Federal Deposit Insurance Corporation (FDIC) v. Capital Hotel, Inc. et al
Filing
68
DECISION & ORDER: It is Ordered that the # 67 Motion for Summary Judgment is granted in part and denied in part as follows: 1) The motion is GRANTED with respect to Plaintiffs mortgage foreclosure claims. Plaintiffs request for a judgment of forecl osure is hereby GRANTED; 2) Plaintiffs request for appointment of a Referee is hereby DENIED with leave to renew; 3) The motion is GRANTED with respect to Plaintiffs damages claims, and judgment is entered against the Defendants in the amount of 6;5,382,931.99; 4) The motion is GRANTED with respect to Plaintiffs claims for attorneys fees, and Defendants are hereby ORDERED to pay LeClair Ryan attorneys fees in the amount of $8,431.06 and attorneys fees in the amount of $30,567.26 to Windels, Marx, Lane & Mittendorf, LLP; 5) Plaintiffs request to strike Defendants counterclaims and affirmative defenses is DENIED AS MOOT; 6) The Doe Defendants are hereby DISMISSED from the case and the Clerks Office shall amend the caption to reflect this change; 7) The motion is DENIED with respect to the New York State Department of Taxation and Finance. Signed by Senior Judge Thomas J. McAvoy on 10/17/2016. (jmb)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
---------- --------------------PHOENIX NLP, LLC
Plaintiff,
v.
1:15-cv-80
(TJM/DJS)
CAPITAL HOTEL, INC., CHIRAG
KABRAWALA, ASHOK DHABUWALA, a/k/a
Ashok M. Dhabuwala, a/k/a Ashok Bhabuwala,
BRANDON LEVIN, a/k/a Brandon Levine,
NEW YORK STATE DEPARTMENT OF
TAXATION AND FINANCE, JOHN DOE
1-10, and JANE DOE 1-10,
Defendants.
------------------------------THOMAS J. McAVOY
Senior United States Judge
DECISION and ORDER
Before the Court is Plaintiff’s motion for summary judgment in this mortgageforeclosure case. See dkt. # 67. Defendants have not responded to the motion.
I.
BACKGROUND
This case involves an attempt by a lender’s successor to foreclose on hotel
property near the Albany, New York airport. See Amended Complaint (“Amend.
Cmplt.”), dkt. # 20. Defendants entered into a loan of $4,300,000 with the National
Republic Bank of Chicago (“NRBC”) on March 26, 2008. Id. at ¶¶ 11-13. The note
was secured with a mortgage on commercial property in Latham, New York. Id. at ¶ 7,
14. NRBC entered into a series of seven modifications to the loan agreement over the
next five years. Id. at ¶¶ 26-46. Eventually, however, Defendants defaulted on the
loan. Id. at ¶ 48. Plaintiff’s predecessor in interest then instituted the instant action.
This case originated in the Supreme Court of Albany County, New York. See
Notice of Removal (“Removal Notice”), dkt. # 1, at ¶ 3. On June 30, 2014, NRBC f iled a
foreclosure action against the Defendants in that court. Id. On October 24, 2014, the
Office of the Comptroller of the Currency took possession of National Republic and the
FDIC was appointed as the bank’s receiver. Id. at ¶ 1. After the Defendants in this
action answered the Complaint, the parties on November 19, 2014 entered into a
stipulation that substituted the FDIC Receiver in place of National Republic. Id. at ¶ 7.
The stipulation stayed the action pending the Defendants’ exhaustion of administrative
claims process remedies under federal law. Id. On January 22, 2015, the FDIC
Receiver filed a notice of removal in this Court. See Notice of Removal. The FDIC
alleged that it had a statutory right to remove cases in which it was a party. Id. at ¶ 9
(citing 12 U.S.C. § 1819(b)(2)(B)). No party brought a motion to remand the case. On
March 10, 2015, the FDIC notified the Court that Plaintiff Phoenix NPL, LLC, had
purchased the loan that provided the basis for the foreclosure. See dkt. # 8. The Court
substituted Phoenix as Plaintiff on March 27, 2015. See dkt. # 13. Phoenix filed an
Amended Complaint on September 10, 2015. See dkt. # 20.
