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IGS REALTY CO., L.P., Petitioner–Respondent, v. JAMES CATERING, INC., doing business as Loft Eleven, etc., Respondent–Appellant.

IGS Realty, Co., L.P., Petitioner–Respondent, v. Loft West Side at 37th Street, Inc., etc., Respondent–Appellant.

IGS Realty, Co., L.P., Petitioner–Respondent, v. Loft Eleven Inc., Respondent–Appellant.

West Side Loft, Inc., et al., Plaintiffs–Appellants, v. IGS Realty Co., et al., Defendants–Respondents.

IGS Realty, Inc., L.P., etc., Plaintiff–Respondent, v. James H. Brady, Defendant–Appellant.

Decided: October 11, 2012

ANDRIAS, J.P., FRIEDMAN, MOSKOWITZ, FREEDMAN, JJ. Law Offices of Edward Alper, New York (Edward Alper of counsel), for James Catering, Inc., West Side Loft, Inc., and Loft Eleven Inc., appellants. Robert J. Adinolfi, New York, for James H. Brady, appellant. Bryan Cave LLP, New York (Daniel P. Waxman of counsel), for respondents.

Order of the Appellate Term of the Supreme Court, First Department, entered on or about January 23, 2012, which, in a summary nonpayment proceeding, affirmed an order of the Civil Court, New York County (Arthur F. Engoron, J.), entered December 6, 2010, denying respondents James Catering, Inc., West Side Loft, and Loft Eleven Inc.'s (the tenants) motion to vacate the default judgments against them, unanimously reversed, on the law and the facts and in the exercise of discretion, and the motion granted. Order, Supreme Court, New York County (Melvin L. Schweitzer, J.), entered on or about June 16, 2011, which, insofar as appealed from as limited by the briefs, granted defendants-landlords' (IGS Realty) motion for summary judgment dismissing the amended complaint in index no. 600740/09 with prejudice, denied plaintiffs-tenants' cross motion to amend their complaint in index no. 650463/09, and sua sponte dismissed the only remaining cause of action in index no. 650463/09, unanimously reversed, on the law (as to the motion) and on the law and the facts and in the exercise of discretion (as to the cross motion), the motion denied, and the cross motion granted. Judgment, same court (Joan A. Madden, J.), entered November 21, 2011, against tenants' guarantor James H. Brady (Brady) in the amount of $178,631.17, unanimously reversed, on the law, and the judgment vacated. Appeal from order (same court and Justice), entered November 4, 2011, which, insofar as appealed from as limited by the briefs, granted IGS Realty's motion for summary judgment in lieu of complaint and denied Brady's cross motion for summary judgment, unanimously dismissed, without costs, as subsumed in the appeal from the judgment.

Although tenants' argument that IGS Realty never served the default judgments with notice of entry is not preserved for appellate review (see e.g. Ta–Chotani v. Doubleclick, Inc., 276 A.D.2d 313, 714 N.Y.S.2d 34 [1st Dept.2000] ), it is irrelevant since the motion to vacate was timely. Assuming the clock began ticking on the date of entry stamped on the judgments, tenants' motion was made within one year (see CPLR 5015[a][1] ). Further, tenants established both a reasonable excuse for their failure to appear with counsel on October 13, 2009 and a meritorious defense to IGS Realty's nonpayment proceedings.

As a result of tenants' inability to obtain substitute counsel within 13 days of prior counsel being relieved by the court, tenants and Brady, their principal, have been deprived of their day in court in four cases: the Civil Court proceedings brought by the IGS Realty, the Supreme Court actions between tenants and IGS Realty, and the Supreme Court action between IGS Realty and Brady. Given the disputed issues of fact in these cases, they should be resolved by trial, not default. (see Ackerson v. Stragmaglia, 176 A.D.2d 602, 604, 575 N.Y.S.2d 44 [1st Dept.1991] ). Since we are granting the motion to vacate the Civil Court judgments, they no longer have res judicata effect (see e.g. Trisingh Enters. v. Kessler, 249 A.D.2d 45, 46, 671 N.Y.S.2d 70 [1st Dept.1998] ). Thus, the Supreme Court order and judgment, which were based on res judicata, must be reversed.

Tenants' cross motion for leave to amend the complaint in index no. 650463/09 should have been granted. The motion court erred in finding that tenants failed to furnish a proposed amended complaint. Furthermore, the proposed fraud claim was sufficiently specific (see Pludeman v. Northern Leasing Sys., Inc., 10 N.Y.3d 486, 491, 860 N.Y.S.2d 422, 890 N.E.2d 184 [2008] ).

Brady's contention that he is entitled to summary judgment in IGS Realty's action on his guarantees is unavailing. He failed to preserve his claim that the guarantees are unenforceable as unconscionable and there are issues of fact as to whether IGS Realty failed to perform its obligations to tenants.