Opinion
08 Civ. 11320 (DAB)
September 29, 2010, Decided. September 29, 2010, Filed
For SPCP Group, LLC, Plaintiff, Counter Defendant: Prassana Mahadeva, LEAD ATTORNEY, Mahadeva, PLLC, White Plains, NY; Robert Michael Hirsh, Arent Fox LLP(New York), New York, NY.
For Robert A. Russell, Defendant, Counter Claimant: David B Simpson, LEAD ATTORNEY, Stein Simpson & Rosen, P.A., New York, NY; Donald S. Snider, Snider Law Office, Mamaroneck, NY.
DEBORAH A. BATTS, United States District Judge.
Plaintiff SPCP Group ("Plaintiff") entered into a series of commercial loans with various entities owned or controlled by Defendant Robert A. Russell ("Defendant") and the loan amounts are indisputably due and owing. The loans are secured by mortgages or deeds of trust on real property in Idaho, New Mexico and Nevada and Defendant personally guarantied these loans. Plaintiff has instituted foreclosure or other proceedings in these states to recover the owed amounts. Plaintiff also seeks recovery in this action.
Plaintiff now moves for Summary Judgment under Fed. Rule Civ. P. 56. seeking judgment on the owed amounts. Defendant seeks a stay of this case until the out-of-state foreclosure proceedings are completed and all monies are credited towards any net deficiency.
For the reasons below, the Court GRANTS Plaintiff's Motion for Summary Judgment and DENIES Defendant's Cross-Motion to Stay.
I. FACTUAL BACKGROUND
Between the months of February and June of 2007, Plaintiff made a series of commercial loans to entities owned and/or controlled by Defendant. (Pl. 56.1 Stmt. ¶ 1.) These commercial loans, as defined infra, included: (1) the Copper Sage Note and Guaranty; (2) the SVRB Note 1 and Guaranty; (3) the SVRB Note 2 and Guaranty; (4) the South Boise Note and Guaranty; (5) the I-40 Gateway Note and Guaranty; (6) the Precious Gem Note and Guaranty (the "Russell Loans"). (See generally Pl. 56.1 Stmt.) These loans were made at the request of Defendant and all these loans were unconditionally guarantied by Defendant. (Pl. 56.1 St. ¶¶ 1, 3, 7, 11, 14, 17, 20.)
Despite due demand by Plaintiff, Defendant has failed to make a single debt service payment to Plaintiff under the Russell Loans since the end of 2007. (See Cooney Decl. dated May 1, 2009.) While the parties have made unsuccessful efforts at settlement or some type of workout on the Russell Loans, Defendant is currently in breach of contract of his several guaranties and currently in default. (Pl. 56.1 Stmt. ¶¶ 23, 25-31.)
Plaintiff's Complaint also included allegations regarding a February 13, 2007 loan to Franklin/Stratford Investments LLC and guaranty by Defendant. (Pl. 56.1 Stmt. ¶ 13.) However, on May 13, 2009, a non-judicial foreclosure sale resulted in proceeds of $600,000 - sufficient to satisfy Defendant's obligations to Plaintiff under the Franklin/Stratford Note and Guaranty. Plaintiff has withdrawn this claim.
A. The Copper Sage Note and Guaranty
On approximately April 17, 2007, at the request of Defendant, Plaintiff loaned DR Financial LLC $2,556,000.00, as evidenced by a promissory note dated April 17, 2007 (the "Copper Sage Note"). (Pl. 56.1 Stmt. ¶ 2.) Defendant unconditionally guarantied payment and performance of the Copper Sage Note by executing a guaranty ("Copper Sage Guaranty"). (Pl. 56.1 Stmt. ¶ 3.)
Plaintiff alleges it is entitled to entry of judgment against Defendant Russell in connection with his obligations under the Copper Sage Guaranty and Copper Sage Note in the amount $3,019,085.89 as of December 26, 2008, plus interest, expenses and reasonable attorneys fees. (Pl. 56.1 Stmt. ¶ 4.) Defendant asserts that it is only liable for any deficiency under the Copper Sage Guaranty and Copper Sage Note after foreclosure proceedings. (Def. 56.1 Stint. ¶ 4.)
B. The SVRB Notes and Guaranty
On approximately May 14, 2007, at Defendant's request, Plaintiff loaned Platinum Properties 2, LLC $1,281,673.35, as evidenced by a promissory note dated May 14, 2007 (the "SVRB Note 1"). (Pl. 56.1 Stmt. ¶ 5.) On approximately May 14, 2007, at Defendant's request, Plaintiff loaned Platinum Properties 2, LLC $1,569,375.00, as evidenced by a promissory note dated as of May 14, 2007 (the "SVRB Note 2"). (Pl. 56.1 Stmt. ¶ 6.) Defendant unconditionally guarantied payment and performance of the SVRB Note 1 and SVRB Note 2 by executing a guaranty dated May 14, 2007 ("SVRB Guaranty"). (Pl. 56.1 Stmt. ¶ 7.)
