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SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK COMMERCIAL DIVISION

Index No. 654871/2024 Assigned Justice: Hon. Althea Marchetti

BELMONT RIDGE BANK NA,

Plaintiff/Counterclaim Defendant,

– against –

TRITON HARBOR INDUSTRIES, LLC, MARCUS J. KAPPEL, and ELAINE D. KAPPEL,

Defendants/Counterclaim Plaintiffs.

VERIFIED ANSWER TO COUNTERCLAIMS OF PLAINTIFF/COUNTERCLAIM DEFENDANT BELMONT RIDGE BANK NA

Filed: November 22, 2024

Calderwood & Harkness LLP Linda Osei, Esq. Priya Anand, Esq. Carlos Espinoza, Esq. Hannah Brinkley, Esq. 600 Lexington Avenue, 30th Floor New York, New York 10022 Tel: (212) 556-8000

Fax: (212) 556-8001

Attorneys for Plaintiff/Counterclaim Defendant Belmont Ridge Bank NA

PRELIMINARY STATEMENT

Plaintiff/Counterclaim Defendant Belmont Ridge Bank NA ("BRB," "the Bank," or "Counterclaim Defendant"), by and through its attorneys, Calderwood & Harkness LLP, respectfully submits this Verified Answer to the Counterclaims asserted by Defendants/Counterclaim Plaintiffs Triton Harbor Industries, LLC ("Triton Harbor"), Marcus J. Kappel ("M. Kappel"), and Elaine D. Kappel ("E. Kappel") (collectively, "Counterclaim Plaintiffs") in their Answer with Counterclaims filed on October 18, 2024, and in support thereof, states as follows:

BRB denies each and every material allegation contained in the Counterclaims except as specifically and expressly admitted herein. To the extent any allegation is not addressed below, such allegation is deemed denied.

The Counterclaims are a transparent and legally deficient attempt by a defaulting borrower and its principals to avoid their contractual obligations under the Forbearance and Modification Agreement dated October 6, 2023 (the "Forbearance Agreement") and the unlimited personal guaranties executed in connection therewith. Stripped of their inflammatory rhetoric, the Counterclaims amount to nothing more than a borrower's post hoc regret over the terms of an arm's-length workout agreement that was negotiated over several weeks, reviewed by Counterclaim Plaintiffs' own retained restructuring advisor, and executed voluntarily by sophisticated commercial parties.

The Forbearance Agreement contains an unambiguous integration and merger clause at Section 12(a), which provides that the Agreement "constitutes the entire agreement between the parties with respect to the subject matter hereof" and that it "supersedes all prior negotiations, representations, warranties, commitments, offers, contracts, and writings, whether oral or written." The Forbearance Agreement further contains, at Section 9(c), an express disclaimer of any commitment to extend additional credit, providing in plain and unequivocal language: "Nothing herein shall constitute or be deemed to constitute a commitment, agreement, or obligation on the part of Lender to extend additional credit, modify existing facilities, or renew any credit facility." Together, these provisions bar the Counterclaims as a matter of law.

Counterclaim Plaintiffs are not unsophisticated consumers who may have been overborne in negotiation. To the contrary, Marcus J. Kappel is a thirty-year veteran of the marine industrial services industry, the founder and Chief Executive Officer of Triton Harbor — a company that generated approximately $68,000,000 in annual revenue in fiscal year 2022 — and the 72% equity member of the company. Elaine D. Kappel is the Chief Financial Officer of Triton Harbor and its 28% equity member. During the workout negotiations that led to the execution of the Forbearance Agreement, Counterclaim Plaintiffs were represented and advised by Mercer Tidwell & Associates LLC, a well-known restructuring and financial advisory firm retained at Counterclaim Plaintiffs' own expense and managed by Raymond Mercer, a recognized professional in the workout and restructuring field. In these circumstances, any claim of justifiable reliance on alleged oral representations that directly contradict the express terms of the integrated written agreement fails as a matter of law.

BRB exercised its express contractual rights under the Forbearance Agreement when, following the expiration of the 180-day forbearance period on April 3, 2024, it accelerated the outstanding indebtedness. The acceleration was triggered by Triton Harbor's failure to satisfy the covenant-cure milestones specified in the Forbearance Agreement — specifically, the requirement that Triton Harbor achieve a minimum Fixed Charge Coverage Ratio ("FCCR") of 1.20x by the end of the forbearance period. As of March 31, 2024, Triton Harbor's FCCR stood at 0.94x, well below the required threshold. BRB's acceleration was fully authorized by the express terms of the Forbearance Agreement and was not a breach of any duty, implied or express, owed to Counterclaim Plaintiffs.

The Counterclaims fail to state a viable cause of action and should be dismissed in their entirety, with prejudice, and with an award of costs and disbursements to BRB.

RESPONSES TO COUNTERCLAIM ALLEGATIONS

BRB responds to the specific allegations of the Counterclaims, on a paragraph-by-paragraph basis, as set forth below. To the extent the Counterclaims contain headings, titles, characterizations, or legal conclusions, such headings, titles, characterizations, and legal conclusions do not require a response. To the extent any such heading, title, characterization, or legal conclusion is deemed to contain a factual allegation, it is denied unless expressly admitted.

Introductory and Jurisdictional Allegations (Paragraphs 1–15)

1. BRB admits that it is a nationally chartered commercial bank, chartered under the Office of the Comptroller of the Currency ("OCC"), Charter No. 14-00927, with its principal offices located at 1200 Avenue of the Americas, 38th Floor, New York, New York 10036. BRB further admits that its common stock is publicly traded on the New York Stock Exchange under the ticker symbol "BRMR."

2. BRB admits that Triton Harbor Industries, LLC is a Delaware limited liability company, Delaware Division of Corporations File No. 5217839, with its principal place of business at 47-15 Austell Street, Suite 200, Long Island City, New York 11101.

3. BRB admits that Marcus J. Kappel is the founder, Chief Executive Officer, and 72% equity member of Triton Harbor Industries, LLC.

4. BRB admits that Elaine D. Kappel is the Chief Financial Officer and 28% equity member of Triton Harbor Industries, LLC.

5. BRB admits that this Court has jurisdiction over the parties and the subject matter of this action, and that venue is proper in the County of New York pursuant to the forum selection clause set forth in Section 12(e) of the Forbearance Agreement and Section 11.09 of the Credit Agreement.

6. BRB admits that it filed the original Complaint in this action on August 12, 2024, which was assigned Index No. 654871/2024 by the Clerk of this Court.

7. BRB admits that the Counterclaims were filed as part of Counterclaim Plaintiffs' Answer with Counterclaims on October 18, 2024.

8–15. To the extent the remaining introductory and jurisdictional paragraphs contain factual allegations not specifically addressed above, BRB denies such allegations except to the extent they are consistent with the admissions set forth in this section. To the extent any such paragraphs contain legal conclusions, characterizations, or argument, no response is required, but to the extent a response is deemed required, BRB denies the same.

Allegations Regarding the Original Credit Facility (Paragraphs 16–30)

16. BRB admits that BRB, as Lender, and Triton Harbor Industries, LLC, as Borrower, entered into a Credit Agreement dated June 15, 2021 (the "Credit Agreement"), pursuant to which BRB extended the following credit facilities:

(a) Term Loan A, in the original principal amount of Fourteen Million Dollars ($14,000,000), with a maturity date of June 15, 2028, structured with an eighty-four (84) month term and quarterly principal amortization; and

(b) A Revolving Credit Facility, with a commitment amount of Eight Million Dollars ($8,000,000) and a maturity date of June 15, 2026,

for total committed facilities of Twenty-Two Million Dollars ($22,000,000).

17. BRB admits that the applicable interest rate on Term Loan A was the Secured Overnight Financing Rate ("SOFR") plus 275 basis points, and that the applicable interest rate on the Revolving Credit Facility was SOFR plus 250 basis points, in each case as set forth in the Credit Agreement and subject to the terms and conditions thereof.

18. BRB admits that the credit facilities were secured by a first-priority lien on substantially all assets of Triton Harbor, including, without limitation, marine terminal equipment, accounts receivable, inventory, and general intangibles, as well as a first mortgage on the Long Island City terminal facility located at 50-22 Borden Avenue, Long Island City, New York 11101. BRB further admits that title insurance was obtained from Harborview Title & Escrow Co. under Policy No. HT-NYC-2021-04553 in connection with the mortgage.

19. BRB admits that the collateral securing the original credit facilities was appraised at Eighteen Million Seven Hundred Thousand Dollars ($18,700,000) in June 2021 by Ridgeline Appraisal Group, Inc. in an appraisal report delivered in connection with the closing of the Credit Agreement.

20. BRB admits that Marcus J. Kappel executed a limited personal guaranty in the amount of Four Million Five Hundred Thousand Dollars ($4,500,000) in connection with the original Credit Agreement.

21. BRB admits that the Credit Agreement contained certain financial covenants applicable to Triton Harbor, including, without limitation:

(a) a minimum Fixed Charge Coverage Ratio of 1.20x, tested quarterly;

(b) a maximum Total Leverage Ratio of 3.50x, tested quarterly; and

22–30. BRB denies any allegations in these paragraphs that characterize, construe, or impute improper motive, bad faith, or predatory intent to BRB's entry into, structuring of, or administration of the original Credit Agreement. The Credit Agreement was negotiated and executed at arm's length between a sophisticated commercial lender and a sophisticated corporate borrower. Any remaining allegations contained in Paragraphs 16 through 30 not specifically admitted herein are denied.

Allegations Regarding Loan Deterioration and Credit Downgrade (Paragraphs 31–45)

31. BRB admits that Triton Harbor's financial performance deteriorated significantly in calendar year 2023. BRB admits that Triton Harbor's trailing-twelve-month EBITDA as reported for the first quarter of 2023 was approximately Five Million One Hundred Thousand Dollars ($5,100,000), a decline from the adjusted EBITDA of approximately Nine Million Four Hundred Thousand Dollars ($9,400,000) for fiscal year 2022.

32. BRB admits that, as of the first quarter of 2023, Triton Harbor's Fixed Charge Coverage Ratio had fallen to approximately 0.87x, which was below the covenant minimum of 1.20x, and that the Total Leverage Ratio had risen to approximately 4.92x, which exceeded the covenant maximum of 3.50x.

33. BRB admits that BRB's internal credit review committee downgraded the Triton Harbor credits from a "Pass" rating to a "Substandard" classification (Risk Rating 7) on March 8, 2023, consistent with BRB's internal credit risk management policies and applicable OCC regulatory guidance. BRB further admits that, in connection with the downgrade, the Triton Harbor relationship was transferred from BRB's Relationship Management division to BRB's Special Assets Group ("SAG").

