Alterna Mortgage Income Fund, LLC v. GS Holdings-Brookside, Ltd. et al

Filing 69

DECISION AND ENTRY GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (Doc. 62 ) AGAINST DEFENDANTS METZGER, FEDERER, SANSALONE AND MCCARTY DBA MCCARTY PUMP SERVICE. Signed by Judge Timothy S. Black on 11/4/2013. (mr1)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
ALTERNA MORTGAGE INCOME
FUND, LLC,

:
:
:
Plaintiff,
:
:
vs.
:
:
GS HOLDINGS-BROOKSIDE, LTD., et al., :
:
Defendants.
:

Case No. 3:12-cv-252
Judge Timothy S. Black

DECISION AND ENTRY GRANTING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT (Doc. 62) AGAINST DEFENDANTS METZGER, FEDERER,
SANSALONE AND MCCARTY DBA MCCARTY PUMP SERVICE
This civil case is before the Court on the Motion of Plaintiff Alterna Mortgage
Income Fund, LLC (“Alterna”) seeking summary judgment pursuant to Fed. R. Civ. P. 56
against the following Defendants: Stephen Metzger, Treasurer of Clark County, Ohio;
John S. Federer, Auditor of Clark County, Ohio; Anthony Sansalone; and Ronald
McCarthy d/b/a McCarty Pump Service (hereinafter referred to collectively in this
Decision and Entry as “Defendants”). (Doc. 62). The Defendants did not file
memoranda in opposition to Alterna’s Motion for Summary Judgment and the time for
doing so expired on or about August 19, 2013. Alterna’s Motion for Summary Judgment
is ripe for decision by the Court.

I. FACTS 1
1.

On July 27, 2012, Alterna filed its Complaint for Money Judgment,

Foreclosure and Other Equitable Relief (“the Complaint”). (Doc. 1). Alterna is the
owner and holder of the loan documents subject to this action, as described herein
(collectively the “Loan Documents”). (Doc. 1-2).
2.

The Debtor GS Holdings-Brookside (“Debtor”) is the owner of the subject

real property (the “Real Property”), as described in the Complaint, and in the Loan
Documents (including the Mortgage), commonly known as 1962 Mahar Road, South
Vienna, Clark County, Ohio and 2335 West First Street, Springfield, Clark County, Ohio,
and more particularly identified in the property description attached to the subject Real
Estate Mortgage Assignment of Leases and Rents and Security Agreement. (Doc. 1-2;
Doc. 33). The Real Property contains an operating residential mobile home community.
3.

On or about May 1, 2009, Debtor entered into, executed and delivered to

Alterna Capital Funding, LLC (the “Initial Lender,” and predecessor-in-interest to
Alterna by virtue of assignment) a Promissory Note in the original principal amount of
$2,300,000.00, which accrues interest at a fixed rate of 15% per annum, with a final
maturity date of May 8, 2010. (Doc. 1-3). The Initial Lender’s assignment (the

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This statement of facts, in large part, incorporates Alterna’s Proposed Undisputed Facts (Doc. 62-1),
filed in compliance with this Court’s Standing Order Governing Civil Motions for Summary Judgment. Pursuant to
this Court’s Standing Order, “[a]ll material facts set forth in [the Movant’s Statement of proposed Undisputed Facts]
will be deemed admitted unless controverted by the” Opponent’s Response to Proposed Undisputed Facts and
Statement of Disputed Issues of Material Facts required by section (A)(2) of this Court’s Standing Order. In this
case, no party filed any opposition to Alterna’s Motion for Summary Judgment nor any Response to Alterna’s
Statement of Proposed Undisputed Facts.

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“Assignment”) of its rights under the Note is evidenced by an Assignment of Mortgage
and other Loan Documents. (Doc. 1-4). The Assignment was recorded on July 28, 2009
as Instrument No. 200900011484 in the Official Records of Clark County. (Doc. 1-4).
The Initial Lender also assigned to Alterna the Assignment of Agreements, memorialized
on June 7, 2012, and deemed effective as of May 1, 2009 (the aforementioned documents
referred to collectively as “the Assignments.”) (Doc. 1-2; Doc. 1-7).
4.

