Citibank, N.a. v Van Brunt Props., LLC (2012 NY Slip Op 50485(U))

8/2/2019 Citibank, N.a. v Van Brunt Props., LLC (2012 NY Slip Op 50485(U))

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Citibank, N.A. v Van Brunt Props., LLC

2012 NY Slip Op 50485(U)

Decided on March 16, 2012

Supreme Court, Kings County

Lewis, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law 431.

This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on March 16, 2012

Supreme Court, Kings County

Citibank, N.A., Plaintiff,

against

Van Brunt Properties, LLC; and "John Does" and "Jane Does"

No.1-100, the last names being fictitious and unknown to the

plaintiff, the persons and parties intended being the tenants,

occupants, persons or corporations, if any, having or claiming aninterest in or lien upon the premises described in the verified

amended complaint, Defendant. Plaintiff, Sutter Avenue

Management, LLC Miller Lumber & Mill Work Inc.; And "John

Does" and "Jane Does" #1-100, the last names being fictitious

and unknown to the plaintiff, the persons and parties intended

being the tenants, occupants, persons or corporations, if any,

having or claiming an interest in or lien upon the premises

described in the verified amended complaint, Defendants.

Plaintiff, - against -

against

Sutter Avenue Management, LLC Miller Lumber & Mill Work

Inc.; And "John Does" and "Jane Does" #1-100, the last names

ank, N.A. v Van Brunt Props., LLC (2012 NY Slip Op 50485(U)) http://www.courts.state.ny.us/reporter/3dseries/2012/2012_5

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being fictitious and unknown to the plaintiff, the persons and

parties intended being the tenants, occupants, persons or

corporations, if any, having or claiming an interest in or lien upon

the premises described in the verified amended complaint,

Defendants.

3523/10

Plaintiff Attorney: Dacia C Cocariu, Esq.

Sills Cummis & Gross

Defense Attorney: Kirk P. Tzandies, Esq

Yvonne Lewis, J.

Defendant Van Brunt Properties, LLC (Van Brunt) and defendant Sutter Avenue

Management, LLC (Sutter) collectively move for an order, pursuant to [*2]Civil Practice Lawand Rules (CPLR) 602(a), to consolidate the foreclosure action of Citibank, N.A. v Sutter

Avenue Management, LLC., Midwood Lumber & Mill Work, Inc., et al. (Index No. 354/10),

into the foreclosure action of Citibank, N.A. v Van Brunt Properties, LLC, et al. (Index No.

3523/10). Upon consolidation, the defendants seek an order, pursuant to the doctrine of

collateral estoppel, declaring that this court's March 4, 2011 order in the Van Brunt action is

equally binding on the Sutter action. The defendants further move for equitable relief in the

Sutter action based on their assertion that Citibank acted unconscionably and in bad faith during

the protracted period of settlement negotiation. Finally the defendants seek an order terminating

the temporary receivership imposed on the Sutter property.

Citibank cross-moves for an order striking all references to conduct and statements made

during settlement negotiations, including a pre-negotiation agreement (signed by all three

parties), which together form much of the basis of the defendants' claims for equitable relief, in

the Van Brunt action under CPLR 4547. Citibank also cross-moves, pursuant to CPLR 1018,


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to substitute Wells Fargo as the plaintiff in the Van Brunt action, and, pursuant to CPLR 3025,

to correspondingly amend the case caption. Finally, Citibank cross-moves for an order clarifying

the portion of this court's March 4th order which requires Van Brunt to commence making

monthly payments to Citibank.

Background and Procedural History

Sutter is the legal and equitable owner of premises located at 529 Sutter Avenue in

Brooklyn. On October 29, 2007, Citibank entered into a mortgage loan in the principal amount

of $2,610,000.00 with Sutter. Van Brunt is the legal and equitable owner of premises located at

252-254 Van Brunt Street, also in Brooklyn, which is encumbered by a mortgage in the amount

of $950,000.00 financed by Citibank, dated March 21, 2007. Roland Dib is a managing member

of both Sutter and Van Brunt. Both the defendants began to have difficulty meeting their

mortgage obligations and assert that attempts were made in late 2008 and early 2009 tonegotiate with Citibank for a modification of the interest rate so that the requisite payments

could be made. The defendants assert that they expended substantial sums to attract new tenants

to the properties.

Commencing on July 1, 2009, Van Brunt failed to make its required monthly payments..

