[*1]
Grin v Laser Ctr. of Staten Is., Inc.
2015 NY Slip Op 50943(U) [48 Misc 3d 1203(A)]
Decided on June 15, 2015
Supreme Court, Queens County
McDonald, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.


Decided on June 15, 2015
Supreme Court, Queens County


Magdalena Grin, Plaintiffs,

against

The Laser Center of Staten Island, Inc. RANPALI FRENANDO a/k/a RANPALI FERNANDO and "JOHN DOE No.1" through "JOHN DOE #10," the last ten names being fictitious and unknown to the plaintiff, the persons or parties, if any, having or claiming an interest or lien upon the mortgage premises described in the complaint, Defendants.




701257/2014
Robert J. McDonald, J.

The following papers numbered 1 to 20 were read on this motion by the plaintiff for an order pursuant to CPLR 3212, striking the defendants' answer, dismissing all of the affirmative defenses and counterclaims in defendants' answer and directing entry of summary judgment in favor of the plaintiff for the relief demanded in the complaint and entering judgment against the defendants directing foreclosure of the plaintiff's security interest; enjoining the defendant from disposing of collateral; directing the defendants to deliver the collateral in their possession; issuing an order of seizure with regard to the collateral; and apponting a referee to compute in connection with the foreclosure of real property located at 80-23 232nd Street Queens Village, New York; and the cross—motion of the defendants for summary judgment on their cross-claims:

Papers



Numbered



Notice of Motion-Affidavits-Exhibits.............. ...1 - 6



Notice of Cross-Motion-Affirmation in Opposition-



Memorandum of Law...................................7 - 12



Affirmation in Opposition to Cross-Motion............13 - 16



Reply Memorandum to Affirmation in Opposition



to Cross-Motion....................................17 - 20 ______________________________________________________________



This is an action commenced by the plaintiff, Magdalena Grin, by filing a summons and complaint in Queens County Supreme Court on February 25, 2014 seeking an order to foreclose a Mortgage covering the premises located at 80-23 232nd Street, Queens Village New York and to foreclose upon a security interest in certain equipment pursuant to a Note and Security Agreement which lien was perfected by the filing of a UCC-1 Financing Statement on April 15, 2011. Issue was joined by service of an amended answer with affirmative defenses and counterclaims dated April 7, 2014. The plaintiff filed an amended reply to counterclaims dated May 7, 2014.



The complaint asserts that the plaintiff, Magdalena Grin, a resident of Staten Island, lent a sum of money to defendant Ranpali Fernando, a physician, so that Dr. Fernando could purchase medical equipment to open a new business involving cosmetic procedures. The complaint alleges that in March and April 2011, the plaintiff lent the sum of $220,000 to Dr. Fernando to establish the Laser Center of Staten Island. In order to secure repayment of the funds, the defendants offered collateral in the form of a security interest in the office equipment as well as a note and mortgage on a property in Queens County owned by Dr. Fernando.



Pursuant to the terms of the Note, the defendant agreed to pay the entire balance by August 9, 2013. It is alleged that the defendant failed to pay the note by the due date despite demand having been made and is therefore in default. The mortgage provides that in the case of a default in payment of the principal or interest, the holder of the mortgage may declare the entire indebtedness due and would be empowered to sell the mortgaged premises. The security interest provided that in the event of a default, the defendant shall not remove any of the collateral and the plaintiff shall have the authority to enter [*2]the premises and take immediate possession of the collateral. Therefore, the complaint asserts causes of action for foreclosure on the subject premises, for the appointment of a referee to sell the premises, and for authorization for the sheriff to seize the collateral and sell it at a public or private sale.



The plaintiff now moves, prior to discovery, for summary judgment on its causes of action for foreclosure and seizure of collateral. In support of the motion, plaintiff, Magdalena Grin, submits an affidavit stating that she had become friendly with the defendant, Dr. Fernando, as they were neighbors on Staten Island. Ms. Grin states that in June 2010, she was approached by Dr. Fernando, who asked the plaintiff for a loan to assist her with purchasing equipment for a new business involving cosmetic procedures that would be performed by Dr. Fernando. The business was incorporated as the Laser Center of Staten Island. On April 11, 2011, plaintiff loaned the defendant the sum of $220,000 which was to be repaid by August 9, 2012. A closing took place on April 11, 2011 at the office of the plaintiff's attorney, at which Dr. Fernando signed a note and mortgage as well as a security interest in the collateral. The defendant, who was not represented by counsel at the closing, was advised in writing to retain her own attorney. Under the terms of the note, if the defendant did not repay the full loan amount by the due date, the plaintiff would have the right to foreclose on the defendant's property in Queens County and would have the right under the security agreement to seize the specified collateral.