After the Court resolved a number of procedural issues, lifted the stay and
appointed a receiver in the matter, Plaintiff filed the instant motion for summary
judgment and for additional relief. Defendants have not responded.
II.
LEGAL STANDARD
Plaintiff moves for summary judgment. It is well settled that on a motion for
summary judgment, the Court must construe the evidence in the light most favorable to
the non-moving party, see Tenenbaum v. Williams, 193 F.3d 581, 593 (2d Cir. 1999),
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and may grant summary judgment only where "there is no genuine issue as to any
material fact and ... the moving party is entitled to a judgment as a matter of law." FED.
R. CIV. P. 56(a). An issue is genuine if the relevant evidence is such that a reasonable
jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, 477
U.S. 242, 248 (1986).
A party seeking summary judgment bears the burden of informing the court of
the basis for the motion and of identifying those portions of the record that the moving
party believes demonstrate the absence of a genuine issue of material fact as to a
dispositive issue. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the movant is
able to establish a prima facie basis for summary judgment, the burden of production
shifts to the party opposing summary judgment who must produce evidence
establishing the existence of a factual dispute that a reasonable jury could resolve in his
favor. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). A
party opposing a properly supported motion for summary judgment may not rest upon
"mere allegations or denials" asserted in his pleadings, Rexnord Holdings, Inc. v.
Bidermann, 21 F.3d 522, 525-26 (2d Cir. 1994), or on conclusory allegations or
unsubstantiated speculation. Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir. 1998).
Here, the Defendants have not offered any opposition to the Plaintiff’s motion. In
the summary judgment context, “the failure to respond to the motion does not alone
discharge the burdens imposed on a moving party.” Vt. Teddy Bear Co. v. 1-800
BEARGRAM Co., 373 F.3d 241, 246 (2d Cir. 2004). T he moving party must show both
“the absence of a genuine issue of material fact” and “‘that he is entitled to judgment as
a matter of law.’” Id. (quoting FED. R. CIV. P. 56(c)). The Court accepts properly
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supported material facts as true but “the moving party must still establish that the
undisputed facts entitle him to ‘a judgment as a matter of law[.]” Id. Thus a court
“considering a motion for summary judgment must review the motion, even if
unopposed, and determine from what it has before it whether the moving party is
entitled to summary judgment as a matter of law.’” Id. (quoting Custer v. Pan Am. Life
Ins. Co., 12 F.3d 410, 416 (4 th Cir. 1993)).
III.
ANALYSIS
A. Summary Judgment
Plaintiff seeks a judgment of mortgage foreclosure in this case. To obtain a
mortgage foreclosure in New York, “a plaintiff may establish a prima facie right to
foreclosure by producing the mortgage documents underlying the transaction and
undisputed evidence of nonpayment.” Red Tulip, LLC v. Neiva, 44 A.D.3d 204, 209,
842 N.Y.S.2d 1, 5 (1 st Dep. 2007). Such evidence “establishes [plaintiff’s] case as a
matter of law.” Village Bank v. Wild Oaks Holding, 196 A.D.2d 812, 812, 601 N.Y.S.2d
940, 941 (2d Dept. 1993). If the moving party produces such evidence, “the burden
[shifts]” to the non-movant to raise a triable issue regarding her affirmative defenses
and counterclaims in opposition to foreclosure.” Red Tulip, 44 A.D. at 204.
The evidence in this case indicates that NRBC entered into a loan w ith
Defendant Capital Hotel, Inc. (“Capital”) for a consolidated principal sum of $4,300,000
on March 26, 2008. Plaintiff’s Statement of Material Facts (“Plaintiff’s Statement”), dkt.
