LMREC III Note Holder, Inc. v. Hudson EFT LLC
| Decision Date | 01 September 2022 |
| Docket Number | 20-CV-5063 (KMK) |
| Parties | LMREC III NOTE HOLDER, INC, Plaintiff, v. HUDSON EFT LLC et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Sophia Louise Cahill, Esq.
Michael T. Driscoll, Esq.
Robert Sanford Friedman, Esq.
Ira Martin Schulman, Esq.
Sheppard, Mullin, Richter & Hampton LLP
New York, NY
Counsel for Plaintiff
Gary Scott Rosen, Esq.
Jared Michael Rosen, Esq.
Rosen Law LLC
Great Neck, NY
Counsel for Hudson Defendants
Michael Harold Maizes, Esq.
Maizes & Maizes, LLP
Bronx, NY
Counsel for Hudson Defendants
Adam Matthew Marshall, Esq.
Erik Ortmann, Esq.
Kaufman Dolowich & Voluck LLP
Woodbury, NY
Counsel for Defendants Clark & Gaccione
Kim P. Berg
Gould & Berg LLP
White Plains, NY
Counsel for Receiver
Latitude Management Real Estate Capital III (“LMREC”) Note Holder, Inc. (“Plaintiff”) brings this commercial mortgage foreclosure Action against Hudson EFT LLC (“Hudson”), Bridge Mechanical Corporation (“Bridge Mechanical”), GAC Builders Ltd. (‘GAC”), Geberth Electric Inc. (“Geberth”), Noble Elevator Company Inc. (“Noble”), Shawn's Lawns Inc. (“Shawn's Lawns”), Upper Restoration, Inc. (“Upper Restoration”), VSP Mechanical Inc (“VSP”), William Clarke (“Clarke”), Samuel Gaccione (“Gaccione”), Guido Subotovsky, Hugo Subotovsky, and John Does 1-10 (collectively, “Defendants”) involving real property located at 80 Main Street, Ossining, New York.
Before the Court are two Motions: 1) Plaintiff's Motion for Summary Judgment against Hudson, Guido Subotovsky, Hugo Subotovsky (the “Hudson Defendants”), Gaccione, and Clarke; and 2) Plaintiff's Motion for Default Judgment against VSP, Upper Restoration, Noble, Geberth, GAC, Bridge Mechanical, and Shawn's Lawns. (See Not. of Mot. (Dkt. No. 182).) For the reasons articulated below, the Motion for Default Judgment is denied, and the Motion for Summary Judgment is granted.
The following facts are taken from Plaintiff's Statement Pursuant to Local Rule 56.1 (), the Hudson Defendants' Statement Pursuant to Local Rule 56.1 (Hudson Defs.' Rule 56.1 Statement in Opp'n to Mot. for Summ. J ( ) (Dkt. No. 193)), Gaccione and Clarke's Statement Pursuant to Local Rule 56.1 (), and Plaintiff's Counter Statement Pursuant to Local Rule 56.1 (), and the admissible evidence submitted by the Parties. The facts are recounted “in the light most favorable to” the Hudson Defendants, Gaccione, and Clark, the non-movants on the claims subject to Federal Rule of Civil Procedure 56. Torcivia v. Suffolk County, 17 F.4th 342, 354 (2d Cir. 2021).
On September 19, 2017, LMREC entered into a Permanent Loan Agreement and a Building Loan Agreement (together, the “Loan Agreement”) with Hudson. (Pl.'s 56.1 ¶ 29.)[1]On the same day, Hudson executed a Consolidated Amended and Restated Mortgage Promissory Note (the “Permanent Loan Note”). (Id. ¶ 30.) Under the Permanent Loan Note, LMREC and Hudson consolidated prior notes secured by prior existing mortgages in the aggregate outstanding principal amount of $4,905,000. (Id. ¶¶ 30-31.) Hudson also executed a Building Loan Mortgage Promissory Note for $495,000. (Id. ¶ 34.) The Permanent Loan Note and the Building Loan Note (together, the “Note”) were both secured by a property located at 80 Main Street, Ossining, New York (the “Property”). (Id. ¶¶ 33, 36.) According to Clarke and Gaccione, the purpose of the loan was to finance Hudson's construction of a residential apartment building on the Property. (Clarke & Gaccione's 56.1 ¶ 78.) The Permanent Loan Security Instrument and the Building Loan Security Instrument (together, the “Security Instrument”) were recorded in the Office of the Westchester County Clerk on October 2, 2017. (Pl.'s 56.1 ¶ 38.) The Loan Agreement, the Note, and the Security Instrument are together known as the “Loan Documents.” (Id. ¶ 39.)
LMREC assigned the Loan Documents to Plaintiff as successor in interest. (Id. ¶ 40.) On or about September 19, 2017, the date of the assignment, LMREC transferred the Loan Documents to Plaintiff, which is now the present holder and owner of the Loan Documents. (Id. ¶ 42.) The assignment was memorialized in a Loan Agreement Assignment, which was recorded in the Office of the Westchester County Clerk on October 2, 2017. (Id. ¶¶ 40-41.)
