The opinion of the court was delivered by: Sweet, District Judge.
Plaintiff, Superior Funding Corporation ("Superior Funding"),
moves for an order granting judgment against defendants Albert
Benaderet ("Benaderet") and Jack Ringer ("Ringer"), jointly and
severally in the sum of $521,170.97, together with
post-judgment interest thereon from October 3, 1989, and the
costs of this action. For the reasons set forth below, this
motion is granted against Ringer and adjourned against
Benaderet pursuant to the automatic stay imposed upon the
filing of Benaderet's bankruptcy in the United States
Bankruptcy Court of the Southern District of New York.
In May 1988, Superior Funding brought suit against Big Apple,
a New York investment company in the venture capital business,
Ringer, and Benaderet. An answer to the complaint was submitted
by counsel on behalf of all three defendants. Subsequently new
counsel was substituted for Big Apple and Benaderet who did not
thereafter interpose an amended answer nor any counterclaims.
The wilful failure of defendants to deliver any documents or
papers initially resulted in money sanctions against the
defendants, and finally a striking of Big Apple's answer by
order and judgment dated June 30, 1989. In September 1989, all
defendants were given notice of the settlement of the proposed
judgment against Big Apple for $521,170.97 and post-judgment
interest thereon — representing the sum owing, interest from
May 10, 1988, and attorney's fees incurred — subsequently
entered by this court on October 3, 1989. None of the
defendants objected to the amount of the judgment or to how
that amount was computed. Neither Benaderet or Ringer elected
to oppose the calculation. No appeal was taken from the
On January 23, 1990 the complaint against the individual
defendants was tried in a bench trial.
During July 1984, Benaderet and Ringer telephoned from New
York to Allen Tucker ("Tucker") in New Jersey. Benaderet and
Ringer were then the majority shareholders and the directors
and executive officers of Big Apple; Tucker was President of
Superior, a New Jersey corporation. During that telephone
conversation, Benaderet and Ringer told Tucker that Big Apple
was interested in borrowing $200,000.00 from Superior as a
"bridge loan" to finance the operations of certain companies
that Big Apple was shortly going to take public.
A few days later, Tucker, from New Jersey telephoned
Benaderet and Ringer in New York and told them that Superior
Funding would make that loan for not longer than six months at
an interest rate of two percent per month, with security
represented by certain stock that Big Apple, as borrower, and
Benaderet and Ringer as co-guarantors of payment, offered to
provide as collateral security for the repayment of the loan.
The parties agreed to the terms of the proposed loan during
that telephone conversation. The stock consisted of shares in
a number of small public companies controlled by Big Apple,
Benaderet and Ringer, or in which they were shareholders. The
stock was so-called "letter stock" and, in a number of
instances, represented "control stock" and could not be sold
except in compliance with certain regulations of the Securities
and Exchange Commission.
Big Apple, Benaderet, and Ringer were anxious to close the
loan quickly. Superior Funding's New Jersey attorneys, however,
were not particularly familiar with this type of secured
financing, and thus it was decided that Big Apple's New York
attorney would prepare the loan agreement, promissory note and
the related loan documents and send them to Superior Funding's
New Jersey attorney for a proposed closing of the loan on July
30, 1984 in New Jersey.
Tucker, Superior Funding's attorneys, Benaderet, Ringer, a
third director of Big Apple, and Big Apple's attorney were all
present at the closing on July 30, 1984 at
the offices of Superior Funding's attorneys in Millburn, New
Jersey. All of the loan documents, including the loan agreement
and promissory note, were signed and delivered at the closing,
and the collateral security was also then and there delivered.
Benaderet and Ringer also signed and delivered at the closing
their unconditional and continuing guaranty of payment of the
loan, in which guaranty they expressly consented in advance,
without notice to them, to extension of time and changes in the
terms of payment of the note. At the closing Superior Funding
also delivered to Big Apple its $200,000.00 check made payable
to Big Apple and evidencing the loan made by Superior Funding
to that corporate borrower. The loan agreement of July 30, 1984
contained provisions to the effect that the laws of the State
of New Jersey governed the loan transaction and that interest
would be compounded by adding defaulted interest to principal
and computing such interest thereon.
In March 1985, after the due date of the loan had passed
without payment, the parties entered into an extension of the
loan agreement, extending the maturity of the loan from October
30, 1984 to April 1, 1985 and increasing the interest on the
loan from two percent to two and one-half percent per month.
That extension agreement also provided that except as so
changed, the terms and conditions of the loan agreement, the
promissory note, and the guaranty would remain in effect. Also,
in March 1985, Benaderet, a co-guarantor, delivered additional
collateral security to Superior Funding consisting of his
shares and proprietary lease in a cooperative apartment in New
During its approximate nine-year existence as a New Jersey
corporation engaged on a small scale in the interstate
commercial finance business, Superior Funding had made only two
or three loans to New York residents, and Tucker had come to
New York about two or three times and visited the borrowers'
premises in connection with such loans. At no time did Superior
have any office or any employees or any telephone number in New
York, and, except for the few incidental contacts with the
State described above, Superior Funding had no contact with New
York in connection with its lending business. Generally, the
loans which Superior made were to borrowers it knew as a result
of businesses in which other Tucker companies were involved,
primarily the real estate construction and development
business. These affiliated real estate companies had never done
any such real estate business in the State of New York.
Moreover, Superior never solicited any loans; any interested
borrowers would contact Superior Funding.
Big Apple did not pay the first monthly interest payment due
August 30, 1984 in the sum of $4,000.00, nor any of the
successive monthly interest payments. Big Apple also defaulted
in paying the loan at its maturity on October 30, 1984. Big
Apple was in continuous default; at no ...