FILED: NEW YORK COUNTY CLERK 05/02/ :47 PM INDEX NO /2016 NYSCEF DOC. NO. 3 RECEIVED NYSCEF: 05/02/2016

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1 FILED NEW YORK COUNTY CLERK 05/02/ PM INDEX NO /2016 NYSCEF DOC. NO. 3 RECEIVED NYSCEF 05/02/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK x CITIBANK, N.A., Index No. Plaintiff, -against- TARUN SHAH, WONDER ENTERPRISES, INC., AND WONDER INTERNATIONAL TRADING, INC., Defendants x MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF CITIBANK, N.A. S MOTION FOR SUMMARY JUDGMENT IN LIEU OF COMPLAINT SILLS CUMMIS & GROSS P.C. 101 Park Avenue, 28th Floor New York, New York (212) Attorneys for Plaintiff Citibank, N.A. Of Counsel Joshua N. Howley, Esq. Gregory E. Reid, Esq. 1 of 13

2 TABLE OF CONTENTS Page PRELIMINARY STATEMENT... 1 STATEMENT OF FACTS... 2 A. The Loan Documents... 2 B. Default by Defendants... 3 ARGUMENT... 6 I. CPLR 3213 Is The Appropriate Mechanism For Enforcing the Credit Approval Letter and Guarantees... 6 II. Citibank Has Established A Prima Facie Case Under The Credit Approval Letter and Guarantees... 6 III. Defendants Waived All Defenses to Liability... 7 IV. Citibank Is Entitled To Its Costs And Expenses Of Collection, Including Its Reasonable Attorneys Fees... 8 CONCLUSION i- 2 of 13

3 TABLE OF AUTHORITIES Page(s) STATE CASES Bank Leumi Trust Co. v. Rattet & Liebman, 182 A.D.2d 541, 582 N.Y.S.2d 707 (1st Dep t 1992)...7 Chemical Bank v. Nemeroff, 233 A.D.2d 239, 650 N.Y.S.2d 110 (1st Dep t 1996)...6 Citibank, N.A. v. Plapinger, 66 N.Y.2d 90, 495 N.Y.S.2d 309 (1985)...8 Cooperative Centrale Raiffeisen - Boerenleenbank, B.A. v. Navarro, 113 A.D.3d 457, 978 N.Y.S.2d 186 (1st Dep t 2014)...8 Council Commerce Corp. v. Paschalides, 92 A.D.2d 579, 459 N.Y.S.2d 463 (2d Dep t 1983)...6 DDS Partners, LLC v. Celenza 775 N.Y.S.2d 319, 321 (1st Dep t 2004)...6 Kensington House Co. v. Oram, 293 A.D.2d 304, 739 N.Y.S.2d 572 (1st Dep t 2002)...7 Kornfeld v. NRX Technologies, Inc., 62 N.Y.2d 686, 476 N.Y.S.2d 523 (1984)...6 Hackensack Cars, Inc. v. Beverly, 528 N.Y.S.2d 383 (1st Dep t 1988)...6 Manufacturers Hanover Trust Co. v. Green, 95 A.D.2d 737, 464 N.Y.S.2d 474 (1st Dep t 1983)...9 McCormack v. Graphic Machinery Servs., Inc., 139 A.D.2d 631, 527 N.Y.S.2d 271 (2d Dep t 1988)...9 Sterling National Bank v. Mario J. Biaggi, Jr., 47 A.D.3d 436, 849 N.Y.S.2d 521 (1st Dep t 2008)...8 STATE STATUTES CPLR , 9 CPLR 3212(e) and CPLR ,6, 9 -ii- 3 of 13

4 PRELIMINARY STATEMENT Plaintiff Citibank, N.A. ( Citibank ) respectfully submits this Memorandum of Law in support of its motion, pursuant to CPLR 3213, for summary judgment in lieu of complaint (the Motion ) against Defendants Tarun Shah ( Shah ), Wonder Enterprises, Inc. ( Enterprises, and collectively with Shah, Guarantors ), and Wonder International Trading, Inc. ( Borrower, and collectively with Shah and Enterprises, Defendants ). Citibank seeks to recover amounts due and owing under certain loan documents and two unlimited and unconditional guarantees (the Guarantees ), which are instruments for the payment of money only. Guarantors executed the absolute and unconditional guarantees, pursuant to which they guaranteed payment on demand to Citibank for Borrower s indebtedness in connection with a $1,850,000 revolving line of credit ( Loan ), as evidenced by a Credit Approval Letter in the original principal amount of $1,850,000 and on the terms and conditions set forth in the Credit Terms and Conditions Disclosure Booklet ( Disclosure Booklet ). 1 In the Loan Documents, Defendants also waived their right to assert defenses or counterclaims to enforcement. Borrower defaulted under the Loan Documents by failing to maintain at all times a ratio of total unsubordinated liabilities divided by the capital base of not greater than 3.50 to 1.0 (the Leverage Ratio ). As set forth below, this default made full payment of Borrower s obligation to Citibank due immediately. The undisputed documentary evidence establishes that the Loan is in default, remains unpaid, and that Defendants have failed to pay the debt in accordance with the terms of Loan Documents and Guarantees. Accordingly, Citibank s motion for summary judgment in lieu of complaint should be granted. 1 The Credit Approval Letter, Disclosure Booklet, and any other related documents are collectively referred to as the Loan Documents. 4 of 13

