Opinion
Index No. 850275/2021 Motion Seq. No. 001
01-13-2023
WILMINGTON TRUST, NATIONAL ASSOCIATION, Plaintiff, v. 153 ELIZABETH STREET, LLC, 153 ELIZABETH HOTEL LLC, 30 KENMARE MASTER, LLC, EDMOND LI, ENVIRONMENTAL CONTROL BOARD OF THE CITY OF NEW YORK, THE CITY OF NEW YORK, PEOPLE OF THE STATE OF NEW YORK, JOHN DOE Defendant.
Unpublished Opinion
PRESENT: HON. FRANCIS A. KAHN, III Justice
DECISION + ORDER ON MOTION
HON. FRANCIS A. KHAN J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 001) 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71,72, 73 were read on this motion to/for JUDGMENT - SUMMARY. Upon the foregoing documents, the motion and cross-motion are determined as follows:
The within action is to foreclose on a consolidated and modified mortgage encumbering a parcel of commercial real property located at 153 Elizabeth Street, New York, New York given by Defendant 153 Elizabeth Street LLC ("Elizabeth") and 153 Elizabeth Hotel LLC ("Hotel"). The mortgage secures a loan with an original principal amount of $24,000,000.00 which is memorialized by a consolidated, amended and restated note. The note and mortgage, both dated April 8, 2016, were given to non-party Silverpeak Real Estate Finance LLC and were executed by Defendant Edmund Li ("Li"), as Authorized Signatory of both borrowers. Concomitantly with these documents, a document titled "Guaranty of Recourse Obligations" securing the indebtedness was executed by Defendant Li. Plaintiff commenced this action alleging Defendants defaulted under the note. Defendants Elizabeth, Hotel and Li answered jointly and a single combined affirmative defense/counterclaim alleging that Plaintiff breached the implied covenant of good faith and fair dealing.
Now. Plaintiff moves for inter alia summary judgment against Elizabeth, Hotel and Li, for a default judgment against the non-appearing parties, appointing a referee to compute and to amend the caption. Defendants Elizabeth, Hotel and Li oppose the motion and cross-move pursuant CPLR §3025 [b] for leave to amend her answer to assert, inter alia, an affirmative defense of standing as well as to plead certain corrections. Plaintiff opposes the cross-motion.
As the proposed affirmative defense directly impacts what Plaintiff must proffer as a prima facie case for summary judgment (see generally Wells Fargo Bank, N.A. v Tricario, 180 A.D.3d 848 [2nd Dept 2020]; U.S. Bank, NA v Nathan, 173 A.D.3d 1112 [2d Dept 2019]; HSBC Bank USA, N.A. v Bermudez, 175 A.D.3d 667, 669 [2d Dept 2019]), the Court will address that branch of the cross-motion first. Leave
Plaintiff s motion was supported with an affidavit from Josef Bittman ("Bittman"), an Asset . Manager of LNR Partners LLC ("LNR"), the special servicer for Plaintiff. Nowhere in his affidavit | does Bittman claim his knowledge was founded in his personal observations (see Bank of N Y. Mellon v Gordon, 171 A.D.3d 197, 206 [2d Dept 2019]["a witness may always testify as to matters which are within his or her personal knowledge through personal observation"]). Rather, Bittman averred that he: had personal knowledge of the facts of this case by virtue of a review of the books and records of his employer. However, he failed to lay an appropriate foundation for the admission of any of the proffered documents as business records under CPLR §4518 (see eg Wells Fargo Bank. N.A. v Yesmin, 186 A.D.3d 1761, 1762 [2d Dept 2020]). The records evidencing the note and mortgage were created by the original lender, not Plaintiff, and Bittman also demonstrated no knowledge of the lender's record keeping practices (see Berkshire Bank v Fawer, 187 A.D.3d 535 [1st Dept 2020]; IndyMac Fed. Bank, FSB v Vantassell, 187 A.D.3d 725 [2d Dept 2020]). Further, he did not attest any records relied on were to amend a pleading under CPLR §3025 [b] is to be freely given "absent prejudice or surprise resulting directly from the delay" (see e.g. O'Halloran v Metropolitan Transp. Auth., 154 A.D.3d 83 [1st Dept 2017]; Anoun v City of New York, 85 A.D.3d 694 [1st Dept 2011]; see also Fahey v County of Ontario, 44 N.Y.2d 934, 935 [1978]). All that need be shown is that "the proffered amendment is not palpably insufficient or clearly devoid of merit" (MBIA Ins. Corp, v Greystone &Co., Inc., 74 A.D.3d 499 [1st i Dept 2010]). To justify denial of such a motion, the opposing party "must overcome a heavy I presumption of validity in favor of [allowing amendment]" (McGhee v Odell, 96 A.D.3d 449, 450 ). J
