FILED: NEW YORK COUNTY CLERK 08/23/2017 04:43 PM
`FILED: NEW YORK COUNTY CLERK 08E2017 04:43 PM
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`NYSCEF DOC. NO. 545
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`NYSCEF DOC. NO. 545
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`INDEX NO. 652831/2011
`INDEX NO~ 652831/2011
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`RaCaIVaD VYSCEF: 08/23/2017
`RECEIVED NYSCEF: 08/23/2017
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`SUPREME COURT OF THE STATE OF NEW YORK
`COUNTY OF NEW YORK
`
`
`X
`
`SREENIVASA REDDY GADE,
`JAISRIKAR LLC, and JAISRIKAR2, INC.
`
`Plaintiffs
`
`—against—
`
`MOHAMMED M. ISLAM, TRINGLE FOOD
`CORR, TRINGLE TWO FOOD CORR,
`
`Defendants
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`:
`'
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`.
`:
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`Index No. 652831/2011
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`NOTICE OF ENTRY
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`PLEASE TAKE NOTICE that the attached is a true copy of the Decision and Order that
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`was entered in the Office of the New York County Clerk on the 17th day of August, 2017.
`
`Dated: August 23, 2017
`
`ARCHER & GREINER, RC.
`
`44 Wall Street, Suite 1285
`New York, New York 10005
`(201) 342-6000
`Attorneys for Plaintiffs
`SREENIVASA REDDY GADE
`
`4L
`
`Michael S. Horn
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`INDEX NO. 652831/2011
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`INDEX NO~ 652831/2011
`FILED: NEW YORK COUNTY CLERK 08E2017 04:43 PM
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`RECEIVED NYSCEF: 08/23/2017
`NYSCEF DOC. NO. 545
`.7}.
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`7
`NYSCEF DOC. NO..545
`__1,
`..
`fi.
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`‘°-
`-
`-
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`FILED: NEW YORK COUNTY CLERK OBJH2017 02:32 PM
`RECEIVED NYSCEF: 08/17/2017 "
`NYSCEF DOC. NO. 541
`SUPREME COURT OF THE STATE OF NEW YORK
`
`NEW YORK COUNTY
`
`PRESENT:
`
`Q} I
`
`1
`
`§ é
`
`'
`Justice
`
`
`’
`
`PART / L
`
`”7283? II
`
`Web.
`
`-v-
`
`.
`
`MOTION DATE
`
`KW
`
`I
`.
`
`
`MOTION SEQ.NO. 0l2—
`
`, were read on this motion tolfor
`The following papers, numb’éred 1 to
`Notice of Motion/Order to Show Cause —— Affidavits —- Exhibits
`
`
`My,
`
`Answering Affidavits — Exhibits
`
`
`Replying Affidavits
`
`1
`
`1’
`| 0(5).
`
`| No(s).
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`I No(s).
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`Upon the foregoing papers, it is ordered that this motion is
`
` MOTION/CASElSRESPECTFULLYREFERREDTO‘JUSTICE
`
`
`
`
`
`FORTHEFOLLOWINGREASONIS):
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`Dated:
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`$4 I? [77
`
`
`1. CHECK ONE: .....................................................................
`CASE DISPOSED
`
`
`: [j GRANTED
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`2. CHECK As APPROPRIATE: ......I ....................MOTION I
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`[:1 DENIED
`
`
`
`
`ON-FlNAL DISP
`
`#EC.
`J.S.C.