# 67-5, at ¶ 4. On that date, Capital executed and delivered to NRBC an Amended,
Restated and Consolidated Note, wherein Defendants agreed to pay NRBC the above
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principal sum. Id. at ¶ 5. Capital also executed and delivered to NRBC a Mortgage
Consolidation, Extension and Modification, Assignment of Leases and Rents, Security
Agreement and Fixture Filing–a mortgage–in the principal sum of $4,300,000. Id. at ¶
6. That mortgage encumbered real property at 20 Airport Boulevard, Latham, New
York. Id. at ¶ 7. The Albany County Clerk’s Office recorded the mortgage on
November 6, 2009. Id. at ¶ 8. Mortgage tax was paid. Id.
Individual Defendants Chirag Kabrawala, Ashok Dhabuwala, a/k/a Ashok M.
Dhabuwala, and Brandon Levin, a/k/a Brandon Levine all executed and delivered to
NRBC a “guarantee of payment” dated March 26, 2008. Id. at ¶ 9. T his agreement
served as a condition and inducement for NRBC to enter into the loan and also served
as additional security on the agreement. Id. This agreement obligated the individual
Defendants to “absolutely and unconditionally guarantee to NRBC Capital’s
performance under the Note and Mortgage Agreement and other loan documents[.]” Id.
at 10. They also guaranteed “payment of all sums due and to become due under the
documents to NRBC from Capital, at any time, and in any amount, including but not
limited to, all principal, accrued interest, default interest, late fees, attorneys’ fees, and
other costs, amount and charges.” Id. Capital agreed to make consecutive monthly
payments of principal and interest of $38,342.25 plus interest at an 8.75% annual rate.
Id. at ¶ 11.
The note also provided that upon a default, “all sums outstanding under the Note
may at NRBC’s sole option become immediately due and payable in full, and NRBC
may exercise any and all of its remedies set forth in the Note Mortgage and other loan
documents.” Id. at ¶ 12. The note also made Capital liable for a 5% late fee on any
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sum not paid within ten days of the date it became due. Id. at ¶ 13. Capital was also
liable for default interest on the unpaid principal of the lesser of (a) 5% over the interest
rate then in effect or (b) the maximum rate of interest allowable by law. Id. at ¶ 14.
Defendants also agreed to pay the lender’s reasonable attorneys’ fees, costs and
expenses in connection with any collection of the indebtedness on the account. Id. at ¶
15. The parties modified the loan agreement seven times, extending the maturity date
from March 26, 2013 to February 25, 2014. Id. at ¶ 16
The Defendants, Plaintiff contends, are in default of their obligations because
they:
(i) failed to repay the entire loan balance by the maturity date, February
25, 2014;
(ii) failed to pay real estate taxes in excess of $242,000 causing a tax lien
to be filed against the property;
(iii) failed to pay New York State sales and occupancy taxes; and
(iv) failed adequately to insure the property, which caused the insurance
policies to lapse.
Id. at ¶ 17.
The Office of the Comptroller of the Currency took possession of NRBC on
October 24, 2014. Id. at ¶ 18. The Federal Deposit Insurance Corporation was
appointed receiver. Id. On March 10, 2015, the subject note and m ortgage, as
modified, were sold to Plaintiff Phoenix NPL, LLC. Id. at ¶ 19. An assignment of
mortgage was filed in the Albany County Clerk’s Office on March 13, 2015. Id.
Defendants continued to be in default on their obligations. Id. at ¶ 21.
Plaintiff has produced “the mortgage documents underlying the transaction and
undisputed evidence of nonpayment.” Red Tulip, 44 A.D.3d at 209. Plaintiff has
therefore made out a prima facie case for judgment of mortgage foreclosure.
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Defendants offer no evidence or argument in defense. Summary judgment is therefore
appropriate on this claim, and the Court will grant the motion in this respect.