34. BRB admits that the outstanding balances on the Triton Harbor credit facilities as of approximately March 8, 2023 were as follows: approximately Eleven Million Three Hundred Seventy-Five Thousand Dollars ($11,375,000) on Term Loan A and approximately Six Million Two Hundred Thousand Dollars ($6,200,000) drawn on the Revolving Credit Facility, for a total outstanding balance of approximately Seventeen Million Five Hundred Seventy-Five Thousand Dollars ($17,575,000).

35. BRB admits that during the period from approximately March 2023 through September 2023, Triton Harbor lost its municipal stevedoring and cargo-handling contract with the Port of Bridgehaven (estimated annual revenue of approximately $12,000,000) and its maintenance services contract for Newark Bay terminal operations (estimated annual revenue of approximately $7,500,000), resulting in a material adverse change in Triton Harbor's revenue base and business prospects.

36. BRB admits that Derek Whitmore, Senior Vice President and Head of the Special Assets Group, assumed senior management responsibility for the Triton Harbor relationship upon the account's transfer to SAG, and that Joanna Reeves, Vice President in the Special Assets Group, served as the day-to-day relationship manager for the Triton Harbor account.

37–45. BRB denies any allegations in these paragraphs that characterize BRB's internal credit review process, the downgrade decision, or the transfer of the Triton Harbor relationship to the Special Assets Group as evidence of bad faith, improper motive, a plan or scheme to defraud, or any intent to harm Counterclaim Plaintiffs. The credit review and downgrade were undertaken in accordance with BRB's established internal policies and applicable regulatory requirements. BRB's transfer of a distressed credit to its Special Assets Group is a routine and standard practice in the commercial banking industry and does not evidence any wrongful intent. Any remaining allegations contained in Paragraphs 31 through 45 not specifically admitted herein are denied.

Allegations Regarding the Aaronson Memorandum (Paragraphs 46–55)

46. BRB admits that Philip Aaronson serves as Executive Vice President and Chief Credit Officer of Belmont Ridge Bank NA.

47–50. To the extent the Counterclaims reference, quote, characterize, or purport to summarize the contents of an internal BRB memorandum dated August 22, 2023, from Philip Aaronson to Derek Whitmore, with a copy to Margaret Linden, Senior Vice President and General Counsel of BRB (the "Aaronson Memorandum"), BRB objects to such allegations on the grounds of attorney-client privilege. The Aaronson Memorandum was prepared and transmitted with a copy to BRB's General Counsel, Margaret Linden, Esq., for the express purpose of obtaining legal advice in connection with BRB's management of the Triton Harbor workout, and it is therefore protected from disclosure by the attorney-client privilege. BRB does not waive the attorney-client privilege or any other applicable privilege by responding to the Counterclaims.

51. Without waiving any privilege or other objection, BRB denies that the Aaronson Memorandum constitutes evidence of any intent to defraud, deceive, mislead, or otherwise harm Counterclaim Plaintiffs.

52–53. BRB denies that any internal BRB communications regarding collateral disposition strategy, workout management, or any other subject are inconsistent with, or in any way contradicted, the express terms of the Forbearance Agreement that was subsequently negotiated, reviewed, and executed by the parties on October 6, 2023.

54–55. BRB denies all remaining allegations in Paragraphs 46 through 55 to the extent not specifically admitted herein.

Allegations Regarding September–October 2023 Workout Negotiations and Alleged Misrepresentations (Paragraphs 56–85)

56. BRB admits that a meeting took place on September 12, 2023, at BRB's offices located at 1200 Avenue of the Americas, 38th Floor, New York, New York 10036. BRB admits that this meeting was attended by Derek Whitmore, Joanna Reeves, Marcus J. Kappel, and Elaine D. Kappel.

57–60. BRB denies that during the September 12, 2023 meeting, Derek Whitmore or any other BRB representative made a binding, enforceable, or unconditional commitment to extend a new Six Million Five Hundred Thousand Dollar ($6,500,000) revolving credit facility or any other additional credit to Triton Harbor. BRB states that any discussions regarding potential future credit were preliminary, non-binding, expressly subject to formal credit approval by BRB's credit committee, and were in all events superseded by the express terms of the Forbearance Agreement subsequently executed on October 6, 2023.

61–63. BRB denies that Derek Whitmore represented to Marcus J. Kappel, Elaine D. Kappel, or any other person that the additional collateral requested of the Kappels in connection with the proposed workout was merely "a formality to satisfy regulators" or words to that effect. BRB denies that any statements made by Whitmore during the September 12, 2023 meeting constituted actionable misrepresentations of material fact.

64–66. BRB states that any expressions of interest in a continued lending relationship that may have been communicated during the September 12, 2023 meeting or at any other time were preliminary, non-binding, subject to completion of formal underwriting and credit approval, and were in all events expressly superseded by the integration clause (Section 12(a)) and the disclaimer provision (Section 9(c)) of the subsequently executed Forbearance Agreement.

67–70. BRB admits that on September 18, 2023, Joanna Reeves sent an email to Marcus J. Kappel in the ordinary course of the workout discussions. BRB denies that this email constituted a commitment, guarantee, promise, or binding representation that BRB would extend new credit to Triton Harbor or that BRB would take any specific action beyond the terms of the workout then under discussion. BRB states that the language referenced in the Counterclaims — including the phrases "optimistic about a path forward" and "renewed credit relationship" — was aspirational and expressly non-binding, and that such language, to the extent it was used, was in all events superseded by the integration clause (Section 12(a)) and disclaimer provision (Section 9(c)) of the subsequently executed Forbearance Agreement.

71–75. With respect to allegations that Joanna Reeves forwarded an internal draft term sheet for a potential $6,500,000 revolving facility to Derek Whitmore on or about September 29, 2023, BRB states that internal, draft, and unapproved documents prepared within BRB and marked "for discussion purposes only — not approved" do not constitute commitments, promises, or representations to Counterclaim Plaintiffs. BRB further states that the referenced internal draft term sheet was never communicated to Counterclaim Plaintiffs as an approved, final, or binding document, and that such document was never delivered to or shared with Counterclaim Plaintiffs in any form.

76–80. BRB denies that it engaged in any scheme, plan, conspiracy, or course of conduct to fraudulently extract additional collateral from Counterclaim Plaintiffs through false promises of future credit extensions. BRB states that the additional collateral pledged by Counterclaim Plaintiffs in connection with the Forbearance Agreement was bargained-for consideration exchanged in return for BRB's agreement to forbear from exercising its default remedies for 180 days — a forbearance that BRB was under no obligation to grant and that provided substantial benefit to Counterclaim Plaintiffs by allowing Triton Harbor to continue operating its business during the forbearance period.

81–85. BRB denies all remaining allegations in Paragraphs 56 through 85 to the extent not specifically admitted herein.

Allegations Regarding the Forbearance and Modification Agreement (Paragraphs 86–110)

86. BRB admits that BRB, as Lender, and Triton Harbor Industries, LLC, as Borrower, together with Marcus J. Kappel and Elaine D. Kappel, individually and as Guarantors, executed the Forbearance and Modification Agreement on October 6, 2023. The Forbearance Agreement is a fully integrated written agreement that speaks for itself, and BRB respectfully refers the Court to the full text of the Forbearance Agreement for a complete and accurate statement of its terms.

87–95. BRB admits the following key terms of the Forbearance Agreement:

(a) BRB agreed to forbear from exercising its default remedies under the Credit Agreement, the Mortgage, and related loan documents for a period of one hundred eighty (180) days from the date of execution, through and including April 3, 2024 (the "Forbearance Period").

(b) Triton Harbor agreed to make minimum monthly debt service payments of One Hundred Twenty-Five Thousand Dollars ($125,000) during the Forbearance Period, for a total of Seven Hundred Fifty Thousand Dollars ($750,000) over the six-month period.

(c) As additional consideration for BRB's agreement to forbear, Triton Harbor pledged additional collateral consisting of the assignment of two equipment leases with an aggregate appraised value of approximately Two Million Three Hundred Thousand Dollars ($2,300,000).

(d) As further additional consideration, Marcus J. Kappel and Elaine D. Kappel pledged their personal residence located at 14 Birchmont Lane, Westport, Connecticut 06880, with an appraised value of approximately Three Million One Hundred Thousand Dollars ($3,100,000).

(e) The limited personal guaranty previously executed by Marcus J. Kappel in the amount of Four Million Five Hundred Thousand Dollars ($4,500,000) was amended and restated as an unlimited personal guaranty.

(f) Elaine D. Kappel executed a new unlimited personal guaranty of the obligations of Triton Harbor under the Credit Agreement and the Forbearance Agreement.

(g) Triton Harbor agreed to engage, at its own expense, a qualified financial advisor or restructuring consultant and to provide BRB with monthly financial reporting, including monthly financial statements and covenant compliance certificates. Triton Harbor satisfied this requirement by retaining Mercer Tidwell & Associates LLC, under the direction of Raymond Mercer.

(h) Triton Harbor paid a forbearance fee of Eighty-Seven Thousand Five Hundred Dollars ($87,500), representing 0.50% of the approximately Seventeen Million Five Hundred Thousand Dollars ($17,500,000) outstanding at the time of execution, which was paid at the signing of the Forbearance Agreement.

96–98. BRB affirmatively states that Section 9(c) of the Forbearance Agreement provides, in full and unambiguous terms:

"Nothing herein shall constitute or be deemed to constitute a commitment, agreement, or obligation on the part of Lender to extend additional credit, modify existing facilities, or renew any credit facility."

99–101. BRB affirmatively states that Section 12(a) of the Forbearance Agreement contains a comprehensive integration and merger clause, which provides that the Forbearance Agreement "constitutes the entire agreement between the parties with respect to the subject matter hereof" and "supersedes all prior negotiations, representations, warranties, commitments, offers, contracts, and writings, whether oral or written."

102–105. BRB denies that any of the terms of the Forbearance Agreement, the amended personal guaranty of Marcus J. Kappel, or the new personal guaranty of Elaine D. Kappel were procured through fraud, misrepresentation, duress, undue influence, or any other improper means. BRB denies that the Forbearance Agreement or the amended or new personal guaranties are subject to rescission or avoidance on any ground.

106–110. BRB states that Counterclaim Plaintiffs reviewed the Forbearance Agreement and all related instruments prior to execution, had ample opportunity to consult with counsel and advisors of their choosing, and were in fact advised throughout the workout negotiations by their own restructuring advisor, Mercer Tidwell & Associates LLC, managed by Raymond Mercer. BRB states that Counterclaim Plaintiffs executed the Forbearance Agreement and the guaranty instruments knowingly, voluntarily, and with full awareness of the terms and conditions thereof. Any remaining allegations in Paragraphs 86 through 110 not specifically admitted herein are denied.

