FILED: NEW YORK COUNTY CLERK 07/25/ :58 PM INDEX NO /2013 NYSCEF DOC. NO. 50 RECEIVED NYSCEF: 07/25/2014

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1 FILED: NEW YORK COUNTY CLERK 07/25/ :58 PM INDEX NO /2013 NYSCEF DOC. NO. 50 RECEIVED NYSCEF: 07/25/2014 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK x NEXBANK, SSB, Plaintiff, -against- JEFFREY SOFFER and JACQUELYN SOFFER, Index No /13 Hon. Shirley Werner Kornreich, J.S.C. Motion Seq. 002 Defendants. x MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF NEXBANK, SSB S MOTION, PURSUANT TO CPLR 3212, FOR SUMMARY JUDGMENT, AND, PURSUANT TO CPLR 3211(B), TO DISMISS DEFENDANTS AFFIRMATIVE DEFENSES KATTEN MUCHIN ROSENMAN LLP 575 Madison Avenue New York, NY Phone: (212) Attorneys for PlaintiffNexbank, SSB

2 TABLE OF CONTENTS PRELIMINARY STATEMENT...1 STATEMENT OF FACTS... 3 A. The Loan And Guaranty... 3 B. Borrower Defaults And The Nevada Plaintiffs Commence The Nevada Action... 5 ARGUMENT...8 I. SUMMARY JUDGMENT SHOULD BE GRANTED... 8 A. The Legal Standard For Summary Judgment On A Guaranty Claim... 8 B. The Filing Of The Lis Pendens And The Specific Performance Claim Triggered The Loss Provisions Of The Guaranty... 9 C. This Court Has Already Held That The Filing Of The Lis Pendens Placed An Encumbrance on the Property as a Matter of Law...10 D. The Filing Of The Specific Performance Claim Independently Triggered The Loss Provisions Of The Guaranty...12 E. Defendants Are Liable For The Attorneys Fees And Costs Incurred By Plaintiff In Connection With This Action...15 F. A Separate Hearing Should Be Held To Determine The Amount Of Damages Under The Guaranty...15 II. DEFENDANTS AFFIRMATIVE DEFENSES SHOULD BE DISMISSED...16 CONCLUSION 18

3 TABLE OF AUTHORITIES Federal Cases Page(s) Horner v. Semenza, No , 2013 WL (D.Nev. May 31, 2013)...13 Johnson v. Truckee River Highlands HOA, LLC, No. 3:09-CV-587, 2010 WL (D.Nev. Nov. 29, 2010), aff d, 467 F. App x 592 (9th Cir. 2012)...12 Oniszk-Horovitz v. Saxon Mortgage, No. 2:1 l-cv-00243, 2011 WL (D.Nev. Nov. 30, 2011)...11 State Cases 172 Madison (N.Y.) LLCv. NMP-Group, LLC, No /2010, 2013 WL (Sup. Ct. N.Y. Co. Oct. 3, 2013)... 9, 11, Realty Corp. v. O & Y Equity Corp., 64 N.Y.2d 313, 486 N.Y.S.2d 877 (1984)...11 Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 508 N.Y.S.2d 923 (1986)... 8 Becher v. Feller, 64 A.D.3d 672, 884 N.Y.S.2d 83 (2d Dep t 2009)...16 Boro P. Health Management, LLC v. Boro for Health, LLC, No /12, 2013 WL (Sup. Ct. Kings Co. May 10, 2013)...17 Century Surety Co. v. Casino West, Inc., No , 2014 WL (Nev. May 29, 2014)...14 City o f New Yorkv. Clarose Cinema Corp., 256 A.D.2d 69, 681 N.Y.S.2d 251 (1st Dep t 1998)... 8 CMIII, LLC v. Interactive Brand Development, Inc., No /05, 2006 WL (Sup. Ct. N.Y. Co. Sept. 26, 2006) , 15, 16 Cohen Fashion Optical, Inc. v. V & MOptical, Inc., 51 A.D.3d 619, 858N.Y.S.2d 260 (2d Dep t 2008)...16 Cohen v. Gateway Builders Really, Inc., No. 1134/13, 2014 WL (Sup. Ct. Kings Co. May 27, 2014) Coury v. Tran, 111 Nev. 652, 895 P.2d 650 (1995) 10, 12

