Opinion
Index No. 524411/2017
01-05-2023
Powercap Partners LLC, Plaintiff, v. Beaux Equities LLC, YAAKOV POLLAK, MOSHE POLLAK, SHORIVGER TRUST, RAPHAEL GROSSMAN as Trustee of the SHORIVGER TRUST, Defendants.
Attorneys for Plaintiff Simcha D. Schonfeld, Esq. Graig Alan Russo, Esq. Koss & Schonfeld, LLP Attorneys for Defendants Beaux Equities LLC, Yaakov Pollak, and Moshe Pollak Alan Weiss, Esq. Dov Ber Medinets, Esq. Gutman Weiss, P.C. Attorneys for Defendants Shorivger Trust and Raphael Grossman Lawrence R. Kulak, Esq. Law Office of Lawrence R. Kulak
Unpublished Opinion
Attorneys for Plaintiff Simcha D. Schonfeld, Esq. Graig Alan Russo, Esq. Koss & Schonfeld, LLP
Attorneys for Defendants Beaux Equities LLC, Yaakov Pollak, and Moshe Pollak Alan Weiss, Esq. Dov Ber Medinets, Esq. Gutman Weiss, P.C.
Attorneys for Defendants Shorivger Trust and Raphael Grossman Lawrence R. Kulak, Esq. Law Office of Lawrence R. Kulak
FRANCOIS A. RIVERA, J.
Recitation in accordance with CPLR 2219 (a) of the papers considered on the notice of motion filed on August 3, 2021, under motion sequence ten, by defendants Yaakov Pollak (hereinafter Y. Pollak) and Beaux Equities LLC (hereinafter Beaux)(collectively the moving defendants) for an order: (1) pursuant to CPLR 3212 granting summary judgment on their counterclaim asserted against plaintiff, Powercap Partners LLC (hereinafter plaintiff); (2) granting summary judgment in their favor dismissing the causes of action asserted against them; (3) cancelling the notice of pendency; (4) vacating the Confessions of Judgments entered on December 18, 2017, by the Kings County Clerk under Index Nos. 524267/2017 and 524268/2017 and directing the County Clerk to cancel them as of record; and (5) declaring the Declaration of Restriction, dated and executed April 13, 2017, recorded with the Office of the City Registrar on May 16, 2017 void and directing the Kings County Office of the City Register to cancel it as of record.
The motion is opposed by the plaintiff.
Notice of Motion
Affidavit of Y. Pollak
Memorandum of Law
Exhibits A to K
Statement of Material Facts
Affirmation in Opposition
Further Affirmation in Support
Affirmation in Reply
Exhibit L
Memorandum of Law in Reply
BACKGROUND
On December 19, 2017, plaintiff commenced the instant action seeking, among other things, to determine claims to real property pursuant to RPAPL Article 15, by filing a summons, verified complaint and notice of pendency with the Kings County Clerk's Office (hereinafter KCCO).
On June 7, 2018, Beaux, Y. Pollak and Moshe Pollak jointly interposed a verified answer with one counterclaim. The answer asserted nine denominated affirmative defenses, one counterclaim and two crossclaims. As relevant to the instant motion, the ninth affirmative defense alleged that the plaintiff's claims were barred in whole or in part because the subject loans upon which all of plaintiff's claims rest violated New York State's criminal usury laws.
The counterclaim sought a judgment declaring that two specific loans (hereinafter the subject loans) were illegal, usurious, and void. The crossclaims were asserted against Shorivger Trust (hereinafter the Trust) and Raphael Grossman (hereinafter Grossman) as trustee of the Trust. The first crossclaim seeks, inter alia, a declaration that a certain loan which had interest rate of no less than 30% per annum was illegal, usurious, and void. It further alleged that the Trust and Grossman as trustee illegally required them to repay the illegal loan. The second crossclaim seeks, inter alia, a determination of their claims to certain real property and a declaration that a certain deed conveying the subject property and all subsequent deeds and mortgages were void.
On September 6, 2018, the plaintiff filed a reply to the moving defendants' counterclaim which it denominated as a verified answer to counterclaims. The reply did not assert any affirmative defenses.
