JDM Capital Funding, LLC v Horseblock Rd. Props., LLC

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JDM Capital Funding, LLC v Horseblock Rd. Props., LLC 2011 NY Slip Op 32471(U) August 16, 2011 Sup Ct, Suffolk County Docket Number: 10-15351 Judge: Joseph Farneti 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] INDEX NO. SUPREME COURT I.A.S. PART 37 - 10-15351 STATE OF NEW YORK SUFFOLK COUNTY PRESENT: Hoii. MOTION DATE 8-30- I O MOTION DATE 9-8-10 ADJ. DATE 6-2-1 1 Mot. Seq. # 001 - MD # 002 - MG JOSEPH FARNETI Actiiis Justice Supreme Court X LuLLkh- & D-Y-KIvlAN,i i P Attorney for Plaintiff 100 Quentin Roosevelt Boulevard Garden City, New York 11530-4850 JDM CAPITAL FUNDIYG, LLC, Plain tiff, - against - HORSEBLOCK ROAD PROPERTIES, LLC, JPEC LAND DEVELOPMENT, LLC, C.A.S.S. HOLDINGS, L,LC DEBRA FERNANDEZ EUGENIO FERNANDEJZ RICHARD WEINSTEIN NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE THE PHEN GROUP, LIX, EUGENE FERNANDEZ, AS TRUSTEE OF THE EUGENE FERNANDEZ REVOCABLE LIVING TRUST U/ND 1 1/18/04 OLD FIELD PROPERTIES, LLC, LAKE AVENUE PROPERTIES, LLC, GLOBAL HOME 11, LLC, HALF HOLLOW ESTA.TES, LLC, THALER AND GERTLER LLP JOHN DOE NO. 1 TO JOHN DOE NO. XXX, inclusive, the last thirty names being fictitious and unknown to plaintiff, the persons or parties intended being the tenants, occupants, persons or corporations, if any, having or claiming an interest i n or lien upon the premises described in the coinpl aint, Defendants. BECKER & POLIAKOFF, LLP Attorney for Defendants Horseblock Road Properties, LLC, JPEC Land Development, LLC, C.A.S.S. Holdings, LLC, Debra Fernandez, Eugeiiio Femandez, Richard Weinstein, The Phen Group, LLC, Eugene Femandez, As Trustee of the Eugene Femandez Revocable Living Trust UIIVD 1 1 /l8/04, Old Field Properties, LLC, Lake Avenue Properties LLC, Global Home 11, LLC, Half Hollow Estates, LLC 45 Broadway New York, New York 10006 THALER & GERTLER, LLP Attorney for Defendant Thaler & Gertler, LLP 90 Merrick Avenue, Suite 400 East Meadow, New York 11554 : : : : : _--___---_---_------------------------------------------------X [* 2] I D M v [Horseblock Road Index N o . I O - 1535 1 P a ~ No. 2 c Idpon the follo\cing papers numbered I t o 5 0 read on these motions for an order of reference and for a11 i n i u n c t h ; Yotice of Motion/ Order to Show Cause and supporting papers 1 - 15; 24 - 36 ; Notice ofCross Motion and supporting papers -; Answering Affidavits and supporting papers 16 -18; 19 - 23; 37 - 40 ; Replying Affidavits and supporting papers4I - 50 ; Other -: ( m x k d k r e it is, ) ORDERED that the motion (#001) by plaintiff for an order of reference and the niotion (#002) by plaintiff for an order pursuant to CPLR 6301 are consolidated for the purposes ofthis determination; and it is further ORDERED that the motion (#001) by plaintiff for an order of default against non-appearin:< defendants, an order granting summary judgment on its complaint on the issue of liability and striking the answers of the appearing defendants, an order of reference appointing a referee to compute, and an amendment of the caption of this action is denied; and it is further ORDERED that the motion (#002) by plaintiff for an order pursuant to CPLR 6301 enjoining defendant Horseblock Road Properties LLC from conveying the property located at Horseblock Road, Yaphank, New York, and enjoining said defendant, its agents, assigns, and contract vendees from interfering with the security interest of plaintiff in all collateral including, without limitation, the removal of sand from said premises is granted. This is an action to foreclose a mortgage on commercial property. Plaintiff allegedly extended loans in the outstanding principal amount of $12,800,000.00 to defendants The Global Home Group, LLC ( Global Home Group ), The Phen Group, LLC ( Phen Group ), Eugene Fernandez, as Trustee oYthe Eugene Fernandez Revocable Living Trust U/A/D 11/18/04 ( Trust ), Oldfield Properties, LLC ( Oldfield ), Lake Avenue Properties, LLC ( Lake Avenue ), Global Home 11, LLC ( Global Home [ , Half Hollow Estates, LLC ( Half Hollow ), and Horseblock Road I) Properties, LLC ( Horseblock ) that are the subject of this action and two other related actions. Said