Capital One, National Association v. AF&NR LLC et al

Filing 74

MEMORANDUM AND ORDER: For the foregoing reasons, defendants' motion for injunctive relief is granted to the extent that the restriction that this Court imposed on plaintiff's ability to transfer title of the foreclosed property is extended pending appeal to the Second Circuit. As a condition of this relief, defendants are directed to post forthwith a supersedeas bond in the amount of $15,000 for any costs recoverable under such bond that plaintiff incurs should defendants be unsuccessful on appeal. If defendants fail to perfect their appeal within the time allotted by the Second Circuit, plaintiff is granted leave to seek an order dissolving the stay. Ordered by Judge Eric N. Vitaliano on 5/15/2015. (Fernandez, Erica)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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SDF9 COBK LLC,

Plaintiff,
MEMORANDUM & ORDER
-against12-CV-3078 (ENV)(RML)
AF & AR LLC, ALBERT ZA VUROV,
CONGREGATION TIFERETH TORNOR:
DVORA SFARD, INC., Y. ZAVUROV, E
BUSINESS SERVICES, F. ZA VUROVA,
N. ZA VUROVA, and NEW YORK CITY
ENVIRONMENTAL BOARD BUREAU,
Defendants.
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VITALIANO, D.J.
Defendants Yakov Zavurov, Frida Zavurova, and Nisin Zavurova,
tenants residing in the real property that is the subject of this foreclosure
dispute, have filed a notice of appeal from the Court's April 27, 2015 denial of
their emergency application to enjoin plaintiff SDF9 COBK LLC ("SDF9")
from conveying rights and title to the subject property at auction sale. 1 On
April 28, 2015, pursuant to Rule 62(c), or alternatively Rule 62(d), of the
Federal Rules of Civil Procedure, defendants renewed their application,
1

The Court presumes the parties' familiarity with the facts and history of this
case, including the traverse hearing which led to the denial of defendants'
motion to dismiss for want of in personam jurisdiction, and will not repeat
them here.
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requesting a stay of the sale, scheduled to take place later that day pending
appeal. Despite their failure to file a supersedeas bond in the full amount of
the judgment, and with an eye toward avoiding the added expense to plaintiff
of another public notice of auction sale, the Court granted defendants'
emergency request to the extent that, while permitting SDF9 to proceed with
the auction sale, it temporarily restrained SDF9 from transferring any rights,
title, or interest in the subject property to the successful bidder without
further court order.
The auction sale took place, as scheduled, but, because no bidders other
than plaintiff participated, SDF9 obtained ownership rights in the foreclosed
property with a winning bid of$1000. (Yellen Deel., ECF No. 72, at 5 n.2).
Following the sale, and with plaintiff restrained from transferring title,
defendants offered to post a partial supersedeas bond "in an amount that is
practicable, which would insulate [SDF9] for any loss incurred while the
appeal is pending, in lieu of the full amount of judgment." (Defs.' Reply, ECF
No. 73, at~ 75). For the reasons and to the extent set forth below, defendants'
motion for a stay restricting plaintiff from transferring, rights, title, or
interest in the subject property is granted.

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Discussion
"[A] party arguing entitlement to a stay pending appeal, directed to the
court which issued the order that is being appealed, faces the Sisyphean task
of convincing the court that it was in error and substantially likely to be
reversed on appeal." In re Albicocco, No. 06-CV-3409, 2006 WL 2620464, at
*5 (E.D.N.Y. Sept. 13, 2006). Rule 62(c) confers jurisdiction on a district
court to issue a stay of an order denying injunctive relief/ and to require the
appellant to post a bond, "'to preserve the status quo pending appeal."'

