FILED NEW YORK COUNTY CLERK 02/14/2017 1126 AM INDEX NO. 650803/2017 NYSCEF DOC. NO. 3 RECEIVED NYSCEF 02/14/2017 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ---------------------------------------------------------------- x CAPITAL ONE EQUIPMENT FINANCE CORP., Plaintiff, -against- OFFER HARARI, AMALIA HARARI, LUKE EMERY, KAREENE HARARI, JOELLE HARARI, PAULA BOUZAGLOU, NOREEN HARARI, DANIEL BOUZAGLOU, ARIE H, LLC, ASTREP SERVICE CORP., BUNDI CAB CORP., CHELSEA CAB CORP., FELICHE, LLC, FIRST H & H, LLC, FIRST IGAL H, LLC, FIRST SAAD TAXI CORP., G & K TAXI, INC., GABBI CAB CORP., GENT SERVICE CO., INC. a/k/a GENT SERVICE CORP., H. ASHIRA K, LLC, KAREENE JOELLE HACKING CORP., MAGYAR CAB CORP., MIDGET SERVICE CORP., RYDER TAXI, INC., SONG CAB CORP., TAIRI HACKING CORP., TERM TAXI, INC., and TIMOT CAB CORP., Defendants. ---------------------------------------------------------------- x Index No. Commercial Division (, J.) Motion Seq. No. 1 CAPITAL ONE S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT IN LIEU OF COMPLAINT HERRICK, FEINSTEIN LLP Jonathan L. Adler Hanh V. Huynh Halimah I. Famuyide Attorneys for Plaintiff Two Park Avenue New York, New York 10016 212.592.1400 HF 11250869v.4 1 of 12
FILED NEW YORK COUNTY CLERK 02/14/2017 1126 AM INDEX NO. 650803/2017 NYSCEF DOC. NO. 3 RECEIVED NYSCEF 02/14/2017 TABLE OF CONTENTS TABLE OF AUTHORITIES... ii PRELIMINARY STATEMENT...1 UNDISPUTED FACTS...2 A. OSG Loaned the Borrowers Approximately $31.5 Million...2 B. The Borrowers' Owners Execute Irrevocable and Unconditional Guarantees...3 C. OSG Assigns Its Right, Title and Interest in the Loans to COTMF...4 D. The Borrowers Default and the Loans Mature in 2015-2016...5 E. Amounts Due and Owing by Defendants to COTMF...5 ARGUMENT...6 COTMF IS ENTITLED TO SUMMARY JUDGMENT PURSUANT TO CPLR 3213...6 A. Legal Standard...6 B. COTMF Has Established a Prima Facie Case for its Claims on the Promissory Notes and the Guarantees...8 CONCLUSION...9 i 2 of 12
FILED NEW YORK COUNTY CLERK 02/14/2017 1126 AM INDEX NO. 650803/2017 NYSCEF DOC. NO. 3 RECEIVED NYSCEF 02/14/2017 TABLE OF AUTHORITIES Cases Bank of Am., N.A. v. Solow, 59 A.D.3d 304 (1st Dep t 2009)...8 Bank of Am., N.A. v. Tatham, 305 A.D.2d 183 (1st Dep t 2003)...8 German Am. Capital Corp. v. Oxley Dev. Co., 102 A.D.3d 408 (1st Dep t 2013), leave to appeal denied, 21 N.Y.3d 862 (2013)...9 Jason Trading Corp. v. Lason Trading Corp., 303 A.D.2d 180 (1st Dep t 2003)...8 LaBoeuf v. Saide, 134 A.D.3d 515 (1st Dep t 2015)...8 Poah One Acquisition Holdings Ltd. v. Armenta, 96 A.D.3d 560 (1st Dep t 2012)...8 Smith v. Shields Sales Corp., 22 A.D.3d 942, 944 (3d Dep t 2005)...8 Solanki v. Pandya, 269 A.D.2d 189 (1st Dep t 2000)...8 Warburg, Pincus Equity Partners, L.P. v. O Neill, 11 A.D.3d 327 (1st Dep t 2004)...8 Worms v. Andre Café Ltd., 183 A.D. 2d 494 (1st Dep t 1992)...3 Statutes CPLR 3213... passim CPLR 3218...2 CPLR 3218(b)...2 CPLR 5001...7 ii 3 of 12
FILED NEW YORK COUNTY CLERK 02/14/2017 1126 AM INDEX NO. 650803/2017 NYSCEF DOC. NO. 3 RECEIVED NYSCEF 02/14/2017 Plaintiff Capital One Equipment Finance Corp., formerly known as All Points Capital Corp. and doing business as Capital One Taxi Medallion Finance ( COTMF ), respectfully submits this Memorandum of Law in support of its Motion for Summary Judgment in Lieu of Complaint pursuant to New York Civil Practice Law and Rules ( CPLR ) 3213 against defendants Offer Harari, Amalia Harari, Luke Emery, Kareene Harari, Joelle Harari, Paula Bouzaglou, Noreen Harari and Daniel Bouzaglou (collectively, the Guarantors ) and against taxicab companies owned by one or more of the Guarantors Arie H, LLC, Astrep Service Corp., Bundi Cab Corp., Chelsea Cab Corp., Feliche, LLC, First H & H, LLC, First Igal H, LLC, First Saad Taxi Corp., G & K Taxi, Inc., Gabbi Cab Corp., Gent Service Co., Inc. a/k/a Gent Service Corp., H. Ashira K, LLC, Kareene Joelle Hacking Corp., Magyar Cab Corp., Midget Service Corp., Ryder Taxi, Inc., Song Cab Corp., Tairi Hacking Corp., Term Taxi, Inc., Timot Cab Corp. (collectively, the Borrowers and together with the Guarantors, the Defendants ). PRELIMINARY STATEMENT This is an action pursuant to CPLR 3213 to recover the aggregate principal amount