Allegations Regarding Acceleration (Paragraphs 111–130)

111. BRB admits that the 180-day Forbearance Period established by the Forbearance Agreement expired on April 3, 2024.

112. BRB admits that Triton Harbor made all six monthly forbearance payments during the Forbearance Period, totaling Seven Hundred Fifty Thousand Dollars ($750,000) in aggregate.

113. BRB admits that, based on the financial statements and compliance certificate delivered by Triton Harbor for the period ending March 31, 2024, Triton Harbor's Fixed Charge Coverage Ratio as of that date was 0.94x. BRB states that this ratio did not satisfy the covenant-cure milestone set forth in the Forbearance Agreement, which required Triton Harbor to achieve a minimum FCCR of 1.20x by the expiration of the Forbearance Period as a condition to any extension or modification of the forbearance.

114–115. BRB admits that, following the expiration of the Forbearance Period and Triton Harbor's failure to satisfy the covenant-cure milestones, BRB issued a Notice of Default and Acceleration dated April 15, 2024, declaring the entire outstanding balance of the indebtedness under the Credit Agreement, as modified by the Forbearance Agreement, to be immediately due and payable.

116. BRB admits that the outstanding balances at the time of acceleration were as follows:

(a) Term Loan A: Ten Million Six Hundred Twenty-Five Thousand Dollars ($10,625,000), reflecting Seven Hundred Fifty Thousand Dollars ($750,000) in principal reduction attributable to the monthly payments made during the Forbearance Period;

(b) Revolving Credit Facility: Six Million Two Hundred Thousand Dollars ($6,200,000) (no paydown during the Forbearance Period);

(d) Late fees and default interest: One Hundred Forty-Three Thousand Eight Hundred Ninety Dollars ($143,890); and

(e) Total Accelerated Amount: Seventeen Million Four Hundred Fifty-Six Thousand Two Hundred Twelve Dollars ($17,456,212).

117. BRB admits that it commenced foreclosure proceedings on the Long Island City terminal facility located at 50-22 Borden Avenue, Long Island City, New York 11101, on or about May 20, 2024, in accordance with applicable law and the terms of the Mortgage.

118. BRB admits that an updated collateral appraisal performed by Ridgeline Appraisal Group, Inc. in September 2023 valued the real property and marine terminal equipment securing the credit facilities at approximately Eleven Million Two Hundred Thousand Dollars ($11,200,000), representing a decline of approximately Seven Million Five Hundred Thousand Dollars ($7,500,000), or approximately 40.1%, from the Eighteen Million Seven Hundred Thousand Dollars ($18,700,000) valuation in the origination appraisal performed in June 2021.

119–125. BRB denies that its acceleration of the indebtedness was improper, undertaken in bad faith, arbitrary, capricious, or constituted a breach of any duty — whether express, implied, contractual, or otherwise — owed to Counterclaim Plaintiffs. BRB states that it exercised its express contractual rights under the Forbearance Agreement following Triton Harbor's failure to satisfy the covenant-cure conditions that were a necessary prerequisite to any further forbearance or modification of the credit facilities.

126–130. BRB denies all remaining allegations in Paragraphs 111 through 130 to the extent not specifically admitted herein.

Response to First Counterclaim: Fraudulent Inducement (Paragraphs 131–155)

131–135. BRB denies that it made any material misrepresentation of existing fact to Counterclaim Plaintiffs in connection with the negotiation, drafting, or execution of the Forbearance Agreement or any related instrument.

136–140. BRB denies that any statements made by Derek Whitmore, Joanna Reeves, or any other employee, officer, agent, or representative of BRB during the September–October 2023 workout negotiations or at any other time constituted fraudulent misrepresentations of material fact, whether by affirmative statement, concealment, or omission.

141–145. BRB denies that it acted with scienter, intent to defraud, or knowledge of the falsity of any statement made to Counterclaim Plaintiffs. BRB denies that any statement attributed to its employees was made with the intent to induce Counterclaim Plaintiffs to enter into the Forbearance Agreement or to pledge additional collateral based on false premises.

146–150. BRB denies that Counterclaim Plaintiffs justifiably or reasonably relied on any alleged oral or written statements that are contradicted by, inconsistent with, or disclaimed by the express terms of the Forbearance Agreement, including, without limitation, Section 9(c) (disclaimer of commitment to extend additional credit) and Section 12(a) (integration and merger clause). BRB states that, under well-established New York law, a party to a comprehensive written agreement containing integration and specific disclaimer provisions cannot sustain a fraud claim based on alleged oral representations that directly contradict the agreement's express terms.

151–155. BRB denies that Counterclaim Plaintiffs suffered any damages proximately caused by any conduct of BRB. BRB denies all remaining allegations of the First Counterclaim to the extent not specifically admitted herein.

Response to Second Counterclaim: Negligent Misrepresentation (Paragraphs 156–170)

156–160. BRB denies that it owed Counterclaim Plaintiffs a special duty of care, a fiduciary duty, or any duty beyond the express terms of the Credit Agreement, the Forbearance Agreement, and the related loan documents. BRB states that the relationship between BRB and Counterclaim Plaintiffs is and at all relevant times was an arm's-length commercial lending relationship, and that under New York law, a commercial lender does not owe a duty to its borrower to provide financial advice or to ensure that the borrower's interests are protected in a workout transaction.

161–165. BRB denies that it made any negligent misrepresentation of material fact to Counterclaim Plaintiffs. BRB denies that any information communicated to Counterclaim Plaintiffs was false, incomplete, or misleading.

166–170. BRB denies that Counterclaim Plaintiffs reasonably relied on any alleged misrepresentations in light of the express disclaimers contained in the Forbearance Agreement and the sophistication of Counterclaim Plaintiffs and their access to independent professional advisors, including Mercer Tidwell & Associates LLC. BRB denies all remaining allegations of the Second Counterclaim to the extent not specifically admitted herein.

Response to Third Counterclaim: Breach of the Implied Covenant of Good Faith and Fair Dealing (Paragraphs 171–185)

171–175. BRB denies that it breached the implied covenant of good faith and fair dealing. BRB states that, under well-established New York law, the implied covenant of good faith and fair dealing cannot be used to create obligations that are inconsistent with or go beyond the express terms of the governing agreement. See, e.g., 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 153 (2002).

176–180. BRB states that its acceleration of the outstanding indebtedness following the expiration of the Forbearance Period and Triton Harbor's failure to achieve the covenant-cure milestones was expressly authorized by the terms of the Forbearance Agreement. BRB's exercise of an express contractual right cannot, as a matter of law, constitute a breach of the implied covenant of good faith and fair dealing.

181–185. BRB denies that it acted in bad faith in exercising its contractual remedies. BRB denies all remaining allegations of the Third Counterclaim to the extent not specifically admitted herein.

Response to Fourth Counterclaim: Rescission (Paragraphs 186–200)

186–190. BRB denies that the Forbearance Agreement, the amended personal guaranty of Marcus J. Kappel, or the new personal guaranty of Elaine D. Kappel were procured through fraud, duress, undue influence, mistake, or any other ground warranting rescission under New York law.

191–195. BRB denies that Counterclaim Plaintiffs are entitled to rescission of the Forbearance Agreement or any instrument executed in connection therewith.

196–200. BRB states that Counterclaim Plaintiffs ratified and affirmed the Forbearance Agreement by performing their obligations thereunder throughout the entire 180-day Forbearance Period, including by making all six monthly debt service payments totaling Seven Hundred Fifty Thousand Dollars ($750,000), by pledging the additional collateral (including the assignment of equipment leases and the mortgage on the Kappel residence at 14 Birchmont Lane, Westport, Connecticut 06880), by paying the $87,500 forbearance fee, and by engaging Mercer Tidwell & Associates LLC and providing monthly financial reporting to BRB as required by the Forbearance Agreement. Under New York law, a party that performs under a contract with knowledge of the facts underlying an alleged ground for rescission is deemed to have ratified the contract and waived the right to seek rescission. BRB denies all remaining allegations of the Fourth Counterclaim to the extent not specifically admitted herein.

Response to Damages Allegations (Paragraphs 201–210)

201–205. BRB denies that Counterclaim Plaintiffs are entitled to compensatory damages of Twelve Million Five Hundred Thousand Dollars ($12,500,000) or in any other amount. BRB denies that any conduct of BRB caused Counterclaim Plaintiffs to suffer any compensable damages.

206–208. BRB denies that Counterclaim Plaintiffs are entitled to punitive damages on any ground whatsoever. BRB states that, under New York law, punitive damages in a fraud action require proof that the defendant's conduct was aimed at the public generally or was so egregious as to constitute a high degree of moral turpitude and wanton dishonesty. See Walker v. Sheldon, 10 N.Y.2d 401, 405 (1961); Rocanova v. Equitable Life Assurance Soc'y of the U.S., 83 N.Y.2d 603, 613 (1994). The Counterclaims allege, at most, a private commercial dispute between a lender and its borrower and guarantors, and the allegations do not approach the threshold required for an award of punitive damages.

209–210. BRB denies all remaining allegations regarding damages to the extent not specifically admitted herein.

AFFIRMATIVE DEFENSES

Without assuming any burden of proof that would not otherwise rest with BRB, and reserving the right to assert additional affirmative defenses as may become appropriate in light of discovery, BRB asserts the following Affirmative Defenses to the Counterclaims:

FIRST AFFIRMATIVE DEFENSE: Integration Clause / Parol Evidence Rule

The Forbearance Agreement contains a comprehensive integration and merger clause at Section 12(a), which provides that the Forbearance Agreement "constitutes the entire agreement between the parties with respect to the subject matter hereof" and "supersedes all prior negotiations, representations, warranties, commitments, offers, contracts, and writings, whether oral or written." Under New York's parol evidence rule, Counterclaim Plaintiffs are barred from introducing extrinsic evidence of alleged prior or contemporaneous oral or written representations to vary, contradict, or supplement the terms of the fully integrated Forbearance Agreement. See W.W.W. Assocs., Inc. v. Giancontieri, 77 N.Y.2d 157, 162 (1990); Schron v. Veltran Sanders LLP, 20 N.Y.3d 430 (2013). All four Counterclaims are barred to the extent they are premised on alleged representations that are contradicted by or inconsistent with the express terms of the Forbearance Agreement, including the disclaimer of commitment to extend additional credit set forth in Section 9(c) thereof.

