Resolution Trust v. HIDDEN PONDS PHASE IV DEVELOP., CV 92-3534.

• Court: United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
• Writing for the Court: WEXLER
• Citation: 873 F. Supp. 799
• Parties: RESOLUTION TRUST CORP., etc., Plaintiff, v. HIDDEN PONDS PHASE IV DEVELOPMENT ASSOCIATES, et al., Defendants.
• Docket Number: No. CV 92-3534.,CV 92-3534.
• Decision Date: 31 January 1995

873 F. Supp. 799

RESOLUTION TRUST CORP., etc., Plaintiff,
v.
HIDDEN PONDS PHASE IV DEVELOPMENT ASSOCIATES, et al., Defendants.

No. CV 92-3534.

United States District Court, E.D. New York.

January 31, 1995.

873 F. Supp. 800

COPYRIGHT MATERIAL OMITTED

873 F. Supp. 801

COPYRIGHT MATERIAL OMITTED

873 F. Supp. 802

Berkman, Henoch, Peterson, Peddy & Scarcella, P.C. by Thomas E. Stagg, Garden City, NY, for plaintiff

Meltzer, Lippe, Goldstein, Wolf, Schlissel & Sazer, P.C. by Richard Gabriele, Mineola, NY, for defendants Hidden Ponds Phase IV Development Associates & Solgar Co., Inc.

MEMORANDUM AND ORDER

WEXLER, District Judge.

Plaintiff Resolution Trust Corporation ("RTC"), as receiver for Whitestone Federal Savings and Loan Association ("Whitestone") and Nassau Savings and Loan Association, F.A. ("Nassau"), brought this action to foreclose a first mortgage given by defendant Hidden Ponds Phase IV Development Associates ("Phase IV") and to foreclose a subordinate mortgage held by defendant Solgar Credit, A Division of the Solgar Company, Inc. ("Solgar"). Presently before the Court are plaintiff's motion for an order, pursuant to Rule 56(c) of the Federal Rules of Civil Procedure ("FRCP"), granting summary judgment against defendants and defendants' cross-motions for an order, pursuant to Rule 37(c)(1) of the FRCP, precluding plaintiff from moving to strike defendants' affirmative defenses, and for an order, pursuant to Rule 56(f) of the FRCP, staying plaintiffs motion pending additional discovery.

I. FACTS AND BACKGROUND

Hidden Ponds Associates ("HPA") was the developer of a parcel of residential real estate in Long Island, New York (the "parcel"). HPA was composed of two general partners, N.W. Associates and State Associates. N.W. Associates, in turn, was a partnership between Whitestone Equities Hauppauge Corp. ("Whitestone Equities") and Nassau Equities Smithtown Corp. ("Nassau Equities"). Whitestone Equities and Nassau Equities were wholly owned subsidiaries of Whitestone Savings, F.A. ("Old Whitestone") and Nassau Federal Savings and Loan Association ("Old Nassau"), respectively.

By contract dated April 8, 1987 (the "contract"), HPA sold a section of the parcel (the "premises") to Lewis S. Meltzer. The purchase price, as set forth in Schedule A of a rider to the contract, was $5,363,644. The purchaser was to satisfy $3,832,500 of that amount by executing and delivering a note and purchase-money mortgage to the seller. The purchaser intended to build and sell 73 residential housing units on the parcel, and, to that end, the contract provided, inter alia, that the "seller represents that the present sewer system is adequate to service the proposed 73 units to be constructed ... and will continue to be adequate in the future to permit such hook up" and that "seller will perform such work to keep same in compliance with all municipal ordinances or requirements."

By contract dated April 23, 1987, Mr. Meltzer assigned his rights and duties under the contract to Phase IV (the "contract assignment").

873 F. Supp. 803

On July 10, 1987, Phase IV executed and delivered a note to HPA in the sum of $3,832,500 (the "note"). On the same day Phase IV executed and delivered a mortgage to HPA to secure repayment of the note (the "mortgage"). The mortgage was recorded

By contract dated June 20, 1988, HPA assigned its rights under the note and the mortgage to Old Whitestone and Old Nassau (the "mortgage assignment"). The mortgage assignment was recorded. Prior to the mortgage assignment, by estoppel certificate dated April 20, 1988, Phase IV acknowledged that the mortgage assignment was to be made and that there were no defenses or offsets to the note or the mortgage.

