SUPREME COURT STATE OF NEW YORK COUNTY OF NASSAU. Plaintiff INDEX NO. : /1995. Defendants. DECISION AFTER TRIAL

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1 SCAN MEMORANDUM SUPREME COURT STATE OF NEW YORK COUNTY OF NASSAU PRESENT: HON. IRA B. WARSHAWSKY, Justice. TRIAL/IAS PART 16 EFSTATHIOS "STEVE" VALIOTIS, as successor in interest to PETER KREA TSOULAS, - against - Plaintiff INDEX NO. : /1995 PETER XENOPOLOUS, DEMETRIOS BEKAS, DEMETRIOS K. DEMETRIOS a/k/a DIMITRIOS PAULOS DIMTRIOSLAKAS and JOHN ZAPANTIS, Defendants. DECISION AFTER TRIAL In December 1990-January 1991, Peter Kreatsoulas loaned $500, to Levant Lines, S.A. by a series of promissory notes. It was guaranteed by five individuals, Efstathios "Steve" Valiotis, Peter Xenopolous, Demetrios Bekas, Demetrios K. Demetrios a/k/a Dimitrios Paulos Dimtrioslakas, and John Zapantis. The interest rate on the notes was 2% per month. The obligors were jointly and severally liable. The notes were also allegedly secured by freight on board ships. Levant Lines, S. defaulted on the notes. The history of the defaults and the disappearance of the collateral will not be discussed herein. In January 1995, Kreatsoulas initiated this action on the guaranty. At no time during this action did any of the guarantors initiate cross claims for contribution against any of their co-defendants. On September 27, 1996, Kreatsoulas and Demetrios Demetrios (a/k/a Jay) entered into a handwritten agreement which limited Jay s liability on the $500, 000. loan depending upon whether Kreatsoulas recovered all or part of the said

2 $500, (Defendant's Exhibit A). At trial, the court ruled that this document would be interpreted to mean that if Kreatsoulas recovered the $500, principal of the original loan, Jay would have no responsibilty for any other sums. However, if he recovered less than the $500, principal, Jay would be responsible for no more than $ Again, this would refer to principal and would not include any interest or costs that might be due. At no time during the pendency of the action did any defendant cross-claim for contribution against any other defendant. In 1999, Mr. Kreatsoulas moved for summary judgment against Valiotis, Xenopoulos and Bekas. The motion was granted by Justice O'Connell on May , (Court Exhibit VII A), against the aforesaid defendants, jointly and severally. On August 4, 1999, after an inquest on damages, Justice Ralph Franco ordered judgment to be entered against these three gentlemen for $1 699, Judgment was entered on August 10, (Court Exhibit VII B & C). At some point thereafter (post August 10, 1999), though still in the month of August, counsel for the three defendants and counsel for plaintiff entered into a three page agreement (Defendant's - B) wherein, amongst other things, it was agreed Valiotis would pay Kreatsoulas $1 625, and Kreatsoulas would: 7. Furthermore, plaintiff agrees to assign to STEVE VALIOTIS such rights as plaintiff may have in this action against any other party to the action not covered by this Agreement. 8. In consideration of the assignment of plaintiff's rights these defendants: A. hereby acknowledge that they take plaintiff' s rights 'as is' and without any representations or warranties as to those rights or what might be recoverable under such rights as they may exist. Later, on September 27, 1999, Valiotis agreed to pay Kreatsoulas $1 625,000. by a date certain, and Kreatsoulas sold, transferred and assigned to Valiotis "all his right, title and interest" as follows:

3 that certain note or series of notes in the original principal sum of FIVE HUNDRED THOUSAND and/100 ($500,000.00) Dollars, and all security therefore; and b. that action (the "Action ) pending in the SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NASSAU, under INDEX NO /95, entitled, PETER KREA TSOULAS. Plaintiff v. STEVE VALIOTIS. PETER XENOPOULOS. DEMETRIOS BEKAS. Defendants. including without limitation the Judgment (the "Judgment") entered on or about August 10, 1999 by Hon. Ralph P. Franco in favor of plaintiff threin and attached hereto, in the amount of $1, , Now therefore, it is agreed as follows: 1) Assignor hereby assigns to the Assignee and the Assignee hereby accepts the assignment of the Notes and the Action, including the Judgment therein, (including the right to enforce the said Judgment), and all other rights attendant to a holder of the foregoing. 2) In payment for the assignment of the Notes and Action, including the Judgment in the amount of $1 699,999., the Assignee has paid to the Assignor the sum of $1, 625, (Defendant's - B, Plaintiff' s - 17). The court notes that the action assigned in paragraph " " above does not include the names Demetrios Demetrios or John Zapantis. Thus, apparently Kreatsoulas did not assign his rights in the action against Demetrious and Zapantis. However, he did assign his rights in the notes and all security therefor. Valiotis, now labeled "as successor in interest" on the caption, continued the action against Zapantis and Demetrios before the underigned. He also proceeded to obtain contribution from Xenopoulos ($450,000.00) under the judgment. On July 22, 2003, while the jury was deliberating, Zapantis settled with Valiotis for $400,000.00, leaving Demetrios Demetrios as the sole defendant. The trial (without a jury) continued with the court rendering specific findings during the trial and eventually requesting the parties answer specific questions in their final written arguments to the court. The questions set forth by the court were as follows: 1. What effect, if any does Defendant's Exhibit B (three page document signed by counsel "settling" the case) have on the Assignment of Cause of Action" (Plaintiff' s Exhibit 17)? 2. Did Kreatsoulas have anything to assign to Valiotis as of

