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The FOREST ROAD COMPANY LLC, Plaintiff, v. GARBO HOLDINGS LLC, Vitality Visual Effects LLC, David Glenn Strause, and Linda Liddell Strause, Defendants.
The following e-filed documents, listed by NYSCEF document number (Motion 001) 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19 were read on this motion to/for JUDGMENT - DEFAULT.
In this action seeking to enforce a personal guarantee of a promissory note, plaintiff The Forest Road Company LLC moves, pursuant to CPLR 3215, for entry of a default judgment against defendant David Glenn Strause. Defendant has submitted no opposition.
According to a term sheet executed October 25, 2019 (the Term Sheet), plaintiff agreed to furnish nonparty Skyline 2 Productions Inc. (Skyline), a Canadian corporation, with funding up to $1 million dollars in advance of certain Canadian federal and provincial tax credits Skyline expected to receive for filming a movie production in the Province of British Columbia (NY St Cts Elec Filing [NYSCEF] Doc No. 15, Jason M. Koral [Koral] affirmation, exhibit A, ¶¶ 6 and 14-16). On the maturity date on the loan, which had been set as one year from the date of the initial advance, Skyline agreed to repay plaintiff “[a]n amount equal to (i) 114% of the Net Loan Amount (the ‘Loan Amount’) plus (ii) any Default Interest, as described herein, accrued thereon and any reasonable costs of enforcement or collection incurred by Lender (the ‘Repayment Amount’)” (NYSCEF Doc No. 10, Idan Shani [Shani] aff, exhibit 1 at 1). The “Default Interest” provision in the Term Sheet reads as follows:
“To the fullest extent permitted by applicable law, commencing on the Maturity Date, ‘Default Interest’ shall begin to accrue on the outstanding balance for each Default Interest Period as follows: (i) at the quarterly rate of five percent (5%) for the first Default Interest Period; (ii) at the quarterly rate of seven percent (7%) for the second Default Interest Period; (iii) at the quarterly rate of nine percent (9%) for the third Default Interest Period; (iv) at the quarterly rate of eleven percent (11%) for the fourth Default Interest Period; and (v) at the annual rate of fifteen percent (15%) for each Default Interest Period thereafter. For the purposes hereof, a ‘Default Interest Period’ shall mean each ninety (90) day period following the Maturity Date, with the first Default Interest Period commencing as of the Maturity Date and ending ninety (90) days following the Maturity Date, the second Default Interest Period commencing on the 91st day following the Maturity Date and ending 180 days following the Maturity Date, etc.
Default Interest calculated hereunder shall be computed on the outstanding principal balance of the Note as of the first day of the applicable Default Interest Period and shall be compounded quarterly. For clarity, Default Interest shall be applicable for the entire Default Interest Period as of the first day of such Default Interest Period (e.g., as of the 91st day following the Maturity Date, the outstanding balance of the Note shall be compounded 6%)”
(id. at 2).
That same date, Skyline executed a promissory note (the Note) in favor of plaintiff in the principal amount of $1 million, together with interest to accrue at the rates set forth in the Term Sheet (NYSCEF Doc No. 11, Shani aff, exhibit 2 at 1). The Note provides that Skyline “hereby waives presentment for payment, notice of non-payment, protest and notice of protest and any other condition precedent to action against the undersigned for payment of this Note and does hereby agree to pay all costs and expenses (including all reasonable legal costs) paid or incurred in collecting the same after the same shall become due and payable upon and following demand” (id.).
On October 25, 2019, defendant executed a guarantee (the Guarantee) for the benefit of Skyline, as “debtor,” and in favor of plaintiff, as “lender” (NYSCEF Doc No. 12, Shani aff, exhibit 3 at 1). The Guarantee reads, in pertinent part, that defendant:
“unconditionally guarantees jointly and severally with the Debtor payment to the Lender of all indebtedness, obligations and liabilities of any kind, now or hereafter existing, direct or indirect, absolute or contingent, joint or several, of the Debtor to the Lender, whether as principal or surety, together with all expenses (including legal fees on a solicitor and client basis) incurred by the Lender, its receiver or agent in the preparation, perfection and enforcement of security or other agreements held by the Lender in respect of such indebtedness, obligations or liabilities, and interest thereon”
(id.). The Guarantee provides that plaintiff need not exhaust its recourse against Skyline before pursuing payment from defendant (id. at 3). The Guarantee also states that defendant shall pay plaintiff its reasonable expenses, including its reasonable legal fees, incurred in enforcing the Guarantee (id.). Last, the Guarantee specifies that New York law shall apply and that defendant consents to jurisdiction in New York for disputes arising under the Guarantee (id. at 5). Skyline allegedly failed to repay $1.14 million due when the loan matured on November 12, 2020.
Plaintiff commenced this action against defendant by filing a summons and complaint asserting a single cause of action for breach of the Guarantee. The complaint seeks compensatory damages of $1.14 million plus interest at the rates set forth in the Term Sheet and an award of its costs, attorney's fees and disbursements. Plaintiff now moves for a default judgment.
It is well settled that an application for a default judgment must be supported with “proof of service of the summons and the complaint[,] proof of the facts constituting the claim, [and] the default” (CPLR 3215 [f]). “ ‘[B]y defaulting, a defendant admits all traversable allegations contained in the complaint, and thus concedes liability, although not damages’ ” (HF Mgt. Servs. LLC v Dependable Care, LLC, ––– AD3d ––––, 2021 NY Slip Op 05459, *1 [1st Dept 2021] [citation omitted]; Rokina Opt. Co. v Camera King, 63 NY2d 728, 730 ). Plaintiff has met this burden.
