Opinion
No. 2022-50693 Index No. 651477/2021
07-29-2022
The Forest Road Company LLC, Plaintiff, v. Garbo Holdings LLC, VITALITY VISUAL EFFECTS LLC, DAVID STRAUSE, LINDA STRAUSE, Defendant.
Unpublished Opinion
Robert R. Reed, J.
The following e-filed documents, listed by NYSCEF document number (Motion 002) 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 42, 43, 44, 45 were read on this motion for JUDGMENT - DEFAULT.
In this action to enforce personal guarantees of a promissory note, plaintiff The Forest Road Company LLC ("plaintiff") moves, pursuant to CPLR 3215, for entry of a default judgment against defendants Garbo Holdings LLC ("Garbo"), Vitality Visual Effects LLC ("Vitality"), and Linda Liddell Strause ("Linda Strause"). Defendants have submitted no opposition.
Background
According to a term sheet executed on October 25, 2019 ("term sheet"), plaintiff agreed to loan nonparty Skyline 2 Productions Inc. ("Skyline"), a Canadian corporation, up to $1 million in advance of Canadian federal and provincial tax credits Skyline was expected to receive for filming a movie in British Columbia (NYSCEF doc. no. 23, affidavit of Idan Shani [Shani aff], paras. 5-7). On November 12, 2019, plaintiff advanced $1 million to Skyline, and Skyline issued a promissory note ("the note") to plaintiff in the principal amount of $1 million, together with interest to accrue at the rates set forth in the term sheet (id., para. 8; NYSCEF doc. no. 25, at 1). The loan had a one-year maturity date from the initial advance date, and Skyline agreed to repay plaintiff an amount equal to 114% of the net loan amount plus default interest, as accrued thereon and any reasonable costs of enforcement or collection incurred by lender ("the repayment amount") (NYSCEF doc. no. 24, at 1). The default interest provision in the term sheet provides:
"To the fullest extent permitted by applicable law, commencing on the Maturity Date, "Default Interest" shall begin to accrue on the outstanding balance for each Default Interest Period as follows: (i) at the quarterly rate of five percent (5%) for the first Default Interest Period; (ii) at the quarterly rate of seven percent (7%) for the second Default Interest Period; (iii) at the quarterly rate of nine percent (9%) for the third Default Interest Period; (iv) at the quarterly rate of eleven percent (11%) for the fourth Default Interest Period; and (v) at the annual rate of fifteen percent (15%) for each Default Interest Period thereafter. For the purposes hereof, a "Default Interest Period" shall mean each ninety (90) day period following the Maturity Date, with the first Default Interest Period commencing as of the Maturity Date and ending ninety (90) days following the Maturity Date, the second Default Interest Period commencing on the 91st day following the Maturity Date and ending 180 days following the Maturity Date, etc.
Default Interest calculated hereunder shall be computed on the outstanding principal balance of the Note as of the first day of the applicable Default Interest Period and shall be compounded quarterly. For clarity, Default Interest shall be applicable for the entire Default Interest Period as of the first day of such Default Interest Period (e.g., as of the 91st day following the Maturity Date, the outstanding balance of the Note shall be compounded 6%)"(id. at 2).
The note provides that Skyline "hereby waives presentment for payment, notice of non-payment, protest and notice of protest and any other condition precedent to action against the undersigned for payment of this Note and does hereby agree to pay all costs and expenses (including all reasonable legal costs) paid or incurred in collecting the same after the same shall become due and payable upon and following demand" (NYSCEF doc. no. 25, at 1).
On October 25, 2019, defendants Garbo, Vitality and Linda Strause each separately and individually executed a guarantee ("the guarantees") for the benefit of Skyline, as "debtor," in favor of plaintiff, as "lender" (NYSCEF doc. no. 23, Shani aff, para 16; NYSCEF doc. nos. 26 [Garbo guarantee], 27 [Vitality guarantee], and 28 [Linda Strause guarantee]). These guarantees identically provide, in pertinent part, that defendants Garbo, Vitality and Linda Strause each:
"unconditionally guarantees jointly and severally with the Debtor payment to the Lender of all indebtedness, obligations and liabilities of any kind, now or hereafter existing, direct or indirect, absolute or contingent, joint or several, of the Debtor to the Lender, whether as principal or surety, together with all expenses (including legal fees on a solicitor and client basis) incurred by the Lender, its receiver or agent in the preparation, perfection and enforcement of security or other agreements held by the Lender in respect of such indebtedness, obligations or liabilities, and interest thereon" (NYSCEF doc. nos. 26, 27, and 28 at 1).
