56 Willoughby A LLC v. Zhang

• Decision Date: 16 August 2021
• Docket Number: 20-CV-3973-CBA-SJB
• Parties: 56 WILLOUGHBY A LLC and 56 WILLOUGHBY B LLC, Plaintiffs, v. JACK ZHANG, Defendant.
• Court: U.S. District Court — Eastern District of New York

56 WILLOUGHBY A LLC and 56 WILLOUGHBY B LLC, Plaintiffs, v. JACK ZHANG, Defendant.

No. 20-CV-3973-CBA-SJB

United States District Court, E.D. New York

August 16, 2021

REPORT & RECOMMENDATION

SANKET J. BULSARA, United States Magistrate Judge.

Plaintiffs 56 Willoughby A LLC and 56 Willoughby B LLC (together “56 Willoughby” or “Plaintiffs”) commenced this action on August 26, 2020 against Defendant Jack Zhang (“Zhang”), alleging breach of a real estate guaranty agreement, and seeking $113, 000 in damages together with prejudgment interest, attorney's fees and costs, and post-judgment interest.^[1] Zhang failed to answer or otherwise respond to the Complaint. On October 23, 2020, the Clerk of the Court entered a default against Zhang.^[2] On January 8, 2021, Plaintiffs moved for a default judgment.^[3] The Honorable Carol Bagley Amon referred the motion to the undersigned on January 8, 2021, for a report and recommendation.^[4]

For the reasons outlined below, the Court respectfully recommends that the motion for default judgment be granted in part and damages, attorney's fees and costs, and prejudgment interest be awarded as detailed herein.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Plaintiff 56 Willoughby A LLC is a New York limited liability company with its principal place of business in Brooklyn, New York. (Compl. ¶ 3). Its members are citizens of New York. (Id.). Plaintiff 56 Willoughby B LLC is a New York limited liability company, with its principal place of business in Brooklyn, New York. (Id. ¶ 4). Its members are citizens of New York. (Id.). Defendant Zhang is an individual and citizen of Arizona who resides at 752 East Torrey Pines Place, Chandler, Arizona 85249. (Id. ¶ 5). Zhang is the president and a member of Paw Property Inc. (“Paw Property”), a New Jersey corporation. (Id. ¶¶ 9-10). Zhang is also the sole and managing member of Willoughby DTB LLC (“Willoughby DTB”), a New York limited liability company. (Id. ¶¶ 16, 18). Willoughby DTB is not a defendant in the case.

On August 1, 2012, Plaintiffs and Paw Property entered into a ten-year, triple net lease^[5] agreement for Paw Property to rent a commercial property at 56 Willoughby Street, Brooklyn, New York 11201. (Id. ¶¶ 9-10; Decl. in Supp of Mot. dated Jan. 7, 2021 (“Golowa Decl.”), Dkt No. 13, ¶ 7; Lease dated as of Aug. 1, 2012 (“Lease”), attached as Ex. A to Golowa Decl., Dkt. 13). Pursuant to the Lease, Paw Property agreed to make monthly rent payments to Plaintiffs before the first day of each month. (Compl. ¶ 12; Lease § 1.6). And as “additional rent, ” Paw Property also agreed to pay any real estate taxes within 20 days of receipt of either a tax bill or notice from Plaintiffs, (Lease § 4.5), as well as “water charges and/or sewer rents” within 15 days of receipt of a bill from Plaintiffs, (id. § 4.6). In the event of default, Paw Property agreed to pay, in addition to all rent and additional rent owed, liquidated damages, interest, and “reasonable counsel fees[ ] involved in collecting or endeavoring to collect” unpaid rent or additional rent. (Id. §§ 12.1-.2, 12.4-.5).

On July 13, 2012, Zhang executed an “absolute and unconditional” personal guaranty of Paw Property's obligations under the Lease. (Compl. ¶ 13; Guarantee dated July 13, 2012 (“Original Guaranty”), attached as Ex. B to Golowa Decl., Dkt. 13, § 3). Under the Original Guaranty, Zhang agreed to pay to Plaintiffs “all rent and additional rent that has accrued or may accrue under the terms of the Lease.” (Original Guaranty § 1). Additionally, Zhang waived

all notice of non-payment, non-performance, non-observance or proof, or notice, or demand, whereby to charge [Zhang] therefore, all of which [he] expressly waives and expressly agrees that the validity of this guarantee and the obligation of [Zhang] hereto shall in no ways be terminated, effected or impaired by reason of the assertion by [Plaintiffs] against [Paw Property] of any of the rights of remedies reserved to [Plaintiffs] pursuant to the performance of the lease.

(Id. § 4). The parties agreed that the Original Guaranty would “remain and continue in full force and effect as to any renewal, modification, option period or extension of the lease.” (Id. § 5). They also agreed that the Original Guaranty would terminate if 56 Willoughby executed a replacement guaranty with a “new replacement guarantor of similar financial stability to the then existing guarantor.” (Id. § 8) (emphasis omitted).