The verified complaint contains eighty-eight numbered paragraphs in support of six causes of action. The first cause of action is pursuant to RPAPL Article 15 and is asserted against defendants Beaux and the Trust. The second cause of action, asserted against Beaux, is for fraud. The third cause of action is asserted against defendants Y. Pollak and Moshe Pollak (hereinafter M. Pollak) for fraud. The fourth cause of action is asserted against the Trust for fraud. The fifth cause of action is asserted against the Trust for tortious interference with economic relations. The sixth cause of action is asserted against the Trust for unjust enrichment.
The complaint alleges the following salient facts. On or about April 13, 2017, Y. Pollak borrowed the sum of $750,000.00 from plaintiff. This loan was due to be paid in full on or before June 13, 2017 (hereinafter the First Loan). At the time of the First Loan, defendant Beaux was the sole beneficial owner of three properties: 5405 18th Avenue, Brooklyn, New York (hereinafter the 5405 Property), 5409 18th Avenue, Brooklyn, New York (hereinafter the 5409 Property), and 541118th Avenue, Brooklyn, New York (hereinafter the 5411 Property) (hereinafter collectively as the Properties). The plaintiff alleges that Y. Pollak pledged 100% of the membership interests of Beaux to the plaintiff. Beaux executed a Deed in Lieu of Foreclosure in favor of the plaintiff as additional security for the first loan.
Additionally, Y. Pollak executed a Declaration of Restriction on behalf of Beaux and in favor of the plaintiff (hereinafter the Declaration). In the Declaration, Beaux agreed that it would not "mortgage, assign, lease, convey, transfer, encumber, pledge, hypothecate or otherwise take any action," which would create a security interest in Beaux and/or the Properties. By the express terms of the Declaration, any conveyance without the written consent of David Fleischmann, Esq. "shall be null and void and of no force and effect." This Declaration was recorded in the Office of the City Register on May 16, 2017, CRFN No. 20170516004700100EFC0F.
Plaintiff further alleges that on or about May 16, 2017, it loaned the sum of $265,000.00 to Y. Pollak and M. Pollak (hereinafter the Second Loan). At that time, Beaux was still the sole beneficial owner of the Properties. Following an agreed extension, the First Loan and the Second Loan (hereinafter collectively the subject loans) became due and payable on October 31, 2017. Plaintiff contends that Y. Pollak and M. Pollak defaulted on their payment obligations with respect to the subject loans.
When the First Loan was executed, Y. Pollak and Beaux represented and warranted to the plaintiff that the membership interests of Beaux were unencumbered and had not been pledged to any individual or entity except for Kearny Bank. Similarly, when the Second Loan was executed, Beaux, Y. Pollak and M. Pollak represented that the Properties owned by Beaux were only pledged to Kearny Bank.
Nevertheless, a deed was recorded on or about November 27, 2017 (hereinafter the Trust Deed), which conveyed the Properties to the Trust. The plaintiff alleges that the Trust Deed violated the Declaration. Defendant Grossman, sued in the action as the trustee of the Trust, is alleged to be a family member of Y. Pollak and Y. Pollak.
On June 28, 2018, the Trust and Grossman jointly interposed a verified answer to the cross claims of Y. Pollak, Beaux and M. Pollak.
On August 16, 2018, defendants the Trust and Raphael Grossman as trustee of the Trust jointly interposed a verified answer with crossclaims and a counterclaim.
On September 6, 2018, the plaintiff filed a verified answer to the counterclaims of the Trust and Grossman.
MOTION PAPERS
Defendants Y. Pollak and Beaux's motion papers consist of a notice of motion, an affidavit by Y. Pollak, an affirmation of counsel, a memorandum of law and eleven annexed exhibits labeled A through K. Exhibit A is described as a copy of the First Note. It is dated April 13, 2017. Exhibit B is described as a copy of the Second Note. It is dated May 16, 2017. Exhibit C and D is the deposition testimony of Avery Laub, a witness for the plaintiff. Exhibit E is described as the Declaration of Restriction, CRFN 2017000185389, recorded in the City Register on May 16, 2017. Exhibit F includes copies of two Confessions of Judgment. The first, under Index No. 524267/2017, was entered on December 18, 2017. The affirmation is signed on November 16, 2017, by Yaakov Pollak, as the sole member of Beaux. The second, under Index No. 524268/2017, was entered on December 18, 2017. The second includes two affirmations: (1) signed by Yaakov Pollak on November 15, 2017, and (2) signed by Moshe Pollak on November 16, 2017. Exhibit G is a copy of a Deed In Lieu of Foreclosure dated November 15, 2017. Exhibit H includes a copy of a document titled Certificate of Representations and Warranties. Exhibit I includes the summons and verified complaint of plaintiff Powercap Partners LLC. Exhibit J is the verified answer of defendants Yaakov Pollak, Moshe Pollak, and Beaux. Exhibit K is a copy of the note of issue filed on June 7, 2021.