loans were made pursuant to a Loan Agreement, dated August 4,2006, which was amended by a First Amendment to Loan Agreement dated March 22, 2007. The loan agreements were hrther amended by an Amended and Restated Master Loan Agreement, dated February 25,2009, between plaintiff and the borrower defendants Global Home Group, Phen Group, Trust, Oldfield, Lake Avenue, Global Home 1L, Half Hollow, and Horseblock ( borrower defendants ) and the guarantor defendants Horse Block, C.A.S.S. Holdings, LLC ( CASS ), JPEC Land Development, LLC ( JPEC ), Debra Fernandez, Eugenio Femandez and Richard Weinstein ( guarantor defendants ). Plaintiff has commenced three separate foreclosure actions with respect to mortgages obtained through these agreements, JDM Capital Funding, LLC v HalfHollow Estates, LLC under Index number 15350/2010, JDlM Capital Funding, LLC v Hovseblock Road Pvopevties, LLC under Index number 1535 1/2010, and JDM Capital Funding, LLC v Old Field Pvopevties, LLC under Index number 15352/2010. In the instant action, plaintiff seeks to foreclose a mortgage, assignment of rents, and security agreement ( m,ortgage ) securing a guaranty of payment of the debt under the original loan agreement up to the amount of $2,750,000.00. The mortgage, dated January 29, 2007, was executed in plaintiffs favor by Eugene Femandez as manager of defendant Horseblock and filed in the Office of the Suffolk County Clerk on December 22, 2008. The guaranty was also purportedly executed on the same date. The mortgage is on property located at Horseblock Road, Yaphank, New York. A [* 3] JDM v Horseblock Road Index NO. 10-15351 Page No. 3 Reaffirmation of Secured Guaranty, dated February 25, 2009, was executed by Eugcne FernandeL as manager of defendant Global Home Group on behalf of defendant Horseblock. The mortgage was modified by a Moi-tgagc Modification Agreement dated February 25, 2009 and filed on April 23, 3099 in the Office o f the Suffolk County Clerk. Said modification agreement was executed by Eugene Fernandez on behalf of defendant Horseblock. Defendant Horseblock allegedly defaulted on its payments due on May 1, 2009 and thereafter. The borrower and guarantor defendants allegedly failed to cure the default and plaintiff elected to accelerate the loan. Plaintiff subsequently commenced the instant action for a judgment of foreclosure against the borrower and guarantor defendants, the New York State Department of T d h d i l V l l d i d FiiidiiLC f o ~ possibk uilpdid franchise Idheb, aiid Thdlii & Gci-tjcl, LLP ds subordinatc J iidgment holder. The borrower and guarantor defendants served an answer denying, among other things, their default. They also asserted affirmative defenses including that the global economic collapse of 2008 to 2009 was a force majeure that none of the parties to the subject agreements could reasonably have anticipated and which excused defendants perfomlance of their obligations under said agreements; and that plaintiff failed to negotiate with defendants in good faith to most fairly mitigate each party s damages. Some of their other affirmative defenses were failure to state a cause of action, unclean hands, and the doctrines of waiver, estoppel and laches. Defendant Thaler & Gertler, LLP ( T & G ) served its answer admitting that it holds judgment as against certain defendants in this action and seeking surplus monies from a mortgage foreclosure sale of the mortgaged premises. Plaintiff now moves for an order of default against the non-appearing defendants, summary judgment on its complaint on the issue of liability and striking the answers of the appearing defendants, an order of reference appointing a referee to compute, and an amendment of the caption of this action deleting defendants John Doe No. I to John Doe No. XXX. In order to establish primafacie entitlement to summary judgment in a foreclosure action, a, plaintiff must submit the mortgage and unpaid note, along with evidence of default (see Capstone Business Credit, LLC v Imperia Family Realty, LLC, 70 AD3d 882, 883, 895 NYS2d 199 [2d Dept 20101). The burden then shifts to the defendant to demonstrate the existence of a triable issue of fact as to a bona fide defense to the action, such