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CREDIT LYONNAIS v. GETTY SQUARE ASSOCS.

February 2, 1995

CREDIT LYONNAIS, Plaintiff, against GETTY SQUARE ASSOCIATES, and SOL ARKER, Defendants.


The opinion of the court was delivered by: HAROLD BAER, JR.

 HAROLD BAER, JR., United States District Judge.

 Credit Lyonnais ("CL") commenced this action against Getty Square Associates ("Getty") and Sol Arker (collectively, the "Defendants") to foreclose its first mortgage lien on the premises located at 30 South Broadway, Yonkers, New York (the "Premises"). CL now moves for summary judgment. Defendants cross-move for summary judgment contending that this court lacks subject matter jurisdiction, and, in the alternative, that CL does not have a right to certain rents collected by Getty. Additionally, Arker moves for summary judgment on the ground that he is not personally liable for any rents collected by Getty. For the reasons that follow, CL's motion is GRANTED, Getty's motion is DENIED, and Arker's motion is DENIED.

 In August 1989, Getty executed a promissory note (the "Note") wherein Getty promised to pay to CL the principal sum of $ 4,500,000. To secure the principal and interest thereon, Getty executed a mortgage (the "Mortgage") giving CL a consolidated first mortgage lien on the Premises. The Mortgage gives CL the express right to commence foreclosure proceedings in the event of a default. In August 1989, Getty also executed an assignment of leases (the "Assignment") wherein it assigned the rents and profits of the Premises to CL.

 Getty failed to pay interest installments due on July 1, 1994, and thereafter. On August 19, 1994, CL gave Getty written notice of default and demanded that Getty remedy the default by August 29, 1994. Upon Getty's failure to cure, CL notified Getty of its election to receive all money due under the Note and all rents collected since July 1, 1994, the date of default. The court appointed a receiver on September 16, 1994.

 CL maintains that Getty is a single asset real estate company, owning only the Premises, and will be unable to satisfy any judgment. CL has therefore named So Arker, Getty's general partner, as a defendant.

 II. Discussion

 CL contends that because Defendants are in default, it is entitled to foreclose and to collect all rents received by the Defendants after the date of default. Defendants concede that they are in default under the Note but maintain that (1) this court lacks subject matter jurisdiction; and (2) CL is entitled only to the rents received after the appointment of the receiver. Further, Arker denies personal liability for any rents collected, and in the alternative, claims that CL must proceed against Getty's assets before moving against his individual assets.

 A. Standard of Review

 In a motion for summary judgment, the burden is on the moving party to establish that there are no genuine issues of material fact in dispute and that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). A dispute regarding a material fact is genuine "'if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Aldrich v. Randolph Cent. Sch. Dist., 963 F.2d 520, 523 (2d Cir. 1992) (quoting Anderson, 477 U.S. at 248), cert. denied, 121 L. Ed. 2d 359, 113 S. Ct. 440 (1990). The court resolves "all ambiguities and draw[s] all inferences in favor of the nonmoving party in order to determine how a reasonable jury would decide." Aldrich, 963 F.2d at 523. Thus, "only when reasonable minds could not differ as to the import of the evidence is summary judgment proper." Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir.), cert. denied, 502 U.S. 849, 112 S. Ct. 152, 116 L. Ed. 2d 117 (1991). See also Suburban Propane v. Proctor Gas, Inc., 953 F.2d 780, 788 (2d Cir. 1992).

 B. Subject Matter Jurisdiction

 CL asserts that federal subject matter jurisdiction exists in this action under 28 U.S.C. § 1332(a)(4), which grants original jurisdiction to district courts over actions exceeding $ 50,000 and involving a "foreign state," as defined in 28 U.S.C. § 1603(a). Under section 1603(a), & "foreign state" includes a "political subdivision of a foreign state or an agency or instrumentality of a foreign state as defined in subsection (b)." Subsection (b) states that an "agency or instrumentality of a foreign state" is any entity "which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof . . . ." 28 U.S.C. § 1603(b)(2) (emphasis added).

 CL maintains that it is a "foreign state" under section 1603(a), and therefore subject matter jurisdiction exists under section 1332(a)(4). CL argues that it fits this definition because a majority of its shares are owned by the Republic of France. According to Jean-Marc Moriani, Senior Vice President of the New York Branch of CL, France owns outright 48.5% of CL's outstanding shares. Moriani Aff. P 35. In addition, he claims that France owns 99.97% of SPBI SNC, another French corporation, which has an 8.67% ...


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