Several years later, on April 18, 2016, Paw Property assigned the Lease to Willoughby DTB. (Compl. ¶ 16; Golowa Decl. ¶ 14; Assignment and Assumption of Lease dated Apr. 18, 2016 (“Assignment”), attached as Ex. A to Suppl. Decl. in Further Supp. of Mot. dated July 7, 2021 (“Suppl. Golowa Decl.”), Dkt. No. 17). Pursuant to the Assignment, Willoughby DTB assumed Paw Property's Lease obligations. (Assignment at 1 (“[Willoughby DTB] agrees to pay the rent promptly and perform all of the terms of the Lease as of the date of this Assignment. [Willoughby DTB] assumes full responsibility for the Lease as if [it] signed the Lease originally as Tenant.”); accord Compl. ¶ 17; Golowa Decl. ¶ 15). At the same time, Zhang executed a second personal guaranty of Willoughby DTB's obligations. (Compl. ¶ 18; Guaranty dated April 18, 2016 (“Replacement Guaranty”), attached as Ex. C to Golowa Decl., Dkt. No. 13). Pursuant to this second guaranty, Zhang

unconditionally and irrevocably guarant[eed] that all payments required to be made under the Lease will be promptly paid when due, together with any and all reasonable legal costs and expenses incurred or paid by [Plaintiffs] as a result of any default in any of the payments required to be made under the Lease.

(Replacement Guaranty at 1). Zhang also waived to the extent allowed by law:

(1) presentment and demand for any payment or performance due under the Lease; (2) notice of the occurrence of any default in any payments or performance due under the lease; (3) protest of the non-payment of any payment or of the non-performance of any performance due under the Lease; (4) notice of presentment, demand and protest; (5) notice of acceptance of the terms and provisions hereof . . .; (6) notice of any indulgence or extensions or consents granted to the Tenant; (7) any requirements of diligence or promptness . . . in the enforcement of . . . rights under the Lease or the Assignment; and (8) any and all notices of every kind and description which may otherwise be required.

(Id. at 2).

Willoughby DTB defaulted on its obligations in 2019. (Compl. ¶ 26; Golowa Decl. ¶ 24). Specifically, Willoughby DTB failed to pay rent in September, October, November, and December 2019; quarterly water and sewer charges billed on January 16, 2019, May 1, 2019, August 1, 2019, and November 1, 2019; and its share of the real estate taxes for 2019. (Golowa Decl. ¶ 27). Plaintiffs notified Willoughby DTB of these defaults. (Compl. ¶ 27; Golowa Decl. ¶ 25). However, Willoughby DTB did not satisfy its outstanding debts. (Compl. ¶ 27; Golowa Decl. ¶ 25).

Plaintiffs commenced an action in Kings County Civil Court (the “Civil Court Action”) to recover the money owed by Willoughby DTB under the Lease. (See Golowa Decl. ¶ 26). On February 10, 2020, Judge Rupert V. Barry found Willoughby DTB liable for $113, 000. (Decision/Order dated Jan. 3, 2020 (“Civil Ct. Order”), attached as Ex. D to Golowa Decl., Dkt. No. 13).^[6] Neither Willoughby DTB nor Zhang paid any of this amount. (Compl. ¶ 40).

On August 26, 2020, Plaintiffs commenced this action against Zhang. (Compl.). Plaintiffs allege Zhang breached his personal guaranty of the Lease by failing to pay the amounts owed under the Lease, and they assert a single claim for breach of guaranty. (Id. ¶¶ 31-44).

Zhang was served with a summons and the Complaint on September 1, 2020 via personal service at his home on an adult authorized to accept service. (Proof of Service dated Sept. 2, 2020 (“Summons Returned Executed”), Dkt. No. 6). Zhang failed to respond, and at Plaintiffs' request, (Req. for Certificate of Default dated Oct. 19, 2020, Dkt. No. 7), the Clerk of Court issued a certificate of default as to Zhang, (Certificate of Default). On January 8, 2021, Plaintiffs moved for default judgment on the single count in the Complaint. (Mot.). The motion and its supporting papers were mailed to Zhang at 752 East Torrey Pines Place, Chandler, Arizona 85249, his last known residential address. (Aff. of Service by Mail dated January 8, 2021 (“Default J. Service”), Dkt. No. 15). On June 8, 2021, the Court requested, (Order dated June 8, 2021), and Plaintiffs provided, (Suppl. Decl. in Further Supp. of Pls.' Req. for Att'ys' Fees on Mot. dated June 22, 2021 (“Bonfield Suppl. Decl.”), Dkt. No. 16), their counsel's contemporaneous billing records and additional support for the requested fee award. This supplemental submission was mailed to Zhang at his last known residential address. (Aff. of Service by Mail dated June 22, 2021 (“Suppl. Default J. Service”), attached to Bonfield Suppl. Decl., Dkt. No. 16). And on July 7, 2021, the Court requested, (Order dated July 7, 2021), and Plaintiffs provided, (Suppl. Golowa Decl.), a copy of the agreement assigning the Lease from Paw Property to Willoughby DTB, (Assignment). This second supplemental submission was also mailed to Zhang at his last known residential address. (Aff. of Service by Mail dated July 7, 2021 (“Second Suppl. Default J. Service”), attached to Suppl. Golowa Decl., Dkt. No. 17).

Plaintiffs seek judgment against Zhang in the amount of $131, 570.10 which consists of: (1) $113, 000, the amount of the judgment entered in the Civil Court Action; (2) $17, 967.60 in attorney's fees;^[7] (3) $602.50 in costs; and (4) prejudgment interest. (Proposed Default J.;...