Old Republic Natl. Tit. Ins. Co. v Salamon

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Old Republic Natl. Tit. Ins. Co. v Salamon 2021 NY Slip Op 31631(U) May 11, 2021 Supreme Court, Kings County Docket Number: 517742/18 Judge: Lawrence S. Knipel Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [*FILED: 1] KINGS COUNTY CLERK 05/13/2021 09:43 AM NYSCEF DOC. NO. 124 INDEX NO. 517742/2018 RECEIVED NYSCEF: 05/13/2021 At an IAS Term, Part Comm 6 of tl1e Supreme Court of the State of New York, held in and for the County of Kings, at the Cou1thouse, at Civic Center, Brooklyn, New York, on the 11th day of May, 2021. PRES ENT: HON. LAWRENCE KNIPEL, Justice. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -X OLD REPUBLIC NATIONAL TITLE INSURANCE COMPANY, AS SUCCESSOR IN lNTEREST TO BEJS CHASIDEI GORLITZ, Plaintiff, Index No. 517742118 - against YEHUDA SALAMON and ETTY SALAMON, Defendants. -- ---- --- -- - -- -- - - - -- - - - - -- - -- - - - - -X The following: e-filed papers read herein: NYSCEF Doc Nos. Notice of Motion/Order to Show Cause/ Petition/Cross Motion and Affidavits (Affinnations} _ _ _ _ _ __ 49-69 110-115 Opposing Affidavits (Affirmations), _ _ __ 111-115 116-119 Reply Affidavits (Affinnations) _ _ _ __ 116-119 Upon the foregoing papers in this action to foreclose a mortgage which was converted to an action to recover on a 1nortgage note, plaintiff Old Republic National Title Insurance Company, as Successor in Interest to Beis Chasidei Gorlitz (Old Republic), moves (in motion sequence [mot. seq.] two) for an order, pursuant to CPLR 3215, granting it a default judgment against defendants Yehuda Salamon and Etty Salamon (collectively, defendants or guarantors). 1 of 9 [*FILED: 2] KINGS COUNTY CLERK 05/13/2021 09:43 AM NYSCEF DOC. NO. 124 INDEX NO. 517742/2018 RECEIVED NYSCEF: 05/13/2021 Defendants cross-move (in mot. seq. three) for an order, pursuant to CPLR 3012 (d), extending their time to appear or plead, nunc pro tune, to February 5, 2020, and compelling Old Republic to accept their answer to the amended complaint that was electronically filed at NYSCEF Doc. No. 47 on Februaiy 5, 2020. Background Tlte Foreclosure Action On August 30, 2018, Beis Chasidei Gorlitz (Garlitz) commenced this action to foreclose on real property at 4917/4921 12'" Avenue, Units Cl and RI in Brooklyn (Property) by filing a su1nmons, a verified complaint and a notice ofpendency against the Property. On October22, 2018, defendants answered the complaint. Tlte A111entled Co111plai11t On August 27, 2019, Old Republic moved for an order substituting it as plaintiff, as successor in interest to Garlitz, and a1nending the co1nplaint and the caption. By a December 9, 2019 order, the court (Vaughan, J.) granted the motion and ordered that Old Republic serve the order together with the amended complaint within 60 days. Old Republic filed an affidavit of service reflecting that it served defense counsel with the amended complaint by first class mail on December 18, 2019. The a1nended co1nplaint alleges that "[t]his is an action based on an instru1nent for payment of money" (amended complaint at~ 4). Specifically, the amended complaint alleges that: (1) on February 5, 2004, the borrower 4921 12'" Avenue LLC (borrower) 2 2 of 9 [*FILED: 3] KINGS COUNTY CLERK 05/13/2021 09:43 AM NYSCEF DOC. NO. 124 INDEX NO. 517742/2018 RECEIVED NYSCEF: 05/13/2021 executed a promissory note in favor of Flushing Savings Bank, FSB (Flushing) in the principal amount of$420,000,00 (Flushing Note), artd (2) on March 8, 2005, the borrower executed a promissory note in favor of Zev Pollack and Yedida Pollack in the principal amount of $650,000.00 (Pollack Note) (id. at~~ 5 and 6). On May 2, 2006 and April 27, 2006, respectively, the Flushing Note and the Pollack Note were allegedly negotiated to Garlitz (id. at~~ 7-8). On May 4, 2006, the borrower allegedly executed a $241,358.44 gap note in favor of Garlitz (id. at~ 9). On May 4, 2006, the borrower allegedly executed a consolidated and restated mortgage note in the principal amount of $1,300.000.00 in favor of Garlitz (Consolidated Note), which consolidated the Flushing Note, the Pollack Note and Gap Note (id. at~ 10). On May 4, 2006, the borrower also allegedly executed a $1,200,000.00 building loan note (Building Loan Note) in favor ofGorlitz (id. at~ 11). The amended complaint alleges that: (!) on August 15, 2007, the borrower and defendant Yehuda Sala1non executed an extension agree1nent (Extension Agree1nent) under which Salamon personally agreed to pay the monies then owed, and (2) on February 21, 2010, the borrower and defendants, as guarantors, allegedly executed a forbearance agree111ent (Forbearance Agreement) under