Plaintiff alleges it is entitled to entry of judgment against Defendant in connection with his obligations under the SVRB Notes Guaranty with respect to the SVRB Note 1 in the amount of $1,566,671.07 as of December 26, 2008, plus interest, expenses and reasonable attorneys fees. (Pl. 56.1 Stmt. ¶ 8.) Plaintiff also alleges it is entitled to entry of judgment against Defendant in connection with his obligations under the SVRB Notes Guaranty with respect to the SVRB Note 2 in the amount of $1,649,360.35 as of December 26, 2008, plus interest, expenses and reasonable attorneys fees. (Pl. 56.1 Stmt. ¶ 9.) Defendant asserts that it is only liable for any deficiency under the SVRB Notes Guaranty with respect to the SVRB Notes 1 and 2 after foreclosure proceedings. (Def. 56.1 Stmt. ¶ 9.)
C. The South Boise Note and Guaranty
On approximately June 29, 2007, at Defendant's request, Plaintiff loaned South Boise Distribution Center, Inc. $9,500,000.00, as evidenced by a promissory note dated June 29, 2007 (the "South Boise Note"). (Pl. 56.1 Stmt. ¶ 10.) Defendant unconditionally guarantied payment and performance of the South Boise Note by executing a guaranty. (the "South Boise Guaranty"). (Pl. 56.1 Stmt. ¶ 11.)
During the pendency of this matter, foreclosure has been completed on this property. (Mahadeva Decl. dated June 10, 2010 ¶ 6.) Plaintiff obtained an appraisal of the South Boise property as of the foreclosure sale date of March 6, 2009, and the fair market value of the property was determined to be $5,985,000.00. (Mahadeva Decl. dated June 10, 2010 ¶ 6.) Accounting for taxes Defendant failed to pay (in the amount of $103,209.31) and after deducting the fair market value of the property as of the sale date from the indebtedness due as of April 20, 2009 ($10,822,083.33), Plaintiff is owed $4,940,292.64, plus interest, fees and costs from April 30, 2009 through date of entry of judgment. (Mahadeva Decl. dated June 10, 2010 ¶ 6.) Defendant admits that it is liable for any deficiency under the South Boise Note after foreclosure proceedings. (Def. 56.1 Stmt. ¶ 12.)
D. The I-40 Gateway Note and Guaranty
On approximately February 13, 2007, at Defendant's request, Plaintiff loaned I-40 Gateway West LLC $3,987,054.82, as evidenced by a certain promissory note dated February 13, 2007 (the "I-40 Gateway Note"). (Pl. 56.1 Stmt. ¶ 16.) Defendant unconditionally guarantied payment and performance of the I-40 Gateway Note by executing a guaranty (the "I-40 Gateway Guaranty"). (Pl. 56.1 Stmt. ¶ 17.) Due to a non-judicial foreclosure proceeding on a cross-collateralized loan, excess proceeds of $21,377.81 were applied to the I-40 Gateway loans. (Cooney May 21, 2009 Decl. ¶¶ 9-11.)
Plaintiff is entitled to entry of judgment against Defendant in connection with his obligations under the I-40 Gateway Note in the amount of $2,215,031.99 as of April 30, 2009, plus interest, expenses and reasonable attorneys fees. (Cooney May 21, 2009 Decl. ¶¶ 9-11; Pl. 56.1 Stint. ¶ 18.) Defendant asserts that it is only liable for any deficiency under the 1-40 Gateway Note after foreclosure proceedings. (Def. 56.1 Stmt. ¶ 18.)
E. The Precious Gem Note and Guaranty
On approximately March 6, 2007, at Defendant's request, Plaintiff loaned Precious Gem Investments LLC $1,300,000.00, as evidenced by a promissory note dated March 6, 2007 (the "Precious Gem Note"). (Pl. 56.1 Stmt. ¶ 19.) Defendant unconditionally guarantied payment and performance of the Precious Gem Note by executing a guaranty (the "Precious Gem Guaranty"). (Pl. 56.1 Stmt. ¶ 20.)
During the pendency of this action, on May 13, 2009, a non-judicial foreclosure sale this property was completed. (Mahadeva Decl. dated June 10, 2010 ¶ 6.) The fair market value of the property as of the foreclosure sale date was $1,525,000.00. (Mahadeva Decl. dated June 10, 2010 ¶ 6.) Plaintiff credited that amount against the indebtedness due and owing as of April 30, 2009 under the Precious Gem loan, plus outstanding real estate taxes for 2007 and 2008 in the amount of $40,874.37. (Mahadeva Decl. dated June 10, 2010 ¶ 6.) Plaintiff is currently owed an amount not less than $350,354.94. Defendant admits that it is liable for any deficiency under the Precious Gem Note after foreclosure proceedings. (Def. 56.1 Stmt. ¶ 21.)
II. DISCUSSION
A. Summary Judgment Standard
The standards governing motions for summary judgment are well-settled. A court may grant summary judgment only where there is no genuine issue of material fact and the moving party is therefore entitled to judgment as a matter of law. See Fed R. Civ. P. 56 (c); accord Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). Summary judgment should be denied "if the evidence is such that a reasonable jury could return a verdict" in favor of the non-moving party. See NetJets Aviation, Inc. v. LHC Commc'ns, LLC, 537 F.3d 168, 178-79 (2d Cir. 2008).
