(Turning two comments into an answer)
The definition of $L(x,\alpha+1)$ was wrong, instead it should have been $$L(x,\alpha+1)\leftrightarrow\bigvee_{n\in\omega}\bigvee_{\varphi}\exists p_1,\ldots,p_n \, \forall y(y\in x\leftrightarrow (L(y,\alpha)\land\varphi(y,p_1,\ldots,p_n)))$$, and as this is not $\Sigma_1$, $\Sigma$-recursion is not applicable with the corrected definition.