Antonucci v. Small Business Administration et al

Filing 19

ORDER. For the reasons set forth in the attached, I grant the defendants' 15 motion for summary judgment. The Clerk is instructed to close this case. Signed by Judge Michael P. Shea on 9/30/2018. (Self, A.)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT

RICHARD ANTONUCCI
Plaintiff,

No. 3:17-CV-01139 (MPS)

v.
SMALL BUSINESS ADMINISTRATION, et. al.
Defendants.

Ruling on Motion to Dismiss and Motion for Summary Judgment
I.

Introduction
Richard Antonucci appeals a decision by the defendant United States Small Business

Administration (“SBA”) regarding a wage garnishment action by defendant United States
Department of Treasury Bureau of the Fiscal Services (“Treasury”). Mr. Antonucci agreed to
guarantee the repayment of a loan in the amount of $430,000.00 for his business. The lender was
the Home Loan Investment Bank, F.S.B. (“HLIB”). The loan was secured by a mortgage on real
property owned by his business. The SBA in turn guaranteed the loan up to an amount of
seventy-five percent of its value. When Mr. Antonucci’s business defaulted on the loan, HLIB
foreclosed upon the property. The property was eventually sold through a private sale. The net
proceeds recovered from that sale did not fully satisfy the delinquent principal and interest on the
loan. As a result, the SBA commenced subsequently its own administrative collection action
against Antonucci by way of an administrative wage garnishment of Mr. Antonucci’s wages.
Mr. Antonucci challenged the garnishment action in an administrative hearing. The
hearing officer ruled against him. He appeals that decision in this lawsuit. Now before me is the
defendants’ motion to dismiss or in the alternative for summary judgment regarding Mr.
Antonucci’s claims against the Treasury and for summary judgment with respect to his claims

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against the SBA.1 (ECF No. 15). For the reasons set forth below, the defendants’ motion is
granted.
II.

Background
A.

SBA Loan and Foreclosure

The following facts, which are taken from the parties’ Local Rule 56(a) Statements and
the exhibits, are undisputed unless otherwise indicated.
“On or about May 21, 2007, the [SBA] approved and authorized a federally guaranteed
small business loan (hereinafter ‘the loan’).” (ECF No. 15-2, Defendants’ Local Rule 56(a)1
Statement (“Def.’s L.R. 56(a)1 Stmt.”) at ¶ 1; ECF No. 17-1, Plaintiff’s Local Rule 56(a)2
Statement (“Pl.’s L.R. 56(a)2 Stmt.”) at ¶ 1.) “The Lender of the loan was [HLIB], and the

I treat the defendants’ motion to dismiss the claims against the Treasury as a motion
for summary judgment. “If, on a motion under Rule 12(b)(6) . . ., matters outside the pleadings
are presented to and not excluded by the court, the motion must be treated as one for summary
judgment under Rule 56.” Fed. R. Civ. P. 12(d). In determining whether to convert a Rule
12(b)(6) motion “into a motion for summary judgment, the essential inquiry is whether the
appellant should reasonably have recognized the possibility that the motion might be converted
into one for summary judgment or was taken by surprise and deprived of a reasonable
opportunity to meet facts outside the pleadings.” Nat'l Ass'n of Pharm. Mfrs., Inc. v. Ayerst
Labs., Div. of/& Am. Home Prod. Corp., 850 F.2d 904, 911 (2d Cir. 1988) (internal quotation
marks and alterations omitted). Here, the defendants have presented matters outside the
pleadings in support of their motion. (See ECF No. 15-3; ECF No. 15-4.) Further, Mr.
Antonucci cannot claim surprise at the conversion of the defendants’ motion to dismiss his
claims against the Treasury into a motion for summary judgment given that: (1) the defendants’
motion requested summary judgment as an alternative remedy; (2) the motion to dismiss
concerns the exact same set of facts as the motion for summary judgment—i.e., the hearing
officer’s decision; and (3) both parties submitted Local Rule 56 Statements agreeing as to the
material facts (see Def.’s L.R. 56(a)1 Stmt. at ¶¶ 1-21; Pl.’s L.R. 56(a)1 Stmt. at ¶ 1-21
(admitting these factual allegations). See Zynger v. Dep't of Homeland Sec., 615 F. Supp. 2d 50,
58 (E.D.N.Y. 2009) (concluding plaintiff had sufficient notice of possibility that defendants’
motion to dismiss would be construed as motion for summary judgment given that defendants’
motion requested summary judgment as an alternative form of relief and included a Local Rule
56.1 statement with its opening papers). Further, the defendants posted the administrative record
on the docket (ECF No. 14), which “has been certified as true and accurate by [the hearing
officer].” (Id.). The plaintiff does not dispute the administrative record.
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Borrower was Robrich Associates, LLC” (“Robrich”). (Id.) Robrich’s “Operating Company and
co-borrower was Annexed Used Cars, Inc.” (Id.) The loan from HLIB “was in the original
principal amount of $430,000, and the SBA guaranteed 75% of that principal loan amount.”
(Id.) The loan was secured by a “Promissory Note, an Unconditional Guarantee and a Standby
Creditor’s Agreement,” all of which were signed by Mr. Antonucci. (Def.’s L.R. 56(a)1 Stmt. at
¶¶ 2.)2 The guarantee agreement provided as follows with respect to Mr. Antonucci’s
obligations under the loan:
Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note. This Guarantee remains in effect until the Note is paid in full.
Guarantor must pay all amounts due under the Note when Lender makes written
demand upon Guarantor. Lender is not required to seek payment from any other
source before demanding payment from Guarantor.
(ECF No. 14, Administrative Record (“AR”) at 46.) HLIB declared the loan in default on April
1, 2008. (Def.’s L.R. 56(a)1 Stmt. at ¶ 6.)
“On August 21, 2009, [HLIB] commenced a foreclosure action against [Robrich] in the
State of Connecticut Superior Court” concerning the property that secured the loan. (Def.’s L.R.
56(a)1 Stmt. at ¶ 7; ECF No. 15-3 at 3 (case docket).). On December 11, 2009, HLIB filed a
motion for judgment, and the Connecticut Superior Court entered a Judgment of Strict
Foreclosure ten days later. (Def.’s L.R. Stmt. at ¶ 8; ECF No. 15-3 at 3) “The Judgment of
Strict Foreclosure set a law day of February 22, 2010, at which time each equity owner would
have an opportunity to redeem their respective interest in the subject property on successive
days.” (Def.’s L.R. Stmt. at ¶ 8.) On February 23, 2010, Robrich “filed a Chapter 11 bankruptcy