5 Specifically, Citibank seeks judgment against Defendants, jointly and severally, (i) due to failure to repay the note in favor of Citibank that is in default, for the principal sum of $1,839,033.40, plus additional accrued interest of $43,600.41, as of April 25, 2016, (ii) field examination fees of $10,241.75, and (iii) for liability for attorneys fees and collection costs, including the costs and disbursements for this action, incurred by Citibank, in an amount to be fixed by the Court. In addition, Citibank respectfully requests that, after determining liability, this Court direct the severance of its claim for attorneys fees and collection costs for assessment purposes, pursuant to CPLR 603, so that immediate judgment may be entered on the principal sum plus accrued interest and field examination fees. STATEMENT OF FACTS The relevant facts are set forth in detail in the accompanying Affidavit of Bernadette Walsh, a Vice President at Citibank, sworn to on April 25, 2016 ( Walsh Aff. ), and the exhibits annexed thereto, and Citibank respectfully refers the Court thereto for a complete statement of facts, which are incorporated herein by reference. A. The Loan Documents On August 30, 2013, Borrower executed and delivered to Citibank a Credit Approval Letter in the amount of $1,850,000 in connection with a revolving line of credit that Citibank made available to Borrower subject to the terms and conditions set forth in the relevant loan documents. Walsh Aff. 8, Ex. A. The Credit Approval Letter provides that Borrower and Guarantor[s] hereby acknowledge the receipt of the Disclosure Booklet, which shall be applicable to the [revolving line of credit]. Id. at 9, Ex. A at p. 4. The Disclosure Booklet provides at pages 9 and 10 that an Event of Default occurs on the Loan if, among other things, (i) payment is not made when due, (ii) a party fails to perform any 2 5 of 13

6 term, covenant, or agreement in the Loan Documents, or (iii) if at any time Citibank shall, in its sole discretion, consider the obligations insecure or any part of the collateral unsafe, insecure, or insufficient. Walsh Aff. at 10, Ex. B. Further, upon the occurrence and continuance of an Event of Default, the Disclosure Booklet gives Citibank the right to accelerate Defendants obligations and declare all sums owing to Citibank, all interest thereon, and all other amounts payable under the Loan Documents to be immediately due and payable. Id. at 11, Ex. B, p. 11. The Disclosure Booklet further provides, in pertinent part, that the Guarantor[s] hereby unconditionally and irrevocably guarantee[] to Citibank the full and punctual payment by the Borrower when due, whether at the stated due date, by acceleration, or otherwise of the Guaranteed Obligations. Id. at 13, Ex. B, p. 6. Guaranteed Obligations are defined in the Disclosure Booklet as all Obligations 2 of the Borrower, however created, arising or evidenced, voluntarily or involuntarily, whether direct or indirect, absolute or contingent, now or hereafter existing or owing to Citibank. Id. at 14, Ex. B, p. 15. B. Default by Defendants On May 29, 2015, Citibank received a consulting field examination report providing that Borrower s books and records were considered unsatisfactory. Walsh Aff. at 19. On October 8, 2015, Citibank and Borrower attended an in-person meeting during which Borrower agreed to provide updated financials by the following week and to allow Citibank to conduct a second field examination. Id. at 20. On October 15, 2015, Borrower sent Citibank a letter requesting an extension of time to provide updated financials to Citibank until October 23, 2015 because Borrower was moving to a new warehouse, and to delay conducting the second 2 Obligations means all now existing or hereafter arising obligations of Borrower to Citibank pursuant to the [Loan Documents], whether for principal, interest, fees, expenses or otherwise, together with all costs of collection or enforcement, including without limitation, reasonable attorneys fees incurred in any collection efforts or in any action or proceeding. Id. at Ex. B, p of 13