4 September 27, 1999? (For example, did Kreatsoulas have a right to assign anything other than the $75,000, which represents the difference between the judgment amount of $1, 699, and the amount of $1 625, that Valiotis paid Kreatsoulas for the assignment?) If so, what did Kreatsoulas have to assign as to Defendant Demetrios? 3. Is Valiotis' ability to recover against Demetrios limited by any of the following documents?: a) the general release dated September 30, 1999 from Kreatsoulas to Xenopoulos (Defendant's Exhibit C)? If so, to what extent? b) the general release dated February 11, 2000 from Valiotis to Xenopoulos (Plaintiff' s Exhibit 37)? If so, to what extent? c) the handwritten agreement dated September 27, 1996 between Kreatsoulas and Demetrios (Defendant's Exhibit A)? If so, to what extent? 4. Does the future acceptance of $ from Defendant Zapantis negate any recovery against Defendant Demetrios? 5. Did the acceptance of $ from Defendant Xenopoulos negate any recovery from Defendant Demetrios? After the trial concluded, plaintiff brought an action for contribution against Demetrios in Queens County (September 2003). The court will address the above questions seriatim. Question 1 - What effect, if any, does Defendant's Exhibit B have on the Assignment of Cause of Action" (Plaintiff' s Exhibit 17)? Plaintiff contends that Exhibit B inadvertently bears the "footer" of "settlement" from a prior draft and that the payment by Valiotis of $ millon was not a settlement of the judgment, but, rather, the "price of the assignment." This is translated to mean he "bought a cause of action" that Kreatsoulas had remaining with "zero satisfaction of The Judgment." Thus, argues plaintiff, he had the right to enforce "The Judgment" agair:st the remaining defendants Demetrios and Zapantis. Plaintiff strenuously argues that the intent of the parties was reflected in the

5 testimony of Wiliam C. Shayne, Esq., who drew the document, Peter Kreatsoulas, the assignor, and Steve Valiotis, the assignee. He contends the parties intent was to assign to Valiotis: a) the underlying lawsuit against Zapantis and Demetrios based on the enforcement of the original guaranty and the series of promissory notes, and b) the $1,699,999.09judgment that had been had against Valiotis, Xenopoulas and Bekas. Plaintiff further argues that there is no evidence that the parties intended to satisfy the judgment entered on August 10, The goal was to assign all rights Kreatsoulas had in a certain series of notes in the principal sum of $500, Defendant argues that, yes, Kreatsoulas did transfer whatever claims he had against Demetrios to Valiotis, but he could only transfer what he had left after entry of the judgment on August 10, 1999, which adjudicated the December 1990 guaranty. Said assignment was "as is without any representations or warranties as to those rights or what might be recoverable under such rights as they may exist." (From three page document, (no date) August, Ruling: The plaintiff could not enforce the judgment against Demetrios because he was not a judgment debtor. He may proceed on the action, however, in that he was assigned all rights thereunder on the notes. Question 2 - Did Kreatsoulas have anything to assign to Valiotis as of September 27, 1999? (For example, did Kreatsoulas have a right to assign anything other than the $75,000, which represents the difference between the judgment amount of 699, and the amount of $1 625, that Valiotis paid Kreatsoulas for the assignment?) If so, what did Kreatsoulas have to assign as to Defendant Demetrios? What did Kreatsoulas have to assign as of September 27, 1999? He had a judgment which fully extinguished the guaranty on the loan. He could have proceeded to collect the judgment through enforcement procedures. Defendant argues Valiotis and his counsel were "well aware" Valiotis was not receiving any live rights under the adjudicated guaranty "only a mere expectancy..." Thus, claims defendant, Valiotis lacks any substantive rights under the guaranty upon which to assert or continue this action. In other words, since the guaranty has been adjudicated, it cannot provide standing for Valiotis. Ruling: As of August 10, 1999 and as of September 27, 1999, what did Peter