SECOND AFFIRMATIVE DEFENSE: Disclaimer of Representations / Section 9(c)

Section 9(c) of the Forbearance Agreement expressly provides: "Nothing herein shall constitute or be deemed to constitute a commitment, agreement, or obligation on the part of Lender to extend additional credit, modify existing facilities, or renew any credit facility." Counterclaim Plaintiffs' claims of fraudulent inducement and negligent misrepresentation are premised entirely on alleged oral statements that BRB would extend a new $6,500,000 revolving facility following the forbearance period, which alleged commitment is directly contradicted and disclaimed by Section 9(c). Under New York law, a specific disclaimer of reliance on representations regarding future credit extensions defeats a claim of justifiable reliance as a matter of law, particularly where the disclaimer is negotiated at arm's length between sophisticated commercial parties with access to independent professional advisors. See Danann Realty Corp. v. Harris, 5 N.Y.2d 317 (1959); Ridgeway Capital Markets v. Itochu Int'l, Inc., 308 A.D.2d 232 (1st Dep't 2003).

THIRD AFFIRMATIVE DEFENSE: Sophistication of Borrower / No Justifiable Reliance

Counterclaim Plaintiffs are sophisticated commercial actors who cannot establish justifiable reliance on alleged oral representations that are directly contradicted by the express terms of a written agreement they reviewed, negotiated, and executed with the benefit of independent professional advisors. Marcus J. Kappel is a thirty-year veteran of the marine industrial services industry, the founder and Chief Executive Officer of a company that generated approximately $68,000,000 in annual revenue in fiscal year 2022, and the 72% equity member of Triton Harbor. Elaine D. Kappel serves as the Chief Financial Officer of Triton Harbor and is its 28% equity member. During the workout negotiations, Counterclaim Plaintiffs retained their own restructuring financial advisor, Mercer Tidwell & Associates LLC, under the direction of Raymond Mercer, and thus had independent professional advice throughout. Under the "sophisticated party" doctrine applied by New York courts, Counterclaim Plaintiffs' reliance on alleged oral statements that contradict the integrated written agreement is unjustifiable as a matter of law. See Centro Empresarial Cempresa S.A. v. Stonefield Group, 17 N.Y.3d 269, 278 (2011); HSH Nordbank AG v. Greaves Commerce Bank, 95 A.D.3d 185, 194–95 (1st Dep't 2012).

FOURTH AFFIRMATIVE DEFENSE: Statute of Frauds

To the extent Counterclaim Plaintiffs' claims are premised on an alleged oral commitment by BRB to extend a new $6,500,000 revolving credit facility, such alleged commitment is unenforceable under the statute of frauds. New York General Obligations Law § 5-701(a)(1) requires that an agreement to lend money, or to extend credit, in an amount exceeding $50,000 be in writing and signed by the party to be charged. No written agreement signed by BRB or any authorized representative of BRB committing to extend the alleged new $6,500,000 revolving facility exists. Accordingly, any claim premised on such an alleged oral commitment is barred by the statute of frauds.

FIFTH AFFIRMATIVE DEFENSE: Ratification and Waiver

Counterclaim Plaintiffs ratified the Forbearance Agreement and waived any claims arising from its formation by performing their obligations under the Forbearance Agreement for the entire 180-day Forbearance Period with full knowledge of the facts underlying their present counterclaims. Specifically, Counterclaim Plaintiffs made all six monthly payments totaling $750,000; pledged the additional collateral, including the assignment of equipment leases and the mortgage on the Kappel residence; paid the $87,500 forbearance fee; engaged Mercer Tidwell & Associates LLC as required; and provided monthly financial reporting to BRB — all without objecting to the terms of the Forbearance Agreement or asserting that they had been defrauded or misled. Counterclaim Plaintiffs' performance with knowledge of the facts underlying their counterclaims constitutes ratification and waiver of any claims arising from the negotiation and formation of the Forbearance Agreement and the related guaranty instruments.

SIXTH AFFIRMATIVE DEFENSE: Failure to State a Claim for Punitive Damages

Counterclaim Plaintiffs' demand for punitive damages fails as a matter of law because the Counterclaims allege, at most, a private commercial dispute between a lender and its borrower and guarantors. Under New York law, punitive damages in a fraud action require proof that the defendant's conduct was aimed at the public generally or was so egregious as to constitute a high degree of moral turpitude and wanton dishonesty. See Rocanova v. Equitable Life Assurance Soc'y of the U.S., 83 N.Y.2d 603, 613 (1994). The Counterclaims do not allege, and cannot establish, that BRB's conduct was directed at the public generally. BRB's exercise of its contractual remedies under the Forbearance Agreement, even if the Court were to credit Counterclaim Plaintiffs' allegations (which BRB expressly denies), does not rise to the level of conduct warranting an award of punitive damages.

SEVENTH AFFIRMATIVE DEFENSE: Failure to Plead Fraud with Particularity

To the extent the First Counterclaim (Fraudulent Inducement) fails to plead the circumstances constituting the alleged fraud with the particularity required by CPLR § 3016(b) — including the specific identity of the person making each alleged misrepresentation, the precise words used, the time, place, and manner of each alleged statement, and the basis for alleging that each statement was false when made — such counterclaim fails to satisfy the heightened pleading requirements and should be dismissed on that basis.

EIGHTH AFFIRMATIVE DEFENSE: Failure to Mitigate Damages

Counterclaim Plaintiffs failed to mitigate their alleged damages. Among other things, Counterclaim Plaintiffs failed to cure the covenant defaults within the time period permitted by the Forbearance Agreement, failed to secure alternative financing from other lenders, failed to pursue the renegotiation or replacement of lost contracts, and failed to take commercially reasonable steps to preserve and maximize the value of the collateral securing the credit facilities. Any damages alleged by Counterclaim Plaintiffs, to the extent they exist at all (which is denied), must be reduced by the amount that could have been avoided through the exercise of reasonable diligence and commercially reasonable efforts to mitigate.

NINTH AFFIRMATIVE DEFENSE: Reservation of Additional Defenses

BRB reserves the right to assert additional affirmative defenses as discovery proceeds and additional facts become known, including but not limited to defenses based on estoppel, laches, unclean hands, set-off, recoupment, and any additional defenses that may become apparent upon completion of discovery. BRB's assertion of the affirmative defenses set forth herein shall not be construed as a waiver of any other defense or objection available to BRB at law or in equity.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff/Counterclaim Defendant Belmont Ridge Bank NA respectfully requests that this Court enter judgment:

1. Dismissing the First Counterclaim (Fraudulent Inducement) asserted by Triton Harbor Industries, LLC, Marcus J. Kappel, and Elaine D. Kappel, in its entirety and with prejudice;

2. Dismissing the Second Counterclaim (Negligent Misrepresentation) asserted by Triton Harbor Industries, LLC, Marcus J. Kappel, and Elaine D. Kappel, in its entirety and with prejudice;

3. Dismissing the Third Counterclaim (Breach of the Implied Covenant of Good Faith and Fair Dealing) asserted by Triton Harbor Industries, LLC, Marcus J. Kappel, and Elaine D. Kappel, in its entirety and with prejudice;

4. Dismissing the Fourth Counterclaim (Rescission) asserted by Triton Harbor Industries, LLC, Marcus J. Kappel, and Elaine D. Kappel, in its entirety and with prejudice;

5. Striking the demand for punitive damages contained in the Counterclaims;

6. Awarding BRB its costs and disbursements incurred in defending against the Counterclaims, including reasonable attorneys' fees to the extent permitted by the loan documents and applicable law;

7. Granting such other and further relief as this Court deems just and proper.

VERIFICATION

STATE OF NEW YORK COUNTY OF NEW YORK ss.:

I, Thomas Hargreaves, being duly sworn, depose and state:

1. I am a Vice President and Associate General Counsel of Belmont Ridge Bank NA, the Plaintiff/Counterclaim Defendant in the above-captioned action. I am authorized to make this verification on behalf of Belmont Ridge Bank NA.

2. I have read the foregoing Verified Answer to Counterclaims of Plaintiff/Counterclaim Defendant Belmont Ridge Bank NA and am familiar with the contents thereof.

3. The statements of fact contained in the foregoing Verified Answer to Counterclaims are true to my knowledge, based upon my review of the books, records, and files of Belmont Ridge Bank NA and upon information provided to me by officers and employees of Belmont Ridge Bank NA who have personal knowledge of the facts and circumstances at issue in this action.

4. The denials contained in the foregoing Verified Answer to Counterclaims are based upon my review of the books, records, and files of Belmont Ridge Bank NA and upon information and belief formed after reasonable inquiry.

5. I make this verification pursuant to CPLR § 3020(d)(3), which authorizes verification by an officer of a corporation or other entity that is a party to the action.

________________________________________

Thomas Hargreaves Vice President and Associate General Counsel Belmont Ridge Bank NA 1200 Avenue of the Americas, 38th Floor New York, New York 10036

Date: November 22, 2024

Sworn to and subscribed before me this 22nd day of November, 2024.

________________________________________

Notary Public, State of New York My Commission Expires: ____

ATTORNEY SIGNATURE BLOCK

CALDERWOOD & HARKNESS LLP

By: ________

Linda Osei, Esq. Priya Anand, Esq. Carlos Espinoza, Esq. Hannah Brinkley, Esq.

