UFP Atlantic Division, LLC v. Route 299 Retail Center, LLC et al
Filing
110
MEMORANDUM-DECISION AND ORDER granting 105 Motion to confirm the Referee's Report of Sale and Staying 105 Plaintiff's motion for leave to file a deficiency judgment: The Court hereby ORDERS that Plaintiff's motion to confirm the Referee's Report of Sale is GRANTED; and the Court further ORDERS that Plaintiff's motion for leave to file a deficiency judgment is STAYED; andthe Court further ORDERS that if Plaintiff fails to submit evidence establishing the fair market value of the property within thirty (30) days of this Memorandum-Decision and Order, Plaintiff's motion will be denied and dismissed without further order of this Court. Signed by U.S. District Judge Mae A. D'Agostino on 7/2/14. (ban)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
____________________________________________
UFP ATLANTIC DIVISION, LLC a
Michigan limited liability company,
Plaintiff,
vs.
1:12-cv-00053
(MAD/ATB)
ROUTE 299 RETAIL CENTER, LLC
a New York limited liability company,
MICHAEL BARNETT, an individual,
DENISE BARNETT, an individual,
HIGHLAND SQUARE DEVELOPMENT, LLC,
P. SALA & SONS CONSTRUCTION, INC.,
TECTONIC ENGINEERING & SURVEYING
CONSULTANTS, P.C., CREIGHTON
MANNING ENGINEERING LLP, JOHN
DOES 1-10 said names being fictitious and
unknown to Plaintiff, the persons or parties
intended being any and all tenants, occupants,
persons or corporations, if any, having or
claiming an interest in or lien upon the
premises described in the Amended Complaint,
Defendants.
____________________________________________
APPEARANCES:
OF COUNSEL:
ISEMAN, CUNNINGHAM,
REISTER & HYDE, LLP
9 Thurlow Terrace
Albany, New York 12203
Attorneys for Plaintiff
RICHARD A. MITCHELL, ESQ.
MICHAEL W. DEYO, ESQ.
ROUTE 299 RETAIL CENTER, LLC
Defendant pro se
MICHAEL BARNETT
10 Wintergreen Place
Hopewell Junction, New York 12533
Defendant pro se
DENISE BARNETT
6 Heather Court
Fishkill, New York 12524
Defendant pro se
HIGHLAND SQUARE DEVELOPMENT LLC
Defendant pro se
CORBALLY, GARTLAND, AND
RAPPLEYEA, LLP
35 Market Street
Poughkeepsie, New York 12601
Attorneys for Defendant P. Sala &
Sons Construction, Inc.
WILLIAM W. FRAME, ESQ.
MILBER MAKRIS PLOUSADIS
SEIDEN, LLP
1000 Woodbury Road
Suite 402
Woodbury, New York 11797
Attorneys for Defendant Tectonic
Engineering & Surveying
Consultants, P.C.
PATRICK F. PALLADINO, ESQ.
DRIVER GREENE, LLP
90 State Street
Suite 1011
Albany, New York 12207
Attorneys for Defendant Creighton Manning
Engineering, LLP
JOHN D. HOGGAN, JR., ESQ.
Mae A. D'Agostino, U.S. District Judge:
MEMORANDUM-DECISION AND ORDER
I. INTRODUCTION
Plaintiff brought this action pursuant to New York Real Property Actions and Proceedings
Law ("RPAPL") section 1301 et seq, seeking to foreclose on a mortgage and obtain judgment on
a separate promissory note. See Dkt. No. 39 at ¶ 1. Currently before the Court is Plaintiff's
motion to confirm the Referee's Report of Sale, and for leave to enter a deficiency judgment
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against Defendants Route 299 Retail Center, LLC ("Route 299"), Michael and Denise Barnett,
and Highland Square Development, LLC ("Highland"). See Dkt. No. 105-3.
