Three Point Capital, LLC v Myden

[*1] Three Point Capital, LLC v Myden 2011 NY Slip Op 51742(U) Decided on September 21, 2011 Supreme Court, New York County Fried, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on September 21, 2011
Supreme Court, New York County

Three Point Capital, LLC, Plaintiff,

against

Mark Myden, ERIC MITCHELL, SILVER SCREEN PICTURES, LLC, ROYAL STREET ENTERTAINMENT, LLC and PROSPECT PARK PRODUCTIONS, LLC, Defendants.



650055/11

 

FOR PLAINTIFF

Law Offices of Bruce Levinson

747 Third Avenue, 4th Floor

New York, New York 10017-2803

(212) 750-9898

FOR DEFENDANTS

Mitchell, Royal Street and

Prospect Park

Silvia Serpe, Esq.

41 Madison Avenue, 41st Floor

New York, New York 10010

(212) 213-8053

FOR DEFENDANT Myden

Tagliaferro & LoPresti, LLP

45 Broadway, Suite 2200

New York, New York 10006

(212) 734-4029

Bernard J. Fried, J.

Motion sequence numbers 001 and 002 are consolidated for disposition.

In motion sequence number 001, plaintiff moves, pursuant to CPLR 3213, for summary judgment in lieu of complaint. [*2]

In motion sequence number 002, defendants move, pursuant to CPLR 3212 or 3213, for summary judgment dismissing the complaint or, in the alternative, for a judgment denying plaintiff's motion for summary judgment in lieu of complaint, pursuant to CPLR 3211 (a) (1) and (7).

At oral argument on these motions, held on July 13, 2011, plaintiff's counsel represented to the court that it had settled its dispute with defendant Mark Myden (Myden), but that it was still proceeding as against the remaining defendants.

Plaintiff, a Delaware limited liability company, entered into an agreement with Prospect Park Productions LLC (Prospect Park) whereby plaintiff agreed to loan Prospect Park funds up to $1 million, said funds to be used to pay production costs of a theatrical motion picture. Motion, Ex. A. Pursuant to the terms of the agreement, the loan was secured by a promissory note in the principal amount of 113.9% of each advance made under the agreement. Motion, Ex. B. This note was executed by defendant Eric Mitchell (Mitchell) on behalf of Prospect Park. Id.

The agreement was also secured by an irrevocable guaranty, dated December 4, 2009, pursuant to which defendants Silver Screen Pictures, LLC (Silver Screen),[FN1] Royal Street Entertainment, LLC (Royal Street), Mitchell and Myden, agreed to act as sureties, jointly and severally, by guarantying Prospect Park's performance. Motion, Ex. C.

Section 7.1 of the agreement states:

"Borrower [Prospect Park] shall take all actions

necessary in order for the Picture to qualify for the

Tax Credits in an amount not less than $673,100 including,

without limitation, causing all principal photography of

the Picture to be shot in the State of Michigan. The

Borrower will file a tax return with the State of Michigan

promptly after Borrower's February 28, 2010 tax year end,

but in any event no later than April 1, 2010. Until such

time as Lender [plaintiff] has received an amount equal

to the Indebtedness, in any tax return which Borrower

files with the State of Michigan, Borrower shall specify

that all monies payable to Borrower in connection with

any such tax return (including, without limitation, the

Tax Credits) shall be paid to the Deposit Account."

As part of the security for the loan, Prospect Park granted plaintiff a security interest in the picture and a first priority security in the tax credits that it would receive from the State of Michigan. Section 4.1 of the agreement. In addition, Prospect Park agreed to pay any and all sums incurred by plaintiff in connection with its enforcement of the provisions of the note. Section 7.6 of the agreement.

Section 9 of the agreement specifies what constitutes a default under the agreement. Section 9.1 (d) of the agreement states that a default would be considered:

"Borrower's or any Surety's failure to perform or observe,

in a due and timely manner, any of the other (i.e., other than those subject to the immediately preceding subparagraphs (a), (b) and (c) material terms, [*3]provisions,

covenants, conditions, agreements or obligations contained

herein, in the Loan Documents or in any other agreement,

contract, indenture, document or instrument executed or

to be executed, by Borrower or any Surely in connection

with this Agreement or pursuant hereto and which would

have a material adverse effect on the ability or

obligation of (I) Borrower to perform its obligations

under this Agreement and under the other Loan Documents,

or (ii) any Surety to perform its obligations under the

Guaranty and under the other Loan Documents; ..."

The agreement also states that, in the event of any uncured default, any amounts due shall bear interest at a rate equal to 24% per year, or, should that rate exceed the maximum interest rate permitted by law, the interest rate shall be reduced to the maximum amount permitted by law, until the default has been cured. Section 2.7 of the agreement. In addition, the agreement states that, should the note not be paid in full, Prospect Park agrees to pay all costs of collection, including reasonable attorney's fees. Section 3 of the agreement.

