Arbor-Myrtle Beach PE LLC v. Frydman
| Decision Date | 20 January 2021 |
| Docket Number | Index No.: 657133/2019 |
| Citation | 2021 NY Slip Op 30223 (U) |
| Parties | ARBOR-MYRTLE BEACH PE LLC, Plaintiff, v. JACOB FRYDMAN, Defendant. |
| Court | New York Supreme Court |
DECISION AND ORDER
Under motion sequence 001, plaintiff moves for summary judgment in lieu of complaint. For the following reasons, the motion shall be granted.
On May 21, 2014, plaintiff entered into an LLC Agreement with United Partnership (United), in which defendant Jacob Frydman is a principal, owner, and, for the purposes of this Agreement, the authorized signatory (Pl. Br. at 2 NYSCEF Doc. No. 14]). Under the terms of the Agreement, plaintiff Arbor-Myrtle Beach PE LLC, as an equity provider made a $2,100,000 contribution in United for United to invest in, own, and develop certain property in Myrtle Beach, South Carolina (id.). Plaintiff also received an unconditional guaranty of its investment by Frydman (see id.; Caulfield Aff. ¶ 8, Ex. 1 [NYSCEF Doc. Nos. 3, 4]). Pursuant to the Agreement, United was obligated to pay plaintiff $16,000 per month plus interest at the rate of 15% (see Caulfield Aff. ¶ 9, Ex. 1). If a "Change of Control Event" occurred, the interest rate would increase to 24%, plaintiff would be entitled to accelerate payment of the entire outstanding balance, and receive a 5% late fee (see id. ¶¶ 10-11). Under the terms of the Guaranty, Frydman agreed to "absolutely, irrevocably and unconditionally" guarantee to plaintiff the payment of the Guaranteed Obligations and waiving "any and all defenses to the performance" of his duties (see Pl. Br. at 3; Caulfield Aff. ¶ 13, Ex. 2 [NYSCEF Doc. No. 5]).
On April 6, 2018, United failed to make the required payment and defaulted on every required payment thereafter, thus constituting a Change in Control Event (see Pl. Br. at 4-5). Plaintiff claims it is entitled to accelerate payment of the $880,000 outstanding balance on its PE Contribution, $349,946.67 in interest, and $26,088.00 in late fees for a total of $1,256,034.67 excluding attorneys' fees.
CPLR § 3213 provides for accelerated judgment where the instrument sued upon is for the payment of money only and where the right to payment can be ascertained from the face of the document without regard to extrinsic evidence, "other than simple proof of nonpayment or a similar de minimis deviation from the face of the document" (Weissman v Sinorm Deli, Inc., 88 NY2d 437, 444 [1996]; Interman Indus. Products Ltd. v R.S.M. Electron Power, 37 NY2d 151, 155 [1975]). An action on a guaranty is an action for payment of money only (see Cooperatieve Centrale Raiffesisen-Boerenleenbank, B.A., "Rabobank Intl.," N.Y. Branch v Navarro, 25 NY3d 485, 492 [2015]) ("Cooperative Centrale"). The usual standards for summary judgment apply to CPLR § 3213 motions. The instrument and evidence of failure to make payments in accordance with its terms constitute a prima facie case for summary judgment (see Weissman, 88 NY2d at 444; Matas v Alpargatas S.A.I.C., 274 AD2d 327, 328 [1st Dept 2000]).
Plaintiff begins by reciting CPLR § 3213 which provides for summary judgment in lieu of complaint "when an action is based upon an instrument for the payment of money only". Plaintiff argues that, to obtain summary judgment here, it need only present proof of the instrument and defendant's failure to make payment according to its terms (see Silver v Silver, 17 AD3d 281, 281 [1st Dept 2005]; see Blumenstein v Waspit Grp., Inc., 140 AD3d 620, 620 [1st Dept 2016]; Bhatara v Futterman, 122 AD3d 509, 510 [1st Dept 2014]; DDS Partners, LLC v Celenza, 6 AD3d 347, 348 [1st Dept 2004]; SCP, Inc. v Bermudatel Ltd., 224 AD2d 214, 216 [1st Dept 1996]). The Guaranty here qualifies as an instrument for payment of money only and can be used as the subject of a summary judgment motion in lieu of complaint (see Gard Entm't, Inc. v Country in N.Y., LLC, 96 AD3d 683, 683 [1st Dept 2012]; Bank of Am., N.A. v Solow, 59 AD3d 304, 304-05 [1st Dept 2009]; Jason Trading Corp. v Lason Trading Corp., 303 AD2d 180, 180 [1st Dept 2003]; First Interstate Credit Alliance, Inc. v Sokol, 179 AD2d 583, 583 [1st Dept 1992]; Manufacturers Hanover Tr. Co. v Green, 95 AD2d 737, 737 [1st Dept 1983]; Hess Corp. v Magnone, 27 Misc3d 1220(A), 1220A [Sup Ct New York County 2010]). Plaintiff also argues that it has established a prima facie case to a right of judgment by presenting proof of the Guaranty and testifying as to defendant's failure to make the required payments (see Caulfield Aff. ¶¶ 3, 14-15, 38-39; see also Boland v Indah Kiat Financial (IV) Mauritius Ltd., 291 AD2d 342, 342-43 [1st Dept 2002];Banesto Banking Corp. v Teitler, 172 AD2d 469, 469 [1st Dept 1991]). Defendant unconditionally guaranteed