as waiver, estoppel, bad faith, fraud, or oppressive or unconscionable conduct on the part of the plaintiff (id.quoting Mahopac Natl. Bank v Baisley, 244 AD2d 466,467,664 W S 2 d 345 [2d Dept 19971, Iv disniissed 91 NY2d 1003,676 NYS2d 129 [ 19981). Plaintiffs submissions in support of its motion include the mortgage, reaffirmation of secured guaranty, mortgage modification agreement, the amended loan agreement of February 25,2009, the summons and complaint, the aforementioned answers, and affidavits of service of the summons and complaint. In addition, plaintiff submits the affidavit dated July 30, 2010 of Dennis Diczok ( Diczok ), plaintiffs vice president, stating that due to default in payment beginning with the payment due on May 1, 2009, the mortgage debt was accelerated by plaintiff, the mortgage debt remains in default, and there is presently due and owing to plaintiff $2,750,000 plus interest. [* 4] .IDM v Horseblock Road Index No. 10- 1535 1 Page No. 4 Here, plaintiff has failed to submit a copy of the original guaranty dated January 29, 2007, referred to in the reaffirmation of secured guaranty dated February 25, 2009, and executed at the same time as the sub.ject mortgage. A mortgage is inerely security for a debt or other obligation and cannot exist independently of the debt or obligation (see FGB Realty Advisors, Irzc. v Purisi, 265 AD2d 297. 090 NYS2d 207 [2d Dept 19991). There IS no evidence that the reaffirmation of secured guaranty supplanted the guaranty. Paragraph 2 of the section entitled Agreement on page 2 of the rcaffirmation of secured guaranty specifically provides that [tlhe obligations evidenced by the Guaranty continue outstanding, and the execution and delivery to Lender of this Reaffirmation does not constitute the creation of a new obligation or the extinguishment of the obligation evidenced by the Guaranty but constitutes only a reaffirmation thereof. Therefore, plaintiff has failed to make a prirri~i~Lcie showing o entidenierii to jucignieni jcowipve Inlund Mtge. Capital Cory. v Reuliy C Equities NM, LLC, 71 r D 3 d 1089, 900 NYS2d 79 [2d Dept 20101; Wells Fargo Bunk v Karla, 71 AD3d 1006, 896 NYS2d 68 1[2d Dept 20101). Plaintiff also seeks a preliminary injunction enjoining defendant Horseblock from conveying the Horseblock Road property and enjoining said defendant, its agents, assigns, and contract vendees froin interfering with the security interest of plaintiff in all collateral including, without limitation, the removal of sand frorn said premises. In his affidavit dated August 9, 201 0, Diczok states that the Horseblock property consists of 36 acres of undeveloped land. In addition, he states that he has recently had several conversations with Eugene Fernandez ( Fernandez ), principal of mortgagor and fee owner of the property, and that Fernandez advised him, subsequent to the commencement of this action, that it was his inlention to convey the property for the development of the land into an organic vegetable farm and that approximately one acre of the property was to be excavated to construct a fish f a d h a t c h e r y as a source of fertilizer for the vegetable farm. Diczok also states that Fernandez indicated that the excavation would require removal of approximately 70,000 tons of sand and that he estimated a profit of $350,000 from the sale of the sand. Diczok believes that Fernandez intends to or has already conveyed the property to Bluegreen Farms, which he believes is also controlled by Femandez. He submits a copy of a letter dated July 13,2010 from the Town of Brookhaven Department of Planning., Environment and Land Management indicating that a site plan has been conditionally approved with respect to a project of Bluegreen Farms at Yaphank. Diczok argues that plaintiff will be irreparably harmed by the removal of sand and the excavation of the property inasmuch as said actions will leave a huge, empty pit at the site and severely erode the value of the property, chill bidding at the foreclosure sale, and significantly increase the likelihood of a deficiency judgment, which plaintiff will be unable to recover. He emphasizes that plaintiff has not consented to the conveyance of the property by the mortgagor