Home Loan Inv. Bank, F.S.B. v. Goodness & Mercy, Inc.
| Decision Date | 30 March 2012 |
| Docket Number | 10-CV-4677 (ADS) (ETB) |
| Court | U.S. District Court — Eastern District of New York |
| Parties | HOME LOAN INVESTMENT BANK, F.S.B., f/k/a OCEAN BANK, F.S.B., Plaintiff, v. GOODNESS AND MERCY, INC.; MARY GILLIAM, HARRIET A. GILLIAM, NEW YORK STATE DEPARTMENT OF TAXATION & FINANCE, NEW YORK STATE WORKERS' COMPENSATION BOARD, THE UNITED STATES OF AMERICA, CAPITAL ONE BANK (USA), N.A. and JOHN DOE Nos. 1-100, Defendants. |
Holland & Knight, L.L.P.
Attorneys for the plaint iff
By: John Michael Toriello, Esq.
Patrick J. Sweeney, Esq., Of Counsel
By: Harriet A. Gilliam, Esq. pro se
New York State Department of Taxation & Finance
New York State Workers' Compensation Board
The United States of America
Presently before the Court are objections to a Report and Recommendation of United States Magistrate Judge E. Thomas Boyle dated January 4, 2012 addressing the calculation of damages in the above-captioned litigation between Home Loan Investment Bank ("Home Loan" or "the Plaintiff"), and Goodness & Mercy, Inc. ("G&M"), Mary Gilliam, and Harriet Gilliam ("the Defendants"). For the reasons set forth below, the Court accepts in part and modifies in part Judge Boyle's Report.
The facts of this case are fully set forth in this Court's previous decision denying the Defendants' motion to vacate the entry of default, see Home Loan Investment Bank. F.S.B. v. Goodness & Mercy. Inc. ("Home Loan I"), No. 10-CV-4677, 2011 WL 1701795 (E.D.N.Y. April 30, 2011), as well as Judge Boyle's Report and Recommendation dated January 4, 2012 ("the Report"). (Docket Entry # 41.) The Court assumes the parties familiarity with the facts and procedural history of this case.
In short, the Plaintiff commenced this mortgage foreclosure and deficiency judgment action on October 13, 2010, against the Defendants based on the Defendants alleged default under the terms of various agreements securing a Small Business Administration ("SBA") loan in the amount of $525,000.
Pursuant to the decision in Home Loan I denying the Defendants' motion to vacate the default, the Court entered a default and referred this matter Judge Boyle for an inquest as to damages, including reasonable attorneys' fees and costs and any other additional relief. Judge Boyle held a hearing on August 9, 2011 ("the Hearing"). At the Hearing, the Plaintiff presented the testimony of Peter R. St. Jean, the commercial workout manager for Home Loan and PatrickJ. Sweeney, counsel for the Plaintiff. Entered into evidence at the Hearing were the following documents: (1) Small Business Administration Note executed on December 15, 2006 by G&M in favor of Home Loan for $525,000 ("the Note"); (2) Mortgage and Security Agreement executed on December 15, 2006 by G&M, creating a mortgage lien in favor of Home Loan in the property known as 67 East Main Street, Riverhead, NY 11901 ("the Mortgage") ; (3) Collateral Mortgage and Security Agreement executed on December 15, 2006 by Mary Gilliam in favor of Home Loan ("the Collateral Mortgage"); (4) Running record of all transactions associated with the loan ("the loan transcript"); (5) invoices for all miscellaneous fees including property appraisals/inspections/taxes; use of phone pay system; and legal fees and costs; (6) Escrow account statement representing insurance premium payments made by Home Loan on behalf of the Defendants to secure insurance for the mortgaged premises; (7) Printout of Prime Rate used to determine the applicable interest rate for the loan; (8) Survey of Billing Rates to support the request for legal fees; and (9) three letters reflecting correspondence between the Plaintiffs and the Defendant post-dating the commencement of the instant action.
At the direction of Judge Boyle, subsequent to the hearing, the Plaintiff submitted the Declaration of Peter R. St. Jean in Support of Home Loan Investment Bank's Statement of Damages, attaching an invoice and check evidencing a $8,050 payment ("St. Jean Declaration") and the Declaration of Patrick Sweeney addressing the Plaintiff's request for attorneys' fees. In addition, both parties submitted supplemental memoranda addressing issues raised at the hearing, including: (1) the proper calculation of the amount due under the subject note and mortgage; (2) whether Judge Boyle should permit discovery of Mr. St. Jean's notes concerning a conversation that he purportedly had with Harriet Gilliam regarding a $42,680 lump sum payment; and (3) the calculation of attorneys' fees.
