Valley Natl. Bank v Silvershore Props. 123 LLC
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Valley Natl. Bank v Silvershore Props. 123 LLC 2022 NY Slip Op 32956(U) August 29, 2022 Supreme Court, Kings County Docket Number: Index No. 513988/21 Judge: Lawrence 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. INDEX NO. 513988/2021 FILED: KINGS COUNTY CLERK 09/01/2022 04:46 PM NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 09/01/2022 At -a11 IAS Tenn, Part- Coinm-6 of the Supreme Court ofthe St&te of New York; at the Courthou.$e~ at 360 Adams Street, Brooklyn,, New York, on the 29111: day of August, .2022. heid in and fot the County of Kings, PRESEN T: HON. LAWREN CE KNI.PEL, Justice. --·--· ----------------- ·--· -------·. :-·--· --- ·--- ·x VALLEY NA T!ONAL BANk, as successor by mergier to OR.ITANI .BANK, Plaintiff, - ago.inst SriNERSHORE; PROPE_RTIES Index No. 5l3988/21 123 LLC, JASON SILVERSTEIN, DAVID 8H0RbNStE IN, CRIMINAL C•i.JRT OF THE CITY OF NEW YORK, YORK C!TY ENVIRONM ENTAL CONTROL BoARo, WASSER & Co. N~w l INC. JOHN" DOE AND JANE DOE 1-10, said names being fictitious., it beirig: the intention the Plaintiff to designate any and all occupants,. tenants, persons or corporations~ ifany, having or claiming an interest in or lien· upon the premises. being; foreclosed heiei11, of Defendants. ----------~----------------------~--~--X The following e.;filed papers read herein: NYSCEF Doc. No·s. Notice of Motion/Or der to Show Cause/ Cross Motion/Af fidavits (Affirmations) ·Annexed._ __ Opposition Affidavits (Affirmatio ns) Annexe d~--Reply Affidavits (Affirmations) Annexed._ _ _ __ 28-35 . 18-46 48~51 Upon the foregoing papers in this action to foreclose a commercial mprtgage o_n the, _property at 236 Schenectady Avenue in Brooklyn. {Block 1J77, Lot J3) (Property), plaintiff Valley National Bank, as successor by mergerto. Oritani Bank (plaintiff), moves(in motion [* 1] 1 of 13 INDEX NO. 513988/2021 FILED: KINGS COUNTY CLERK 09/01/2022 04:46 PM NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 09/01/2022 .. s-equen.ce· [mot. seq.] one) for an order dismissing the counterclaims of defendants Silvershore Property 123 LLC (Botrower),. Jason Siiverstein (Silverstein) ·.and David Shorenstein (Shorenstein) ( collectively, Guarantors and; including the Borrower, defendaiits) based upon documentary evidence- pursuant to CPLR 3211 (a) (1) and for failure.to state a· cause of action pursu_ant to CPLR 321 l. (a){7). Background Plaintiff commen~ed this action; on June 10, 2021, by the filing ofa summons, a -ved.fied compla_ii1t and a notice of per:idency agaiilst. th.e. Prope1ty. The. complaint alle:ges that, on. October 5, 2017.~ Btidgehampt_ort National Bank_:(Bridgehamptori) issued a note.in the principal amount of $1,940,000.00 (Note) to Borrower, which was secured by a cdnsoliciated mortgage executed on October 51 2017 encumbering the Ptoperty" i:n favor of Bridgehampton. (Mortgage); and that, on the same da:te_, Silverstein :and Shorenstein,,.the Guarantors, executed a limited ::guarar:ity to secure ce1t@in payments, costs and expenses relating to the Property (Guaranty) (see complaint at ,r 16-18 and 25 - NYSCEF Doc: No, 3U). The co111plaint.•fiJrther alleges that, after Sorrower failed to make tirnely payments undertheNote artd Mortgage beginning on June 6,2020, plaintiff sent.defendants a notice ofdefauit and acceleratton on :Noveinher 2,2020 (id. 30). Thereafter, on December 11, 2020~ pJaintiff: Hortowet arid Silverstein ·entered into a 2 [* 2] at1 ,r44 and 56 - NYSCEF Doc No. 2 of 13 INDEX NO. 513988/2021 FILED: KINGS COUNTY CLERK 09/01/2022 04:46 PM NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 09/01/2022 forbearance agreement (Forbearance Agreement), 1 by which plaintiff agreed to forebear from pursuing its rights and remedies under the Note, Mortgage and Guaranty (collectively, Loan Documents) until the earlier of May J l, 2021 or a forbearance tennination event as . .. defined in the agreelilent and Borrower and Silverstein (collectively, Party Obligors) agreed to make all payments due under the Note and Mortgage by May 31, 202 l (id. at ,r ,r 44-46- NYSCEF Doc No. 30). The complaint alleges, however, that the Party Obligors defaulted under the Forbearance Agreement by failing to make the agreed payments by . . May 31, 2021. The complaint also alleges that defendants further defaulted under the Loan Documents, in that defendants allowed liens to be placed against the Property; and Shorenstein transfen-ed