Vaster Sub II, LLC v. Safdieh

Vaster Sub II, LLC v Safdieh 2024 NY Slip Op 33808(U) October 23, 2024 Supreme Court, New York County Docket Number: Index No. 650265/2024 Judge: Margaret A. Chan 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: NEW YORK COUNTY CLERK 10/24/2024 04:41 PM INDEX NO. 650265/2024 NYSCEF DOC. NO. 33 RECEIVED NYSCEF: 10/24/2024

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 49M X

VASTER SUB II, LLC INDEX NO. 650265/202 4

Plaintiff, MOTION DATE 01/18/2024

-v- MOTION SEQ. NO. [MS] 001 NORMA NICOLE SAFDIEH,

Defendant. DECISIO N+ ORDER ON MOTION X

HON. MARGARET A. CHAN:

The following e-filed documents, listed by NYSCEF document number (Motion 001) 2, 19, 20, 21, 22, 23,24,25,2 6,27,28,29 , 30,31, 32 were read on this motion to/for SUMMARY JUDGMENT in LIEU OF COMPLAIN T

In this case arising from defendant 's default on a business loan from plaintiff Vaster Sub II, LLC (''Vaster Sub" or "plaintiff' ), plaintiff brings a motion for summary judgment in lieu of complain t pursuant to CPLR 3213 to recover on defendan t Norma Nicole Safdieh's personal guaranty of the loan. Defendan t cross· moves to dismiss pursuant to CPLR 32ll(a)(4) and RPAPL 1301 based on a currently- pending foreclosur e action on the property in New Jersey. For the following reasons, both motions are denied. Background

Plaintiff is "a ,Delaware limited liability company whose principal place of business is in Florida" with no offices in New York (NYSCEF # 4, Rivera Aff, ,r 2). Defendan t is the managing member and 99% owner of non-party 58 Ocean Avenue LLC ("⁵⁸ Ocean"), a New Jersey limited liability company (NYSCEF # 21, Defense Counsel Aff, ,r,r 6-8; NYSCEF # 8, Guaranty Agreemen t, at Recitals). 1

On August 12, 2022, non·party Vaster Loans LLC (Vaster Loans), plaintiffs affiliate, loaned $3.8 million to 58 Ocean ("the Loan") (see NYSCEF # 3, Pltfs MOL, at 2; NYSCEF # 4 ,r 4). The purpose of the Loan was to buy and develop a piece of

FILED: NEW YORK COUNTY CLERK 10/24/2024 04:41 PM INDEX NO. 650265/2024 NYSCEF DOC. NO. 33 RECEIVED NYSCEF: 10/24/2024

FILED: NEW YORK COUNTY CLERK 10/24/2024 04:41 PM INDEX NO. 650265/2024 NYSCEF DOC. NO. 33 RECEIVED NYSCEF: 10/24/2024

FILED: NEW YORK COUNTY CLERK 10/24/2024 04:41 PM INDEX NO. 650265/2024 NYSCEF DOC. NO. 33 RECEIVED NYSCEF: 10/24/2024

Discussion

Plaintiffs Summarv Judgmen t in Lieu of Complain t

A party may seek summary judgment in lieu of complain t pursuant to CPLR 3213 to recover an amount based on an "instrume nt for the payment of money only'' ( Weissman v Sinorm Deli: 88 NY2d 437, 443-444 [1996]). In particular , a party is entitled to relief if "a prima facie case would be made out by the instrume nt and a failure ·to make the payments called for by its terms" (id.). "But the remedy is not available where there are other issues and considera tions presented by the writing," such as where "the liabilities and obligation s can only be ascertain ed by resort to evidence outside the instrumen t, or if more than simple proof of nonpaym ent or a de minimis deviation from the face of the document is involved (Kerin v Ka.ufman, 296 AD2d 336, 337 [1st Dept 2002] [denying summary judgment in lieu of complaint ]).

Here, although defendan t does not challenge any of the underlyin g facts, plaintiffs motion neverthel ess fails for a variety of reasons. Chief among them: the Guaranty is not an instrume nt for the payment of money only. While "[i]t is true that generally, an unconditi onal guaranty qualifies as an instrume nt amenable to CPLR 3213 treatment ," the document s here "guarante e not only 'payment' but also 'performa nce' of the borrower' s obligation s" (PDL Biopharma~ Inc. v Wohlstadter, 147 AD3d 494, 495 [1st Dept 2017]).

