RSS WFCM2018-C44 - NY LOD, LLC v. 1442 Lexington Operating De LLC
| Decision Date | 13 February 2023 |
| Docket Number | 22-1 |
| Parties | RSS WFCM2018-C44 - NY LOD, LLC, Plaintiff-Appellee, v. 1442 Lexington Operating DE LLC, Afshin Hedvat, Daniel Rahmani, Defendants-Appellants. [*] |
| Court | U.S. Court of Appeals — Second Circuit |
Argued: February 7, 2023
Appeal from the United States District Court for the Southern District of New York No. 21-cv-4424, Denise Cote, Judge.
This case presents an apparently unresolved question in this Circuit: whether a district court's order granting a purportedly final judgment on a noteholder's claims seeking (1) foreclosure on a mortgage, (2) foreclosure on a security interest in real property, and (3) possession of said real property is an appealable final judgment - even though the order also refers the case to a magistrate judge to calculate the amount of the judgment of foreclosure and sale. Because we conclude that such a judgment is not in fact "final" within the meaning of 28 U.S.C. § 1291, and that no other basis for appellate jurisdiction exists, we DISMISS the appeal.
DISMISSED.
DAVID V. MIGNARDI (Keith M. Brandofino, on the brief), Holland &Knight LLP, New York, NY, for Plaintiff-Appellee RSS WFCM2018-C44 -NY LOD, LLC.
MATTHEW FEINMAN (Steven Cohn, on the brief), Steven Cohn, PC Carle Place, NY, for Defendants-Appellants 1442 Lexington Operating DE LLC, Afshin Hedvat, Daniel Rahmani.
Before: PARKER, SULLIVAN, and MERRIAM, Circuit Judges.
This case presents an apparently unresolved question in this Circuit: whether a district court's order granting a purportedly final judgment on a noteholder's claims seeking (1) foreclosure on a mortgage, (2) foreclosure on a security interest in real property, and (3) possession of said real property is an appealable final judgment - even though the order also refers the case to a magistrate judge to calculate the amount of the judgment of foreclosure and sale. Because we conclude that such a judgment is not in fact "final" within the meaning of 28 U.S.C. § 1291, and that no other basis for appellate jurisdiction exists, we dismiss the appeal.
In April 2018, 1442 Lexington Operating DE LLC (the "Borrower") obtained a loan from a lender, attendant to which the lender and the Borrower executed a loan agreement, promissory note, and mortgage agreement granting the lender a security interest in real property and improvements located at 1442 Lexington Avenue in Manhattan (the "Property"). At the same time, the lender also executed a guaranty agreement with Afshin Hedvat and Daniel Rhamani (the "Guarantors"). About a month later, the lender executed an allonge[1] to the note and an assignment of the mortgage, transferring its interest to the Wilmington Trust, National Association, acting as trustee for a commercial mortgage trust (the "Trust"). After the Borrower went into default, the Trust sent a notice of default in June 2020, a notice of acceleration in September 2020, and a second notice of default in March 2021.
Around the time of the second notice of default, RSS WFCM2018-C44 - NY LOD, LLC (the "Noteholder") was formed as a limited liability company with the Trust as its sole member, whereupon the Trust executed an allonge to the note, assignment of the mortgage, and a general assignment, transferring its interest to the Noteholder. Shortly thereafter, the Noteholder filed suit against the Borrower and Guarantors, asserting claims for foreclosure on the mortgage, foreclosure on the security interest in the Property, and possession of the Property (collectively, the "Foreclosure Claims"), as well as for breach of contract against the Guarantors (the "Guaranty Claim"). Before discovery was set to conclude, the Noteholder filed a motion to strike the Borrower's and Guarantors' answer, including the affirmative defenses asserted therein; the Noteholder also moved for summary judgment pursuant to Federal Rule of Civil Procedure 56 on the Foreclosure Claims and to sever the Guaranty Claim pursuant to Rule 21.