4 Dobron v. Bunch, 125 Nev. 460, 215 P.3d 35 (2009)...13 G3-Purves Street, LLC v. Thomson Purves, LLC, 101 A.D.3d 37, 953 N.Y.S.2d 109 (2d Dep t2012)...11, 15 Galardi v. Naples Polaris, LLC, 301 P.3d 364 (Nev. 2013)...13 Greco v. Christoffersen, 70 A.D.3d 769, 896 N.Y.S.2d 363 (2d Dep t 2010)...16, 17 Henningham v. Highbridge Community Housing Development Fund Corp,, 91 A.D.3d 521, 938 N.Y.S.2d 1 (1st Dep t 2012)...18 Hess Corp. v. Magnone, No /2009, 2010 WL (Sup. Ct. N.Y. Co. Apr. 12, 2010)... 8 Kahn v. New York Times Co., 122 A.D.2d 655, 503 N.Y.S.2d 561 (1st Dep t 1986)...17 Kornfeldv. NRXTechs., Inc., 93 A.D.2d 772, 461 N.Y.S.2d 342 (1st Dep t 1983), aff d, 62 N.Y.2d 686, 476 N.Y.S.2d 523 (1984)... 8 La Paglia v. Superior Court, 215 Cal. App. 3d 1322, 264 Cal. Rptr. 63 (Cal. Ct. App. 1989), abrogated on other grounds by Lewis v. Superior Court, 19 Cal. 4th 1232, 82 Cal. Rptr. 2d 85 (1999)...11 Mazzei v. Kyriacou, 98 A.D.3d 1088, 951 N.Y.S.2d 557 (2d Dep t 2012)...16 Mohr Park Manor, Inc. v. Mohr, 83 Nev. 107, 424 P.2d 101 (1967)...13 Quality Wash Group V, Ltd. v. Hallak, 50 Cal. App. 4th 1687, 58 Cal. Rptr.2d 592 (Cal. Ct. App. 1996)...10 Robbins v. Growney, 229 A.D.2d 356, 645 N.Y.S.2d 791 (1st Dep t 1996)...16 RSB Bedford Assoc., LLC v. Ricky s Williamsburg, Inc., 91 A.D.3d 16, 933 N.Y.S.2d3 (1st Dep t 2011)...15 S&S Media, Inc. v. Vango Media, Inc., 84 A.D.2d 356, 446 N.Y.S.2d 52 (1st Dep t 1982)...13 Shao v. Tianji Li, No /2011,2013 WL (Sup. Ct. N.Y. Co. July 9, 2013)...15 iii

5 UBS Commercial Mortgage Trust 2007-FL1 v. Garrison Special Opportunities Fund, L.P., No /2010, 2011 WL (Sup. Ct. N.Y. Co. Mar. 8, 2011)...14 Zuckerman v. City o f New York, 49 N.Y.2d 557, 427 N.Y.S.2d 595 (1980)... 8 State Statute and Rules Nev. Rev. Stat (1) C.P.L.R , 16 C.P.L.R passim Treatises 7 Thompson, Real Property 3138 (1962) Powell, Real Property 82A.01 [1] (2000) IV

6 Plaintiff Nexbank, SSB ( Plaintiff or Nexbank ), as Successor Agent1 for Lenders under the Non-Recourse Carveout Guaranty, dated October 25, 2006 (the Guaranty ), executed by Defendants Jeffrey Soffer and Jacquelyn Soffer ( Defendants ), submits this memorandum of law in support of its motion (1) pursuant to CPLR 3212, for summary judgment holding Defendants liable under the Guaranty, and (2) pursuant to CPLR 3211(b), to dismiss the affirmative defenses set forth in Defendants Answer, dated June 25, PRELIMINARY STATEMENT The express terms of the Guaranty at issue render Defendants liable for any losses incurred in connection with the placing of a Lien (defined broadly to include any encumbrance ) on certain mortgaged property located in Nevada (the Property ), which served as the collateral for a construction loan between certain lenders and Turnberry/Centra Sub LLC ( Borrower ), an entity controlled by Defendants, in the original principal amount of $475,000,000. Plaintiffs Verified Complaint alleges that Defendants liability under the Guaranty was triggered when Borrower encumbered the Property by recording a lis pendens and filing a specific performance claim in Nevada District Court demanding that it be given title to the Property in derogation of Plaintiff s security interest therein. On June 2, 2014, this Court unequivocally ruled that [t]he Guaranty was triggered because the Us pendens was an encumbrance under Nevada law in its order denying Defendants motion to dismiss Plaintiffs Complaint. See Nexbank, SSB v. Jeffrey Soffer, /2013, Slip. Op. at 8-9 (Sup. Ct. N.Y. Co. June 2, 2014) (Kornreich, J.) (Docket No. 21) 1Deutsche Bank Trust Company Americas served as the initial agent for Lenders (the Initial Agent ). See Parties Joint Statement of Undisputed Facts, dated July 24, 2014 ( Statement of Undisputed Facts ), 1. On June 15, 2009, The Bank of Nova Scotia, New York Agency (the Former Agent ) succeeded Initial Agent in this capacity. Id. In turn, Nexbank succeeded Former Agent as Agent for Lenders on September 16, Id. \ Affidavit of Grant Smith, sworn to on July 24, 2014 ( Smith Affidavit ), Tf 6. 1

7 ( Nexbank Mot. to Dismiss Decision ). The Court held that [a]s liability under the Guaranty is joint and several, when Turnberry voluntarily filed the Lis Pendens, it triggered the liability of both Defendants, Mr. and Mrs. Soffer under the Guaranty. Id. Accordingly, this action is ripe for summary judgment on the Guaranty claim holding Defendants liable thereunder for failing to pay approximately $4,000,000 in fees and costs incurred as a result of the filing of the lis pendens and the related specific performance claim seeking to take control of the Property. As more fully set forth below, the filings of both the lis pendens and the specific performance claim are matters of public record and are not reasonably subject to dispute. The only questions for the Court are therefore legal ones, i.e., whether the filings of the lis pendens and the specific performance action are encumbrances (and, therefore, Liens) under the terms of the Guaranty. However, since this Court has already determined that the lis pendens was an encumbrance under Nevada law, and that Defendants are jointly and severally liable for any damages incurred as a result thereof, the Court should enter summary judgment holding Defendants jointly and severally liable for any damages caused by the filing of the lis pendens. The Court should also enter summary judgment on liability against Defendants based upon the filing of the specific performance claim. Indeed, as this Court has previously recognized, the purpose of the bad boy Guaranty was to create a financial disincentive to Defendants - who are both sophisticated business people with decades of experience in the real estate industry - from taking actions, or causing Borrower or its affiliates to take actions, detrimental to the Property and the Lenders security interests therein. Filing the specific performance claim demanding that the Property be conveyed to Defendant Jeffrey Soffer clearly falls into this category, and is thus an encumbrance under the Guaranty. Indeed, the lis pendens was an encumbrance for the very reason that it gave notice of the existence of the specific performance claim. 2

