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October 14, 2019Cart

Business

by Westchester County Business Journal
by WCBJ

$2.4M judgment upheld against nursing home investor Harris Schwartzberg

An appeals court has affirmed a $2.4 million judgment against Armonk businessman Harris Schwartzberg for failure to pay a loan he personally guaranteed.

Companies controlled by Schwartzberg had defaulted on a $5.4 million loan from an Encore Nursing Center Partners limited partnership to operate nursing homes.

“A written agreement that is complete, clear and unambiguous,” the second Appellate Division in Brooklyn ruled last month, quoting a legal precedent, “must be enforced according to the plain meaning of its terms.”

Schwartzberg is CEO of The Schwartzberg Cos., a private investment firm in West Harrison that focuses on health care and real estate.

Encore is associated with Seavest Investment Group, a White Plains-based venture capital and real estate investment firm that specializes in health facilities. Richard D. Segal of Rye is the founder and CEO.

In 2006, Encore and the Schwartzberg affiliates set up a deal to run seven nursing homes in Florida, Illinois, Kansas, Missouri and Texas. Encore would own the properties and the Schwartzberg affiliates would operate them.

Encore loaned $5.4 million to the Schwartzberg entities to use as working capital with Harris Schwartzberg personally guaranteeing up to $1.4 million.

The debt was supposed to be repaid by the end of 2009, but the borrowers defaulted on their obligations.

Schwartzberg’s companies filed for Chapter 11 reorganization in 2015. They had concluded by 2013, according to a bankruptcy document, that it was “no longer prudent to continue to operate the facilities.”

Encore sued Schwartzberg in 2015 in Westchester Supreme Court. Schwartzberg’s  companies had stopped paying rents for the nursing homes, according to the complaint, and had failed to pay any of the $5.4 million loan. Encore demanded that he pay the $1.4 million he had personally guaranteed.

Schwartzberg responded that Encore had misrepresented the financial, physical and operational conditions of the nursing homes, and that he would not have guaranteed the loan had he known the true conditions.

His lawyers also argued that Encore had filed the lawsuit too late, and they asked the court to declare the loan and the guarantee unenforceable.

Westchester Supreme Court Justice Alan D. Scheinkman granted Encore’s motion for summary judgment in 2016 and dismissed Schwartzberg’s defenses and counterclaims. In 2017, he ruled that Schwartzberg owed Encore more than $2.4 million, for the guarantee, 9 percent interest, attorneys fees and other costs.

The four-judge appellate panel agreed with Scheinkman. The statute of limitations began when Schwartzberg defaulted at the end of 2009. Encore had six years to file a claim and it had beat the clock.

Schwartzberg had “failed to raise a triable issue of fact, the appellate justices ruled, “with respect to a bonafide defense.”