SUPREME COURT - STATE OF NEW YORK COUNTY OF NASSAU. Defendants.

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1 SCAN SHORT FORM ORDER SUPREME COURT - STATE OF NEW YORK COUNTY OF NASSAU PRESENT: HON. IRA B. WARSHAWSKY, Justice. TRIAL/IAS PART 14 MAGNA ENTERPRISES, LLC -against- Plaintiff INEX NO. : /2005 MOTION DATE: 08/31/2006 MOTION SEQUENCE: 002 and 003 FRED WEINGARTEN and MAY A POL Y ANSKA Y A Defendants. FRED WEINGARTEN and MANY A POL Y ANSKA Y A - against - Third-Par Plaintiffs IRIA KOSTETSKY and MATIN F ARENBLUM Third-Par Defendants. The following papers read on this motion: Notice of Motion, Statement of Facts Pursuant to Rule 19-a, Affidavits Affirmation & Exhibits Annexed Plaintiff s Memorandum of Law... Statement of Facts Pursuant to Rule 19-a ii... 3 Notice of Cross-Motion, Affirmation, Affidavit & Exhibits Anexed... 4

2 Exhibits to Torto Affirmation in Support of Defendants/Third-Part Plaintiffs' Cross- Motion for Summar Judgment and Other Relief and in Opposition to Plaintiffs Motion for Summar Judgment... 5 Memorandum of Law in Support of Defendants/Third-Part Plaintiffs Cross-Motion for Summary Judgment and Other Relief and in Opposition to Plaintiffs Motion for Summary Judgment... 6 Defendants' Rule 19-a Statement... 7 Affidavit of Marin Farbenblum, Affidavit of Irina Kostetsky & Exhibit Anexed... 8 Plaintiff s Reply Memorandum of Law Reply Affirmation of Thomas T orto This motion by plaintiff Magna Enterprises LLC for an order pursuant to CPLR 3212 granting it summar judgment in the amount of$ with interest at 10.75% per anum from October and attorneys fees; dismissing or, in the alternative, severing the counterclaim; and, an order severing the third-part action, is granted to the extent provided. This cross-motion by defendants third-par plaintiffs Fred Weingaren and Manya Polyanskaya for an order pursuant to CPLR 3212 granting them summar judgment dismissing the complaint or, in the alternative, an order pursuant to CPLR 3025(b) allowing them to amend the third-par complaint to add Marin Farbenblum Parnership, L.P., as a third- par defendant, is granted to the extent provided herein. In this action, plaintiff Magna Enterprises seeks to recover on a loan. In essence this action is the result of a failed car wash business venture entered into by defendants Weingaren and Polyanskaya, Polyanskaya s husband, Valentin Zusman, third-part defendant Kostetsky and Kostetsky' s husband, Marin Farbenblum. The subject $ loan was made by Signature Bank to third-par defendant Kostetsky on December and the proceeds were in fact used by Kostetsky as her capital contribution to the business venture, Perrier Auto Wash. Kostetsky' s loan was guaranteed by defendants Fred Weingaren and Manya Polyanskaya as well as Kostetsky' s husband, third-par