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`ClGRANTED IN PART
`
`TION
`
`THER
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`3. CHECK lF APPROPRIATE: ................................................ E] SETTLE ORDER
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`E] SUBMIT o DER
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`D DO NOT POST
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`D FIDUCIARY APPOINTMENT
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`REEFERENCE
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`FILED: NEW YORK COUNTY CLERK 08/23/2017 04:43 PM
`FILED: NEW YORK COUNTY CLERK 08E2017 04:43 PM
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`NYSCEF DOC. NO. 545
`NYSC13F DOC. NO. 545
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`FILED: NEW YORK COUNTY CLERK 08mm
`NYSCEF DOC NO. 541
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`INDEX NO. 652831/2011
`INDEX NO~ 652831/2011
`RECEIVED NYSCEF: 08/23/2017
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`__ BEGEFZT€D§2§§§§FWS3
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`RECEIVED NYSCEF: 08/17/2017
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`
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`SUleME COURT OF THE STATE OF NEW YORK
`COUNTY OF NEW YORK: IAS PART 12
`___________________________________________________________________________x '
`
`SREENIVASA REDDY GADE JAisRIKAR LLC
`and JAISRIKAR2 INC,
`_
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`Index no, 652831/11
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`Plaintiffs,
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`‘
`
`,
`
`Mot. seq. No. 012
`
`— against —
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`DECISION-AND ORDER
`
`MOHAMMED M. ISLAM, TRINGLE FOOD CORR,
`TRINGLE TWO FOOD CORP,
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`Defendants.
`___________________________________________________________________________X
`
`BARBARA JAFFE, 1,:
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`'
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`Plaintiffs Gade, Jaisrikar LLC (LLC),-and-Jaisrikar2, Inc. (Inc‘.) move for an order:
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`(1) entering judgment against defendants Islam, Tringle Food Corp. (Tringle), and Tringle Two
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`Food Corp. (Tringle Two) consistent with the jury’s verdict and judgment presented pursuant to
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`the notice of settlement filed on August 8, 201.6; and (2) permitting plaintiffs to amend the
`
`, second amended complaint consistent with the proposed third amended complaint submitted to
`the court on July 31', 2016. (NYSCEF 456).
`V
`
`Defendants cross—move for orders: (1) pursuant to CPLR 4404(a), setting aside the
`
`verdict and dismiss the action; and (2) pursuant to General Business Law (GBL) § 394~a (2) and
`Uniform Commercial Code § 3—804, directing that plaintiffs provide defendants with a written
`undertaking. (NYSCEF 518),
`A
`
`, L BACKGROUND
`
`A jury trial was held before me on July 26, 28, 29, 2016, and August '1, 2016. At trial,
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`plaintiffs testified about the eventsunderlying the action as follows: Gade, together with three
`
`partners, owned as an investment two Dunkin’ Donuts stores in Manhattan, one located on 125th
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`FILED: NEW YORK COUNTY CLERK 08/23/2017 04:43 PM
`FILED: NEW YORK COUNTY CLERK 08E2017 04:43 PM
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`NYSCEF DOC. NO. 545
`NYSCEF DOC. NO. 545
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`_LED:NEW YORK COUNTY CLERK 08312017 02:32 PM
`NYSCEF DOC, NO. 541
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`INDEX NO. 652831/2011
`INDEX NO~ 652831/2011
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`RECEIVED NYSCEF: 08/23/2017
`CEIVZTP 1 SCEF: 08/2;/2017,
`INDEX NO 652831 2011
`RECEIVED NYSCEF: 08/17/2017
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`_
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`Street and the other on Madison Avenue. In 2007, they sought to divest themselves of
`ownership of the stores; defendant Islam agreed to purchase both'stores. The parties agreed on a
`total purchase price of $1.1 million, $780,000 for the 125‘“ Street location, and $320,000 for the
`Madison Avenue location Subsequently, Islam agreed to pay a total of $1.3 million
`
`During the transitional period between contract and closing, the proposed sale of the
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`franchise must be approved by' Dunkin’, and the purchaser must be trained in running the
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`franchise. Plaintiffs testified that the parties had understood that defendants were to manage the
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`stores over the two-year period before closing, during which defendants would retain any profits,
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`and be liable for any losses. At the closing, assets were transferred, documents were executed,
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`$200,000 of the purchase price was paid, and $100,000 was put in escrow. Islam promised, but
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`failed, to pay the balance after closing. Defendants gave plaintiffs several promissory notes,
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`none of which was satisfied.
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`Defendants denied having acquired the stores, and asserted that, thus, no closing
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`occurred, and asserted that of the four partners who may have owned the stores, only one
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`appeared at trial because the others were “probably paid.” They also alleged that the “contracts?,
`on which plaintiffs rely contain forged signatures, were not properly completed, and are thus
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`unenforceable and incapable of performance”. Defendants also claim ownership of the $100,000
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`held in escrow, assert that it should be released, and deny that they are liable on the promissory
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`notes. They maintain that a demand for payment was never made, and that the notes should not
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`_ have been admitted in evidence at the trial. _
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`The jury rendered the following verdict:
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`l.