Section 9.4 of the agreement states that, should a default occur, Prospect Park appoints plaintiff as its attorney-in-fact with full powers.

Plaintiff alleges that, between December 8, 2009 and January 28, 2010, it advanced Prospect Park the sum of $614,960.00, memorialized in contemporaneously executed borrowing certificates and schedules of advancements. Motion, Ex. D. However, plaintiff states that Prospect Park failed to file for the tax credits with the State of Michigan on or before April 1, 2010, and that it served Prospect Park with a notice of default with a five-day cure period, but that Prospect Park failed to cure the default.

Plaintiff contends that, in order to protect its rights under the agreement, it undertook to make the necessary filings with the State of Michigan, and sent to the State of Michigan the sum of $45,413.58 for withholding taxes that Prospect Park failed to pay, as well as the relevant portions of the 2009 Michigan Business Tax Return, executed on behalf of Prospect Park. Motion, Ex. F.

Plaintiff also maintains that it incurred an additional $64,699.35 in costs curing Prospect Park's default, which, in addition to the sums directly advanced to Prospect Park, renders Prospect Park indebted to plaintiff in the sum of $774,132.00. Moreover, plaintiff claims that it is entitled to the agreement's default interest rate of 24% per annum from the date of the default.

Plaintiff says that it was able to recover $740,564.10 in tax credits from the State of Michigan as a result of its cure efforts, thereby reducing the amount owed to it from Prospect Park to the principal sum of $33,567.90, plus accrued interest. Plaintiff has provided its calculations of such interest in an exhibit attached to its motion. Motion, Ex. G.

Plaintiff maintains that the note and guaranty represent an instrument for the payment of money only, entitling it to relief pursuant to CPLR 3213. Further, pursuant to section 10.3 of the agreement, Prospect Park expressly waived any offset or counterclaim, except for compulsory counterclaims. Lastly, plaintiff argues that the agreement's rate of interest does not violate the usury laws because New York law (which the agreement states is the governing law) provides for an interest rate exceeding 16% for loans of over $250,000.00, and the agreement also provides that, [*4]should the interest rate be deemed usurious, it is to be reduced to the maximum interest rate permitted by law.

In opposition to plaintiff's motion, and in support of their own motion, moving defendants state that, pursuant to section 2.1 of the agreement, plaintiff was required to advance to Prospect Park a sum equal to 88% of the estimated tax credit that would be available to Prospect Park. According to moving defendants, the amount of the estimated tax credit it would receive from Michigan, as of January 25, 2010, was $773,000, making plaintiff's required advance equal to $680,240, which is $180,440 more than plaintiff actually provided. Defendants' motion, Ex. 3. Hence, according to moving defendants' calculations, plaintiff is in default of the agreement and is, therefore, not entitled to summary judgment.

Moving defendants also aver that Prospect Park could not file for the tax credit until all invoices were paid, a fact of which Prospect Park allegedly informed plaintiff. Further, moving defendants claim that plaintiff's interests were not materially affected by Prospect Park's failure to file the returns in a timely manner, because the agreement granted plaintiff attorney-in-fact status and plaintiff did file the returns on behalf of Prospect Park. Therefore, argue moving defendants, there was no default under the agreement.

Moving defendants also contend that the guaranties are only required to compensate plaintiff for any shortfall, but that there is no shortfall because plaintiff received more than it was owed, including interest, according to their calculations. Defendants' motion, Ex, 5. It is moving defendants' position that plaintiff is attempting to inflate the amount owed by including unnecessary costs and expenses in its calculations.

Lastly, moving defendants claim that plaintiff is not entitled to judgment because the agreement provides for criminal usury.

In opposition to moving defendants' motion, plaintiff claims that moving defendants' motion must be denied because they failed to comply with Rule 19-a of the Commercial Division in not filing a Statement of Material Facts. Further, plaintiff asserts that moving defendants have failed to provide any evidence, except their own calculations, that would bar granting plaintiff summary judgment.

Basically, in reply to moving defendants, plaintiff says that there is merely a contradiction in the calculations of the parties, which does not preclude granting plaintiff the relief it seeks. Further, plaintiff states that it is entitled to summary judgment as against Silver Screen on default.

CPLR 3213 states:

"When an action is based upon an instrument for the

payment of money only or upon any judgment, the

plaintiff may serve with the summons a notice of

motion for summary judgment and the supporting

papers in lieu of a complaint."

"The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case [internal quotation marks and citation omitted]." Santiago v Filstein, 35 AD3d 184, 185-186 (1st Dept 2006). The burden then shifts to the motion's opponent to "present evidentiary facts in admissible form sufficient to raise a genuine, triable issue of fact." Mazurek v Metropolitan Museum of Art, 27 AD3d 227, 228 (1st Dept 2006); see Zuckerman v City of New York, [*5]49 NY2d 557, 562 (1980). If there is any doubt as to the existence of a triable fact, the motion for summary judgment must be denied. See Rotuba Extruders, Inc. v Ceppos, 46 NY2d 223, 231 (1978).

