TD Bank, N.A. v Morcal Corp.

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TD Bank, N.A. v Morcal Corp. 2012 NY Slip Op 31319(U) May 3, 2012 Sup Ct, Nassau County Docket Number: 21825/10 Judge: Stephen A. Bucaria Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] SHORT FORM ORDER SUPREME COURT - STATE OF NEW YORK Present: HON. STEPHEN A. BUCARIA Justice TRIAL/lAS , PART NASSAU COUNTY TD BANK , N. INEX No. 21825/10 Plaintiff MOTION DATE: March 22 , 2012 Motion Sequence # 003 -againstMORCAL CORP. , ATLANTIC FEATHER AND FOAM , INC. , IAN RUBINSTEIN , 420 DOUGHTY BL YD. , CORP. , DOUGHTY PAR INC. , NEW YORK STATE DEPARTMENT OF TAXTION AND FINANCE , FDIC AS RECEIVER FOR LIBERTY POINTE BANK AEC ELECTRICAL SERVICES CORP. MAAMSUPPL Y CO. , INC. , and " JOHN DOE NOS. 1- 10" being fictitious and unknown to plaintiff, the persons or parties intended being the tenants , occupants, persons or corporation , if any, having or claiming to have an interest in or lien upon the described premises Defendants. MORCAL CORP. , ATLANTIC FEATHER AND FOAM , INC. and IAN RUBINSTEIN Counterclaim Plaintiffs -againstTD BANK , N... , TOM SZCZEPANIAK , BRIAN 1. TERRY and KEN V. JONES Counterclaim Defendants. [* 2] TD BANK, N. A. v MORCAL CORP. , et al Index no. 21825/10 The following papers read on this motion: Notice of Motion....................................... X Affirmation in Opposition......................... X Rep ly Affirmation...................................... X Memorandum of Law................................. X Motion by plaintiffTD Ban for summary judgment against defendants Morcal Corp. Ian Rubinstein , Atlantic Feather and Foam , Inc. , and New York State Department of Finance is eranted to the extent of liabilty on the note and mortgage. Motion by plaintiff for .:ranted . Motion by .:ranted summary judgment dismissing the Morcal defendants ' counterclaims is plaintiff for a default judgment against defendantAEC Electrical Services Corp is Motion by plaintiffto dismiss as against defendants Robert Consulting Group, Ltd. , Rock- ItCargo USA , LLC , Pacific Transit Services , Inc. , U. C. Overseas , Inc. , SpeedMark Transportation , Inc. , 420 Doughty Boulevard Corp. , and Doughty Park , Inc. , without prejudice to rights plaintiff may have against those defendants pursuant to leases covering t:ranted . Motion by plaintiff for the appointment of a referee to compute the t:ranted to the extent that plaintiff may submit an order in compliance with Par 36 of the Rules of the Chief Judge. Motion by plaintiff to amend the caption to delete the names of " John Doe eranted to the extent indicated below. the premises is amount due on the mortgage is " parties is This is an action to foreclose a mortgage. Plaintiff TD Bank holds a mortgage on a parcel of real propert located in Inwood. The mortgage secures a note dated September 29 2008 in the amount of $6 080 000 issued by defendant Morcal Corp. Pursuant to the terms of the note , Morcal was required to pay monthly principal and interest at a variable rate of LffOR plus a margin. The note required the maker to enter an " interest rate hedging agreement " or " SWAP " with the Bank , with a notional amount equal to the amount outstanding on the mortgage. The "net economic effect" of the hedging agreement was to fix the cost to the maker of the interest rate under the note. The note was due September 1 2013 and had an acceleration provision if the maker defaulted in a monthly principal and interest payment. The note was guaranteed by defendant Ian Rubinstein and also by defendant Atlantic Feather and Foam , Inc. Atlantic Feather is controlled by Rubinstein and is also a tenant in the premises. On September 10 , 2009 , the parties entered into a modification agreement , whereby the the interest rate was adjusted , so that the margin was 2 % up until September 10 , 2009 and 2. 