Plaintiff's counsel, Malvina Lin, Esq., submits an affidavit in support of the motion, stating that because the loan to the defendant does not constitute a "home loan" and the plaintiff as a private individual and not a bank, and as the loan was for business purposes, plaintiff is not a lender as defined in RPAPL 1304 and therefore, the requirements of CPLR 3408 for a residential foreclosure conference and RPAPL § 1304 do not apply. in addition, the mortgaged property is not the defendant's principal residence.



The plaintiff claims that defendants were properly served with a copy of the summons and complaint on March 12, 2014 and March 17, 2014. The plaintiff has submitted documents, including a copy of the Secured Note, dated April 11, 2011, a copy of the UCC-1 Financing Statement recorded on April 19, 2011, a copy of the third mortgage on the premises recorded on April 11, 2011, and a copy of the 90 day default notice with opportunity to cure, dated October 24, 2013.



Plaintiff states that prior to August 9, 2013, the defendant [*3]ceased doing business at the Laser Center and removed all of the secured collateral. Plaintiff states that a formal demand for payment and an opportunity to cure the default was provided to Dr. Fernando. The defendant has not responded to the demand and has refused to deliver the collateral. Plaintiff's counsel states that she is in possession of the original Secured Note, Mortgage, and Security Agreement. Counsel asserts that she has established the plaintiff's entitlement to foreclosure as a matter of law through production of the mortgage, the unpaid note, and evidence of the defendant's default. Counsel also asserts that the defendants have failed to raise a meritorious defense and moreover, the mortgage provides that the mortgagor waives the right to assert any counterclaims. Counsel states that the defendant was warned that she was unrepresented at the time of the closing and Dr. Fernando signed a written document acknowledging same. Therefore, the plaintiff states that she is entitled to summary judgment striking the defendants answer and counterclaims and is entitled to an Order of Seizure and an order appointing a referee to compute the amount due and owing to the plaintiff.



The defendants' amended answer contains twelve affirmative defenses including failure to state a cause of action; unclean hands; lack of personal jurisdiction; statute of limitations, laches, waiver and estoppel; lack of standing; unjust enrichment; and fraud overreaching, and unconscionability. In its counterclaims the defendants assert that in 2010 the plaintiff's husband Gennardy Grin, suggested that he, Gennardy, would set up Dr. Fernando in an esthetics medical practice and that the money Gennardy provided would be an investment. Defendant states that plaintiff and her husband represented to defendant that in two or three years after the medical practice was profitable, the investment would be returned with interest. She states she was not represented by counsel in any of the transactions with the plaintiff.



Defendant states that although on paper she was the President of The Laser Center, the business was completely managed by plaintiff's husband and the plaintiff's friend, Victoria Taliansky, who was a partner in the business. Defendant asserts that Ms. Taliansky's unethical and dishonest practices brought the business into disrepute and financial ruin. Dr. Fernando denies that the plaintiff provided the funds to the defendants. Defendant asserts that the plaintiff fraudulently caused a mortgage lien to be placed on the premises by misrepresenting that plaintiff extended funds to the defendant, misrepresenting that the funds would be an investment, and misrepresenting that defendant would not have to repay any funds [*4]until after the business became profitable.



Therefore, the defendant seeks summary judgment on her cross-claims asserting that she has suffered monetary damages as a result of plaintiff's misrepresentations and that said misrepresentations render void and unenforceable the alleged Note, Mortgage, and Security Agreement. In addition, the defendants asserts a cause of action against he plaintiff for negligence in their failure to properly manage The Laser Center of Staten Island, and failure to exerise reasonable care in the supervision and conduct of its operations.



Dr. Fernando submits an affidavit in opposition to the motion stating that she was never personally served with the summons and complaint and the Laser Center was never properly served. She also disputes the plaintiff's version of the loan arrangement. She states that she had no knowedge of corporate structure, shares, operations, officers, financial accounts. She states that the entire business was dominated and conrolled by the plaintiff and her husband and she was an unknowing victim. She states she never requested money from the plaintiff. She states that she did not guarantee any repayment of the loan as she did not receive any loan and it was the plaintiff who bought the machines from the company. She states that here is no legal documentation evidencing the loan. She states that after the business closed, the equipment was brought to her home in order to clear the office for the landlord.



