United Cent. Bank v. Team Gowanus, LLC
| Decision Date | 14 November 2012 |
| Docket Number | No. 10 CV 3850 (ERK) (VVP),10 CV 3850 (ERK) (VVP) |
| Court | U.S. District Court — Eastern District of New York |
| Parties | UNITED CENTRAL BANK, successor by acquisition to Mutual Bank, Plaintiff, v. TEAM GOWANUS, LLC, SQUARE ONE HOLDING CORP., PETER MOORE, PETER KOVACS, JOHN SUTTER, BEN HANSEN ARCHITECT LLC, ENVIRONMENTAL CONTROL BOARD OF THE CITY OF NEW YORK, "JOHN DOE" #1-10, "MARY DOE" #1-10, and "JANE DOE" #1-10, Defendants. |
UNITED CENTRAL BANK, successor by acquisition to Mutual Bank, Plaintiff,
v.
TEAM GOWANUS, LLC, SQUARE ONE HOLDING CORP., PETER MOORE, PETER
KOVACS, JOHN SUTTER, BEN HANSEN ARCHITECT LLC, ENVIRONMENTAL
CONTROL BOARD OF THE CITY OF NEW YORK, "JOHN DOE" #1-10,
"MARY DOE" #1-10, and "JANE DOE" #1-10, Defendants.
No. 10 CV 3850 (ERK) (VVP)
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK
Dated: November 14, 2012
KORMAN, J.:
Plaintiff United Central Bank filed this diversity action for foreclosure pursuant to New York Real Property Actions and Proceedings Law § 1301 et seq. against defendants Team Gowanus, LLC, Square One Holding Corp., Peter Moore, Peter Kovacs, John Sutter, and several named and fictitious holders of judgments, liens or other interests in the mortgaged property. United Central Bank moves for summary judgment on its claims pursuant to Fed. R. Civ. P. 56 and to dismiss the defendants' counterclaims pursuant to Fed. R. Civ. P. 12(b)(6).
I. Team Gowanus Purchased the Property with Loans from Mutual Bank and Square One
On or about May 1, 2008, Team Gowanus, LLC ("Team Gowanus") purchased property located at 68-92 Third Street, Brooklyn, New York, Block: 465, Lot: 12 (the "Property) from Square One Holding Corp. ("Square One") for $12.5 million. Square One Def. 56.1 Cntrstmnt. ¶
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1, ECF No. 56. There were two sources of funding utilized by Team Gowanus: (1) a $9 million loan from Mutual Bank secured by a mortgage and guaranties of the members of Team Gowanus ("Mutual Bank Note" and "Mutual Bank Mortgage"); and (2) a $2.25 million loan from Square One secured by a purchase money mortgage ("Square One Note"). Id. ¶¶ 2-3.
The Mutual Bank Note obligated Team Gowanus to make monthly payments of interest at 8% per annum and to repay the entire principal upon maturity on May 1, 2009. Pl. 56.1 Stmnt. ¶ 1, ECF No. 50. The Mutual Bank Mortgage granted Mutual Bank a first-priority security interest in the Property. Id. ¶ 4. In addition, Messrs. Moore, Kovacs and Sutter individually guaranteed Team Gowanus' loan up to specified percentages of the aggregate amount borrowed (collectively, "Team Gowanus Defendants"). Id. Mr. Sutter's guaranty lists his maximum liability as 28.18%. Id. In addition, Messrs. Moore, Kovacs and Sutter executed a Commercial Loan Agreement on Team Gowanus' behalf on the date of the purchase. Id. ¶ 6.
The Square One Note obligated Team Gowanus to make monthly payments of interest at 8.5% per annum and to repay the entire principal upon maturity on December 15, 2008. Id. ¶ 8; Square One Def. 56.1 Cntrstmnt. ¶ 4. The loan by Square One to Team Gowanus was secured by a purchase money mortgage in the amount of $2.25 million, which granted Square One a second-priority security interest in the Property. Pl. 56.1 Stmnt. ¶ 8; Square One Def. 56.1 Cntrstmnt. ¶¶ 3, 5. In addition, Messrs. Moore, Kovacs and Sutter guaranteed Team Gowanus' loan. Id. ¶ 6.
II. Team Gowanus Negotiated with Mutual Bank and Square One to Restructure the Loans
From June 1 to December 15, 2008, Team Gowanus failed to make their monthly interest payments in the amount of $15,937.50, as well as late payment charges, to Square One as
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required by the Square One Note and Mortgage. Id. ¶ 7. On or about December 12, 2008, Team Gowanus requested an extension of the maturity date of the Square One Note, which Square One rejected. Id. ¶ 8. On December 15, 2008, the Square One Note and Mortgage matured and the entire principal balance plus interest, costs and fees became due and payable. Id. ¶ 9. From that date through May 1, 2009, Team Gowanus and its guarantors did not make any payments toward the principal balance of $2.25 million or any of the accrued interest. Id. ¶ 10.
