SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK --------------------------------------------------------------x ANCHIE KUO, against Plaintiff, JAMES FERNANDEZ and SPERRO FABRICATION, INC., Defendants. --------------------------------------------------------------x Index No. 652695/2017 MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF S MOTION TO SEVER PURSUANT TO CPLR 603, LIFT THE STAY, AND FOR LEAVE TO RENEW PURSUANT TO CPLR 2221(e) COHEN & GRESSER LLP 800 Third Avenue, 21 st Floor New York, NY 10022 Phone (212) 957-7600 Fax (212) 957-4514 Attorneys for Plaintiff Anchie Kuo 1 of 8
Plaintiff Anchie Kuo submits this memorandum of law in support of his motion to sever the proceeding pursuant to CPLR 603 and lift the stay against Defendant Sperro Fabrication, Inc. ( Sperro ); to seek leave to renew his motion for summary judgment in lieu of complaint pursuant to CPLR 2221(e) against Defendant Sperro; and for a referral to a referee for a determination of interest and costs of collection. PRELIMINARY STATEMENT AND FACTUAL HISTORY What began as a straight-forward case has become even more clear-cut Defendant James Fernandez has conceded in court filings the amount of the principal debt owed by the Defendants, so summary judgment should be entered as to liability as to Defendant Sperro. 1 As set forth in Dr. Kuo s memorandum in support of his motion for summary judgment in lieu of complaint, (Docket No. 6), this case concerns the failure of Defendants Sperro and James Fernandez (collectively, Defendants ) to repay $285,000, plus interest and costs of collection, to Dr. Kuo pursuant to a Consolidated Master Loan Agreement. On September 29, 2017, the Court denied Dr. Kuo s motion on the ground that it could not calculate the interest owed from the face of the document. (Docket No. 16). The Court did not, however, credit any of the defenses to liability that Defendants had raised or find that Dr. Kuo was not entitled to at least the principal amount claimed. (Id.). Following the Court s decision, Mr. Fernandez, who had filed for personal bankruptcy in the United States Bankruptcy Court for the Southern District of New York, filed a list of his 20 largest creditors. Mr. Fernandez signed this document under penalty of perjury. Included on this list is Dr. Kuo, who is shown as being owed $300,000. Significantly, Mr. Fernandez does not 1 As the parties previously advised the Court, Mr. Fernandez has filed for personal bankruptcy so the case is stayed as against him. 2 2 of 8
list this debt listed as disputed. See Affirmation of Daniel Mandell, dated March 23, 2018 ( Mandell Aff. ), at Ex. 2 (Mr. Fernandez s Bankruptcy Form 104). On November 10, 2017, the parties stipulated to stay this case because they believed that they would be able to resolve Dr. Kuo s claims through Mr. Fernandez s bankruptcy proceeding. The Court so-ordered the parties stipulation and marked the case as stayed. (Docket No. 17). On March 14, 2018, the Court adjourned the preliminary conference and gave Dr. Kuo leave to move by order to show cause to lift the stay as to Sperro, for summary judgment, and any other appropriate relief. (Docket No. 22). Dr. Kuo now brings this motion to sever, lift the stay, and for leave to renew his motion for summary judgment in lieu of complaint. The Court should grant Dr. Kuo leave to renew his original motion because Dr. Kuo can present new evidence in the form of Mr. Fernandez s bankruptcy filings. These filings show that Mr. Fernandez concedes liability for the principal amount owed under the Consolidated Master Loan Agreement. This same evidence further cements Dr. Kuo s entitlement to summary judgment as to that amount of his debt. Furthermore, because Sperro has not declared bankruptcy and proceeding against it will not harm Mr. Fernandez, the Court should sever the case and lift the stay as to Sperro so that Dr. Kuo does not have to wait for the end of the bankruptcy case to obtain the relief he is entitled to receive from Sperro. Finally, following an award of summary judgment on the principal amount, all that will remain is a calculation of interest and costs of collection. A referral to a referee for this purpose is appropriate. 3 3 of 8
