Confidential Lending, LLC v. Project E. 19, LLC

• Decision Date: 21 October 2016
• Docket Number: No. 501265/14.,501265/14.
• Parties: CONFIDENTIAL LENDING, LLC, Plaintiff, v. PROJECT EAST 19, LLC, 774 Properties, LLC; Jack Schwartz; The Board of Managers of the 776 East 8th Street Condominium and John Does 1–100, the latter names being fictitious but intending to designate tenants and persons in possession or, persons having an interest in a portion of the premises described in the complaint herein, Defendants.
• Court: New York Supreme Court

46 N.Y.S.3d 474 (Table)

CONFIDENTIAL LENDING, LLC, Plaintiff,
v.
PROJECT EAST 19, LLC, 774 Properties, LLC; Jack Schwartz; The Board of Managers of the 776 East 8th Street Condominium and John Does 1–100, the latter names being fictitious but intending to designate tenants and persons in possession or, persons having an interest in a portion of the premises described in the complaint herein, Defendants.

No. 501265/14.

Supreme Court, Kings County, New York.

Oct. 21, 2016.

Kurzman, Eisenberg, Corbin & Lever, LLP, John C. Re, White Plains, Attorney for Plaintiff.

Project East 19, LLC, 774 Properties LLC and Jack Schwartz, Kalmon Glovin, Esq., Brooklyn, Attorney for Defendants.

FRANCOIS A. RIVERA, J.

Recitation in accordance with CPLR 2219(a) of the papers considered on the motion of the plaintiff Confidential Lending LLC (hereinafter Confidential), filed on March 9, 2015, under motion sequence number one for an order (1) pursuant to CPLR 3212 granting summary judgment against defendant Project East 19 LLC (hereinafter Project East), 774 Properties LLC(hereinafter 774 Properties), and Jack Schwartz (hereinafter Schwartz); (2) striking the affirmative defenses contained in the answer of defendants Project East, 774 Properties and Jack Schwartz; and (3) appointing a referee to compute the amount due plaintiff for principal, interest, and other charges due under the note and mortgage herein. The motion is jointly opposed by all defendants.

-Notice of Motion

Affirmation of Peter Weiss in Support

Affirmation of Jay Kimmel, Esq.

Affirmation of counsel John C. Re, Esq.

-Exhibits A—Q

-Memorandum of Law

Affirmation in Opposition

Exhibit A—J

-Reply Affirmation

Exhibit A—J

BACKGROUND

On February 12, 2014, plaintiff commenced the instant commercial mortgage foreclosure action by filing a summons and complaint with the Kings County Clerk's office. On April 18, 2014, plaintiff filed a notice of pendency with the Kings County Clerk's Office. The action also seeks a money judgment solely as against Schwartz based on a guarantee of the note.

The complaint alleges in pertinent part, that on October 25, 2007, defendants Project East and 774 Properties executed and delivered a note (the subject note) in favor of Kimmel "as nominee" in the amount of $1,100,000.00. On the same date, Project East and 774 Properties secured the subject note by executing and delivering a mortgage in favor of Kimmel "as nominee" on six parcels of certain real property. The six parcels included the following properties: (1) 1277 East 19th Street, Brooklyn, New York, Block 6739 Lot 16 which is owned by Project East 19; (2) 772 East 8th Street, Units 1 and 3, Brooklyn, New York Block, 6495 Lots 1001 and 1003, which were owned by 774 Properties; and (3) 774 East 8th Street, Units 1, 2, and 3, Brooklyn, New York, designated as Block 6495, Lots 1101, 1102 and 1103, which were owned by 774 Properties¹ . On October 25, 2007, Schwartz executed a guarantee agreement in favor of Kimmel, "as nominee" in further security for the amounts due under the note.

Through a series of transactions several of the properties were unencumbered by the mortgage. Currently, there are only three properties securing the note. The property known as 772 East 8th Street, Unit 1, Brooklyn, New York designated as Block 6495 Lot 1001 and the property known as 774 East 8th Street, Units 1 and 2, Brooklyn, New York designated as Block 6495, Lots 1101 and 1102. The borrowers defaulted in their obligations under the note and mortgage by failing to make the interest payment due under the loan documents on April 25, 2013 and payments thereafter. As a result of the default the entire debt due was accelerated.

By verified joint answer dated February 12, 2014, the defendants Project East, 774 Properties and Schwartz answered the complaint. By amended answer dated April 10, 2014, the defendants amended their joint answer. The amended answer contains eleven affirmative defenses incorrectly denominated as eight.