II. BACKGROUND
This action was commenced on June 17, 2011 to recover a debt owed by Defendants
Route 299, Michael Barnett, and Denise Barnett under a mortgage note. See Dkt. No. 1-2. On
March 1, 2012, Plaintiff filed an amended complaint, which converted this action into one
seeking to foreclose on a mortgage owned by Plaintiff. See Dkt. No. 39. The mortgage
encumbers certain real property owned by Highland, which is commonly known as 50-70 State
Route 299, Town of Lloyd, County of Ulster, New York. See id. at ¶ 18. The mortgage also
encumbers real property owned by Route 299, which is commonly known as 20-40 State Route
299, Town of Lloyd, County of Ulster, New York (together, the "Mortgaged Property"). See id.
at ¶ 20. In its amended complaint, Plaintiff also added M&C of Dutchess, LLC,1 P. Sala and Sons
Construction, Inc., Tectonic Engineering and Surveying Consultants, P.C., Creighton Manning
Engineering, LLP, and unknown parties referred to as "John Doe" Defendants because each of
these entities may claim to have an interest in the Mortgaged Property. See id. at ¶¶ 7-12.
On or around December 16, 2010, Highland and Route 299 executed and delivered to
Plaintiff a promissory note in the principle amount of $5,000,000.00. See id. at ¶ 25; Dkt. No. 396 at 35-39.2 Pursuant to the note, Highland and Route 299 are each jointly and severally liable for
all amounts due under the note. See Dkt. No. 39 at ¶ 26. To secure payment of the note,
1
M&C of Dutchess, LLC is no longer a party in this action. See Dkt. No. 80.
To avoid confusion, whenever the Court references a specific page number for an entry
on the docket, it will cite to the page number assigned by the Court's electronic filing system.
2
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Highland and Route 299 executed and delivered to Plaintiff a mortgage in the principle amount of
$5,000,000.00. See id. at ¶ 27; Dkt. No. 39-6 at 42-51. To further secure payment of the note,
Route 299, Highland, Michael Barnett, and Denise Barnett assigned to Plaintiff a life insurance
policy covering the life of Michael Barnett as collateral. See Dkt. No. 39 at ¶ 32; Dkt. No. 39-7 at
3-6. Moreover, Mr. and Mrs. Barnett personally guaranteed all indebtedness of Route 299 and
Highland owed to Plaintiff under the note. See Dkt. No. 39 at ¶¶ 36-37; Dkt. No. 39-7 at 58-61.
Defendants Route 299, Highland, Michael Barnett, and Denise Barnett subsequently failed
to comply with the terms and provisions of the note and mortgage. Route 299 and Highland did
not make timely interest payments, and Route 299 caused the property to become encumbered by
a separate mortgage and various liens. See Dkt. No. 39 at ¶¶ 57, 62. Similarly, these Defendants
failed to pay the premium due on the life insurance policy. See Dkt. No. 39 at ¶ 59. Plaintiff
notified them of their default and demanded full and immediate payment of all amounts due under
the note. See Dkt. No. 39 at ¶¶ 63-66. Upon Defendants' failure to make full and immediate
payment, Plaintiff sought a judicial sale of the Mortgaged Property to satisfy the amount owed to
it. See id. at ¶ 95.
In a Judgment of Foreclosure and Sale dated March 21, 2013, this Court ordered the sale
of the Mortgaged Property. See Dkt. No. 82. On June 5, 2013, the Referee appointed by the
Court, William N. Cloonan, held a public auction and sold the Mortgaged Property to Plaintiff for
the sum of $1,000,000.00. See Dkt. No. 92 at 1. The deed was delivered on July 30, 2013. See
Dkt. No. 105-1 at ¶ 5.
In a Decision and Order dated August 28, 2013, Magistrate Judge Baxter granted Hiscock
and Barclay, LLP's motion to withdraw as counsel for Route 299, Michael and Denise Barnett,
and Highland. See Dkt. No. 93. The Court ordered that Michael and Denise Barnett obtain
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counsel by September 30, 2013 to represent themselves and their related entities. See id. The
Court also warned them that their failure to comply with the order could result in a default
judgment against them. See id. There is no indication that Mr. and Mrs. Barnett have since
obtained counsel in this action or complied with the Court's orders. Moreover, they failed to
participate in a mandatory telephone conference on June 26, 2014.