Per the Guaranty , defendan t "absolutel y, irrevocab ly and unconditi onally guarantee [d] ... the payment andperfo rmanceo fthe Obligatio ns ... as and when the same shall be due and payable" (NYSCEF # 8 § 1 [a] [emphasis added]). Notably, the Guaranty does not directly define "the Obligatio ns," but instead states that "[c]apital ized terms not otherwise defined herein shall have the meanings given to such terms in the Loan Agreemen t" (id at Recitals). The Loan Agreemen t in tum defines "the Obligatio ns" as having "the meaning set forth in the [M]ortgage" (NYSCEF # 6 at 3). Finally, the Mortgage defines "the Obligation s" as:

"the obligation s under the Note, and any extension s and renewals of the same, and further ... the performa nce of the· covenants , conditions, and agreemen ts hereinaft er set forth and set forth in the Loan Documen ts, and to secure all other indebtedn ess of every descriptio n of Borrower to Lender in connectio n with the Loan, including, without limitation , all Future Advances (as defined in Section 4. I) that may subseque ntly be made to Borrower by Lender, evidenced by any other promissor y notes, and all renewals and extension s thereof, and all charges and expenses of collection incurred by Lender, including , without limitation , court costs, and reasonabl e attorney's fees"

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(NYSCEF # 13 at *19 [emphasis added]). Thus, "the Obligatio ns" refer to the various covenants set forth in the loan document s.

This definition compels the first reason to deny the motion: it is unclear what document s are included in the definition of "Loan Documen ts," and by extension , what may properly be considere d an "Obligatio n" under the Guaranty . The Mortgage states that the term "Loan Documen ts" is "defined below" (NYSCEF # 13 at *19, Granting Clauses]). However, because the Mortgage does not contain a dedicated definition s section, and because plaintiff did not file a searchabl e PDF or provide a pincite, that promised definition remains elusive (see NYSCEF # 13 at *19; see also Part Rule II.B. ["All e·filed document s must be text-searc hable"]). While plaintiffs brief defines Loan Documen ts as "the Note, the Loan Agreemen t, and the Guaranty " (NYSCEF # 3 at 5), .this says nothing about how the Mortgage itself defines the term. This alone requires denial of the motion because it is not clear what documen ts-and therefore what Obligatio ns-are being guarantee d.

Assuming the Loan Documen ts include the Loan Agreemen t, Note, Mortgage , and Guaranty , the covenants making up "the Obligatio ns" require performan ce beyond the mere payment of money. For instance, those covenants include a covenant "[t]o procure, deliver to Lender, and maintain in effect at all times while Borrower is indebted· to Lender" various types of insurance for the Property or construct ion thereupon (NYSCEF # 6 § 5.5); maintena nce of books and records and productio n of such records if demanded by plaintiff (id § 5.8); and even maintaini ng the Property "in complianc e with all applicable laws and regulation s, including zoning, building codes and the American s with Disabiliti es Act and regulation s thereunde r" (id§ 5.1). And those are just the covenants from the Loan Agreemen t. There are further terms from both the Mortgage and the Note that place additiona l obligation s on 58 Ocean, and by extension , defendant .

While plaintiff may ultimately establish that "[s]uch provision[s] do0 not require additiona l performan ce by plaintiff as a condition precedent to payment, or otherwise make defendan t's promise to pay something other than unconditi onal" (Stevens v Phlo Corp., 288 AD2d 56 [1st Dept 2001]), at this stage it is not clear from the face of the Guaranty that it is an instrume nt for the payment of money only (iPaymen t, Inc. v Silverman , 192 AD3d 586, 587 [1st Dept 2021] ["(A) guarantee ofboth payment and performan ce does not qualify as an instrume nt for the payment of money only under CPLR 3213"]; Punch Fashion, LLC v Merchant Factors Corp., 180 AD3d 520, 521 [1st Dept 2020] [same]; see also Manhatta n Real Estate Fund, LP v Paz, - Misc 3d -, 2024 NY Slip Op 32017[U], *3 [Sup Ct, NY County 2024] [denying summary judgment in lieu of complain t where "Guarant eed Obligation s" included "mainten ance of all insurance (and timely payment of all premiums thereon)"] ).

