In re Joe's Friendly Serv. & Son, Inc.
| Decision Date | 11 August 2022 |
| Docket Number | Case No. 8-14-70001-reg, Case No. 8-14-70002-reg (Jointly Administered),Adv. Pro. No.: 8-16-8035-reg |
| Citation | 645 B.R. 94 |
| Parties | IN RE JOE'S FRIENDLY SERVICE & SON, INC., d/b/a Thatched Cottage at the Bay, Debtor. In re Thatched Cottage LP, Debtor. Bethpage Federal Credit Union and Business Services Group, LLC, Plaintiffs, v. The Town of Huntington, Joseph F. Cline, Individually, Richard Vacchio, Individually, and Terence "Terry" McNally, Individually, Defendants. |
| Court | U.S. Bankruptcy Court — Eastern District of New York |
Andrew W. Covey, Peoria, IL, for Plaintiff.
DECISION ON LIABILITY
This adversary proceeding comes before the Court in the jointly-administered cases of Joe's Friendly Service & Son, Inc., d/b/a Thatched Cottage at the Bay ("Joe's Friendly") and Thatched Cottage LP ("Thatched LP") (together, the "Debtors"). The Plaintiffs, Bethpage Federal Credit Union ("BFCU") and its affiliate Business Services Group, LLC ("BSG") (together, the "Plaintiffs"), assert constitutional due process and equal protection violations pursuant to 42 U.S.C. § 1983, and state-law tort and negligence claims arising from the allegedly improper "placarding" of the Debtors’ property (the "Property") by the Town of Huntington (the "Town") and certain of its employees (the "Individual Defendants") (together, the "Defendants"), and the failure to remedy the consequences of their improper acts for almost a year and a half.
Plaintiffs allege that the Defendants’ actions, effectively condemning the Property, were perpetrated as part of a scheme with the Debtors’ former owner, Ralph Colamussi ("Colamussi") designed to interfere with the bankruptcy court-ordered auction sale of the Thatched Cottage catering hall and real property. The Town's role in this alleged scheme was the improper use of its enforcement powers to make the Property in the hands of a third-party purchaser economically unfeasible at the agreed upon contract price. The Town allegedly raised issues with the winning bidder at auction, including but not limited to, requiring a licensing agreement with respect to an alleged encroachment on Town property that had not previously been enforced as against Colamussi. The Town also raised structural concerns, brought to their attention by Colamussi on the verge of the sale closing, that had not been previously raised. While the Town was in active negotiations with the winning bidder to come to an agreement to remedy the alleged defects at the Property, the Defendants, with no prior notice given to the bankruptcy trustee, the winning bidder or BFCU who held the mortgage on the Property, effectively condemned the Property by posting the placard which prohibited any person from entering the building on penalty of $15,000 fine and/or six months imprisonment. To justify their actions, the Defendants’ position is that, relying exclusively on engineering reports delivered to the Town by Colamussi, an emergency existed which required immediate action without notice.
Within a week after the placarding the winning bidder walked away from the sale and BFCU, as backup credit bidder was required by this Court's order to purchase the Property.1 Plaintiffs assert that the Defendants’ actions damaged them because they were unable to sell the Property for a period of almost two years, and then only for a price far below the original sale price and at a significant discount from BFCU's lien. Plaintiffs allege that the placarding of the Property was done without justification, without following proper procedure, and was done in order to further Colamussi's objective of preventing a sale to a third party.
After eighteen days of trial where the Court heard from ten witnesses and examined over 150 exhibits, the Court finds that the Plaintiffs have not proven that the Town's placarding of the Property was part of a scheme with Colamussi. The scheme alleged by the Plaintiffs hinges on Colamussi's connections with the Town: that his father, sister and sister-in-law all worked for the Town at different times; that the Thatched Cottage was an iconic catering facility at which many Town functions were held; and that Colamussi was well-known in the community. All of this may be true, but the record does not support a finding that the Defendants’ actions were undertaken as part of a conspiracy with Colamussi to interfere with the court-ordered sale of the Property. The Plaintiffs’ argument is largely predicated on the theory that the Defendants’ primary goal was to assist Colamussi in a scheme to keep ownership of the Thatched Cottage and their actions should be viewed through that prism. However, the record demonstrates that the Defendants were in fact primarily concerned with remedying problems at the Thatched Cottage that they were previously aware of and did little to nothing to solve. Having an opportunity to address these issues with the change of ownership, the Defendants acted. It is the total disregard for the rights of these Plaintiffs that is the issue before this Court.