Mr. Antonucci admits paragraphs one through twenty-one of the defendants’ Local
Rule 56(a) Statement. (See Pl.’s L.R. 56(a)2 Stmt. at ¶¶ 1 to 21 (“The Plaintiff Admits
Paragraph 1[] through 21[] of the Defendants’ Local Rule 56(a)(1) Statement . . . .”).) I therefore
cite only the defendants’ Local Rule 56(a) Statement when relying upon those factual assertions.
2

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petition,” which “temporarily stayed the foreclosure action.” (Def.’s L.R. Stmt. at ¶ 9.) HLIB
“filed a motion to reset law days, and a second Judgment of Strict foreclosure was entered by the
Connecticut Superior Court on June 15, 2010.” (Def.’s L.R. 56(a)1 Stmt. at ¶ 10.)
“Over the next two years, from August, 2010 through June, 2012 the parties in the
foreclosure action engaged in a motion practice whereby [HLIB] would obtain successive
Judgments of Strict Foreclosure, and [Robrich] would file and be granted successive Motions to
Open Judgment and Extend Law Day.” (Def.’s L.R. 56(a)1 Stmt. at ¶ 11.) On April 6, 2012,
HLIB “assigned to ‘147 & 157 Main Street, New Haven, LLC’ a mortgage given by [Robrich] to
secure the loan. The mortgage was dated June 15, 2007—coinciding with the execution dates of
the Promissory Note, the Unconditional Guarantee and a Standby Creditor’s Agreement.”
(Def.’s L.R. 56(a)1 Stmt. at ¶ 12.) On May 14, 2012, HLIB “successfully moved to substitute
‘147 & 157 Main Street, New Haven, LLC’ as the plaintiff in the foreclosure action.” (Def.’s
L.R. 56(a)1 Stmt. at ¶ 13) On September 7, 2012, 147 & 157 Main Street, New Haven LLC
(“147 Main Street”) “conveyed title to the subject property to a third party, Annex Management,
LLC, in consideration of a payment in the amount of” $275,000.3 (Def.’s L.R. 56(a)1 Stmt. at ¶
14.) “On September 24, 2012, [147 Main Street] filed [a] Motion for Deficiency Judgment in
Connecticut Superior Court against [Robrich]. The Motion for Deficiency Judgment was the last
entry on the Connecticut Superior Court’s docket sheet.” (Def.’s L.R. 56(a)1 Stmt. at ¶ 15.)
B.