The motion also fails because it requires significan t reference to extrinsic evidence. An instrume nt does not qualify for CPLR 3213 treatmen t "if outside proof Page 5 of 8 650265/2024 VASTER SUB II, LLC vs. SAFDIEH, NORMA NICOLE Motion No. 001

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is needed, other than simple proof of nonpaym ent or a similar de minimis deviation from the face of the document " (id; see Maglich v Saxe, Bacon & Bolan, P. C., 97 AD2d 19, 21 [1st Dept 1983] ["(w)here proof outside the instrume nt is necessary to establish the underlyin g obligation , the CPLR 3213 procedure does not apply"]). Outside evidence that can be considere d a "de minimis deviation" includes readily ascertaina ble interest rate ( Weissman, BB NY2d at 444), a line of credit statemen t (Counsel Fin. II LLC v Bortnick, 214 AD3d 1388, 1390 [4th Dept 2023]), or other "simple, readily verified fact, confirmed by document ary evidence in the record" (Nimble Ventures, LLC v Graves, 192 AD3d 514, 516 [1st Dept 2021]). In contrast, summary judgment in lieu of complain t is not available where a note "referred to other document s with regard to events of default" (Matter ofEstate ofPeck, 191 AD3d 537 [1st Dept 2021]), or where the court must construe extrinsic document s to determine the "prelimin ary legal issue" of whether the relevant document s are even currently effective (see PDL, 147 AD3d at 496).

As just shown, the scope of the Guaranty 's "Obligatio ns" without significan t reference to other document s in not de minimis. The definition of "Obligatio ns" alone requires cross·refe rencing not one, but two separate document s (the Loan Agreemen t and the Mortgage ). The actual content of those Obligatio ns cannot be understoo d without a close reading of the terms of at least three document s (the Loan Agreemen t, Mortgage , and Note). While plaintiff filed these document s as proof of the underlyin g Loan, plaintiff is moving on defendan t's Guaranty , and so all these other document s are extrinsic (see e.g., PDL, 147 AD3d at 496 [denying summary judgment in lieu of complain t where reference to and construct ion of other related agreemen ts was necessary to understan d obligation s]). Excursion s to the terms of these agreemen ts are more than de minimis, and therefore out of bounds for CPLR 3213 treatmen t (id).

Plaintiffs motion for summary judgment in lieu of complain t is denied.

Defendant's Cross Motion to Dismiss

CPLR 32ll(a)(4 ) allows a party to move for dismissal where there is "another pending action between the same parties for the same cause of action" in another state or federal court (CPLR 3211 [a] [4]). To warrant dismissal under this provision, "the two actions must be sufficient ly similar and the relief sought must be the same or substanti ally the same" (Montalvo v Air Dock Sys., 37 AD3d 567, 567 [2d Dept 2007] [internal citations and quotation s omitted]; see also Kent Dev. Co. v Liccione, 37 NY2d 899, 901 [1975]). There must also at least be a "substant ial identity of parties 'which generally is present when at least one plaintiff and one defendan t is common in each action' " (JPMorgan Chase Bank, N.A. v Luxama, 172 Page 6 of 8 650265/2024 VASTER SUB II, LLC vs. SAFDIEH, NORMA NICOLE Motion No. 001

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AD3d 1341, 1342 [2d Dept 2019], citing Morgulu s vJ. Yudell Realty, 161 AD2d 211, 213 [1st Dept 1990)). Moreove r, the determi nation of whether to dismiss based on another action pending is subject to the court's broad discretio n ( Whitney v Whitney, 57 NY2d 731,732 [1982]).

Defenda nt cannot benefit from CPLR 3211(a)(4). As an initial matter, dismissa l under that provisio n is not mandato ry, but is based on the court's discretio n (id at 732). While defenda nt is correct that she was a defenda nt in the NJ Foreclos ure case when this case was first fi1ed, she is not a litigant there now. There is therefor e no "substan tial identity of the parties." Plaintif f provides no case law explaini ng why this court should neverthe less find substan tial identity , such as a case allowing the court to pierce the corporat e veil in these circums tances. The . motion is thus denied.

