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Four K. Group, Inc v. Nyctl 2008-A Trust; Bank of New York

April 15, 2013

FOUR K. GROUP, INC.,
PLAINTIFF,
v.
NYCTL 2008-A TRUST; BANK OF NEW YORK, AS COLLATERAL AGENT AND CUSTODIAN FOR THE NYCTL 2008-A TRUST; MOORING TAX ASSET GROUP, LLC; CITY OF NEW YORK; NEW YORK CITY DEPARTMENT OF FINANCE; WINDELS MARX LANE & MITTENDORF LLP; WILLIAM J. FREW; AND WILLIAM J. FREW LAW OFFICES, DEFENDANTS. FOUR K. GROUP, INC., PLAINTIFF,
v.
DAVID M. FRANKEL, COMMISSIONER OF THE NEW YORK CITY DEPARTMENT OF FINANCE;
NEW YORK CITY DEPARTMENT OF FINANCE; CARTER H. STRICKLAND, COMMISSIONER OF THE NEW YORK CITY DEPARTMENT OF ENVIRONMENTAL PROTECTION; NEW YORK CITY DEPARTMENT OF ENVIRONMENTAL PROTECTION; ALBERT F. MONCURE, JR., SECRETARY OF THE NEW YORK CITY WATER BOARD; NEW YORK CITY WATER BOARD; MATTHEW M. WAMBUA, COMMISSIONER OF THE NEW YORK CITY DEPARTMENT OF HOUSING PRESERVATION AND DEVELOPMENT; NEW YORK CITY DEPARTMENT OF HOUSING PRESERVATION AND DEVELOPMENT; BANK OF NEW YORK, AS COLLATERAL AGENT AND CUSTODIAN FOR VARIOUS NYCTL TRUSTS; AND JOHN DOES 1-100, DEFENDANTS.



The opinion of the court was delivered by: John Gleeson, United States District Judge:

ONLINE PUBLICATION ONLY

MEMORANDUM AND ORDER

Four K. Group ("Four K.") commenced these related actions pursuant to 42 U.S.C. § 1983 against a wide constellation of defendants, including the City of New York ("City") and various City agencies. Four K. alleges that the City's tax lien sale violated the Fourth, Fifth, Eighth, and Fourteenth Amendments to the Constitution. Defendants in both actions move to dismiss Four K.'s complaints pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure ("Fed. R. Civ. P."). I heard oral argument on April 11, 2013. For the reasons stated below, the defendants' motions to dismiss are granted.

BACKGROUND

A. Factual Allegations

Four K.'s complaints set forth the following factual allegations, which I accept as true for purposes of deciding this motion. See Harris v. Mills, 572 F.3d 66, 71 (2d Cir. 2009).

1. The Parties

Four K. is a corporation with a place of business at 1236 49th Street, Suite 4B, Brooklyn, New York 11219. Compl. 1 ¶ 11.*fn5 On or around March 10, 2006 Four K. acquired a mortgage lien on Block 1780, Lot 15, located at 422 Chelsea Road, Staten Island, New York (the "Property"). Compl. 1. ¶¶ 1, 19. In or about 2009 Four K. Group commenced a foreclosure proceeding against MMM Group, Inc. Compl. 1 ¶ 20. On or about May 6, 2011 a judgment of foreclosure was entered against MMM Group, Inc. Compl. 1 ¶ 21. On June 23, 2011 the Property was conveyed to Four K., rendering Four K. the fee owner. Compl. 1 ¶ 22-23; Bronster Aff. Ex. J.*fn6

NYCTL 2008-A Trust ("NYCTL") is a Delaware Trust, which was created pursuant to an Agreement of Trust, dated June 1, 2002, between the City and the Wilmington Trust Company. Compl. 1 ¶ 24. NYCTL is the holder of certain City tax liens. Compl. 1 ¶ 25.

The Bank of New York ("BNY") is the collateral agent and custodian for NYCTL. Compl. 1 ¶ 13. Mooring Tax Asset Group LLC ("Mooring") is the servicing agent of NYCTL. Compl. 1 ¶ 16. Windels Marx Lane & Mittendorf LLP ("Windels Marx") represented NYCTL and BNY in the foreclosure proceeding against the Property. Compl. 1 ¶ 17. Williams J. Frew and William J. Frew Law Offices were appointed Referee for the foreclosure of the Property. Compl. 1 ¶ 18.

