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FEDERAL HOME LOAN MORTG. CORP. v. SPARK TARRYTOWN

May 27, 1993

FEDERAL HOME LOAN MORTGAGE CORPORATION, Plaintiff,
v.
SPARK TARRYTOWN, INC., PEOPLE OF THE STATE OF NEW YORK, THE TOWN OF MOUNT PLEASANT, VILLAGE OF NORTH TARRYTOWN, and JOHN DOE NOS. 1 TO 20, Defendants. VILLAGE OF NORTH TARRYTOWN, Third Party Plaintiff, v. LARRY RUSH, Third Party Defendant.



The opinion of the court was delivered by: VINCENT L. BRODERICK

 VINCENT L. BRODERICK, U.S.D.J.

 I

 This mortgage foreclosure suit presents important issues concerning protection of local government liens where owners default on federally granted, insured or acquired mortgages. The action is brought by plaintiff Federal Home Loan Mortgage Corporation ("FHLMC") pursuant to 12 USC ยง 1452(e) against several defendants, including Spark Tarrytown, Inc. ("Spark Tarrytown"), a principal to the note and mortgage sought to be foreclosed and owner of the mortgaged premises, and the lienholding Village of North Tarrytown (the "Village"). I granted the plaintiff's ex parte application for the appointment of a receiver for the subject property in my order dated September 29, 1992. *fn1"

 Plaintiff FHLMC now seeks a judgment of foreclosure and sale and moves for, among other things, a default judgment against Spark Tarrytown; summary judgment against the Village; and collection of rents past due and as yet not received from Spark Tarrytown. The Village opposes the FHLMC's motion for summary judgment and, as third-party plaintiff, moves for entry of default and an inquest to assess damages against third-party defendant Larry Rush ("Rush") individually.

 Mr. Rush is the president and sole stockholder of Spark Tarrytown. On the day responses of Spark Tarrytown and of Rush were due, Rush filed an affidavit seeking a thirty (30) day adjournment of the two motions pending with respect to both the corporate defendant and himself. See Affidavit of Larry Rush ("Rush Aff."), Feb. 1, 1993.

 I approve as modified the FHLMC's proposed judgment of foreclosure and sale, which is attached to this memorandum order. Judgment of default is granted against Spark Tarrytown on the grounds set forth in part II and against the Village, the Town of Mount Pleasant and the State of New York to the extent set forth in parts IV-V; the FHLMC's application to recover rents is granted to the extent provided in part III.

 The FHLMC seeks sanctions against the Village under Fed.R.Civ.P. 56(g). Since I uphold the Village's position that its liens should be preserved, such a request is inappropriate. Stern v. Leucadia National Corp., 844 F.2d 997 (2d Cir. 1988), cert. denied 488 U.S. 852, 102 L. Ed. 2d 109, 109 S. Ct. 137 (1988). The FHLMC's motion to dismiss the action against defendants John Doe Nos. 1 to 20 without prejudice to any of the proceedings in this case is granted.

 I deny without prejudice the application for a deficiency judgment; I shall be in a position to rule upon issues relating to liability for a deficiency until the foreclosure and sale of the property has been concluded and the net assets of the sale ascertained.

 In the third-party action, I deny third-party defendant Rush's request for an adjournment and enter his default for the reasons set forth in part VI below. The case is referred to United States Judge Magistrate Mark D. Fox for the purpose of conducting an inquest with respect to the amount, if any, due to the Village from Larry Rush. The Village must serve Larry Rush with notice of the inquest when it is scheduled and serve him with all papers furnished to the Magistrate Judge. The FHLMC is to be served with all papers in the third-party action.

 II

 On July 13, 1988 the FHLMC became the assignee of a Consolidation Agreement signed by Spark Tarrytown and, as such, became the holder of a first mortgage for a principal sum of $ 350,000 *fn2" on the property that is the subject of this action. On that same date the FHLMC also received as additional collateral from Spark Tarrytown assignment of all rents, issues, and profits due from the mortgaged property.

 By motion dated January 19, 1993 the FHLMC sought a default judgment against the corporate defendant Spark Tarrytown, alleging that Spark Tarrytown had not answered, objected, or otherwise responded to the complaint. On February 1, 1993 the motion response date, defendant Larry Rush, as representative of Spark Tarrytown, *fn3" submitted an affidavit requesting a thirty-day adjournment on the grounds that he had discovered in "Jan 1993" that his attorney had been "suspended from the ...


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