01 % thereafter. . Marcal defaulted on the note by failng to pay the monthly principal [* 3] TD BANK, N. A. v MORCAL CORP., et al Index no. 21825/10 and interest due February 1 , 2010. This action for foreclosure was commenced on November 23 2010. Defendants New York State Department of Finance , Marjam Supply Co. , and LibertPointe Bank appeared and waived notice of all proceedings , except discontinuance ofthe action , the referee s report of the sale , and proceedings to obtain surplus monies. Defendants Morcal , Atlantic Feather, and Rubinstein assert three counterclaims which purport to assert a claim for fraud. Defendants assert that the principal and interest payments were automatically debited each month from Morcal' s account with TD Ban. Defendants argue that because the amount due pursuant to the SWAP agreement was difficult to calculate , Morcal was somehow fraudulently induced to enter into the loan. Plaintiff is moving for summary judgment against defendants Morcal , Rubinstein Atlantic Feather , and New York State Department of Finance. Plaintiff is also moving for summary judgment dismissing the Morcal defendants ' counterclaims. Plaintiff also requests a default judgment against defendant AEC Electrical Services Corp. Additionally, plaintiff moves to dismiss against defendants Robert Consulting Group, Ltd. , Rock- It- Cargo USA LLC, Pacific Transit Services , Inc. , U. C. Overseas , Inc. , SpeedMark Transportation , Inc. 420 Doughty Boulevard Corp. , and Doughty Park, Inc., without prejudice to rights plaintiff may have against those defendants pursuant to leases which have been assigned to plaintiff as mortgagee. Finally, plaintiff moves for the appointment of a referee to compute the amount due on the mortgage and to amend the caption to delete the names of "John Doe parties , who may have an interest in the premises as tenants. On a motion for summary judgment , it is the proponent' s burden to make a prima facie showing of entitlement to judgment as a matter of law , tendering sufficient evidence to demonstrate the absence of any material issues of fact JMD Holdinf Corp. v. Confress 4 NY3d 373 , 384 (2005)). Failure to make such a prima facie showing requires denial of the motion , regardless of the sufficiency of the opposing papers(Id). However , if this showing is made , the burden shifts to the part opposing the summary judgment motion to produce evidentiary proof in admissible form sufficient to establish the Financial Corp. existence of material issues of fact which require a trial (Alvarez v. Prospect Hospital NY2d 320 324 (1986)). and Plaintiffhas established prima facie entitlementto judgment by offering the mortgage Morcal' s default. The burden shifts to defendants to show a triable issue of fact as to [* 4] TD BANK, N. A. v MORCAL CORP., et al Index no. 21825/10 why a judgment of foreclosure should not be entered. In an interest rate SWAP agreement , the paries agree to swap cash flows over a stated period of time on a hypothetical principal amount known as the " notional amount." One part makes periodic interest payments to the other part at a fixed rate , and the counterpar makes periodic payments to the other par at a variable rate on the same notional amount (BKBPropertiesvSuntrustBank 2011 US AppLEXIS 14350 (6th Cir 2011)). SWAP' s are often used by sophisticated investors as a form of hedge transaction. Rubinstein asserts that he did not know the amount due each month pursuant to the SWAP. However, the purpose of the SWAP was to convert the variable interest rate into a fixed rate obligation of the borrower. If Rubinstein s affidavit were sufficient to avoid summary judgment , summary foreclosure would never be available in a mortgage-related SWAP transaction. motion for summary judgment against defendants Morcal Rubinstein , Atlantic Feather , and New York State Deparent of t:ranted to the extent of liabilty on the note and mortgage. Plaintiff s motion for summar judgment dismissing the Morcal defendants eranted Accordingly, plaintiffs Finance is ' counterclaims is Corp. is Plaintiffs motion for a default judgment against defendant AEC Electrical Services t:ranted . Plaintiffs motion for the appointment of a referee to compute the amount due on the mortgage is eranted to the extent that plaintiff may submit an order in compliance with Part 36 of the Rules of the Chief Judge. Motion by plaintiff to dismiss as against defendants Robert Consulting Group, Ltd. Rock- It- Cargo USA , LLC , Pacific Transit Services, Inc. , U. C. Overseas , Inc. , SpeedMark Transportation , Inc. , 420 Doughty Boulevard Corp. , and Doughty Park , Inc. , without prejudice to rights plaintiff may have against those defendants pursuant to leases covering eranted . Plaintiffs motion to amend the caption to delete the names of "John Doe eranted to the extent that all subsequent papers in this action shall bear the names of the proper persons and entities who remain parties to the action. the premises is " parties is So ordered. ENTERED Dated MAY 0 3 2012 MAY 07 2012 NASSAU COUNTY COUNTY ClERK' OFflCf

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