600 Lexington Avenue, 30th Floor New York, New York 10022 Telephone: (212) 556-8000 Facsimile: (212) 556-8001

Attorneys for Plaintiff/Counterclaim Defendant Belmont Ridge Bank NA

CERTIFICATE OF SERVICE

I, Carlos Espinoza, an attorney duly admitted to practice before the courts of the State of New York, hereby certify that on November 22, 2024, a true and correct copy of the foregoing Verified Answer to Counterclaims of Plaintiff/Counterclaim Defendant Belmont Ridge Bank NA was served upon counsel for Defendants/Counterclaim Plaintiffs Triton Harbor Industries, LLC, Marcus J. Kappel, and Elaine D. Kappel, at the following address, by electronic filing through the New York State Courts Electronic Filing System (NYSCEF) and by email:

Kestrel Voss & Huang LLP Theodore Huang, Esq. Natasha Orlov, Esq. 780 Third Avenue, 24th Floor New York, New York 10017

________________________________________

Carlos Espinoza, Esq. Calderwood & Harkness LLP

Date: November 22, 2024

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK COMMERCIAL DIVISION
Index No. 654871/2024 Assigned Justice: Hon. Althea Marchetti
BELMONT RIDGE BANK NA,
Plaintiff/Counterclaim Defendant,
– against –
TRITON HARBOR INDUSTRIES, LLC, MARCUS J. KAPPEL, and ELAINE D. KAPPEL,
Defendants/Counterclaim Plaintiffs.
VERIFIED ANSWER TO COUNTERCLAIMS OF PLAINTIFF/COUNTERCLAIM DEFENDANT BELMONT RIDGE BANK NA
Filed: November 22, 2024
Calderwood & Harkness LLP Linda Osei, Esq. Priya Anand, Esq. Carlos Espinoza, Esq. Hannah Brinkley, Esq. 600 Lexington Avenue, 30th Floor New York, New York 10022 Tel: (212) 556-8000
Fax: (212) 556-8001
Attorneys for Plaintiff/Counterclaim Defendant Belmont Ridge Bank NA
PRELIMINARY STATEMENT
Plaintiff/Counterclaim Defendant Belmont Ridge Bank NA ("BRB," "the Bank," or "Counterclaim Defendant"), by and through its attorneys, Calderwood & Harkness LLP, respectfully submits this Verified Answer to the Counterclaims asserted by Defendants/Counterclaim Plaintiffs Triton Harbor Industries, LLC ("Triton Harbor"), Marcus J. Kappel ("M. Kappel"), and Elaine D. Kappel ("E. Kappel") (collectively, "Counterclaim Plaintiffs") in their Answer with Counterclaims filed on October 18, 2024, and in support thereof, states as follows:
BRB denies each and every material allegation contained in the Counterclaims except as specifically and expressly admitted herein. To the extent any allegation is not addressed below, such allegation is deemed denied.
The Counterclaims are a transparent and legally deficient attempt by a defaulting borrower and its principals to avoid their contractual obligations under the Forbearance and Modification Agreement dated October 6, 2023 (the "Forbearance Agreement") and the unlimited personal guaranties executed in connection therewith. Stripped of their inflammatory rhetoric, the Counterclaims amount to nothing more than a borrower's post hoc regret over the terms of an arm's-length workout agreement that was negotiated over several weeks, reviewed by Counterclaim Plaintiffs' own retained restructuring advisor, and executed voluntarily by sophisticated commercial parties.
The Forbearance Agreement contains an unambiguous integration and merger clause at Section 12(a), which provides that the Agreement "constitutes the entire agreement between the parties with respect to the subject matter hereof" and that it "supersedes all prior negotiations, representations, warranties, commitments, offers, contracts, and writings, whether oral or written." The Forbearance Agreement further contains, at Section 9(c), an express disclaimer of any commitment to extend additional credit, providing in plain and unequivocal language: "Nothing herein shall constitute or be deemed to constitute a commitment, agreement, or obligation on the part of Lender to extend additional credit, modify existing facilities, or renew any credit facility." Together, these provisions bar the Counterclaims as a matter of law.
Counterclaim Plaintiffs are not unsophisticated consumers who may have been overborne in negotiation. To the contrary, Marcus J. Kappel is a thirty-year veteran of the marine industrial services industry, the founder and Chief Executive Officer of Triton Harbor — a company that generated approximately $68,000,000 in annual revenue in fiscal year 2022 — and the 72% equity member of the company. Elaine D. Kappel is the Chief Financial Officer of Triton Harbor and its 28% equity member. During the workout negotiations that led to the execution of the Forbearance Agreement, Counterclaim Plaintiffs were represented and advised by Mercer Tidwell & Associates LLC, a well-known restructuring and financial advisory firm retained at Counterclaim Plaintiffs' own expense and managed by Raymond Mercer, a recognized professional in the workout and restructuring field. In these circumstances, any claim of justifiable reliance on alleged oral representations that directly contradict the express terms of the integrated written agreement fails as a matter of law.
BRB exercised its express contractual rights under the Forbearance Agreement when, following the expiration of the 180-day forbearance period on April 3, 2024, it accelerated the outstanding indebtedness. The acceleration was triggered by Triton Harbor's failure to satisfy the covenant-cure milestones specified in the Forbearance Agreement — specifically, the requirement that Triton Harbor achieve a minimum Fixed Charge Coverage Ratio ("FCCR") of 1.20x by the end of the forbearance period. As of March 31, 2024, Triton Harbor's FCCR stood at 0.94x, well below the required threshold. BRB's acceleration was fully authorized by the express terms of the Forbearance Agreement and was not a breach of any duty, implied or express, owed to Counterclaim Plaintiffs.
The Counterclaims fail to state a viable cause of action and should be dismissed in their entirety, with prejudice, and with an award of costs and disbursements to BRB.
RESPONSES TO COUNTERCLAIM ALLEGATIONS
BRB responds to the specific allegations of the Counterclaims, on a paragraph-by-paragraph basis, as set forth below. To the extent the Counterclaims contain headings, titles, characterizations, or legal conclusions, such headings, titles, characterizations, and legal conclusions do not require a response. To the extent any such heading, title, characterization, or legal conclusion is deemed to contain a factual allegation, it is denied unless expressly admitted.
Introductory and Jurisdictional Allegations (Paragraphs 1–15)
1.  BRB admits that it is a nationally chartered commercial bank, chartered under the Office of the Comptroller of the Currency ("OCC"), Charter No. 14-00927, with its principal offices located at 1200 Avenue of the Americas, 38th Floor, New York, New York 10036. BRB further admits that its common stock is publicly traded on the New York Stock Exchange under the ticker symbol "BRMR."
2.  BRB admits that Triton Harbor Industries, LLC is a Delaware limited liability company, Delaware Division of Corporations File No. 5217839, with its principal place of business at 47-15 Austell Street, Suite 200, Long Island City, New York 11101.
3.  BRB admits that Marcus J. Kappel is the founder, Chief Executive Officer, and 72% equity member of Triton Harbor Industries, LLC.
4.  BRB admits that Elaine D. Kappel is the Chief Financial Officer and 28% equity member of Triton Harbor Industries, LLC.
5.  BRB admits that this Court has jurisdiction over the parties and the subject matter of this action, and that venue is proper in the County of New York pursuant to the forum selection clause set forth in Section 12(e) of the Forbearance Agreement and Section 11.09 of the Credit Agreement.
6.  BRB admits that it filed the original Complaint in this action on August 12, 2024, which was assigned Index No. 654871/2024 by the Clerk of this Court.
7.  BRB admits that the Counterclaims were filed as part of Counterclaim Plaintiffs' Answer with Counterclaims on October 18, 2024.
8–15. To the extent the remaining introductory and jurisdictional paragraphs contain factual allegations not specifically addressed above, BRB denies such allegations except to the extent they are consistent with the admissions set forth in this section. To the extent any such paragraphs contain legal conclusions, characterizations, or argument, no response is required, but to the extent a response is deemed required, BRB denies the same.
Allegations Regarding the Original Credit Facility (Paragraphs 16–30)
16.  BRB admits that BRB, as Lender, and Triton Harbor Industries, LLC, as Borrower, entered into a Credit Agreement dated June 15, 2021 (the "Credit Agreement"), pursuant to which BRB extended the following credit facilities:
(a) Term Loan A, in the original principal amount of Fourteen Million Dollars ($14,000,000), with a maturity date of June 15, 2028, structured with an eighty-four (84) month term and quarterly principal amortization; and
(b) A Revolving Credit Facility, with a commitment amount of Eight Million Dollars ($8,000,000) and a maturity date of June 15, 2026,
for total committed facilities of Twenty-Two Million Dollars ($22,000,000).
17.  BRB admits that the applicable interest rate on Term Loan A was the Secured Overnight Financing Rate ("SOFR") plus 275 basis points, and that the applicable interest rate on the Revolving Credit Facility was SOFR plus 250 basis points, in each case as set forth in the Credit Agreement and subject to the terms and conditions thereof.
18.  BRB admits that the credit facilities were secured by a first-priority lien on substantially all assets of Triton Harbor, including, without limitation, marine terminal equipment, accounts receivable, inventory, and general intangibles, as well as a first mortgage on the Long Island City terminal facility located at 50-22 Borden Avenue, Long Island City, New York 11101. BRB further admits that title insurance was obtained from Harborview Title & Escrow Co. under Policy No. HT-NYC-2021-04553 in connection with the mortgage.
19.  BRB admits that the collateral securing the original credit facilities was appraised at Eighteen Million Seven Hundred Thousand Dollars ($18,700,000) in June 2021 by Ridgeline Appraisal Group, Inc. in an appraisal report delivered in connection with the closing of the Credit Agreement.
20.  BRB admits that Marcus J. Kappel executed a limited personal guaranty in the amount of Four Million Five Hundred Thousand Dollars ($4,500,000) in connection with the original Credit Agreement.
21.  BRB admits that the Credit Agreement contained certain financial covenants applicable to Triton Harbor, including, without limitation:
(a) a minimum Fixed Charge Coverage Ratio of 1.20x, tested quarterly;
(b) a maximum Total Leverage Ratio of 3.50x, tested quarterly; and
(c) a minimum Liquidity requirement of Two Million Dollars ($2,000,000), tested monthly.
22–30. BRB denies any allegations in these paragraphs that characterize, construe, or impute improper motive, bad faith, or predatory intent to BRB's entry into, structuring of, or administration of the original Credit Agreement. The Credit Agreement was negotiated and executed at arm's length between a sophisticated commercial lender and a sophisticated corporate borrower. Any remaining allegations contained in Paragraphs 16 through 30 not specifically admitted herein are denied.
Allegations Regarding Loan Deterioration and Credit Downgrade (Paragraphs 31–45)
31.  BRB admits that Triton Harbor's financial performance deteriorated significantly in calendar year 2023. BRB admits that Triton Harbor's trailing-twelve-month EBITDA as reported for the first quarter of 2023 was approximately Five Million One Hundred Thousand Dollars ($5,100,000), a decline from the adjusted EBITDA of approximately Nine Million Four Hundred Thousand Dollars ($9,400,000) for fiscal year 2022.
32.  BRB admits that, as of the first quarter of 2023, Triton Harbor's Fixed Charge Coverage Ratio had fallen to approximately 0.87x, which was below the covenant minimum of 1.20x, and that the Total Leverage Ratio had risen to approximately 4.92x, which exceeded the covenant maximum of 3.50x.
