The opinion of the court was delivered by: KAPLAN
LEWIS A. KAPLAN, District Judge.
This civil RICO action is brought by the owner of a Mt. Vernon, New York, nursing home against its former owner, the former owner's son, and others. A major element of the dispute between the parties concerns the computation of the outstanding balance due on a wraparound mortgage. The only basis for proceeding in federal rather than state court is the presence of the RICO claims.
Defendants move to dismiss the complaint and for other relief. Plaintiff cross-moves to amend in a limited respect.
The allegations of the complaint, which are deemed true for purposes of the motions to dismiss the complaint, tell the following story:
David Wolf in 1977 was the owner, and his son Howard Wolf the administrator, of Shalom Nursing Home ("Shalom"), a skilled nursing care facility. David Wolf was caught up in the nursing home scandals of that era, convicted of a felony, and forced by an agreement with the New York State Special Prosecutor for Nursing Homes to divest his interest in Shalom. Accordingly, Wolf first leased and then, in January 1983, sold Shalom to the plaintiff. Howard Wolf, who was not implicated in wrongdoing, stayed on with plaintiff as Shalom's administrator.
At the time of the sale, Shalom was subject to a $ 4.8 million first mortgage in favor of Bank of New York ("BNY"). The sale price was $ 5 million, which was paid by plaintiff giving Wolf a wraparound mortgage which in substance consisted of the preexisting BNY first mortgage and a purchase money second mortgage in favor of Wolf in the approximate amount of $ 200,000. Simultaneously with the execution of the wraparound mortgage, Wolf assigned to BNY the entire monthly payments due under the mortgage, and BNY agreed to apply them first to satisfy the principal and interest due on the first mortgage and then to Wolf. The wraparound mortgage was to become due on December 25, 1995 and the BNY first mortgage seven days later.
According to the complaint, the sale of Shalom to plaintiff was intended from the outset by the Wolfs as a ruse to defraud plaintiff. David Wolf allegedly owned a vacant parcel of land adjacent to Shalom. The parcel was landlocked and, allegedly, of value only if used under common ownership with Shalom. Accordingly, the Wolfs are said to have planned from the very beginning to recapture Shalom from plaintiff in order to build a second nursing home on the adjacent lot and to operate the two facilities together.
In September 1993, the defendants allegedly applied to the New York State Public Health Council ("PHC") for approval to build a new nursing facility on the adjacent lot. The application was approved in July 1996.
In late summer 1995, BNY notified plaintiff that it would not renew its mortgage and threatened to foreclose if the mortgage was not paid in full at its December 1995 maturity date. It assigned as reasons Shalom's late payments, checks bounced on its accounts, and David Wolf's intended refusal to extend the wraparound mortgage. It is in this context that the dispute concerning the principal balance of the mortgage arose.
On December 13, 1995, David Wolf notified plaintiff that the principal balance on the mortgage was $ 4.5 million rather than the $ 3.4 million that plaintiff claims is owed. The difference is said to lie in Wolf's allegedly fraudulent application of part of Shalom's monthly mortgage payments to late fees, thus lessening the extent to which Shalom's monthly payments reduced the principal amount of the mortgage and increasing the portion of the monthly payments applied to the mortgage that went to satisfy interest as opposed to principal. The late fees, according to plaintiff, are entirely ...