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Community Preservation Corp. v. Affordable Housing Corp.

Supreme Court, New York County

March 15, 2013

AFFORDABLE HOUSING CORP., HENRY KATKIN, NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE, THE CITY OF NEW YORK, CITY OF NEW YORK ACTING BY AND THROUGH ITS DEPARTMENT OF HOUSING PRESERVATION AND DEVELOPMENT, NEW YORK CITY DEPARTMENT OF FINANCE, BANK OF NEW YORK, STELLAR BISCAYNE LP, NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, and "JOHN DOE #1" through "JOHN DOE #12, " the last twelve names being fictitious and unknown to plaintiff, the persons or parties intended being the tenants, occupants, persons or corporations, if any, having or claiming an interest in or lien upon the premises described in the complaint, Defendants. Index no. 106296/10

Unpublished Opinion


This is an action to foreclosure a commercial acquisition loan mortgage and a building loan mortgage, in the total amount of $4, 950, 000. Plaintiff moves for an order pursuant to CPLR 3212 granting summary judgment for the relief demanded in the complaint, discontinuance of the action against defendant Stellar Biscayne LP, amending the caption to strike the "John Doe" defendants, striking the answer of defendant borrower Affordable Housing Corp. ("Affordable") and defendant guarantor Henry Katkin, and the appointment of a Referee to compute pursuant to CPLR 4301 and CPLR 4311. Plaintiff also seeks an order striking the answer of defendant The City of New York and the City of New York Acting by and Through Its Department of Housing Preservation and Development (collectively "defendant City"), or in the alternative severing the City's cross-claim against co-defendant Affordable to foreclose the City's subordinate mortgage on the same premises in the original principal amount of $340, 000.

Defendants Affordable and Katkin oppose the motion, and cross-move for an order compelling plaintiff to comply with their discovery demands, or alternatively an order dismissing the complaint and granting defendants judgment on their counterclaims. Defendant City opposes the motion in part, to the extent plaintiff seeks to sever the City's cross-claim to foreclose on its own subordinate mortgage.

The following facts are not disputed unless otherwise noted. On June 30, 2005, defendant Affordable executed an Acquisition Loan Note in the amount of $561, 200 and a Building Loan Note in the amount of $4, 388, 800, both payable to plaintiff. The loans were secured by a mortgage on the property located at 306-310 West 142nd Street in Manhattan. The parties also executed a Building Loan Agreement, which provided that the funds from the loan were intended to be used for new construction of a seven-story elevator building with 26 units, "including 1 one bedroom, 24 two bedroom and 1 three bedroom apartments, " and "seventeen underground parking spaces." At the same time, defendant Katkin, Affordable's president, executed a personal guaranty of Affordable's loan obligations.

The loan documents provided for a "Maturity Date" of January 2, 2007, defined as the date the "principal amount or the amount thereof outstanding, with all accrued interest thereon, shall be due and payable." The loan documents also provided for certain "Completion Conditions" regarding the construction of the building on the property, and for three six-month extensions of the Maturity Date in the event the Completion Conditions were not satisfied by the original Maturity Date.

On December 10, 2007, the parties executed an Amendment to the Acquisition Loan Note and an Amendment to Building Loan Note, which both extended the Maturity Date of the loans to January 1, 2009.

On October 20, 2009, the parties executed a Maturity Extension Agreement, stating that the "Loan matured by its terms, however, Lender is willing to extend the maturity date of the Loan subject to strict compliance by the Borrower and Guarantor with all of the terms and conditions set forth in this Agreement." The Maturity Extension Agreement "ratified and confirmed" the terms and conditions of the loan documents. Paragraph 2(a) of the Agreement extended the maturity date of the loan to September 30, 2010,

provided (i) that an Event of Default as defined herein does not occur and (ii) subject to compliance with the following terms and conditions:
(1)Monthly interest payments calculated at the rate set forth in the Loan Documents plus 150 basis points shall be paid commencing retroactively with the payment due on July 1, 2009 and continuing with each payment due to be paid on the first day of each and every month thereafter until the earlier of (i) the end of the Extension Period or (ii) an Event of Default hereunder. At no time shall interest be calculated at a rate less than 5.30%.
(2)Borrower authorizes Lender to release $101, 000 of retainage into a reserve account to be used, along with funds from Borrower's cash-in-lieu account, at Lender's sole discretion, for the payment of construction interest on the Loan, however, in accordance with paragraph 2(a)(1) above, Borrower will continue to pay construction interest out-of-pocket.
(3)No later than July 31, 2010, Borrower shall have completed the constructing and furnishing of a model apartment for purposes of facilitating sales and viewing by prospective purchasers and shall have commenced sales of units at the Mortgaged Premises.
(4)No later than September 30, 2010, Borrower and Guarantor shall deliver to Lender evidence in form satisfactory to Lender, in its sole and absolute discretion, that a temporary or permanent certificate of occupancy has been issued for the Mortgaged Premises; all construction at the Mortgaged Premises to be completed by September 30, 2010.
(5)Borrower and Guarantor agree that in the event, no later than January 31, 2011, Borrower shall have entered into four (4) fully executed contracts of sale, with deposits, in form and substance acceptable to Lender in its sole and absolute discretion, for the sale of units at the Mortgaged Premises, Borrower ...

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