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Wells Fargo Bank, National Association v. Stella Kokolis

March 1, 2012

WELLS FARGO BANK, NATIONAL ASSOCIATION, AS THE TRUSTEE FOR THE REGISTERED HOLDERS OF LSTAR COMMERCIAL MORTGAGE TRUST 2011-1, COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATE, SERIES 2011-1, ACTING THROUGH ITS SPECIAL SERVICER, HUDSON AMERICAS, LLC, PLAINTIFF,
v.
STELLA KOKOLIS, INDIVIDUALLY AND AS EXECUTRIX OF THE ESTATE OF PETER KOKOLIS, SPYRO KOKOLIS AND RONALD KOKOLIS, DEFENDANTS.



The opinion of the court was delivered by: Dora L. Irizarry, U.S. District Judge:

MEMORANDUM AND ORDER

Plaintiff Wells Fargo Bank, National Association, as the Trustee for the Registered Holders of LSTAR Commercial Mortgage Trust 2011-1, Commercial Mortgage Pass-Through Certificate, Series 2011-1, acting through its special servicer, Hudson Americas, LLC ("Plaintiff") brought this action against defendants Stella Kokolis, individually and as Executrix of the Estate of Peter Kokolis, Spyro Kokolis and Ronald Kokolis (collectively "Defendants"), seeking to enforce a guaranty entered into by Peter Kokolis ("Kokolis"), who has since passed away. Defendants moved to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, asserting that this action is barred by New York State law and, in the alternative, that this court should abstain from asserting jurisdiction over this action in favor of an action pending in Florida. Plaintiff opposed the motion. For the reasons set forth below, Defendants' motion is denied in its entirety.

BACKGROUND

On June 16, 2006, Citibank F.S.B. lent Center Plaza, LLC ("Center Plaza") $1,085,000 ("Loan") pursuant to a promissory note ("Note"). (Compl., Dkt. Entry 1, at ¶ 9, Ex. A.) The Loan was secured by a mortgage on a commercial property in New Port Richey, Florida ("Florida Property") owned by Center Plaza. (See id. Ex. A.) On the same date, Kokolis executed a Loan and Continuing Guaranty agreement ("Guaranty") personally guaranteeing payments on the Loan. (Id. ¶¶ 10-14, Ex. B.) The Note and Guaranty subsequently were assigned to Plaintiff. (Id. ¶¶ 16-21.)

Kokolis died on November 18, 2006 and his estate was probated in New York State Surrogate's Court, Kings County. (Id. ¶ 3.) Under Kokolis' Last Will and Testament, Defendants received a total of approximately $11 million from Kokolis' estate. (Id. ¶¶ 27-28.)

On July 1, 2011, Center Plaza defaulted on the Loan and Plaintiff accelerated the payments due. (Id. ¶¶ 22-23.) As of February 21, 2012, the Loan's outstanding balance was approximately $1 million. (Id. ¶ 25.) On December 15, 2011, Plaintiff filed an action in Florida state court seeking to foreclose on the Florida Property and collect under the Guaranty, naming Center Plaza and Peter Kokolis as the defendants. (See Decl. of Yuval D. Bar-Kokhba, Dkt. Entry 6-1 ("Bar-Kokhba Decl."), Ex. 1.) The Florida Action was stayed on or about February 21, 2012, when Center Plaza filed a Chapter 11 Bankruptcy Proceeding in the United States District Court for the Middle District of Florida. (See id. Ex. 2; Mem. of Law in Supp. of Defs.' Mot. to Dismiss the Compl., Dkt. Entry 6-8 ("Defs.' Mem."), at 2; Pl.'s Mem. of Law in Opp'n to Defs.' Mot. to Dismiss the Compl., Dkt. Entry 6-10 ("Pl.'s Opp'n"), at 14.) The bankruptcy petition was dismissed on August 16, 2012 and the stay in the Florida Action was lifted. (See Pl.'s Opp'n 14.)