The guarantees provide that plaintiff need not exhaust its recourse against Skyline before pursuing payment from each of these defendants (id. at 3). The guarantees also provide that each defendant shall pay plaintiff its reasonable expenses, including its reasonable legal fees, incurred in enforcing the guarantees (id.). Further, the guarantees specify that New York law shall apply and that each defendant consents to jurisdiction in New York for disputes arising under the guarantees (id. at 5). On November 12, 2020, Skyline allegedly failed to repay the $1.14 million due upon the loan's maturity.
Plaintiff commenced this action against defendants Garbo, Vitality and Linda Strause by filing a complaint asserting a single claim for breach of the guarantees. The complaint seeks damages of $1.14 million plus interest at the rates set forth in the term sheet, and an award of its costs, attorney's fees, and disbursements. Plaintiff now moves for a default judgment.
Discussion
On an application for a default judgment, pursuant to CPLR 3215, the plaintiff must submit "proof of service of the summons and the complaint[,]... proof of the facts constituting the claim, [and] the default" (CPLR 3215[f]). Upon default, "a defendant admits all traversable allegations contained in the complaint, and thus concedes liability, although not damages" (HF Mgt. Servs. LLC v Dependable Care, LLC, 198 A.D.3d 457, 458 [1st Dept 2021] [internal quotation marks and citation omitted]; Petty v Law Off. of Robert P. Santoriella, P.C., 200 A.D.3d 621, 621 [1st Dept 2021] [while plaintiff must submit proof of prima facie viability of its claims, "the standard of proof is minimal"] [internal quotation marks and citation omitted]). Plaintiff has met this burden.
First, plaintiff has demonstrated that it served each of these defendants with the summons and complaint and that defendants' time to appear or answer has expired. Plaintiff has submitted an affidavit of service sworn to on March 19, 2021, which shows that defendant Garbo was served with process on March 12, 2021, by delivery to its registered agent, Business Filings Incorporated, at 108 West 13th Street, Wilmington, DE 19801 (NYSCEF doc. no. 30, affirmation of Jason M. Koral, para. 3; NYSCEF doc. no. 32). Such service is in conformity with CPLR 311(a)(1).
Plaintiff also has submitted an affidavit of service sworn to on May 6, 2021, which shows that defendant Vitality was served with process on April 30, 2021, by personal service on David Glenn Strause, a member, at 12855 Runway Road, Apt. 1208, Playa Vista, California 90094. Additional mailing was complete on May 14, 2021 by depository at a mailbox maintained by the United States Post Office, in an envelope marked "personal and confidential" that did not indicate on the outside that said notice was from an attorney or concerned an action against Vitality (NYSCEF doc. no. 30, para. 5; NYSCEF doc. no. 33). This service is in conformity with CPLR 311-a.
Finally, plaintiff submitted an affidavit of service sworn to on May 6, 2021, which shows defendant Linda Strause was personally served with process at her usual place of abode on April 30, 2021, by service on David Glenn Strause at 12855 Runway Road, Apt. 1208, Playa Vista, California 90094. Additional mailing was complete on May 14, 2021 by depository in a mailbox maintained by the United States Post Office, in an envelope marked "personal and confidential" that did not indicate on the outside that said notice was from an attorney or concerned an action against Linda Strause (NYSCEF doc. no. 30, para 6; NYSCEF doc. no. 34). At that time, the process server asked David Glenn Strause if his wife defendant Linda Strause was active in the military and received a negative reply (NYSCEF Doc. No. 44). Such service is sufficient under CPLR 308(2) (s ee also, 50 USC § 3931[b]; see Matter of Petre v Lucia, 205 A.D.3d 438, 438 [1st Dept 2022]; Unitrin Advantage Ins. v 21st Century Pharm., 158 A.D.3d 450, 451 [1st Dept 2018][a plaintiff moving for a default judgment against a natural person must furnish proof that the defendant is not active in the military].