8 Finally, none of the affirmative defenses alleged Defendants Answer preclude granting Plaintiff summary judgment on liability. Indeed, these defenses must be dismissed because they are insufficiently pleaded, contradicted by documentary evidence, and inapplicable in an action for money damages. For all of the foregoing reasons, further amplified below, this Court should grant Plaintiffs motion, hold Defendants liable under the Guaranty, and dismiss Defendants affirmative defenses. A separate inquest to determine the full extent of these damages, which approximate $4,000,000, is respectfully requested. STATEMENT OF FACTS A. The Loan And Guaranty On or about October 25, 2006, Borrower, an entity controlled by Defendants, entered into a Construction Loan Agreement (the Loan Agreement ) with certain lenders (the Lenders ). Statement of Undisputed Facts, 5; Ex. D (Loan Agreement).2 Pursuant to the Loan Agreement, Lenders agreed to lend to Borrower an aggregate principal amount not to exceed $475,000,000 (the Loan ) in order to finance construction of a commercial shopping and office mall in Las Vegas, Nevada, known as Town Square Las Vegas Mall (the Property ). Statement of Undisputed Facts, ^ 6. In order to induce Lenders to advance the Loan, Defendants executed and delivered the Guaranty. Smith Aff, ^ 14; Ex. C (Guaranty), at p. 1. The Guaranty was designed to create a disincentive for Defendants to engage in so-called bad boy acts that could harm Lenders ability to enforce their rights under the Loan Agreement and the collateral, including, among other things, causing the Borrower to file for bankruptcy or diminishing the value or marketability of the Property through the filing of an encumbrance, and to compensate Lenders 2 All exhibits referenced herein are attached to the Smith Affidavit. 3

9 for damages caused by such bad boy acts. Smith Aff., 15; Ex. P {Nexbank Mot. to Dismiss Decision), at p. 4 ( [t]he parties agree that the purpose of the Guaranty... was to discourage borrowers and guarantors from committing certain bad boy acts ). Central to this action, under the express and unambiguous terms of the Guaranty, Defendants unconditionally committed to pay to Nexbank, as Agent for Lenders, [a]ny Loss (which may include... reasonable attorneys fees and collection costs) arising out of the placing voluntarily of a Lien on any portion of the Mortgaged Property by Borrower. Smith Aff., f 16; Ex. C (Guaranty), I.3 Section 1.1 of the Loan Agreement (incorporated by reference in the Guaranty broadly defines the term Lien as follows: Any mortgage, deed of trust, lien (statutory or other), pledge, hypothecation, assignment, preference, priority, security interest or other encumbrance or charge on or affecting the Collateral, Borrower or any Borrower Party (including any conditional sale or other title retention agreement, any sale-leaseback, any financing lease having substantially the same economic effect as any of the foregoing, the filing of any financing statement or similar instrument under the Uniform Commercial Code or comparable Law or Regulation of any other jurisdiction, domestic or foreign, and mechanics', materialmen's and other similar liens and encumbrances) (Loan Agreement, Definitions (emphasis added)). Further, the Guaranty provides that Defendants are liable to Plaintiff for all costs and expenses (including court costs and reasonable attorneys fees) incurred by Plaintiff in enforcing the Guaranty. Smith Aff., f 20; Ex. C (Guaranty), 16. Thus, under the Guaranty, Defendants agreed to pay all losses, including, but not limited to, reasonable legal fees and disbursements, that Plaintiff, or its predecessors, incurred as a result of Borrower s placement of any 3 The Guaranty also provides that [ujnless otherwise defined herein, capitalized terms shall have the meaning set forth in the [Loan Agreement]. See Smith Aff, * 17; Ex. C (Guaranty), 29. The Loan Agreement defines Loss as any and all losses... including the fees and disbursements of accountants, consultants, experts and reasonable legal fees and disbursements, and all other costs and expenses of any kind and/or nature. See Smith Aff, ^ 18; Ex. D (Loan Agreement), Definitions. 4

10 encumbrance on the Property. Smith Aff., '] 4. Defendants are also liable for attorneys fees and costs incurred by Plaintiff in connection with this enforcement action. Id., ^ 20. B. Borrower Defaults And The Nevada Plaintiffs Commence The Nevada Action Borrower breached its obligations to pay the Loan at maturity, on March 2, Statement of Undisputed Facts, ^ 8; Smith Aff, *'[ 21; Ex. H (Meister Aff.), f 5; Ex. I (Nevada Summary Judgment Order), 5. As a result of Borrower s breach, a non-judicial foreclosure sale was scheduled for early March Statement of Undisputed Facts, f 9. On or about February 25, 2011, mere days before the foreclosure sale was to take place, Defendant Jeffrey Soffer and Borrower commenced an action against Former Agent, in the District Court of Clark County, Nevada, captioned Soffer v. The Bank of Nova Scotia, New York Agency, No. A -ll C (the Nevada Action ). Statement of Undisputed Facts, f 10; Ex. FI (Meister Aff.), 6. The complaint in the Nevada Action asserted, among other things, that Former Agent breached an alleged agreement to extend or to restructure the Loan. Statement of Undisputed Facts, If 10; Ex. H (Meister Aff), ^ 6. Determined to disrupt the imminent foreclosure sale, with less than 24 hours remaining before the sale was to take place, Defendant Jeffrey Soffer, acting on behalf of Borrower, filed an ex-parte application for a temporary restraining order seeking to enjoin the foreclosure sale. Statement of Undisputed Facts, 11. Then, on March 1, the same day the sale was to take place - Defendant Jeffrey Soffer, acting for Borrower, recorded a lis pendens (notice of pendency), dated February 28, 2011 (the Lis Pendens ) on the Property. Id., ^f 12; Ex. L (Lis Pendens). Thereafter, on March 21, 2011, Defendant Jeffrey Soffer, acting on behalf of Borrower, and Turnberry Development, LLC ( Turnberry ), an affiliate of Borrower (collectively, the Nevada Plaintiffs ), filed a First Amended Complaint in the Nevada Action (the First Amended Complaint ). Statement of Undisputed Facts, * 14; Ex M (Nevada Action - 5

