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UNITED STATES v. LEVINE

March 21, 1995

UNITED STATES OF AMERICA, Plaintiff, against HERMAN LEVINE, LINDA LEVINE, LISA LEVINE, JENNIFER LEVINE and OLD DUTCH MUSTARD CO., INC., Defendants.


The opinion of the court was delivered by: BRIEANT

 Brieant, J.

 By motion fully submitted and supplemented by matters of record in another lawsuit filed in this Court entitled, United States v. Holiday Syrups, et al., 93 Civ. 1620 (GLG) ("the Holiday Syrups Case"), the Government seeks summary judgment in its favor and a default judgment enforcing a junior mortgage upon residential property occupied by defendant Herman Levine as his residence and owned by defendants Lisa and Jennifer Levine. The Court concludes for the reasons set forth below that summary judgment should be granted in favor of the non-moving defendants, dismissing this action as a matter of law. The facts set forth below are uncontested.

 The complaint in this action was filed on January 18, 1994. Familiarity therewith is assumed. The complaint alleges that it was, "brought by the United States of America to collect a sum due and owing to the Small Business Administration (SBA)" on a promissory note and to foreclose a mortgage on property known as 34 Kennedy Terrace located in the City of Middletown, County of Orange, State of New York, in this district (Complaint, P 1).

 On or about April 29, 1977, Bankers Trust Company of Hudson Valley, N.A. (the Lender) loaned to Holiday Syrups, Inc. (the Borrower) the sum of $ 250,000.00, eighty percent of which was guaranteed by the plaintiff through the SBA. The loan was secured by a first mortgage on the business premises of Holiday Syrups, 12-14 Stanton Street, in the City of Middletown, New York.

 On or about the same date, Herman Levine, a principal of the Borrower, and his since deceased wife Linda, delivered their own promissory note to the Lender in the same amount. It is undisputed that the Levine note represented the same indebtedness, and the status of the Levines was that of guarantor of the Holiday Syrups loan. The Levines also delivered a junior real estate mortgage covering their home at 34 Kennedy Terrace in Middletown, New York, the mortgage sought to be foreclosed in this lawsuit, in the amount of $ 35,000.00 in favor of Bankers Trust Company of Hudson Valley, N.A., which mortgage was duly recorded on May 5, 1977 in Orange County Liber 1717 mp 747. That mortgage, which is attached to the complaint in this action, expressly recites that it is given as collateral security for the indebtedness of Holiday Syrups, Inc.

 The complaint in this action seeks judgment holding that Herman Levine and Linda Levine (since deceased) are in default as to that mortgage, and foreclosing their interest in the property and all liens or ownership interests junior in equity to that of the United States as successor of the SBA as guarantor of the loan made by Bankers Trust Company of Hudson Valley, N.A. to Holiday Syrups. *fn1"

 The answer in this action, docketed February 24, 1994, pleads as a third affirmative defense in law, the pendency before this Court of another action relating to the same indebtedness. That "other action" is, of course, the Holiday Syrups litigation under Docket No. 93 Civ. 1620 (GLG).

 Holiday Syrups, the principal obligor or borrower, defaulted on or about June 24, 1980, and on that day the Lender assigned the note, a mortgage on the Borrower's business premises on Stanton Street in Middletown, New York, and the guaranty and mortgage given as collateral by the Levines on the Kennedy Terrace home to SBA, the SBA accelerated the indebtedness and made demand upon the Borrower and the Levines for the full amount then owed by Holiday Syrups. As of June 24, 1994, the SBA certified that the unpaid balance due to the United States of America under the guaranty by Herman Levine was $ 84,000.00.

 On April 28, 1991, an involuntary bankruptcy petition was filed in this district with respect to Holiday Syrups. This debtor's estate was closed January 29, 1987 by the Bankruptcy Court pursuant to Chapter 7 of the Bankruptcy Code and the collateral abandoned. See In re: Holiday Syrups, Inc., 81 B 30228. On March 16, 1993, the United States filed the Holiday Syrups action, 93 Civ. 1620, previously referred to herein, seeking to foreclose the mortgage on the business real property formerly owned by the Borrower and located in the City of Middletown, New York, at 12-14 Stanton Street, hereinafter referred to for convenience as the "Holiday Syrups Property". The defendants named in 93 Civ. 1620 in addition to Holiday Syrups included the City of Middletown, the New York State Industrial Commissioner and the New York State Workers Compensation Board. However, none of the Levines were sued in that case.

 As of the date of the notice of pendency, the record title of 34 Kennedy Terrace appears to have been in defendants Lisa Levine and Jennifer Levine, with occupancy by defendant Herman Levine. Their title was subject to a prior first mortgage of record initially held by Inter County Savings Bank, and a junior lien of Old Dutch Mustard Co., Inc., another defendant in this lawsuit.

 The Holiday Syrups litigation proceeded to final judgment before Judge Goettel of this Court. The Government, although well aware of the underlying facts, declined to make the Levines parties to that litigation. The United States Marshal sold the Stanton Street property in foreclosure on November 18, 1994 at a Public Judicial Sale, equivalent to an auction, conducted in the lobby of the Supreme Court Wing of the Orange County Government Center in Goshen, New York. The SBA purchased the Holiday Syrups property for the sum of $ 45,000.00. The Court has been informed without contradiction that the value of the Stanton Street property was approximately $ 100,000.00 according to a recent appraisal by the SBA. See Tr. of July 22, 1994 at p. 9 in this action. *fn2"

 No application for a deficiency judgment was made in the Holiday Syrups case. None could be made as to the debtor because the debt itself had been discharged in bankruptcy, and, as noted, Herman Levine ...


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