At oral argument for the instant motion, the parties informed the court that summary judgment had been granted in favor of Plaintiff in the Florida Action. The foreclosure sale of the Florida Property is currently set for April 7, 2013. The parties also informed the court that Plaintiff voluntarily dismissed the claims against Kokolis in the Florida Action.

On May 15, 2012, Plaintiff brought the instant action alleging that Defendants are liable for the outstanding balance on the Loan pursuant to the Guaranty. (Compl. ¶ 35.) In lieu of answering the complaint, Defendants moved to dismiss, asserting that this action is barred under New York law because Plaintiff first must foreclose on the Florida Property before trying to collect any money owed under the Guaranty. (See Defs.' Mem. 4-6.) Defendants also assert that, in the alternative, the court should abstain from exercising jurisdiction over this action in favor of the Florida Action. (See id. 7-9.) Plaintiff opposed the motion, contending that it did not have to foreclose on the Florida Property before bringing this action because Defendants do not own the Florida Property and that abstention is not warranted. (See Pl.'s Opp'n 7-15.)

LEGAL STANDARD

Rule 12(b)(6) of the Federal Rules of Civil Procedure states that a defendant may move, in lieu of an answer, for dismissal of a complaint for "failure to state a claim upon which relief can be granted." Fed R. Civ. P. 12(b)(6). To determine whether dismissal is appropriate, "a court must accept as true all [factual] allegations contained in a complaint" but need not accept "legal conclusions." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). For this reason, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice" to insulate a claim against dismissal. Id. Moreover, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

"[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint . . . has not shown that the pleader is entitled to relief." Id. at 679. (internal alteration and quotation marks omitted).

Generally, consideration of a Rule 12(b)(6) motion to dismiss is limited to the complaint itself. Faulkner v. Beer, 463 F. 3d 130, 134 (2d Cir. 2006). However, "[c]onsideration of materials outside the complaint is not entirely foreclosed." Id. A court may consider statements and documents "incorporated in [the complaint] by reference," Cortec Indus., Inc. v. Sum Holding L.P., 949 F. 2d 42, 47 (2d Cir. 1991), as well as documents "integral" to the complaint, without converting a motion to dismiss into one for summary judgment. Int'l Audiotext Network, Inc. v. Am. Tel. & Tel. Co., 62 F. 3d 69, 72 (2d Cir. 1995); accord Broder v. Cablevision Sys. Corp., 418 F. 3d 187, 196 (2d Cir. 2005) (where a complaint relies on the terms of a contract, the court may look to the agreement itself on a motion to dismiss).

DISCUSSION

I. Motion to Dismiss Under New York State Law

A. New York Estates, Powers and Trusts Law

Defendants contend that, pursuant to New York Estates, Powers and Trusts Law §§ 12-1.1 and 3-3.6, Plaintiff first must foreclose on the Florida Property before bringing a deficiency action against Defendants. (Defs.' Mem. 4-6.)*fn1 According to Defendants, because Plaintiff has not foreclosed on the Florida Property yet, this action must be dismissed. (Id.) Plaintiff counters that these provisions do not apply here because Defendants do not own the Florida Property and the terms of the Guaranty provide that Plaintiff can bring a separate action to collect on the Guaranty without foreclosing on the property. (Pl.'s Opp'n 7-11.)

Ordinarily, under New York law "distributees and testamentary beneficiaries are liable, in an action, to the extent of the value of any property received by them as such, for the debts . . . of a decedent." N.Y. Est. Powers & Trusts Law § 12-1.1(a). However, testamentary beneficiaries are not liable "[u]nless plaintiff establishes satisfactorily to the court that he cannot fully satisfy his claim . . . (3) By the enforcement, under 3-3.6, of any lien, security interest or other charge he holds against property of the decedent specifically disposed of by will or passing to a distributee." Id. § 12-1.1(b) (emphasis added).

Section 3-3.6(a) of the New York Estates, Powers and Trusts Law provides:

Where any property, subject, at the time of decedent's death, to any lien, security interest or other charge, including a lien for unpaid purchase money, is specifically disposed of by will or passes to a distributee . . ., the personal representative is not responsible for the ...


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