LF COLLATERAL SPV IV LLC v. CITADEL NY INC (2026)

DECISION & ORDER

In an action to foreclose a mortgage, the defendants Citadel NY, Inc., and Sevda U. Imranova appeal from two orders of the Supreme Court, Kings County (Lawrence Knipel, J.), both dated June 17, 2024.  The first order, insofar as appealed from, granted those branches of the plaintiff's motion which were for summary judgment on the complaint insofar as asserted against those defendants and dismissing their first counterclaim, to strike those defendants’ answer, and for an order of reference, and denied those defendants’ cross-motion for summary judgment dismissing the complaint insofar as asserted against them and to deem, inter alia, the subject mortgage to be a nullity and unenforceable.  The second order, insofar as appealed from, granted those branches of the plaintiff's motion which were for summary judgment on the complaint insofar as asserted against those defendants and dismissing their first counterclaim, to strike those defendants’ answer, and for an order of reference, and appointed a referee to compute the amount due to the plaintiff.

ORDERED that the orders are affirmed insofar as appealed from, with one bill of costs.

In July 2023, the plaintiff commenced this action against, among others, the defendants Citadel NY, Inc., and Sevda U. Imranova (hereinafter together the defendants) to foreclose a mortgage on certain real property located in Manhattan and Brooklyn.  The defendants interposed an answer asserting, inter alia, a first counterclaim alleging that the subject mortgage was criminally usurious and, thus, void and unenforceable.  Thereafter, the plaintiff moved, among other things, for summary judgment on the complaint insofar as asserted against the defendants and dismissing their first counterclaim, to strike the defendants’ answer, and for an order of reference.  The defendants opposed the plaintiff's motion and cross-moved for summary judgment dismissing the complaint insofar as asserted against them and to deem, inter alia, the subject mortgage to be a nullity and unenforceable.  In an order dated June 17, 2024, the Supreme Court, among other things, granted those branches of the plaintiff's motion and denied the defendants’ cross-motion.  In a second order also dated June 17, 2024, the court, inter alia, granted those branches of the plaintiff's motion and appointed a referee to compute the amount due to the plaintiff.  The defendants appeal from both orders.

To establish prima facie entitlement to judgment as a matter of law in an action to foreclose a mortgage, a plaintiff must produce the mortgage, the unpaid note, and evidence of default (see Everbank v. Greisman, 180 A.D.3d 758, 759, 119 N.Y.S.3d 231;  Deutsche Bank Natl. Trust Co. v. Abdan, 131 A.D.3d 1001, 1002, 16 N.Y.S.3d 459).  Here, the plaintiff established its prima facie entitlement to judgment as a matter of law.  Contrary to the defendants’ contention, the plaintiff was not required to demonstrate that it had standing to commence this action in order to establish its prima facie entitlement to summary judgment, as the defendants waived a defense based on lack of standing by failing to raise the defense in their answer (see Nationstar Mtge., LLC v. Gayle, 191 A.D.3d 1003, 1006, 143 N.Y.S.3d 78;  US Bank N.A. v. Nelson, 169 A.D.3d 110, 114, 93 N.Y.S.3d 138).

In opposition, the defendants failed to raise a triable issue of fact (see Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324, 508 N.Y.S.2d 923, 501 N.E.2d 572).  A corporation or a limited liability company (hereinafter LLC), or an individual guarantor of such an entity's debt, may not assert the defense of civil usury (see General Obligations Law § 5–521[1];  Limited Liability Company Law § 1104[a];  Schneider v. Phelps, 41 N.Y.2d 238, 242, 391 N.Y.S.2d 568, 359 N.E.2d 1361).  Although a corporation or LLC, or a guarantor of such an entity's debt, may assert the defense of criminal usury (see General Obligations Law § 5–521[3];  Limited Liability Company Law § 1104[c];  Penal Law § 190.40;  Adar Bays, LLC v. GeneSYS ID, Inc., 37 N.Y.3d 320, 326, 157 N.Y.S.3d 800, 179 N.E.3d 612), here, the defendants failed to raise a triable issue of fact as to whether the loan was criminally usurious.  Further, contrary to the defendants’ contention, the plaintiff can recover against Imranova, as the guarantor, because the guaranty transferred with the assignment of the note and the mortgage to the plaintiff (see WHCS Real Estate Ltd. Partnership v. 1610 O.C.R. Operating, 232 A.D.2d 548, 548, 648 N.Y.S.2d 667).

Accordingly, the Supreme Court properly granted those branches of the plaintiff's motion which were for summary judgment on the complaint insofar as asserted against the defendants and dismissing their first counterclaim, to strike the defendants’ answer, and for an order of reference.  For the same reasons, the court properly denied the defendants’ cross-motion for summary judgment dismissing the complaint and to deem, among other things, the subject mortgage to be a nullity and unenforceable.

The parties remaining contentions either are improperly raised for the first time on appeal or need not be reached in light of our determination.

GENOVESI, J.P., WAN, VENTURA and QUIRK, JJ., concur.