In deciding a motion for summary judgment, the Court must construe the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in the non-moving party's favor. In re "Agent Orange" Prod. Liab. Litig., 517 F.3d 76, 87 (2d Cir. 2008).
A. This Action can Proceed to Judgment
It is undisputed by the parties that Plaintiff made the Russell Loans - a series of loans to commercial entities - that were personally guarantied by Defendant and are now due and owing. Plaintiff's motion before the Court is to receive summary judgment on its undisputed breach of contract claims and proceed toward final judgment. Defendant opposes Plaintiff's motion for summary judgment and asserts his own cross-motion to stay on the defense that Plaintiff cannot seek judgment in this Court as there are pending out-of-state foreclosure proceedings on the Russell Loans that could satisfy the amounts owed to Plaintiff. Defendant's argument is without merit.
Under New York's Real Property and Proceedings Law ("R.P.A.P.L"), where the property is located in New York, a plaintiff must make an "election of remedies," i.e., the holder of a bond and mortgage has a choice: (1) she may proceed at law to bring an action on the debt as evidenced by the note or bond; or (2) she may proceed at equity by bringing an action to foreclose the mortgage. See, e.g., N.Y.R.P.A.P.L. § 1301; Chase Manhattan Bank, N.A. v. Reale, 1992 U.S. Dist. LEXIS 15185, 1992 WL 297576 (S.D.N.Y. 1992); In re 1020 Warburton Ave. Realty Corp., 127 B.R. 333 (Bkrtcy. S.D.N.Y. 1991).
However, it is well settled that such an election need not be made where the property at issue is located outside of the State of New York. See Chase Manhattan Bank, 1992 U.S. Dist. LEXIS 15185, 1992 WL 297576 at *4)(holding that it is well settled that an election need not be made where the property at issue is located outside New York); see also Fielding v. Drew, 94 A.D.2d 687, 463 N.Y.S.2d 15, 16 (1st Dep't 1983) (citing Provident Sav. Bank & Trust Co. v. Steinmetz, 270 N.Y. 129, 200 N.E. 669 (1936)).
Defendant argues, inter alia, that mortgage notes governed by and construed by New York State law should still be subject to the election of remedies under N.Y.R.P.A.P.L. § 1301. He also argues that since New York courts have applied other sections of New York's R.P.A.P.L. as applicable where there is an out-of-state proceeding, then Section 1301 should apply here. However, Defendant can point to no case that overrules or truly distinguishes the line of cases starting with Provident Sav. Bank & Trust Co., which provides that there is no need for an election of remedies where the property is located outside of New York. When applying New York law, this Court is not empowered to act in contravention of what New York says regarding its own law.
As New York law does not preclude Plaintiff's claims from proceeding to final judgment while foreclosure proceedings proceed in other states, Defendant's defenses are insufficient as a matter of law. In addition, Defendant has raised no triable issue of fact. Accordingly, summary judgment is granted to the Plaintiff's breach of contract claims on (1) the Copper Sage Note and Guaranty; (2) the SVRB Note A and Guaranty; (3) the SVRB Note B and Guaranty; (4) the South Boise Note and Guaranty; (5) the I-40 Gateway Note and Guaranty; (6) the Precious Gem Note and Guaranty. Accordingly, Defendant's Cross-Motion to Stay is denied.
B. A Sum Certain Judgment is Appropriate
Defendant argues that for the guaranties on the properties located in Idaho (South Boise and Precious Gem), Plaintiff agreed that the amount owed would be the difference between the amount owed on the note minus the fair market value of the property. See Def's Memo of Law, Ex. 2. The Court disagrees. The email exchange in Exhibit 2 of Defendant's Memo of Law is merely an acknowledgement by Plaintiff's counsel of his interpretation of Idaho law in the course of negotiations - which broke down and resulted in the Motion before the Court. The exchange between counsel does not bind Plaintiff in any way. With the exception of arguing that there was an agreement over the Idaho properties, Defendant has never challenged in this Court Plaintiff's recovery calculations on the foreclosure of various properties and how those recoveries should be deducted from the amount owed on the guaranties. The only issue before this Court is the amount of the guaranty, plus applicable interest, costs and fees minus any actual recovery. There can be no dispute as to these numbers. Accordingly, a sum certain amount for judgment on each guaranty is appropriate in this case.
III. CONCLUSION
For the reasons below, the Court GRANTS Plaintiff's Motion for Summary Judgment and DENIES Defendant's Cross-Motion to Stay. Within 14 days of the date of this Order, Plaintiff shall submit to the Court a proposed Order of Judgment for a sum certain, along with a supporting affidavit and attaching documentation that fully describes how Plaintiff arrived at its calculations. There shall be no double recovery.
SO ORDERED.
Dated: New York, New York
September 29, 2010
/s/ Deborah A. Batts
Deborah A. Batts
United States District Judge