Defendants demonstrated that standing, for pleading purposes, has merit. Plaintiff was not the original lender and appears to have become holder of the note through a series of endorsements contained in allonges. In opposition, Plaintiff failed to demonstrate the existence of any prejudice based upon the delay in seeking leave to amend (see GMAC Mtge., LLC v Coombs, 191 A.D.3d 37, 50-51 [2d . Dept 2020]; cf HSBC Bank USA, N.A. v Szoffer, 149 A.D.3d 1400 [2d Dept 2017]). Since Defendants have raised an issue for the first time in opposition to Plaintiffs motion for summary judgment, Plaintiff; is entitled to submit rebuttal evidence in reply to cure any deficiencies in its prima facie case on this s issue occasioned by the amendment (see GMAC Mtge., LLC v Coombs, supra; Citimortgage, Inc. v Espinal, 134 A.D.3d 876, 879 [2d Dept 2015]).
In moving for summary judgment, Plaintiff was required to establish prima facie entitlement to judgment as a matter of law though proof of the mortgage, the note, and evidence of Defendants' default in repayment (see eg U.S. Bank, N.A. v James, 180 A.D.3d 594 [1st Dept 2020]; Bank of NYv Knowles, 151 A.D.3d 596 [1st Dept 2017]; Fortress Credit Corp, v Hudson Yards, LLC, 78 A.D.3d 577 [1st Dept 2010]). Based upon the above amendment, Plaintiff was also required to demonstrate it had standing when this action was commenced (see eg Wells Fargo Bank, N.A. v Tricario, 180 A.D.3d 848 [2nd Dept 1 2020]).
Proof supporting a prima facie case on a motion for summary judgment must be in admissible 1 form (see CPLR §3212[b]; Tri-State Loan Acquisitions III, LLC v Lilkowski, 172 A.D.3d 780 [1st Dept 2019]). A plaintiff may rely on evidence from persons with personal knowledge of the facts, documents in admissible form and/or persons with knowledge derived from produced admissible records (see eg ( U.S. Bank N.A. v Moulton, 179 A.D.3d 734, 738 [2d Dept 2020]). No particular set of business records f must be proffered, as long as the admissibility requirements of CPLR 4518[a] are fulfilled and the j records evince the facts for which they are relied upon (see eg Citigroup v Kopelowitz, 147 A.D.3d 1014, 1015 [2d Dept 2017]). received from the makers, incorporated into the records their employers kept and that Plaintiff routinely relied on such records in its business (see U.S. Bank N.A. v Kropp-Somoza, 191 A.D.3d 918 [2d Dept 2021]; Tri-State Loan Acquisitions III, LLC v Litkowski, 172 A.D.3d 780, 782-783 [2d Dept 2019]; cf. Bank of Am., N.A. v Brannon, 156 A.D.3d 1, 10 [1st Dept 2017]). At most, Bittman's affidavit demonstrates that he conducted a naked "review of records maintained in the normal course of business [which] does not vest an affiant with personal knowledge" (JPMorgan Chase Bank, N.A. v Grennan, J 175 A.D.3d 1513, 1517 [2d Dept 2019]). |
Plaintiffs attempt to cure these defects with a further affidavit Bittman submitted in reply is inappropriate and may not be considered by the Court (see Deutsche Bank Natl. Trust Co. v Adlerstein, 171 A.D.3d 868, 870 [2d Dept 2019]; see also Ditech Fin., LLC v Cummings, 208 A.D.3d 634, 636 [2d Dept 2022]). Unlike the issue of standing, which was raised for the first time in opposition (see Central Mtge. Co. v Jahnsen, 150 A.D.3d 661, 664-665 [2d Dept 2017]), a prima facie case for foreclosure cannot be met upon reply. Accordingly, since none of the evidence proffered to demonstrate the note, mortgage, Defendants' default and Plaintiffs standing are admissible, Movant failed to establish any of the prima facie elements of the cause of action for foreclosure (see Federal Natl. Mtge. Assn, v Allanah, 200 A.D.3d 947 [2d Dept 2021]). .