On March 15, 1990, the Office of Thrift Supervision of the Department of the Treasury of the United States ("OTS") appointed the RTC as receiver for Old Whitestone and Old Nassau. The RTC immediately organized and chartered two new federal savings associations, Whitestone and Nassau, for which the RTC was appointed conservator by the OTS. On March 16, 1990, the RTC, as receiver for Old Whitestone and Old Nassau, entered into agreements with the RTC, as conservator for Whitestone and Nassau, whereby substantially all of the assets of Old Whitestone and Old Nassau were transferred to Whitestone and Nassau, respectively (the "purchase and assumption transactions").

On June 29, 1990, Phase IV entered into an agreement with Whitestone and Nassau by which the maturity date of the note and the mortgage was extended to August 31, 1990 (the "extension agreement"). Phase IV made payments pursuant to the note and the mortgage through July 31, 1990 in the total amount of $2,821,875. But on August 31, 1990, Phase IV failed to make payment of the $1,010,625 principal balance and accrued interest owed under the note and the mortgage.

The RTC was appointed as receiver for Whitestone and Nassau by the OTS on November 16, 1990; it brought this foreclosure action in July 1992.¹ Phase IV and Solgar submitted an answer, in which they raised five affirmative defenses. Three of the five affirmative defenses are relevant to the summary judgment motion presently before the Court. The second affirmative defense suggests that the Court abstain because of the existence of a "closely-related action pending in state court." Answer ¶ 26. The fourth affirmative defense asserts that the mortgage is "void and unenforceable by reason of lack of consideration." Id. ¶ 28. The fifth affirmative defense alleges that the sale of the premises, the note, and the mortgage were procured by fraud and misrepresentations. Id. ¶ 32.

At its core, the defense emanates from assurances relating to the sewage system made by HPA in the contract. Defendants contend that despite "HPA's representations and promises.... the sewer system ... never worked properly.... and was not adequate to permit hook up to the 73 homes intended to be built on the premises." Affidavit of Lewis S. Meltzer ¶ 40. Defendants allege that, because of the inadequate sewage system, they were able to build only 43 of the 73 units. For this reason, defendants insist that they should not be responsible for paying the balance due on the note.

Discovery continued through November 1994. As discovery neared its conclusion, plaintiff sought and was given permission by the Court to make the instant summary judgment motion. The case has since been marked ready for trial.

II. DISCUSSION

A party seeking summary judgment must demonstrate 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." Fed.R.Civ.P. 56(c). The moving party bears the initial burden of "`informing the ... court of the basis for its motion, and identifying those portions of the record, which it believes demonstrate the

873 F. Supp. 804

absence of a genuine issue of material fact.'" FDIC v. Giammettei, 34 F.3d 51, 54 (1994) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986)). The nonmoving party may defeat the summary judgment motion by producing sufficient evidence to establish a genuine issue of material fact for trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). In ruling on a motion for summary judgment, a court is required to resolve all ambiguities and draw all reasonable inferences in favor of the nonmoving party. See Donohue v. Windsor Locks Bd. of Fire Comm'rs., 834 F.2d 54, 57 (2d Cir.1987). The nonmoving party, however, "must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). Indeed, the nonmoving party's opposition may not rest on mere allegations or denials of the moving party's pleading, but "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e)

In support of its motion, the RTC identifies the note, the mortgage, the mortgage assignment, and the extension agreement as evidence indicating the existence of the debt owed by Phase IV to Whitestone and Nassau, and the mortgage lien securing that debt. As evidence of Phase IV's default, the RTC proffers the affidavit of Darlene Austin, an independent asset manager hired by the RTC, as receiver for Whitestone and Nassau, to monitor the Phase IV account.

Defendants neither dispute the existence of their initial obligation on the face of the note and the mortgage, nor do they not claim that Phase IV satisfied the note in full; rather, defendants argue that the summary judgment motion should be denied...