Plaintiff’s prayer for relief contains a request that the Court grant “a judgment of
foreclosure be awarded permitting a Referee to sell the property at public auction.” “A
Plaintiff is entitled to foreclose on a property if it demonstrates the existence of an
obligation secured by a mortgage, and a default on that obligation.” Eastern Sav. Bank,
FSB v. Beach, 2014 WL 923151, at *15 (E.D.N.Y. March 10, 2014) (internal citation and
quotations omitted). As explained above, Plaintiff has demonstrated just such an
obligation and default, and the Court will grant the judgment of foreclosure.
Plaintiff has not, however, provided the Court with the name of any individual it
proposes should be appointed referee. If Plaintiff desires such an appointment, Plaintiff
must file a motion seeking such relief and provide the Court with the name of a person
to be appointed and the proposed appointee’s q ualifications. The Court will therefore
deny that portion of the request with leave to renew. Plaintiff may renew its request for
the appointment of a referee, but must submit for approval the name of an attorney
admitted in the Northern District of New York who is willing to serve in that role.
Plaintiff also seeks to have the Court fix the amount of damages to be awarded
in the action as a means of guiding any sale of the foreclosed property. The undisputed
facts establish that, as of the date that Plaintiff filed the instant motion, Plaintiff owed
the following sums, exclusive of attorneys and costs and the costs and expenses of
receivership:
(i) Principal:
(ii) Contract Interest (to 7/21/16):
(iii) Default Interest (to 7/21/16):
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$4,045,229.35
$716,235.25
$492,488.12
(iv) Late Fees:
(v) Protective Advances:
TOTAL
$87,480.10
$43,499.17
$5,382,931.99 1
Plaintiff’s Statement at ¶ 22. The Court therefore finds that summary judgment is
appropriate on this claim and will award Plaintiff $5,382,931.99 in damages on the
foreclosure action.
B.
Attorneys Fees
Plaintiff also seeks attorneys fees, arguing that the loan agreement between the
parties entitles Plaintiff to such recovery. Courts in New York hold that “[a]n attorney’s
fee is merely an incident to litigation and is not recoverable absent a specific
contractual provision or statutory authority. Levine v. Infidelity, Inc., 2 A.D.3d 691, 692,
770 N.Y.S.2d 83, 84 (2d Dept. 2003). Nothing in New York statutory law authorizes
recovery of attorneys fees in a foreclosure action, and thus “an attorney’s fee may be
recovered in the mortgage foreclosure action itself if the mortgage document obligates
the mortgagor to pay such a fee for the expenses incurred in that action.” Id.
The undisputed material facts establish that Defendants “agreed to pay lender’s
reasonable attorney’s fees, costs and expenses, in connection with collection of the
indebtedness due.” Plaintiff’s Statement at ¶ 15. Having examined the agreements in
question, the Court is persuaded that they permit the Plaintiff to recover attorneys fees
for the cost of bringing suit to foreclose upon the property securing the mortgage.
Levine, 2 A.D.3d at 692. The documents establish in relevant part that “Lender is
1
While Plaintiff has provided sufficient evidence to support its claims for
damages, the Court has corrected Plaintiff’s math. Plaintiff calculated the total amount
due as $5,384,966.17, which is an adding error.
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authorized to . . . bring any action or proceeding to protect its interest in the Property or
to foreclose the Security Instrument or collect the Loan and the cost and expense
thereof (including reasonable attorneys fees to the extent permitted by Law)[.]” See
Exh. 6 to Declaration of David Silverstein, dkt. # 67-7, at ¶ 9.3.
The undisputed facts also establish that Defendants owe $8,431.06 in legal fees
and costs connected to Plaintiff’s original counsel, LeClair Ryan, and $30,567.26
connected to Plaintiff’s current counsel, Windels, Marx, Lane & Mittendorf, LLP.
Plaintiff’s Statement at ¶ 22. The Court will grant Defendant’s motion in this respect as
well. Plaintiff shall pay attorneys fees to LeClair Ryan in the amount of $8,431.06 and
$30,567.26 to Windels, Marx, Lane & Mittendorf, LLP.
C.