Citibank contends that on December 16,2009, it notified Van Brunt that it was in default and

advised that if the default was not cured, Citibank reserved its right to exercise all of its rights

and remedies. Citibank initiated a foreclosure proceeding against Van Brunt on February 5,2010.On August 9, 2010, Citibank moved for summary judgment on its foreclosure action

against Van Brunt and sought dismissal of Van Brunt's answer and affirmative defenses and the

appointment of a temporary receiver. Van Brunt cross-moved for an order determining that

Citibank was not entitled to: any interest on the principal balance of the mortgage loan, late

charges, advances, attorneys' fees, prepayment penalties, commissions and all other costs and

expenses. On October 15, 2010, Citibank transferred all interest in the note and mortgage, as

well as the other loan documents, to LSREF2 Nova Investments, LLC ("Nova"). On December

10, 2010, all interest in the note and mortgage , together with the other loan documents, were

transferred to Wells Fargo. On June 24, 2011, Citibank moved to substitute Wells Fargo into the

action as the plaintiff.

In an order dated March 4, 2011, this Court denied that branch of[*3]Citibank's motion

seeking the appointment of a receiver, and denied without prejudice that branch of the motion

seeking substitution and for summary judgment. The order granted Van Brunt's cross motion to


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the extent of ordering that Citibank is not entitled to any interest from the date of the alleged

default to and through March 31, 2011 and found that Citibank is not entitled to any default

interest or expenses, including attorneys fees and prepayment penalties. Van Brunt was directed

to pay the principal and interest due under the loan commencing on April 1, 2011. In addition, it

was directed to pay to Citibank by April 1, 2011, the principal only from the date of default to

March 31, 2011, which would be applied to the reduction of the principal.

As regards Sutter, beginning October 2009 it failed to make its required monthly payments

under the mortgage. By letter dated December 16, 2009, Citibank maintains that it advised

Sutter that it was in default and that failure to cure could result in Citibank exercising its right to

accelerate the indebtedness. On February 5, 2010, Citibank filed a separate foreclosure action

against the Sutter property. On February 24, 2010, a receiver was appointed to manage the

Sutter property.On May 26, 2011, Citibank moved for summary judgment on its foreclosure

action and to dismiss Sutter's answer and affirmative defense. On October 15, 2010, Citibanktransferred all interest in the note and mortgage, as well as the other loan documents, to

LSREF2 Nova Investments, LLC ("Nova"). On December 10, 2010, all interest in the note and

mortgage , together with the other loan documents, were transferred to Wells Fargo. On April

11,2011, Citibank moved to substitute Wells Fargo into the action as the plaintiff.

Defendants' Motion

Consolidation

The defendants move to consolidate the Van Brunt and Sutter actions arguing that both

actions involve common questions of law and fact and arise from the same facts and

circumstances and assert the identical legal theories and defenses, in accord with the direction of

602(a) of the CPLR. If successful on the issue of consolidation, the defendants then seek an

order, pursuant to the doctrine of collateral estoppel, declaring that this court's March 4, 2011

order in the Van Brunt action is equally binding on the Sutter action. The defendants further

move for equitable relief in the Sutter action based on their assertion that Citibank acted

unconscionably and in bad faith during the protracted period of settlement negotiation. Finally

the defendants seek an order terminating the temporary receivership imposed on the Sutter

property.They further contend that the resolution of both cases will involve the same documents

and witnesses and thus, such overlap, necessitates consolidation to avoid unnecessary costs,

delays and inconsistent judgments. Finally, they contend that there would be no prejudice to


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Citibank if the actions were consolidated arguing that both actions are in the same pre-discovery

stage.

The defendants assert that Citibank treated the two mortgages as a package from the

moment of default, noting for example, that Citibank alleges that it notified both properties of

default on the same day and that all renegotiation' efforts were done with both properties and as

a package. The defendants note that every transfer of the property - October 15, 2010 to Nova

and December 10, 2010 to Wells Fargo - was packaged as well. They argue that both of the

defendants' theory of the case is that foreclosure should be denied due to the bad faith and

unconscionable behavior of Citibank throughout the course of said joint negotiations. They

allege that they were jointly induced [*4]to make substantial personal investments in the

respective properties at issue, based on an implied promise by Citibank that this show of good

faith on the defendants' part would result in a renegotiation of both mortgages, thereby avoiding

default. The defendants conclude that the substance and legal theories of both cases areidentical, will require the same testimony and evidence to be presented to the court, and should

therefore be consolidated to avoid unnecessary costs, delay and inconsistent judgments.In

opposition, Citibank argues that Van Brunt and Sutter are foreclosure actions filed separately by

Citibank on February 5th, 2010 against two different commercial borrowers, namely Van Brunt

Properties LLC, et al. and Sutter Avenue Management, LLC, et. al., each of whom holds a

mortgage on a distinct property. They further point out that the circumstances under which each

loan was made, the loan documents, and the defaults differ from one another. Moreover,

Citibank avers that the receivership status and procedural posture of each case differs. Citibank

maintains that consolidation should be denied inasmuch as the two actions do not have the

requisite common issues of law and fact. Citibank also argues that it would be prejudiced by

consolidation since consolidation would delay the resolution while both actions were aligned

with one another. Finally, Citibank claims that the defendants are only seeking consolidation in

an attempt to obtain a more favorable outcome, noting that there was no motion for

consolidation until, this court's ruling favorable to Van Brunt in the Van Brunt action.