Plaintiff demonstrated its compliance with CPLR 3215(g)(3)(i) and (4)(i). Plaintiff served each of these defendants with additional notice of the summons and complaint by mail at the Playa Vista address for both defendants Vitality and Linda Strause and at the Wilmington, DE address for defendant Garbo (NYSCEF Doc. Nos. 42, 43, 44, and 45).
On the merits, to enforce a written guaranty, the plaintiff need only prove "an absolute and unconditional guaranty, the underlying debt, and the guarantor's failure to perform under the guaranty" (Gansevoort 69 Realty LLC v Laba, 130 A.D.3d 521, 521 [1st Dept 2015] [internal quotation marks and citation omitted]). "[W]here a guaranty is clear and unambiguous on its face and, by its language, absolute and unconditional, the signer is conclusively bound by its terms absent a showing of fraud, duress or other wrongful act in its inducement" (Citibank, N.A. v Uri Schwartz & Sons Diamonds Ltd., 97 A.D.3d 444, 446-447 [1st Dept 2012] [internal quotation marks and citation omitted]). Plaintiff has demonstrated the merits of its claim against each defendant. Plaintiff's authorized agent, Idan Shani, attested that plaintiff advanced $1 million to Skyline on November 12, 2019 in exchange for the note (NYSCEF doc. no. 23, affidavit of Idan Shani, dated October 13, 2021, paras. 1 and 8). Shani avers that Skyline has never made any payments on the note, and that, as of November 12, 2020, the note's maturity date, Skyline has remained in default (id., para. 12). On November 18, 2020, plaintiff sent a notice of default and demand for payment to Skyline, but neither Skyline nor any of defendant guarantors responded to the demand (id., paras. 19 and 21; see also NYSCEF doc. no. 29). Shani attests that a total of $409,628 in interest on the loan has accrued as follows: $57,000 as of November 13, 2020; $83,790 on February 11, 2021, $115,271 on May 12, 2021, and $153,167 on August 10, 2021 (NYSCEF doc. no. 23, Shani aff, para. 14). The interest calculation is based on a rate of 5% for the first quarter after November 12, 2020, 7% for the second quarter and so on as per the term sheet (id., para. 13). Shani avers that $1,549,628 has accrued in principal and interest as of October 13, 2021 (id., ¶ 14).
The terms of the defendants' guarantees allow plaintiff to recover its attorney's fees (NYSCEF doc. nos. 26, 27, and 28, para 13 at 3; see Suttongate Holdings Ltd. v Laconm Mgt. N.V., 193 A.D.3d 489, 490 [1st Dept 2021]). Factors considered by the court in determining the reasonableness of a legal fee include: "time and labor required, the difficulty of the questions involved, and the skill required to handle the problems presented; the lawyer's experience, ability and reputation; the amount involved and benefit resulting to the client from the services; the customary fee charged by the bar for similar services; the contingency or certainty of compensation; the results obtained; and the responsibility involved" (Matter of Freeman, 34 N.Y.2d 1, 9 [1974]).
As applied here, plaintiff's motion is deficient as counsel merely affirms without supporting documentation that plaintiff has incurred $6,180 in legal fees (NYSCEF doc. no. 30, Koral aff, para 9). Nevertheless, plaintiff may submit proper proof of its legal fees incurred thus far, as set forth below.
Accordingly, it is
ORDERED that the motion of plaintiff The Forest Road Company LLC for a default judgment against defendants Garbo Holdings LLC, Vitality Visual Effects LLC, and Linda Liddell Strause is granted without opposition; and it is further
ORDERED that the Clerk is directed to enter judgment in favor of plaintiff The Forest Road Company LLC in the sum of $1,140,000, together with accrued interest of $409,628 from November 13, 2020 to August 10, 2021, with interest at the contractual rates from August 11, 2021 through the date of entry of this judgment, and at the statutory rate thereafter, together with costs and disbursements as taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further
ORDERED that, within 30 days of this order, plaintiff The Forest Road Company LLC, if it be so advised, may file proper proof of reasonable attorney's fees incurred, including an additional attorney's affirmation, billing records or invoices, and any other supplemental proof on its application for attorney's fees.