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`Tringle Two breached a promissory note issued to LLC, dated November 14,
`2007, causing damages of $600,000, plus applicable interest, as per the note;
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`INDEX NO. 652831/2011
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`INDEX N0.
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`NYSCEF DOC. NO.
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`RECEIVED NYSCEF: 08/23/2017
`NYSCEF DOC. NO. 545
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`INDEX NO. 652831/2011
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`NYSCEF DOC. NO. 541
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`RECEIVED NYSCEF: 08/17/2017
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`2.
`
`3.
`
`4.
`
`5.
`
`Tringle Two breached a promissory note issued to Inc., dated November 14,
`2007, causing damages of $350,000, plus applicable interest, as per the note.
`
`Tringle Two breached a promissory note issued to Inc., dated November 27,
`2007, causing damages of $350,000, plus applicable interest, as per the note.
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`Inc. and Tringle entered into a management/partnership agreement, dated
`November 14, 2007-; Tringle did not breach this agreement.
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`Inc. and Tringle entered into a management/partnership agreement, dated
`November 14, 2007; Tringle did not breach this agreement.
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`6. .
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`LLC and Tringle "Iwo entered into a management/partnership agreement, dated
`November 14, 2007; Tringle Two did not breach this agreement.
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`7;
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`8.
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`9.
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`Inc. and Tringle entered into a contract of sale, dated December 2007; Tringle
`breached this agreement, causing damages of $630,000.
`'
`
`LLC and Tringle Two entered into an oral contract of sale; Tringle Two breached
`this agreement, causing damages of $270,000.
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`Islam did not falsely represent any fact topplaintiffs.
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`(NYSCEF 512).
`
`II. MOTION TO AMEND
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`A. Contentions
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`Plaintiffs prevailed .on five of the nine questions on the verdict sheet, three as to the
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`promissory notes, and two as to the contracts. of sale. The second amended complaint contains
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`four causes of action that are relevant to these motions: (1) breach of contract by Tringle;
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`(2) breach of contract by Tringle Two; (3)._bréach-of contract by Islam; and (4) consumer fraud
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`and common law, fraud by Islam. It was filed on October 15, 2013, and defendants answered on‘
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`or about November 24, 2013. (NYSCEF 1'14).
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`Plaintiffs seek to amend the second amended complaint to add, inter alia, the following '
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`allegations:
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`INDEX NO. 652831/2011
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`NYSCEF DOC. NO. 545
`WWW—“WW”: M 7m 7
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`NYSCEF DOC. NO. 541
`RECEIVED NYSCEE‘: 08/17/2017
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`1.
`
`2.
`
`3'.
`
`4.
`5.
`
`6.
`
`Before the November 14, 2007 closing, Tringle Two and Islam signed a note by.
`which they promised to pay Jaisrikar, LLC, $600,000, as part of assurances that it
`would pay for, and properly manage, the stores (note 1);
`
`Tringle Two failed to pay the $600,000 owed under note I;
`
`Before the November 14, 2007' closing, Tringle Two and Islam signed a note by
`which they promised to pay Jaisrikar 2, Inc. $350,000, as part of assurances that it
`would pay for, and properly manage, the stores (note 2);
`.
`
`‘
`Islam signed note 2, personallylas well as on behalf of his company;
`. Tringle Two failed to pay the $300,000 owed under note 2;
`
`Before theNovember 14, 2007 closing, Tringle Two and Islam signed a note by
`which they promised to pay Jaisrikar2, Inc. $350,000, as part of assurances that it
`would pay for, and prOperly manage, the stores (note 3); and
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`7.
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`Tringle Two failed to pay the $350,000 owed under note 3.
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`Defendants argue that they would be prejudiced'by the proposed amendment as to the
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`promissory notes, and Object to what they characterize as “new, but time-barred, causes of ,
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`action.” They claim there is no mention of promissory notes in the seCond amended complaint,
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`and that permitting a post—trial amendment triggers their right to answer and interpose defenses.