of $31,580,000.00 (exclusive of late charges, interest, costs, and attorneys fees) based upon instruments for the payment of money only. The instruments are promissory notes executed and delivered by the Borrowers (the Promissory Notes ), companies that own New York City taxicab medallions and operate taxicabs in New York City, and the guarantees executed and delivered by their respective owners (the Guarantees ), in favor of taxicab medallion lending company The OSG Corp ( OSG ), all in connection with loans funded by COTMF between November 2012 and May 2013. All of the Guarantees at issue were signed by defendant Offer Harari, either in his own name or on behalf of the remaining Guarantor- 4 of 12
FILED NEW YORK COUNTY CLERK 02/14/2017 1126 AM INDEX NO. 650803/2017 NYSCEF DOC. NO. 3 RECEIVED NYSCEF 02/14/2017 Defendants. 1 OSG subsequently transferred and assigned all of its interests and rights in the loans to Plaintiff COTMF. The assignment gave COTMF the right to all sums payable under the Promissory Notes, including the Guarantors irrevocable and unconditional Guarantees of the Borrowers payment obligations. Each of the loans has matured by their terms and the Borrowers and Guarantors are in default under the Loan Documents as a result of their failure, to date, to make the required payments under the Loan Documents. As a result, the Borrowers and Guarantors are jointly and severally liable for all amounts due under these loans, plus late charges, interest and costs, including reasonable attorneys fees, as set forth more fully below and in the accompanying Affidavit of Michael Robinson, sworn to on February 13, 2017 ( Robinson SJ Aff. ) UNDISPUTED FACTS A. OSG Loaned the Borrowers Approximately $31.5 Million Between November 2012 and May 2013, OSG made individual loans to each of the Borrowers in the aggregate principal amount of approximately $31.5 million (the Loans ). (Robinson SJ Aff. 23.) Each of the Loans, which range from $560,000 to $3.75 million in original principal, is evidenced and secured by the following documents, which are materially identical in all substantive respects for each of the Loans a Promissory Note, a Guaranty, a Security Agreement, a Pledge Agreement, an Affidavit for Judgment by Confession, a Power of Attorney (where applicable), and an Assignment & Transfer. These documents, and all other documents, instruments at any time executed and delivered in connection therewith, each as 1 Twelve of the Guarantees were signed via power of attorney by Offer Harari. In one instance, the Guaranty for Feliche LLC was signed by Offer Harari as agent for Luke Emery. 2 5 of 12
FILED NEW YORK COUNTY CLERK 02/14/2017 1126 AM INDEX NO. 650803/2017 NYSCEF DOC. NO. 3 RECEIVED NYSCEF 02/14/2017 amended, restated supplemented or otherwise modified from time to time, are collectively referred to as the Loan Documents. 2 B. The Borrowers Owners Execute Irrevocable and Unconditional Guarantees As a condition to extending loans to the Borrowers, OSG required the Borrowers owners, the Guarantors, to execute irrevocable and unconditional guarantees. Defendant Offer Harari signed all of the Guarantees, either in his own name or on behalf of the remaining Guarantor-Defendants. 3 (Robinson SJ Aff., at 34.) Under the express terms of the Guarantees, each Guarantor, as primary obligor and not merely as a surety[,] irrevocably and unconditionally guarantee[d] to the Lender payment when due, whether by acceleration or otherwise, of any and all liabilities of the Borrower to the Lender, together with all interest thereon and all attorneys fees, costs and expenses of collection. (Id. at 35.) The term liabilities of the Borrower is broadly defined The term liabilities of the Borrower shall include duties, debts, liabilities and obligations of the Borrower (or its successors, assigns or legal representatives) to the Lender, present or future, whether now or hereafter existing, contingent or absolute, howsoever arising or incurred or evidenced, including, without limitation, the duties, debts, liabilities and obligations of the Borrower under a certain Security Agreement dated [same as Guaranty] between the Borrower and the Lender and under a certain Promissory Note of even date herewith given by the Borrower to the Lender and evidencing a debt in the sum of [the amount lent]. 