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April 11, 1990


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 postjudgment 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.

Prior Proceedings

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 judgment.

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 parties agreed to ed 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.

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 York City.

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 ...

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