The amounts due and owing under the Note are secured by the Real Estate

Mortgage, Assignment of Leases and Rents and Security Agreement granted by Debtor
and Forest Lake Campground and R.V. Center, LLC (“Forest Lake”) to the Initial
Lender, which was duly recorded on May 22, 2009 as Instrument No. 200900007928 DR
in the Official Records of Clark County. (Doc. 1-4). Through the Assignments, the
Initial Lender assigned its rights under the Mortgage to Alterna. (Doc. 1-2). As set forth
in the Mortgage, Debtor granted a good and valid and enforceable mortgage on, among
other things, the Real Property, which is described in more detail in the Mortgage and in
the Property’s legal description attached to the Mortgage.
5.

Alterna is the current owner and holder of the Note and Mortgage via the

transactions described herein and in the Complaint. (Doc. 1-2).
6.

The amounts advanced under the Note are also secured by UCC-1

Financing Statements (the “Financing Statements”) (Doc. 1-5); an Assignment of
Agreements Affecting Real Estate (the “Assignment of Agreements”) (Doc. 1-5);
a Commercial Security Agreement (the “Security Agreement”) (Doc. 1-6, PAGEID 61);
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a Loan Agreement (the “Loan Agreement”) (Doc. 1-6, PAGEID 72); a Hazardous
Substance Certificate and Indemnification Agreement (the “Indemnity”) (Doc. 1-6,
PAGEID 79); and a Further Assurance and Compliance Agreement (Doc. 1-7). The
Security Agreement provided additional security for the payment of Debtor’s obligations
under the Note, a first position security interest in all of Debtor’s non-real property assets,
including fixtures, and all personal property and the proceeds thereof (“the Personal
Property”). That first position security interest was properly perfected by the filing of a
UCC-1 financing statement on July 28, 2009, and was assigned to Alterna pursuant to the
Assignments.
7.

By virtue of the Assignments, Alterna has a first and best lien on the Real

Property, after property taxes and assessments, and a first and best lien on the Personal
Property (referred to collectively as the “Property”). Alterna also has the first and best
interest in the Rents derived from the Property based on the Assignment of Rents set
forth in the Mortgage.
8.

Debtor and Forest Lake are in default of their obligations under the Note

and Mortgage, and as a result of, among other things, Debtor’s and Forest Lake’s failure
to pay all amounts due and owing as and when due in accordance with the terms of the
Note and Mortgage, including substantial property taxes in the approximate amount of
$200,000.00. (Doc. 1-2).
9.

Prior to filing the Complaint, Alterna obtained a preliminary judicial report

(“PJR”), which it filed with the Complaint. (Doc. 1-8). The PJR, prepared by a duly4

licensed title company, reflects that the Mortgage is the first and best lien on the
Property. (Doc. 1-8).
10.

By their express terms, the Note and Mortgage are cross-defaulted with

one another. (Doc. 1-2).
11.

The Note called for Debtor to make the following payments: Commencing

on June 8, 2009, and continuing on the 8th day of each and every month thereafter
through and including April 8, 2010, monthly interest only payments shall be due and
payable; the entire unpaid principal balance of the Note, together with all accrued interest
due thereon, shall be due and payable on May 8, 2010 (the “Maturity Date”). (Doc. 1-2;
Doc. 1-3).
12.

Debtor failed to make the payments required under the Note, which failure

is an event of default under the Note and Mortgage. Debtor has failed to cure its default
and such failure led to the appointment of the Receiver. (Doc. 33).
13.

As a result of Defendant’s defaults, including failure to pay the full amount

of the Mortgage Indebtedness under the Note and Mortgage, Alterna filed its Complaint
seeking, among other relief, foreclosure of the Mortgage.
14.

Due to the aforementioned defaults, the conditions of the Mortgage have

been broken and the same have become absolute. (Doc. 1-4). In light of the defaults
under the Note and Mortgage, the Mortgage Indebtedness is presently due and owing to
Alterna.

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15.

As further security for the repayment of the Loan, the Mortgage at

Paragraph 7 assigns and transfers to Alterna all rents, income, issues and profits of the
Property, and all right, title, and interest of Debtor and Forest Lake in and under any
leases and tenancies and occupancy agreements of any nature whatsoever (and any
extensions and renewals thereof) now or hereafter affecting the Property. Pursuant to
Paragraph 7, Debtor and Forest Lake further empowered Alterna, its, agents or attorneys,
to demand, collect, sue for, receive, settle, compromise and give acquittances for all of
the rents that may become due under the Leases and to avail itself of and pursue all
remedies for the enforcement of the leases and rights thereunder. Alterna is further
vested with full power and authority to use all measures, legal and equitable, deemed
necessary or proper by Alterna to enforce the assignment of rents, to collect the rents
assigned, and/or to cure any default and perform any covenant of Debtor and/or Forest
Lake as landlord under any leases. Debtor and Forest Lake further empowered Alterna to
use and apply all such rents and other income of the Property to the payment of the loan
and all interest thereon and any other indebtedness or liability of Debtor and Forest Lake
to Alterna.
16.