ARGUMENT I. THE COURT SHOULD SEVER THE CASE, LIFT THE STAY AND PERMIT PLAINTIFF TO PROCEED AGAINST SPERRO FABRICATION, INC. Dr. Kuo agreed to stay this matter as to Sperro because Defendants initially represented to him that there was sufficient value in Mr. Fernandez s bankruptcy estate to expeditiously pay Dr. Kuo all that he is owed under the Consolidated Master Loan Agreement. However, it has now become evident that Dr. Kuo will not obtain a full recovery in the bankruptcy case. Thus, in order to prevent further prejudicing Dr. Kuo, the Court should permit him to proceed against Sperro, which is not a debtor in bankruptcy protection and therefore not entitled to the automatic stay of bankruptcy. The filings in Mr. Fernandez s bankruptcy case reveal that the only significant asset in his estate is a 50% ownership of an LLC that holds title to a New York City condominium. Mr. Fernandez originally represented to the bankruptcy court that this condominium was worth $8.5 million and that once sold he would be able to pay all of his debts in full. Mandell Aff. at Ex. 3 (Decl. of James A. Fernandez pursuant to Local Bankruptcy Rule 1007-2, dated Oct. 15, 2017, at 13). However, based on subsequent filings in the bankruptcy case, it appears that the condominium is actually worth only $7.1 million and that it is encumbered with secured debt worth $6.8 million. Id. at Ex. 4 (CREIF Lender LLC s Motion to Vacate the Automatic Stay or Terminate Exclusivity at 22-25). Although the secured lender has agreed to reduce its claim to $6.1 million plus attorneys fees, id. at Ex. 5 (Stipulation and Conditional Order Vacating the Automatic Stay), it is clear from the total claims already admitted in the bankruptcy case that there is not sufficient value in the bankruptcy estate to provide Dr. Kuo with the full amount he is owed. Mr. Fernandez s bankruptcy counsel has acknowledged this to Dr. Kuo s counsel. Id. 4 4 of 8
at 7. Given that he will not obtain a full recovery in the bankruptcy case, Dr. Kuo seeks to proceed with his claim in this case against Sperro. There is ample authority showing that Dr. Kuo s request for severance of the Defendants and permitting plaintiff to proceed against the non-bankrupt defendant is appropriate. CPLR 603 provides that [i]n furtherance of convenience or to avoid prejudice the court may order a severance of claims, or may order a separate trial of any claim, or of any separate issue. The Appellate Division has repeatedly found it appropriate to sever a bankrupt co-defendant and permit a plaintiff to proceed against the non-bankrupt co-defendant in order to avoid prejudicing the plaintiff with a long delay. See Weber v. Baccarat, Inc., 70 A.D.3d 487, 488 (1st Dep t 2010) (finding severance appropriate where bankrupt co-defendant would not be prejudiced); Kharmah v. Metro. Chiropractic Ctr., 288 A.D.2d 94, 94 (1st Dep t 2001) (finding severance proper where it would prevent any prejudice to plaintiff stemming from delay preceding termination of the... defendants bankruptcy proceedings ); Golden v. Moscowitz, 194 A.D.2d 385, 385-86 (1st Dep t 1993) (finding severance appropriate because prejudice from making plaintiff wait until bankruptcy proceeding concluded outweighed impact on defendants); Vasquez v. New York City Health & Hosps. Corp., 100 A.D.3d 868, 869-70 (2d Dep t 2012) (reversing trial court and holding that severance should have been granted where prejudice to the plaintiff in being required to await the conclusion of the bankruptcy proceeding before obtaining any remedy outweighs any potential inconvenience to the [remaining] defendants ) (quotations omitted). Importantly, the automatic bankruptcy stay does not apply to Sperro. It is well-settled that the automatic stay provisions of the Federal bankruptcy laws apply only to the parties in the adversary proceeding in Bankruptcy Court and do not extend to nonbankrupt codefendants. 5 5 of 8