SBA Collection Action and Subsequent Appeal

The defendants’ Local Rule 56(a) Statement lists the amount as $225,000. (See Def.’s
L.R. 56(a)1 Stmt. at ¶ 14 (citing AR at 71-72).) The administrative record page they cite,
however, demonstrates that the full amount of consideration provided for the property was
$275,000. (See AR at 71.)
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“SBA’s records show that the net proceeds recovered from the sale of the subject
property to Annex Management, LLC totaled $223,420.000, which were applied to the principal
portion of the loan on September 11,” 2012.4 (Def.’s L.R. 56(a)1 Stmt. at ¶ 16.) “By letter dated
January 13, 2016, the [Treasury] provided notice to Antonucci that the SBA had submitted his
debt owed to SBA to Treasury to pursue an administrative wage garnishment against
Antonucci’s wages.” (Def.’s L.R. 56(a)1 Stmt. at ¶ 17.) On February 1, 2016, “Antonucci
executed a Hearing Request and returned it to Treasury.” (Def.’s L.R. 56(a)1 Stmt. at ¶ 18.) In a
subsequent letter to Treasury, “Antonucci raised two issues, the first concerning the calculation
of the amount owed; and second, that no deficiency judgment was rendered in the underlying
foreclosure case and the statues [sic] has expired as to all State and Federal Statutes to enforce
the guaranty.” (Def.’s L.R. 56(a)1 Stmt. at ¶ 20 (internal quotation marks and alterations
omitted).)
The Hearing Officer issued her decision on June 5, 2017. (See Def.’s L.R. 56(a)1 Stmt.
at ¶ 225; ECF No. 14-5, Hearing Officer’s Decision (“Decision”) at 14.) “The Decision found

The defendants’ Local Rule 56(a) Statement avers that the $223,420.00 was applied to
Mr. Antonucci’s balance on September 11, 2015. (See Def.’s L.R. 56(a)1 Stmt. at ¶ 16 (citing
AR at 54, 119).) The administrative record page they cite in support of that proposition,
however, states that the $223,400 was applied to Mr. Antonucci’s balance on September 11,
2012. (See AR at 54, 119.)
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Although Mr. Antonucci does not admit the defendants’ subsequent allegations, he also
does not deny them. (See Pl.’s L.R. 56(a)2 Stmt. at ¶¶ 22-30 (listing alleged disputed issues of
material fact).) I therefore deem these facts admitted. See D. Conn. L. R. 56(a)(3) (“[E]ach
denial in an opponent’s Local Rule 56(a)2 Statement . . . must be followed by a specific citation
to (1) the affidavit of a witness competent to testify as to the facts at trial, or (2) other evidence
that would be admissible at trial. . . . Failure to provide specific citations to evidence in the
record as required by this Local Rule may result in the Court deeming admitted certain facts that
are supported by the evidence in accordance with Local Rule 56(a)1 . . . .”). In any event, the
defendants’ recounting of the hearing officers’ decision is borne out by the administrative record,
as I note in my citations to her decision throughout this paragraph.
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that Antonucci’s debt to SBA was enforceable by the SBA, and that the administrative wage
garnishment action could proceed.” (Def.’s L.R. 56(a)1 Stmt. at ¶ 22; Decision at 14). “The
Decision addressed Antonucci’s claim that the debt was unenforceable due to the lack of a
deficiency judgment,” noting that “‘the failure of a lender to obtain a deficiency judgment
against the borrower does not prevent the lender from thereafter pursuing other loan obligors,
such as guarantors, for the balance due.’” (Def.’s L.R. 56(a)1 Stmt. at ¶ 22 (quoting Decision at
5).) “The Decision also distinguished Antonucci as a guarantor, finding that guarantors such as
Antonucci are not proper parties to a claim seeking the foreclosure of a mortgage and their
obligations are not limited by the extinguishment of the mortgagor’s rights and obligations.”
(Def.’s L.R. 56(a)1 Stmt. at ¶ 22 (internal quotation marks omitted); Decision at 7-8). The
Decision concluded that “[t]herefore, the guarantors could not be parties to the foreclosure as
required by [Conn. Gen. Stat.] S 49-1.” (Def.’s L.R. 56(a)1 Stmt. at ¶ 22 (internal quotation
marks omitted); Decision at 11.). “The Decision also addressed Antonucci’s general claim that a
state or federal statute of limitation barred administrative collection,” noting that “‘the instant
federal administrative wage garnishment proceeding is not-time barred by any statute of
limitations.’” (Def.’s L.R. 56(a)1 Stmt. at ¶ 22 (quoting Decision at 12).) Finally, the Hearing
Officer “reviewed the debt calculation of Antonucci’s debt,” and “found that the application of
Antonucci’s payments ‘appears to be consistent with the terms of the Notice and Debtor has not
provided any reason or evidence from which to conclude that payments should have been applied
differently . . .’” (Def.’s L.R. 56(a)1 Stmt. at ¶ 22 (quoting Decision at 12).)
Mr. Antonucci appealed the hearing officer’s decision on June 10, 2017. (ECF No. 1.)
The defendants filed the certified administrative record on the docket on February 8, 2018. (ECF

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No. 14.) Mr. Antonucci does not contest the accuracy of the administrative record filed on the
docket in any of his papers.
C.