7 field examination until mid-november because of the Diwali Festival on November 11, Id. at 21. Citibank has been unable to confirm the new address of Borrower s warehouse where at least some of Citibank s collateral is located. Moreover, Borrower failed to provide updated financials to Citibank as promised. Id. at 22. Further, Citibank retained Durkin Group to conduct the second field examination, but Borrower ignored Durkin Group s requests to set up a site visit. Borrower has refused to allow the second field examination to occur. Id. at 23. On November 4, 2015, Citibank sent Defendants a letter stating that Borrower had failed to comply with the Loan Documents because Borrower had violated the financial covenant requirement of maintaining a Leverage Ratio not greater than 3.5 to 1.0. The November 4, 2015 letter stated that Borrower s failure to comply with this requirement constituted an Event of Default under the Loan Documents. Id. at 24, Ex. C. On February 22, 2016, Citibank sent Defendants a letter reiterating that Borrower was in default because it had, among other things, (1) failed to repay the Loan in full as requested in the November 4, 2015 letter, (2) rendered Citibank insecure based upon the collateral shortfall contained in the field examination completed in May 2015, (3) failed to provide Citibank with financial information, and (4) a material adverse change had occurred with the Loan due to Borrower s failure to cooperate and the rendering of Citibank insecure. Walsh Aff. at 25, Ex. D. Also in the February 22, 2016 letter, Citibank again demanded repayment in full of the indebtedness under the Loan Documents by February 29, 2016, in the total amount of $1,858, (the Payoff Total ). Id. at 26. To date, Defendants have failed to make full payment of the indebtedness owed to Citibank, and thus they are in default of their obligations under the Loan Documents and Guarantees. As of April 25, 2016, the outstanding amount of principal owed by Borrower to 4 7 of 13

8 Citibank under the note was 1,839,033.40, plus additional accrued interest of $43,600.41, and field examination fees of $10,241.75, for a total amount owed of $1,892,875.56, the repayment of which Guarantors have guaranteed. Id. at 28. Accordingly, Defendants should be adjudged jointly and severally liable to repay the Indebtedness of Borrower in full to Citibank. 5 8 of 13

9 ARGUMENT I. CPLR 3213 Is The Appropriate Mechanism For Enforcing the Credit Approval Letter and Guarantees Pursuant to CPLR 3213, [w]hen an action is based upon an instrument for the payment of money only... the plaintiff may serve with the summons a notice of motion for summary judgment and the supporting papers in lieu of a complaint. CPLR New York law provides that both promissory notes and guaranties of a debt are instruments for the payment of money only as that phrase is used in CPLR See Kornfeld v. NRX Techs., Inc., 62 N.Y.2d 686, 476 N.Y.S.2d 523 (1984) (affirming grant of summary judgment in lieu of complaint under CPLR 3213 on guaranty and promissory note); Hackensack Cars, Inc. v. Beverly, 528 N.Y.S.2d 383 (1st Dep t 1988) (promissory note is instrument for the payment of money only); Chemical Bank v. Nemeroff, 233 A.D.2d 239, 239, 650 N.Y.S.2d 110, 111 (1st Dep t 1996) (guaranty is an instrument for payment of money only); Council Commerce Corp. v. Paschalides, 92 A.D.2d 579, 459 N.Y.S.2d 463 (2d Dep t 1983) (personal guaranty by defendants qualified as instrument for payment of money only). It is indisputable that the Credit Approval Letter and Guarantees constitute instruments for the payment of money only. Accordingly, Citibank s motion for summary judgment in lieu of complaint based upon the Credit Approval Letter and Guarantees is appropriate. II. Citibank Has Established A Prima Facie Case Under The Credit Approval Letter and Guarantees To establish a prima facie case to recover under the Credit Approval Letter, Citibank must submit proof of an unconditional promise to pay a sum certain, signed by the maker and due on demand or at a definite time. DDS Partners, LLC v. Celenza, 775 N.Y.S.2d 319, 321 (1st Dep t 2004). As to the attendant Guarantees, Citibank must submit proof of the existence of 6 9 of 13

