YANKEE BANK FOR FINANCE & SAV. v. TASK ASSOCIATES
| Decision Date | 30 March 1992 |
| Docket Number | No. 88-CV-224.,88-CV-224. |
| Citation | 139 BR 71 |
| Parties | YANKEE BANK FOR FINANCE & SAVINGS, FSB (Now the Federal Deposit Insurance Corporation, In Its Capacity as Receiver for Yankee Bank for Finance & Savings, FSB), Plaintiff, v. TASK ASSOCIATES, INC., Hanover Square Associates-Two Limited Partnership, Delhi Steel Corp., Lenehan & Sawicke, Inc., Bianchi Excavating, Inc., Spensieri Painting Co., Inc., Tipperary Heating & Plumbing Corp., Carpet Wholesale, Inc., WCA Roofing & Sheet Metal Co., Inc., Raynor Overhead Door Sales Co., Inc., B & P Ceramic Tile Co., Edward Schalk & Sons, Inc., Ajay Glass & Mirrors Co., Inc., Pro Masonry Corporation, Midstate Elevator Co., Inc., Hosek Contractors, Inc., d/b/a Eastern Painting Co., Inc., Armani Plumbing & Mechanical, Inc., Commercial Air Control, Inc., Simone Electrical Contractors, Inc., Donald J. Judd d/b/a Judd Associates, B.R. Johnson, Inc., the People of the State of New York, C.G. Boone, Inc., Stonefield Cleaning and Travers Maintenance Service, Inc., Consolidated Electrical Distributors, Inc., Trading as Ced. Baldwin-Hall, MCK Building Associates, Inc., Bohem Manufacturing Company, Inc., Surface Renewal Corporation, and Robertson, Strong Apgar Architects, P.C., Defendants. |
| Court | U.S. District Court — Northern District of New York |
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Hancock & Estabrook, Syracuse, N.Y., for plaintiff; Thomas C. Buckel, Jr., of counsel.
Menter Rudin & Trivelpiece, Syracuse, N.Y., for Consol. Elec.; Antonio E. Caruso, of counsel.
Harris Beach Wilcox Rubin & Levey, Rochester, N.Y., for Hanover Square Associates-Limited; Bruce L. Maas, of counsel.
Welch Welch & Carr, Syracuse, N.Y., for Hosek Contractors; Anthony P. Adorante, of counsel.
Robert W. Hartnett, Syracuse, N.Y., for Lenehan & Sawicke.
Hiscock & Barclay, Syracuse, N.Y., for Raynor Overhead Door; Peter Hogan, of counsel.
John L. Stinziano, Esq., E. Syracuse, N.Y., for Robertson, Strong Apgar Architects.
MacKenzie Smith Lewis Lewis Michell & Hughes, Syracuse, N.Y., for Ajay Glass; Alfred W. Popkess, of counsel.
Bryant O'Dell and Basso, Syracuse, N.Y., for Armani Plumbing, Schalk, Simone, WCA Roofing & MCK Bldg. & B & P Ceramic; Robert Silkey, of counsel.
Bond Schoeneck & King, Syracuse, N.Y., for Bianchi, Delhi Steel, Spensieri Painting & Tipperary Heating; Joseph J. Lawton, of counsel.
Freeman Mintz Hagner & Deiches, Haddonfield, N.J., for Bohem Mfg.
Devorsetz Stinziano & Smith, Syracuse, N.Y., for C.G. Boone; Mark Grobosky, of counsel.
Robert Abrams, Atty. Gen., of the State of N.Y., Albany, N.Y., for People of the State of New York; Alan Hegeman, Asst. Atty. Gen., of counsel.
Carrigan & Ryan, Syracuse, N.Y., for Surface Renewal Corp.; William F. Carrigan, Jr., of counsel.
Robert Woodford, Syracuse, N.Y., Referee.
Familiarity with this case is assumed. Therefore only the facts necessary to an understanding of the issues raised by Magistrate Judge DiBianco's January 28, 1991, report-recommendation and the objections thereto will be set forth herein.
This court previously granted the motion for summary judgment of foreclosure and sale on the SA & K building brought by plaintiff, the Federal Deposit Insurance Corporation ("FDIC"),1 as against one of the defendants, Hanover Square Associates-Two Limited Partnership ("HSA-II"). That building has since been sold at a mortgage foreclosure sale, and the $505,000.00 in sale proceeds are in a trust account pending further court order. In its simplest terms, the controversy now centers on how much, if any, of those sale proceeds the FDIC and/or the various defendant mechanic's lienors2 should receive.
At the direction of this court, on August 29, 1990, Magistrate Judge DiBianco ("the Magistrate") conducted a hearing to determine "(A) the amount actually expended toward the purchase of the SA & K building by Yankee Bank and (B) the validity and reasonableness of the mechanic's liens." Yankee Bank for Finance & Sav., FSB v. Task Assoc., Inc., 731 F.Supp. 64, 72 (N.D.N.Y.1990) ("Yankee Bank III"). On January 28, 1991, the Magistrate issued a report-recommendation; and the FDIC and the defendants timely filed objections thereto.