2. NYCTL's Tax Lien Against the Property

On June 26, 2008 NYCTL acquired a tax lien on the Property.*fn7 Compl. 1 ¶ 25; Bronster Aff. Ex. A. NYCTL acquired this tax lien for less than the $110,000 owed in taxes on the property. Compl. 1 ¶ 26-27. The tax lien has priority over all other liens on the Property. Compl. 1 ¶ 42-43.

Following NYCTL's acquisition of the tax lien on the Property, the City continued to assess taxes on the Property. Compl. 1 ¶ 28. The City assessed taxes on the Property at a rate "far in excess of the Property's true market price." Compl. 1 ¶ 29. The City assessed approximately $80,000 a year in real estate taxes, even though the Property had a market value of approximately $400,000. Compl. 1 ¶ 31. The City gave no notice to Four K. of the taxes being imposed on the Property until approximately November 2011. Compl. 1 ¶ 96.

On July 15, 2009 NYCTL and BNY commenced an action in the Supreme Court of the State of New York, County of Richmond, to foreclose its tax lien on the Property.*fn8 Compl. 1 ¶ 33; Bronster Aff. Ex. A. On September 2, 2009 Four K. filed a notice of appearance in this action. Bronster Aff. Ex. D. On October 5, 2010 the Supreme Court entered a Decision and Order granting NYCTL and BNY's motion to appoint a referee. Bronster Aff. Ex. E. In its Decision and Order, the Supreme Court noted that Four K. had filed an affidavit in opposition to this motion but had failed to interpose an answer and could not, therefore, "properly oppose th[e] motion for a referee." Bronster Aff. Ex. E. On January 10, 2011 the Supreme Court entered an Order appointing William J. Frew as referee "to ascertain and compute the amount due to plaintiffs." Bronster Aff. Ex. F. On April 26, 2011 the Referee issued its report, which ascertained the amount due to plaintiffs to be $110,011.92 plus interest. Bronster Aff. Ex. G.

On May 9, 2011 NYCTL and BNY moved in Supreme Court for entry of judgment of foreclosure and sale of the Property.*fn9 Bronster Aff. Ex. H. On October 19, 2011 the Supreme Court entered a judgment of foreclosure and sale. Bronster Aff. Ex. I. The judgment stated that each of the defendants had been served and/or appeared and that "none of the defendants had served any answer to said Complaint." Bronster Aff. Ex.

I. The judgment ordered that the Property "be sold, in one parcel at public auction . . . by and under the direction of William J. Frew, Esq. who is hereby appointed Referee for that purpose." Bronster Aff. Ex. I. It further directed the Referee to "give public notice of the time and place of such sale" and "on receiving the proceeds of such sale . . . pay therefrom, the taxes, assessments, sewer, rents and water rates which are or may become liens on the premise at the time of sale." Bronster Aff. Ex. I. Finally, the judgment ordered that "each and all of the defendants in this action and all persons claiming under them . . . after the filing of such notice of pendency of this action . . . are hereby forever barred and foreclosed of all right, claim, lien, title, interest and equity of redemption in the said liened premises . . . ." Bronster Aff. Ex. I.

On November 30, 2011 NYCTL and BNY served defendants in the foreclosure action, including Four K., with a notice of sale scheduled for February 7, 2012. Bronster Aff. Ex.

K. The notice listed the approximate amount of the tax lien on the property as $110,011.92 plus interest and costs. Compl. 1 ¶ 55; Bronster Aff. Ex. K. The notice listed an erroneous address -- 1422 (rather than 422) Chelsea Road, Staten Island, New York -- for the Property. Compl. 1 ¶ 56; Bronster Aff. Ex. K.

Four K. appeared at the auction seeking to bid on the Property. Compl. 1 ¶ 58. Four K. requested to review the terms of sale. Compl. 1 ¶ 60. The Referee allowed Four K. to review the terms of sale but refused to answer any questions concerning ambiguities in the terms. Compl. 1 ¶ 61. The terms of sale did not indicate whether all outstanding taxes would be paid from the proceeds of the sale, and whether the successful bidder would receive title to the Property free and clear of all taxes. Compl. 1 ¶ 62. The Referee also refused to give Four K. a copy of the terms of sale. Compl. 1 ¶ 63.

NYCTL's opening bid on the Property was $471,030.17. Compl. 1 ¶ 65. Four K. protested during the bidding process that this opening bid was "a fraud, as no one would pay that much for the Property." Compl. 1 ¶ 67. The Referee held NYCTL ...


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