Safeco Ins. Co. ofAm. v. M.E.S., Inc., No. 09-CV-3312, 2010 WL 5464894, at
*3 (E.D.N.Y. Dec. 29, 2010) (citations omitted). Relatedly, Rule 62(d) provides
for a stay "as of right" by posting a sufficient supersedeas bond in the full
amount of the judgment. Cohen v. Metropolitan Life Ins. Co., 334 F. App'x
375, 378 (2d Cir. 2009); de la Fuente v. DC/ Telecomm., Inc., 269 F. Supp. 2d
237, 240 (S.D.N.Y. 2003). The bond serves three purposes: (1) it ensures the
judgment debtor may obtain a refund if he or she is meritorious on appeal (in
lieu of paying the judgment before appealing); (2) it mitigates any risk that
the judgment debtor may not be able to fulfill the judgment after appeal; and

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Movants seek dismissal of the action but, part and parcel of the application,
is their request that the Court discharge the equitable order it entered
permitting plaintiff to auction the subject property as part of the foreclosure
judgment.

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(3) it guarantees that the appellee can recover damages caused by any delay
incident to the appeal, such as interest and costs. 3 In re Nassau Cnty. Strip

Search Cases, 783 F.3d 414, 417 (2d Cir. 2015); Morgan Guar. Trust Co. of
N. Y. v. Republic of Palau, 702 F. Supp. 60, 65 (S.D.N.Y. 1988).
"Despite these advantages, however, the Second Circuit has recognized
that 'an inflexible requirement for impressment of a lien and denial of a stay
of execution unless a supersedeas bond in the full amount of the judgment is
posted can in some circumstances be irrational, unnecessary, and selfdefeating, amounting to a confiscation of the judgment debtor's property
without due process."' Morgan Guar. Trust Co., 702 F. Supp. at 65 (quoting

Texaco Inc. v. Pennzoil Co., 784 F.2d 1133, 1154 (2d Cir. 1986), rev'd on other
grounds, 481 U.S. 1, 107 S. Ct. 1519, 95 L. Ed. 2d 1 (1987)). Accordingly, an
appellant may post a partial supersedeas bond, or none at all, subject to the
district court's approval, if posting the full amount is unnecessary under the
circumstances of the case to protect the appellee's interests. See id. (citing

Texaco, 784 F.2d at 1154). Clearly, a "district court has discretion to grant a

With regard to covl.'i~lt! costs, the Second Circuit distinguishes a
supersedeas bond from what is known as a "cost bond" or "appeal bond."
Adsani v. Miller, 139 F.3d 67, 70 n.2 (2d Cir. 1998). "A 'supersedeas bond' is
retrospective covering sums related to the merits of the underlying judgment
(and stay of its execution), whereas a 'cost bond' is prospective relating to the
potential expenses of litigating an appeal." Id. (quoting The Astoria v. Slayne,
1 F.R.D. 742, 743 (E.D.N.Y. 1941)).
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stay of judgment with no supersedeas bond or with only a partial supersedeas
bond if doing so does not unduly endanger the judgment creditor's interest in
ultimate recovery." Id. (compiling cases). The judgment debtor seeking to
reduce the supersedeas bond amount "bears the burden of showing 'specific
reasons' why a stay is appropriate." Ambac Assurance Corp. v. Adelanto Pub.

Util. Auth., No. 09-CV-5087, 2014 WL 2893306, at *3 (S.D.N.Y. June 26, 2014)
(citation omitted).
In determining whether to grant a stay without requiring the appellant
to post a full-amount supersedeas bond, there are four factors a district court
must consider:
(1) whether the stay applicant has made a strong
showing that he is likely to succeed on the merits; (2)
whether the applicant will be irreparably injured
absent a stay; (3) whether issuance of the stay will
substantially injure the other parties interests in the
proceeding; and (4) where the public interest lies.