2 Given that the Affidavits for Judgment by Confession were executed more than three years ago, COTMF is not seeking to enforce its rights under the Guarantees pursuant to CPLR 3218. See N.Y. C.P.L.R. 3218(b) (McKinney 2017). 3 It is well-settled that a guarantor may become liable under a guaranty, even if he or she did not sign it, so long as the person who signed had a power of attorney for the guarantor. Worms v. Andre Café Ltd., 183 A.D. 2d 494, 494-95 (1st Dep t 1992) (holding individual guarantor liable under guaranty executed by the guarantor s brother, who had a power of attorney to act in the guarantor s name with respect to banking transactions and all other matters ). Furthermore, it is well-settled that a principal is bound where an agent acts with apparent authority, i.e., where a person reasonably assumes that an agent has authority to bind a principal. See Greene v. Hellman, 51 N.Y.2d 197, 210-11, 433 N.Y.2d 75, 83-84 (1980). 3 6 of 12
FILED NEW YORK COUNTY CLERK 02/14/2017 1126 AM INDEX NO. 650803/2017 NYSCEF DOC. NO. 3 RECEIVED NYSCEF 02/14/2017 (Id. at 36.) The Guarantors expressly waived presentment, demand of payment, protest, notice of dishonor or nonpayment of any such liabilities, suit or taking other action by the Lender against, and any other notice to, any party liable thereon (including the undersigned). (Robinson SJ Aff. 37). The Guarantees also provide that should the Lender bring any judicial proceedings in relation to any such matter [arising under this guaranty], the undersigned will not impose any counterclaim or setoff of any nature, and further that, (Id. at 38.) [n]o invalidity, irregularity or unenforceability of all or any part of the liabilities hereby guaranteed or of any security therefor or any other circumstance that might otherwise constitute a legal or equitable defense of a guarantor shall affect, impair or be a defense to this guaranty, and this guaranty is a primary obligation of the undersigned. C. OSG Assigns Its Right, Title and Interest in the Loans to COTMF COTMF and OSG are parties to a Master Joint Participation Agreement (the MJPA ) dated August 11, 2010. COTMF funded 100% of all the Loans through the MJPA. At or shortly after the closing of each Loan, OSG executed an Assignment & Transfer, assigning and transferring all of OSG s rights in and to the subject Loan to COTMF. Pursuant to the Assignment & Transfer document for each Loan, COTMF is expressly authorized by OSG to indorse each Promissory Note. Prior to the filing of this Action, COTMF, as authorized signatory for OSG, indorsed each of the Promissory Notes in accordance with each Assignment & Transfer. (Robinson SJ Aff. 40-44.) The assignment of each Loan is permitted under the Loan Documents as well. (Id. 45.) Accordingly, COTMF is the lawful owner and is in possession of the Loan Documents, including the Promissory Notes. 4 7 of 12
FILED NEW YORK COUNTY CLERK 02/14/2017 1126 AM INDEX NO. 650803/2017 NYSCEF DOC. NO. 3 RECEIVED NYSCEF 02/14/2017 D. The Borrowers Default and the Loans Mature in 2015-2016 The Borrowers agreed in their Promissory Notes to make monthly payments until the maturity date, at which time the unpaid principal balance and accrued interest shall be due and payable. (Robinson SJ Aff. 46.) Prior to the maturity dates, the Borrowers defaulted under the Loan Documents for failing to make monthly payments due thereunder. (Id. at 48.) Each of the Loans matured by their terms in either December 2015, January 2016, or June 2016, but the amounts due and owing thereunder remain unpaid. (Id. at 5, 6.) These failures constitute Events of Default. (Id. at 49.) 