his· ownership interest in Borrower to Silverstein without plaintiffs prior consent (id. at ,i ,r 48, 49 and 52-55 -NYSCEF Doc No. 30). As to standing, the coinplaint alleges that, on or about June 27, 2018, BNB Bank, formerly Bridgehamp ton, assigned the Note and Mortgage to Oritani Finance Company, a wholly owned subsidiary ofOritani Bank (Oritani), by Assignment of Mortgage recorded on July 24, 2018; thus, plaintiff, "as successor by merger to Oritani, is the owner of any and all rights; title, and interest in the mortgages, related debt instruments, and loan documents referenced herein" (ld. at ,r ,r 28 and 30 - NYSCEF Doc No. JO). Shorenstein was not a party to the Forbearance Agreement, as he had already transfetred his ownership interest in Borrowertci Silvetstein, which is acknowledged by the Party Ohligorsin the Fotbearartce Agreement as a default under the Loan Documents (see Forbearance Agreement at2 - NYSCEF Doc Nos. 31 ). .. 3 1 [* 3] 3 of 13 FILED: KINGS COUNTY CLERK 09/01/2022 04:46 PM NYSCEF DOC. NO. 70 INDEX NO. 513988/2021 RECEIVED NYSCEF: 09/01/2022 Defendants' Answer Defendants filed an answer, verified by Silverstein, on July 23, 2021, denying the material allegations in the complaint and asserting counterclaims based upon fraud and breach of the covenant of good faith and fair dealing .. Defendants also asserted a counterclaim seeking a declaratory judgment declaring that the Guarantors' liability is limited to the '"Guaranteed Amounts" listed in the Guaranty (see defendants' answer NYSCEF Doc No. 25). According to defendants, after plaintiff's metgerwith Oritani, plaintiff, by its Vice President Kenneth Swedlet (Swedler), told Borrower that it wanted to divest itself of the Mortgage and began pressuring Borrower to pay off the Mortgage before its May 2025 tnatudty date. "In an effort to satisfy" plaintiff, Borrower attempted to refinance with another lender. During·this time, defendantsa llegethatSw edler, knowingtha t defendants were 60 days behind in payments, made false assurances that plaintiff would not dedare a default while they were seeking to refinance (id. at 11 129-130, 132 and 145 -NYSCEF Doc No. 25). Defendants further allege that in July 2020, after they were unable to refinance due to the COVID-19 pandemic, Swedler told them to stop making payments while plaintiff contemplated a forbearance agreement. However, on August 11, 2020, plaintiff sent Borrower a default email, followed by a formal default letter. Based upon this, defendants allege that plaintiff fraudulently induced them to default on the Mortgage and also breached the covenant of good faith.and fair dealing. 4 [* 4] 4 of 13 INDEX NO. 513988/2021 FILED: KINGS COUNTY CLERK 09/01/2022 04:46 PM NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 09/01/2022 Additionally, defendants allege that;- ~~following canst.ant aggressive· pressure," plaintiff fraudulently induced Borrower to execute the. "completely one-sided" Forbearance Agreement, which it had ;;no choice but to sign;" since it could neither pay off the Mortgage nor affordti1e,defati.ltrate interest (id. at ,r ,rt 56-157 - NYSCEF Doc No. 25}. Defendants -further alleg~ that plaintiff als.o induced them to execitte the Forbearance Agreement by failing to disclose that plaintiff intended to file a separate foreclosure action against the Patty Obligors regarding an unrelated property and that defendants also breached the covenant ofgood faith and.faith dealing by cominencing the other foreclosure action_. as it hindered their ability to. -seek tefinancing and satisfy the· Mor.tgage on the Property before May 2021 in accordance with the Forbearance Agreement .. Plaii1tifjs Instant Motion On September 24, 20.21, plaintiff filed tl-ie instant moli,on s~eking dismissal of defendants 1 counterclaims. In support .of its motion, plaintiff argues that_ defendants expressly waived their right to assert any counterclaims in the. Forbearance Agreement, which' defendants negotiated with the bendit 'Of counsel; the general ·release executed in c.onjim.ction w.ith the Fo.rbe~ance J\.greenient (Ge1teral Release); and th~ Loan- Documents. Based upon these documents; _piaintiff contend~ that defendants' counterclaims.sh ould he dismissed pursuant to CPLR 3211 (a) (i). Plaintiff further argµ~s that defendants' counterclaims should also be dismissed pursuant to CPLR 32.J 1 (a){7),a~ tl1eir fraud and.breach of the covenant·ofgood faith and fair dealing counterdaitns fail to state a cause of action. Plaintiff