33.  BRB admits that BRB's internal credit review committee downgraded the Triton Harbor credits from a "Pass" rating to a "Substandard" classification (Risk Rating 7) on March 8, 2023, consistent with BRB's internal credit risk management policies and applicable OCC regulatory guidance. BRB further admits that, in connection with the downgrade, the Triton Harbor relationship was transferred from BRB's Relationship Management division to BRB's Special Assets Group ("SAG").
34.  BRB admits that the outstanding balances on the Triton Harbor credit facilities as of approximately March 8, 2023 were as follows: approximately Eleven Million Three Hundred Seventy-Five Thousand Dollars ($11,375,000) on Term Loan A and approximately Six Million Two Hundred Thousand Dollars ($6,200,000) drawn on the Revolving Credit Facility, for a total outstanding balance of approximately Seventeen Million Five Hundred Seventy-Five Thousand Dollars ($17,575,000).
35.  BRB admits that during the period from approximately March 2023 through September 2023, Triton Harbor lost its municipal stevedoring and cargo-handling contract with the Port of Bridgehaven (estimated annual revenue of approximately $12,000,000) and its maintenance services contract for Newark Bay terminal operations (estimated annual revenue of approximately $7,500,000), resulting in a material adverse change in Triton Harbor's revenue base and business prospects.
36.  BRB admits that Derek Whitmore, Senior Vice President and Head of the Special Assets Group, assumed senior management responsibility for the Triton Harbor relationship upon the account's transfer to SAG, and that Joanna Reeves, Vice President in the Special Assets Group, served as the day-to-day relationship manager for the Triton Harbor account.
37–45. BRB denies any allegations in these paragraphs that characterize BRB's internal credit review process, the downgrade decision, or the transfer of the Triton Harbor relationship to the Special Assets Group as evidence of bad faith, improper motive, a plan or scheme to defraud, or any intent to harm Counterclaim Plaintiffs. The credit review and downgrade were undertaken in accordance with BRB's established internal policies and applicable regulatory requirements. BRB's transfer of a distressed credit to its Special Assets Group is a routine and standard practice in the commercial banking industry and does not evidence any wrongful intent. Any remaining allegations contained in Paragraphs 31 through 45 not specifically admitted herein are denied.
Allegations Regarding the Aaronson Memorandum (Paragraphs 46–55)
46.  BRB admits that Philip Aaronson serves as Executive Vice President and Chief Credit Officer of Belmont Ridge Bank NA.
47–50. To the extent the Counterclaims reference, quote, characterize, or purport to summarize the contents of an internal BRB memorandum dated August 22, 2023, from Philip Aaronson to Derek Whitmore, with a copy to Margaret Linden, Senior Vice President and General Counsel of BRB (the "Aaronson Memorandum"), BRB objects to such allegations on the grounds of attorney-client privilege. The Aaronson Memorandum was prepared and transmitted with a copy to BRB's General Counsel, Margaret Linden, Esq., for the express purpose of obtaining legal advice in connection with BRB's management of the Triton Harbor workout, and it is therefore protected from disclosure by the attorney-client privilege. BRB does not waive the attorney-client privilege or any other applicable privilege by responding to the Counterclaims.
51.  Without waiving any privilege or other objection, BRB denies that the Aaronson Memorandum constitutes evidence of any intent to defraud, deceive, mislead, or otherwise harm Counterclaim Plaintiffs.
52–53. BRB denies that any internal BRB communications regarding collateral disposition strategy, workout management, or any other subject are inconsistent with, or in any way contradicted, the express terms of the Forbearance Agreement that was subsequently negotiated, reviewed, and executed by the parties on October 6, 2023.
54–55. BRB denies all remaining allegations in Paragraphs 46 through 55 to the extent not specifically admitted herein.
Allegations Regarding September–October 2023 Workout Negotiations and Alleged Misrepresentations (Paragraphs 56–85)
56.  BRB admits that a meeting took place on September 12, 2023, at BRB's offices located at 1200 Avenue of the Americas, 38th Floor, New York, New York 10036. BRB admits that this meeting was attended by Derek Whitmore, Joanna Reeves, Marcus J. Kappel, and Elaine D. Kappel.
57–60. BRB denies that during the September 12, 2023 meeting, Derek Whitmore or any other BRB representative made a binding, enforceable, or unconditional commitment to extend a new Six Million Five Hundred Thousand Dollar ($6,500,000) revolving credit facility or any other additional credit to Triton Harbor. BRB states that any discussions regarding potential future credit were preliminary, non-binding, expressly subject to formal credit approval by BRB's credit committee, and were in all events superseded by the express terms of the Forbearance Agreement subsequently executed on October 6, 2023.
61–63. BRB denies that Derek Whitmore represented to Marcus J. Kappel, Elaine D. Kappel, or any other person that the additional collateral requested of the Kappels in connection with the proposed workout was merely "a formality to satisfy regulators" or words to that effect. BRB denies that any statements made by Whitmore during the September 12, 2023 meeting constituted actionable misrepresentations of material fact.
64–66. BRB states that any expressions of interest in a continued lending relationship that may have been communicated during the September 12, 2023 meeting or at any other time were preliminary, non-binding, subject to completion of formal underwriting and credit approval, and were in all events expressly superseded by the integration clause (Section 12(a)) and the disclaimer provision (Section 9(c)) of the subsequently executed Forbearance Agreement.
67–70. BRB admits that on September 18, 2023, Joanna Reeves sent an email to Marcus J. Kappel in the ordinary course of the workout discussions. BRB denies that this email constituted a commitment, guarantee, promise, or binding representation that BRB would extend new credit to Triton Harbor or that BRB would take any specific action beyond the terms of the workout then under discussion. BRB states that the language referenced in the Counterclaims — including the phrases "optimistic about a path forward" and "renewed credit relationship" — was aspirational and expressly non-binding, and that such language, to the extent it was used, was in all events superseded by the integration clause (Section 12(a)) and disclaimer provision (Section 9(c)) of the subsequently executed Forbearance Agreement.
71–75. With respect to allegations that Joanna Reeves forwarded an internal draft term sheet for a potential $6,500,000 revolving facility to Derek Whitmore on or about September 29, 2023, BRB states that internal, draft, and unapproved documents prepared within BRB and marked "for discussion purposes only — not approved" do not constitute commitments, promises, or representations to Counterclaim Plaintiffs. BRB further states that the referenced internal draft term sheet was never communicated to Counterclaim Plaintiffs as an approved, final, or binding document, and that such document was never delivered to or shared with Counterclaim Plaintiffs in any form.
76–80. BRB denies that it engaged in any scheme, plan, conspiracy, or course of conduct to fraudulently extract additional collateral from Counterclaim Plaintiffs through false promises of future credit extensions. BRB states that the additional collateral pledged by Counterclaim Plaintiffs in connection with the Forbearance Agreement was bargained-for consideration exchanged in return for BRB's agreement to forbear from exercising its default remedies for 180 days — a forbearance that BRB was under no obligation to grant and that provided substantial benefit to Counterclaim Plaintiffs by allowing Triton Harbor to continue operating its business during the forbearance period.
81–85. BRB denies all remaining allegations in Paragraphs 56 through 85 to the extent not specifically admitted herein.
Allegations Regarding the Forbearance and Modification Agreement (Paragraphs 86–110)
86.  BRB admits that BRB, as Lender, and Triton Harbor Industries, LLC, as Borrower, together with Marcus J. Kappel and Elaine D. Kappel, individually and as Guarantors, executed the Forbearance and Modification Agreement on October 6, 2023. The Forbearance Agreement is a fully integrated written agreement that speaks for itself, and BRB respectfully refers the Court to the full text of the Forbearance Agreement for a complete and accurate statement of its terms.
87–95. BRB admits the following key terms of the Forbearance Agreement:
(a) BRB agreed to forbear from exercising its default remedies under the Credit Agreement, the Mortgage, and related loan documents for a period of one hundred eighty (180) days from the date of execution, through and including April 3, 2024 (the "Forbearance Period").
(b) Triton Harbor agreed to make minimum monthly debt service payments of One Hundred Twenty-Five Thousand Dollars ($125,000) during the Forbearance Period, for a total of Seven Hundred Fifty Thousand Dollars ($750,000) over the six-month period.
(c) As additional consideration for BRB's agreement to forbear, Triton Harbor pledged additional collateral consisting of the assignment of two equipment leases with an aggregate appraised value of approximately Two Million Three Hundred Thousand Dollars ($2,300,000).
(d) As further additional consideration, Marcus J. Kappel and Elaine D. Kappel pledged their personal residence located at 14 Birchmont Lane, Westport, Connecticut 06880, with an appraised value of approximately Three Million One Hundred Thousand Dollars ($3,100,000).
(e) The limited personal guaranty previously executed by Marcus J. Kappel in the amount of Four Million Five Hundred Thousand Dollars ($4,500,000) was amended and restated as an unlimited personal guaranty.
(f) Elaine D. Kappel executed a new unlimited personal guaranty of the obligations of Triton Harbor under the Credit Agreement and the Forbearance Agreement.
(g) Triton Harbor agreed to engage, at its own expense, a qualified financial advisor or restructuring consultant and to provide BRB with monthly financial reporting, including monthly financial statements and covenant compliance certificates. Triton Harbor satisfied this requirement by retaining Mercer Tidwell & Associates LLC, under the direction of Raymond Mercer.
(h) Triton Harbor paid a forbearance fee of Eighty-Seven Thousand Five Hundred Dollars ($87,500), representing 0.50% of the approximately Seventeen Million Five Hundred Thousand Dollars ($17,500,000) outstanding at the time of execution, which was paid at the signing of the Forbearance Agreement.
96–98. BRB affirmatively states that Section 9(c) of the Forbearance Agreement provides, in full and unambiguous terms:
"Nothing herein shall constitute or be deemed to constitute a commitment, agreement, or obligation on the part of Lender to extend additional credit, modify existing facilities, or renew any credit facility."
99–101. BRB affirmatively states that Section 12(a) of the Forbearance Agreement contains a comprehensive integration and merger clause, which provides that the Forbearance Agreement "constitutes the entire agreement between the parties with respect to the subject matter hereof" and "supersedes all prior negotiations, representations, warranties, commitments, offers, contracts, and writings, whether oral or written."