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`(NYSCEF 520).
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`Plaintiffs contend that in opposing the motion to amend, defendants ignore pleading
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`requirements, and that they properly seek to conform the pleadings to the facts adduced at trial.
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`(NYSCEF 531).
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`I 4B. Discussion
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`Pursuant to CPER 3025, a party may amend a pleading “at any time by leave of court
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`. before or after judgment to conform [the pleading] to the evidence.” (CPLR 3025[b], [c]; Kimso,
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`Apts., LLC v Gandhi, 24 NY3d 403, 411 [2014]). Leave “shall be freely given upon such terms
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`,!
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`NYSCEF DOC. NO. 541
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`as may be just,” “even ifthe amendment substantially alters the theory of recovery.” (Id.-
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`[internal quotation marks and citation omitted]). The sole factor for the court to consider is
`whether the opposing party will-be prejudiced by the amendment, even where the motion to
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`amend is made during or after trial. (Murray v City ofNew York, 43 NY2d 400, 405 [1977];
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`Gonfiantini v Zino, 184 AD2d 368, 369 [15‘ Dept 1992]).
`Evidence pertaining to the notes was admitted in evidence at trial (see tr. at 52:14 —
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`53:18; 61 :20 - 65:23 [Gade’s testimony that note given as security to take over management of
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`stores]; 77:15 — 92:8 [issues of authenticity and admissibility of notes and status as to
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`repayment]; 150: 12 - 25 [Gade’s testimony that notes given as security; due diligence regarding
`notes]; 165:23 - 166:20 [cross examination regarding [notes]; 356:8 — 357:7 [Islam’s testimony
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`regarding lack of payment on note]; 401 :20 - 25 {Islam’s testimony regarding notes]), along with
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`copies of the notes (NYSCEF 462, 463). . Thus, there is no prejudice in permitting the
`amendment. (See MEntertainment, Inc. v Leydz'er, 71 AD3d 517, 520 [1Sl Dept 2010] [“The
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`RECEIVED NYSCEF: 08/17/2017
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`document was received into evidence by the trial court. It was considered by the court in
`
`rendering its decision and is part ofthe record on appeal. Therefore, there can be no prejudice to
`
`(defendant) inpennitting the amendment”]).8
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`Moreover, defendants could not have been surprised by evidence of the notes.
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`In motion
`
`sequence 009, plaintiffs argued that defendants were liable on the notes. (See Parra v Ardmore
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`Mgt. Co., Inc, 258 AD2d 267 [15‘ Dept 1999], lv denied 93 NY2d 805 [trial court did not err in
`
`granting motion to amend third-party complaint after verdict, as third—party defendant had
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`sufficient notice before trial that claim may be asserted]; Equitable Life Assur. Socy. of US v
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`Nico Constr. Co., Inc., 245 AD2d 194, 195 [13‘ Dept 1997] [defendant cannot claim prejudice;
`
`evidence at trial made it aware that plaintiff intended to prove that contract for work existed]; see
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`5
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`INDEX NO. 652831/2011
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`INDEX N0. 652831/2011
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`RECEIVED NYSCEF: 08/23/2017
`NYSCEF DOC. NO. 545
`WMMMLIV“ v
`Hz,
`3/%g%7
`FILED. NEW YORK COUNTY CLERK cal-112017 02: 32 P
`TfiDfiPNE-
`650288621/2
`NYSCEF DOC NO 54l
`RECEIVED NYSCEF: 08/17/2017
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`also Paradiso &DiMenna v DiMerma, 232 AD2d 257, 257 [1St Dept: 1996] [“Since'defendant
`
`'
`
`I was on notice that this check writing practice was at the heart Of this case, defendant was not
`
`prejudiced by the trial court’s amendment of the pleadings to conform to proof adduced at trial
`
`Of a conversion of funds pursuant to that practice"]).
`
`In Lanpont v Savvas Cab Corp, the trial court denied a motion made on the eve 'of trial to
`
`amend an answer to assert the defense ofthe exclusivity of workers’ compensation, thereby
`
`precluding that defense from being presented at the trial (244 AD2d 208 [1St Dept 1997]). On
`appeal, the Court reversed and required a remand to the trial court to consider the new defense.