11 First Amended Compl.). The First Amended Complaint asserted a claim for specific performance as its Fifth Cause of Action, requesting that Former Agent be ordered to transfer Town Square to Soffer and/or their new business entity pursuant to their alleged modification agreement in derogation of Lenders security interests in the Property (the Specific Performance Claim ). Smith Aff, If 26; Ex M (Nevada Action - First Amended Compl.), On March 4, 2011, an affiliate of Lenders acquired title to the Property at a foreclosure sale as a result of Borrower s default on the Loan. Statement of Undisputed Facts, ^f 13. This did not end the Nevada Action, however, as Defendants and Borrower failed to release the Lis Pendens on the Property and persisted in prosecuting the Specific Performance Claim for ownership of the Property. Smith Aff., Ufj Indeed, litigation before the District Court in the Nevada Action continued for over 17 months, during which time exhaustive discovery was conducted, and significant attorneys fees and costs were incurred by Former Agent and Plaintiff as a direct result of the pendency of the Nevada Action, the recorded Lis Pendens, and the Specific Performance Claim, which created a cloud on the title of the Property and impaired its value. Smith Aff, 32. Former Agent thus was required to continue to defend the Nevada Action, and to incur attorneys fees and costs, in order, among other things, to clear such cloud on the Property s title and to remove such encumbrances. Id. On August 31, 2012, the Nevada District Court granted Former Agent s Summary Judgment motion and dismissed the Nevada Action in its entirety. Statement of Undisputed Facts, Tf 17; Ex. I (Nevada Summary Judgment Order). On September 6, 2012, the Nevada District Court ordered that the Lis Pendens be cancelled and expunged. Statement of Undisputed Facts, f 17; Ex. N (Order Expunging Lis Pendens). The order expunging the Lis Pendens was not appealed. Statement of Undisputed Facts, ^ 18. The Nevada Plaintiffs, however, appealed the decision granting summary judgment on the underlying claims in the 6

12 Second Amended Complaint, including the Specific Performance Claim. Statement of Undisputed Facts, f 19. To date, Plaintiff and its predecessors have incurred approximately $4,000,000 in attorneys fees and costs in connection with the Nevada Action, including the appeal. Smith Aff., $ 32. On or about June 10, 2013, Plaintiff sent a letter to Defendants informing them that, under the express terms of the Guaranty, they are liable for Plaintiffs attorneys fees and costs in connection with the Nevada Action and demanding immediate payment. Statement of Undisputed Facts, f 20; Smith Aff, *\ 33. To date, however, Defendants have failed and refused to pay Plaintiff under the Guaranty. Smith Aff, $ 33. Accordingly, on June 11, 2013, Plaintiff brought this lawsuit to recover the amounts due and owing under the Guaranty. See Ex. A (Compl.). Defendants filed their Answer and Affirmative Defenses (the Answer ) on June 25, Ex. B (Answer). The Answer alleges twelve boilerplate affirmative defenses all of which are improperly pleaded, contradicted by documentary evidence and/or contrary to the Nexbank Motion to Dismiss Decision, and must be dismissed.4 Ex. B (Answer), $$ The alleged affirmative defenses are as follows: (1) failure to state a claim, (2) misconduct/unclean hands, (3) laches, waiver, release, and estoppel, (4) accord and satisfaction, (5) set off and recoupment, (6) res judicata and collateral estoppel, (7) Nevada s compulsory counterclaim rule, (8) payment, (9) damages were caused by persons or entities other than Defendants or any Borrower Party, (10) standing, (11) barred under the terms of the Guaranty and Loan Agreement, and (12) barred as unreasonable. 7