6 Kreatsoulas have? He had a millon dollar judgment against three guarantors and an action remaining against the remaining two guarantors who are jointly and severally liable on their guaranty. Peter Kreatsoulas could never recover more than the million dollars, the amount of the judgment he received from the court (not including future statutory interest). Did the judgment entered August 10, 1999, preclude a recovery against Demetrios and Zapantis? No - because they remained jointly and severally liable on the notes that formed the basis of the action. However, if he was paid said judgment by one or more of the judgment debtors on or about September 27, 1999, he would not have been able to recover against the remaining two defendants, in that a judgment for the full amount of the debt as determined by the court would have been satisfied. The only limitation on Peter Kreatsoulas' recovery against Demetrios would be the agreement of September 27, 1996, and any partial payments he may have received. Thus, when Peter Kreatsoulas received less than the full amount of the judgment from a judgment debtor, it kept alive the action against the two remaining guarantors. G Therefore, when Valiotis became the assignee of Peter Kreatsoulas' rights via the September 27, 1999 "Assignment of Cause of Action, he stepped into the shoes of Peter Kreatsoulas and all that came with it - the quicksand of the September 27, 1996 agreement which limited Demetrios' liability on the guaranty. It should be noted that Zapantis, if he had not settled, would stil have been jointly and severally liable for the full amount of the debt limited only by what may have been previously recovered by Peter Kreatsoulas or the person who received the assignment of Peter Kreatsoulas action (Valiotis). G. L ; Gaylorv. Burroughs, 248 AD. 915 (2d Dept. 1936) affd. 273 N.Y. 606 (1936). As this court ruled during the trial, the agreement between Peter Kreatsoulas and Demetrios was directed at recovery of the principal $500, Defendant argues that since Peter Kreatsoulas recovered more than $500, 000., any further recovery by Peter Kreatsoulas or his assigns against Demetrios should be precluded. What must be determined is whether Peter Kreatsoulas recovered the $500, principal when he received milion dollars of the milion dollar

7 judgment. The plaintiff has proffered the following mathematical approach: Judgment $1 699,999. Amount Paid - $1,625, 000. Judgment Principal - $ 500, 000. Ratio of Principal to Assignment % Principal as Part of Judgment - $ 477, Unpaid Principal - $ The plaintiff then adds to that amount pre-judgment and post-judgment interest. For the time being, the court will not address those numbers. Further, the court will not allow post-judgment interest from date of entry of judgment, August 10, 1999 to date of settlement/assignment, September 27, It was not contemplated by the settling parties. If they wanted to include it, they would have at the time of settlement. The defendant views the issue of "principal" somewhat differently than plaintiff. He applies a "straight line" method, discounting the $1 625, to September 27, 1996, to determine if Peter Kreatsoulas received less than the $500, principal. He subtracts soft money of $282, (expenses from September 27, 1996 to September ) and interest at $10, per month from September 27, 1996 to September 27, $360, to obtain a total of $ in expenses and interest. He subtracts this from the settlement amount of $1 625, to reach a net balance paid to Peter Kreatsoulas of $982, This amount is obviously over $500, and eliminates any amount defendant, Demetrios, could have owed Peter Kreatsoulas and, thus argues defense counsel, precluded recovery by Peter Kreatsoulas or his assignee, Valiotis. Either the defendant has misinterpreted the court' s ruling or the court was unclear in the manner in which it ruled. The agreement between Kreatsoulas and Demetrios, as the court ruled concluded that if Kreatsoulas recovered $500,000.00, the principal of the loan defendant would owe him nothing. However, if Peter Kreatsoulas recovered less than the $500, loan principal, the contribution by Demetrios to loan principal would be no more than $50, The court's comment on the continuation of the 24% annual interest rate does not impact our case. The matter did not settle for an additional three years and the interest continued to accumulate. The agreement of September 27

8 1996 does not lock in that date for any computation purpose. Further, the court never made a specific ruling on "costs" beyond that they were not included or contemplated by the $500, in the agreement between Demetrios and Peter Kreatsoulas as of September 27, (This is supported by the testimony of Kreatsoulas. ) Thus, the court finds that the amount uncollected by Kreatsoulas of the principal of $500,000. as of the settlement/assignment of September 27, 1999 is $ If Peter Kreatsoulas continued the action against Demetrios on the promissory notes, as he could have, interest on the unpaid portion of principal ($22,058.57) would have been 24% per annum running from September 27, 1999 forward. Therefore, the court awards interest at 24% per annum from September 27, 1999 to July 1, 2003 (trial)( u ncom pou nded): Principal - 3 years at 24% - 9 months at $ per month - Sub-total - $ $15, 882. $ $ The court then awards pre-judgment interest of 9% on the above sub-total for nine months to March at $ per month, equaling $ $41,911. $ Total - $ The court further finds that defendant may also be liable for appropriate costs and attorney fees post September 27, 1999 that may be attributable to the action against Zapantis and Demetrios and then solely against Demetrios. Credit to be given against these amounts based upon the settlement of Zapantis. Any cost associated with the attempts to proceed against co-defendants on the judgment (Le., Xenopolous or Bekas) or separately against Zapantis will not be considered. The issue of attorney fees will be determined at a hearing to be held on May 21, 2004, at 9:30 AM. In the alternative, the parties may consent to submit on the attorney fees issue. The court further finds that all other recoveries, settements or releases as set forth in the aforesaid questions 3a, 3b, 4 and 5 do not impact on Valiotis' right to

9 recover against Demetrios. The court would note that plaintiff has gone to great lengths to provide the court with multiple detailed scenarios of how the damages should be calculated against Demetrios. The court does not dispute his mathematics - only the outcome. The court has chosen its own path through a rather unusual set of circumstances, which it believes to be a just decision on the facts. Dated: April 2, 2004 ENTEREO APOS- co NASSAU CLltt\ ;i COUNff FF'eE