FILED: NEW YORK COUNTY CLERK 07/09/ :06 PM INDEX NO /2014 NYSCEF DOC. NO. 50 RECEIVED NYSCEF: 07/09/2015

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1 FILED: NEW YORK COUNTY CLERK 07/09/ :06 PM INDEX NO /2014 NYSCEF DOC. NO. 50 RECEIVED NYSCEF: 07/09/2015 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK X WINSTON CAPITAL LLC, Index No.: /2014 -against- JOSHUA KIRSCHENBAUM et al., Plaintiff, REPLY AFFIRMATION IN FURTHER SUPPORT OF DEFENDANT S APPLICATION TO INTERPOSE AN AMENDED ANSWER Defendants X Motion Seq. No. 002 MICHAL FALKOWSKI, ESQ., an attorney duly licensed to practice law in the Courts of the State of New York hereby affirms the following under the penalties of perjury: 1. I am a principal at Paykin, Richland & Falkowski, P.C., attorneys of record for Defendant Joshua Kirschenbaum ( Defendant ), and as such am fully familiar with the facts of this case. 2. I submit this Reply Affirmation in further support of Defendant s motion seeking leave to amend the Verified Answer pursuant to CPLR 3025(b), and for such other and further relief as this Court may deem just and proper. 3. Defendant s application must be granted as Plaintiff has failed to demonstrate any prejudice or surprise from the proposed amendment. Instead, Plaintiff launches into ad hominum attacks on the undersigned s good faith, a mere red herring to divert the Court from the actual facts of this motion. Notably, Plaintiff omits key facts about the prior proceedings, including its counsel s prior failures and deficiencies in the prior actions. Hence, Plaintiff s one-sided bombast attempts to guilt the Court into sympathy, when, in reality, Plaintiff has manufactured its 1

2 own prejudice by repeatedly ignoring my requests for consent to this motion and by filing a motion for summary judgment after this application. 4. The instant action is the third foreclosure action commenced by Plaintiff and must be swiftly approaching this Court s record for greatest number of foreclosures involving the same loan, parties, premises, and default. 5. The first action, Index No /2011, was commenced on July 7, 2011 ( First Foreclosure Action ), and the second action, Index No /2011, was commenced on May 13, 2013 ( Second Foreclosure Action ). See Exhibit A, Exhibit B. 6. It is also uncontested that the Second Foreclosure Action was dismissed by the Court sua sponte pursuant to NY RPAPL 1301(c) because of the undisclosed First Foreclosure Action. See Short Form Order of the Hon. Arthur F. Engoron, attached hereto as Exhibit C. 7. Thereafter, and instead of prosecuting the first foreclosure action, Plaintiff asked the Court to discontinue the first action. By Decision & Order dated April 15, 2014, the Hon. Carol E. Huff dismissed the first foreclosure action. Exhibit D. More than two months thereafter, Plaintiff recommenced through this, the third foreclosure action. 8. The three year delay in resolution of this dispute, as measured from commencement of the first action on July 7, 2011, through the commencement of this action on June 18, 2014, is solely the fault of Plaintiff and its respective counsel. 9. Since commencement, little to nothing has been done on this matter by Plaintiff. The Plaintiff waited more than a year to move for summary judgment, which motion was clearly prompted by the instant motion in an attempt to manufacture prejudice, and has not engaged in any discovery or even requested a Preliminary Conference. 2

3 10. The Plaintiff s alleged prejudice here could have been eliminated, for example, merely if Plaintiff s counsel had responded to the undersigned s s dated May 10, 2015 and June 4, 2015, which sought consent to interpose the amended answer. 11. Plaintiff s counsel simply ignored my s and now brazenly and baldly argues that it would be prejudiced. 12. Further, the Plaintiff s cited case law and statutory authority is inapplicable. 13. Plaintiff s reliance on Lattanzio v. Lattanzio is misplaced and Lattanzio is distinguishable. 55 A.D.3d 431 (1st Dept. 2008). In Lattanzio, the Court denied Defendant s application for leave to amend the answer because the application was made on the eve of trial, after discovery had already been completed, and only after Plaintiff had filed his application for summary judgment. Id. While it is true that the proposed affirmative defense was known to defendant at the time he interposed his answer, the Court considered all of the above-referenced factors before using its direction to deny the application. 14. For the same reasons, Plaintiff s reliance on L.B. Foster Co. v. Terry Contracting, Inc. is also misplaced and inapplicable to the instant action. 25 A.D.2d 721 (1st Dept. 1966) (holding that movant failed to provide any justification for its more than three year delay in making the motion to amend his answer, on the eve of trial). 15. In the case at hand, Plaintiff has been aware of the inadvertently omitted affirmative defense of usury, as the defense was interposed in the 2013 action. Exhibit E. Further, omission of the affirmative defense in this action can be attributable to law office oversight, excusable pursuant to CPLR 2001, As such, plaintiff was on actual notice of the affirmative defense and cannot demonstrate any surprise. 3

