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Bank of America, National v. Commack Properties

November 4, 2011

BANK OF AMERICA, NATIONAL ASSOCIATION, AS SUCCESSOR BY MERGER TO LASALLE BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR THE REGISTERED HOLDERS OF J.P. MORGAN CHASE COMMERCIAL MORTGAGE SECURITIES TRUST 2007-LDP 11, COMMERCIAL MORTGAGE
PASSTHROUGH CERTIFICATES SERIES 2007-LDP 11, PLAINTIFF,
v.
COMMACK PROPERTIES, LLC, AND JAY R. VIDERS, DEFENDANTS.



The opinion of the court was delivered by: Hurley, Senior District Judge:

MEMORANDUM & ORDER

Before the Court is a request by plaintiff that upon discharge of the Receiver in this action, the surplus net rental receipts in possession of the Receiver be turned over to plaintiff, instead of defendants. (Plaintiff's Letter Request ("Pl.'s Letter Req."), docket no. 53.) Plaintiff seeks possession of the rent receipts to cover plaintiff's mistaken payment of real estate taxes on the subject property for the month of May 2011. According to plaintiff, the taxes should have been paid by defendants under the settlement agreement. For the reasons set forth below, plaintiff's request is denied.

BACKGROUND

Effective May 27, 2011, the parties entered into an agreement to settle this foreclosure action. Pursuant to the terms of that agreement, defendants were to pay plaintiff $4.5 million as the "Discounted Settlement Amount,"*fn1 which constituted, by the terms of the agreement, "full satisfaction of the Indebtedness." (Settlement Agreement at 3, attached to Defendants' Opposition Letter ("Ds' Opp.") as Exhibit A.)

However, because the agreement-negotiated at the beginning of May 2011-would not go into effect until the end of that month, plaintiff wanted to ensure that the May real estate taxes were paid. Accordingly, acceptance of the Discounted Settlement Amount was conditioned upon defendant "[d]eliver[ing] to [the plaintiff] Lender . . . documentary proof reasonably acceptable to the Lender that real estate taxes are current as of the [agreement's] effective date [i.e. May 27, 2011]." (Settlement Agreement § 2(g).) Plaintiff contends that this clause leaves "no doubt that the Settlement Agreement contemplated that the Defendants would pay the real estate taxes on the property." (Pl.'s Reply at 2.) Nevertheless, as the result of what plaintiff describes as a "breakdown in [] communication" between the two servicers that manage plaintiff's mortgage securities (Pl.'s Reply at 2), plaintiff paid the May taxes directly to the local municipality in the amount of $68, 909.08, (Pl.'s Letter Req. at 1).

On an unspecified date, the defendant's paid plaintiff $4.5 million as required by the settlement agreement. Thereafter, on June 13, 2011, the parties signed a "Mutual Release" ("release") which contains the following relevant language:

M. All terms and conditions set forth in the Settlement Agreement have been timely satisfied and the Parties desire to enter into this Mutual Release pursuant to the terms of the Settlement Agreement. . . .

. . . . Lender hereby releases and forever discharges [defendants] from any and all causes of action, suits, liabilities, debts, damages, controversies, agreements, trespasses, judgments, executions, demands and claims of any nature whatsoever, whether in law or equity, whether known or unknown, and any and all rights, duties, obligations, whether presently enforceable or enforceable in the future, by reason of any matter or cause whatsoever from the beginning of time to the date of its execution of this release, which arise out of, are related to, or are in any way connected, directly or indirectly, with the Loan Documents or the Settlement Agreement." (Mutual Release at 2-3, attached to Ds' Opp., docket no. 55, as Exhibit B.)

Despite the language of this release stating that all terms and conditions of the settlement agreement had been met, plaintiff now claims that "[d]efendant[s] did not remit sufficient funds at closing to cover the taxes." (Pl.'s Letter Req. at 1.) Plaintiff demanded reimbursement from defendants for the $68,909.08 tax payment, but the request went unheeded. (Id.) Aware that the Receiver is in the possession of approximately $31,000 in rental receipts from the subject property, plaintiff seeks a Court order here directing the Receiver to turn this surplus over to plaintiff to cover a portion of the money it paid to cover the May taxes.

DISCUSSION

I.SUMMARY PROCEEDINGS

As an initial matter, as the property at issue here has been under receivership, and as this particular dispute directly implicates the disposition of receivership assets, the Court has discretion to address plaintiff's application in a summary proceeding. See Federal Deposit Ins. Corp. v. Bernstein, 786 F. Supp. 170, 177 (E.D.N.Y. 1992)("[T]he use of summary proceedings in equity receiverships, as opposed to plenary proceedings under the Federal Rules [of Civil Procedure], is within the jurisdictional authority of a district court."(quoting SEC v. Hardy, 803 F.2d 1034, 1040 (9th Cir. 1986))); see also Bernstein, 786 F. Supp. at 178 ("This court is [ ] empowered to determine in a summary proceeding the rights and obligations of the parties to the contract, particularly when the issues presented involve a simple matter of contract interpretation."). "A summary proceeding reduces the time necessary to settle disputes, decreases litigation costs, and prevents further dissipation of receivership assets." SEC v. Elliott, 953 F.2d 1560, 1566 (11th Cir. 1992)(citing SEC v. Wencke, 783 F.2d 829, 837 (9th Cir.1986)). Both sides have presented their arguments on this issue, including the submission of a reply and sur-reply. (See docket nos. 53-57.)

II.THE SETTLEMENT AGREEMENT

Absent from the settlement agreement is any language authorizing plaintiff's instant request. Instead, the agreement provides that if the Discounted Settlement Amount is timely paid, the surplus rent receipts must be turned over to the defendants when the Receiver is discharged. (See Settlement Agreement ยง5 ["Lender confirms that if the Discounted Settlement Amount is timely paid, Lender shall not seek payment to Lender from the funds held by the rent ...


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