4 Once an Event of Default occurs, each Promissory Note gives the Note s holder the option to make the unpaid balance hereof and all accrued interest... immediately due and payable. (Id. at 29.) The Promissory Notes further provide that [p]resentment of payment, notice of dishonor, protest, notice of protest, and trial by jury are hereby waived. (Id. at 34.) E. Amounts Due and Owing by Defendants to COTMF For the Court s convenience, the amounts owed by each Borrower and Guarantor under the Promissory Notes and Guarantees (exclusive of late charges, interest, costs, and attorneys fees), are set forth in Appendix A to the Robinson SJ Aff. In addition to the principal amounts, each Promissory Note provides that upon (i) an Event of Default under the Security Agreement, (ii) the Maturity Date under the Promissory Note or (iii) nonpayment of amounts due under the Promissory Note, interest shall accrue at the highest rate permitted by law. (Robinson SJ Aff. 28.) Each of these conditions is met and, accordingly, COTMF is entitled to pre-judgment interest at the statutory rate (9.0% 4 Event of Default is defined to mean, among other things, non-payment, including not paying any other part of the Indebtedness or any other amount payable upon or in connection with the Indebtedness or any part thereof. (Robinson SJ Aff. 28.) Indebtedness is defined as [t]he principal sum of the Note, together with all payments due hereunder or under the Note... together with any interest due and payable with respect to any of the foregoing until all such sums and the interest thereon are paid. (Id. at 27.) 5 8 of 12
FILED NEW YORK COUNTY CLERK 02/14/2017 1126 AM INDEX NO. 650803/2017 NYSCEF DOC. NO. 3 RECEIVED NYSCEF 02/14/2017 simple interest) calculated from the Maturity Date under each Promissory Note pursuant to CPLR 5001. Moreover, pursuant to the Promissory Notes, COTMF is entitled to a late charge of five cents ($0.05) for each dollar ($1.00) so overdue. (Id. at 31.) The Promissory Notes further provide that the Borrowers and Guarantors are liable for all costs of collection, including reasonable attorneys fees and disbursements, in case the unpaid principal balance of this Note, or any payment of principal and/or interest thereon, is not paid when due, or in case it becomes necessary to protect the security for the indebtedness evidenced hereby, whether suit be brought or not. (Id. at 32.) The Guarantees similarly obligate the Guarantors to pay all attorneys fees, costs and expenses of collection incurred by the Lender.... (Id. at 35.) Thus, COTMF is entitled to an award of all costs, including reasonable attorneys fees and disbursements, incurred in commencing and prosecuting this Action through judgment. A. Legal Standard ARGUMENT COTMF IS ENTITLED TO SUMMARY JUDGMENT PURSUANT TO CPLR 3213 CPLR 3213 provides, in pertinent part, that [w]hen an action is based upon an instrument for the payment of money only... the plaintiff may serve with the summons a notice of motion for summary judgment and the supporting papers in lieu of a complaint. N.Y. C.P.L.R. 3213 (McKinney 2017). Plaintiff establishes its prima facie entitlement to an immediate judgment pursuant to CPLR 3213 upon showing that Defendant(s) executed the instrument(s) for the payment of money upon which the claim is based, and failed to make the required payment(s) due under the instrument(s). See, e.g., Warburg, Pincus Equity Partners, 6 9 of 12
FILED NEW YORK COUNTY CLERK 02/14/2017 1126 AM INDEX NO. 650803/2017 NYSCEF DOC. NO. 3 RECEIVED NYSCEF 02/14/2017 L.P. v. O Neill, 11 A.D.3d 327, 327 (1st Dep t 2004) ( [P]laintiff establishes a prima facie case by virtue of a note and a failure to make payments called for therein[.] ). New York courts routinely grant summary judgment pursuant to CPLR 3213 based upon defendants defaults under promissory notes and unconditional guarantees like those at issue here. See, e.g., LaBoeuf v. Saide, 134 A.D.3d 515, 516 (1st Dep t 2015) ( [T]he loan was memorialized by a promissory note. It is undisputed that Defendants never paid on the note, and so, as permitted under CPLR 3213, plaintiffs commenced this action with a summons and notice of motion for summary judgment in lieu of complaint. Supreme Court properly granted the motion, as there is no basis to conclude that the promissory note was anything other than an instrument for the payment of money only. ); Poah One Acquisition Holdings Ltd. v. Armenta, 96 A.D.3d 560, 560 (1st Dep t 2012) ( Plaintiff demonstrated its entitlement to summary judgment as against Armenta by submitting the guaranty executed by him and an affidavit of nonpayment. Plaintiff appropriately moved