On October 4, 2013, Plaintiff filed a motion to confirm the Referee's Report of Sale and
for leave to enter a deficiency judgment pursuant to the RPAPL against Defendants Route 299,
Michael and Denise Barnett, and Highland. See Dkt. No. 105-1. Plaintiff contends that "the
deficiency is in the sum of $6,840,458.15, less the maximum fair and reasonable value of the
property as $1,000,000, yielding a net deficiency pursuant to the terms of New York Real
Property Actions and Proceedings Law § 1371 of $5,840,458.15." Id. at ¶ 9.
Currently before the Court is Plaintiff's motion for leave to enter a deficiency judgment.
See Dkt. No. 105.
III. DISCUSSION
A.
Motion to confirm
Plaintiff has moved pursuant to Section 1355 of the RPAPL to confirm the Referee's
Report of Sale. Defendants have not opposed Plaintiff's motion, and Plaintiff has met all the
requirements under RPAPL § 1355. Accordingly, the Court grants Plaintiff's motion to confirm
the Referee's Report of Sale.3
While the Court confirms the Referee's Report of Sale to the extent that it reflects that a
deficiency exists, the aspect of the Referee's Report which purports to set forth the actual amount
of deficiency is excepted from this Order.
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B.
Motion for leave to file a deficiency judgment
RPAPL § 1371(2) provides as follows:
Simultaneously with the making of a motion for an order
confirming the sale, provided such motion is made within ninety
days after the date of the consummation of the sale by the delivery
of the proper deed of conveyance to the purchaser, the party to
whom such residue shall be owing may make a motion in the action
for leave to enter a deficiency judgment upon notice to the party
against whom such judgment is sought or the attorney who shall
have appeared for such party in such action. Such notice shall be
served personally or in such other manner as the court may direct.
Upon such motion the court, whether or not the respondent appears,
shall determine, upon affidavit or otherwise as it shall direct, the
fair and reasonable market value of the mortgaged premises as of
the date such premises were bid in at auction or such nearest earlier
date as there shall have been any market value thereof and shall
make an order directing the entry of a deficiency judgment. Such
deficiency judgment shall be for an amount equal to the sum of the
amount owing by the party liable as determined by the judgment
with interest, plus the amount owing on all prior liens and
encumbrances with interest, plus costs and disbursements of the
action including the referee's fee and disbursements, less the market
value as determined by the court or the sale price of the property
whichever shall be the higher.
N.Y. R.P.A.P.L. § 1371(2). In other words, "RPAPL 1371(2) permits the mortgagee in a
mortgage foreclosure action to recover a deficiency judgment for the difference between the
amount of indebtedness on the mortgage and either the auction price at the foreclosure sale or the
fair market value of the property, whichever is higher." BTC Mtge. Invs. Trust 1997–SI v.
Altamont Farms, 284 A.D.2d 849, 849-50 (3d Dept. 2001) (citing Columbus Realty Inv. Corp. v.
Gray, 240 A.D.2d 529, 530 (2d Dept. 1997); Marine Midland Bank v. Harrigan Enters., 118
A.D.2d 1035, 1037 (3d Dept. 1986)). "The mortgagee has the initial burden to make a prima
facie showing of the fair market value of the property as of the foreclosure sale date", id. at 850
(citations omitted), and whether the mortgagee meets that initial burden presents "a factual
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question for the court to resolve based on the entire record." Marine Midland Bank, 118 A.D.2d
at 1037 (citation omitted).
The price at which the foreclosed property is sold is not necessarily determinative of fair
market value.