First, plaintiff has demonstrated that it served defendant with the summons and complaint and that his time to answer or appear in the action has expired. An affidavit of service sworn to on March 21, 2021 shows that defendant was personally served with process on March 16, 2021 at 12855 Runway Road, Apt. 1208, Playa Vista, California 90094 (NYSCEF Doc No. 16, Koral affirmation, exhibit B at 1). Such service is in conformity with CPLR 313.
Additionally, a plaintiff moving for entry of a default judgment must furnish proof that the defendant is not active in the military (see 50 USC § 3931 [b]; Military Law § 303 ; Unitrin Advantage Ins. Co. v 21st Century Pharm., 158 AD3d 450, 450 [1st Dept 2018]; Emigrant Mtge. Co., Inc. v Daniels, 2010 NY Slip Op 32720[U], *4 [Sup Ct, NY County 2010] [stating that an investigation into a defendant's military status must occur after the default]). An affidavit of service sworn to on June 29, 2021 reveals that defendant was personally served with the instant motion on June 22, 2021 at the Playa Vista address (NYSCEF Doc No. 19). At that time, the process server asked defendant if he was active in the military and received a negative reply (id.). The process server's affidavit is sufficient to establish defendant's military status.
Plaintiff has also demonstrated its compliance with CPLR 3215 (g) (3) (i). Plaintiff served defendant with additional notice of the summons and complaint by mail at the Playa Vista address on June 5, 2021 (NYSCEF Doc No. 18, Koral affirmation, ¶ 2).
As to the merits, a party seeking to enforce a written guaranty need only prove “an absolute and unconditional guaranty, the underlying debt, and the guarantor's failure to perform under the guaranty” (Gansevoort 69 Realty LLC v Laba, 130 AD3d 521, 521 [1st Dept 2015] [internal quotation marks and citation omitted]). “[W]here a guaranty is clear and unambiguous on its face and, by its language, absolute and unconditional, the signer is conclusively bound by its terms absent a showing of fraud, duress or other wrongful act in its inducement” (Citibank, N.A. v Uri Schwartz & Sons Diamonds Ltd., 97 AD3d 444, 446-447 [1st Dept 2012] [internal quotation marks and citation omitted]). Plaintiff has demonstrated the merits of its claim. Shani, an authorized agent for plaintiff, avers that plaintiff advanced $1 million to Skyline on November 12, 2019 in exchange for the Note (NYSCEF Doc No. 9, Shani aff, ¶¶ 1 and 8). Shani avers that Skyline has never made any payments on the Note, and that, as of November 12, 2020, Skyline has remained in default (id., ¶ 12). On November 18, 2020, plaintiff sent a notice of default and demand for payment to Skyline, but neither Skyline nor defendant responded to the demand (id., ¶¶ 19 and 21; NYSCEF Doc No. 13, Shani aff, exhibit 4). Shani avers that a total of $256,061 in interest on the loan has accrued as follows: $57,000 on November 13, 2020, $83,790 on February 11, 2021 and $115,271 on May 12, 2021 (NYSCEF Doc No. 9, ¶ 14). The interest calculation is based upon a rate of 5% for the first quarter after November 12, 2020, 7% for the second quarter and so on as per the Term Sheet (id., ¶ 13). Shani states that $1,396,061 in principal and interest has accrued as of May 19, 2021 (id.).
Furthermore, the terms of the Guarantee allow plaintiff to recover its attorneys’ fees (see Suttongate Holdings Ltd. v Laconm Mgt. N.V., 193 AD3d 489, 490 [1st Dept 2021]). Factors for the court to consider in determining the reasonableness of a legal fee include:
“time and labor required, the difficulty of the questions involved, and the skill required to handle the problems presented; the lawyer's experience, ability and reputation; the amount involved and benefit resulting to the client from the services; the customary fee charged by the Bar for similar services; the contingency or certainty of compensation; the results obtained; and the responsibility involved”
(Matter of Freeman, 34 NY2d 1, 9 ). As applied here, the motion is deficient as counsel merely affirms without any supporting documentation that plaintiff has incurred $4,620 in fees (NYSCEF Doc No. 140, Koral affirmation, ¶ 9). Nevertheless, plaintiff may submit proper proof of its legal fees incurred thus far, as set forth below.
Accordingly, it is
ORDERED that the motion brought by plaintiff The Forest Road Company LLC for a default judgment against defendant David Glenn Strause is granted, without opposition; and it is further
ORDERED that the Clerk is directed to enter judgment in favor of plaintiff The Forest Road Company LLC in the sum of $1,140,000, together with accrued interest of $256,061 from November 13, 2020 to May 12, 2021, with interest at the contractual rates from May 13, 2021 through the date of entry of this judgment, and at the statutory rate thereafter, together with costs and disbursements as taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further
ORDERED that within 60 days of this order, plaintiff The Forest Road Company LLC, if it be so advised, may file proper proof of reasonable attorneys’ fees incurred, including an additional attorney's affirmation, billing records or invoices, and any other supplemental proof on its application for attorneys’ fees.
Robert R. Reed, J.
Response sent, thank you
Docket No: Index No. 651477/2021
Decided: November 10, 2021
Court: Supreme Court, New York County, New York.
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