(Doc. 1-4).
The Assignment of Agreements grants additional collateral to secure the

Note, including, inter alia, Permits and Licenses, Contracts, and Leases, which include by
definition in the Mortgage, all written or verbal agreements for the leasing, letting, rental,
use or occupancy of all or any portion of the Property, together with the rents, issues and
profits arising at any time therefrom, as well as any advance rents, security deposits or
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other payments made or to be made pursuant thereto (“the Additional Collateral”). (Doc.
1-5). Upon default under the Note, Mortgage, or any Permits, Contracts, or Leases, as
defined in the Assignment of Agreements, without notice and without regard to the
adequacy, value or condition of the security, and with or without court action, or by a
receiver, Alterna may exercise total control over the Additional Collateral, which
includes without limitation, taking over and enjoying the benefits of the Leases,
exercising Debtor’s rights under the Additional Collateral and performing all acts in the
same manner and to the same extent as Debtor might do. Under the Assignment of
Agreements, Alterna is further authorized to enter upon the Property and collect, sue for
and receive in its own name the rents accrued by unpaid and in arrears at the date of such
default, as well as the rents thereafter accruing and becoming payable. (Doc. 1-5).
17.

Based on the aforementioned defaults, there is also a default under

the Assignment of Rents. (Doc. 1-4).
18.

By virtue of Debtor’s default under the Note, the Mortgage, and other Loan

Documents, Alterna is entitled to exercise all rights under the Mortgage and the
Assignment of Agreements, including but not limited to (a) receiving a full and complete
accounting of all amounts received in connection with or relating to the Property,
including but not limited to rents and lease payments received; and (b) allowing Alterna
to collect all of such amounts and to apply such amounts to the balance owed to it under
the Judgment (see Paragraph 20, supra) or otherwise.

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19.

Default judgments have been entered in Alterna’s favor against Defendants

Roto- Rooter Services Company, JGR Properties, Inc., Debtor, and Forest Lake. The
default judgment against Debtor was awarded in the amount of $2,908,250.00 (plus
prejudgment and postjudgment interest). (Doc. 47).
21.

Defendant Clark County, Ohio Treasurer Stephen T. Metzger and Clark

County, Ohio Auditor John S. Federer filed a joint Answer claiming a first lien in the
Real Property arising from taxes, assessments, interest, penalties, and charges due and
owing to Clark County. While the foregoing amounts may either be in dispute or not yet
liquidated, Alterna does not dispute the validity of Clark County’s lien as to the Real
Property.
22.

Defendant Sansalone filed an Answer (Doc. 14) claiming an interest in the

Real Property by virtue of a mortgage dated May 28, 2009, and recorded on June 1, 2009
with the Clark County, Ohio Recorder’s Office.
23.

Defendant McCarty filed an Answer (Doc. 22) claiming an interest in the

Real Property by virtue of a Mechanic’s Lien in the amount of $7,048.76 dated October
12, 2010, and recorded on October 13, 2010 with the Clark County Recorder’s Book
1914, Pages 1032 et seq. An affidavit of Defendant McCarthy on file with the Clark
County Recorder, states that the first construction labor performed on the Property
commenced February 5, 2010. (Doc. 1-9, PAGEID 128).