Discussion

Section 602(a) of the CPLR gives a court discretion to consolidate actions where common

questions of law or fact are present. Consolidation is preferred where these commonalities exist,

absent proof that consolidation will prejudice a substantial right of the party opposing the

motion (Best Price Jewelers.Com, Inc. v Internet Data Stor. & Sys., Inc., 51 AD3d 839 [2008];

Beerman v Morhaim, 17 AD3d 302 [2005]; Progressive Insurance Co. v Vasquez, 10 AD3d


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518, 519 [2004];Zupich v Flushing Hosp. & Med. Ctr., 156 AD2d 677, 677 [1989]). Further,

consolidation is appropriate where it will avoid unnecessary duplication of trials, save

unnecessary costs and expense, and prevent an injustice which would result from divergent

decisions based on the same facts (see Zupich, 156 AD2d at 677). The defendants assert that

their respective actions raise identical factual and legal issues, that the two properties have been

dealt with as a package since they defaulted, that there will be little delay as the result ofconsolidation, that there would be no substantial prejudice to the plaintiff and therefore

consolidation is required. The plaintiff does not dispute that the two properties were dealt with

as a package during the period of renegotiation of their mortgages, but opposes the consolidation

of these actions primarily on the ground that substantial prejudice would result from the delay

that such a consolidation would cause. It avers that each action has an independent mortgage

related to a separate and distinct parcel of land, that consolidation will unduly and additionally

delay resolution and that the defendants' motion is an attempt to forum shop in order to get a

more favorable outcome in both actions

Absent a showing of prejudice to a substantial right the existence of common questions of

law or fact justifies the grant of a motion for consolidation. (Lamboy v. Inter Fence Co., 196

AD2d 705, 601 N.Y.S.2d 619 (1st Dept.1993).However, a delay which would prevent a trial

from taking place for some time to come has justified the denial of such a motion,Mulligan v.

Farmingdale Union Free School District No. 22, 133 AD2d 617, 519 N.Y.S.2d [*5]725 (2d

Dept.1987). In the instant actions, there are, as the plaintiff suggests, different procedural

postures but these differences are not likely to cause such a delay as would substantially

prejudice the plaintiff. The plaintiff does argue that it will be so prejudiced, but the arguments

consist of conclusory self-serving statements that prejudice would occur if consolidation were

ordered. The plaintiff suggests that there will be a delay "while the actions [are] brought in line

with each other." The major delay , appears to be caused by the appeals this Court's March 4,

2011 Order, and the appeal of the instant motion, regardless of the out come. The plaintiff's

counsel says, "[t]rying to bring these actions in line with each other, so that they can proceed

together, would only create undue delay and confusion, allowing defendant to prolong theproceedings and avoid judgement to Plaintiff's severe prejudice." Counsel does say not how the

plaintiff is prejudiced nor what the prejudice is. There is no showing of prejudice to a substantial

right of the plaintiff. "[A] and mere delay of the trial is not a sufficient basis upon which to deny

a motion for consolidation or a joint trial (seeAlsol Enters., Ltd. v. Premier LincolnMercury,

Inc., 11 AD3d 494, 783 N.Y.S.2d 620; Zupich, 156 AD2d at 677)." (Whiteman v Parsons

Transportation Group of New York, Inc, et al. 72 AD3d 677, 900 N.Y.S.2d 87 ( 2d Dept 2010)


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CitingHalyalkar v. Board of Regents of the State of NY, 72 NY2d 261,268, the plaintiff,

argues in opposition, that collateral estoppel is inapplicable unless the matter has been "actually

litigated" The plaintiff's counsel buttresses Citibank's argument with a reminder that the actions

"involve, among other things, different loan transactions and different parties. Most notably, the

Sutter Loan Documents and the circumstances of Sutter's default have never even been before

this Court." In sum, the argument is that collateral estoppel cannot be applied herein becausethere has been no actual litigation of the foreclosure in the Sutter action. Halyalkar,defines

actually litigated' as follows: "To satisfy the identicality requirement, the question must have

been actually litigated and, therefore, it must have been properly raised by the pleadings or

otherwise placed in issue and actually determined in the prior proceeding."Halyalkar, supra at

261.