The first affirmative defense is lack of personal jurisdiction. The second affirmative defense is lack of standing. The third affirmative defense is failure to give the defendants statutory notices required by law. The fourth affirmative defense is entitled wrongful declaration of default. There are three affirmative defenses labeled as the fifth affirmative defense. The first-fifth affirmative defense is entitled improper assessment of interest. The second-fifth affirmative defense is entitled improper assessment of late charges. The third-fifth affirmative defense is that the defendant is entitled to a de-acceleration of the mortgage. The sixth affirmative defense is entitled "failure to exercise option for acceleration." The seventh affirmative defense is the failure to comply with RPAPL 1305/1306. The eighth affirmative defense is that the assignment was not authorized or effective. A note of issue has not been filed.

LAW AND APPLICATION

It is well established that summary judgment may be granted only when it is clear that no triable issue of fact exists (Alvarez v. Prospect Hospital, 68 N.Y.2d 320 [1986] ). The burden is upon the moving party to make a prima facie showing that he or she is entitled to summary judgment as a matter of law by presenting evidence in admissible form demonstrating the absence of material facts (Guiffirda v. Citibank, 100 N.Y.2d 72 [2003] ).

A failure to make that showing requires the denial of the summary judgment motion, regardless of the adequacy of the opposing papers (Ayotte v. Gervasio, 81 N.Y.2d 1062 [1993] ). If a prima facie showing has been made, the burden shifts to the opposing party to produce evidentiary proof sufficient to establish the existence of material issues of fact (Alvarez v. Prospect Hospital, supra, 68 N.Y.2d at 324, 508 N.Y.S.2d 923, 501 N.E.2d 572 ).

"Pursuant to CPLR 3212(b) a court will grant a motion for summary judgment upon a determination that the movant's papers justify holding, as a matter of law, "that there is no defense to the cause of action or that the cause of action or defense has no merit." Further, all of the evidence must be viewed in the light most favorable to the opponent of the motion (Marine Midland Bank v. Dino & Artie's Automatic Transmission Co., 168 A.D.2d 610 [1990] )" (People ex rel. Spitzer v. Grasso, 50 A.D.3d 535, 544, 858 N.Y.S.2d 23 [1st Dept 2008] ).

Summary Judgment as Against Project East and 774 Properties

Confidential seeks an order granting summary judgment in their favor and against Project East and 774 Properties and appointing a referee to compute pursuant to CPLR 3212 and RPAPL 1321.

RPAPL 1321 provides in pertinent part as follows:

If the defendant fails to answer within the time allowed or the right of the plaintiff is admitted by the answer, upon motion of the plaintiff, the court shall ascertain and determine the amount due, or direct a referee to compute the amount due to the plaintiff and to such of the defendants as are prior incumbrancers of the mortgaged premises, and to examine and report whether the mortgaged premises can be sold in parcels and, if the whole amount secured by the mortgage has not become due, to report the amount thereafter to become due.

When seeking an order of reference to determine the amount that is due on an encumbered property, a plaintiff must show its entitlement to a judgment. That entitlement may be shown by demonstrating defendant's default in answering the complaint, or by the plaintiff showing entitlement to summary judgment or by showing that the defendant's answer admits plaintiff's right to a judgment (see RPAPL 1321 ; 1–2 Bruce J. Bergman, Bergman on New York Mortgage Foreclosures, § 2.01[4][k] [note: online edition] ). In order to establish prima facie entitlement to judgment as a matter of law in a foreclosure action, a plaintiff must submit the mortgage and unpaid note, along with evidence of the default (see Bank of N .Y. Mellon v. Aquino, 131 A.D.3d 1186, 16 N.Y.S.3d 770 [2nd Dept 2016] ; Washington Mut. Bank v. Schenk, 112 A.D.3d 615, 975 N.Y.S.2d 902 [2nd Dept 2013] ).

"Where, as here, a plaintiff's standing to commence a foreclosure action is placed in issue by the defendant, it is incumbent upon the plaintiff to prove its standing to be entitled to relief" (Bank of New York Mellon v. Visconti, 136 AD3d 950 [2nd Dept 2016] citing Citimortgage, Inc. v. Stosel, 89 A.D.3d 887, 888, 934 N.Y.S.2d 182 [2nd Dept 2011] ). A plaintiff establishes its standing in a mortgage foreclosure...