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COLONY NYRO PTNRS., L.P. v. WATERSIDE DEV. CORP.

December 13, 1993

COLONY NYRO PARTNERS, L.P., Plaintiff,
v.
WATERSIDE DEVELOPMENT CORP., KENNETH R. SOSKZA, JOEL WALLACH, CARL KAMHI, JEMI CONSTRUCTION CORP., LEVITT-FUIRST ASSOC. LTD., JAMES FORD PLUMBING AND HEATING, INC., JOHN ARGYROS, MARIAN ARGYROS, THE PEOPLE OF THE STATE OF NEW YORK, BOARD OF MANAGERS OF VILLAS ON THE LAKE CONDOMINIUM, OLD YORKTOWN VILLAGE COMMUNITY ASSOCIATION, INC., Defendants.



The opinion of the court was delivered by: CHARLES L. BRIEANT

 CHARLES L. BRIEANT, U.S.D.J.

 I

 This mortgage foreclosure action presents questions relating to the appropriate timing of the foreclosure and sale of residential condominium units while litigation with respect to the priority of claims to the sale proceeds and other related matters remain unresolved.

 This lawsuit involves foreclosure and sale of 39 of 135 condominium units known as Villas on the Lake Condominium (the "Villas Condominium") on property owned by defendant Waterside Development Corporation ("Waterside") in Yorktown, New York. The action was first brought by the Howard Savings Bank, the original mortgagee bank, in the Supreme Court of the State of New York, County of Westchester alleging default by Waterside and two of its principals. The Federal Deposit Insurance Corporation ("FDIC"), having acquired the assets of the Howard Savings Bank as receiver under 12 U.S.C. § 1821 in October 1992, removed this case to federal court on December 31, 1992 pursuant to 12 U.S.C. § 1819 and 28 U.S.C. § 1446 and was substituted as plaintiff by stipulation and order dated August 18, 1993. After considerable pretrial litigation, including full submission of the motion now before me and while this motion was pending, the FDIC notified the parties and the court that its interests in the Howard Savings Bank were scheduled to be sold. Two weeks later, on November 18, 1993, Colony NYRO Partners, L.P. ("Colony" or the "plaintiff"), purchased the mortgages held by the FDIC covering the property at issue here and the FDIC assigned the mortgages to Colony, which was substituted as plaintiff by order dated November 24, 1993.

 Although there is now no federal party to this suit based on state claims, jurisdiction to complete adjudication of this matter is found under the provisions of 28 U.S.C. § 1367. *fn1"

 II

 Colony now seeks confirmation of the referee's report and judgment of foreclosure and sale against the property. The three answering defendants each oppose the plaintiff mortgagee's motion in part: the Board of Managers of Villas on the Lake Condominium (the "Board of Managers") objects to the sale of the property in one parcel; John Argyros and Maria Argyros (the "Argyroses") seek to prevent the mortgagee from foreclosing an alleged water easement benefitting the Argyros's property; and Carl Kamhi ("Kamhi"), claims that his own mortgage lien, which is also in default, has priority over the plaintiff's mortgage. Although he does not oppose foreclosure, Kamhi objects to certain provisions of the plaintiff's proposed Judgment of Foreclosure and Sale and submits a cross-motion together with a counter proposed Judgment of Foreclosure and Sale.

 Kamhi, by letter to the court dated December 6, 1993, now contends that a sale at this time would be unfair since he does not know the amount of his equity of redemption, and therefore does not know what to bid.

 Title in this case appears to be marketable, sufficient net sale proceeds probably will remain available for the satisfaction of any prevailing claims and there is otherwise no prejudice to the claims or defenses of any of the parties. Should it turn out to be otherwise, this court may refuse confirmation of the foreclosure sale. The public interest and interests of all parties will be served best by a prompt sale of the residential condominium units, which may deteriorate in value and are accruing expenses. Delay occasioned by prolonged litigation resulting in keeping housing units unoccupied and unavailable to the local community may be avoided. Foreclosure and sale prior to determination of remaining claims is appropriate in this case, where preservation of all claims or defenses for adjudication against the proceeds of sale is specifically provided by order dated April 6, 1993. *fn2"

 This court sees no problem affecting a bid by Kamhi. This is not the ancestral farm; it is merely investment property. The decision on what to bid is therefore driven only by the bidder's perception of the difference, if any, between the last bid, and the fair market value of the mortgaged premises sold according to the terms of sale. The argument of Kamhi's attorney is spurious in the context of the purely economic issues of this foreclosure sale.


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