PATCH OF LAND LENDING, LLC v. SARANNA HOLDINGS, LLC et al

Filing 20

OPINION. Signed by Judge Madeline Cox Arleo on 12/21/17. (DD, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

PATCH OF LAND LENDING, LLC,
Plaintiff,

Civil Action No. 17-0944

v.

OPINION

SARANNA HOLDINGS, LIMITED
LIABILITY COMPANY, a New Jersey
limited liability company; SAJJAD A.
KHAN, aka FAJJAD A. KHAN, aka
SAAJAD KHAN, aka SAJJAD KHAN, aka
SAJJAD A. KHAN, aka SAJJAD AHSAN
KHAN, aka SAJJAD R. KHAN, aka
SAJJAD KHANAM, aka KHAN SAJJAD;
TTLBL, LLC; UNKNOWN OWNERS;
NON-RECORD LIEN CLAIMANTS; and
“JOHN DOE”, “JANE DOE” and “DOE
CORP.” of 71.5 VIRGINIA AVENUE,
JERSEY CITY, NEW JERSEY 07304.
Defendants.

ARLEO, UNITED STATES DISTRICT JUDGE
THIS MATTER comes before the Court on Plaintiff Patch of Land Lending, LLC’s
(“POL Lending” or “Plaintiff”) motion for default judgment against Defendants Saranna
Holdings, Limited Liability Company, and Sajjad A. Khan aka Fajjad A. Khan, aka Saajad Khan,
aka Sajjad Khan, aka Sajjad A. Khan, aka Sajjad Ahsan Khan, aka Sajjad R. Khan, aka Sajjad
Khanam, aka Khan Sajjad (together, “Defendants”) pursuant to Federal Rule of Civil Procedure
55(b)(2). ECF Nos. 17, 18. For the reasons set forth herein, the motions are GRANTED.
I.

BACKGROUND
Plaintiff Patch of Land Lending, LLC (“POL Lending”), is a Delaware limited liability
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company composed of a sole member, Patch of Land, Inc. (“POL”), a Delaware corporation.
Compl. ¶ 1, ECF No. 1. Defendant Saranna Holdings is a New Jersey limited liability company.
Id. ¶ 2. Defendant Sajjad A. Khan is a citizen of New York and the sole member of Saranna
Holdings. Id. ¶ 2-3.
On February 4, 2015, Saranna Holdings executed a promissory note (as amended and
modified from time to time, the “Note”) in the original principal amount of $120,000, plus interest
on the unpaid principal balance. Id. ¶ 10. On that same day, Khan executed and delivered to POL
a commercial personal guaranty (as amended and modified from time to time, the “Guaranty”).
Id. ¶ 11.
Also on February 4, 2015, Saranna Holdings executed and delivered to POL a commercial
mortgage (as amended and modified from time to time, the “Mortgage”). Id. ¶ 12. In the
Mortgage, Saranna Holdings granted, mortgaged, and conveyed to POL and POL’s successors and
assigns, with mortgage covenants, its right, title, and interest in and to one parcel of real property
known as 71.5 Virginia Avenue, Jersey City, New Jersey 07304 (Hudson County, Block 21102,
Lot 40) (the “Mortgaged Property”). Id. ¶ 13. POL subsequently perfected the mortgage. Id. ¶
14.
Additionally, Saranna Holdings executed and delivered a security agreement to further
secure repayment (as amended and modified from time to time, the “Security Agreement”). Id. ¶
15. In the Security Agreement, Saranna Holdings granted and pledged to POL and POL’s
successors and assigns a continuing senior security interest in, a continuing first lien upon, an
unqualified right to possession and disposition of, and a right of set-off against all of its right, title,
and interest in and to certain personal property including Saranna Holding’s “assets . . . personal
property . . . and all furniture, fixtures, and equipment” at 71.5 Virginia Avenue, Jersey City, New

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Jersey 07304 (individually and collectively, the “Personal Property”). Id. ¶ 15. POL perfected the
Security agreement.