3 defendant Marin Farbenblum. Farbenblum represents that he is a "Managing Member" of plaintiff Magna Enterprises. Kostetsky' s loan was converted to a Term Loan on March, 2004 which loan was guaranteed by the same guarantors, as well as, in addition, the Marin Farbenblum Parnership, L.P. On October Signature Ban assigned Kostetsky' s loan to Magna Enterprises. That day, Magna Enterprises notified Kostetsky, Weingaren and Polyanskaya of its assignment and requested that the October payment be made to it. On October 11, 2005, those individuals were notified that the Note was in default and full payment was demanded. On November 3, 2005, this action against Weingarten and Polyanskaya to recover on their guaranties was commenced. Despite her status as primar obligor, Kostetsky was not named a defendant in this action nor was Farbenblum or the Marin Farbenblum Parnership, L.P., despite their status as guarantors of the loan. In its complaint, Magna Enterprises alleges that defendants Weingaren and Polyanskaya guaranteed the $ loan to Kostetsky, which was assigned to Magna Enterprises on October 3, 2005, along with the loan guarantees. Magna Enterprises alleges that it notified defendants Weingaren and Polyanskaya that day of its assignment and when the payment which was due was not made by October , it notified defendants Weingarten and Polyanskaya that the entire balance was due and owing on account of the default. In their Answer, as and for their first affirmative defense, Weingaren and Polyanskaya allege that the assignment constitutes champert and as such, is barred by Judiciar Law 489. As and for their second affirmative defense, they allege that Kostetsky is Martin Farbenblum s wife; that Marin Farbenblum is the controllng principal of Magna Enterprises; and, that the plaintiff Magna Enterprises is accordingly Kostetsky' s alter ego. They allege that Magna Enterprises is accordingly subject to the same defenses that Kostetsky would be. They further allege that the loan assignment to Magna Enterprises and the action pursuant thereto constitute a breach of Kostetsky'

4 contractual and fiduciary obligations to Perrier Car Wash. As and for their third affirmative defense, they allege that the Complaint is barred by reason ofkostetsky' violation of her fiduciary duties to Perrier Car Wash. As and for their fourth affirmative defense, they allege that they are guarantors of collection and that an execution has not been retured unsatisfied. As and for their fifth affirmative defense, they allege that Magna Enterprises' claim fails for want of consideration for the assignment. As and for their sixth affirmative defense, they allege that Magna Enterprises lacks standing. As and for their seventh affirmative defense, they allege that Kostetsky caused the default on her loan and is bared from benefitting from it. As and for their eighth affirmative defense, they allege that they are discharged as a result ofthe loan s assignment to Kostetsky' agent, Magna Enterprises. As and for their ninth affirmative defense, they allege that plaintiff has failed to join necessary paries, specifically, Kostetsky and Farbenblum. As and for their tenth affirmative defense, they allege that the complaint is bared by bad faith, laches, acquiescence, waiver, estoppel and unclean hands. As and for their eleventh affirmative defense, they allege a failure to mitigate damages. As and for their twelfth affirmative defense, they allege that the complaint is bared by Kostetsky' s breach of contract. Defendants Weingarten and Polyanskaya advance a counterclaim sounding in Kostetsky' s breach of contract and fiduciar duties. Defendants Weingaren and Polyanskaya commenced a third-par action against Irina Kostetsky and Marin Farbenblum. They allege that they, along with Kostetsky, were shareholders in Perrier Auto Wash. They each owned 35% of the stock and Kostetsky owned 30%. They allege that Kostetsky used the proceeds of the Signature Ban loan as and for her capital contribution to Perrier Auto Wash. They further allege that Kostetsky commenced an action against them and Polyanskaya s husband Valentin Zusman who helped run Perrier Auto Wash in June, 2005 seeking, inter alia, to impose liabilty for the Signature Bank loan on them. Allegations of breach of fiduciary duties