which the Consolidated Note was extended to December 31, 2016, the parties acknowledged $5,194,948.99 was due and owing Garlitz and the guarantors guaranteed payment to Garlitz (id. at~~ 12-15). The amended complaint further alleges that the borrower and guarantors "failed to co1nply with tl1e te11ns of the Extension Agree1nent and Forbearance Agree1nent by 3 3 of 9 [*FILED: 4] KINGS COUNTY CLERK 05/13/2021 09:43 AM NYSCEF DOC. NO. 124 INDEX NO. 517742/2018 RECEIVED NYSCEF: 05/13/2021 failing to pay the monthly installment due beginning on December 31, 2016, and the instalhnent due on each subsequent inonth in accordance with the terms thereof' (id. at 'ii 16), On August 30, 2018, Garlitz allegedly elected to accelerate the entire unpaid prin-cipal due under the Consolidated Note, the Building Loan Note, the Exte11sion Agreement and the Forbearance Agreement (id. at 1f 17). The amended complaint alleges that as of November 5, 2018, $14,442,000.000 is due and owing under the Consolidated Note, the Building Loan Note, the Extension Agreement and the Forbearance Agree1nent, all of which "were negotiated to Old Republic on or about November 5, 2018" (id. at 1f1l 18 and 19). De/enrlants' A11s>rer On February 5, 2020, defendants electronically filed their answer to the amended complaint. Notably, defendants admit the allegations in paragraph 16 of the amended complaint regarding their payment default (answer at 1f I), deny that Garlitz "had the ability to 'accelerate' any principal or interest" as alleged in paragraph 17 of the amended complaint (id. at 1f 7), deny the allegations regarding the amount due and owing in paragraph 18 of the amended complaint (id. at 1f 3) and admit that the Extension and Forbearance Agreement were executed, "however avers that the same were obtained through fraudulent means and never intended to be accurate or enforceable" (id at 1f 5). Defendants also asserted affirmative defenses, including that: (I) "[t]he Extension Agree1nent and the Forbearance Agreement, as defined in the Complaint, were 4 4 of 9 [*FILED: 5] KINGS COUNTY CLERK 05/13/2021 09:43 AM NYSCEF DOC. NO. 124 fraudulently induced" (id. INDEX NO. 517742/2018 RECEIVED NYSCEF: 05/13/2021 at~ 8); (2) "[a]ll funds due and owing to ... Garlitz by [the borrower] 4921 12'" Avenue LLC were paid in full" (id. at ~ 9); and (3) the claims asserted are barred by the applicable statute of li1nitations. On February 6, 2020, Old Republic filed a Notice of Rejection of defendants' answer to the a1nended complaint, asserting that "[d]efendants['] time to answ_er expired on January 22, 2020 and was not extended." Old Republic's Motion for a Default Judgment Old Republic now moves for a default judg1nent against defendants in the a1nount of $14,442,000.00 with 24% interest accruing from November 5, 2018. Old Republic asserts that "[ d]efendants' ti1ne to answer the amended complaint has expired and has not been extended'' and "[d]efendants have not timely answered and are in default." Old Republic's counsel affirms that "[t]he amended complaint was served on defendants by ec file service and mail upon their attorney of record on December 18, 2019." Old Republic's counsel further affirms that "[a]n additional copy of the summons and a1nended co1nplai11t were served on defendants and tl1eir counsel by first class 1nail on January 8, 2020 pursuant to CPLR 3215 (g)." In support of its motion, and to substantiate the allegations in the amended complaint, Old Republic submits an Affidavit of Merit from Maria Filippelli, a Senior Vice President and Deputy Chief Claims Counsel for Old Republic. Old Republic also submitted an affirmation from Rabbi Isaac Jungreis, the President and a 1ne1nber of the 5 5 of 9 [*FILED: 6] KINGS COUNTY CLERK 05/13/2021 09:43 AM NYSCEF DOC. NO. 124 INDEX NO. 517742/2018 RECEIVED NYSCEF: 05/13/2021 Board of Directors of Garlitz. Defe11tlt111ts' Cross Motio1i Defendants oppose Old Republic's motion and cross-move for an order, pursuant to CPLR 3012 (d), extending their time to appear or plead and compelling Old Republic to accept their answer to the amended complaint that was electronically filed at NYSCEF Doc. No. 47 on February 5, 2020. Defense counsel argues that "[p]laintiff clai1nS to have served its amended complaint (with no summons) on Defendants via mailing to your affirmant on December 18, 2019 ... However, service on the Defendants themselves did not take place until January 8, 2020, when Plaintiff caused a copy of the summons, and the original complaint, and the amended complaint, to be mailed to the individual defendants directly." Defense counsel argues that "[s]ince the Complaint was not served on the Defendants via personal delivery to them ... the time to answer the complaint was thirty days from January 8, 2020, and your Affirmant properly calendared it as such." Defense counsel asse1is that he timely filed an answer to the amended complaint on February 5, 2020, "before the thirty-day period had run ... " Defense counsel notes that the amended complaint asserts "entirely new claims against th'e Individual Defendants that had not previously been asserted" since tl1e original co1nplaint sought foreclosure on a 1nortgage against the cor1Jorate borrower and did not seek a money judg1nent against the Salamon defendants as guarantors. 