102–105. BRB denies that any of the terms of the Forbearance Agreement, the amended personal guaranty of Marcus J. Kappel, or the new personal guaranty of Elaine D. Kappel were procured through fraud, misrepresentation, duress, undue influence, or any other improper means. BRB denies that the Forbearance Agreement or the amended or new personal guaranties are subject to rescission or avoidance on any ground.
106–110. BRB states that Counterclaim Plaintiffs reviewed the Forbearance Agreement and all related instruments prior to execution, had ample opportunity to consult with counsel and advisors of their choosing, and were in fact advised throughout the workout negotiations by their own restructuring advisor, Mercer Tidwell & Associates LLC, managed by Raymond Mercer. BRB states that Counterclaim Plaintiffs executed the Forbearance Agreement and the guaranty instruments knowingly, voluntarily, and with full awareness of the terms and conditions thereof. Any remaining allegations in Paragraphs 86 through 110 not specifically admitted herein are denied.
Allegations Regarding Acceleration (Paragraphs 111–130)
111.  BRB admits that the 180-day Forbearance Period established by the Forbearance Agreement expired on April 3, 2024.
112.  BRB admits that Triton Harbor made all six monthly forbearance payments during the Forbearance Period, totaling Seven Hundred Fifty Thousand Dollars ($750,000) in aggregate.
113.  BRB admits that, based on the financial statements and compliance certificate delivered by Triton Harbor for the period ending March 31, 2024, Triton Harbor's Fixed Charge Coverage Ratio as of that date was 0.94x. BRB states that this ratio did not satisfy the covenant-cure milestone set forth in the Forbearance Agreement, which required Triton Harbor to achieve a minimum FCCR of 1.20x by the expiration of the Forbearance Period as a condition to any extension or modification of the forbearance.
114–115. BRB admits that, following the expiration of the Forbearance Period and Triton Harbor's failure to satisfy the covenant-cure milestones, BRB issued a Notice of Default and Acceleration dated April 15, 2024, declaring the entire outstanding balance of the indebtedness under the Credit Agreement, as modified by the Forbearance Agreement, to be immediately due and payable.
116.  BRB admits that the outstanding balances at the time of acceleration were as follows:
(a) Term Loan A: Ten Million Six Hundred Twenty-Five Thousand Dollars ($10,625,000), reflecting Seven Hundred Fifty Thousand Dollars ($750,000) in principal reduction attributable to the monthly payments made during the Forbearance Period;
(b) Revolving Credit Facility: Six Million Two Hundred Thousand Dollars ($6,200,000) (no paydown during the Forbearance Period);
(c) Accrued and unpaid interest: Four Hundred Eighty-Seven Thousand Three Hundred Twenty-Two Dollars ($487,322);
(d) Late fees and default interest: One Hundred Forty-Three Thousand Eight Hundred Ninety Dollars ($143,890); and
(e) Total Accelerated Amount: Seventeen Million Four Hundred Fifty-Six Thousand Two Hundred Twelve Dollars ($17,456,212).
117.  BRB admits that it commenced foreclosure proceedings on the Long Island City terminal facility located at 50-22 Borden Avenue, Long Island City, New York 11101, on or about May 20, 2024, in accordance with applicable law and the terms of the Mortgage.
118.  BRB admits that an updated collateral appraisal performed by Ridgeline Appraisal Group, Inc. in September 2023 valued the real property and marine terminal equipment securing the credit facilities at approximately Eleven Million Two Hundred Thousand Dollars ($11,200,000), representing a decline of approximately Seven Million Five Hundred Thousand Dollars ($7,500,000), or approximately 40.1%, from the Eighteen Million Seven Hundred Thousand Dollars ($18,700,000) valuation in the origination appraisal performed in June 2021.
119–125. BRB denies that its acceleration of the indebtedness was improper, undertaken in bad faith, arbitrary, capricious, or constituted a breach of any duty — whether express, implied, contractual, or otherwise — owed to Counterclaim Plaintiffs. BRB states that it exercised its express contractual rights under the Forbearance Agreement following Triton Harbor's failure to satisfy the covenant-cure conditions that were a necessary prerequisite to any further forbearance or modification of the credit facilities.
126–130. BRB denies all remaining allegations in Paragraphs 111 through 130 to the extent not specifically admitted herein.
Response to First Counterclaim: Fraudulent Inducement (Paragraphs 131–155)
131–135. BRB denies that it made any material misrepresentation of existing fact to Counterclaim Plaintiffs in connection with the negotiation, drafting, or execution of the Forbearance Agreement or any related instrument.
136–140. BRB denies that any statements made by Derek Whitmore, Joanna Reeves, or any other employee, officer, agent, or representative of BRB during the September–October 2023 workout negotiations or at any other time constituted fraudulent misrepresentations of material fact, whether by affirmative statement, concealment, or omission.
141–145. BRB denies that it acted with scienter, intent to defraud, or knowledge of the falsity of any statement made to Counterclaim Plaintiffs. BRB denies that any statement attributed to its employees was made with the intent to induce Counterclaim Plaintiffs to enter into the Forbearance Agreement or to pledge additional collateral based on false premises.
146–150. BRB denies that Counterclaim Plaintiffs justifiably or reasonably relied on any alleged oral or written statements that are contradicted by, inconsistent with, or disclaimed by the express terms of the Forbearance Agreement, including, without limitation, Section 9(c) (disclaimer of commitment to extend additional credit) and Section 12(a) (integration and merger clause). BRB states that, under well-established New York law, a party to a comprehensive written agreement containing integration and specific disclaimer provisions cannot sustain a fraud claim based on alleged oral representations that directly contradict the agreement's express terms.
151–155. BRB denies that Counterclaim Plaintiffs suffered any damages proximately caused by any conduct of BRB. BRB denies all remaining allegations of the First Counterclaim to the extent not specifically admitted herein.
Response to Second Counterclaim: Negligent Misrepresentation (Paragraphs 156–170)
156–160. BRB denies that it owed Counterclaim Plaintiffs a special duty of care, a fiduciary duty, or any duty beyond the express terms of the Credit Agreement, the Forbearance Agreement, and the related loan documents. BRB states that the relationship between BRB and Counterclaim Plaintiffs is and at all relevant times was an arm's-length commercial lending relationship, and that under New York law, a commercial lender does not owe a duty to its borrower to provide financial advice or to ensure that the borrower's interests are protected in a workout transaction.
161–165. BRB denies that it made any negligent misrepresentation of material fact to Counterclaim Plaintiffs. BRB denies that any information communicated to Counterclaim Plaintiffs was false, incomplete, or misleading.
166–170. BRB denies that Counterclaim Plaintiffs reasonably relied on any alleged misrepresentations in light of the express disclaimers contained in the Forbearance Agreement and the sophistication of Counterclaim Plaintiffs and their access to independent professional advisors, including Mercer Tidwell & Associates LLC. BRB denies all remaining allegations of the Second Counterclaim to the extent not specifically admitted herein.
Response to Third Counterclaim: Breach of the Implied Covenant of Good Faith and Fair Dealing (Paragraphs 171–185)
171–175. BRB denies that it breached the implied covenant of good faith and fair dealing. BRB states that, under well-established New York law, the implied covenant of good faith and fair dealing cannot be used to create obligations that are inconsistent with or go beyond the express terms of the governing agreement. See, e.g., 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 153 (2002).
176–180. BRB states that its acceleration of the outstanding indebtedness following the expiration of the Forbearance Period and Triton Harbor's failure to achieve the covenant-cure milestones was expressly authorized by the terms of the Forbearance Agreement. BRB's exercise of an express contractual right cannot, as a matter of law, constitute a breach of the implied covenant of good faith and fair dealing.
181–185. BRB denies that it acted in bad faith in exercising its contractual remedies. BRB denies all remaining allegations of the Third Counterclaim to the extent not specifically admitted herein.
Response to Fourth Counterclaim: Rescission (Paragraphs 186–200)
186–190. BRB denies that the Forbearance Agreement, the amended personal guaranty of Marcus J. Kappel, or the new personal guaranty of Elaine D. Kappel were procured through fraud, duress, undue influence, mistake, or any other ground warranting rescission under New York law.
191–195. BRB denies that Counterclaim Plaintiffs are entitled to rescission of the Forbearance Agreement or any instrument executed in connection therewith.
196–200. BRB states that Counterclaim Plaintiffs ratified and affirmed the Forbearance Agreement by performing their obligations thereunder throughout the entire 180-day Forbearance Period, including by making all six monthly debt service payments totaling Seven Hundred Fifty Thousand Dollars ($750,000), by pledging the additional collateral (including the assignment of equipment leases and the mortgage on the Kappel residence at 14 Birchmont Lane, Westport, Connecticut 06880), by paying the $87,500 forbearance fee, and by engaging Mercer Tidwell & Associates LLC and providing monthly financial reporting to BRB as required by the Forbearance Agreement. Under New York law, a party that performs under a contract with knowledge of the facts underlying an alleged ground for rescission is deemed to have ratified the contract and waived the right to seek rescission. BRB denies all remaining allegations of the Fourth Counterclaim to the extent not specifically admitted herein.
Response to Damages Allegations (Paragraphs 201–210)
201–205. BRB denies that Counterclaim Plaintiffs are entitled to compensatory damages of Twelve Million Five Hundred Thousand Dollars ($12,500,000) or in any other amount. BRB denies that any conduct of BRB caused Counterclaim Plaintiffs to suffer any compensable damages.
206–208. BRB denies that Counterclaim Plaintiffs are entitled to punitive damages on any ground whatsoever. BRB states that, under New York law, punitive damages in a fraud action require proof that the defendant's conduct was aimed at the public generally or was so egregious as to constitute a high degree of moral turpitude and wanton dishonesty. See Walker v. Sheldon, 10 N.Y.2d 401, 405 (1961); Rocanova v. Equitable Life Assurance Soc'y of the U.S., 83 N.Y.2d 603, 613 (1994). The Counterclaims allege, at most, a private commercial dispute between a lender and its borrower and guarantors, and the allegations do not approach the threshold required for an award of punitive damages.
209–210. BRB denies all remaining allegations regarding damages to the extent not specifically admitted herein.
AFFIRMATIVE DEFENSES
Without assuming any burden of proof that would not otherwise rest with BRB, and reserving the right to assert additional affirmative defenses as may become appropriate in light of discovery, BRB asserts the following Affirmative Defenses to the Counterclaims:
FIRST AFFIRMATIVE DEFENSE: Integration Clause / Parol Evidence Rule
