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Bank of America v. Sharim

December 13, 2010


The opinion of the court was delivered by: Honorable Paul A. Crotty, United States District Judge



Defendants Sharim, Inc. ("Borrower"), Joseph Moinian, and Josephson LLC (collectively "Defendants") seek a stay or abstention of this action initiated by Bank of America ("Lender" or "Plaintiff") through its special servicer CW Capital Asset Management LLP ("CW Capital") to foreclose a certain mortgage. Defendants urge the Court to exercise its discretion to stay this matter on the ground that there is an earlier filed state court action for declaratory judgment between the parties with the same issues and concerns arising out of the same mortgage loan.

On September 17, 2010, Borrower commenced an action in the Supreme Court of New York County for a declaratory judgment challenging the validity of an acceleration of the underlying mortgage, based on a demand for payment of additional charges said to be improper under the express terms of the loan documents. Borrower moved for a preliminary injunction and a hearing was scheduled for October 7, 2010. Before the hearing could be held, however, Lender commenced this action on October 7, 2010, based on diversity, to foreclose the mortgage.

Defendants urge that Lender may answer and counterclaim or begin a related case for foreclosure in the state court. Lender denies that it is "forum shopping," contending that the state court and the federal actions are separate actions. Moreover, even if they are parallel, Lender Plaintiff,10 Civ. 7570 (PAC) argues that the balance of the relevant abstention factors require the Court to exercise its jurisdiction over the matter. For the reasons that follow, the Court rejects the Lender's arguments and GRANTS Defendants' motion for a stay pending the resolution of the state court action.

I. Facts

This litigation arises out of a mortgage loan for a commercial building at 72 Madison, New York, New York ("Building"). (Mem in Supp. 3.) Borrower refinanced the loan in 2007 for $22 million pursuant to a mortgage consolidation agreement issued by a securitized trust and various certificate holders ("Mortgage"). (Id.) A series of trustees have administered the Mortgage-first Wachovia, then Wells Fargo, and now Bank of America. (Id.)

Defendants contend that the Mortgage "performed reasonably well" following the refinancing. (Id.) In 2009, however, Borrower fell behind in its monthly mortgage payments. (Id.) Borrower sought a voluntary restructuring from the lender and its regular servicer several times. (Id.) Defendants contend that, while the regular servicer was initially receptive, the relationship turned sour when the Mortgage was turned over to the special servicer, CW Capital. (Id.)

On July 15, 2010, CW Capital issued a notice of default, demanding payment of $1,405,617.39, including default interest and late charges dating back to 2009. (Id.) Defendants contend that some default interest and late charges had been reversed or never actually charged. (Id.) Accordingly, Borrower disputed the amount required to cure the default; but, on July 28, 2010, paid the full amount of alleged arrears under protest. (Id. 4) Lender accepted the payment; but refused to return the Mortgage to non-default status until Borrower paid an additional fee of $220,000 for reinstatement and other charges, all totaling $292,837.50. (Id.)

Borrower objected to this reinstatement fee, arguing that it was not provided for in any of the loan documents and was demanded by Lender for the benefit of CW Capital, without contractual entitlement. (Id.) In response, Lender accelerated the Mortgage, by notice dated August 20, 2010. (Id.)

The notice prompted Borrower to commence the state court action on September 17, 2010 against Bank of America and CW Capital, seeking:

(1) A declaratory judgment that (a) Borrower cured the defaults demanded in the July 15 Notice and the Mortgage should be returned to non-default status without any obligation to make the additional payments demanded; (b) Lender is not entitled to receive the reinstatement fee; (c) default interest and late charges prior to April 2010 are not owed because they had been waived, reversed, and/or never charged; (d) the Mortgage cannot properly be accelerated; (e) the August 20, 2010 Acceleration Notice is not effective; and (f) Lender does not have the right to enforce the Mortgage due to incomplete assignments in the prior chain of title;

(2) Injunctive relief preventing Lender from acting on the notice of acceleration and continuing to charge additional default interest while the ...

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