6 6 of 9 [*FILED: 7] KINGS COUNTY CLERK 05/13/2021 09:43 AM NYSCEF DOC. NO. 124 INDEX NO. 517742/2018 RECEIVED NYSCEF: 05/13/2021 Even if Old Republic is correct tl1at service of the a1nended co1nplaint 011 defense counsel without a su1n1nons was good service, defense counsel asserts that the answer was filed a nlere fourteen days after Old Republic contends that it was due, and therefore, seeks an order compelling Old Republic to accept the answer as filed. Defense counsel argues that "[p]lain tiff has not asserted (let alone proved) any prejudice [due to] that short delay." Assuming defendants must establish a 1neritorious defense, they have included a copy of a November 16, 2017 affirmation from defendant Yehuda Salamon which was sub1nitted in a companion, pending case. 1 In that affinnation, Salamon affirmed that the Forbearance Agree111ent "was not a 'real' docu1nent, but rather was supposedly being used by Rabbi Jungreis solely in connection with his dealings with the New York Attorney General's office" in connection with an investigations by the Charities Bureau. Salamon also affirmed and described how the entire $3.2 million loan from Garlitz to the borrower had been paid in full. Old Republic's Opposition and Reply Old Republic, in opposition to defendants' cross motion and in further support of its 1notion for a default judgment, argues that '"[tJhe Sala1nons do not state or even attempt to state a reasonable excuse for their default." Old Republic asserts that service of the ainended complaint upon defense cou11sel was "authorized and therefore proper." Old The companion, pending case is Bets Chasidei Garlitz v 4921 J2'h Avenue LLC, Kings County 1 index No. 519469/16. 7 7 of 9 [*FILED: 8] KINGS COUNTY CLERK 05/13/2021 09:43 AM NYSCEF DOC. NO. 124 INDEX NO. 517742/2018 RECEIVED NYSCEF: 05/13/2021 Republic also claims that the defense proffered in the November 2017 Salamon affir1nation was rejected by this cou11 in the companion, pending case. Disc11ssio11 CPLR 3012 (d) provides that: "Extension of time to appear or plead. Upon the application of a party, the court may extend the time to appear or plead, or con1pel the acceptance of a pleading untimely served, upon such terms as 1nay be just and upon a showing of reasonable excuse for delay or default." "In light of the public policy favoring the resolution of cases on their merits, the Supreme Court may compel a plaintiff to accept an untimely answer (see CPLR 2004, 3012 [d]) where tl1e record demonstrates that there was 011ly a short delay in appearing or answering the complaint, that there was no willfulness on the part of the defendant, that there would be no prejudice to the plaintiff, and that a potentially meritorious defense exists" ( Yongjie Xu v JJW Enterprises, Inc., 149 AD3d 1146, 1147 [2017]). Under the circumstances presented here, where there was only a fourteen-day delay in answering the amended complaint and there is no discemable prejudice to Old Republic, defendants 1 cross 1notion to compel Old Republic to accept their answer, which was electronically filed on February 5, 2020, is warranted (see Leogrande v Glass, 106 AD2d 431, 432 [1984] [holding that order compelling plaintiff to accept an answer that was only 16 days late was properly exeused by the court as a matter of discretion]). Old Republic's claim that defendants' defenses are barred by res judicata should properly be 8 8 of 9 [*FILED: 9] KINGS COUNTY CLERK 05/13/2021 09:43 AM INDEX NO. 517742/2018 NYSCEF DOC. NO. 124 RECEIVED NYSCEF: 05/13/2021 considered on a dispositive motion after issue is joined. Accordingly, it is hereby ORDERED that Old Republic's motion (mot. seq. two) for a default judgment against defendants is denied; and it is further ORDERED that defendants' cross motion (mot. seq. three) is granted and Old Republic is compelled to accept defendants' February 5, 2020 answer to the amended complaint, pursuant to CPLR 3012 (d). This constitutes the decision and order of the court. / ./ ENTER/::'. . J N. LA RENCE KNIPEL ADMINISTRATIVE JUDGE 9 9 of 9

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