Regarding the counter claim, it is established that implicit in all contracts is an implied covenant of fair dealing and good faith (see 511 W. 232nd Owners Corp, v Jennifer Realty Co., 98 N.Y.2d 144, 153, [2002]), "which encompasses any promises that a reasonable promisee would understand to be included" (New York Univ, v Continental Ins. Co., 87 N.Y.2d 308, 318 [1995]). Here, Defendants posit Plaintiffs breached this covenant "by sending its notice of acceleration and commencing this action when it did, thereby interfering with the Elizabeth Street Defendants' ability to market and sell the mortgaged property at fair market value and without the need for and expense of foreclosure proceedings" (Defendants' Answer ¶18). This claim fails, however, as "no obligation can be implied that 'would be inconsistent with other terms of the contractual relationship'" (Dalton v Educ. Testing Serv., 87 N.Y.2d 384, 389 [1995], citing Murphy v American Home Prods. Corp., 58 N.Y.2d 293, 304, [1985]). To accept Defendants' cause of action as viable could lead to the incongruous determination that Plaintiff breached the implied covenant by exercising its express right to accelerate the debt under the same contract.
Plaintiff has established that it is entitled to a default judgment against all non-appearing Defendants (see CPLR §3215; SRMOF II 2012-1 Trust v Telia, 139 A.D.3d 599, 600 [1st Dept 2016]).
The branch of Plaintiff s motion to amend caption to substitute John Doe and Jane Doe in place of John Doe #1, John Doe #2, John Doe #3 through John Doe # 12 is granted without opposition (see generally CPLR §3025; JP Morgan Chase Bank, N.A. v Laszio, 169 A.D.3d 885, 887 [2d Dept 2019]).
Accordingly, it is
ORDERED that the branch of Plaintiff s motion for summary judgment on its claim for foreclosure, appointment of a referee is denied, and it is
ORDERED that the branch of the motion for summary judgment dismissing the counterclaim is granted, and it is
ORDERED that the Defendants' cross-motion is granted only to the extent that they may file an amended answer containing the affirmative defense of lack of standing and the typographical and grammatical corrections, and it is
ORDERED that the branch of Plaintiff s motion for a default judgment is granted as against all non-appearing Defendants, and it is
ORDERED that the branch of Plaintiff s motion to amend the caption is granted and the amended caption is as follows:
SUPREME COURT STATE OF NEW YORK COUNTY OF NEW YORK
WILMINGTON TRUST, NATIONAL ASSOCIATION, AS TRUSTEE FOR THE BENEFIT OF THE REGISTERED HOLDERS OF WELLS FARGO COMMERCIAL MORTGAGE TRUST 2016-C34, COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2016-C34, BY AND THROUGH ITS SPECIAL SERVICER, LNR PARTNERS, LLC, Plaintiff
v.
153 ELIZABETH STREET, LLC, 153 ELIZABETH HOTEL LLC, 30 KENMARE MASTER, LLC, EDMOND LI, ENVIRONMENTAL CONTROL BOARD OF THE CITY OF NEW YORK, THE CITY OF NEW YORK, PEOPLE OF THE STATE OF NEW YORK, Defendants
Index No. 850275/2021
This matter is set down for a status conference on March 15, 2023 @ 10:40 am via Microsoft Teams.
CHECK ONE: [ ] CASE DISPOSED [X] NON-FINAL DISPOSITION
[ ] GRANTED [X] GRANTED IN PART [ ] OTHER
APPLICATION [ ] SETTLE ORDER [ ] SUBMIT ORDER
CHECK IF APPROPRIATE: [ ] INCLUDES TRANSFER/REASSIGN [ ] FIDUCIARY APPOINTMENT [ ] REFERENCE