13 ARGUMENT I. SUMMARY JUDGMENT SHOULD BE GRANTED A. The Legal Standard For Summary Judgment On A Guaranty Claim Summary judgment shall be granted if, upon all the papers and proof submitted, the cause of action shall be established sufficiently to warrant the court as a matter of law in directing judgment in favor of the movant. Zuckerman v. City of New York, 49 N.Y.2d 557, 562, 427 N.Y.S.2d 595, 597 (1980) (citing CPLR 3212(b)). Once the movant makes a prima facie showing, the burden shifts to the party opposing the motion for summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action. Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324, 508 N.Y.S.2d 923, 925 (1986); Kornfeldv. NRXTechs., Inc., 93 A.D.2d 772, 773, 461 N.Y.S.2d 342, (1st Dep t 1983), aff d, 62 N.Y.2d 686, 476 N.Y.S.2d 523 (1984) ( A bona fide triable issue must be established and reliance upon mere suspicion or surmise is insufficient for this purpose. Similarly, the issue must be shown to be real, not feigned since a sham or frivolous issue will not preclude summary relief. ) (emphasis in original; citations omitted). A plaintiff establishes a prima facie claim on a guaranty by demonstrating (1) the existence of the guaranty, (2) a default on the underlying obligation secured by the guaranty, and (3) the defendant's failure to honor the guaranty. See Hess Corp. v. Magnone, No /2009, 2010 WL , at *4 (Sup. Ct. N.Y. Co. Apr. 12, 2010) (citing Hotel 71 Mezz Lender LLC v. Mitchell, 63 A.D.3d 447, 448, 880 N.Y.S.2d 67 (1st Dep t 2009)); see also City of New Yorkv. Clarose Cinema Corp., 256 A.D.2d 69, 71, 681 N.Y.S.2d 251, 253 (1st Dep t 1998). As set forth below, summary judgment in favor of Plaintiff is appropriate here because (1) the Guaranty is absolute, unconditional, and enforceable, (2) under the

14 Guaranty, Defendants must compensate Plaintiff for any Loss arising from the placing of any encumbrance on the Property, (3) it is undisputed that Borrower and its agents filed the Lis Pendens and Specific Performance Claim, (4) the Lis Pendens and Specific Performance Claim each constituted an encumbrance under the terms of the Guaranty, and (5) Defendants have failed to pay Plaintiff the substantial damages resulting therefrom. There are no material issues of fact that preclude such a finding. B. The Filing Of The Lis Pendens And The Specific Performance Claim Triggered The Loss Provisions Of The Guaranty The Guaranty is an enforceable agreement under New York law. Smith Aff, *[ 3; Ex. C (Guaranty); 172 Madison (N. Y.) LLC v. NMP-Group, LLC, No /2010, 2013 WL (Sup. Ct. N.Y. Co. Oct. 3, 2013) (Kornreich, J.) (enforcing bad boy guaranty). Section 1 of the Guaranty provides that Defendants unconditionally, absolutely and irrevocably guarantee^] to pay... (A) Any Loss (which may include... reasonable attorneys fees and collection costs) incurred or to be incurred by Agent or Lenders and arising out of or in connection with any of the following circumstances... (G)... the placing voluntarily of a Lien on any portion of the Mortgaged Property by Borrower. See Smith A ff,'[ 16; Ex. C (Guaranty), 1. Lien is broadly defined in the underlying Loan Agreement to include any... encumbrance or charge on or affecting the [Property]. (Emphasis added). See Smith Aff, 19; Ex. D (Loan Agreement), Definitions. It is undisputed that Borrower and its agents filed the Lis Pendens and Specific. Performance Claim against the Property. See Statement of Undisputed Facts, *[*[ 12, 14-15; Smith Aff, Ex. L (Lis Pendens); Ex. K (Nevada Action - Second Amended Compl.). These filings are matters of public record. Accordingly, there are no factual issues that must be resolved in order to determine whether Defendants are liable under the Guaranty. The only questions left to resolve on this motion are legal, i.e., whether the Lis Pendens and Specific 9

15 Performance Claims constituted encumbrances on the Property within the meaning of the Guaranty. Both of these questions should be answered in the affirmative. C. This Court Has Already Held That The Filing Of The Lis Pendens Placed An Encumbrance on the Property as a Matter of Law Significantly, this Court has already held as a matter of law that the Lis Pendens was an encumbrance under the Guaranty. On August 2, 2013, Defendants moved to dismiss the Plaintiffs Complaint in this action arguing that the filing of the Lis Pendens did not constitute an encumbrance under applicable law and that the Complaint therefore failed to state a claim. See Docket No. 6 (Defendants Memo of Law In Support of Motion to Dismiss). The Court denied Defendants motion to dismiss in its entirety. See Statement of Undisputed Facts, ^ 23. In doing so, the Court held that Nevada law governed the definition of Lien (and encumbrance) in the Guaranty and that, as a matter of Nevada law, [t]he Guaranty was triggered because the lis pendens was an encumbrance. See Smith Aff, ^ 34; Ex. P (Nexbank Mot. to Dismiss Decision), slip op. at 7-8 (citing Uranga v. Montroy Supply Co. o f Nevada, No , 2009 WL , at *2 (Nev. Jan. 9, 2009) (lis pendens encumbered personal residence) and Levinson v. Eighth Judicial Dist. Ct. o f Nevada, 109 Nev. 747, 752, 857 P.2d 18, 21 (1993) (plaintiff encumbered property by filing a notice of lis pendens)). The Court s ruling was undoubtedly correct, as an encumbrance includes any burden on real estate which tends to lessen its value or interfere with its free enjoyment, and the Lis Pendens clearly falls within this definition.5 Without question, its filing clouded the title of the Property. See Coury v. Tran, 111 Nev. 652, 657, 895 P.2d 650, 653 (1995). The impact of such 5 See 1 Thompson on Real Property, 3138, at 274 (1962); Quality Wash Group V, Ltd. v. Hallak, 50 Cal. App. 4th 1687, , 58 Cal. Rptr.2d 592, 597 (Cal. Ct. App. 1996) (holding that encroachment was an encumbrance because it impaired the use and transferability of the subject property). 10