Plaintiff’s Complaint

Mr. Antonucci’s complaint alleges that the Hearing Officer’s “finding is in error and not
based on the facts and evidence provided.” (ECF No. 1 (“Complaint”) at ¶ 14.) In particular, he
claims that the Hearing Officer erred in declining to credit towards his obligation under the loan
the value of the property set by the Connecticut Superior Court during foreclosure proceedings—
$350,000—, as opposed to “the amount that the property was ultimately sold for post judgment.”
(Id. at ¶ 16.) Mr. Antonucci also contends “that upon foreclosure, the SBA or its
predecessor/Assignor, failed to seek a deficiency judgment for any balance[] owed in the
foreclosure action” and that, as a result, “the Plaintiff was not given the opportunity to argue the
balance due on the debt, if any, after title to the property was transferred.” (Id. at ¶ 18.) Finally,
Mr. Antonucci “alleges that the SBA failed to provide any notice regarding outstanding balance
(sic) due upon the Plaintiff (sic) in order to provide Plaintiff the opportunity to contest the debt
and alleged costs and interest until the Plaintiff was notified by the [Treasury] on or about
January 13, 2016 of its intent to initiate Administrative Wage Garnishment Proceedings.” (Id. at
¶ 19.)
II.

Legal Standards
A. Summary Judgment
Summary judgment is appropriate only when the moving party “shows that there is no

genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). “In making that determination, a court must view the evidence in the light
most favorable to the opposing party.” Tolan v. Cotton, 134 S.Ct. 1861, 1866 (2014) (internal

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quotation marks omitted). “A fact is material if the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.” McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184,
202 (2d Cir. 2007) (internal quotation marks omitted). The moving party bears the burden “of
showing that no genuine factual dispute exists . . . , and in assessing the record to determine
whether there is a genuine issue as to any material fact, the court is required to resolve all
ambiguities and draw all factual inferences” in favor of the non-moving party. Cronin v. Aetna
Life Ins. Co., 46 F.3d 196, 203 (2d Cir. 1995). “Once a party moves for summary judgment, in
order to avoid the granting of the motion, the non-movant must come forward with specific facts
showing that a genuine issue for trial exists.” Jackson v. Nassau Cty. Bd. of Sup'rs, 818 F. Supp.
509, 530 (E.D.N.Y. 1993). The non-moving party may not rely on the allegations of the complaint;
he must point to admissible evidence warranting a trial. See Ying Jing Gan v. City of New York,
996 F.2d 522, 533 (2d Cir. 1993) (noting that a non-moving party may not rely “upon the mere
allegations . . . [of his] pleading”). Finally, the “submissions of a pro se litigant must be construed
liberally and interpreted to raise the strongest arguments they suggest.” Triestman v. Fed. Bureau
of Prisons, 470 F.3d 471, 474 (2d Cir. 2006) (internal quotation marks omitted).
The defendants failed to provide Mr. Antonucci with a “Notice to Self-Represented
Litigant Concerning Motion for Summary Judgment,” as required by this Court’s Local Rules.
(See D. Conn. L.R. 56(b).) They instead provided only a “Notice to Self-Represented Litigant
Concerning Motion to Dismiss.” (See ECF No. 16.) The Second Circuit has held that “[a] district
court must advise a pro se litigant as to the nature of summary judgment unless the moving party
has provided the litigant with the requisite notice or the record makes clear that the litigant
understood the nature and consequences of summary judgment.” United States v. U.S. Currency
in the Sum of $9,100, 18 F. App'x 47, 49 (2d Cir. 2001). The Second Circuit has reversed numerous

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district court decisions in which it concluded that this requirement was not satisfied. See, e.g., id.;
Vital v. Interfaith Med. Ctr., 168 F.3d 615, 621 (2d Cir. 1999). Nonetheless, the Second Circuit
has also held that this principle “should not be understood . . . to set down an unyielding rule
prohibiting district courts from acting upon motions for summary judgment sought against pro se
litigants in the absence of explanatory notice.” Sawyer v. Am. Fed'n of Gov't Employees, AFLCIO, 180 F.3d 31, 35 (2d Cir. 1999). Rather, “the issue in each case remains whether from all of
the circumstances, including the papers filed by the pro se litigant, it is reasonably apparent that
the litigant understood the nature of the adversary’s summary judgment motion and the
consequences of not properly opposing it.” Id.
Here, there is ample evidence that Mr. Antonucci “understood the nature of the
[defendants’] summary judgment motion and the consequences of not properly opposing it.” First,
he filed an opposition to the defendants’ motion, along with his own Local Rule 56(a) Statement
admitting various portions of the defendants’ Local Rule 56(a) Statement. (See Pl.’s L.R. 56(a)2
Stmt. at ¶¶ 1-21.) Second, as noted previously, the defendants have filed a certified copy of the
administrative record on the docket. (See ECF No. 14.) Since this is an administrative appeal, the
merits of the defendants’ motion will turn upon that record. See 5 U.S.C. § 706 (noting that in
reviewing an agency decision under the Administrative Procedure Act, a “court shall review the
whole record or those parts of it cited by a party”). Thus, Mr. Antonucci was not prejudiced by
any lack of opportunity to buttress the summary judgment record. Finally, Mr. Antonucci does
not appear to dispute any portion of the administrative record. Thus, given that his appeal rests
upon that record, he does not raise any genuine issues of material fact in opposing the defendants’
motion. As such, I conclude that the record demonstrates that Mr. Antonucci understood his