The district court struck the Borrower's and Guarantors' affirmative defenses, granted the motion for summary judgment on the Foreclosure Claims, and granted the motion to sever the Guaranty Claim in an opinion and order, dated December 2, 2021. That same day, the district court issued an order and judgment (the "December 2, 2021 Order and Judgment"), which reiterated the conclusions of the opinion and order, and also stated that "[the Noteholder] is hereby granted final judgment as to the [Foreclosure Claims] of the Complaint" and that "the calculation of the amount of the judgment of foreclosure and sale is hereby referred to" a magistrate judge. Sp. App'x at 13. In addition, the district court entered an order of reference to a magistrate judge for an "[i]nquest [a]fter [d]efault" or "[d]amages [h]earing." Id. at 14. The Borrower filed a notice of appeal on December 29, 2021, and no proceedings have occurred in the district court or before the magistrate judge in the interim.[2]
On appeal, the Borrower contends that the district court improperly struck certain affirmative defenses prior to entering summary judgment for the Noteholder on the Foreclosure Claims. Concerned, however, that we lacked jurisdiction to consider the appeal, we issued an order instructing the parties to be prepared to discuss our appellate jurisdiction at oral argument - during which the Borrower continued to assert jurisdiction, while the Noteholder conceded that we lacked jurisdiction. After due consideration of the parties' positions, we now dismiss the Borrower's appeal for lack of jurisdiction, without deciding the merits of the issues raised.
"We turn first, as we must, to the issue of our [own appellate] jurisdiction." Joseph v. Leavitt, 465 F.3d 87, 89 (2d Cir. 2006). Although no party suggested in their briefs that we lacked appellate jurisdiction, "we have an independent obligation to consider the presence or absence of subject[-]matter jurisdiction sua sponte." Id.
We begin with 28 U.S.C. § 1291 and find that we do not have jurisdiction under that provision. As an initial matter, we note that "a district court's assertion of finality cannot deliver appellate jurisdiction to review a decision that is not otherwise 'final' for purposes of [section] 1291." Henrietta D. v. Giuliani, 246 F.3d 176, 181 (2d Cir. 2001). In the same vein, "the district court's . . . directive to close the case [is] insufficient to vest this Court with jurisdiction under [section] 1291." Mead v. Reliastar Life Ins. Co., 768 F.3d 102, 111 (2d Cir. 2014) (internal quotation marks omitted). Rather, section 1291 provides that a "court of appeals . . . shall have jurisdiction of appeals from all final decisions of the district courts." 28 U.S.C. § 1291. Generally speaking, a decision is considered final if it "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Ray Haluch Gravel Co. v. Cent. Pension Fund of Int'l Union of Operating Eng'rs, 571 U.S 177, 183 (2014) (citing Catlin v. United States, 324 U.S. 229, 233 (1945)); see also, e.g., Guggenheim Cap., LLC v. Birnbaum, 722 F.3d 444, 449 (2d Cir. 2013). Thus, a finding of liability is ordinarily not treated as a final decision for purposes of section 1291 when questions of remedy remain unresolved, unless it can be said that "only ministerial proceedings remain." Transaero, Inc. v. La Fuerza Aerea Boliviana, 99 F.3d 538, 541 (2d Cir. 1996) (internal quotation marks omitted).
These general rules also apply in the context of foreclosures. Once a judgment of foreclosure and sale is entered, it is generally final "because all that remains to be done is executing the judgment to enforce the rights and obligations that have been adjudicated." HSBC Bank USA, N.A. v. Townsend, 793 F.3d 771, 78485 (7th Cir. 2015) (Hamilton, J., dissenting); see also Ray v. Law, 7 U.S. (3 Cranch) 179, 180 (1805); Whiting v. Bank of U.S., 38 U.S. (13 Pet.) 6, 15 (1839). Some foreclosure orders, however, "are not final and appealable . . . because they leave undecided questions going to the merits of the dispute," such as the amount due upon the debt. Townsend, 793 F.3d at 785 (Hamilton, J., dissenting). For example, a foreclosure decree is not truly final if it solely "overrules the defense of the [mortgagor] as set forth in his cross-bill, and declares that the [mortgagee] is the holder and owner of the debt secured by the deeds of trust, but refers the case to an auditor to ascertain the amount due upon the debt, the amount due certain judgment and lien creditors, the existence and priorities of liens, and the claims for taxes." Grant v. Phx. Mut. Life Ins. Co., 106 U.S. 429, 431 (1882).[3]
Here the district court's December 2, 2021 Order and Judgment explicitly leaves unresolved the question of the amount due upon the debt. Although it states that "[the Noteholder] is hereby granted final judgment as to the [Foreclosure Claims]," and vaguely alludes to an " having been ordered, it also specifies that "the calculation of the amount of the judgment of foreclosure and sale is hereby referred to" a magistrate judge. Sp. App'x at 12-13; see also, e.g., J. App'x at 28 (complaint seeking the "[f]ixing [of] the amount due to [the Noteholder] pursuant to the [l]oan [d]ocuments"); id. at 537 (). Because the remedy - i.e., the amount to be paid to the Noteholder from the future sale of the Property - has not yet been...
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