According to Plaintiff, Hudson is in default under the Loan Documents because it has failed to make payments to Plaintiff since March 2020. (Id. ¶¶ 49-50; see also Clarke & Gaccione 56.1 ¶ 49.) Plaintiff also alleges non-monetary events of default. (See generally Am. Compl.) Plaintiff reached out to Hudson on March 10, 2020 and March 12, 2020 about the missed payment that was due on March 1, 2020, but received no response. (Pl.'s 56.1 ¶ 52.) On April 3, 2020, Plaintiff sent Hudson a Notice of Default by mail. (Id. ¶ 53.) Plaintiff also sent copies to Guido Subotovsky, Hugo Subotovsky Gaccione, and Clarke via email. (Id.) In the Notice of Default, Plaintiff notified Hudson that it was accelerating its obligations under the Loan Documents, specifically demanding that Hudson immediately pay Plaintiff a total of $5,588,131.41, which included the outstanding principal in the amount of $5,400,000, an exit fee in the amount of $108,000, and other payments due under the Loan Documents. (Id. ¶¶ 54-55.) The Notice of Default also notified Hudson that interest would accrue on its obligations under the Loan Documents until they were paid in full. (Id. ¶ 56.)
Plaintiff has calculated that, as of July 31, 2021, Hudson owes Plaintiff a total of $7,139,045.31, excluding attorney's fees and costs. (Id. ¶ 67.) This consists of the principal balance of $5,400,000, $4,244.05 in late payment fees, $29,362.50 in interest from February 1, 2020 through February 29, 2020, interest at the default rate in the amount of $997,438.76 from March 1, 2020 through July 31, 2021, an exit fee of $108,000, and receiver costs and receiver legal fees and costs of $600,000. (Id. ¶ 68.)
Plaintiff seeks partial summary judgment as to Hudson's liability on Count I of the Amended Complaint, which alleges that Plaintiff is entitled to foreclosure of the Property and demands $7,139,045.31 in relief. (See Not. of Mot.; Am. Compl. ¶¶ 78-81.)
Plaintiff filed its Complaint on July 1, 2020. (Dkt. No. 1.) On July 7, 2020, Plaintiff filed a Notice of Pendency. (Dkt. No. 28.) On August 5, 2020, the Hudson Defendants filed a stipulation by which Plaintiff and the Hudson Defendants jointly agreed to extend the Hudson Defendants' time to file an Answer. (Dkt. No. 38.) On August 10, the Hudson Defendants filed a letter outlining the reasons for their anticipated Motion To Dismiss the Complaint. (Dkt. No. 43.) On August 17, 2020, Plaintiff filed a response. (Dkt. No. 47.)
Meanwhile, on July 9, 2020, Plaintiff filed a proposed Order to Show Cause as to why an order should not be issued pursuant Federal Rule of Civil Procedure 66 appointing a receiver to take control of the property located at 80 Main Street, Ossining, New York. (Dkt. Nos. 32-35.) The Hudson Defendants filed an Opposition on August 14, 2020, (Dkt. No. 46), and Plaintiff filed a Reply on August 19, 2020. (Dkt. Nos. 49-51.) On August 21, 2020, after hearing oral arguments on the Order to Show Cause, the Court granted Plaintiff's request to appoint Andrew L. Herz (“Herz”) as Receiver. (See Dkt. (minute entry for Aug. 21, 2020); see also Dkt. No. 59.) On August 25, 2020, the Hudson Defendants filed a Notice of Interlocutory Appeal from the Order Appointing a Receiver. (Dkt. No. 60.)[2] On September 9, 2020, the Court signed an Order appointing counsel for the Receiver. (Dkt. No. 67.) Following the appointment of the Receiver, the Court has approved various interim disbursements to the Receiver and counsel for the Receiver. (See, e.g., Dkt. Nos. 104-105, 110, 118.)
On September 4, 2020, Plaintiff filed an Amended Complaint. (Dkt. No. 66.) On September 11, 2020, the Court signed the Plaintiff and the Hudson Defendants' stipulation agreeing to a briefing schedule for the Hudson Defendants' anticipated Motion To Dismiss the Amended Complaint. (Dkt. No. 71.) On the same day, the Court adopted a Case Management Plan. (Dkt. No. 72.) On September 18, 2020, the Court referred this Action to Magistrate Judge Paul Davison for a settlement conference. (Dkt. No. 74.) On October 2, 2020, the Court signed Plaintiff and the Hudson Defendants' stipulation agreeing to delay the briefing schedule for the Hudson Defendants' anticipated Motion To Dismiss the Amended Complaint until after the settlement conference. (Dkt. No. 80.) The Court granted another extension on October 30, 2020. (Dkt. No. 101.)
Meanwhile, on October 5, 2020, the Court signed the Plaintiff, Gaccione, and Clark's consent letter agreeing to extend Gaccione and Clark's time to file an Answer or otherwise respond to the Amended Complaint. (Dkt. No. 82.) The Hudson Defendants filed their Answer to the Amended Complaint on November 30, 2020. (Dkt. No. 106.) Gaccione and Clark filed their Answer on the same day. (Dkt. No. 107.)
On June 7, 2021, the Court approved the Parties' request to extend the fact discovery deadline for 60 days to accommodate the Parties' settlement efforts. (Dkt. No. 134.) On July 26, 2021, the Court entered an Order extending limited...
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