The opinion of the court was delivered by: BRIEANT
Plaintiff United States of America moves this Court, pursuant to Rule 59(e) of the Federal Rules of Civil Procedure and Rule 3(j) of the Local Civil Rules, to reconsider its Memorandum & Order dated March 21, 1995, which granted summary judgment in favor of the defendants and dismissed the complaint in this mortgage foreclosure action. The motion, filed on May 19, 1995, was marked fully submitted on June 16, 1995 based upon the papers with no oral argument having been heard.
Familiarity on the part of the reader with this Court's Memorandum & Order dated March 21, 1995, and with the underlying facts and all prior proceedings in this case 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. 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.
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. 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.
In its Memorandum & Order dated March 21, 1995, this Court dismissed the complaint for failure of the Government to obtain a deficiency judgment in the prior action against Herman Levine, as required by Section 1371 of the New York RPAPL.
Whether or not the Levines were personally obligated for the deficiency, the Kennedy Terrace property was, and the proceedings set forth in New York RPAPL § 1371(3) were required to be taken by the Government in order to determine the amount of that deficiency and protect its right to collect. The Court observes that the Government failed even to commence these deficiency proceedings. In short, this Court is not convinced that the Government could not with due diligence comply with § 1371(3), as any commercial New York lender would have been required to do.
The dispute as to whether or not the statute of limitations had run as to the Levines' guaranties is not properly before this Court, as it should have been raised in the prior action (United States v. Holiday Syrups, et al., 93 Civ. 1620 (GLG)) and resolved therein. The Government did not even attempt to comply with New York law and name Herman Levine in the mortgage foreclosure action so as to obtain a deficiency judgment against him, as required by Section 1371 of the New York RPAPL.
In any event, the defendants have not pursued a statute of limitations defense in the instant action to foreclose the mortgage on the residential property of the Levines; this Court did not in its dismissal of the Government's claim for failure to obtain a deficiency judgment under New York law, find that claim to be time-barred or subject to any statute of ...