`
`As Lanpont neither pertains to a motion to amend a complaint, nor stands for the proposition that
`
`amending a complaint requires a new answer, it is_ inapposite, especially as the defense at issue
`was to be decidedlby the trial judge rather than the jury.
`
`III. MOTION TO SET ASIDE
`
`A. Contentions
`
`Defendants argue that: ( 1) the evidence at-trial dOes not support the verdicts rendered in
`
`plaintiffs’ favor, in that there was no showing of valid contracts; and (2) the allegations as to the
`promissory notes arenot contained in the pleadings, and should'not have been included as part of
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`the verdict. (NYSCEF 520).
`
`Plaintiffs argue that the jury properly found that there was a contract between
`(a) Inc. and Tringle, and (b) LLC and Tringle Two, and that plaintiffs fulfilled their Obligations
`
`under the contracts. (NYSCEF 531).
`
`' Pursuant to CPLR 4404(a):
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`B. Discussion
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`' E E E
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`FILED: NEW YORK COUNTY CLERK 08/23/2017 04:43 PM
`FILED: NEW YORK COUNTY CLERK 08E2017 04:43 PM
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`NYSCEF DOC. NO.
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`NYSCEF DOC. NO. 545
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`DOC. NO. 541
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`RECEIVED NYSCEF: 08/17/2017
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`1
`
`. the court may set
`.
`. upon the motion of any party .
`.
`After a trial of a cause of action .
`asidea verdict or any judgment entered thereon and direct that judgment be entered in
`favor of a party entitled to judgment as a matter of law or it may order a new trial of a
`cause of action or separable issue where the verdict is contrary to the weight of the
`evidence, in the interest of justice. .
`.
`
`A party’s entitlement to judgment as a matter of law depends on whether the evidence
`
`“so preponderates” in favor of the movant that the verdict “could not have been reached on any ‘
`
`fair interpretation of the evidence.” (Killon v Parrotta, 28 NY3d 101, 108 [2016] [internal
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`quotation marks and citation omitted]; Lahain v Bin Chambi, 34 AD3d 374, 374 [15‘ Dept 2006]).
`
`'It must be found that “there is simply no validline of reasoning and permissible inferences
`
`which could possibly lead rational [people] to the conclusion reaChed by the jury on the basis of I
`
`the evidence presented at trial.” (Cohen v Hallmark Cards, Inc., 45 NY2d 493, 499 [1978];
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`Vaccaro v County ofSuflolk, 137 AD3d 101 1 [2d Dept 2016]). If the verdict is set aside as a
`
`matter of law, the remedy is a judgment in the movant’s favor. (Cohen, 45 NY2d at 498).
`
`“Whether a particular factual determination is against the weight of the evidence is itself
`
`a factual question” that “involves what is in large part a discretionary balancing of many
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`factors.” (Cohen, 45 NY2d at 499). The court’s discretiOn is informed by the deference given
`
`the jury’s resolution of disputed factual issues and inconsistencies in witnesses’ testimony
`
`(Bykowsky v Eskenozi, 72 AD3d 590 [15‘ Dept 2010], lv denied 16 NY3d 701 [201 l]; Desposito v
`City ofNew York, 55 AD3d 659 [2d Dept 2008]), and by the entitlement of the party opposing
`the motion to “every inference which may properly be drawn {from the facts presented,” and “the
`facts must be considered in a light more favorable to the nonmovant” (Szczerbiak v Pilot, 90
`NY2d 553, 556 [1997]; KBL, LLP v Community Counseling & Mediation Servs. , 123 AD3d 488,
`489 [15‘ Dept 2014]). Nonetheless, “[t]he critical inquiry is whether the verdict rested on a fair
`
`interpretation of the evidence.”l(KBL, LLP, 123 AD3d at 489 [internal quotes-omittedD. Where
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`NYSCEF DOC. NO. 545
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`a verdict is against the weight of the evidence, the remedy is a new trial (Cohen, 45 NY2d at
`498; Nicastrolv Park, 113 AD2d 129 [2d Dept 1985]).