The record does support a finding that the Defendants’ actions were motivated by their desire to force the prospective purchaser to cure alleged infirmities at the Property that existed long before the auction sale of which the Town was fully aware for at least one year prior to the placarding. It is clear to the Court that the Defendants placarded the Property when they did, regardless of the safety of the structure, to ensure the remediation of these alleged deficiencies before any new owner of the Property could operate a business at that location. Whatever the Court may feel about such behavior, that is not the issue to be resolved in this case. What is before the Court is whether the Defendants’ conduct violated Plaintiffs’ constitutional rights.
There is no dispute that the Defendants placarded the Property without prior notice. It is clear from the record that the Defendants failed to follow proper procedures established in the Huntington Town Code prior to placing the placard. The Defendants’ excuse for not providing notice, i.e., that the condition of the Property presented an immediate danger to the public safety, is not borne out by the facts: the Property was fenced at the time of the placarding; the catering facility was closed; the Town had inspected the Property and issued an assembly permit for the Thatched Cottage only three months prior to the placarding; and there was a two-day delay between deciding to placard the property and the actual placarding, which belies any claim of emergency, and during which time notice of the intention to placard could surely have been given. These facts clearly demonstrate that there was no emergency.
Also, some aspects of the Defendants’ decision defy logic. The basis for the Defendants’ actions was the receipt by the Town of engineering reports given to them by Colamussi, who they believed at the time to be the owner of the Property, showing the building was unsafe. At no time did they question why Colamussi would present the Town with reports showing that the building was unsafe, nor did they inquire as to who the reports were prepared for or for what purpose. Also, the author of the engineering report upon which the Defendants apparently relied the most was an engineer with whom they had little, if any, familiarity. This Property was but a few miles from Town Hall yet no one from the Town conducted an independent inspection of the Property to confirm the conclusions contained in those reports. There appears to have been little to no discussion among the Individual Defendants of the proper Huntington Town Code procedures to follow prior to placarding, and the form of the placard and the reference to the applicable legal precedent was haphazard at best. Finally, presented with a situation that, according to their own testimony, they had never encountered before, no one consulted with the Town Attorney to discuss proper procedures to follow prior to placarding.
In the end, however, it is the Defendants’ failure to follow the Town's own processes put in place to satisfy constitutional due process requirements that require this Court to rule in favor of the Plaintiffs. The Court is being asked to excuse the failure to follow the law and the common sense of advising parties that have an interest in the subject property of the intent of the Town to effectively condemn the Property. The Defendants’ position is that their actions were motivated by the responsibility they had to protect the residents of the Town of Huntington from what they concluded was a dangerous situation at the Thatched Cottage, i.e., that they acted in the face of an emergency and therefore we should excuse whatever violations of the Plaintiffs’ rights might have occurred. However, where the Constitution of the United States is concerned the ends do not justify the means.
It is disturbing that the Defendants seem to believe that exercising their power in this manner was a perfectly acceptable tactic in achieving goals they believed were in the best interest of the public. However, violating the rights of anyone should never be permitted as just another card in the arsenal of the government. The Court finds that the Defendants knowingly violated the Plaintiffs’ constitutionally protected rights and this should never be permitted to go unchecked.
For the reasons that follow the Court finds the Town, Cline and Vacchio are liable for violations of the Plaintiffs’ due process rights as asserted in the fourth cause of action of the Amended Complaint. The Plaintiffs’ claims for violation of their rights to equal protection (fifth cause of action) will be dismissed as against all Defendants as will the state claims asserted in the first, second and third causes of action of the Amended Complaint. All claims against McNally will be dismissed. This represents this Court's decision on liability. The trial will continue as to damages.
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