Defendants’ Counterclaims and Affirmative Defenses
Plaintiff next argues that Defendants cannot maintain any of the counterclaims or
affirmative defenses raised in their answer. Defendants do not point to any evidence to
support those claims and the Court has determined that summary judgment is
appropriate for the Plaintiff based on the material facts in the case. Plaintiff’s motion to
dismiss Defendants’ counterclaims and affirmative defenses is therefore denied as
moot.2
2
Plaintiff seeks to have the Court “strike” the Defendants’ “amended answer.”
Defendants did not file an “amended answer,” though they did file an Answer to the
Amended Complaint. See dkt. # 33. Plaintiff filed an Answer to the Counterclaims in
the Defendants’ Answer. See dkt. # 37. Plaintiff’s grounds for “striking” the answer and
affirmative defenses are grounds for a motion to dismiss, not a motion to strike, and the
time has passed for filing such a motion. See FED. R. CIV. P. 12(a)(1)(B) (“A party must
serve an answer to a counterclaim or crossclaim within 21 days after being served with
the pleading that states the counterclaim or crossclaim.”). The Court will not “strike” the
answer and crossclaims in question, which are immaterial in any case. The Court has
found that summary judgment is appropriate for the Plaintiff.
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D. Amended Caption
Plaintiff also requests that the Doe Defendants be deleted from the caption,
since “no parties other than the Defendants previously served in this action, have an
interest in or lien upon the Mortgaged Property. Plaintiff’s motion will be granted and
the Doe Defendants dismissed from the case.
E. New York State Department of Taxation and Finance
Plaintiff also seeks summary judgment against Defendant New York State
Department of Taxation and Finance. Plaintiff asserts that the Department is a
defendant “by virtue of possible unpaid corporate and/or franchise taxes, which are
inferior to the mortgage lien of Plaintiff sought to be foreclosed.” The Department’s
notice of appearance states in relevant part that “[s]ervice of all papers and notices of
all proceedings in said action is hereby waived, except notice of discontinuance of the
action; executed judgment of foreclosure and sale; notice of sale; referee’s report
of sale and confirmation thereof; and notice of all proceedings to obtain surplus
monies.” Notice of Appearance, dkt. # 23 (emphases in original).
The Court will deny the motion in this respect. None of the claims in the
Amended Complaint name the Department. See dkt. # 20. The Department did not file
an action against the Plaintiff. The Department simply entered an appearance to be
kept abreast of the proceedings in the action and to signify some future interest in the
proceeds of any sale. Plaintiff does not point to any dispositive issue on which
summary judgment could be granted. The Court can only grant judgment when there is
a judgment to be had. In any case, at least two of the purposes of the Department’s
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entry of appearance–notice of executed judgment of foreclosure and sale and notice of
sale–have not yet transpired. The Department will receive the notices as requested.
IV.
CONCLUSION
For the reasons stated above, the Plaintiff’s motion for summary judgment, dkt. #
67, will be granted in part and denied in part, as follows:
1. The motion is GRANTED with respect to Plaintiff’s mortgage
foreclosure claims. Plaintiff’s request for a judgment of foreclosure is
hereby GRANTED;
2. Plaintiff’s request for appointment of a Referee is hereby DENIED with
leave to renew;
3. The motion is GRANTED with respect to Plaintiff’s damages claims,
and judgment is entered against the Defendants in the amount of
$5,382,931.99;
4. The motion is GRANTED with respect to Plaintiff’s claims for attorneys
fees, and Defendants are hereby ORDERED to pay LeClair Ryan
attorneys’ fees in the amount of $8,431.06 and attorneys’ fees in the
amount of $30,567.26 to Windels, Marx, Lane & Mittendorf, LLP;
5. Plaintiff’s request to strike Defendants’ counterclaims and affirmative
defenses is DENIED AS MOOT;
6. The Doe Defendants are hereby DISMISSED from the case and the
Clerk’s Office shall amend the caption to reflect this change; and
7. The motion is DENIED with respect to the New York State Department
of Taxation and Finance.
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IT IS SO ORDERED
Dated:October 17, 2016
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