5 and financial mismanagement were also plead in that action. Weingarten and Polyanskaya further allege that on August 9, 2005, Kostetsky' s attorneys notified them that Kostetsky would no longer make her monthly contributions to Perrier Auto Wash of$ to $ While an application by Weingarten and Polyanskaya seeking dismissal of Kostetsky' s action was pending, Magna Enterprises acquired Kostetsky' s loan and the guarantees via its assignment and shortly thereafter, notified Weingarten and Polyanskaya of the loan, default. Only then did Kostetsky discontinue her action against Weingarten and Polyanskaya and within only one week, this action was commenced. The defendants third-par plaintiffs note that Magna Enterprises failed to name Kostetsky, Farbenblum or the Marin Farbenblum Family Partnership as defendants in this action. By their first cause of action, the defendant third-par plaintiffs seek judgment over and against Kostetsky as the obligor on the loan. By their second cause of action defendants third-par plaintiffs allege that Kostetsky' s refusal to continue her monthly contributions to Perrier Auto Wash constituted a breach of her fiduciar duties to them as well as a violation of the duty of fair dealing and an obligation to act in good faith, which conduct allegedly precipitated her default on the Signature Ban loan. As and for their third cause of action, defendants third-par plaintiffs allege that Kostetsky' s failure to continue her monthly contributions to Perrier Auto Wash as well as her loan payments constituted a breach of contract. As and for their fourth cause of action, defendants thirdpart plaintiffs seek judgment over and against Kostetsky and Farbenblum, if they are held liable on their guarantees. As and for their fifth cause of action, they seek judgment over and against third-par defendant Farbenblum as Kostetsky' s alter ego. A few facts and allegations are worthy of note. In support of Magna Enterprises' summary judgment motion, Farbenblum attests that he is not a Member of Magna Enterprises, that he is only a "Managing Member. Further, that he and Magna Enterprises had a longstanding relationship with Signature Ban and he was notified by it when Perrier Auto Wash closed its account there since

6 Kostetsky' s monthly loan payments had been automatically made through that account. Thus, Farbenblum attests that he satisfied his wife s loan which Perrier Auto Wash had been paying to protect his credit as well as his relationship with Signature Bank. In support of its cross-motion, defendant Polyanskaya s husband, Valentin Zusman, attests that he had experience owning and operating car washes and in 2003 Farbenblum desired to acquire a car wash for his wife Kostetsky and her son Vlad to run. Thus, at Farbenblum s behest, he negotiated the purchase of Perrier Auto Wash, along with Farbenblum and Kostetsky, for 1.2 milion dollars. Zusman attests and Weingaren confirms that since Weingarten had longstanding relationships with credit unions Zusman referred Farbenblum to Weingarten for assistance procuring financing. Zusman and Weingaren both attest that Weingarten helped procure 1.2 milion in financing for Kostetsky, which loans were guaranteed by Weingarten and Polyanskaya at the credit union s request. In addition, both Weingaren and Zusman attest that Weingaren and Zusman s wife Polyanskaya were asked and agreed to guarantee Kostetsky' s loan with Signature Ban. Those funds were used as a contribution by Kostetsky to Perrier Auto Wash: Both Zusman and Weingarten attest that in exchange for Weingarten and Zusman s contributions to the acquisition and operation of Perrier Auto Wash Weingaren and Zusman s wife Polyanskaya were each given 35% of Perrier Auto Wash' s stock. Zusman attests that the car wash opened in December 2003 or Januar was present on a daily basis to assist Kostetsky, the president of Perrier Auto Wash, and her son, the manager, in running the car wash. Because revenues were insufficient to meet Perrier Auto Wash' s expenses, Kostetsky made monthly contributions. Then, in June 2005, Kostetsky commenced an action against Zusman, Weingarten and Polyanskaya and shortly thereafter, in the summer of 2005, her son resigned his position at Perrier Auto Wash. In August, 2005, Kostetsky stopped making her monthly contributions and Perrier Auto Wash suffered dire financial consequences, including defaulting on Signature