The plaintiff's opposition papers consist of an affirmation of counsel and a memorandum of law.
The moving defendants' reply papers consist of the affirmation of Dov Medinets, Esq., counsel, a memorandum of law, an affirmation of Naftaly Weisz, Esq., counsel, and one annexed exhibit labeled L. Exhibit L includes the following documents: the joint verified answer to cross claims of defendants Shorivger Trust and Raphael Grossman, as Trustee of the Shorivger Trust; the verified answer to the plaintiff's complaint by defendants Shorivger Trust and Raphael Grossman, as Trustee of the Shorivger Trust; the verified reply of defendants Yaakov Pollak, Moshe Pollak, and Beaux Equities LLC to the cross claims of the Shorivger Trust and Raphael Grossman; and the verified answer of plaintiff Powercap Partners LLC to the counterclaims of defendants Yaakov Pollak, Moshe Pollak, and Beaux.
LAW & APPLICATION
The moving defendants seek, among other things, an order pursuant to CPLR 3212 granting summary judgment in their favor on their counterclaim asserted against the plaintiff and dismissing the causes of action asserted by the plaintiff against them. They also seek an order: (1) cancelling the notice of pendency filed by the plaintiff; (2) vacating the Confessions of Judgments entered on December 18, 2017, by the Kings County Clerk under Index Nos. 524267/2017 and 524268/2017 and directing the County Clerk to cancel them as of record; (3) declaring the Declaration of Restriction, dated and executed April 13, 2017, recorded with the Office of the City Registrar on May 16, 2017 void; and (4) directing the Kings County Office of the City Register to cancel it as of record.
It is well established that summary judgment may be granted only when it is clear that no triable issue of fact exists (Alvarez v Prospect Hospital, 68 N.Y.2d 320 [1986]). The burden is upon the moving party to make a prima facie showing that he or she is entitled to summary judgment as a matter of law by presenting evidence in admissible form demonstrating the absence of material facts (Guiffirda v Citibank, 100 N.Y.2d 72 [2003]).
A failure to make that showing requires the denial of the summary judgment motion, regardless of the adequacy of the opposing papers (Ayotte v Gervasio, 81 N.Y.2d 1062 [1993]). If a prima facie showing has been made, the burden shifts to the opposing party to produce evidentiary proof sufficient to establish the existence of material issues of fact (Alvarez, 68 N.Y.2d at 324).
Pursuant to CPLR 3212 (b), a court will grant a motion for summary judgment upon a determination that the movant's papers justify holding, as a matter of law, that there is no defense to the cause of action or that the cause of action or defense has no merit. Furthermore, all of the evidence must be viewed in the light most favorable to the opponent of the motion (Marine Midland Bank v Dino & Artie's Automatic Transmission Co., 168 A.D.2d 610 [2nd Dept 1990]).
Summary Judgment on the Counterclaim
The moving defendants have pled one counterclaim against the plaintiff seeking a judgment declaring that the subject loans provided to the moving defendants were void, illegal, and usurious.
In support of the motion they submitted, among other things, a copy of the note of the first loan, a copy of the note of the second loan, the deposition transcript of Avery Laub and other documents. Avery Laub's deposition testimony establishes the following facts, among others. At all relevant times, he was the managing member of the plaintiff. The subject loans were drafted by him or at his direction with the assistance of his counsel. He determined the rates of interest and the terms of repayment applicable for each loan. He had the borrowers execute several documents to secure the subject loans. These documents included two Confessions of Judgment, the Deed in Lieu of Foreclosure and a Declaration of Restriction on the properties owned by Beaux annexed in the moving defendants' motion papers. The plaintiff made the First Loan to Y. Pollak and made the Second Loan to both Y. Pollak and M. Pollak. He also identified and authenticated the copy of the first note and second note. He further testified that the first note which was dated April 17, 2017, was for a loan of $750,000.00 with a monthly interest rate of 2.5%. He also testified that the second note which was dated May 16, 2017, was for a loan in the amount of $265,000.00 with a monthly interest rate of 3.0%. The First Loan and the Second Loan were for a combined principal amount of $1,015,000.00. He testified that the damages the plaintiff was seeking pursuant to the instant action was recovery of the total principal amount of $1,015,000.00.