`Generally, “in the absence of indications that substantial justice has notbeen done, a
`
`successful litigant is entitled to the benefits of a favorable,jury verdict,” and “the court may not
`
`employ its discretion simply because it disagrees with a verdict, as this would unnecessarily
`
`interfere with the fact—finding function of the jury to a degree that amounts to an usurpation of
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`the jury’s duty.” (McDermott' v Coffee Beanery, Ltd, 9 AD3d 195, 206 [lSt Dept 2004] [internal
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`quotation marks and citation omitted]).
`I
`
`In answer to question seven of the verdict sheet, the jury found that there was a contract
`
`of sale between Inc. and Tringle, dated December 2007, with resulting damages sustained by Inc.
`
`in the amount of $630,000. In its answer to question eight, the jury found the existence of an ‘
`
`oral contract of sale between 'LLC and Tringle Two, with resulting damages sustained by LLC in
`
`the amount of $270,000. In support of the argument that'these verdicts are not supported by the
`
`weight of the evidence, defendants assert that:
`
`l.
`
`2.
`
`3.
`
`4.
`
`5.
`
`6.
`
`Plaintiffs admitted only one contract, and did not fulfill the condition that they
`deliver a bill of sale.
`
`Contrary to the allegations in the complaint, there was no evidence at trial of any
`closing transaction of either contract for the purchase of either store.
`
`There is no contract for the sale of the Madison Avenue store.
`
`Plaintiffs signed a letter stating that defendants have “no balance due” (NYSCEF
`
`523; tr at 139:21-23, 140:67).
`
`Gade denied having sent a demand for payment for the sale of the businesses or
`the notes (tr. at 145: 18—25; 152).
`
`Gade admitted that he was in trouble with his home mortgage loan and the “GE
`loan,” neither of which1s defendants’ obligation (NYSCEF 524);
`
`I
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`INDEX NO~ 652831/2011
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`6
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`7.
`
`8.
`
`Gade never demanded payment pursuant to the terms of the contracts of sale.
`
`Plaintiffs failed to establish any breach by defendants of an obligation owed to
`them.
`'
`'
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`These assertions, even taken collectively, do not demonstrate the absence of a basis for
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`the jury verdict, as the evidence is at least equally supportive of the verdict. Plaintiffs rely on the
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`following trial evidence:
`
`1.
`
`Islam admitted to having signed several contracts to purchase the two stores,
`including (a) the contract of sale, dated December 2007, between LLC and
`Tringlel (Hom Aff., Exh. 1); (b) the transitional management/partnership
`agreement betWeen LLC and Tringle, dated November 14, 2007 (id , exh. 2);
`(c) the transitional management/partnership agreement between officers of LLC
`(Gade) and Tringle (Islam), dated November 14, 2007 (id , exh. 3); (d) the
`transitional management/partnership agreement between Gade and Islam, as an
`officer of Tringle Food Corp, dated'November 14, 2007 (id, exh. 4); (e) the
`contract between Inc. and Tringle, dated June 19, 2008 (id. , exh. 15); and (t) the
`contract between LLC and Tringle Two, dated June 19, 2008 (id, exh. 16).
`
`‘Islam' made partial down payments for the stores.(id, exh. 12 [copies of four
`checks, each in the amount of $50,000]).
`
`Islam signed “Franchise Request” forms, indicating that that the total purchase
`price was $1.1 million (id, exh.‘ 13 '[request to Dunkin’ Donuts]).
`
`‘
`
`Islam signed several transfer documents, all pertaining to the Dunkin’ Donuts
`. purchases such as: (a) “Notification of Sale, Transfer or Assignment in Bulk” (id,
`exh. 20); (b) “Assignment and Assumption Agreement” (id, exhs. 21 and 22);
`and (c) “Franchise Agreements” (id , exhd. 23-24).
`
`In his discovery responses, Islam admitted that he had “enter[ed] into an
`agreement to purchase both stores” (id , exh. 27, item 4).
`
`'
`
`Islam admitted during his deposition that there was a closing at which the stores
`were transferred (id, exh. 38, tr. 119:6 — 25).
