Kapitus Servicing, Inc. v. Southern Source, Inc.

Kapitus Servicing, Inc. v Southern Source, Inc. 2026 NY Slip Op 05855 October 8, 2026 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This decision is uncorrected and subject to revision before publication in the Official Reports. Kapitus Servicing, Inc., formerly known as Colonial Funding Network, Inc., etc., Plaintiff-Respondent, v Southern Source, Inc. doing business as Southern Source, et al., Defendants-Appellants. Decided and Entered: October 08, 2026 Index No. 653066/20|Appeal No. 7178|Case No. 2025-04808| Before: Manzanet-Daniels, J.P., Kennedy, Friedman, Kapnick, Higgitt, JJ. Emouna & Mikhail, PC, Garden City (Matin Emouna of counsel), for appellants. Kristyn Servicing, Inc., New York (Kristyn N. Harrison of counsel), for respondent. [*1] Order, Supreme Court, New York County (Arlene P. Bluth, J.), entered July 1, 2025, which, to the extent appealed from as limited by the briefs, denied defendants' motion pursuant to CPLR 5015(a)(3) and (4) to vacate a default judgment against them, unanimously affirmed, without costs. Supreme Court correctly denied defendants' motion to vacate a default judgment against them based on CPLR 5015(a)(4). Contrary to defendants' contention, it is unclear from the record whether or not the person who notarized the affidavits of service was a commissioned notary when she notarized the affidavits in November 2020. In any event, even if this was a defect in the affidavit of service, defendants clearly had actual notice of the action (see Ruffin v Lion Corp., 15 NY3d 578, 582 [2010]), as defendant Herbert Loebl admitted that he was served on October 24, 2020, and the parties engaged in settlement discussions in October 2020. Supreme Court providently exercised its discretion to deny defendants' motion seeking vacatur based on CPLR 5015(a)(3). Defendants failed to establish that the underlying agreement was a loan, which is a necessary element of a defense sounding in usury (see Seidel v 18 E. 17th St. Owners, 79 NY2d 735, 744 [1992]; Blue Wolf Capital Fund II, L.P. v American Stevedoring, Inc., 105 AD3d 178, 183 [1st Dept 2013]). Defendants failed to demonstrate, among other things, that the agreement had a finite term (see LG Funding, LLC v United Senior Props. of Olathe, LLC, 181 AD3d 664, 666 [2d Dept 2020]). As defendant Southern Source, Inc. was required to pay plaintiff 15% of its future receivables, rather than a fixed weekly amount, Southern Source's obligations could become fully satisfied at different times depending on the size of its future receivables. Accordingly, defendants failed to prove their usury defense "by clear evidence as to all its elements" (Freitas v Geddes Sav. & Loan Assn., 63 NY2d 254, 261 [1984]). THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT. ENTERED: October 8, 2026