16 a cloud is considerable, because it effectively retard [s] the alienability of real property without any prior judicial review, thereby substantially lessening the value of the property until the lis pendens is expunged. See 5303 Realty Corp. v. O & YEquity Corp., 64 N.Y.2d 313, , 486 N.Y.S.2d 877, 881 (1984); Oniszk-Horovitzv. Saxon Mortgage,'Ho. 2:ll-cv-00243, 2011 WL , at *2 (D.Nev. Nov. 30, 2011) (stating that the ease of filing a lis pendens and the serious consequences resulting from the cloud it places on title makes it susceptible to serious abuse, providing unscrupulous plaintiffs with a powerful lever to force settlement of groundless or malicious suits ) (citation omitted); La Paglia v. Superior Court, 215 Cal. App. 3d 1322, 1326, 264 Cal. Rptr. 63, 66 (Cal. Ct. App. 1989) ( the practical effect of a recorded lis pendens is to render a defendant's property unmarketable and unsuitable as security for a loan ), abrogated on other grounds by Lewis v. Superior Court, 19 Cal. 4th 1232, 82 Cal. Rptr. 2d 85 (1999). The Lis Pendens was thus an encumbrance on the Property as it clearly and materially impacted the value of Lenders interests therein. Moreover, in its June 2, 2014 decision, the Court further held that [a]s liability under the Guaranty is joint and several, when Turnberry voluntarily filed the Lis Pendens, it triggered the liability of both Defendants, Mr. and Mrs. Soffer. Ex. P (Nexbank Mol. to Dismiss Decision), slip op. at 9. Accordingly, since these core legal issues have already been decided, Plaintiff is entitled to summary judgment holding Defendants jointly and severally liable for any damages caused by the filing of the Lis Pendens. See G3-Purves Street, LLC v. Thomson Purves, LLC, 101 A.D.3d 37, 39-40, 953 N.Y.S.2d 109, (2d Dep t2012) (granting summary judgment to plaintiff under springing guaranty); 172 Madison (N. Y.) LLC, 2013 WL , at *3 (granting motion for summary judgment enforcing liability under nonrecourse carveout guaranty); CM1II, LLC v. Interactive Brand Development, Inc., No /05, 2006 WL 11

17 , at *6 (Sup. Ct. N.Y. Co. Sept. 26, 2006) (granting motion for summary judgment enforcing liability under guaranty). D. The Filing Of The Specific Performance Claim Independently Triggered The Loss Provisions Of The Guaranty Summary judgment should also be granted holding Defendants liable under the Guaranty for any losses caused by their filing of the Specific Performance Claim, the sole purpose of which was to seize control of the Property from the Lenders. See Ex. M (Nevada Action - First Amended Compl.), f 60 ( Soffer... is entitled to specific performance by way of a court order compelling Agent to fully perform...; specifically, that Agent must be ordered to transfer Town Square to Soffer and/or their new business entity... ) (emphasis added); Ex. K (Nevada Action - Second Amended Compl.), ^ 65 (same). Indeed, the Court s finding that the Lis Pendens constituted an encumbrance on the Property necessitates a similar conclusion with respect to the Specific Performance Claim. As noted above, Nevada law governs the meaning of encumbrance in the Guaranty and, under Nevada law, a lis pendens is an encumbrance. But the purpose of [a lis pendens\ under Nevada law is merely to provide constructive notice to a purchaser or encumbrancer of the property that the property is involved in a lawsuits Johnson v. Truckee River Highlands HOA, LLC, No. 3:09-CV-587, 2010 WL , at *4 (D.Nev. Nov. 29, 2010) (emphasis added), aff d, 467 F. App x 592 (9th Cir. 2012). In other words, the cloud on title caused by a lis pendens stems not from the lis pendens itself but from what it represents - the fact that a third party has filed a lawsuit which may affect the owner s title or possession of real property. See NRS (1); Coury v. Tran, 111 Nev. 652, 657, 895 P.2d 650, 653 (1995) (the purpose of a lis pendens is to cloud title before a sale of property occurs so that the claims of a party may be resolved before transfer o f titles') (emphasis added); 14 Powell on Real Property, 82A.01[1] (2000) ( a prospective purchaser cannot ignore a notice of lis pendens because notice of the fact 12

18 that the property is involved in litigation places a questionable cloud on the property which may... drastically change the purchaser s interest... [A]ny [subsequent] transfer is made with the risk that the transfer may be nullified if the judgment goes against the transferor ) (emphasis added). Thus, if the Lis Pendens - which merely provided constructive notice of the Specific Performance Claim - constituted an encumbrance on the Property, a fortiori, the Specific Performance Claim itself, which represented the real and tangible threat to the Lenders interests in, and ownership of, the Property, was also an encumbrance under the Guaranty. Well-established principles of contract construction strongly support such finding. Under Nevada law, encumbrance, like any contract term, must be interpreted according to its plain meaning. See Horner v. Semenza, No , 2013 WL , at *2 (D.Nev. May 31, 2013); Dobron v. Bunch, 125 Nev. 460, , 215 P.3d 35, 37 (2009) (applying general principles of contract construction to a guaranty agreement and rejecting the doctrine that a guaranty should be strictly construed). In determining the plain meaning of a contract, Nevada courts must ascertain the intention of the parties from the language employed as applied to the subject matter in view o f the surrounding circumstancessee Mohr Park Manor, Inc. v. Mohr, 83 Nev. 107, 111, 424 P.2d 101, 105 (1967) (emphasis added). Moreover, the words of a contract derive meaning from usage and context... Galardi v. Naples Polaris, LLC, 301 P.3d 364, 367 (Nev. 2013); see also S&SMedia, Inc. v. Vango Media, Inc., 84 A.D.2d 356, 360, 446 N.Y.S.2d 52, 54 (1st Dep t 1982) (in interpreting contracts Courts should give due consideration to the circumstances surrounding its execution, to the purpose of the parties in making the contract and... give to the agreement a fair and reasonable interpretation. ) (citation omitted). Here, Defendants are sophisticated business people with decades of experience in the real estate development industry. Statement of Undisputed Facts, 2-3. They executed the Guaranty for due consideration, in order to induce the Lenders to advance the Loan. Smith Aff, 13