It is noted that Moshe Pollak is not included as one of the moving defendants even though he was part of the joint answer in which the counterclaim of usury was asserted against the plaintiff. It is also noted that although Beaux is one of the moving defendants Beaux was not a borrower of the subject loans.
New York usury law is composed of General Obligations Law §§ 5-501, 5-511, 5-521; Banking Law § 14-a [1]; and Penal Law § 190.40 (Adar Bays, LLC v GeneSYS ID, Inc., 37 N.Y.3d 320, 326 [2021]). Together, the statutes establish that loans of less than $250,000 to individuals cannot exceed a 16% annual rate, loans between $250,000 and $2.5 million cannot exceed 25%, the criminal usury rate, and loans of $2.5 million or more are not subject to the usury laws (id.). More specifically, the General Obligations Law and Banking Law provide that the maximum rate of interest upon a loan or forbearance of any money, goods, or things shall be 16% per annum unless otherwise provided by law, and no person or corporation shall, directly or indirectly, charge take or receive any money, goods, or things in action as interest at a rate exceeding 16% (Id., quoting General Obligations Law § 5-501 [1], [2]; Banking Law § 14-a [1]). Furthermore, a lender commits a class E felony when, without other legal authorization, the lender, knowingly charges, takes or receives any money or other property as interest on the loan or forbearance of any money or other property, at a rate exceeding [25%] per annum or the equivalent rate for a longer or shorter period (Adar Bays, LLC, 37 N.Y.3d at 326, quoting Penal Law § 190.40). Any loan that reserves or takes any greater interest than is prescribed in section 5-501-the civil usury prohibition (16%)-shall be void, unless the lender is a bank or loan association, which will be held to have forfeited all interest on the loan (Adar Bays, LLC, 37 N.Y.3d at 326, citing General Obligations Law § 5-511 [1]).
The moving defendants' evidentiary submissions establish that Avery Laub, as the managing member of the plaintiff, made the first loan to Y. Pollak and made the second loan to both Y. Pollak and M. Pollak. Both notes on their face called for interest rate that exceeded 25% per annum. Where, as here, the loan is for less than a year, the interest rate is annualized (see O'Donovan v Galinski, 62 A.D.3d 769, 770 [2nd Dept 2009]). The interest rate of the first loan was 2.5% per month or 30% per annum. The interest rate of the second loan was 3% per month or 36% per annum.
It is noted that both notes contain the following text.
"It is not intended hereby to charge interest at a rate in excess of the maximum legal rate of interest permitted to be charged to Borrower under applicable law, but if, notwithstanding, interest in excess of said maximum legal rate shall be paid hereunder, the excess shall be applied in reduction of the principal."
This language did not make the subject notes non-usurious (see Bakhash v Winston, 134 A.D.3d 468, 469 [1st Dept 2015], citing Simsbury Fund v New St. Louis Assoc., 204 A.D.2d 182 [1st Dept 1994]).
Criminal usury occurs when a person "knowingly charges, takes or receives any money or other property as interest on the loan or forbearance of any money or other property, at a rate exceeding twenty-five per centum per annum" (Penal Law § 190.40; see Venables v Sagona, 85 A.D.3d 904, 905 [2nd Dept 2011]) A usurious contract is void and relieves the borrower of the obligation to repay principal and interest thereon (Venables, 85 A.D.3d at 905, see General Obligations Law § 5-511; Seidel v. 18 E. 17th St. Owners, 79 N.Y.2d 735, 740 [1992]). Indeed, where usury has occurred, the borrower can simply keep the borrowed funds and walk away from the agreement (Seidel, 79 N.Y.2d at 740). This harsh penalty has resulted in a presumption against a finding of usury, such that a person seeking to establish usury in a transaction bears the heavy burden of proving it by clear and convincing evidence (see Freitas v Geddes Sav. & Loan Assn., 63 N.Y.2d 254, 260-261 [1984]).