From January through March 2009, Team Gowanus made repeated, but unsuccessful, efforts to enter into a forbearance agreement with Square One. Id. ¶ 12. Sometime in March 2009, Mutual Bank learned that Square One was threatening to declare Team Gowanus in default because it had failed to pay $2.25 million in principal and $160,000 in interest that was due to Square One on December 15, 2008. Pl. 56.1 Stmnt. ¶ 27. Such a declaration by Square One would trigger a cross-default on the loan from Mutual Bank. Id. ¶ 28. At that time, Mr. Sutter requested that Robert Hoholik, the Mutual Bank loan officer responsible for the bank's relationship with Team Gowanus, consider restructuring the bank's loan to Team Gowanus. Id. ¶¶ 25, 28.
On March 9, 2009, Mr. Hoholik drafted and submitted to Mutual Bank's Special Assets Group Committee (the "Committee") a loan presentation which included a proposal to restructure the Team Gowanus loan based on Mr. Sutter's request. Id. ¶¶ 28-29. The presentation suggested several conditions precedent to restructuring of the loan, including a restructuring of Square One's loan and a payment of interest arrears to Square One in the amount of $160,000. Id. ¶ 30. Furthermore, Mr. Hoholik's presentation included the requirement that any new five-year loan to Team Gowanus satisfy a maximum 65% loan-to-value ratio. Id. ¶ 32. The presentation was ultimately signed "Recommended By" Charles Cantro, a Mutual Bank vice
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president, and signed "Approved By" David Clark, a Mutual Bank senior vice president. Id. ¶ 34. The parties agree that the presentation was not signed by the Team Gowanus Defendants. Id. ¶ 34.
On March 13, 2009, a second record of the presentation was created in the form of an unexecuted Minute of the Special Assets Committee Meeting for March 13, 2009 ("the Minute"). Id. ¶ 37. The Minute's two signature lines were left blank and the Minute contains no substantive information about the proposed restructuring, but simply states that "[t]he Committee reviewed and approved the following recommendations: Workout Presentations - Restructures . . . Team Gowanus LLC - R. Hoholik." Hoholik Aff., Ex. K. at 1163, ECF No. 48-11, & Ex. L at 277, ECF No. 48-12. After the presentation was approved, Mr. Hoholik sent a letter to Mr. Sutter which included some of the terms for a proposed restructuring. Pl. 56.1 Stmnt. ¶ 40. Soon after, Mutual Bank and Team Gowanus began negotiation of a term sheet. Id. ¶ 42.
Also in or about March 2009, Square One entered into negotiations with Team Gowanus regarding a revision of their loan agreement with the intention that it "be part of a global restructuring of the Team Gowanus debt." Square One Def. 56.1 Cntrstmnt. ¶ 13. Team Gowanus communicated to Square One that any restructuring of its debt to Mutual Bank would require, among other conditions, that Team Gowanus restructure its debt to Square One "on the same terms Mutual Bank had proposed for restructuring its loan with Team Gowanus." Id. ¶ 15.
On April 6, 2009, Team Gowanus sent its first draft of a term sheet to Mutual Bank. Pl. 56.1 Stmnt. ¶ 44. In the email transmitting the draft, Mr. Sutter wrote to Mutual Bank that Team Gowanus "wanted to take our discussions to the next step and draft up a more detailed term sheet that can be the basis of the modification and extension of the loan." Id. This draft of the term
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sheet, and all subsequent drafts, contained a provision drafted by Team Gowanus which stated that except for a provision relating to one of the guarantors, "all the other terms in this term sheet shall be non-binding to either party unless and until substantive agreements between the parties are executed and exchanged." Id. ¶ 45.
On April 13, 2009, Mr. Sutter emailed Mr. Hoholik with a revised draft of the term sheet and wrote in the accompanying email: "If it does not need any additional comments from you, if you can sign, I will then send it to Square One so they can subscribe to the same restructuring logic." Id. ¶ 46. Later that day, Mr. Sutter again emailed Mr. Hoholik urging Mutual Bank "to sign the Term Sheet we sent you Friday today" so that Team Gowanus could work with Square One to restructure the secondary loan and mortgage. Id.
On April 15, 2009, Mr. Sutter emailed Mutual Bank to advise that Team Gowanus' attorney was revising a new draft of the term sheet which would separate part of the project into five separate loans with separate tax lots, deeds and personal guaranties. Id. ¶ 47. Mr. Sutter again stressed the importance of getting "the term sheet signed" in order to get Square One to "buy into the restructuring." Id.
On April 16, 2009, Mr. Sutter emailed Mutual Bank a revised draft term sheet that incorporated the proposed separation of the Property into seven different tax lots and contained several other material alterations from the previous draft, including a proposal that his personal guaranty be reduced from 28.18% to 6.79%, instead of from 28.18% to 7.74%. Id. ¶¶ 48-49. Sometime between April 16 and April 20, 2009, Mutual Bank executed this draft of the term sheet and returned it to Team Gowanus. Id. ¶ 52.
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On April 20, 2009, Mr. Sutter requested that Mutual Bank re-execute the term sheet in light of several typographical errors. Id. ¶ 53. Mutual Bank re-executed the term sheet after making the changes that Mr. Sutter had requested and adding a provision specifying certain conditions that must be met...
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