In re World Trade Center Disaster Site Litig., 503 F.3d 167, 170 (2d Cir. 2007)
(internal quotation marks and citation omitted). "[T]he degree to which a
factor must be present varies with the strength of the other factors, meaning
that more of one [factor] excuses less of the other." Id. In gauging the
likelihood of success on appeal, "the necessary level or degree of possibility of
success will vary according to the Court's assessment of the other stay
factors." Tummino v. Hamburg, 936 F. Supp. 2d 198, 201 (E.D.N.Y. 2013)
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(citations, alterations, and internal quotation marks omitted). That is,'" [t]he
probability of success that must be demonstrated [by appellant] is inversely
proportional to the amount of irreparable injury [appellant] will suffer absent
the stay.'" Thapa v. Gonzales, 460 F.3d 323, 334-45 (2d Cir. 2006) (alteration
in original) (quoting Mohammed v. Reno, 309 F.3d 95, 101 (2d Cir. 2002)).
As for the merits of their appeal, in addition to their personal
jurisdiction objection, defendants argue that the original plaintiff in this
action, Capital One, National Association ("Capital One"), from whom SDF9
derives its rights and interests, has its "nerve center" in New York. This
factual contention rests on Capital One's 10-K filings, which indicate that it
conducts significant business in New York. Its New York presence,
defendants claim, destroys diversity and deprives the Court of subject-matter
jurisdiction. (Defs.' Reply, at,, 43-45). It is a contention with no support at
law; Capital One's citizenship for diversity purposes is not even reasonably
arguable. Capital One, it appears, is a "national bank[] with [its] main offices
located in Virginia. For purposes of diversity jurisdiction, ... [it is]

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considered [a) citizen only ofVirginia." 4 BanxCorp. v. Costco Wholesale Corp.,
978 F. Supp. 2d 280, 312 (S.D.N.Y. 2013) (emphasis added) (citing Wachovia

Bank v. Schmidt, 546 U.S. 303, 307, 126 S. Ct. 941, 163 L. Ed. 2d 797 (2006)
(holding a national banks is not "deemed a citizen of every State in which it
conducts its business or is otherwise amendable to personal jurisdiction," but
is a citizen of "the State designated in its articles of association as its main
office")); see also Excelsior Funds, Inc. v. JP Morgan Chase Bank, N.A., 470 F.
Supp. 2d 312, 322 (S.D.N.Y. 2006) (holding, for diversity purposes, that a
"national bank is not also 'located' in the state where it maintains its principal
place of business[) when that state is different from the state of the national
bank's main office"); One West Bank, FSB v. Joam LLC, No. 10-CV-1063, 2011
WL 6967635, at *3-4 (E.D.N.Y. July 16, 2011) (confirming that a national
bank's principal place of business plays no part in determining its citizenship
for purposes of diversity jurisdiction).
Based on these principles, although it is downright futile to present, as

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Defendants also note that SDF9 is a New York corporation. (Defs.' Reply, at
~ 9). But, it is a "well-established rule that diversity of citizenship is assessed
at the time the action is filed," and "if jurisdiction exists at the time an action
is commenced, such jurisdiction may not be divested by subsequent events."
Freeport-McMoRan, Inc. v. KN Energy, Inc., 498 U.S. 426, 111 S. Ct. 858, 112
L. Ed. 2d 951 (1991) (quoting Wichita R.R. & Light Co. v. Pub. Util. Comm'n of
Kan., 260 U.S. 48, 54, 43 S. Ct. 51, 67 L. Ed. 124 (1922) ("Jurisdiction once
acquired ... is not divested by a subsequent change in the citizenship of the
parties.")).
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defendants intend, their subject matter jurisdiction argument, they still may
have preserved their in personam jurisdiction arrow in their quiver-and it is
centered on a question of fact which, no matter how unlikely, at least offers a
prayer for success on appeal.
Moreover, the Court, of course, must consider the other factors, which
can more than make up for a slim possibility of success on the merits. See