19 ][ 14; Ex. C (Guaranty), at p. 1. Furthermore, the Guaranty is a bad boy guaranty; a type of guaranty that is a common feature in commercial mortgage loans and is intended to provide lenders with protection against acts being taken by the borrower, its principals, or affiliates, to the detriment of the lenders. UBS Commercial Mortgage Trust 2007-FL1 v. Garrison Special Opportunities Fund, L.P., No /2010, 2011 WL , at *5 (Sup. Ct. N.Y. Co. Mar. 8, 2011) (Schweitzer, J.); Smith Aff, 1[ 15; Ex. P (Nexbank Mot. to Dismiss Decision), slip. op. at 4. In the context of the Loan Agreement, the purpose of the Guaranty was thus to create a significant monetary disincentive against Defendants taking any action, or causing Borrower to take any action, to the detriment of the Lenders and/or Plaintiff, including actions that would burden the Property, which served as the collateral for the Loan. See Smith Aff, ^ 13-15; Ex. A (Compl.), Tf 7. Given the sophistication of Defendants, the industry-wide use and object of bad boy guaranties like the Guaranty herein, and the fact that the Specific Performance Claim was the linchpin in Defendants plan to cloud title to, and take control of, the Property, the claim must be considered an encumbrance under the terms of the Guaranty. Such an interpretation is entirely consonant with the plain meaning of the Guaranty, the expectations of the parties, and the protections from bad boy acts that a reasonable person in the Lenders and Plaintiffs position would be justified in understanding would be included therein. Moreover, a different conclusion would be contrary to the underlying purpose of the Guaranty as well as the mandate that Courts should avoid giving an absurd or unreasonable interpretation to a contract. See Century Surety Co. v. Casino West, Inc., No , 2014 WL , at *1 (Nev. May 29, 2014) (citing Reno Club, Inc. v. YoungInv. Co., 64 Nev. 312, 325, 182P.2d 1011, 1017 (1947)). Accordingly, Plaintiff is entitled to judgment as a matter of law that Defendants are jointly and severally liable under the Guaranty for any damages caused by the filing of the Lis Pendens and Specific Performance Claim, including the recovery of attorneys fees and costs incurred in the Nevada 14

20 Action.6 See G3-Purves Street, LLC, 101 A.D.3d at 39-40, 953 N.Y.S.2d at ; 172 Madison (N.Y.) LLC, 2013 WL , at *3; CMILI, LLC, 2006 WL , at *6. E. Defendants Are Liable For The Attorneys Fees And Costs Incurred By Plaintiff In Connection With This Action The Guaranty provides that [i]n the event the [Defendants] should breach or fail to timely perform any provision of the Guaranty, they are liable for all costs and expenses (including court costs and reasonable attorneys fees) incurred by Plaintiff in enforcing the Guaranty. Smith Aff, ^ 20; Ex. C (Guaranty), 16. It having been established that the filings of the Lis Pendens and Specific Performance Claim were encumbrances under the Guaranty, Plaintiff is also entitled to summary judgment holding Defendants jointly and severally liable for the attorneys fees and costs incurred by Plaintiff in connection with this action. See RSB Bedford Assoc., LLC v. Ricky s Williamsburg, Inc., 91 A.D.3d 16, 24, 933 N.Y.S.2d 3, 8 (1st Dep t 2011). F. A Separate Inquest Should Be Held To Determine The Amount Of Damages Under The Guaranty As summary judgment should be granted in favor of Plaintiff on the issue of Defendants liability under the Guaranty, the only remaining issue is the amount of damages due and owing thereunder. Plaintiff respectfully requests that a separate inquest be held in order to fix the amount of those damages. SeeShaov. Tianji Li,No /2011,2013 WL , at *4 (Sup. Ct. N.Y. Co. July 9, 2013) (Ramos, J.) (granting summary judgment in favor of plaintiff on 6 Moreover, absent such a holding, Defendants may escape significant liability for their misconduct. As noted above, the order expunging the Lis Pendens was entered on September 6, 2012 and was not appealed by the Nevada Plaintiffs. See Statement of Undisputed Facts, f f However, the Nevada Court s decision and order granting summary judgment and dismissing the Nevada Plaintiffs Second Amended Complaint, including the Specific Performance Claim, was appealed. Id.,*\ 19. Plaintiff has incurred significant attorneys fees as a result of this appeal, and Defendants should not be permitted to escape liability under the Guaranty for the damages it has caused merely because they made the tactical decision not to appeal the order expunging the Lis Pendens. 15