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burden in opposing the defendants’ summary judgment motion and that, in any event, the posting
of the uncontested administrative record nullifies any potential prejudice to him.
B. Review of Agency Decision
The Administrative Procedure Act, 5 U.S.C. § 701 et seq. (“APA”), provides a reviewing
court with the power to “hold unlawful and set aside agency action, findings, and conclusions
found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with
law . . . .” 5 U.S.C. § 706(2)(A). “The scope of review under the ‘arbitrary and capricious’
standard is narrow and a court is not to substitute its judgment for that of the agency.” Motor
Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). “A
reviewing court may not itself weigh the evidence or substitute its judgment for that of the
agency.” Islander E. Pipeline Co., LLC v. McCarthy, 525 F.3d 141, 150 (2d Cir. 2008). Instead,
“in deciding whether agency action is arbitrary and capricious, a court considers whether the
agency ‘relied on factors which Congress has not intended it to consider, entirely failed to
consider an important aspect of the problem, offered an explanation for its decision that runs
counter to the evidence before the agency, or is so implausible that it could not be ascribed to a
difference in view or the product of agency expertise.’” Id. (quoting State Farm, 463 U.S. at 43).
IV.

Discussion
A.

Challenge to the SBA’s Decision

Mr. Antonucci makes three arguments in his opposition to the SBA’s motion for
summary judgment: (1) that the Hearing Office erred in applying the amount the property sold
for rather than the valuation of his property from the foreclosure proceeding against his
outstanding balance under the loan; (2) that the Hearing Officer should have at least credited the
full amount the property sold for against the balance of the loan, rather than that amount less the

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cost of sale; and (3) that because the SBA was entitled only to the portion of the loan it
guaranteed—i.e., seventy-five percent of the full loan balance—, and because that portion
amounted to less than the valuation of the property in the foreclosure proceeding, he owes
nothing. (See Generally ECF No. 17.) He also made an argument in his complaint that the SBA
failed to provide him “any notice regarding” his outstanding balance before referring his case to
the Treasury for wage garnishment. (See Complaint at ¶ 19.) While Mr. Antonucci does not
mention this argument in his opposition to the defendants’ motion for summary judgment, I will
nonetheless analyze it in my ruling given his pro se status. I address each of Mr. Antonucci’s
contentions in turn.
1.

Superior Court’s Valuation of the Property

Mr. Antonucci argues that the Hearing Officer erred in crediting him only for the net
proceeds of the sale of his property rather than the property’s value as set by the Superior Court
during the foreclosure proceeding. (See id. at 5; AR at 84 (Superior Court document dated
December 21, 2009 granting strict foreclosure of property and finding property value to be
$350,000.00).) He makes three interlocking arguments in support of this contention: (1) the
property was foreclosed upon and transferred to 147 Main Street after being valued at $350,000
by the Connecticut Superior Court; (2) 147 Main Street did not obtain a deficiency judgment
against Robrich before selling the property; and (3) the Rooker-Feldman doctrine fortifies these
claims. (ECF No. 17 at 5-12.)
The hearing officer addressed the second of these contentions at length in her decision.
In response to Mr. Antonucci’s contention regarding the lack of a deficiency judgment, she noted
that “the failure of a lender to obtain a deficiency judgment against the borrower does not
prevent the lender from thereafter pursuing other loan obligors, such as guarantors, for the