contends that, pursuant .5 [* 5] 5 of 13 INDEX NO. 513988/2021 FILED: KINGS COUNTY CLERK 09/01/2022 04:46 PM NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 09/01/2022 to the terms oftheLoan Documents, as well as GOL 15-301, the Loan Documents cannot be modified absent a written agreement. Therefore, any alleged oral agreement between plaintiff, by Swedler, and defendants could not serve to modify these contracts and, since there was rio valid om! agtee111ent, there could be no breach of the covenant ofgood faith and fair dealing. Similarly, plaintiff contencls that, since the Loan Docutnentsand GOL 15301 bar oral modification, defendants could not have reasonably relied upon any alleged oral agreementwith Swedler, thus, defe11dants' fraud counterclaim fails to establish all the requisite elements that constitute a fraud, Moreover, plaintiff argues that defendants' request for a declaratory judgment as to the Guaranty terms is dismissable as unnecessary since that issue wm ultimately be determined upon resolution ofthe litigation. Defendants' Opposition In opposition, defendants argue that GOL 15-301 is inapplicable to this action since GOL 15-301 refers to actual changes to contract terms, not oral waivers of contract conditions, like in the case at bar~ where plaintiff orally waived a condition in the Loan Documents by agreeing not to default defendants while they sought to refinance. Notwithstanding, defendants argue that, even if the court found their agreement with plaintiff to be an oral modification, GOL 15-301 and the Loan Documents would not serve to bar .their counter¢! aims due· to plain tiffs fraudulent acts. To substantiate their fraud and breach of the covenant of good faith and fair dealing counterclaims,. defendants submitted an email chain betweehplaintiff, by Swedler-andLouis Manderino (Manderino) [plaintiffs 6 [* 6] 6 of 13 FILED: KINGS COUNTY CLERK 09/01/2022 04:46 PM NYSCEF DOC. NO. 70 INDEX NO. 513988/2021 RECEIVED NYSCEF: 09/01/2022 Senior Vice; President}, -and Silverstein,_ which they all¢ge establishes the 0_1~a1 agreement between the parties, and plaintiffs later breach ofthat..agreem.ent. As to the.. other default events, defendants contend that these aUegatiqos are unproven and, thqs, cannot serve as a basis to dismiss the'it countetclaims. Defendants further argue that their declftt;'atory judgment counterclaim should not be dismissed, since Guarantors are ·entitled to -s.eek a determination as to thejr liabil.ity under the Guaranty; Email Cltabt The email chain submitted by defendants begi_ns with ~n email from Swedler to Silverstein dated August 3, 2020; in which SWedler asks Silver.stein if the May payment was sentlast week. Silverstein responds on August 10, 2020, stating that he has triedto contact Swedler ·"niultiple times to discuss what we spoke about. Please call me-."" On August l i, 202_0,_ Swedler responds, "[ a]s you are aware.events of default h~ve occ\lrred and are continuing. under the loan -.documents with respect to the·.subject loan .... including but not limited toi) faiiure to make payment of principal; interestand escrow for the period beginning._ May 5, 2020. In that regard,_ it has ·'been discussed and decided. that the loan is -being transferred to the, Special Assets Dept (i.e. workoiit) for handling. In the near future, you will be contacted by a representative from that depai11nent with whom: youwiU. communicate going forward." · ·s.-nverstein then responds, ori the.same,-datc.\ s_tatirtg that "[a] paymerit was sent in. As 4iscusse.d_J would appreciatei:fthe bank would agree to defer pa,yn1ents,_-as other banks . have been doing, in the light of the pandemic and the effect it has [had] on operations." 7 [* 7] 7 of 13 FILED: KINGS COUNTY CLERK 09/01/2022 04:46 PM NYSCEF DOC. NO. 70 INDEX NO. 513988/2021 RECEIVED NYSCEF: 09/01/2022 Later, on August 11, 2020; Manderino sends ail einail, stating that ''[the referenced loan was delinquentin payments long before the 'Pandemic' set-in. Up until now, the Bank choose not to call a default and tried to work with. you, the Borrower to no avail. The Bank is now placing the loan in default and will move to protect its interest under the loan documents ... '' Sii verstein s ubseq uen tl y responds, "[p]lease have someone can me. This is unreal. A conversation was had with Ken over a week ago regarding paylllent deferrals and he agreed to get back to me in short order. There has been no response despite multiple follow ups over the past