based on the absolute and unconditional guaranty, which expressly waived demand or presentment, and is an instrument for the payment of money only. ) (internal citations omitted); Solanki v. Pandya, 269 A.D.2d 189, 189 (1st Dep t 2000) (unanimously affirming trial court ruling granting summary judgment pursuant to CPLR 3213 based upon promissory note); Bank of Am., N.A. v. Solow, 59 A.D.3d 304, 304-05 (1st Dep t 2009) (same); Jason Trading Corp. v. Lason Trading Corp., 303 A.D.2d 180, 180 (1st Dep t 2003) (unanimously affirming ruling that Appellant s unconditional guaranty of the corporate defendant s promissory note is an instrument for the payment of money only within the meaning of CPLR 3213 ); accord Bank of Am., N.A. v. Tatham, 305 A.D.2d 183, 183 (1st Dep t 2003); Smith v. Shields Sales Corp., 22 A.D.3d 942, 944 (3d Dep t 2005) (finding promissory note and guaranty were instruments for payment of money only for the purposes of CPLR 3213). 7 10 of 12
FILED NEW YORK COUNTY CLERK 02/14/2017 1126 AM INDEX NO. 650803/2017 NYSCEF DOC. NO. 3 RECEIVED NYSCEF 02/14/2017 B. COTMF Has Established a Prima Facie Case for its Claims on the Promissory Notes and the Guarantees As set forth in the accompanying Robinson SJ Aff. and the indisputable documentary evidence annexed thereto, COTMF has established a prima facie case for summary judgment. The Borrowers executed and delivered Promissory Notes, and the Guarantors i.e., the Borrowers owners executed and delivered irrevocable and unconditional Guarantees promising that those notes would be repaid. (Robinson SJ Aff. 3, 4, 41). The Borrowers and Guarantors are in default based on their failure to make required payments under the Promissory Notes and Guarantees. (Id. at 46-52). The Borrowers agreed that [p]resentment of payment, notice of dishonor, protest, notice of protest, and trial by jury are hereby waived. (Id. at 38). The Guarantors likewise waived all notice requirements and expressly agreed not to make any counterclaims or setoffs, or to otherwise attempt to challenge or impair the validity of the Guarantees. (Id. at 39). Nothing more is required for COTMF, as assignee of OSG and the lawful owner and holder of the Promissory Notes, to establish its entitlement to judgment as a matter of law. Accordingly, COTMF s Motion for Summary Judgment in Lieu of Complaint Pursuant to CPLR 3213 should be granted. See, e.g., German Am. Capital Corp. v. Oxley Dev. Co., 102 A.D.3d 408, 408 (1st Dep t 2013) ( Plaintiff established its entitlement to judgment as a matter of law in this action to recover on a promissory note executed by borrower.... Plaintiff submitted evidence, including the note, the loan agreement and guaranty, and an affidavit of plaintiffs principal who attested to [borrower s] failure to make payment on the loan at its maturity date. ), leave to appeal denied, 21 N.Y.3d 862 (2013); Tatham, 305 A.D.2d at 183 ( Plaintiffs motion for summary judgment was properly granted upon proof of the loan 8 11 of 12
FILED NEW YORK COUNTY CLERK 02/14/2017 1126 AM INDEX NO. 650803/2017 NYSCEF DOC. NO. 3 RECEIVED NYSCEF 02/14/2017 documents, including the guaranty agreement, and failure to pay in accordance therewith. ); see also cases cited supra I.A. CONCLUSION For the reasons set forth above, summary judgment should be entered in favor of COTMF against Defendants for (i) the entire principal balances due under the Promissory Notes and Guarantees; (ii) accrued interest through the dates of default; (iii) late charges and statutory interest from the dates of default, which continue to accrue; (iv) costs and expenses, including reasonable attorneys fees, for the commencement and prosecution of this action through judgment; 5 and (v) such other relief as the Court may deem just and proper. Dated February 14, 2017 New York, New York HERRICK, FEINSTEIN LLP By/s/ Jonathan L. Adler Jonathan L. Adler Hanh V. Huynh Halimah I. Famuyide Attorneys for Plaintiff Two Park Avenue New York, New York 10016 212.592.1400 5 COTMF respectfully requests the opportunity to substantiate the amount of attorneys fees, costs, late charges and interest it is entitled to by affidavit following any finding of liability in this case. 9 12 of 12