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balance due.” (See Decision at 5 (citing JP Morgan Chase Bank, N.A. v. Winthrop Props, LLC,
312 Conn. 662 (2014).) She then quoted the Connecticut Supreme court’s decision in JP
Morgan at length and, in particular, emphasized the following language used by the JP Morgan
court: “Due to the separate and distinct liability of a guarantor, courts generally have recognized
that, in the absence of a statute expressly pertaining to guarantors, such secondary obligors are
not proper parties to a claim seeking the foreclosure of a mortgage and their obligations are not
limited by the extinguishment of the mortgagor’s rights and obligations.” (Decision at 7-8
(emphasis deleted) (quoting JP Morgan, 312 Conn. at 677).) The Hearing Officer then noted as
follows with respect to Mr. Antonucci’s obligations:
In the instant matter, the hearing record reflects that [HLIB] initiated a strict
foreclosure action in the Superior Court of Connecticut, Judicial District for New
Haven. There is no indication from the documents in the hearing record that a
deficiency judgment was entered. If [Mr. Antonucci] had been the borrower of the
Loan—and thus obligated to repay the Loan solely based upon the promissory
note—the lack of a deficiency judgment would preclude further collection from
[Mr. Antonucci] personally for the amounts remaining due on the Loan after the
strict foreclosure and sale of the property. However, because [Mr. Antonucci] was
and still is a guarantor of the Loan pursuant to an Unconditional Guarantee, under
applicable Connecticut law, recovery may be sought from [Mr. Antonucci] for the
balance of the Loan.
(Decision at 11.) The Hearing Officer’s reasoning was on point. “When payment of a
promissory note secured by a mortgage is further protected by a separate guarantee, . . . the
mortgagee may pursue a claim against the guarantors to recover any of the unpaid debt of the
mortgagor.” JP Morgan, 312 Conn. at 675. As noted above, a guarantor’s “obligations are not
limited by the extinguishment of the mortgagor’s rights and obligations.” Id. at 677. Thus
HLIB’s failure to attain a deficiency judgment against Robrich, the borrower on the Loan, does
not affect its ability to recoup the outstanding balance of the loan from him as the guarantor on
the Loan. When HLIB sold the property for the amount listed above, it decreased the

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outstanding loan balance by the amount of funds recouped from the sale.6 (See AR at 119
(transcript of loan account crediting payment of $223,420.00 to the loan principal).) As the
guarantor on the loan, Mr. Antonucci was not entitled to offset his obligation by the Superior
Court’s valuation of the property in the foreclosure proceeding. Rather, he was entitled to the
benefit of the proceeds attained from the sale of the property, because those proceeds reduced the
balance on the debt he had guaranteed. See F.D.I.C. v. Fonte, 48 Conn. App. 531, 543, 712 A.2d
416, 422 (1998) (”In calculating a deficiency judgment, a mortgagor is not entitled to a credit for
the fair market value of the property sold, but, rather, is entitled to a credit for the amount of the
sale proceeds.”). His challenge on this issue is therefore without merit.7
2.

Amount Applied to Loan Balance

Mr. Antonucci also argues that the hearing officer erred in concluding that the SBA’s
application of $223,420.00 to the loan balance was proper when the property sold for $275,000.
The hearing officer explained her decision on this issue:

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At some point in time, the SBA purchased the loan from HLIB—giving it a basis to
bring the wage garnishment action underlying this case. (ECF No. 1 at 8 (Hearing officer’s
decision noting that “[t]he Loan was referred to SBA, and which referred it to the [Treasury] . . .
for collection . . . .”).) In their Local Rule 56(a) Statement, the defendants note that “no exact
date is provided” regarding when the loan was purchased by the SBA. (See Def.’s L.R. Stmt. at
¶ 2, n. 3.) They do note, however, that “SBA’s records indicate an initial ‘transaction date’ of
February 17, 2009, as to when SBA ‘purchased’ the Annexed Used Cars, Inc. account.” (Id.
(citing AR at 54, 119).) This does not appear to be the date of the SBA’s purchase of the loan,
however, as HLIB commenced foreclosure proceedings against Mr. Antonucci under the loan
after that date. In any event, Mr. Antonucci does not contest that the SBA purchased the loan at
some point in time before the garnishment action in this case.
Mr. Antonucci’s invocation of the Rooker-Feldman doctrine (see ECF No. 17 at 8)
does not change this conclusion. Under the Rooker-Feldman doctrine, a federal district court
does not possess the authority to reverse a state court judgment. Exxon Mobil Corp. v. Saudi
Basic Industries Corp., 544 U.S. 280, 284 (2005) (internal quotation marks omitted). Since Mr.
Antonucci is not challenging the state court’s judgment—and because that judgment relates to an
obligation distinct from his obligation as guarantor—the doctrine is inapplicable.
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The applied sale proceeds, in the amount of $223,430.00, were applied to the
principal balance of the loan; the amount of these proceeds is less than the gross
sales . . . price of $275,000.00, as the applied amount reflects the net sales proceeds
(i.e., the gross sales price less the cost of sale) less other expenses relating to the
foreclosure and sales process.
(Decision at 12-13 (some emphases added).) Mr. Antonucci does not point to any evidence
contradicting the hearing officer’s conclusion in this regard or even argue that the SBA
fabricated its expenses relating to the foreclosure and sales process. In any event, the figures
cited by the hearing officer find support in the administrative record. (See AR at 54 (noting a
payment toward the principal loan balance of $223,420.00; AR at 4 (noting property was sold for
$275,000).) He also fails to present any reason why the SBA would be barred from deducting
the costs of the sales process from the amount credited to the loan balance, and I note that
Connecticut law endorses this calculation. Fonte, 48 Conn. App. at 543 (“The defendant is not
entitled to have the entire sale price applied to reduce the debt. Rather, in arriving at the sale
proceeds to be applied, the court determines and allows for the expenses incurred in connection
with the sale.”). As such, I conclude that Mr. Antonucci has failed to raise a genuine dispute of
material fact concerning whether the hearing officer’s rejection of this argument was arbitrary
and capricious.
3.