Defenda nt's referenc es to RPAPL 1301(3) do not save the motion. RPAPL 1301(3) prohibit s mortgag e lenders from pursuin g both foreclos ure actions and actions to recover mortgag e debt at the same time without specific permiss ion from the court in whichev er action came first (see RPAPL 1301 [3]). Defenda nt argues that because the NJ Foreclos ure Case remains pending , plaintiff cannot bring this action. 2 But RPAPL 1301(3) "does not apply where, as here, the property securing the loan is located outside of New York State" ( Wells Fargo Bank Minnesota, NA. v Cohn, 4 AD3d 189 [1st Dept 2004)). Defenda nt's reliance on WellsFargo Bank, NA. v Pena, 51 Misc 3d 241 [Sup Ct, Kings County 2016] is unavaili ng, as the First Departm ent recently confirm ed that Cohn remains good law (see Wells Fargo Bank, NA. v Bajana, 228 AD3d 526, 527 [1st Dept 2024] [finding RPAPL § 1301(3) inapplic able where "the subject properti es (were) located in Florida" ]; see also WPC B111Bd Lender LLC v Bartkow ski: - Misc 3d - 2024 NY Slip Op 32526[U] **3 [Sup Ct, NY County] [citing Bajana to rule RPAPL 1301(3) does not apply to out-of-s tate properti es]).

Defenda nt's cross motion to dismiss is denied.

Conclusion

Based on the foregoing, it i~

ORDER ED that plaintif fs motion for summar y judgme nt in lieu of complai nt is denied; and it is further

2 The court does not reach plaintiffs additiona l argument regarding whether these defenses were waived under the Guaranty . Page 7 of 8 650265/2024 VASTER SUB 11, LLC vs. SAFDIEH, NORMA NICOLE Motion No. 001

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ORDERE D that defendant 's cross·mot ion to dismiss is denied; and it is further

ORDERE D that this proceedin g is converted into a plenary action; and it is further

ORDERE D that plaintiff shall efile a formal complain t within 20 days of entry of this order; and it is further

ORDERE D that defendan ts shall answer or otherwise respond to the complain t within 20 days of efiling of the formal complaint ; and it is further

ORDERE D that the parties shall serve a copy of this Decision and Order with notice of entry on the Clerk of the Court in accordanc e with the procedure s set forth in the Protocol on Courthou se and County Clerk Procedure s for Electronic ally Filed Cases (accessibl e at the "E-Filing' ' page and on the court's website at the address www.nyc ourts.gov /supctman h).

10/23/2024 DATE MARGARET A. CHAN, J.S.C.

~ CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION

GRANTED 0 DENIED GRANTED IN PART □ OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER

CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT □ REFERENCE

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Footnotes

[1] Defendant does not challenge jurisdiction . The court presumably has jurisdiction because defendant resides in New York City (see NYSCEF # 18, Aff of Service, ,i 3 [serving defendant via USPS to an address in New York City]). 650265/2024 VASTER SUB II, LLC vs. SAFDIEH, NORMA NICOLE , Page 1 of 8 Motion No. 001 · [* 1] 1 of 8 real estate in New Jersey located at 58 Ocean Avenue, Deal, NJ 07723 ("the Property" ) (see NYSCEF # 7, Affidavit of Business Purpose of Loan, ,r 3). Loan Documen ts The Loan is governed by a series of document s including , among others, [i] a Promissor y Note between Vaster Loans and 58 Ocean ("Promiss ory Note" or "Note") (NYSCEF # 5, Promisso ry Note); [ii] a Loan Agreemen t between Vaster Loans and