CPLR 3211 (a), "Motion to dismiss cause of action,"states that:

"[a] party may move for judgment dismissing one or more causes of action asserted against him on the ground that:

(1) a defense is founded upon documentary evidence; or

***

(7) the pleading fails to state a cause of action ... ."

As stated in Ladenburg Thalmann & Co., Inc. v Tim's Amusements, Inc. (275 AD2d 243, 246 [1st Dept 2000]),

"the court's task is to determine only whether

the facts as alleged, accepting them as true

and according plaintiff every possible favorable

inference, fit within any cognizable legal theory

(Leon v Martinez, 84 NY2d 83, 87-88 [1994]).

Dismissal pursuant to CPLR 3211 (a) (1) is

warranted only if the documentary evidence

submitted conclusively establishes a defense to

the asserted claims as a matter of law (id., at 88)."

To defeat a pre-answer motion to dismiss pursuant to CPLR 3211, the opposing party need only assert facts of an evidentiary nature which fit within anycognizable legal theory. Bonnie & Co. Fashions, Inc. v Bankers Trust Co., 262 AD2d 188 (1st Dept 1999). Further, if any question of fact exists with respect to the meaning and intent of the contract in question, based on the documentary evidence supplied to the motion court, a dismissal pursuant to CPLR3211 is precluded. Khayyam v Doyle, 231 AD2d 475 (1st Dept 1996).

Plaintiff's motion is granted with respect to liability only, and defendants' motion is denied.

At the outset, it is evident that the loan agreement and note are proper instruments for consideration for summary judgment, pursuant to CPLR 3213, since plaintiff is only seeking to recover the principal amount still outstanding, plus interest, plus attorney's fees, as provided for in the agreement. Stevens v Phlo Corp., 288 AD2d 56 (1st Dept 2001); see also Juste v Niewdach, 26 AD3d 416 (2d Dept 2006).

The moving defendants' three arguments in opposition to plaintiff's motion and in support of their own motion are unpersuasive.

First, the amount of interest appearing in the agreement in the case of Prospect Park's default, 24%, does not, as claimed by moving defendants, constitute criminal usury. Only interest rates in excess of 25% are considered to be criminal usury, pursuant to Penal Law § 190.40. Nikezic v Balaz, 184 AD2d 684 (2d Dept 1992).

Second, plaintiff's filing the tax returns as Prospect Park's attorney-in-fact, pursuant to section 9.4 of the agreement, does not mean that Prospect Park did not fail to fulfill an obligation under the agreement or that plaintiff was not materially injured thereby. Plaintiff could only act as Prospect Park's attorney-in-fact once a breach had occurred, and its actions were designed to mitigate [*6]damages, not to evidence that the injuries caused by Prospect Park's breach were not material.

Third, moving defendants' claim that plaintiff breached the agreement by not advancing 88% of the estimated tax credit is nothing more than a red herring. Moving defendants have provided no evidence that, prior to the institution of this action, they ever considered plaintiff to be in breach, nor have the provided any evidence that a demand was made on plaintiff to cure this presumptive breach. Hence, this argument is unavailing to raise a triable issue of fact, either to defeat plaintiff's motion or to support moving defendants' motion. See Blair v Otto Brehm, Inc., 54 AD3d 702 (2d Dept 2008).

The only issue presented by the parties is the accuracy of the calculations provided by each side, which will be referred to a Special Referee to hear and report on the amount, if any, that remains due and owing to plaintiff.

Accordingly, it is hereby

ORDERED that plaintiff's motion (motion sequence number 001) asserted as against Mark Myden is withdrawn, pursuant to plaintiff's request; and it is further

ORDERED that plaintiff's motion for summary judgment in lieu of complaint (motion sequence number 001) is granted with respect to liability only as against Eric Mitchell, Royal Street Entertainment, LLC and Prospect Park Productions, LLC; and it is further

ORDERED that plaintiff is granted a default judgment as against Silver Screen Pictures, LLC; and it is further

ORDERED that defendants' motion (motion sequence number 002) is denied; and it is further

ORDERED that the issue of the amount of damages, if any, owing to plaintiff is referred to a Special Referee to hear and report; and it is further

ORDERED that counsel for plaintiff shall, within 30 days from the date of this order, serve a copy of this order with notice of entry, together with a completed Information Sheet,[FN2] upon the Special Referee Clerk in the Motion Support Office (Room 119M), who is directed to place this matter on the calendar of the Special Referee's Part for the earliest convenient date.

DATED: _______________

ENTER:

_____________________________

J.S.C. Footnotes

Footnote 1:At the time of this writing, Silver Screen is not represented by counsel.

Footnote 2: Copies are available in Rm, 119M at 60 Centre Street and on the Court's website at www.nycourts.gov/supctmanh under the "References' section of the "Courthouse Procedures" link.