Defendant cross-moves for an order granting summary judgment on its counterclaims for monetary damages and fraud. Firstly, counsel asserts that the Dr. Fernando has stated that she was not properly served pursuant to CPLR 308. Counsel claims that the plaintiff has not provided an affidavit of service showing that service was properly made on both the individual defendant, Dr. Fernando and the corporate defendant, The Laser Center of Staten Island. In addition, defendant asserts that the plaintiff has not served a certificate of merit in accordance with CPLR 3012-b. Counsel also asserts that the plaintiff has failed to comply with RPAPL 1306 requiring a lender to file information with the Superinendent of Financial Services. Said filing is required to be made within three days of the filing of a foreclosure notice pursuant to RPAPL § 1304. In addition, defendant asserts that a genuine material issue of fact exists as to whether plaintiff is a bona fide encumbrancer citing Williams v Mentore, 115 AD3d 664 [2d Dept. 2014]; JP Morgan Chase Bank v. Munoz, 85 AD3d 1124 [2d Dept. 2011]; Morris v Adams, 82 AD3d 946 [2d Dept. 2011]). Counsel claims that a deed based upon forgery or obtained by false pretenses is void ab initio and a mortgage based on such a [*5]deed is likewise invalid (citing First Natl. Bank of Nev. v. Williams, 74 AD3d 740 [2d Dept. 2010]).



In reply, the plaintiff submits affidavits of service showing that the plaintiff was served by substituted service on March 12, 2014, and the corporate defendant was served on March 17, 2014 by service upon the Secretary of State pursuant to Section 306 of the BCL. Plaintiff also contends that the cited provisions of RPAPL do not apply to this foreclosure as it is based upon a commercial loan transaction. In addition, counsel asserts that CPLR 3012-b affidavit of merit is not required herein as this is not a home loan for purposes of CPLR 3408 and RPAPL § 1304. Moreover, counsel has herself stated that she has reviewed the relevant documents and that she is personally in possession of the original secured note and Security Agreement. Counsel also asserts that defendant, has set forth in her affidavit, that she is presently in possession of the collateral having removed it from her office.



Plaintiff also reiterates that the defendant defaulted on the terms of the Note and Perfected Security Interest by failing to pay the amount borrowed by the due date set forth in the note. Counsel also asserts that the defendant may not assert any of the claims set forth in the counterclaims because the Mortgage provides at paragraph 27, that the mortgagor waives the right to assert a counterclaim in any action brought against her by the Mortgagee. Counsel asserts that the Second Department has upheld dismissal of all counterclaims based upon a valid waiver under the express terms of the mortgage (citing KeyBank N.A. v Chapman Steamer Collective, LLC, 117 AD3d 991 [2d Dept. 2014][plaintiff demonstrated prima facie entitlement to judgment as a matter of law dismissing the counterclaim which the defendants validly waived under the express terms of the mortgage and guaranty]). Counsel also asserts that Dr. Fernando expressly declined, in writing, to retain counsel for the closing and was told that plaintiff's attorney only represented the plaintiff.



It is well settled that a plaintiff in a mortgage foreclosure action establishes a prima facie case of entitlement to summary judgment through submission of proof of the existence of the underlying note, mortgage, and default in payment after due demand (see Witelson v Jamaica Estates Holding Corp. I, 40 AD3d 284 [1st Dept. 2007]; Marculescu v Ouanez, 27 AD3d 701 [2d Dept. 2006]; US. Bank Trust National Assoc. v Butti, 16 AD3d 408 [2d Dept. 2005]; Layden v Boccio, 253 AD2d 540 [2d Dept. 1998]; State Mortgage Agency v Lang, 250 AD2d 595 [2d Dept.1998]). Upon such a showing, the burden shifts to the defendant to produce evidence in admissible form sufficient to raise a material issue of fact requiring a trial.



This Court finds that the plaintiff's submissions are sufficient to establish its entitlement to summary judgment against defendant mortgagor, Ranpali Frenando a/k/a Ranpali Fernando and the Laser Center of Staten Island. The plaintiff has presented a copy of the "Secured Note" dated April 11, 2011 stating that promisors, Dr. Fernando and The Laser Center, for value received would pay the entire outstanding principal of $220,000 and any interest due upon default, no later than August 9, 2013. The Note was signed by Dr. Fernando. The Note states that it is secured up to a maximum of $220,000 by a mortgage made on the property located at 80-23 232nd Street. Queens Village. New York. The Note states that it is also secured by a Security Agreement in and to certain medical equipment owned by the promisors. The Note also states that the promisors waive any notice of default



The perfected "Security Agreement" states that The Laser Center of Staten Island, in consideration of a loan of $220,000 made by Magdalena Grin, creates a security interest in the medical machinery and goods described in the agreement. The security interest created by the Agreement secures payment of the indebtedness defined in and evidenced by the Note made by the debtor. The security interest also states that upon default the secured party would be entitled to enter the debtors' premises to take immediate possession of the equipment and sell it at a private or public sale and apply the proceeds to any unsatisfied portion of the indebtedness of the debtor to the secured party. The Security Agreement was signed by Dr. Fernando as President and Treasurer of The Laser Center.



