S. Acquisition Co. v. TNT, LLC

• Decision Date: 06 April 2021
• Docket Number: EF2014-1033
• Citation: 147 N.Y.S.3d 342,71 Misc.3d 1002
• Court: New York Supreme Court
• Parties: SOUTHERN ACQUISITION COMPANY LLC, Plaintiff, v. TNT, LLC, Dino Toscani, 119 Main Street, LLC, Commissioner of Taxation and Finance of the State of New York, Eats & Drinks, Inc., d/b/a Grimaldi's, Rascals Bar and Grill, d/b/a Shea O'Briens, Tokyo Sushi and Chai, Inc., d/b/a Tokyo Sushi, Defendants.

71 Misc.3d 1002

147 N.Y.S.3d 342

SOUTHERN ACQUISITION COMPANY LLC, Plaintiff,

v.TNT, LLC, Dino Toscani, 119 Main Street, LLC, Commissioner of Taxation and Finance of the State of New York, Eats & Drinks, Inc., d/b/a Grimaldi's, Rascals Bar and Grill, d/b/a Shea O'Briens, Tokyo Sushi and Chai, Inc., d/b/a Tokyo Sushi, Defendants.

EF2014-1033

Supreme Court, New York, Ulster County.

Decided on April 6, 2021

Stephanie M. Whidden, Esq., Counsel for Plaintiff, movant, Law Office of Stephanie M. Whidden, Esq., P.O. Box 249, West Hurley, New York 12491

No appearances from Defendants

Lisa M. Fisher, J.

This is a commercial foreclosure and an issue of first impression, wherein the Plaintiff requests the Court 1) to invalidate and find the COVID-19-related hardship declaration filed by Defendants as lacking merit, and 2) to authorize the foreclosure sale to occur before May 1, 2021, notwithstanding the Executive Orders and the "Covid-19 Protect Our Small Business Act of 2021" (L 2021, c 73). Defendants did not submit opposition by the return date of March 16, 2021, prompting Plaintiff's counsel to submit a proposed order granting their relief. Approximately a week after the return date, Plaintiff's counsel inquired as to the status of the proposed order and was reminded that pursuant to CPLR § 2219 (a) the Court has sixty days from the return date of the motion to render a decision. Counsel should further be aware that not all unopposed motions are granted, as in the instant case.

The novel coronavirus known as COVID-19 has impacted the global economy in many unprecedented ways, particularly here in New York which largely shouldered the initial brunt of the first wave in the United States. The ravaging effects of this virus echoed through nearly every facet of our lives, resulting in crippling and dire financial circumstances effecting people and businesses alike. This has become the impetus for a renewed surge of foreclosures, where we presently stand at the beginning of a new wave of actions.

Local and State governments, largely and previously without meaningful federal assistance, have been deputized with the herculean task of balancing the rights of mortgagees versus residential and commercial mortgagors. The majority of the Executive Orders and Judicial Administrative Orders have focused on residential mortgagors, including stays of all proceedings, moratoriums on new filings, and new procedures regarding holding hardship conferences.

But small businesses in particular have been disproportionally impacted by the effects of COVID-19, despite being largely left out of many of the protections enjoyed by residential mortgagors. This changed dramatically in January of 2021 with the introduction of the "Covid-19 Protect Our Small Business Act of 2021" (hereinafter the "Act") which subsequently passed in both the Senate and Assembly, and was signed by the Governor on March 9, 2021 (L 2021, c 73).

The Legislature acknowledged that "COVID-19 presents a historic threat to small businesses[ ] .... [and] [t]housands of small businesses are facing eviction or foreclosure due to necessary disease control measures that closed or restricted businesses across the state" (Act, § 3). Given this impact, "[i]t is, therefore, the intent of this legislation to avoid as many evictions and foreclosures of small businesses as possible for businesses experiencing a financial hardship during the COVID-19 pandemic" (id. ).

The Act is separated into two Parts, with Part A focusing on eviction proceedings (tenant rights) and Part B focusing on foreclosure proceedings (owner or mortgagor rights). Part B is further categorized into Subparts governing any action to foreclosure a mortgage relating to commercial property, foreclosure tax proceedings, and applying to any owner or mortgagor of commercial real property relating to discrimination in credit decisions. Each Subpart provides for a hardship declaration form.

Pertinently here, Subpart A allows an owner of mortgagor of a commercial property owning ten or fewer commercial units, where the business is a resident of New York, and employs 50 or fewer people (Act, Part B, Subpart A, § 1), to complete a hardship declaration preventing a foreclosure "until at least May 1, 2021" if the owner or mortgager is experiencing financial hardship due to a loss of revenue, increase in necessary expenses, moving expenses and difficulty in securing an alternative commercial property, and if one or more of the business's commercial tenants has defaulted on a significant amount of their rent payments since March 1, 2020 (Act, Part B, Subpart A, § 2, [1]-[4]).

In any action to foreclosure a mortgage in which a judgment of sale has been issued prior to the effective date of the Act, like in this case, "the court shall stay the execution of the judgment at least until the court has held a status conference with the parties" (Act, Part B, Subpart A, § 8). However, where "the mortgagor provides a hardship declaration ... prior to the execution of the judgment, the execution shall be stayed until at least May 1, 2021" (id. ). "A hardship declaration shall create a rebuttable presumption that the mortgagor is suffering financial hardship, in any judicial or administrative proceeding that may be brought, for the purposes of establishing a defense under an executive order of the governor or any other local or state law, order, or regulation restricting actions to foreclose a mortgage...