A court determining the fair market value of mortgaged property
can take a variety of factors into consideration, including the price
actually obtained at the foreclosure sale. 79 N.Y. Jur. 2d Mortgages
§ 809 (Updated 2011) ("The court should receive evidence of the
age and construction of the buildings on the premises, the rent
received therefore, assessed value, location, condition of repair, and
sale price of property of a similar nature in the neighborhood,
conditions in the neighborhood which affect the value of property
therein, accessibility, and all other elements which may be fairly
considered as affecting the market value of real property in a given
neighborhood." (quoting Heiman v. Bishop, 272 N.Y. 83, 4 N.E.2d
944, 946 (1936))). But cf. 79 N.Y. Jur. 2d Mortgages § 810
(Updated 2011) (noting while foreclosure in an ordinary market
furnishes some criterion of the value of the realty, an emergency
foreclosure with no bidders other than a plaintiff is not a true
criterion of value (citing Central N.Y. Mortg. & Title Co. v.
Williams, 155 Misc. 376, 279 N.Y.S. 451 (N.Y. Sup. Ct. 1935))).
In re Ebadi, 448 B.R. 308, 314-15 (Bkrtcy. E.D.N.Y. 2011).
Here, the deed was delivered on July 30, 2013, and Plaintiff's motion was filed on October
4, 2013. See Dkt. No. 105; Dkt. No. 105-1 at ¶ 5. Thus, Plaintiff's motion was timely served
within ninety (90) days. However, Plaintiff has submitted no evidence establishing the fair
market value of the property at the time of the auction. Plaintiff's only statement regarding the
fair market value was a conclusory assertion made by Plaintiff's counsel that "[u]pon information
and belief, the fair and reasonable value of the premises on June 5, 2013, was not in excess of
$1,000,000.00." Dkt. No. 105-1 at ¶ 8. This conclusory statement, without any evidence to
support it, is not sufficient for the Court to determine the fair market value of the property. See
Flushing Sav. Bank, FSB v. Bitar, 106 A.D.3d 690, 691 (2d Dept. 2013) (holding that the plaintiff
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did not establish fair market value when it "submitted only a four-paragraph affidavit of a
licensed real estate appraiser setting forth his opinion as to the fair market value of the premises
on the date of the foreclosure sale"). Since the Court must subtract the higher of either the fair
market value or the sale price of the property when calculating the amount of a deficiency, see
N.Y. R.P.A.P.L. § 1371(2), the Court cannot grant Plaintiff's motion for leave to enter a
deficiency judgment without first determining the fair market value of the property.
Accordingly, Plaintiff's motion for leave to enter a deficiency judgment is stayed.
Plaintiff is directed to submit sufficient evidence establishing the fair market value of the property
within thirty (30) days of the signing and filing of this Memorandum-Decision and Order. If
Plaintiff fails to submit such evidence, its motion for leave to file a deficiency judgment will be
denied without further order of this Court.
C.
Defendants Michael Barnett and Denise Barnett
As previously discussed, Defendants Michael and Denise Barnett failed to comply with
Magistrate Judge Baxter's order requiring them to retain new counsel for Defendants Route 299
and Highland, which they have failed to do. See Dkt. No. 93 at 2-3 & n.1. Further, pursuant to a
text order dated June 18, 2014, all parties were ordered to participate in a telephone conference
set for June 26, 2014. See Text Notice dated June 18, 2014. Again, Defendants Michael and
Denise Barnett failed to comply with this order. The Court warns Defendants Michael and
Denise Barnett that any future failures to abide by orders of this Court will result in the
imposition of sanctions, unless they are able to demonstrate cause as to why such sanctions would
be inappropriate.
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IV. CONCLUSION
After carefully reviewing the entire record in this manner, the parties' submissions and the
applicable law, and for the above-stated reasons, the Court hereby
ORDERS that Plaintiff's motion to confirm the Referee's Report of Sale is GRANTED;
and the Court further
ORDERS that Plaintiff's motion for leave to file a deficiency judgment is STAYED; and
the Court further
ORDERS that if Plaintiff fails to submit evidence establishing the fair market value of the
property within thirty (30) days of this Memorandum-Decision and Order, Plaintiff's motion will
be denied and dismissed without further order of this Court; and the Court further
ORDERS that the Clerk of the Court shall serve a copy of this Memorandum-Decision
and Order on all parties in accordance with the Local Rules.
IT IS SO ORDERED.
Dated: July 2, 2014
Albany, New York
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