4 16. Further, leave to amend should be freely granted and rests in sound discretion of the trial court. Birdsall v. New York, 60 A.D.2d 522 (1st Dept. 1977); Marks v. Macchiarola, 221 A.D.2d 217 (1st Dept. 1995) ( Leave to amend shall be freely given at any time, even as to defenses deemed waived [.] ). 17. Plaintiff s reliance on G.O.L (6)(a) is also unavailing and unsupported by any case law, as 5-501(6) is applicable to all residential loans and not merely to one to two family residence. Further, a condominium is considered a one family dwelling and therefore covered under the statute. 18. Plaintiff s reliance on New York Banking Regulation 4.2(a) is misplaced as 4.2(a) only applies to owner-occupied residential loans. Also, Plaintiff s reliance on Anna Louise Realty Corp. v. Grahel Associates LLC is misplaced and inapplicable to the instant action as the loan therein was a commercial loan. See 2010 N.Y. Misc. LEXIS 4844, 2010 N.Y. Slip Op (U) (Sup. Ct. Queens Cty. 2010). 19. With respect to the merits of the proposed defense, Plaintiff does not deny that the defense is potentially meritorious. Instead, Plaintiff alleges that usury is not applicable to second mortgages, and cites to Second Department case law in support of its position. See Galatti v. Alliance Funding Co., 228 A.D.2d 550 (2nd Dept. 1996). Unlike in Galatti, Plaintiff herein fails to provide any evidence to demonstrate that Plaintiff is a licensed mortgage banker or an exempt organization[] within the meaning of Banking Law 590(1)9e) and (2), and, as such, Plaintiff has failed to demonstrate that usury is not applicable to the loan in question. Galatti v. Alliance Funding Co., 228 A.D.2d 550 (2nd Dept. 1996). Further, plaintiff has failed to demonstrate that the mortgage in question is even a second mortgage; as Plaintiff could not even be bothered to attach a complete copy of the purported first mortgage. 4

5 20. As such, Plaintiff has failed to prove that the defense is without merit. 21. Further, and, as articulated by the Court of Appeals in Hammelburger v. Foursome Inn Corp., when calculating the interest rate, the amount of the loan is deemed not the original principal amount, but only the net principal amount actually received by the borrower after deducting points and other fees considered interest and paid from the loan proceeds. 54 N.Y.2d 580 (1981). 22. In the case at hand, it is undisputed that the interest rate is sixteen percent (16%) annum. As such, if even a penny of the original loan amount went towards points or other fees, it must be considered interest, and therefore the annual interest would be more than sixteen percent, making it usurious. 23. Granting Defendant leave to interpose the amended answer will not cause any prejudice or surprise to plaintiff, as Plaintiff, the original lender, was aware of the actual closing costs associated with the loan, as well as the interest rate contained within the Note. See U.S. Bank, N.A. v. Sharif, 89 A.D.3d 723, 724 (2d Dept. 2011) ( Mere lateness is not a barrier to the amendment. It must be lateness coupled with significant prejudice to the other side[.] ); Rife v. Union College, 30 A.D.2d 504 (3d Dept. 1968) ( [O]ne cannot successfully claim prejudice when he has had full knowledge of all the facts and an opportunity to present his theory of the case is allowed. ); see also DiMauro v. Metro Bus, 483 N.Y.S.2d 383, 388 (2d Dept. 1984). 24. In opposition to the instant motion, all Plaintiff had to do was produce a copy of the closing statement to demonstrate that there were no such fees or points, and that the actual interest rate is sixteen percent annum. Instead of producing same, Plaintiff merely asserts in a conclusory fashion that the proposed defense is without merit. 5

6 25. It is respectfully submitted that a party seeking leave to amend [his pleading] is not required to establish the merit of the proposed amendment in the first instance. Lucido v. Mancuso, 49 A.D.3d 220, 227, 851 N.Y.S.2d 238 (2008). It is further respectfully submitted that Plaintiff s counsel s denials and conclusory allegations are insufficient to demonstrate that the proposed defense is completely devoid of merit. See Fellner v. Morimoto, 52 A.D.3d 352 (1st Dept. 2008) (holding that denial of motion for leave to amend was error because defendant would not have been unduly prejudiced or surprised and the proposed claims were not devoid of merit); Castor Petroleum, Ltd. V. Petroterminal de Panama, S.A., 90 A.D.3d 424 (1st Dept. 2011) (movant was entitled to amend its pleading since the proposed amendment [was] not palpably insufficient or clearly devoid of merit. );RCLA, LLC v Realty, LLC, 48 A.D.3d 538 (2nd Dept. 2008) (holding that trial court should have granted motion to amend because the proposed amendment was not patently devoid of merit and no showing of prejudice); Long Island Tit. Agency, Inc. v. Frisa, 45 A.D.3d 649 (2nd Dept. 2007). 26. This matter is still in its infancy and discovery will allow the parties to explore the viability of the proposed defense, as Plaintiff should be in possession of all of the closing documents. 27. In sum, Plaintiff should not be rewarded for manufacturing its own prejudice by finally acting and filing its summary judgment motion after Defendant filed this application. 28. Accordingly, Defendant respectfully requests leave to amend his Answer to include the affirmative defense of usury. 6

7 WHEREFORE, Defendant prays that this Court issue an Order granting leave to interpose an amended answer pursuant to CPLR 3025(b), and for such other and further relief as this Court may deem just and proper. DATED: July 9, 2015 Garden City, NY Respectfully Submitted, Paykin, Richland & Falkowski, PC Michal Falkowski, Esq. 591 Stewart Avenue, Suite 400 Garden City, New York Phone: x 803 Fax: (not for service of process) Attorneys for Defendant Joshua Kirschenbaum 7