week. Ken is fully aware of the situation regarding the take out loan and the effectthe pandemic had on it moving forv-rnrd. As you know we are still working on refinancing the asset and I am hopeful it will move for\\rard but to take this position is not only unreasonable but completely incorrect when you st.ate you tried working with the borrower 'to no avail'. It could not be further from the truth. In any event a payment was sent this AM and the borrower fully intends on working towards a sut:cessful take out ofthe loan'' (see email chain - NYSCEF Doc No. 42). Plaintiff's Reply In reply, plaintiff argues that the email chain confirms that there was no oral agreement between the parties, since Silverstein states in his emails that he has been awaiting plaintiff's response to his inquiry about payment deferral, which belies defendants' claim that the parties had orally agreed to defer payments while defendants pursued refinancing. Plaintiffnextcontends that defendants' argument that it orally waived a condition in the Loan Documents is unavailing. given the express language in the Loan Documents that plaintiff's acceptance. of partial .or late payments ''$hall not constitute a 8 [* 8] 8 of 13 INDEX NO. 513988/2021 FILED: KINGS COUNTY CLERK 09/01/2022 04:46 PM NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 09/01/2022 waiver or default of any provisions'' of the Note or the Mortgage (Note at 2 - NYSECF Doc No. 45; see also Section 2.06 ofthe Mortgage - NYSECF Doc No. 45). Moreover, plaintiffargues that its commencement of another proceeding against an unrelated property was not a breach of any alleged covenant of good faith and fair dealing or fraudulent act; since commencement ofthataction was not done to frustrate the purpose of the Forbearance Agreement; instead; that action was foreseeable as defendants had receiveda default and acceleration notice regarding the unrelated mortgage in September 23, 2020, nearly two rilonths before the Forbearance Agreelilent was executed on December 11, 2020; Additionally, plaintiff contends that defendants' argument that Shorenstein's transfer of interest and the Property liens are unproven and thus cannot serve as a .basis to dismiss their counterclaims is unavailing, since defendants ad1n it Sh orenstein' s trans fer of ownership in the Forbearance Agreement, which defendants corrobol'ated by annexing same to their attorney affirmation. Therefore, plaintiff avers that defendants' contention that plaintiff fraudulently induced them to default on the Loan Documents is meritless, since Shorenstein;s transfer of his interest in Borrower to Silverstein, alone, serves as a proper basis for this foreclosure action. Disc tission. (1) CPLR 3211 (a} (1) CPLR 32I I (a) (l) provi4es, in pertinent parf, that" [a] party may move tor Judgment dismissing one or more· causes of action asserted .against him on the gro urtd that a defense 9 [* 9] 9 of 13 INDEX NO. 513988/2021 FILED: KINGS COUNTY CLERK 09/01/2022 04:46 PM NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 09/01/2022 is founded upon documentary evidence.'' A dismissal ofa counterclaim pursuant toCPLR 3211 (a) (1) is warranted where the sub1rtitted documentary evidence utterly refutes the counterclaims' factual allegations; thus, conclusively establishing a defense as a matter of law (see Anderson v Annentano, 139 AD3d 769, 770 [2d Dept2016]; Goshen v Mut. Life Ins. Co., 98NY2d 314,326 [2002]). Here, in support of its motion to dismiss defendants' counterclaims pursuant to CPLR 32 U (a) ( l), plaintiff submits the Forbearance Agreement and General Release, which each have counterclaim waiver provisions. More spec:ifically, in section 11 (a) of the Forbearance Agreement, the Party Obligors agreed "[T]hatc as of the date hereof, they have no legal or equitable claitrt, counterclaim, cause of action, right of set offor defense of any kind by way of offset or otherwise against the Lender. The foregoing notwithstanding~to the extent that any such claim or defense may or does exist; as of the date hereof, each of the Party ObHgors expressly waive and release any and all such claims, counterclaims, cause ofaction and defenses." Sections 2 (a) and (c) arid LI (b) of the Forbearance Agreement reiterate this waiver, and the General Release, as well as the Note, Mortgage andGuaranty which were submitted by defend.:mts, all have similar waivers (see sections 2 (a} and (c} and 11 (a) and (b) of the Forbearance Agreement; ,i I ofthe General Release; Note at 3; sections 1.04 and 1.26 of the Mortgage; and Guaranty at2 -NYSCEF Doc Nos. 31, 32, 45, 46 and 40, respectively). Based upon the foregping,this court finds thatthe submitted docurn.