In addition, the Mortgage, at Paragraph 27, states that the Mortgagor waives the right to assert a counterclaim in any action or proceeding brought against it by the mortgagee in any matter whatsoever arising out of or in any way connected with the mortgage, the Note or any of the other security document. As stated by the plaintiff the Courts have recognized express waivers of counterclaims in mortgage foreclosure actions (see KeyBank N.A. v. Chapman Steamer Collective, LLC, 117 AD3d 991[1d Dept. 2014]; Baron Assoc., LLC v Garcia Group Enters., Inc., 96 AD3d 793 [2d Dept. 2012]). The mortgage was signed by Dr. Fernando. The record also contains a copy of a 90-day notice of foreclosure served on October 25, 2013 by certified and first class mail. The record also contains a copy of an acknowledgment signed by Dr. Fernando on April 11, 2011 at the closing, in which it is stated that attorney Malvina Lin, Esq. was representing the plaintiff only for the closing and that Dr. Fernando was advised to retain independent counsel but declined to do so.



Therefore, based upon the record before this court, this Court finds that defendants entered into a mortgage and security agreement with plaintiff Magdalena Grin on April 11, 2011 in the principal amount of $220,000. Defendant also executed and delivered a Secured Note acknowledging the loan, the rate of interest, and the date that the note was due. The Note was signed by the defendant. The plaintiff asserts that defendant defaulted on the note and mortgage when she failed to repay the entire debt by August 9, 2013 despite a demand therefore. The record contains copies of the note, mortgage and properly recorded security interest in the collateral.



The plaintiff subsequently sent a 90 day notice of default to the defendant pursuant to RPAPL § 1304 and then accelerated the defendant's mortgage and brought an action to foreclose by filing a lis pendens and summons and complaint on February 25, 2014. Affidavits of service were filed indicating that defendant, Dr. Fernando was served by nail and mail service on March 12, 2014 and the corporate defendant was served pursuant to BCL § 306 on March 17, 2014, by service upon the Secretary of State.



A process server's affidavit stating proper service in accordance with CPLR 308, constitutes prima facie evidence of proper service (see Bank, Natl. Assn. v Arias, 85 AD3d 1014 [2d Dept. 2011]; Scarano v Scarano, 63 AD3d 716 [2d Dept. 2009]). Here, the affidavits submitted by the plaintiff were sufficient to demonstrate, prima facie, proper proof of service. Further, the defendant waived the defense of lack of jurisdiction by failing to move for dismissal on that ground within 60 days of interposing the answer.



A residential foreclosure settlement conference was not held in this matter as the obligation arose out of a business loan and CPLR 3408 is inapplicable (see Independence Bank v Valentine, 113 AD3d 62 [2d Dept. 2013]).



The affirmation of plaintiff's counsel, Malvina Lin, states that she has been in possession of the original note, mortgage and security interest as of the time of the closing and the commencement of the action. She also states that a 90-day pre-foreclosure notice was sent to the defendant prior to the commencement of the action. As this is a mortgage for a business loan counsel's affirmation that she has all of the pertinent documents in her possession and has a reasonable basis to commence the action for foreclosure is sufficient to constitute an affidavit of merit pursuant to CPLR 3012-b. In addition, RPAPL § 1306 does not apply to this action as it is a business loan.



Although the defendant served an answer with affirmative defense and counterclaims this court finds that the counterclaim are dismissed as the defendant expressly waived the right to assert a counterclaim. Moreover, the plaintiff submitted sufficient proof to establish that the remaining affirmative defenses set forth in the answer are subject to dismissal due to their unmeritorious and conclusory nature. The defendant failed to present evidentiary proof to demonstrate the existence of a triable issue of fact as to a bona fide defense to the action. The moving papers demonstrate, prima facie, that none of the asserted defenses set forth in the answer of defendant are meritorious and plaintiff is entitled to summary judgment on its claims against said defendant (see EMC Mortg. Corp. v Riverdale Assocs., 291 AD2d 370 [2d Dept. 2002]; State of New York v Lang, 250 AD2d 595 [2d Dept. 1998]).



Accordingly, for all of the above stated reasons, the defendant's cross-motion for summary judgment is denied.



The plaintiff's motion for summary judgment is granted and the affirmative defenses contained in the defendant's answer are stricken. Plaintiff's further application for the appointment of a referee to compute the amounts due under the subject mortgage is also granted. Plaintiff's application for an order directing the return of the collateral identified in the Security Agreement and for an order of seizure is granted.



Order granting summary judgment and granting an order of seizure of collateral and appointing a referee to compute signed contemporaneously herewith.



Dated: Long Island City, NY

June 15, 2015



______________________________

ROBERT J. MCDONALD

J.S.C.