In determining whether a transaction is usurious, the law looks not to its form, but its substance, or real character (O'Donovan, 62 A.D.3d at 769). Whether a transaction constitutes a cover for usury is a question of fact and, when determining whether a transaction constitutes a usurious loan it must be considered in its totality and judged by its real character, rather than by the name, color, or form which the parties have seen fit to give it (Abir v Malky, Inc., 59 A.D.3d 646, 649 [2nd Dept 2009]). To constitute usury, it must appear that the real purpose of the transaction was, on the one side, to lend money at usurious interest reserved in some form by the contract and, on the other side, to borrow upon the usurious terms (Id., quoting Donatelli v Siskind, 170 A.D.2d 433, 434 [2nd Dept 1991]).
A borrower bears the burden of proving each element of usury by clear and convincing evidence, and usury will not be presumed (Freitas, 63 N.Y.2d at 261). Here, the plaintiff admits that the interest on the First and Second Loan exceed 25% per annum. Further, where a loan agreement is usurious on its face, usurious intent will be implied and usury will be found as a matter of law (see O'Donovan, 62 A.D.3d at 770). Thus, the moving defendants met their burden of establishing the elements of criminal usury. Moreover, there was no evidence of a special relationship between the parties (see) and no evidence that the defendants set a rate they knew to be usurious for the purpose of avoiding repayment of the loan (Roopchand v. Mohammed, 154 A.D.3d 986, 988-89 [2nd Dept 2017], citing Seidel, 79 N.Y.2d at 743; see Russo v Carey, 271 A.D.2d 889, 890 [3rd Dept 2000]).
It is noted that although the moving defendants submitted a statement of material facts in compliance with Uniform Court Rule 202.8-g(a), the plaintiff did not submit a statement of the material facts as to which it is contended that there exists a genuine issue to be tried. The Court in an exercise of discretion disregards the plaintiff's failure to comply with Uniform Court Rule 202.8-g(b).
The evidentiary submissions of Y. Pollak have made a prima facie showing that the first and second loan were criminally usurious. In opposition, the plaintiff has claimed that the motion must be denied as defective due to the moving defendants' failure to annex the parties' pleadings. Here, all the pleadings were not only electronically filed and available to the Supreme Court and the parties, but also were contained in the moving defendants' reply papers. Furthermore, the plaintiff did not assert that they were prejudiced by the omission. Under such circumstances, the Court may properly disregard the moving defendants' omission (Sensible Choice Contracting, LLC v Rodgers, 164 A.D.3d 705, 707 [2nd Dept 2018], citing Brightman v Prison Health Serv., Inc., 108 A.D.3d 739, 742 [2nd Dept 2013]).
The plaintiff has also contended that the moving defendants have failed to meet their prima facie burden of demonstrating entitlement to a judgment in their favor. The plaintiff did not explain what was lacking in the moving defendants' submission. Consequently, the plaintiff's opposition papers do not raise a triable issue of fact. Therefore, the subject loans are criminally usurious and Y. Pollak is relieved of the obligation to repay the principal and interest thereon.
There is an important distinction, however, between Y. Pollak and Beaux. Beaux, as a limited liability company, may not bring an action seeking a declaratory judgment that the subject loans violate civil and criminal usury law. Although, the defense of civil usury is not available to limited liability companies, this bar does not preclude a limited liability company borrower from raising the defense of "criminal usury" (i.e., interest over 25%) in a civil action (see Limited Liability Company Law § 1104 [c]). However, it may only be raised as an affirmative defense and may not be asserted as a direct cause of action against the lender. Consequently, that branch of the moving defendants' motion seeking summary judgment on its counterclaim declaring the subject loans are void as usurious as applied to Beaux is denied. The denial is without regard to the sufficiency of plaintiff's opposition papers (Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851 [1985] and is without prejudice to Beaux's right to raise criminal usury as an affirmative defense.
Summary Judgment on the Complaint
The plaintiff's verified complaint contains eighty-eight numbered paragraphs in support of six causes of action. The first cause of action is pursuant to RPAPL Article 15 and is asserted against defendants Beaux Equities LLC (hereinafter Beaux) and Shorivger Trust (hereinafter the Trust). The second cause of action, asserted against Beaux, is for fraud. The third cause of action, asserted against defendants Yaakov Pollak (hereinafter Y. Pollak) and Moshe Pollak (hereinafter M. Pollak) is for fraud. The fourth, fifth, and sixth cause of action are not asserted against the moving defendants.