Thapa, 460 F.3d at 334-45. Unlike the public interest factor, which, other than
the general interest in a fair and just resolution of the matters in dispute, is
not implicated at all, see, e.g., Chevron Corp. v. Donziger, No. 11-CV-691, 2011
WL 1408386, at *4 (S.D.N.Y. Apr. 6, 2011); Leinster Inter S.A. v. Botley Ltd.,
No. 09-CV-3874, 2009 WL 5246211, at *1 (S.D.N.Y. Dec. 30, 2009), the second
and third factors, which measure irreparable harm to the parties (defined as
"certain and imminent harm for which a monetary award does not adequately
compensate," Wisdom Import Sales Co. v. Labatt Brewing Co., 339 F.3d 101,
113-14 (2d Cir. 2003)), do present issues for consideration.
For defendants, there is unquestionably potential irreparable harm in
not granting a stay because, "[g]enerally, eviction from one's home constitutes
irreparable injury." Ayyad-Rama/lo v. Marine Terrace Assocs. LLC, No. 13CV-7038, 2014 WL 2993448, at *4 (E.D.N.Y. July 2, 2014) (collecting cases).
Indeed, if there is an "imminent danger" of eviction, " [c] leary, the

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[appellants] will suffer irreparable harm by losing their only residence."

Ca/vagno v. Bisbal, 430 F. Supp. 2d 95, 100 (E.D.N.Y. 2006). Harm of this
nature has the power to tip the "balance of hardships [] decidedly" in the
appellants' favor. Id. Defendants advance potential eviction as a very real
harm, arguing that "the relocation of multiple families comprised of human
beings of various ages, including children," (Defs.' Reply,

at~

63), which is

made more likely by this upset of the status quo, creates significant injury.
On the other side of the coin, and not to be lost in the shuffle, the
balancing test recognizes that "creditors certainly have a strong interest in
obtaining proceeds from sale of[] assets before they dissipate." Albicocco,
2006 WL 2620464, at *4 n.8. However, the circumstances here demonstrate
that there is virtually no risk of asset dissipation. Specifically, plaintiff, at the
April 28, 2015 auction sale, obtained all rights to the subject property (already
fully encumbered by its mortgage) with merely a $1000 bid. Since the sale has
been completed (but for closing), and no bidders other than SDF9 found it
worth enough to even make a bid, and with no new auction sale costs
reasonably in the offing, no obvious harm to plaintiff can come from a stay.
Nor can plaintiff genuinely fear that any delay in transferring title to itself
could have an adverse effect on the future value of the property. The absence
of bidders at the auction sale suggests, flatly, that the property is, when

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viewed on the open market, worth less than plaintiff's mortgage. The value of
the property can only increase over time, not dissipate. The exposure to
plaintiff, as creditor, is nil, and, as a consequence, the irreparable harm
factors weigh decidedly in defendants' favor.
These are the principal support beams upon which this decision rests.
Given the circumstances presented, any balance of the hardships in this case
must weigh entirely in favor of defendants. Notwithstanding that there is only
the slightest possibility of success, a stay without a substantial supersedeas
bond is warranted by the absence of harm to plaintiff. See Thapa, 460 F.3d at
334-45. Considering it possible, albeit remotely, that defendants may succeed
on appeal, the Court will extend the temporary stay on any transfer of title to
the subject property, by plaintiff to itself, so that defendants may seek review
from the Second Circuit without jeopardizing their right to remain in
possession of their residence.
Conclusion
For the foregoing reasons, defendants' motion for injunctive relief is
granted to the extent that the restriction that this Court imposed on plaintiff's
ability to transfer title of the foreclosed property is extended pending appeal
to the Second Circuit. As a condition of this relief, defendants are directed to
post forthwith a supersedeas bond in the amount of $15,000 for any costs

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recoverable under such bond that plaintiff incurs should defendants be
unsuccessful on appeal. If defendants fail to perfect their appeal within the
time allotted by the Second Circuit, plaintiff is granted leave to seek an order
dissolving the stay.
So Ordered.
Dated:

Brooklyn, New York
May 15, 2015

s/Eric N. Vitaliano

•v

ERIC N. VITALIANO ...
United States District Judge

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