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FEDERAL HOME LOAN MORTG. v. DUTCH LANE

October 16, 1991

FEDERAL HOME LOAN MORTGAGE CORPORATION, PLAINTIFF,
v.
DUTCH LANE ASSOCIATES, MORTON L. GINSBERG, MLG PROPERTIES, INC., PATRICK MCARDLE, D/B/A A & P MAINTENANCE, VILLAGE OF SPRING VALLEY, PEOPLE OF THE STATE OF NEW YORK, AND JOHN DOE NO. 1 TO 77, DEFENDANTS. THE NAMES OF THE JOHN DOE DEFENDANTS BEING FICTITIOUS AND UNKNOWN TO PLAINTIFF, THE PERSONS AND ENTITIES INTENDED BEING PARTIES HAVING AN INTEREST IN OR LIEN AGAINST THE PREMISES SOUGHT TO BE FORECLOSED HEREIN, AS OWNER, TENANT, OR OTHERWISE.



The opinion of the court was delivered by: Goettel, District Judge.

OPINION

Plaintiff Federal Home Loan Mortgage Corporation has commenced this action against Dutch Lane Associates, et al for foreclosure on a mortgage, sale of the mortgaged property, and collection of rents past due and as yet unreceived from defendants.

I. FACTUAL BACKGROUND

In May 1985, defendant Dutch Lane Associates ("Dutch Lane") executed a Consolidated Mortgage and a Consolidated Note with Raritan Valley Savings and Loan Association ("Raritan"), the assignee and/or mortgagee of three prior mortgages and their respective notes relating to a 77-unit apartment building. By its terms, Dutch Lane agreed to pay Raritan $875,000 with interest in monthly installments. Dutch Lane also assigned to Raritan all rents, issues, and profits from the mortgaged property. On May 17, 1985, Raritan assigned to the Federal Home Loan Mortgage Corporation ("FHLMC") all rights under the consolidated agreement and assignment of rents.

According to the FHLMC in its complaint, beginning in April 1990, Dutch Lane failed to make its monthly payments. Dutch Lane, while not specifically responding to this allegation in its answer, admits that some of its monthly installments were not made timely. On October 8, 1990, the FHLMC notified the defendants by certified mail at their offices that the Consolidated Agreement was in default and the FHLMC was exercising its rights to all rents and revenues generated by the property. It demanded payment in full of the entire debt by October 18th. On October 19, 1990, FHLMC sent a second letter by certified mail to defendants at same addresses notifying them that it had accelerated the entire unpaid balance of the Consolidated Note and a foreclosure action would be commenced if payment in full was not received. It also demanded all rents collected in October and November of 1990.

On November 28, 1990, FHLMC commenced a foreclosure action against the defendants. On January 21, 1991, after securing an extension of time from the court, the defendants filed an answer. A pre-trial conference was held in May 1991 at which defendants appeared through their attorney and requested more time to make a settlement offer. The court granted the request and set a second conference for June. Although counsel for FHLMC travelled from Washington, D.C. to appear for the conference before the district court judge, counsel for the defendants failed to appear. The pre-trial conference was later held by telephone. Despite repeated settlement proposals, the parties failed to reach any agreement. Plaintiff contends that defendants inability to make any good faith payment on the mortgage led to the failed negotiations. A motion schedule was set for the case.

II. DISCUSSION

Before the court today are plaintiff's motion requesting summary judgment on its foreclosure action and rejecting defendants' affirmative defenses, a default judgment against several of the defendants, and dismissal of the complaint against the John Doe defendants. Also here today is defendants' cross motion to dismiss the complaint.

A. Default Judgement

We first dispose of the plaintiff's default judgment against defendants' Patrick McArdle d/b/a A & P Maintenance ("McArdle"), Village of Spring Valley and the People of the State of New York. As the affidavits of service show, process was served on McArdle on April 10, 1991. No answer was received within the 20 days allowed by Rule 12 and no appearance or pleading has been offered. Defendants Village of Spring Valley and People of the State of New York filed a notice of appearance and waived their right to interpose an answer. Consequently, under Rule 55 of the Federal Rules of Civil Procedure, Plaintiff's default judgment is granted against these defendants.

B. Motion for Summary Judgment

Turning to plaintiff's summary judgment motion for foreclosure and sale of the Property, defendants in their answer raised three affirmative defenses. First, defendants contend that the court lacks personal jurisdiction over the defendants. Second, they argue that Dutch Lane has tendered payment of arrears which plaintiff has refused to accept. Finally, defendants claim that plaintiff is not entitled to any equitable relief.

The standard for summary judgment is well-established. Under Rule 56 of the Federal Rules of Civil Procedure summary judgment is only proper where "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party, FHLMC in this case, bears the initial burden of demonstrating to the court that no genuine issues of material fact exist. If the moving party meets this burden, the opposing party must "set forth specific facts showing that there is a genuine need for trial." Fed.R.Civ.P. 56(e). Creating some abstract doubt as to material issues is not enough; the standard calls for specific facts. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1355, 89 L.Ed.2d 538 (1986). The court's role in this process is limited. We must answer one question: are there any genuine factual issues that are disputed and therefore must be resolved by the trier of fact? If so, the ...


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