Phx. Grantor Trust v. Exclusive Hospitality, LLC

• Decision Date: 08 May 2019
• Docket Number: Index No. 710949/15,2016–07435
• Citation: 101 N.Y.S.3d 175,172 A.D.3d 923
• Parties: PHOENIX GRANTOR TRUST, Respondent, v. EXCLUSIVE HOSPITALITY, LLC, et al., Appellants, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

172 A.D.3d 923

101 N.Y.S.3d 175

PHOENIX GRANTOR TRUST, Respondent,

v.EXCLUSIVE HOSPITALITY, LLC, et al., Appellants, et al., Defendants.

2016–07435

Index No. 710949/15

Supreme Court, Appellate Division, Second Department, New York.

Argued - January 25, 2019

May 8, 2019

Cordova & Schwartzman, LLP, Garden City, N.Y. (Jonathan B. Schwartzman and Debra L. Cordova of counsel), for appellants.

Windels Marx Lane & Mittendorf, LLP, New York, N.Y. (Mark A. Slama of counsel), for respondent.

WILLIAM F. MASTRO, J.P., SHERI S. ROMAN, SYLVIA O. HINDS–RADIX, JOSEPH J. MALTESE, JJ.

DECISION & ORDER

In an action, inter alia, to foreclose a mortgage, the defendants Exclusive Hospitality, LLC, Hiren Shah, Chandresh M. Patel, and Kaushek Patel appeal from stated portions of an order of the Supreme Court, Queens County (Allan B. Weiss, J.), entered June 22, 2016. The order, inter alia, denied those branches of the motion of those defendants which were pursuant to CPLR 3211(a)(1) and (3) to dismiss the complaint insofar as asserted against them.

ORDERED that the order is affirmed insofar as appealed from, with costs.

In this action, the plaintiff seeks, inter alia, to foreclose a commercial mortgage encumbering real property in Woodside, Queens, improved with a hotel operated by the defendant Exclusive Hospitality, LLC (hereinafter Exclusive), under a franchise agreement. In addition to Exclusive, the defendants include the members and managers of Exclusive, who are also guarantors or limited guarantors of the subject mortgage loan. On May 20, 2008, Exclusive, by its managers, closed on the purchase of the property and obtained a commercial loan from the National Republic Bank of Chicago (hereinafter NRBC) in the amount of $ 10,500,000 to finance the purchase and development of the property.

On October 21, 2015, the plaintiff, as successor in interest to NRBC, commenced this foreclosure action, alleging, inter alia, that Exclusive had defaulted under the loan documents by failing to make payment of the balance of the mortgage debt on the alleged maturity date of October 18, 2015, and by failing to pay real estate taxes and assessments, and that Exclusive's guarantors and limited guarantors were in default for failing to make those payments upon Exclusive's failure to do so.

In lieu of answering, Exclusive and the defendants Hiren Shah, Chandresh M. Patel, and Kaushek Patel (hereinafter collectively the appellants) moved, inter alia, pursuant to CPLR 3211(a)(1) and (3) to dismiss the complaint insofar as asserted against them, and to discharge any amounts due under the note and guaranties. The appellants asserted, inter alia, that the note relied upon by the plaintiff was the product of a fraudulent alteration of the genuine note, which shortened the repayment period from 10 years to 5 years, and that Exclusive was not in default. In addition, the appellants asserted that the plaintiff lacked standing to foreclose. Determining that the documents submitted by the appellants had failed to conclusively establish that the note sued upon was fraudulent or that the plaintiff lacked standing, the Supreme Court denied the motion.

"To succeed on a motion to dismiss based upon documentary evidence pursuant to CPLR 3211(a)(1), the documentary evidence must utterly refute the plaintiff's factual allegations, conclusively establishing a defense as a matter of law" ( Gould v. Decolator, 121 A.D.3d 845, 847, 994 N.Y.S.2d 368 ; see Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314, 326, 746 N.Y.S.2d 858, 774 N.E.2d 1190 ). "[T]o qualify as ‘documentary evidence,’ it must be ‘unambiguous, authentic, and undeniable’ " ( Attias v. Costiera, 120 A.D.3d 1281, 1282, 993 N.Y.S.2d 59, quoting Granada Condominium III Assn. v. Palomino, 78 A.D.3d 996, 996, 913 N.Y.S.2d 668 ; see Cives Corp. v. George A. Fuller Co., Inc., 97 A.D.3d 713, 714, 948 N.Y.S.2d 658 ; see also Nero v. Fiore, 165 A.D.3d 823, 826, 86 N.Y.S.3d 96 ; Feldshteyn v. Brighton Beach 2012, LLC, 153 A.D.3d 670, 670–671, 61 N.Y.S.3d 60 ; Parekh v. Cain, 96 A.D.3d 812, 815, 948 N.Y.S.2d 72 ; Flushing Sav. Bank, FSB v. Siunykalimi, 94 A.D.3d 807, 808, 941 N.Y.S.2d 719 ; Fontanetta v. John Doe 1, 73 A.D.3d 78, 86, 898 N.Y.S.2d 569 ). Here, in support of their motion, the appellants submitted affidavits, emails, and letters, none of which are considered "documentary evidence within the intendment of CPLR 3211(a)(1)" ( Nero v. Fiore, 165 A.D.3d at 826, 86 N.Y.S.3d 96 [internal quotation marks omitted]; see Feldshteyn v. Brighton Beach 2012, LLC, 153 A.D.3d at 671, 61 N.Y.S.3d 60 ; 25–01 Newkirk Ave., LLC v. Everest Natl. Ins. Co., 127 A.D.3d 850, 851, 7 N.Y.S.3d 325 ; Attias v. Costiera, 120 A.D.3d at 1283, 993 N.Y.S.2d 59 ; Rodolico v. Rubin & Licatesi, P.C., 114 A.D.3d 923, 925, 981 N.Y.S.2d 144 ). While "documents reflecting out-of-court transactions such as mortgages, deeds, contracts, and any other papers, the contents of which are essentially undeniable, would qualify as documentary evidence in the proper case" ( Fontanetta v. John Doe 1, 73 A.D.3d at 84–85, 898 N.Y.S.2d 569 [internal quotation marks omitted]; see Cives Corp. v. George A. Fuller Co., Inc., 97 A.D.3d at 714, 948 N.Y.S.2d 658 ), the note submitted by the appellants in support of their motion, which provided for a 10–year repayment term, did not "utterly refute the plaintiff's factual allegations" ( Gould v. Decolator, 121 A.D.3d at 847, 994 N.Y.S.2d 368 ; see Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d at 326, 746 N.Y.S.2d 858, 774 N.E.2d 1190 ), since the plaintiff alleged that the note initially had a repayment term of 10 years before the parties agreed to revise the repayment term to 5 years. Similarly, NRBC's records from 2014, which revealed, inter alia, NRBC's escrow deposits from Exclusive only for 2014, did not utterly refute the plaintiff's allegations of Exclusive's failure to pay past due taxes for other years. Accordingly, we agree with the denial of that branch of the appellants' motion which was pursuant to CPLR 3211(a)(1) to dismiss the complaint insofar as assorted against them.

Since the appellants failed to conclusively establish that the note sued upon was fraudulent, they similarly were not entitled to the discharge of their obligation to repay the loan...