This Court's March 4, 2011order in the Van Brunt action was issued after consideration of

the papers and after oral argument on several motions which were before the Court. The motionsand cross motion were before the court on March 4th and they were heard together. The

plaintiff's motions sought a temporary receiver, substitution and summary judgement on the

foreclosure. The relief requested was denied with express permission to re-file both as to

substitution and summary judgement. The motion for a temporary receiver can be made anew at

anytime during the course of the proceeding where new facts arise. The defendants cross motion

sought equitable relief; the plaintiff responded with opposition and oral argument was heard on

the motion. The March 4th Order resulted from a full presentation by the parties on the issues

before the court. As relevant to the collateral estoppel, the order addresses the behavior of the

parties in that action and the consequences of that behavior with regard to the period following

the "default" and renegotiation efforts made by the parties. It is not a permanent determination

with regard to the foreclosures of the subject properties, rather it is the imposition of an equity

equalizer put in place in recognition of the fact that Citibank and its assigns, as determined on

papers and after oral argument, did actively prolong these proceeding with such lack of good

faith as to require that they should forfeit any interest that would have otherwise been owning to

them under the terms of the agreement they had with the borrowers. All of the renegotiationefforts were made with both Van Brunt and Sutter and at all the same times and places. Citibank

had a full and fair opportunity to contest the prior determination; the issues were actually

litigated in the Van Brunt action. In as much as the behavior of the lenders in the Van Buren

action were identical, both in substance and in time, to the behavior of the lenders in Sutter, this

Court cannot see how any different outcome for the Sutter action can fail to be an inconsistent

result and a waste of judicial resources.


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Finally the defendants seek an order terminating the temporary receivership imposed on the

Sutter property. This Court is without sufficient information to make a determination as to

wether or not the temporary receiver should be removed. Upon consolidation, and in as much as

the papers are already before the Court, defendant Sutter may request a

[*7]conference/argument with the plaintiff on the appropriateness/lack of need for the receiver.

Citibank's Cross Motion.

Citibank cross-moves for an order finding that all conduct and statements over the course of

settlement negotiations entered into between Citibank and the defendants, including the

pre-negotiation agreement signed by all three parties, be ruled inadmissable in the Van Brunt

action, pursuant to CPLR 4547. Citibank also cross moves for an order seeking to substitute

Wells Fargo as the plaintiff in the Van Brunt action and that the case caption be amended

accordingly. Finally, Citibank cross-moves for clarification of two rulings contained in thiscourt's March 4, 2011 order.

In opposition to Citibank's cross motion, the defendants argue that the cross motion and

opposition papers should not be considered as such submissions were untimely and defective.

On the issue of timeliness, the court notes that CPLR 2215 pertinently provides that "[a]t least

three days prior to the time at which the motion is noticed to be heard, or seven days prior to

such time if demand is properly made pursuant to subdivision (b) of rule 2214, a party may serve

upon the moving party a notice of cross-motion demanding relief, with or without supportingpapers . . ." Here, the defendants motion was served upon the plaintiff on April 6, 2011. The

cross motion was not served until June 20, 2011, a full seventy-five days later.

The defendants further argue that the plaintiff's papers are defective and should not be

considered by the court. Specifically, it is argued that the papers are defective because they are

submitted in reliance upon an affidavit of Marisa K. McGuaghey, who describes herself as an

"authorized representative of Hudson Americas LLC" and bases her authority to submit her

affidavit on behalf of Wells Fargo pursuant to an undated, uncertified copy of a Limited Power

of Attorney. A power of attorney presented to the Court must be an original or a copy certified

by an attorney, pursuant to CPLR 2105. Section 2105 of the CPLR states, inter alia, that "an

attorney admitted to practice in the court of the state may certify that it has been compared by

him with the original and found to be a true and complete copy" (see Security Pacific Nat. Trust

Co. v Cuevas, 176 Misc 2d 846 [1998]). Here, there is nothing in the record indicating that the

plaintiff's attorney has performed this comparison (see Lasalle Bank N.A. v Smith, 26 Misc 3d


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1239A [2010]; United States Bank Natl. Assn. v White, 22 Misc 3d 1112A [2009]; U.S. Bank

Natl. Assn. v Bernard,18 Misc 3d 1130A [2008]). Additionally, the court notes that the fact that

the limited power of attorney is undated is a further defect (see Ameriquest Mortgage Co., v

Basevich, 16 Misc 3d 1104A [2007]. Based upon the foregoing, the court finds that the

plaintiff's papers are defective and therefore will not address the merits, or lack thereof, of the

plaintiff's cross motion.

This constitutes the decision and order of the court.

E N T E R,

____________________________

yvonne lewis, JSC