10 the underlying debt obligation, the unconditional guaranty, and the guarantor s failure to pay it in accordance with its terms. See Kensington House Co. v. Oram, 293 A.D.2d 304, 304, 739 N.Y.S.2d 572, 572 (1st Dep t 2002); Bank Leumi Trust Co. v. Rattet & Liebman, 182 A.D.2d 541, 582 N.Y.S.2d 707 (1st Dep t 1992). Here, Citibank has submitted the Loan Documents, including the Guarantees, and other evidence in admissible form demonstrating (i) the existence of the Loan Documents, (ii) the amounts due and outstanding by Borrower under the Loan, (iii) that Borrower defaulted under the Loan Documents by failing to make the required payments on the Loan to Citibank upon demand, and (iv) that Guarantors defaulted under the Guarantees by failing to make the required payments to Citibank upon demand. Walsh Aff Consequently, Citibank has established a prima facie right to summary judgment in lieu of complaint. III. Defendants Waived All Defenses to Liability In the Disclosure Booklet, Defendants absolutely, unconditionally, and irrevocably waive[d] any and all right to assert any set-off, counterclaim or cross-claim of any nature whatsoever with respect to the Standard Terms, the Credit Approval Letter [Note] and the other Loan Documents. Walsh Aff. 16, Ex. B at p. 14. Further, in the event that Citibank exercises its right to accelerate Borrower s obligations as a remedy for an Event of Default, as occurred here, all sums owing to Citibank shall become immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived... Id. at 17. The Guarantee Provisions of the Disclosure Booklet provide that Guarantors unconditionally and irrevocably guarantee[] to Citibank the full and punctual payment by the Borrower when due, whether at the stated due date, by acceleration or otherwise of the Guaranteed Obligations. Id. at 18. The obligations of the Guarantors are expressly not 7 10 of 13

11 subject to any counterclaim, set-off, deduction or defense based upon any claim the Guarantors may have against Citibank, the Borrower, or any other person. Id. New York courts routinely enforce such provisions, and Defendants, having expressly waived defenses to payment, and Guarantors having absolutely and unconditionally guaranteed payment by Borrower, are precluded from interposing defenses or counterclaims to contest their liability under the Loan Documents. See Citibank, N.A. v. Plapinger, 66 N.Y.2d 90, 95, 495 N.Y.S.2d 309, 312 (1985); Cooperative Centrale Raiffeisen - Boerenleenbank, B.A. v. Navarro, 113 A.D.3d 457, , 978 N.Y.S.2d 186 (1st Dep t 2014) (enforcing absolute and unconditional guaranty where defendant waived all defenses and despite fact that co-defendant conducted Ponzi scheme causing underlying indebtedness); Sterling National Bank v. Biaggi, Jr., 47 A.D.3d 436, 849 N.Y.S.2d 521 (1st Dep t 2008) (granting lender s motion for summary judgment and dismissing guarantor s defenses and counterclaims based on absolute and unconditional waiver of right to assert any defenses, set-offs or counterclaims concerning guarantor s obligations). IV. Citibank Is Entitled To Its Costs And Expenses Of Collection, Including Its Reasonable Attorneys Fees Citibank also seeks recovery of its costs and expenses incurred of collection, including reasonable attorneys fees and court costs incurred in enforcing its rights under the Loan Documents. The terms and conditions of the Guarantees specifically provide that Guarantors guarantee all of Borrower s Obligations to Citibank, with Obligations defined as all now existing or hereafter arising obligations of Borrower to Citibank pursuant to the Standard Terms, the Credit Approval Letter or any other Loan Document, whether for principal, interest, fees, expenses or otherwise, together with all costs of collection or enforcement, including without limitation, reasonable attorneys fees incurred in any collection efforts or in any action or 8 11 of 13

12 proceeding. Walsh Aff. 15, Ex. B at p. 16. Contractual provisions allowing for the recovery of costs and expenses of collection, including reasonable attorneys fees, are enforced by the New York courts. See, e.g., Manufacturers Hanover Trust Co. v. Green, 95 A.D.2d 737, 464 N.Y.S.2d 474 (1st Dep t 1983). Accordingly, Defendants are liable for Citibank s costs and expenses incurred in this collection action, including Citibank s reasonable attorneys fees, in an amount to be fixed by this Court. Citibank respectfully requests that the Court grant liability on this claim, sever its claim for attorneys fees and direct an inquest on such portion of Citibank s claim. CPLR 603. The necessity of severance of inquest on attorneys fees is not a barrier to granting a motion under CPLR See Manufacturers Hanover Trust Co. v. Green, supra. Pursuant to CPLR 3212(e) and 5012, a court is authorized to grant summary judgment as to any one or more causes of action or part thereof, and after severance, to direct judgment upon part of one or more causes of action and to proceed separately on the balance. See, e.g., McCormack v. Graphic Machinery Servs., Inc., 139 A.D.2d 631, 527 N.Y.S.2d 271 (2d Dep t 1988) of 13

13 CONCLUSION For the foregoing reasons, and the reasons set forth in the accompanying Affidavit of Bernadette Walsh, Plaintiff Citibank, N.A. respectfully requests that the Court grants its motion in its entirety, together with such other and further relief as this Court deems just and proper. Dated New York, New York May 2, 2016 SILLS CUMMIS & GROSS P.C. By /s/ Joshua N. Howley Joshua N. Howley Gregory E. Reid 101 Park Avenue, 28 th Floor New York, New York (212) Attorneys for Plaintiff Citibank, N.A of 13