Amount of Loan Recoupable by SBA

Mr. Antonucci also contends that the SBA was obligated to guarantee only seventy-five
percent of the loan value, and that seventy-five percent of the loan value is less than the
$350,000 valuation of the collateral property—thereby resulting in the full satisfaction of his
debt to the SBA. (See ECF No. 17 at 11.) The hearing officer addressed this contention at
length in her decision. She noted that “the SBA guarantee on the Loan balance . . . has no impact
on the Loan balance or on [Mr. Antonucci’s] liability under the Unconditional Guarantee.”

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(Decision at 13.) Rather, she concluded that “[t]he guarantee is . . . an agreement between SBA
and the lender relating to SBA authorizing the extension of the loan and repurchasing the
outstanding balance of the loan under certain circumstances.” (See id. (citing 13 C.F.R. §
120.2(a)(2) (“If SBA agrees to guarantee (authorizes) a portion of the loan, the Lender funds and
services the loan. If the small business defaults on the loan, SBA’s guarantee requires SBA to
purchase its portion of the outstanding balance, upon demand by the Lender and subject to
certain conditions.”)).) On this basis, the hearing officer concluded that the SBA guarantee
merely “shifts the burden of final collection and loss on a defaulted loan from the lender to SBA,
and does not alter the outstanding loan balance that may be collected from borrowers or
guarantors.” (Id. (citing BancOhio Nat. Bank v. Small Bus. Admin., 820 F.2d 405, 1987 WL
37611 at *2 (6th Cir. 1987) (“Pursuant to the terms of the agreement between BancOhio and the
SBA, if SBA purchases a loan they then stand in the shoes of the bank with all the security and
guarantee provided running to them.”).)
Mr. Antonucci has failed to present any flaws in the Hearing Officer’s analysis of this
issue. The SBA guaranteed a portion of the loan provided by HLIB. See 13 C.F.R. §
120.2(a)(1)(iii) (permitting SBA to provide a “guarantee loan . . . by which SBA guarantees a
portion of a loan made by a Lender”). As the hearing officer noted, the “SBA’s guarantee
requires [the] SBA to purchase its portion of the outstanding balance” in the event of a default by
the borrower. See 13 C.F.R. § 120.2(a)(2). The applicable regulations lay out the SBA’s
obligations in the event of a default:
(1) . . . A Lender may demand in writing that SBA honor its guarantee if the
Borrower is in default on any installment for more than 60 calendar days (or less if
SBA agrees) and the default has not been cured, provided all business personal
property securing the defaulted SBA loan has been liquidated. A Lender may also
submit a request for purchase of a defaulted 7(a) loan when a Borrower files for
federal bankruptcy once a period of at least 60 days has elapsed since the last full

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installment payment. If a Borrower cures a default before a Lender requests
purchase by SBA, the Lender's right to request purchase on that default lapses. SBA
considers liquidation of business personal property collateral to be completed when
a Lender has exhausted all prudent and commercially reasonable efforts to collect
upon these assets. In addition, SBA, in its sole discretion, may purchase the
guaranteed portion of a loan at any time whether in default or not, with or without
the request from a Lender.
13 C.F.R. § 120.520(a)(1). As this provision demonstrates, “the SBA does not act as a surety or
guarantor for [a] small business borrower.” Rooster's Grill, Inc. v. Peoples Bank, 965 F. Supp.
2d 770, 774 (S.D. Miss. 2013); (see also AR at 48 (Guarantee signed by Mr. Antonucci stating
that “Guarantor’s liability will continue even if SBA pays lender.”).) Instead, the SBA acts as an
extra assurance to the lender in the event of a default. Should the borrower default and the other
conditions listed above be met, the SBA is on the hook to the lender for its guaranteed portion of
the loan.
Once the SBA purchases an outstanding loan, it stands in the shoes of the original lender
and may recoup the balance of the loan owed by the borrower. See BancOhio Nat. Bank, 1987
WL 37611 at *2 (“[I]f SBA purchases a loan they then stand in the shoes of the bank with all the
security and guarantees originally provided running to them.”); Rooster's Grill, Inc. v. Peoples
Bank, 965 F. Supp. 2d 770, 774 (S.D. Miss. 2013) (“An SBA guarantee does not release the
borrower from its indebtedness; it simply changes who enforces the debt.”); Wells Fargo Bank,
N.A., v. Peirce, No. 4:16-CV-98, 2016 WL 4734634, at *9 (S.D. Tex. Aug. 12, 2016), report and
recommendation adopted, No. 4:16-CV-98, 2016 WL 4733162 (S.D. Tex. Sept. 7, 2016) (noting
that should SBA “fulfill its loan guarantee to [the lender], then the SBA would be entitled to
pursue the [borrowers] for the debt”). This principle aligns with the purposes of the SBA’s loan
program. “[T]he SBA’s loan guarantee program is meant to protect lenders from the risk of