or any other entity and has not consented to the excavation of the property for the construction of a vegetable farm and related fish/farm hatcheiy, which consent is required pursuant to paragraphs 1.09 and 1 .OS (a) of the mortgage. In opposition to the request for a preliminary injunction, Fernandez submits his affidavit dated September 21,20 10 indicating that he devised the business plan in the Fall of 2008 to convey the property to Bluegreen Farms and to sell the sand on the property, with the support of plaintiff, and that it was all made for the purpose of a global settlement, which plaintiff refused to consummate. [* 5] J D M v Horseblock Road Index NO. 10-1 535 1 Page No. 5 To be entitled to a preliminary injunction, the moving party has the burden of demonstrating: ( 1 ) a likelihood of success on the merits; (2) irreparable injury absent granting the preliminary iiijunction; and (3) a balancing of the equities in the movant s favor (see CPLR 6301 ; Aetrza Ins. Go. v Cupusso, 75 NY2d 860, 862, 552 NYS2d 91 8 [ 19901; Dixorz v MalouJ 61 AD3d 630, 630, 875 NYS2d 9 18 (2d Dept 20093; Coinmacli Corp. v Alley Pond Owners Corp., 25 AD3d 642, 643, 808 NYS2d 31 8 [2d Dept 2 i 6 ) The purpose of a preliminary injunction is to maintain the status quo C01. and prevent the dissipation of property that could render a judgment ineffectual (see Dixon v Malozif, 61 AD3d at 630; Ruiz v Meloney, 26 AD3d 485, 486, 810 NYS2d 216 [2d Dept 20061; Ying Furzg Moy v Hohi Umeki, 10 AD3d 604, 781 NYS2d 684 [2d Dept 20041). The decision to grant or deny a preliminary injunction rests in the sound discretion of the court (see Dixon v Malouf, 61 AD3d at 630; Ruiz v Melone-v,26 AD3d at 486). The existence of an issue of fact should not be the sole ground for denial of the motion (see CPLR 6312 [c]; Stockley v Gorelik, 24 AD3d 535, 536, 808 NYS2d 282 [2d Dept 2005l). Here, plaintiff has shown irreparable injury if the property is transferred and developed as contemplated, and Fernandez fails to indicate in his submissions in opposition that work on the project has stopped. The status quo will not be preserved absent a preliminary injunction (see Stockley v Gorelik, 24 LD3d at 536). Thus, plaintiff is entitled to a preliminary injunction pendinjz the determination of the action (see CPLR 6301; S.J.J.K. Tennis, Inc. v Confer Bethpage, LLC, 81 AD3d 629, 916 W S 2 d 789 [2d Dept 201 13; Winchester Global Trust Co. Ltd. v Donovan, 58 AD3d 833, 873 NYS2d 130 [2d Dept 20091). The borrower and guarantor defendants have not raised issues of fact warranting an evidentiary hearing (see CPLR 63 12 [c]). Prior to the granting of a preliminary injunction, the plaintiff shall give an undertaking in an amount to be fixed by the court (CPLR 63 12 [b]). The sum fixed by the court for the undertaking must be sufficient to compensate the party being enjoined for the damages and costs sustained by them as a result of the issuance of the preliminary injunction in the event that it is later determined that the requester was not entitled to the injunctive relief (CPLR 63 12 [b]; Carter v Konstantatos, 156 AD2d 632,549 NYS2d 131 [2d Dept 19891). The absence of an undertaking renders the preliminary injunction voidable (Obchna v Town ofSmithtown, 51 AD2d 1036, 381 NYS2d 321 [2d Dept 19761). Counslel for plaintiff suggests that the undertaking be the estimated profit from the sale of the sand, $350,000.00. Counsel for Horseblock suggests that the undertaking be the estimated value of the property and the planned project, $8.8 million. The Court fixes the undertaking of plaintiff in the sum of eight hundred thousand ($800,000.00) dollars. Accordingly, the Court denies plaintiffs request for an order of reference and grants its request for a preliiniiiary injunction The preliminary injunction shall be effective immediately upon service of a copy of this order upon defendants Horseblock Road Properties, LLC and Eugene Fernandez together with proof of filing of an undertaking, pursuant to CPLR 63 12 (b), in the sum o f eight hundred thousand ($800,000.00) dollars. Dated: August 16, 201 1 Acting Justice Supreme Court - FINAL DISPOSITION X NON-FINAL DISPOSITION

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