On January 4, 2012, Judge Boyle issued the Report, recommending that the Court grant the default judgment and award the Plaintiff the following damages:
(1) $509,460.35 in principal that is owed under the Note and Mortgage; (2) $50,067.77 in interest, with additional interest to be calculated through the date of judgment at a rate of $80.26 per day; (3) $8,437.60 in late fees, with additional late fees to be calculated through the date of judgment at a rate of $189.60 per month; (4) $25,343.65 in escrow fees; (5) $1,359.00 in miscellaneous fees; (6) $20,965.00 in attorney's fees; and (7) $3,213.90 in costs, for a total monetary award of $618,847.27, plus additional interest and late fees calculated through the date of judgment entered herein.
(Report at 17.)
The Defendants filed timely objections to the Judge Boyle's Report and the Plaintiff filed a timely response to the Defendants' objections.
A court is required to make a de novo determination as to those portions of the report and recommendation to which objections were made. 28 U.S.C. § 636(b)(1)(C); Grassia v. Scully, 892 F.2d 16, 19 (2d Cir. 1989). The phrase " de novo determination" in Section 636(b)(1)—as opposed to "de novo hearing"—was selected by Congress "to permit whatever reliance a district judge, in the exercise of sound judicial discretion, chose to place on a magistrate's proposed findings and recommendations." United States v. Raddatz, 447 U.S. 667, 676, 100 S. Ct. 2406, 65 L. Ed. 2d 424 (1980). Section 636 does not require a court "to rehear the contested testimony in order to carry out the statutory command to make the required 'determination,'" Id. at 674, 100 S. Ct. 2406. Rather, in making such a determination, a court may in its discretion review the record and hear oral argument on the matter. See Pan Am. World Airways. Inc. v. Int'l Bhd. of Teamsters, 894 F.2d 36, 40 n. 3 (2d Cir. 1990). Furthermore, a court may in its sound discretionafford a degree of deference to the magistrate judge's report and recommendation. See Raddatz. 447 U.S. at 676, 100 S. Ct. 2406, 65 L. Ed. 2d 424.
In a case where a party "makes only conclusory or general objections, or simply reiterates his original arguments, the Court reviews the Report and Recommendation only for clear error." Pall Corp. v. Entegris. Inc., 249 F.R.D. 48, 51 (E.D.N.Y. 2008) (quoting Barratt v. Joie, No. 96-CV-324, 2002 WL 335014, at *1 (S.D.N.Y. Mar. 4, 2002)). "Furthermore, even in a de novo review of a party's specific objections, the Court ordinarily will not consider arguments, case law and/or evidentiary material which could have been, but were not, presented to the magistrate judge in the first instance." Fairfield Fin. Mortg, Group. Inc. v. Luca, No. 06-CV-5962, 2011 WL 3625589, at *2 (E.D.N.Y. Aug. 16, 2011) (internal quotation marks omitted).
The Defendants main objection centers on a $42,680 lump sum payment by the Defendants on July 21, 2009, of which the Plaintiff allocated $35,238.73 to reduce interest and $7,441.27 to reduce the principal. The Defendants maintain that, in a July 21, 2009 conversation between Mr. St. Jean and Harriet Gilliam, Mr. St. Jean agreed, that in exchange for the lump sum payment, the Plaintiff "would grant an SBA waiver of three months on the payment of the loan" and waived all of the interest and late fees due and owing under the Note. (Pl.'s Obj. at 13.) As a result, the Defendants argue that the principal, interest, and late fee calculations should be substantially reduced. The Defendants further object to Judge Boyle's decision not to require the Plaintiff to produce the written notes of the July 21, 2009 conversation between Mr. St. Jean and Harriet Gilliam and his subsequent decision to calculate damages based on the assumption that the $42,680 lump sum payment was a "single installment payment" under the Note, rather than consideration for an oral modification of the Note.
In addition, the Defendants contend that Judge Boyle erred in awarding the Plaintiff: (1) compound interest; (2) post-acceleration late fees; (3) $8,050 in escrow fees; and (4) attorneys' fees at the requested amount. The Court addresses each of these objections in turn.
The Defendants contend that, in a July 21, 2009 conversation between Harriet Gilliam and Mr. St. Jean, the Plaintiff agreed that, in exchange for a lump sum payment of $42,680, the Defendant would waive all existing interest and late fees. This would result in a further reduction of principal, and corresponding reduction in the amount of late fees and interest currently due and owing based on the Defendants' default. The Defendants argue that Judge Boyle erred in calculating the applicable damages by failing to: (1) consider exceptions to the rule enforcing no-oral modification clauses and grant their request for the discovery to support those exceptions and (2) take into account equitable considerations when a lender has acted in bad faith as required by New York law.
Section 3 of the Note provides that the "Lender will apply each installment payment first to pay interest accrued to the day Lender receives the payment, then to bring principal current, then to pay any late fees, and will apply any...
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