[58] Ocean ("Loan Agreemen t") (NYSCEF # 6, Loan Agreemen t); [iii] a Guaranty Agreemen t by defendan t in favor of Vaster Loans ("Guaran ty Agreemen t" or "Guaranty ") (NYSCEF # 8, Guaranty ); and [iv] a Mortgage on the Property in favor of Vaster Loans ("Mortgage") (NYSCEF # 13, NJ Case Documen ts, at *19·*37 [Mortgage]). All four document s are governed by New Jersey law (see NYSCEF # 5 §§ 7Ll], 7[k]; NYSCEF # 6 § 8.15; NYSCEF # 8 § 18; NYSCEF # 13 at *33, § 4.16). Plaintiff refers to these document s together as the Loan Documen ts, except for the Mortgage , which is treated separatel y (NYSCEF # 3 at 5). Under the Note, 58 Ocean was to pay Vaster Loans interest each month on a fixed schedule beginning February 2023 and then repay the principal of the Loan and all unpaid interest on the Maturity Date in Septembe r 2023 (NYSCEF # 5 §§ 1, 4 [a] [i]). Failure to make these payments constitute s an Event of Default (id§ 6). Upon an Event of Default, all the principal and accrued unpaid interest, as well as any other "permitte d charges," become "immedia tely due and payable without notice to or demand upon Borrower " (id). The Note also mandated certain other charges, including post-judg ment interest and a fee for fully repaying the Loan under any circumsta nce (id§§ 3 [b], 4 [cl). The Loan Agreeme nt sets forth the terms of the Loan in more detail. For instance, the Loan Agreemen t includes several condition s to the Loan including "issuance " of title insurance , "delivery of an as·built survey ... confirmin g that [the Property] is in complianc e with all applicable ... requireme nts" upon Lender's request, and certain agreemen ts from present leasehold ers of the Property if any exist (NYSCEF # 6 at Article III,§§ 3.3, 3.5. 3.7). The Loan Agreemen t also contains certain covenants from 58 Ocean, including a covenant to use the Loan proceeds solely to purchase the Property or as otherwise allowed in the Loan Agreemen t, maintain insurance , keep books and record, manage or hire a managem ent company for the Property, pay taxes for the Property, and more (id at Article V). The Loan Agreemen t and Note are secured by both the Mortgage and the Guaranty Agreeme nt (see NYSCEF # 3 at 4). Per the Mortgage , 58 Ocean made additiona l covenants regarding the care, taxes, expenses, and more related to the Property (see NYSCEF # 13 at *22·*26, Article II). Per the Guaranty , defendan t "absolutel y, irrevocab ly and unconditi onally guarantee [d] ... the payment and performan ce of the Obligatio ns ... as and when Page 2 of 8 650265/2024 VASTER SUB II, LLC vs. SAFDIEH, NORMA NICOLE Motion No. 001 [* 2] 2 of 8 the same shall be due and payable" (NYSCEF # 8 § 1 [a]). As will be discussed below, "the Obligatio ns" are not defined directly, but instead require reference to other document s. Ownershi p of the Loan The Loan changed hands several times before falling into plaintiffs . At the time of the Loan, Vaster Loans simultane ously "assigned all of its right, title, and interest in and to the Loan Documen ts to [plaintiff]" (NYSCEF # 3 at 5·6, citing NYSCEF # 9, First Assignme nt of Loan Documen ts). Plaintiff later transferre d the Loan to a third-part y, and then finally on April 25, 2023 took back ownership (NYSCEF # 3 at 6, citing NYSCEF #s 10 & 12, Second and Third Assignme nts of Loan Documen ts). Loan Default and Subseque nt Actions There is no dispute that 58 Ocean failed to make timely payments of interest as required under the Loan Documen ts. And defendant , whose briefing dispenses with a facts section, does not dispute plaintiffs facts (see NYSCEF # 3 at 6; NYSCEF # 27, Def Opp, at 1). Thus, defendan t accepts that 58 Ocean was in default and that plaintiff accelerate d the debt on May 22, 2023, by bringing a foreclosure action in New Jersey against both 58 Ocean and defendan t ("NJ Foreclosu re Case" or "Foreclos ure Case) (NYSCEF # 3 at 7; NYSCEF # 13 at 1 [NJ Foreclosu re Complaint]). The parties later stipulated to dismiss without prejudice defendan t from the Foreclosu re Case (see NYSCEF # 26, NJ Stipulatio n of Dismissal ). As of the date of the parties' final brief in this case, the NJ Foreclosu re Case remains ongomg. On January 18, 2024, plaintiff initiated this case against defendan t via motion for summary judgment in lieu of complain t pursuant to CPLR 3213 (NYSCEF # 1). Plaintiff argues that the guaranty is a document for payment only, that 58 Ocean defaulted on the Loan, and that defendan t is obligated to pay as the guarantor (see generally NYSCEF # 3). Plaintiff demands "$4,486,323.77 plus interest at the per diem amount of $1,688.88 between January 1, 2024 and the date judgment is entered, together with the costs and fees of [the] motion" (id at 10). Defendan t cross-mov es to dismiss pursuant to CPLR 3211(a)(4) and RPAPL 1301(3). Defendan t argues that under New York law, the NJ Foreclosu re Case cannot or should not be brought simultane ously with an action against a guarantor (NYSCEF # 27). While defendan t is no longer a party to the NJ Foreclosu re Case, defendant argues that plaintiff brought this case while she was still a defendan t in New Jersey, and therefore CPLR 3211(a)(4) should apply (NYSCEF # 30, Def Reply at 2·5). Defendan t further argues that maintaini ng this action would go against the fundamen tal purpose ofRPAPL 1301 (id at 5·7). Page 3 of 8 650265/2024 VASTER SUB II, LLC vs. SAFDIEH, NORMA NICOLE Motion No. 001 3 of 8 [* 3]