Id. ¶ 17-19.

On September 16, 2015, Saranna Holdings executed a

modification of mortgage and security agreement with assignment of rents and leases in favor of
POL (“Modification of Mortgage”). Id. ¶ 20. POL perfected the Modification to Mortgage. Id.
20-21.
POL performed all of the conditions precedent required under the Note, the Guaranty, the
Mortgage (as amended and modified by the Modification of Mortgage), and the Security
Agreement up to December 7, 2016. Id. ¶ 22. On December 7 2016, POL transferred and assigned
the Note, the Guaranty, the Mortgage (as amended and modified by the Modification of Mortgage),
and the Security Agreement to Plaintiff POL Lending. Id. ¶ 22-27. Plaintiff performed all the
conditions precedent required under the Note, the Guaranty, the Mortgage, and the Security
Agreement since December 7, 2016. Id. ¶ 30.
Saranna Holdings failed to pay any installment or other sum due under the Note when due
and payable. Id. ¶ 35. On November 15, 2016, Plaintiff mailed a written notice of default to
Saranna Holdings and provided Saranna Holdings with a cure period of ten days. Id. ¶ 37. Saranna
Holdings failed to cure the default. Id. ¶ 38. Also on November 15 2016, POL Lending mailed a
written notice of default to Khan informing him of the events of default and providing him with a
cure period of ten days, but Khan failed to cure the default. Id. ¶ 42-43.
On February 13, 2017, Plaintiff filed a Complaint asserting four counts: (1) Breach of
Cognovit Promissory Note, (2) Breach of Personal Guaranty, (3) Foreclosure of Mortgage and
Security Agreement with Assignment of Rents and Leases, and (4) Foreclosure of Security
Agreement. Id. ¶¶ 33-39, 45-54. Pursuant to Count Two of the Complaint, POL Lending seeks to

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enforce the terms and conditions of the Guaranty and to recover in personam damages against
Defendant Khan. Id. ¶¶ 40-44.
Defendant Khan was served with the Summons and Complaint both individually and as
managing member and authorized agent of Saranna Holdings by personal service on April 3, 2017
at 5033 97th Street, Floor 3, Corona, New York 11368. ECF Nos. 6, 7. Defendants were required
to file an appearance and answer or otherwise plead to the Complaint within twenty-one days after
service, pursuant to Fed. R. Civ. P. 12(a)(1)(A)(i). On April 26, 2017, Plaintiff filed a request for
entry of default by the Clerk of Court as to Defendants, pursuant to Fed. R. Civ. P. 55(a). ECF
Nos. 12, 13. On April 26, 2017, the Clerk of Court entered default against Defendants. ECF Nos.
14, 15. As of the filing of the instant motion, neither Defendant has appeared in this case, filed an
answer, or otherwise pled to the Complaint.
Plaintiff seeks the following relief: upon Count One, judgment against Saranna Holdings
in the total sum of $139,478.62, plus non-default interest, default interest, additional late charges,
costs and collection expenses, and all other amounts recoverable; upon Count Two, judgment
against Khan for the previously listed amounts; upon Count Three, judgment and decree of
mortgage foreclosure against Saranna Holdings (1) foreclosing the Mortgage executed by Saranna
Holdings, as relates to the Mortgaged Property, (2) foreclosing the equity of redemption, (3)
adjudging the Property to be sold pursuant to 28 U.S.C. § 2001, et seq., and Order(s) to satisfy the
total amount due, and (4) fixing the amount due under the Mortgage at the previously listed amount
and any other amounts recoverable under the Mortgage; and upon Count Four, judgment and
decree of foreclosure (1) foreclosing the Security Agreement, (2) foreclosing any right of
redemption, (3) adjudging the Personal Property to be sold and Order(s) to satisfy the total amount
due under the Security Agreement, and fixing the amount due under the Security Agreement for

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the previously listed amounts and any other amounts recoverable under the Security Agreement.
Compl. ¶¶ 33-54.
II.