The Magistrate recommended that the court find "that the amount expended for the purchase of the SA & K property be $464,172.02." Yankee Bank for Finance & Sav., FSB v. Task Assoc., Inc., 88-CV-224 slip op. at 14 (Report-Recommendation January 28, 1991) ("Report"). That amount reflects a purchase price finding of $610,000.00 "minus the amount that Ticor disbursed back to Task after the closing (i.e. $106,327.98) and minus the $39,500.00 that was not utilized for acquisition of the property." Id. at 11. The Magistrate further recommended "that the FDIC be awarded the above amount with interest calculated from the date of the judgment of foreclosure and sale as first priority on the funds received from the sale of the building, . . ." Id. at 14-15. Lastly he recommended "that the remainder of the money, if any, be distributed to the mechanic's lienors based on their priorities." Id. at 15.
The $464,172.02 figure is not some arbitrary amount randomly selected by the Magistrate. Rather, the Magistrate evidently arrived at that figure, in part, based upon several documents. First, he relied upon a letter from Ticor Title Guarantee ("Ticor") to Matthew Antell,3 which states, in part, that pursuant to Mr. Antell's request, "the $610,000.00 wire into your account was distributed as follows:. . . ." Ex. 47 at 1.4 The letter goes on to set forth a break down of the distributions of the $610,000.00, including $432,820.52 which was paid to Breger, Gorin & Leuzzi, the seller's attorneys.5 The Magistrate also relied upon the mortgage in the amount of $2,600,000.00 between Task, as the mortgagor, and Home Savings Bank, FSB ("Home Bank"),6 executed October 1, 1984, wherein it is handwritten that "the balance of $610,000.00 is advanced independently, the date hereof October 1, 1984. . . ." Ex. 2. Finally, the Magistrate noted that "the exhibits also reflect that $610,000.00 was in fact wired from Yankee Bank on October 2, 1984,. . . ." Id. Although the Magistrate did not designate which specific exhibits support that statement, presumably he relied upon exhibits 18 and 30 because those are the exhibits reflecting a $610,000.00 wire transfer on October 2, 1984. Robert Sellers, an FDIC witness and the only witness to testify for any of the parties, testified that that amount was wired to Ticor. Tape Recording Hearing (November 29, 1989). Based upon the evidence just described, the Magistrate concluded that "it is clear that the $610,000.00 went from Yankee Bank to Ticor Title Guarantee for the purpose of purchasing the property SA & K building." Report at 8.
The Magistrate rejected the defendants' argument that "because the sale of the property may have been orchestrated with the improper purpose of avoiding taxes, the FDIC should not be able to take advantage of this wrong." Id. The Magistrate observed that, "the FDIC certainly was not party to any misrepresentation of the purchase price if such a misrepresentation did occur." Id. at 8-9. In addition, referring to Langley v. Federal Deposit Insurance Corp., 484 U.S. 86, 108 S.Ct. 396, 98 L.Ed.2d 340 (1987), the Magistrate reasoned that "to hold the FDIC responsible for whatever improper transaction, would be to subvert all the existing policies that apply to the FDIC." Report at 9.
The defendants also argued unsuccessfully before the Magistrate that whatever purchase price was determined, various sums should have been offset against that amount. The obvious effect of such offsets, if allowed, would be to reduce the extent of the FDIC's first priority lien. The first offset claimed by the defendants was the $150,000.00, which HSA-II placed in an escrow account with Yankee Bank on approximately August 22, 1986. According to the defendants, that sum was placed in escrow for their benefit. The defendants maintain that the money from the escrow account was not used for that purpose; but it was used instead to reduce the debt. Thus, they believe that the purchase price should be reduced by $150,000.00 plus interest.
The defendants also sought a $40,000.00 offset for the amount of the down payment on the subject property. The defendants contended that that amount should be offset because the down payment did not come from funds advanced by Yankee Bank. The Magistrate declined to recommend a reduction of this amount, explaining that "although it is true that the initial check for $40,000.00 did not come from funds sent by the Bank, it does not change the fact that $464,172.02 was disbursed from the $610,000.00 that was sent from the bank." Id. at 13. The third and final offset urged by the defendants was in the amount of $65,000.00, supposedly representing the amount paid by Antell on the principal in 1986. Without any discussion, the Magistrate found no support for that reduction. Id. at 14.
The parties' objections can be succinctly stated: the FDIC contends that the court should find that the amount actually expended to purchase the SA & K building is more than that proposed by the Magistrate and the defendants contend that the amount should be less. The defendants' objections can be divided into three broad categories: (1) evidentiary; (2) application of the D'Oench doctrine; and (3) failure to offset. The FDIC's objections are twofold. First, the FDIC objects on the basis that the Magistrate incorrectly calculated the interest accrual date. Second, the FDIC contends that the Magistrate improperly failed to take into consideration the purchase money mortgage as part of the purchase price. All of those objections will be addressed herein.
The first issue presented is a procedural one and that is which standard of review applies: a clearly erroneous standard or a ...
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