21 his contract claim and ordering parties to contact the Part Clerk and schedule a hearing to determine the amount of damages); CMIII, LLC, 2006 WL , at *6 (granting summary judgment holding guarantors liable under guaranty, and referring amount of attorneys fees/damages to a separate hearing). II. DEFENDANTS AFFIRMATIVE DEFENSES SHOULD BE DISMISSED Under CPLR 3211(b), [a] party may move for judgment dismissing one or more defenses, on the ground that a defense is not stated or has no merit. See Mazzei v. Kyriacou, 98 A.D.3d 1088, , 951 N.Y.S.2d 557, 559 (2d Dep t 2012) (citations omitted). Here, Defendants affirmative defenses lack merit and must be dismissed for multiple reasons. First, in denying Defendants motion to dismiss, this Court held as a matter of law that, pursuant to Section 4 of the Guaranty, Defendants had waived all defenses, except full payment of the Guaranteed Obligations. See Ex. P (Nexbank Mot. to Dismiss Decision), slip op. at All of Defendants affirmative defenses aside from the defense of payment must, therefore, be dismissed. See, e.g., Greco v. Christoffersen, 70 A.D.3d 769, 771, 896 N.Y.S.2d 363, 366 (2d Dep t 2010) (dismissing affirmative defense based upon documentary evidence). Second, even if the affirmative defenses had not been waived, they all still fail because they are pleaded as bare legal conclusions and must, therefore, be dismissed. See e.g. Robbins v. Growney, 229 A.D.2d 356, , 645 N.Y.S.2d 791, 792 (1st Dep t 1996) (dismissing defense on the ground that it is unsupported by factual allegations and that bare legal conclusions are insufficient to raise an affirmative defense ); Becher v. Feller, 64 A.D.3d 672, 677, 884 N.Y.S.2d 83, 88 (2d Dep t 2009) (dismissing affirmative defenses because they were not substantiated with factual allegations and were conclusory in nature ); Cohen Fashion Optical, Inc. v. V&MOptical, Inc., 51 A.D.3d 619, , 858 N.Y.S.2d260, 261 (2dDep t 2008) (dismissing defenses of payment and accord and satisfaction where they were unsubstantiated 16

22 by any factual allegations and conclusory in nature ); see also Boro P. Health Management, LLC v. Boro for Health, LLC, No /12, 2013 WL , at *7 (Sup. Ct. Kings Co. May 10, 2013) (affirmative defenses pleaded without any factual or legal support warrant dismissal as conclusory and meritless ). Indeed, not a single one of the affirmative defenses is supported by any factual allegations. Third, the affirmative defenses of failure to state a claim, res judicata, collateral estoppel, compulsory counterclaim, and payment were already raised by Defendants in their motion to dismiss and subsequent correspondence and were rejected by the Court, which affirmatively held that, as a matter of law, Plaintiffs Complaint stated a cause of action and was not barred by these defenses. Ex. P (Nexbank Mot. to Dismiss Decision), slip op. at 8-13; Cohen v. Gateway Builders Realty, Inc., No. 1134/13, 2014 WL , at *4 n.4 (Sup Ct. Kings Co. May 27, 2014) (dismissing failure to state a claim defense because the court in its previous decision ruled that plaintiff had stated a cause of action upon which relief can be granted ). Fourth, the affirmative defenses of laches and unclean hands are equitable in nature, and are unavailable where, as here, the action is solely for money damages. See Kahn v. New York Times Co., 122 A.D.2d 655, 663, 503 N.Y.S.2d 561, 567 (1st Dep t 1986) (stating that laches is an equitable defense and does not lie as a defense to actions at law such as those seeking the payment of money damages); Greco, 70 A.D.3d at 771, 896 N.Y.S.2d 363 at 366 (dismissing unclean hands defense in action at law). Fifth, the affirmative defense of standing should be dismissed as Defendants admitted in their Answer that agency under the Loan Agreement and Guaranty has transferred from Deutsche Bank to The Bank of Nova Scotia to Nexbank. Ex. B (Answer), *\ 2; Statement of Undisputed Facts, %1; Henningham v. Highbridge Community Housing Development Fund Corp., 91 A.D.3d 521, , 938 N.Y.S.2d 1, 2-3 (1st Dep t 2012) (granting summary 17

23 judgment on liability on the basis of admissions in defendant s answer). Moreover, any assertion that agency was not transferred to Nexbank is contradicted by the Successor Agency Agreement, dated as of September 16, 2011, between Former Agent, and Nexbank, SSB, which expressly states that Former Agent assigned all rights, powers, trusts, discretions, privileges, duties, and obligations as Agent and administrative agent pursuant to the Construction Loan Agreement, the other Loan Documents, and any other agreements relating to the Loan to which [Former Agent] is a party immediately prior to the Effective Date in its capacity as Agent or administrative agent. Ex. G (Successor Agency Agreement), 6(b). Accordingly, by its express terms, the Successor Agency Agreement made Nexbank administrative agent under the Guaranty, and undermines Defendants standing defense. Ex. C (Guaranty), at p. 1. For all of the foregoing reasons, Defendants affirmative defenses should be dismissed. CONCLUSION Plaintiffs motion for summary judgment on the issue of Defendants liability under the Guaranty should be granted and Defendants affirmative defenses should be dismissed with prejudice. Plaintiff respectfully requests that a separate hearing should be calendared to determine the amount of Plaintiff s damages under the Guaranty. 18

24 Dated: New York, New York July 25, 2014 KATTEN MUCHIN ROSENMAN LLP By: latthew D. Parrott Jonathan A. Rotenberg 575 Madison Avenue New York, NY Phone: Fax: Attorneys for Plaintiff Nexbank, SSB 19