LEGAL STANDARD
“The district court has the discretion to enter default judgment, although entry of default

judgments is disfavored as decisions on the merits are preferred.” Animal Sci. Prods., Inc. v. China
Nat’l Metals & Minerals Imp. & Exp. Corp., 596 F. Supp. 2d 842, 847 (D.N.J. 2008). Before
entering default judgment the court must: (1) determine it has jurisdiction both over the subject
matter and parties; (2) determine whether defendants have been properly served; (3) analyze the
Complaint to determine whether it sufficiently pleads a cause of action; and (4) determine whether
the plaintiff has proved damages. See Chanel, Inc. v. Gordashevsky, 558 F. Supp. 2d 532, 535-36
(D.N.J. 2008); Wilmington Savings Fund Soc., FSB v. Left Field Props., LLC, No. 10-4061, 2011
WL 2470672, at *1 (D.N.J. June 20, 2011). Although the facts pled in the Complaint are accepted
as true for the purpose of determining liability, the plaintiff must prove damages. See Comdyne
I, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990).
In addition, prior to granting default judgment, the Court must make explicit factual
findings as to: (1) whether the party subject to the default has a meritorious defense; (2) the
prejudice suffered by the party seeking default judgment; and (3) the culpability of the party
subject to default. Doug Brady, Inc. v. N.J. Bldg. Laborers Statewide Funds, 250 F.R.D. 171, 177
(D.N.J. 2008).
III.

ANALYSIS
A. Jurisdiction & Service
The Court has both subject matter jurisdiction over this dispute and personal jurisdiction

over Saranna Holdings and Khan. This Court has subject matter jurisdiction by virtue of diversity
jurisdiction under 28 U.S.C. § 1332 because Plaintiff is a citizen of Delaware with a principal place
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of business in California and Defendants are citizens of New York and the amount in controversy
exceeds $75,000. Compl. ¶ 8. The Court has personal jurisdiction over the Defendants because a
substantial portion of events giving rise to the claims occurred within New Jersey and the property
at issue is located at 71.5 Virginia Avenue, Jersey City, New Jersey 07304. Id. ¶ 9. Defendants
were properly served on April 3, 2017. ECF Nos. 5, 6.
B. Liability
As Defendants have not filed an Answer or otherwise responded to the Complaint, the
Court must accept the truthfulness of Plaintiff’s well-pled allegations as to liability. Comdyne I,
908 F.2d at 1149. The Court is satisfied that Plaintiff had adequately pled claims against Saranna
Holdings for breach of the Note and against Khan for breach of the Guaranty.
Plaintiff has alleged that: (1) POL and Saranna Holdings executed the Note in which Saranna
Holdings promised to repay Plaintiff $120,000, plus interest, see Compl. ¶ 34; Ex. A; (2) POL and
Khan executed the Guaranty in which Khan promised to guarantee Saranna Holding’s repayment of
the Note; see Compl. ¶11, Ex. B; (3) Saranna Holdings breached the Note by failing to make any
required principal or interest payments, see Compl. ¶¶ 35-36; (4) Khan breached the Guaranty when
he failed to fulfill Saranna Holding’s obligations under the Note, see id. ¶¶ 42-43, Ex. A, B; and (5)
that both breaches constitute events of default under the Note, Guaranty, Mortgage, and Security
Agreement, see id. ¶¶ 35-36, 42-43, 48, 51, Ex. A-D. Plaintiff has sufficiently alleged breach of the
Note by Saranna Holdings and of the Guaranty by Khan.
In a foreclosure action in New Jersey, “‘[t]he only material issues . . . are the validity of the
mortgage, the amount of the indebtedness, and the right of the mortgagee to resort to the mortgaged
premises.’” Wells Fargo Bank v. Zelaya, No. 11-6807, 2012 WL 1079554 (D.N.J.) (quoting Great
Falls Bank v. Pardo, 263 N.J. Super. 388, 394 (Ch. Div. 1993)). Under Article III of the Uniform
Commercial Code and New Jersey law, the mortgagee has the right to enforce the Note and related

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agreements if it is the holder of the negotiable instrument. See Bank of America, N.A. v. Princeton
Park Associates, LLC, 2012 WL 5439006 (N.J. App. Div. 2012) (citing N.J.S.A. 12A:3-301).