Maynard v. George A. Fuller Co., 236 A.D.2d 300, 300 (1st Dep t 1997). Although the stay may impact a non-bankrupt co-defendant if a judgment against the non-bankrupt co-defendant would have an immediate adverse economic consequence for the debtor s estate, Empire Erectors & Elec. Co. v. Unlimited Locations LLC, 102 A.D.3d 419 (1st Dep t 2013) (quotations omitted), this exception to the rule does not apply here because there is no indemnification obligation in the Consolidated Master Loan Agreement. The opposite is true. Permitting Dr. Kuo to proceed against Sperro can only benefit Mr. Fernandez s bankruptcy estate because the Consolidated Master Loan Agreement imposes joint and several liability so any amount that Dr. Kuo is able to recover from Sperro would reduce Mr. Fernandez s obligation to Dr. Kuo. Therefore, the Court should sever the case and lift the stay with respect to Sperro. II. NEW EVIDENCE FURTHER SUPPORTS PLAINTIFF S ENTITLEMENT TO SUMMARY JUDGMENT AT LEAST WITH RESPECT TO THE PRINCIPAL AMOUNT OWED CPLR 2221(e) provides that a party may seek leave to move the court to renew its motion where there are new facts not offered on the prior motion that would change the prior determination.... CPLR 2221(e)(2); see also BLDG ABI Enterprises, LLC v. 711 Second Ave Corp., 116 A.D.3d 617, 618 (1st Dep t 2014) ( [M]otions for renewal should be based on newly discovered facts that could not be offered on the prior motion ) (quotations omitted). Here, following the Court s ruling, Mr. Fernandez conceded in a court filing that he owes Dr. Kuo at least the principal amount due under the Consolidated Master Loan Agreement. This admission under penalty of perjury, together with the evidence submitted on the original motion, leaves no issue of fact as to Dr. Kuo s entitlement to an order granting at least partial summary judgment as to liability in his favor. Indeed, the Court rejected all of defendants arguments as to liability in the initial motion. Furthermore, because Mr. Fernandez s bankruptcy court filing was not 6 6 of 8
made until after the motion was fully submitted to the Court, Dr. Kuo could not present it with his initial motion papers. In these circumstances, Dr. Kuo should be granted leave to renew his motion and the Court should grant him partial summary judgment in the amount of the principal owed against defendant Sperro. See Thomas v. Gonzalez, 158 A.D.3d 531, 531 (1st Dep t 2018) (explaining that party was entitled to renewal based on new evidence developed after court s decision); Luna v. Port Auth. of New York & New Jersey, 21 A.D.3d 324, 325-26 (1st Dep t 2005) (reversing denial of motion to renew where new evidence that would have changed court s determination was not available for presentation on original motion). Because all that will remain to be resolved in this case is a calculation of interest, Dr. Kuo respectfully submits that a referral to a special referee is appropriate. CONCLUSION For the foregoing reasons, Dr. Kuo respectfully requests that the case be severed, the stay be lifted as to Sperro Fabrication, Inc., and he be granted leave to renew his motion for summary judgment in lieu of complaint and awarded partial summary judgment as to defendant Sperro Fabrication, Inc. in the amount of $285,000. The Court should also refer the case to a special referee in order to calculate accumulated and pre-judgment interest as well as other costs of collection to which Dr. Kuo is entitled. 7 7 of 8
Dated March 23, 2018 New York, New York By CM & SER LLP ;;; Daniel H. Tabak Luke Appling 800 Third A venue, 21 st Floor New York, NY 10022 Phone (212) 957-7600 Fax (212) 957-4514 Daniel Mandell 2001 Pennsylvania A venue, NW Suite 300 Washington, DC 20006 Phone (202) 851-2070 Fax (202) 851-2081 Attorneys for Plaintiff Anchie Kuo 8 8 of 8