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default, not to indemnify borrowers.” Regions Bank v. Gator Equip. Rentals, LLC, No. CV 155084, 2016 WL 4429947, at *4 (E.D. La. Aug. 22, 2016).
In any event, as already shown above, Mr. Antonucci’s argument that the amount he
owes should be reduced by the $350,000 valuation of the property finds no support in the law or
the facts here.
Finally, as also noted above, Mr. Antonucci does not argue in his objection that he is
entitled to a reduction of his debt to the Treasury based upon the SBA’s guarantee of only
seventy-five percent of the loan. Indeed, he did not make that argument in his initial objection to
the Treasury’s first garnishment notice. (See AR at 13 (garnishment notice signed by Mr.
Antonucci noting an objection to the “[e]xistence of the debt – I do not owe the debt” and not
noting any objection to the “[a]mount of the debt”).) Rather, he argues that he “does not owe
[the] SBA a debt since [HLIB] took title to the collateral and did not obtain a deficiency
judgment.” (ECF No. 17 at 11.) This argument misses the mark for the reasons stated above.
HLIB’s failure to obtain a deficiency judgment against Mr. Antonucci does not affect his
obligations under the loan as a guarantor.
I therefore conclude that Mr. Antonucci has failed to establish that the hearing officer’s
conclusion on this issue was arbitrary and capricious.
4.

Notice

Mr. Antonucci also contends in his complaint (but not in his objection to the motion for
summary judgment) that the “SBA failed to provide any notice regarding [the] outstanding
balance due [on his loan]” before referring the loan to the Treasury, thereby divesting him of
“the opportunity to contest the debt and alleged costs and interest” before then. (Complaint at ¶
19.) The hearing officer addressed this contention in her decision, noting as follows:

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Pursuant to 13 C.F.R. § 140.11(e), written notice must be provided to a debtor’s
last known address at least thirty days before initiating garnishment and advise
regarding the type and amount of the debt; the intent to collect the debt; and the
debtor’s rights—including the right to request a hearing before a hearing official.
The Notice sent to [Mr. Antonucci] conforms to these requirements. In that regard,
after the Notice was sent, [Mr. Antonucci] submitted a hearing request thereby
prompting the instant written records hearing . . . . [Mr. Antonucci] submitted
additional supporting documentation on November 18, 2016.
(Decision at 4.) The administrative record supports the hearing officer’s conclusion. Mr.
Antonucci was notified of the Treasury’s wage garnishment action on January 13, 2016. (AR at
13-14.) The notice provided Mr. Antonucci with the amount of his debt, instructions on how to
request a hearing contesting his debt, and a checklist form for objections to the debt. (Id.) As
noted above, Mr. Antonucci checked off a box noting that he contested the “[e]xistence of the
debt.” (Id. at 13.) He provided a statement in support of this objection with the notice. (Id. at
15.) Further, Mr. Antonucci eventually submitted a hearing request contesting the garnishment
action. (See id. at 1 (SBA letter to Mr. Antonucci dated October 28, 2016 noting that it had
received his hearing request).) Since Mr. Antonucci does not provide any indication of exactly
what sort of notice was lacking in his case and evidently used every right at his disposal to
contest the garnishment action, I conclude that the hearing officer’s determination that he
received adequate notice was not arbitrary and capricious.
I therefore conclude that Mr. Antonucci has failed to establish a genuine dispute of
material fact regarding whether the hearing officer’s decision on this issue was arbitrary and
capricious. I therefore grant the defendants’ motion for summary judgment with respect to the
SBA. Further, since Mr. Antonucci’s claims against the Treasury rest upon the same objections
to the hearing officer’s decision (see ECF No. 17 at 4-5 (“The action against the Treasury is
based on an appeal from a final agency decision for purposes of judicial review under the

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[APA].”), I grant the defendants’ motion for summary judgment with respect to the claims
against the treasury as well.
V.

Conclusion
For the reasons set forth above, I grant the defendants’ [15] motion for summary

judgment. The Clerk is instructed to close this case.

IT IS SO ORDERED.
/s/
Michael P. Shea, U.S.D.J.

Dated:

Hartford, Connecticut
September 30, 2018

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