Plaintiff has alleged that: (1) POL and Saranna Holdings executed the Mortgage which
stipulated that Saranna Holdings would transfer its title to and interest in the property located at
71.5 Virginia Avenue, Jersey City, New Jersey 07304 in the event of default on the Note, and POL
later perfected that Mortgage, see Compl. ¶¶ 12-14, 46-49; (2) POL and Saranna Holdings
executed the Security Agreement which stipulated that KT NY Group would grant a senior security
interest and an unqualified right to possession and dispossession in the collateral located at 71.5
Virginia Avenue, Jersey City, New Jersey 07304 in the event of default on the Note, and POL later
perfected that Security Agreement, see Compl. ¶¶ 15-19, 49-54; and (3) Plaintiff POL Lending is
the holder of the Note, the Guaranty, the Mortgage, and the Security Agreement, and it has
perfected the various documents. Compl. ¶ 23-29. Plaintiff has sufficiently alleged the validity
of the Mortgage and Security Agreement, the amount of payment due on the Note, and that Plaintiff
is entitled to enforce the Note, Guaranty, Mortgage, and Security Agreement as it is the holder of
the four agreements.
C. Appropriateness of Default Judgment
Next, the Court must consider: (1) whether the party subject to the default has a meritorious
defense; (2) the prejudice suffered by the party seeking default judgment; and (3) the culpability
of the party subject to default. Doug Brady, 250 F.R.D. at 177. The Court concludes that in the
absence of any responsive pleading and based upon the facts alleged in the Complaint, the
Defendants do not have a meritorious defense. See U.S. Small Business Admin. v. Silver Creek
Const. LLC, 2014 WL 3920489 (D.N.J.), at *5. Second, the Court finds that POL will suffer
prejudice absent entry of default judgment as POL will have no other means of obtaining relief.
Finally, the Court finds the Defendants acted culpably as they have been served with the
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Complaint, are not infants or otherwise incompetent, and are not presently engaged in military
service. See id.; see also Nationwide Mut. Ins. Co. v. Starlight Ballroom Dance Club, Inc., 175 F.
App’x 519, 523 (3d Cir. 2006) (holding that a defendant’s failure to respond to communications
from the plaintiff and the court can constitute culpability).
D. Monetary Damages
POL has requested a default judgment in the amount of $139,478.62. Fritton Aff. ¶ 41, Ex.
F. This amount is calculated as of April 30, 2017 and consists of the unpaid principal of
$119,872.06, accrued and unpaid interest in the amount of $9,509.85, and unpaid charges in the
sum of $4,392.50, other fees in the sum of $5,426.00, and the reserve balance in the sum of
$278.21. Id. POL also seeks non-default interest at the rate of 14% per year, which amounts to a
per diem of $79.91, from May 1, 2017. Id. POL has provided the Court with sufficient proof of
these amounts. Id.
Based on the foregoing, judgment shall be entered against Saranna Holdings and Khan,
jointly and severally, for $139,478.62 plus $79.91 per day until the date of full repayment. The
Mortgaged Property and the Personal Property are to be sold with the proceeds paid to Plaintiff
Patch of Land Lending, LLC until the debt is fully repaid. If the sale amount exceeds the amount
of the debt, the excess shall be returned to Defendants. Defendants are responsible for any debt
remaining after the sale of the property.
IV.

CONCLUSION
For the reasons set forth herein, POL’s motions for default judgment, ECF. Nos. 17 and

18, are GRANTED. An appropriate Order accompanies this Opinion.
Dated: December 21, 2017
/s Madeline Cox Arleo__________
Hon. Madeline Cox Arleo
United States District Judge
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