7 Ban' s loan. Zusman attests that at that point, he began making monthly contributions to Perrier Auto Wash so that the credit union loans could be paid. A petition to dissolve Perrier Auto Wash was ultimately fied on or about December Magna Enterprises' Summar Judgment Motion Defendant Magna Enterprises seeks summar judgment on its complaint. Magna Enterprises has established Kostetsky' s loan and the defendant Polyanskaya and Weingaren s guarantees, as well as its assignment of the loan and its default, thereby establishing its entitlement to summar judgment absent a valid defense. Whether Magna Enterprises' action is bared by Judiciary Law must be determined. Judiciary Law ~ 489 provides inter alia: (No corporation or association, directly or indirectly, itself or by or through its officers, agents or employees, shall solicit buy or take an assignent of, or be in any manner interested in buying or taking an assignment of a bond, promissory note bil of exchange, book debt, or other thing in action,or any claim or demand with the intent and for the purpose of bringing an action or proceeding thereon (emphasis added). The Court of Appeals has commented: (the statute s) ' language is significant and indicates that a mere intent to bring a suit on a claim purchased does not constitute the offense; the purchase must be made for the very purpose of bringing such suit, and this implies an exclusion of any other purpose.... To constitute the offense the primar purpose of the purchase must be to enable him to bring a suit and the intent to bring a suit must not be merely incidental and contingent.' " Bluebird Parners. L.P. First Fidelity Bank. N., 94 NY2d 726, 735 (2000), quoting Moses McDivitt, 88 NY 62, 65 (1882). "(T)he statute is violated only if the primary purpose of the purchase or taking by assignent of the thing in action is to enable the

8 (assignee) to commence a suit thereon. The statute does not embrace a case where some other purpose induced the purchase, and the intent to sue was merely incidental and contingent." (Sprung Jaffe, 3 NY2d 539, 544 (1957)), citing Moses McDivitt supra at p. 65). In fact, in Fairchild Hiler Corp. McDonnell Douglas Corp. 8 NY2d (1971)), the Court of Appeals held that "in order to fall within the statutory prohibition, the assignment must be made for the very purpose of bringing suit and this implies an exclusion of any other purpose. " In Fairchild Hiler, the Court of Appeals refused to dismiss a claim as champterous because the evidence did not establish that the assignment was received "for the sole and primar purose of bringing an action.... Fairchild Hiler Corp. McDonnell supra, at p. 330). In Bluebird Parners First Fidelity Ban. N. (supra at p. 736), the Court of Appeals concluded that "(t)he bottom line is that Judiciar Law 489 requires that the acquisition be made with the intent and for the purpose (as contrasted to purpose) of bringing an action or proceeding (citations omitted)." The "purchase of debt obligations ' is not made ilegal by the existence of the intent on (the purchaser s) part at the time of the purchase, which must always exist in the case of such purchases, to bring suit upon them if necessar for their collection. Ellott Associates. L.P. Banco de la Nacion, 194 F.3d 363, 379 (2d Cir. 1999), quoting Moses McDivitt supra, at p. 67. Indeed, in Ellott Associates. L.P. Banco de la Nacion supra. at p. 379), the Second Circuit held that "turning a profit" constituted a "legitimate business purpose rather than a collateral purpose prohibited by Section 489." The Second Circuit concluded "Section 489 is not violated when, as here, the accused par' s 'primar goal' is found to be satisfaction of a valid debt and its intent is only to sue absent full performance. Ellott Associates Banco de la Nacion supra, at p Magna Enterprises' acquisition of the loan was not solely for the purpose of commencing an action. The evidence here indicates that Magna Enterprises and Farbenblum had a relationship with Signature Bank and may have been influential in Kostetsky' s procurement of the loan. Moreover, Farbenblum himself guaranteed the loan.