`
`The parties stipulated at trial that “the Dunkin’ Donuts’ contract of sale and
`related documents were submitted to Dunkin’ Donuts’” (NYSCEF 528, exh. H, tr.
`21420-21426).
`
`1 This contract, and others cited by plaintiffs, erroneously refer to Tringle Food Corp. as “Triangle Food
`Corp.”
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`Based on the foregoing, it cannot be said “that the verdict could not have been reached on
`any fair interpretation ofthe evidence}: (Laham v Bin Chambi, 34 AD3d at 374). Moreover, as
`much of the evidence at trial consisted of testimony, any credibility issues arising therefrom
`
`were resolved by thejury, and its resolution of such “issues is entitled to deference.” (Laham v
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`Bin Chambi, 34 AD3d at 375).
`
`IV. INTEREST
`
`The notes provide for interest at the rate of seven percent. In their proposed judgment,
`
`plaintiffs seek interest at that rate from November 14, 2007, until judgment, and the statutory
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`rate of nine percent thereafter.
`
`Only'two of the three notes are dated November 14, 2007; the third is dated November
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`27, 2007, as per the jury verdict. Moreover, the notes do nOt provide for the rate of interest upon
`
`default.
`
`Pursuant to CPLR 5001 (a), a creditor may recover prejudgment interest on unpaid
`
`1
`
`I
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`interest and principal payments awarded “from the date each payment became due under the
`terms of the promissory note to the. date liability is established.” (Spodek v Park Prop. Dev.
`
`Assoc. , 96 NY2d 577, 581 [2001]). “When a claim is predicated on a breach of contract, the
`
`applicable rate of prejudgment interest varies depending on the nature and terms of the contract.”
`
`(NML Capital v Republic ofArgentina, 17 NY3d 250, 258 [2011]). “Most agreements
`
`associated with indebtedness provide a .‘contract rate’ of interest that determines the value of the-
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`loan and that rate is used to calculate interest on principal prior to loan maturity or a default in
`
`performance.” (Id).
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`Here, the applicable rate is seven percent, and it applies to the period prior to default.
`
`And, as the parties did not— provide for the interest rate that governs after default, New York’s
`
`statutory rate applies as the default rate. (Id. ). Therefore, the statutory rate of nine percent
`
`applies, bpt it accrues on'the date of default under the notes, not the dates that the notes were
`
`executed. (See Chipetine v McEvoy, 238 AD2d 536, 536 [2d Dept 1997] [trial court improperly
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`computed amount of interest due on promissory note after default; as note did not provide that
`
`interest be paid at specified rate until principal fully paid, court should have awarded only
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`statutory interest rate of nine percent after date of defendant’s default]).
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`As the parties do not address the date of default under the notes, nor did the jury decide
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`this issue, the amount of interest owed, including, but not limited to, the date of default, is
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`referred to a special referee.
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`V. UNDERTAKIN G
`
`As an alternative to dismissing the complaint, defendants argue that plaintiffs should be
`
`directed to deliver an undertaking pursuant to Uniform Commercial Code § 3—804 and General
`
`Business Law §I394-a (2).
`
`'
`
`Uniform Commercial Code § 3—804 provides:
`
`theft or
`The owner of an instrument which is loSt, whether by destruction,
`otherwise, may maintain an action in his own name and recover from any party
`liable thereon upon due proof of his Ownership,
`the facts which prevent his
`production of the instrument and its terms. The court shall require security, in an
`amount fixed by the court not less than twice the amount allegedly unpaid on the
`instrument,
`indemnifyng the defendant, his heirs, personal
`representatives,
`successors and assigns against loss, including costs and expenses, by reason of
`further claims on the instrument, but this provision does not apply where an
`action is prosecuted or defended by the state or by a public officer in its behalf.
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`General Business Law § 394-a similarly provides:
`
`ll
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`1. Where, upon the trial of an action, it appears that a negotiable instrument
`within article three Of the uniform commercial code, upon which the action or a
`counterclaim interposed in the action is founded, was lost while it belonged to-the
`party claiming the amount due thereupon, he may prove the contents thereof by
`parol or other secondary evidence and may recover or set off the amount due
`thereupon as if it was produced.