First Cause of Action RPAPL Article 15
The first cause of action is to quiet title to real property pursuant to RPAPL Article 15 and is asserted solely against Beaux. To maintain a cause of action to quiet title to real property, a plaintiff must allege actual or constructive possession of the property and the existence of a removable cloud on the property, which is an apparent title to the property, such as in a deed or other instrument, that is actually invalid or inoperative (Nurse v Rios, 160 A.D.3d 888, 888 [2nd Dept 2018], citing Zuniga v BAC Home Loans Servicing, L.P., 147 A.D.3d 882, 883 [2nd Dept 2017]; RPAPL 1515; RPAPL 1501[1]).
CPLR 2214 (a) provides that a notice of motion shall "specify the time and place of the hearing on the motion, the supporting papers upon which the motion is based, the relief demanded and the grounds therefor" (Abizadeh, 159 A.D.3d at 857 [2nd Dept 2018]). The moving defendants did not cite any law, refer to any fact or proffer any legal argument in support of the branch of its motion seeking to dismiss the first cause of action. It is therefore denied.
Second and Third Cause of Action for Fraud
Plaintiff's complaint alleged the following facts in support of its claim that Y. Pollak and Beaux committed fraud. When the first loan was executed, Y. Pollak and Beaux represented and warranted to the plaintiff that the membership interests of Beaux were unencumbered and had not been pledged to any individual or entity except for Kearny Bank. Similarly, when the second loan was executed, Beaux, Y. Pollak and M. Pollak represented that the properties were only pledged to Kearny Bank. Nevertheless, a deed was recorded on or about November 27, 2017 (hereinafter the Trust Deed), which conveyed the properties to the Trust.
The elements of a cause of action sounding in fraud are a material misrepresentation of an existing fact, made with knowledge of the falsity, an intent to induce reliance thereon, justifiable reliance upon the misrepresentation, and damages (Vice, Inc. v Stapp, 209 A.D.3d 794, 796 [2nd Dept 2022], quoting Trump Vil. Section 4, Inc. v Vilensky, 202 A.D.3d 865, 865-866 [2nd Dept 2022]).
The second cause of action is asserted against Beaux for fraud. The third cause of action is asserted against Y. Pollok for fraud. In support of their motion seeking dismissal of the fraud claims, neither Beaux nor Yaakov Pollak denied the facts alleged in the plaintiff's complaint constituting the acts of fraud.
Instead, the moving defendants made the following contentions in their memorandum of law. The complaint is seeking damages against them arising from a criminal loan transaction. The plaintiff cannot enforce the subject notes because they are criminally usurious, and the plaintiff cannot get around it by seeking damages for fraud rather than enforcement of the subject notes. Any alleged fraud by the moving defendants was part of the same illegal, void, and criminally usurious transaction. Finally, the alleged fraud did not cause any damages to plaintiff, other than the loss of the illegal loan; thus, a necessary element of a fraud cause of action, that is, damages is missing. In sum, plaintiff's unlawful conduct is the underlying basis for the fraud claim against the moving defendants which necessitates their dismissal.
Beaux's motion for summary judgment on the counterclaim seeking a declaration that the subject notes were both civilly and criminally usurious was denied. Therefore, it remains Beaux's burden to demonstrate that the affirmative defense of criminal usury bars the claim of fraud asserted against it. For the reasons set forth below Beaux's evidentiary submission has met that burden.
Y. Pollak's arguments are identical to Beaux. To prevail on his motion, it is Y. Pollak's burden to make a prima facie showing that his allegedly fraudulent misrepresentations to the plaintiff cannot support a cause of action against him for fraud. Y. Pollak contends that he met that burden because any alleged misrepresentation was made in the context of an illegal and criminally usurious loan agreement.
The only damages that the plaintiff is pursuing, according to the deposition testimony of the plaintiff's managing member; is the return of the principal on the subject loans. In the light most favorable to the plaintiff as the nonmovant, the alleged fraud occurred prior to the execution of the subject loans and the alleged misrepresentations were allegedly made by Beaux and Y. Pollak to induce the plaintiff to make the subject loans. However, there is no dispute that the moving defendants played no role in drafting or setting the interest rate and repayment terms of the subject loans or in determining what documents or property would be used as security. A borrower may be estopped from interposing a usury defense when, through a special relationship with the lender, the borrower induces reliance on the legality of the transaction (Seidel, 79 N.Y.2d at 743). Thus, there is no factual basis to estop the moving defendants from asserting the claim of criminal usury.
