIVED NYSCEF: NYSCEF: 11/22/2019 10/31/2019 responsible; (vii) laches; (viii).estoppel; (ix) unclean hands; and (x) failure to mitigate damages; "I" (See Exhibit Ami Mesika interposed Answer on behalf of Vered Mesika without her knowledge or consent 36. On February 25, 2015, this Court entered a stipulated order of seizure in which GMD agreed to turn over itsdiamond and diamond jewelry inventory (the "Diamond Security") to Bank Leumi. 37. After taking possession of the Diamond Security, Bank Leumi retained a consultant in the diamond jewelry industry who had audited GMD's inventory since 2009, to value the Diamond Security and to determine the process for disposing of itin a "commercially reasonable manner. 38. After evaluating the Diamond Security, itwas estimated that Bank Leumi would be able to recover approximately $275,000 to $310,000 for the Diamond Security. 39. At the request of Bank Leumi, a seller of distressed jewelry and diamond inventory, examined the Diamond Security three times in April of 2015, and estimated that the Diamonds in had a reserve price of $275,000 and would sell for between $325,000 and $360,000 if Security sold at a diamond and convention in Las Vegas in May 2015. jewelry 40. After the Diamond Security available to four parties for examination and bidding, making the Diamond was sold to the highest bidder, Sparkling Jewelry Inc., for $318, Security ultimately 600, in or around May 2015. value" 41. GMD claims that the Diamond Security's "book (i.e., the original cost less any "impairment cost") was $789,467.00. 43 10 10 of of 50 50 FILED: FILED : NEW NEW YORK YORK COUNTY COUNTY CLERK CLERK 11/22/2019 10/31/2019 10:23 11: 42 AM AM| INDEX INDEX NO. NO. 150474/2015 15047 4/2015 NYSCEF NYSCEF DOC. DOC. NO. NO. 533 509 RECEIVED RECEIVED NYSCEF: NYSCEF: 11/22/2019 10/31/2019 Enforcciscat of Guarantees 42. It isfurther alleged that and Bank Leumi seeks to hold the Guarantors liable for the amounts owed by GMD under the Installment Note and Forbearance (Agreement. 43. The Court held that a party establishes itsentitlement to payment under a guaranty by submitting evidence of the underlying debt, the absolute and unconditional guaranty, and the guarantor's failure to perform thereunder. 44. The Court also held in error that, Bank Leumi satisfied itsprima facie case for summary judgmeñt by submitting: (i) the 2013 Note and Installment Note; (ii) the Unlimited Guarantees; and (iii) the Selove Affidavit, attesting to GMD's default. 45. Here, defendant Vered Mesika respectfully submits that summary judgment was inappropriate and improper as to alleged Guarantor Vered Mesika because Vered Mesika was never a shareholder, member, officer, director or employee of GM Diamonds, Inc. 46