9 It also appears that Kostetsky' s loan was in default and not likely to be revived by her as the primar obligor. The assignment safeguarded Farbenblum and Magna Enterprises relationship with Signature Bank. More importantly, Farbenblum s intent was to collect the debt, not necessarily commence suit. Notice and an opportunity to cure were in fact supplied. Moreover, the interest rate set forth in the Note could net a handsome retu Le., a profit. Thus, Farbenblum s claim is not barred by Judiciar Law ~ 489. Deposit Insurance Corporation See Federal Suffolk Place Associates. Inc., 270 AD2d 304 (2d Dept. 2000), lv to app dism. 96 NY2d 730 (2001); Limpar Realty Corp. Uswiss Realty Holding. Inc., 112 AD2d 834 (Ist Dept. 1985); 1015 Gerard Realty Corp. A & S Improvements Corp., 91 AD2d 927 (pt Dept. 1983); DMJ Associates. LLC Capasso 288 F.Supp.2d 262, (E. Y. 2003); Cavendish Traders. Ltd. Nice Skate Shoes. Ltd., 117 F.Supp.2d (S. Y. 2000). The next issue for this Court' s resolution is whether Magna Enterprises is the alter ego of Irina Kostetsky and as such, is subject to the same defenses and counterclaims that she would be. (W)here a shareholder uses a corporation for the transaction of the shareholder s personal business, as distinct from the corporate business, the courts have held the shareholder liable for acts of the corporation in accordance with the general principles of agency (citations omitted). Port Chester Elec. Constr. Corp. Atlas, 40 NY2d , 657. That is, the corporation becomes a shareholder s alter ego if the shareholder exercises such dominion and control over the corporation and uses it as a vehicle for purely personal ends. Bonani Straight Arows Publishers. Inc., 133 AD2d 585 (Ist Dept. 1987). The evidence here establishes that Kostetsky has no relationship whatsoever with plaintiff Magna Enterprises. Farbenblum s status as Kostetsky' s husband, standing alone does not suffice to render him, let alone Magna Enterprises, Kostetsky' s agent or alter ego. Since Magna Enterprises is not Kostetsky' s agent or alter ego, the defendants

10 Weingarten and Polyanskaya s second, third, seventh and twelfth affirmative defenses and their first counterclaim fail and are dismissed. While the defendant third-part plaintiffs maintain in opposition to Magna Enterprises' motion that Magna Enterprises is Farbenblum s agent/alter ego, that claim was not advanced in their Answer. The defendants Weingarten and Polyanskaya s fourth affirmative defense fails. Their guarantees are guarantees of payment, not collection. They guarantee the "full and prompt payment and performance by Borrower of all of Borrower s indebtedness... and obligations to the Ban... and promise to pay to Ban, or order, on demand, in lawful money of the United States, all of Borrower s Indebtedness to Bank...." They require defendants to pay if not paid when due. See, UCC ~ 3-416(I). Defendants Weingarten and Polyanskaya s fifth affirmative defense also fails. General Obligations Law ~ provides "(a)n assignent shall not be denied the effect of irrevocably transferring the assignor s rights because of the absence of consideration, if such assignment is in writing and signed by the assignor... Defendants Weingaren and Polyanskaya s sixth affirmative defense fails. Magna Enterprises has established its valid formation under the Limited Liabilty Company Law. This court discerns no grounds for denying Magna Enterprises' standing as it has been assigned the loan by Signature Bank. Defendants Weingaren and Polyanskaya s ninth affirmative defense fails. Assuming, arguendo that Kostetsky and Farbenblum are necessar paries, the plaintiffs failure to name them has been cured by the defendant third-par plaintiffs commencement of the third-par action against them. Defendants Weingaren and Polyanskaya s tenth and eleventh affirmative defenses are inadequately pled. CPLR In view of the foregoing, the plaintiff Magna Enterprises motion for summar judgment is granted. The counterclaim and the affirmative defenses are dismissed and 10-

11 Magna Enterprises is hereby granted summar judgment with respect to liabilty as against defendants Weingarten and Polyanskaya. However, in light of the third- par claims, entr of judgment in favor of Farbenblum is deferred pending resolution of the third-par action or further order of this Court. Magna Enterprises' application for a severance of the third-par action is denied. The defendant third-par plaintiffs Weingaren and Polyanskaya s motion for summar judgment dismissing the complaint is denied. Their motion for permission to amend their third-par complaint to add Martin Farbenblum Parnership, L.P. is granted. This matter wil appear upon the court' s calendar for a conference on October at 9:30 A. Dated: October 10, 2006 EN1ERE QC\ '\ 'j 1 ts cotn i'( COUN'TY SR\Z' S off\ce 11-