The plaintiff's sole damage, based on Y. Pollak and Beaux's alleged fraud is the loss caused by the moving defendants' breach of the usurious loan agreement. Since no right of action can arise from an illegal contract, the plaintiff is barred, as a matter of law, from suing on the alleged agreement and on the alleged misrepresentations pertaining to the properties that were used to secure the illegal agreement (Sabia v Mattituck Inlet Marina & Shipyard, Inc., 24 A.D.3d 178, 179 [1st Dept 2005]). Y. Pollak has made a prima facie showing that the claims of fraud asserted against him must be dismissed. In opposition, the plaintiff has not raised a triable issue of fact.
Although Beaux was not a signatory or borrower on either one of the subject loans, Y. Pollak's pledged 100% of his interest in Beaux, which necessarily included all the real property Beaux owned, as security for the subject illegal loans. Under these circumstances, Beaux has standing to seek dismissal of the plaintiff's claims against it for the same reasons advanced by Y. Pollak. Moreover, applying the rationale of the New York State Court of Appeals set forth in the matter of Seidel v. 18 E. 17th St. Owners Inc. (79 N.Y.2d at 742) Beaux would not be precluded from asserting a usury defense to the plaintiff's fraud claim asserted against it.
Consequently, Beaux has made a prima facie showing of entitlement to dismissal of the fraud claims asserted against it based on the affirmative defense that the subject loans were criminally usurious. In opposition, the plaintiff has not raised a triable issue of fact.
Cancelling The Notice of Pendency
CPLR 2214 (a) provides that a notice of motion shall "specify the time and place of the hearing on the motion, the supporting papers upon which the motion is based, the relief demanded and the grounds therefor" (Abizadeh, 159 A.D.3d at 857). The moving defendants did not cite any law, refer to any fact or proffer any legal argument in support of the branch of its motion seeking to vacate the notice of pendency. It is therefore denied.
Cancelling the Confessions of Judgment and Other Documents
The moving defendants contend that the Court must vacate the Confessions of Judgment and declare them, the Declaration of Restriction, and the Deed in Lieu of Foreclosure void and unenforceable. As previously stated, Avery Laub's deposition testimony establishes that he, as the managing member of the plaintiff, had Y. Pollak, M. Pollak and Beaux execute the subject loans and certain documents to secure those loans.
When a court deems a transaction to be usurious, it must declare the transaction and its supporting documents void, enjoining prosecution on them and order that all documents and collateral be cancelled and surrendered (Adar Bays, LLC v GeneSYS ID, Inc., 962 F.3d 86, 88 [2d Cir. 2020] [finding that a contract that violated New York's civil usury statute is "void ab initio"]; Fareri v Rain's International. Ltd., 187 A.D.2d 481, 482 [2nd Dept 1992]). This is precisely the relief sought by the moving defendants and the relief it is granted.
For all the foregoing reasons, the plaintiff may not seek enforcement of the declaration of restriction against the moving defendants. It is undisputed that the Kings County Office of the City Register is not a party to the instant action and that it was not served with notice of the motion. Therefore, the Court declines to issue an order directing the Kings County Office of the City Register to cancel the declaration of restriction from its records.
CONCLUSION
The branch of the motion by Yaakov Pollak and Beaux Equities LLC for an order pursuant to CPLR 3212 granting them summary judgment in their favor on their counterclaim asserted against plaintiff, Powercap Partners LLC is granted.
The branch of the motion by Yaakov Pollak and Beaux Equities LLC for an order pursuant to CPLR 3212 granting them summary judgment in their favor dismissing the causes of action asserted against them is granted in part and denied in part.
The motion to dismiss the first cause of action by which Powercap Partners LLC seek to quite title on certain properties pursuant to RPAPL Article 15 is denied.
The motion to dismiss the second cause of action asserted against Beaux Equities LLC is granted.
The motion to dismiss the third cause of action asserted against Yaakov Pollak is granted.
The branch of the motion by Yaakov Pollak and Beaux Equities LLC for an order vacating the Confessions of Judgments entered on December 18, 2017, by the Kings County Clerk under Index Nos. 524267/2017 and 524268/2017 and directing the County Clerk to cancel them as of record is granted.
The branch of the motion by Yaakov Pollak and Beaux Equities LLC for an order declaring void the Declaration of Restriction, dated and executed April 13, 2017, recorded with the Office of the City Registrar on May 16, 2017, is granted.
The foregoing constitutes the decision and order of this Court.