the payment obligations of United to plaintiff under the LLC Agreement and defendant failed to honor those terms as to the amounts owed (see Caulfield Aff. ¶¶ 3, 14-15). In view of the unexcused default on the Guaranty, summary judgment must be granted for the total amount due and owing plus attorneys' fees (see e.g. Beer Sheva Realty Corp. v Ponjnitayapanu, 214 AD2d 352, 352 [1st Dept 1995]; Council Commerce Corp v Paschalides, 92 AD2d 579, 579 [2d Dept 1983]). Frydman is also required to pay plaintiff, upon demand, "all costs and expenses (including court costs and reasonable attorney's fees) incurred by plaintiff in connection in the enforcement hereof or the preservation of plaintiff's rights hereunder" (Caulfield Aff. Ex. 2 § 1.10; see also id. § 1.2). Plaintiff adds that courts routinely award attorneys' fees and costs to plaintiffs seeking summary judgment pursuant to CPLR 3213 (see DDS Partners, 6 AD3d 347, 349; Tars Uluslararasi Dis Ticaret Turizm ve Sanayi Ltd., Sirketi v Leonard, 26 AD3d 298, 299 [1st Dept 2006]; Desiderio v Devani, 24 AD3d 495, 497 [2d Dept 2005]). Consequently, the court should issue a judgment on the principal and interest owing, and separately direct an inquest be held to determine the amount of costs and expenses to be awarded to plaintiff (see Pl. Br. at 9-10).
In opposition, defendant argues that CPLR 3213 is unavailable as the First Department has rejected the use of summary judgment in lieu of complaint pursuant to CPLR 3213 to recover alleged debts under an operating agreement between the parties (see Def. Br. at 2 [NYSCEF Doc. No. 20]; see also e.g. Anstalt v Zoghby, 170 AD2d 241 [1st Dept 1991]; Grossman v Clarey, 133 AD2d 443 [2d Dept 1987]; Hirsch v Rifkin, 166 AD2d 293 [1st Dept 1990]; Tonkonogy v Seidenberg, 63 AD2d 587, 588 [1st Dept 1978]). Defendant further argues that courts have denied CPLR 3213 summary judgment when the documents upon which the action is based raise triable issues of fact as to liability or damages (see, e.g. City Nat'l Bank v Morelli Ratner, P.C., 129 AD3d 425 [1st Dept 2015]; Eugenia VI Venture Holdings, Ltd. v AMC Inv'rs, LLC, 35 AD3d 157, 159 [1st Dept 2006]; Finkelstein v IABM Bakery Sys., Inc., 91 AD2d 922, 923 [1st Dept 1983]; Times Square Assocs. v Grayson, 333 NYS2d 155, 156 [1st Dept 1972]). A complaint and discovery in this matter are vital, in contrast to typical summary judgment in lieu of complaint actions in which a formal complaint is superfluous (see HSBC Bank USA v IPO, LLC, 290 AD2d 246 [1st Dept 2002]; Interman Indus. Prods., Ltd. v R.S.M. Electron Power, Inc., 37 NY2d 151, 154 [1975]).
Defendant also argues that accelerated relief is improper here because such actions must be based on an instrument for the payment of money only or a judgment and the transaction giving rise to defendant's guaranty involved the purchase of real property with mortgage financing (see Def. Br. at 4-5; Weissman, 88 NY2d at 443-44). Because defendant's Guaranty is not with respect to a promissory note or written instrument for money, and because of the complexity of the transaction, the court must deny plaintiff's motion (see Def. Br. at 5). The First Department has rejected motions under CPLR 3213 where the movant, like plaintiff here, relies on proof outside of the instrument to make a prima facie case (see e.g. Bonds Fin., Inc. v Kestrel Techs., LLC, 48 AD3d 230 [1st Dept 2008]; Hirsch, 166 AD2d at 293). The Guaranty only guaranteed payment of the "Guaranteed Obligations," and plaintiff cannot prove that the Guaranteed Obligations are not satisfied without referring to the LLC Agreement as well as "five exhibits and two schedules" (Def. Br. at 6). The terms included in the definition of Guaranteed Obligations requires an analysis of rights and obligations under the Operating Agreement beyond the scope of a CPLR 3213 motion (see id.). Courts have denied CPLR 3213 motions in cases similar to this (see e.g. JFURTI, LLC v First Capital Real Estate Advisors, LP, 165 AD3d 419, 421 [1st Dept 2018] []; see also Montecalvo v Cat E., LLC, 128 AD3d 783 [2d Dept 2015] []). Defendant argues that plaintiff's suit is not based on an instrument for money only but, instead, on detailed contractual redemption and other provisions in the Operating Agreement, "Definitive Documents" incorporated by reference in the Operating Agreement, and a settlement agreement plaintiff made with United (see Def. Br. at 7-8). Because plaintiff's claim appears to have been based on a settlement with United as to which defendant was neither a party nor even aware, additional factual questions have been raised necessitating denial of the motion and the inclusion of additional parties (see id. at 8-9; see also PDL Biopharma, I...
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