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II. STANDARD OF REVIEW
A motion for summary judgment should be granted if the evidence submitted to
the Court demonstrates that there is no genuine issue as to any material fact and that the
Alterna is entitled to summary judgment as a matter of law. Fed. R. Civ. P. 56; see also
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 247-248 (1986). “Summary judgment is only appropriate ‘if the
pleadings, depositions, answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law.’” Keweenaw Bay Indian
Comm. v. Rising, 477 F.3d 881, 886 (6th Cir. 2007) (quoting Fed. R. Civ. P. 56(c)).
“Weighing of the evidence or making credibility determinations are prohibited at
summary judgment - rather, all facts must be viewed in the light most favorable to the
non-moving party.” Id.
Once “a motion for summary judgment is properly made and supported, an
opposing party may not rely merely on allegations or denials in its own pleading[.]”
Viergutz v. Lucent Technologies, Inc., 375 Fed. Appx. 482, 485 (6th Cir. 2010) (citation
omitted). Instead, the party opposing summary judgment “must - by affidavits or as
otherwise provided in this rule - set out specific facts showing a genuine issue for trial.”
Id. (citation omitted). In fact, Fed. R. Civ. P. 56(c) states that “[a] party asserting that a
fact . . . is genuinely disputed must support the assertion by . . . citing to particular parts
of materials in the record . . . or . . . showing that the material cited do not establish the
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absence . . . of a genuine dispute[.]” Where “a party fails . . . to properly address another
party’s assertion of fact as required by Rule 56(c), the court may . . . consider the fact
undisputed for purposes of the motion.” Fed. R. Civ. P. 56(e)(2).
III. ANALYSIS
Alterna seeks judgment against Defendants Metzger, Federer, Sansalone and
McCarthy finding that, subject only to valid, unpaid real estate taxes and/or assessments
of record against the Real Property, Alterna’s rights in the Real Property are first,
superior, and prior to any rights, liens, or security interests of any person or entity in and
to the Property, including any of the Claimants, or any other individual or entity. Alterna
also seeks a judgment finding that Alterna’s rights in the Personal Property are first and
best without exception.
“Ohio mortgage priority law can be summarized as ‘first in time, first in right.’”
Home Sales, Inc. of Delaware v. Burris, No. 10CA6, 2011 WL 2623673, *2 (Ohio App.
Jun. 28, 2011). Pursuant to Ohio Rev. Code § 5301.23, “[a]ll properly executed
mortgages shall be recorded in the office of the county recorder of the county in which
the mortgaged premises are situated and shall take effect at the time they are delivered to
the recorder for record. . . [t]he first mortgage presented shall be the first recorded, and
the first mortgage recorded shall have preference.” Accordingly, Ohio courts hold that
“the first mortgage recorded will generally have priority over a subsequent recorded
mortgage.” Home Sales, Inc., 2011 WL 2623673 at *2 (citing Ohio Rev. Code
§ 5301.23(A)); see also DB Midwest, LLC v. Pataskala Sixteen, LLC, No. 8-08-18, 2008
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WL 5330476, *4 (Ohio App. Dec. 22, 2008). In addition, “a mortgage filed prior to the
commencement of construction work takes priority over liens subsequently acquired and
filed.” In re BJ Packing, Inc., 158 B.R. 988, 991 (N.D. Ohio 1993).
Here, Alterna presents evidence that its mortgage lien on the Real Property has
priority over the mortgage interest of Defendant Sansalone and mechanics lien of
Defendant McCarthy. The Mortgage in which Alterna maintains in interest in the
property was recorded on May 22, 2009. (Doc. 1-4). The mortgage under which
Sansalone may have an interest was recorded June 1, 2009. (Doc. 1-8, PAGEID 120).
The mechanics lien asserted by McCarty, d/b/a McCarty Pump Service, was recorded
October 13, 2010, and the Affidavit for Mechanic’s Lien indicates that “[t]he first of the
labor or work was performed or material was furnished on the 5th day of February, 2010.”
(Doc. 1-9, PAGEID 128). No party has presented any evidence to the contrary in
opposition to Alterna’s Motion for Summary Judgment. Accordingly, Alterna’s Motion
for Summary Judgment (Doc. 62) is GRANTED.
IV. CONCLUSION
Based on the foregoing, Alterna’s Motion for Summary Judgment as to
Defendants Metzger, Federer, Sansalone and McCarty d/b/a McCarty Pump Service is
GRANTED. Accordingly, the Court concludes that, subject only to valid, unpaid real
estate taxes and/or assessments of record against the Real Property, Alterna’s rights in the
Real Property are first, superior, and prior to any rights, liens, or security interests of any
person or entity in and to the Property, including any of the Claimants, or any other
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individual or entity. Alterna’s rights in the Personal Property are first and best without
exception.
IT IS SO ORDERED.

Date: 11/4/13

s/ Timothy S. Black
Timothy S. Black
United States District Judge

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