The Forbearance Agreement contains a comprehensive integration and merger clause at Section 12(a), which provides that the Forbearance Agreement "constitutes the entire agreement between the parties with respect to the subject matter hereof" and "supersedes all prior negotiations, representations, warranties, commitments, offers, contracts, and writings, whether oral or written." Under New York's parol evidence rule, Counterclaim Plaintiffs are barred from introducing extrinsic evidence of alleged prior or contemporaneous oral or written representations to vary, contradict, or supplement the terms of the fully integrated Forbearance Agreement. See W.W.W. Assocs., Inc. v. Giancontieri, 77 N.Y.2d 157, 162 (1990); Schron v. Veltran Sanders LLP, 20 N.Y.3d 430 (2013). All four Counterclaims are barred to the extent they are premised on alleged representations that are contradicted by or inconsistent with the express terms of the Forbearance Agreement, including the disclaimer of commitment to extend additional credit set forth in Section 9(c) thereof.
SECOND AFFIRMATIVE DEFENSE: Disclaimer of Representations / Section 9(c)
Section 9(c) of the Forbearance Agreement expressly provides: "Nothing herein shall constitute or be deemed to constitute a commitment, agreement, or obligation on the part of Lender to extend additional credit, modify existing facilities, or renew any credit facility." Counterclaim Plaintiffs' claims of fraudulent inducement and negligent misrepresentation are premised entirely on alleged oral statements that BRB would extend a new $6,500,000 revolving facility following the forbearance period, which alleged commitment is directly contradicted and disclaimed by Section 9(c). Under New York law, a specific disclaimer of reliance on representations regarding future credit extensions defeats a claim of justifiable reliance as a matter of law, particularly where the disclaimer is negotiated at arm's length between sophisticated commercial parties with access to independent professional advisors. See Danann Realty Corp. v. Harris, 5 N.Y.2d 317 (1959); Ridgeway Capital Markets v. Itochu Int'l, Inc., 308 A.D.2d 232 (1st Dep't 2003).
THIRD AFFIRMATIVE DEFENSE: Sophistication of Borrower / No Justifiable Reliance
Counterclaim Plaintiffs are sophisticated commercial actors who cannot establish justifiable reliance on alleged oral representations that are directly contradicted by the express terms of a written agreement they reviewed, negotiated, and executed with the benefit of independent professional advisors. Marcus J. Kappel is a thirty-year veteran of the marine industrial services industry, the founder and Chief Executive Officer of a company that generated approximately $68,000,000 in annual revenue in fiscal year 2022, and the 72% equity member of Triton Harbor. Elaine D. Kappel serves as the Chief Financial Officer of Triton Harbor and is its 28% equity member. During the workout negotiations, Counterclaim Plaintiffs retained their own restructuring financial advisor, Mercer Tidwell & Associates LLC, under the direction of Raymond Mercer, and thus had independent professional advice throughout. Under the "sophisticated party" doctrine applied by New York courts, Counterclaim Plaintiffs' reliance on alleged oral statements that contradict the integrated written agreement is unjustifiable as a matter of law. See Centro Empresarial Cempresa S.A. v. Stonefield Group, 17 N.Y.3d 269, 278 (2011); HSH Nordbank AG v. Greaves Commerce Bank, 95 A.D.3d 185, 194–95 (1st Dep't 2012).
FOURTH AFFIRMATIVE DEFENSE: Statute of Frauds
To the extent Counterclaim Plaintiffs' claims are premised on an alleged oral commitment by BRB to extend a new $6,500,000 revolving credit facility, such alleged commitment is unenforceable under the statute of frauds. New York General Obligations Law § 5-701(a)(1) requires that an agreement to lend money, or to extend credit, in an amount exceeding $50,000 be in writing and signed by the party to be charged. No written agreement signed by BRB or any authorized representative of BRB committing to extend the alleged new $6,500,000 revolving facility exists. Accordingly, any claim premised on such an alleged oral commitment is barred by the statute of frauds.
FIFTH AFFIRMATIVE DEFENSE: Ratification and Waiver
Counterclaim Plaintiffs ratified the Forbearance Agreement and waived any claims arising from its formation by performing their obligations under the Forbearance Agreement for the entire 180-day Forbearance Period with full knowledge of the facts underlying their present counterclaims. Specifically, Counterclaim Plaintiffs made all six monthly payments totaling $750,000; pledged the additional collateral, including the assignment of equipment leases and the mortgage on the Kappel residence; paid the $87,500 forbearance fee; engaged Mercer Tidwell & Associates LLC as required; and provided monthly financial reporting to BRB — all without objecting to the terms of the Forbearance Agreement or asserting that they had been defrauded or misled. Counterclaim Plaintiffs' performance with knowledge of the facts underlying their counterclaims constitutes ratification and waiver of any claims arising from the negotiation and formation of the Forbearance Agreement and the related guaranty instruments.
SIXTH AFFIRMATIVE DEFENSE: Failure to State a Claim for Punitive Damages
Counterclaim Plaintiffs' demand for punitive damages fails as a matter of law because the Counterclaims allege, at most, a private commercial dispute between a lender and its borrower and guarantors. Under New York law, punitive damages in a fraud action require proof that the defendant's conduct was aimed at the public generally or was so egregious as to constitute a high degree of moral turpitude and wanton dishonesty. See Rocanova v. Equitable Life Assurance Soc'y of the U.S., 83 N.Y.2d 603, 613 (1994). The Counterclaims do not allege, and cannot establish, that BRB's conduct was directed at the public generally. BRB's exercise of its contractual remedies under the Forbearance Agreement, even if the Court were to credit Counterclaim Plaintiffs' allegations (which BRB expressly denies), does not rise to the level of conduct warranting an award of punitive damages.
SEVENTH AFFIRMATIVE DEFENSE: Failure to Plead Fraud with Particularity
To the extent the First Counterclaim (Fraudulent Inducement) fails to plead the circumstances constituting the alleged fraud with the particularity required by CPLR § 3016(b) — including the specific identity of the person making each alleged misrepresentation, the precise words used, the time, place, and manner of each alleged statement, and the basis for alleging that each statement was false when made — such counterclaim fails to satisfy the heightened pleading requirements and should be dismissed on that basis.
EIGHTH AFFIRMATIVE DEFENSE: Failure to Mitigate Damages
Counterclaim Plaintiffs failed to mitigate their alleged damages. Among other things, Counterclaim Plaintiffs failed to cure the covenant defaults within the time period permitted by the Forbearance Agreement, failed to secure alternative financing from other lenders, failed to pursue the renegotiation or replacement of lost contracts, and failed to take commercially reasonable steps to preserve and maximize the value of the collateral securing the credit facilities. Any damages alleged by Counterclaim Plaintiffs, to the extent they exist at all (which is denied), must be reduced by the amount that could have been avoided through the exercise of reasonable diligence and commercially reasonable efforts to mitigate.
NINTH AFFIRMATIVE DEFENSE: Reservation of Additional Defenses
BRB reserves the right to assert additional affirmative defenses as discovery proceeds and additional facts become known, including but not limited to defenses based on estoppel, laches, unclean hands, set-off, recoupment, and any additional defenses that may become apparent upon completion of discovery. BRB's assertion of the affirmative defenses set forth herein shall not be construed as a waiver of any other defense or objection available to BRB at law or in equity.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff/Counterclaim Defendant Belmont Ridge Bank NA respectfully requests that this Court enter judgment:
1.  Dismissing the First Counterclaim (Fraudulent Inducement) asserted by Triton Harbor Industries, LLC, Marcus J. Kappel, and Elaine D. Kappel, in its entirety and with prejudice;
2.  Dismissing the Second Counterclaim (Negligent Misrepresentation) asserted by Triton Harbor Industries, LLC, Marcus J. Kappel, and Elaine D. Kappel, in its entirety and with prejudice;
3.  Dismissing the Third Counterclaim (Breach of the Implied Covenant of Good Faith and Fair Dealing) asserted by Triton Harbor Industries, LLC, Marcus J. Kappel, and Elaine D. Kappel, in its entirety and with prejudice;
4.  Dismissing the Fourth Counterclaim (Rescission) asserted by Triton Harbor Industries, LLC, Marcus J. Kappel, and Elaine D. Kappel, in its entirety and with prejudice;
5.  Striking the demand for punitive damages contained in the Counterclaims;
6.  Awarding BRB its costs and disbursements incurred in defending against the Counterclaims, including reasonable attorneys' fees to the extent permitted by the loan documents and applicable law;
7.  Granting such other and further relief as this Court deems just and proper.
VERIFICATION
STATE OF NEW YORK COUNTY OF NEW YORK ss.:
I, Thomas Hargreaves, being duly sworn, depose and state:
1.  I am a Vice President and Associate General Counsel of Belmont Ridge Bank NA, the Plaintiff/Counterclaim Defendant in the above-captioned action. I am authorized to make this verification on behalf of Belmont Ridge Bank NA.
2.  I have read the foregoing Verified Answer to Counterclaims of Plaintiff/Counterclaim Defendant Belmont Ridge Bank NA and am familiar with the contents thereof.
3.  The statements of fact contained in the foregoing Verified Answer to Counterclaims are true to my knowledge, based upon my review of the books, records, and files of Belmont Ridge Bank NA and upon information provided to me by officers and employees of Belmont Ridge Bank NA who have personal knowledge of the facts and circumstances at issue in this action.
4.  The denials contained in the foregoing Verified Answer to Counterclaims are based upon my review of the books, records, and files of Belmont Ridge Bank NA and upon information and belief formed after reasonable inquiry.
5.  I make this verification pursuant to CPLR § 3020(d)(3), which authorizes verification by an officer of a corporation or other entity that is a party to the action.
________________________________________
Thomas Hargreaves Vice President and Associate General Counsel Belmont Ridge Bank NA 1200 Avenue of the Americas, 38th Floor New York, New York 10036
Date: November 22, 2024
Sworn to and subscribed before me this 22nd day of November, 2024.
________________________________________
Notary Public, State of New York My Commission Expires: ____
ATTORNEY SIGNATURE BLOCK
CALDERWOOD & HARKNESS LLP
By: ________
Linda Osei, Esq. Priya Anand, Esq. Carlos Espinoza, Esq. Hannah Brinkley, Esq.
600 Lexington Avenue, 30th Floor New York, New York 10022 Telephone: (212) 556-8000 Facsimile: (212) 556-8001
Attorneys for Plaintiff/Counterclaim Defendant Belmont Ridge Bank NA
CERTIFICATE OF SERVICE
I, Carlos Espinoza, an attorney duly admitted to practice before the courts of the State of New York, hereby certify that on November 22, 2024, a true and correct copy of the foregoing Verified Answer to Counterclaims of Plaintiff/Counterclaim Defendant Belmont Ridge Bank NA was served upon counsel for Defendants/Counterclaim Plaintiffs Triton Harbor Industries, LLC, Marcus J. Kappel, and Elaine D. Kappel, at the following address, by electronic filing through the New York State Courts Electronic Filing System (NYSCEF) and by email:
Kestrel Voss & Huang LLP Theodore Huang, Esq. Natasha Orlov, Esq. 780 Third Avenue, 24th Floor New York, New York 10017
________________________________________
Carlos Espinoza, Esq. Calderwood & Harkness LLP
Date: November 22, 2024

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK COMMERCIAL DIVISION

BELMONT RIDGE BANK NA,

PRELIMINARY STATEMENT

RESPONSES TO COUNTERCLAIM ALLEGATIONS

AFFIRMATIVE DEFENSES

PRAYER FOR RELIEF

VERIFICATION

ATTORNEY SIGNATURE BLOCK

CALDERWOOD & HARKNESS LLP

CERTIFICATE OF SERVICE

Record

Parties

Dates

Amounts