`
`2. For that purpose, he must give to the adverse party a written undertaking, in a
`sum fixed by the judge or the referee, not less than twice the amount of the note
`or bill, with at least two sureties, approved by the judge or the referee, to the
`effect
`that he will
`indemnify the adverse party, his heirs and personal
`representatives, against any claim by any other person, on account of the note or
`bill, and against all costs and expenses, byreason of such a claim.
`
`Notwithstanding the use of'the word “shall” in Uniform Commercial Code § 3-804,
`
`opinion is divided as to whether the posting of an undertaking is mandatory. In the Official
`
`Comments to the statute, an undertaking is deemed discretionary:
`
`If the claimant testifies falsely, or if the instrument subsequently turns up in the
`hands of a holder in due course, the obligor may be subjected to double liability.
`The court is therefore authorized to. require security indemnifying the obligor
`against loss by reason of such possibilities. There may be cases in which so much
`time has elapsed, or there is so little possible doubt as to the destruction of the
`instrument and its ownership that there is no good reason to require the security.
`The requirement is thereforenot an absolute one, and the matter is left to the
`' discretion of the court.
`
`(Uniform Commercial Code § 3—804 Official Comments).
`
`Decisions in which courts found an undertaking to be discretionary include Newbury
`
`Place Reo III, LLC v Sultan, 48 Misc 3d 1206(A), 2015 NY Slip Op 50985(U), *4 (Sup Ct,
`
`Kings County 2015) (requirement not absolute; matter left to court’s discretion), 487 Clinton
`
`Ave. Corp. v Chase Manhattan Bank, 63 Misc 2d 715, 717-718 (Sup Ct, Kings County 1970)
`
`(court rejects. mandatory interpretation. of statute, and grants plaintiffs’ request to use interest
`
`bearing account as security); and Kwon v Yun, 606 F Supp 2d 344, 369-370 (SD NY 2009)
`
`(requirement of undertaking discretionary).
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`Although the Appellate Division, First Department, in Sills v Waheed Enters, held that
`
`the plaintiff “should have been required to post security to indemnify appellant from any future
`
`actions on these lost instruments (UCC 3—804),” it did not discuss whether an undertaking is
`
`mandatory in all circumstances. (253 AD2d 351, 352 [15‘ Dept 1998], lv denied 93 NY2d 808
`
`[1999]).
`
`However, in Matter ofDias v Manufacturers Hanover Trust Co. , the court concluded that
`it may not order payment on a lost negotiable instrument without requiring the payee to post an
`undertaking and that the undertaking is thus mandatory. (92 Misc 2d 802, 805~806 [Sup Ct,
`
`Queens County 1977]). And in Beswick v Weiss, construing General Business Law § 394~a, the
`
`Court affirmed the lower court’s order directing the defendant to pay on a note conditioned on
`
`the plaintiffobtaining an undertaking, observing that the undertaking “effectively protected
`defendant from the risk of double liability should the lost instrument reappear.” (126 AD2d 854,
`
`855-856 [3d Dept 1987]).
`
`Here, the notes were issued in 2007, this action has been pending since 201 1, and there is
`
`little likelihood of a future claim. The facts here are similar to those addressed in Kwon v Yun,
`
`although there, the plaintiff did not dispute that he borrowed the money, received the funds, and
`failed to repay:
`
`While the question is a close one, the Court concludes that, on balance, there is no
`reasonable ground for requiring security‘here. This litigation has been pending for
`more than four years. No other party has asserted any claim based on the Notes,
`and — aside from plaintiff’s claim that the Notes were distributed to a member of
`Metedeconk —' there is no evidence that the Notes have been negotiated or
`
`transferred to 'any other party.
`
`(606 F Supp 2d at 369).
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`l3
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`VI. CONCLUSION
`
`Accordingly, it is hereby
`
`ORDERED, that the motion‘by plaintiffs Sreenivasa Reddy Gade, Jaisrikar LLC, and
`
`Jaisrikar2, Inc. is granted to the extent of (1) permitting plaintiffs to amend the second amended
`
`complaint consistent with the propOsed third amended complaint submitted to the court on July
`
`3], 2016; and (2) grantin