~ntary evid~nce cohclu$ive.ly .establishes that defendants validly waived their rights tb interpose any counterdaims in this actioD, .except for their fraud.counterclaim. A waiver of the right to 10 [* 10] 10 of 13 INDEX NO. 513988/2021 FILED: KINGS COUNTY CLERK 09/01/2022 04:46 PM NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 09/01/2022 interpose a counterclaim is not against public policy ·and wil I be enforced in the absence of fraud allegations (see North Fork Bank v Computerized Quality Separation Corp., 62 AD3d 973, 974 [2d Dept 2009]). Although defendants argue that the parties orally modified the Loan Documents or that plaintiff waived its right to seek a default, this argument lacks merit, in light of the Loan Documents' bar to oral modification, and waiver by plaintiff(see the Note at 2 and 4;sections 2.06 and 3.09 of the Mortgage; and Guaranty at4- NYSCEF Doc Nos. 45, 46 and 40, respectively). As such, defendants' breach of the covenant of good faith and fair dealing and declaratory judgment counterclaims must be dismissed pursuant to CPLR 3211 (a) (l ). 2 (2) CPLR 3211 (a) (7) Turrtingto defendants' fraud counterclaim, "[t]he elements of a qmse of action for fraud require a material misrepresentation ofa fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages" (Eurcyleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 559 [2009] [citations omitted]). When considering a motion to dismiss pursuant to CPLR 3211 (a) (7), the court . . ... must determine whether the pleadings state a cognizable cause of action or defense (see Dinerman v Jewish Bd. of Family & Cliildren 's Servs., Inc.; 55 AD3d 530, 531 [2d Dept. 2 The dismissal of defendants' dedaratory judgment counterclaim is of no event since the Guarantors' liability under the Guaranty will ultimately and rtecessarily be determined upon resolution of th is Ii tigatioh. . . . 1l [* 11] 11 of 13 INDEX NO. 513988/2021 FILED: KINGS COUNTY CLERK 09/01/2022 04:46 PM NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 09/01/2022 2008]). In doing so, the· court m:ust '~aftbrd· th'e pleadings a liberal construction, take the allegations in the_[pleadings] as true and._afford the (pleadings] the be11efitofevety possible inference" (EBC I, Inc. v.Goldman, Sachs & Co., 5 NY3d 11, 19 [20d5]). Hete, defendants·,..coui1tercla1m tails tb demonstrate a cognizable cause.ofaction for fraud. The email chain subm.itted by defendants to substantiate their dahit actua.lly contradicts it. In fact; Silverstein explicitlystates in his final email to phiintiff that, ''when you state that you trieq working with the borrower 'to no avail'. It could not be further ·from the truth~-• (see email chain - NYSCEF Doc Np. 42). Thus, defendants' allegation, -that plaintiff111.isr.epresented that it would not default _defendants while they attempiecl. to refinance:, fails;. Furthermore, defendants' .claim that they relied upon this alleged misrepresentation is not justifiable, given the Loan Dncuments' restrictions against oral modification, arid waiver-by plaintiff Moreover, defendants' argume.nt that plaintiff fraud.likntly induced the Party Obligors to enter into the Forbearance Agreement knowing that it was. going to co1nmepce another foreclosure actiQn on an unrelated property to hinder Party ObHgors;. coinpliahce with the Forbearance Agteem¢nt is; also_ unavailing, since defendants w~re served with the notice of defaultand acceleration in the unrelated actioi1 well before.. the Party Qbligors entered 'into the Forbearance Agreement, and defendants have not shm:vn thatplaintiff was tinder any obligation to forbear the enforcement of 1ts rights and remedies in- the unrelated action. l2 [* 12] 12 of 13 INDEX NO. 513988/2021 FILED: KINGS COUNTY CLERK 09/01/2022 04:46 PM NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 09/01/2022 As such, defendants' fraud counterclaim must be dismissed pursuant to CPLR 3211 (a) (7). Accordingly, it is ORDERED that plaintiffs motion (mot. seq. one) to dismiss defendants' counterclaims, pursuant to CPLR 32 I l (a) (I) and (7), is granted; and it is further ORDERED that defendants' counterclaims are hereby dismissed. This constitutes the decision and order of the court. ENTER, HON. LAWRENCE KNIPEL ADMINISTRATIVE JUDGE 13 [* 13] 13 of 13
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