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Grand Manor Health Related Facility, Inc. v. Hamilton Equities, Inc.

United States District Court, S.D. New York

April 24, 2013

GRAND MANOR HEALTH RELATED FACILITY, INC., Plaintiff,
v.
HAMILTON EQUITIES INC., HAMILTON EQUITIES COMPANY, ROBERT NOVA, AND SUZAN CHAIT-GRANDT, Defendants. HAMILTON EQUITIES INC., HAMILTON EQUITIES COMPANY, ROBERT NOVA, SUZAN CHAIT-GRANDT, MACRON & COWHEY, P.C., AND JOHN MACRON, Interpleader Plaintiffs,
v.
THE UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT AND BERKADIA COMMERCIAL MORTGAGE, LLC, Interpleader Defendants. HAMILTON EQUITIES INC. AND HAMILTON EQUITIES COMPANY, Third Party Plaintiffs,
v.
THE UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT AND BERKADIA COMMERCIAL MORTGAGE, LLC, Third Party Defendants

Decided: April 23, 2013.

Page 407

[Copyrighted Material Omitted]

Page 408

For Grand Manor Health Related Facility, Inc., Plaintiff: Roy W. Breitenbach, LEAD ATTORNEY, Jason Yin-Zen Hsi, Garfunkel Wild, P.C., Great Neck, NY; John J. Macron, MacRon & Cowhey, P.C, Rockaway Park, NY.

For Hamilton Equities Company, Hamilton Equities, Inc., Robert Nova, Suzan Chait-Grandt, Defendants: John J. Macron, MacRon & Cowhey, P.C, Rockaway Park, NY.

For Hamilton Equities Company, Hamilton Equities, Inc., Robert Nova, Suzan Chait-Grandt, Macron & Cowhey, P.C., John Macron, ThirdParty Plaintiffs, Interpleader Plaintiffs: Philip Victor Shelly, LEAD ATTORNEY, Self, White Plains, NY.

For Berkadia Commercial Mortgage, LLC, Interpleader Defendant: Steven Scott Rand, LEAD ATTORNEY, Zeichner Ellman & Krause LLP, New York, NY.

For The United States Department of Housing and Urban Development, Interpleader Defendant: Rebecca Sol Tinio, LEAD ATTORNEY, U.S. Attorney's Office, SDNY, New York, NY.

OPINION

Page 409

OPINION AND ORDER

John G. Koeltl, United States District Judge.[1]

The parties have brought five separate motions relating to: first, a lease between the plaintiff-lessee Grand Manor Health Related Facility, Inc. (" Grand Manor" ) and defendants-property owners Hamilton Equities Company, Hamilton Equities Inc., Robert Nova, and Suzan Chait-Grandt (collectively " Hamilton Equities" ); and, second, two regulatory agreements, one between the United States Department of Housing and Urban Development (" HUD" ) and Grand Manor, and another between HUD and Hamilton Equities Company. The issues in this case revolve around funds that were disbursed, allegedly improperly, to Hamilton Equities by Berkadia Commercial Mortgage, LLC (" Berkadia" ), Hamilton Equities' mortgagee, at the direction of HUD, and the parties' respective obligations under the lease and the regulatory agreements.

Grand Manor argues that it is entitled to the funds for the improvement of a fire

Page 410

and sprinkler system for the nursing home that it operates on the property. Hamilton Equities claims that it is entitled to the funds under the lease. While the case originated in state court, it was removed to this Court after HUD was added as a party. As a result of the current motions, it is clear that HUD must be dismissed as a party and that there is no longer a basis for federal subject matter jurisdiction. The original state law claims must therefore be remanded to state court.

I.

The following facts are undisputed, unless otherwise noted.

A.

Hamilton Equities is the owner of the property at 700 White Plains Road, Bronx, New York. (HUD R. 56.1 Stmt. ¶ 1; Hamilton Equities' Resp. R. 56.1 Stmt. (" HE Resp." ) ¶ 1.)[2] On July 30, 1974, Hamilton Equities, Inc., entered into a lease agreement with Saul Liebman and Bert Liebman,[3] doing business as Grand Manor, whereby Grand Manor would lease and operate a New York state licensed nursing facility on the premises. (See HUD Mem. Supp. Mot. Dismiss Interpleader Compl. Ex. A (" Lease" ); HUD R. 56.1 Stmt. ¶ 1; HE Resp. ¶ 1; Liebman Decl. ¶ 8[4].)

Hamilton Equities financed the construction of the project through the Federal Housing Administration's loan guarantee program. (Liebman Decl. ¶ 12.) That program is now administered by HUD. (Liebman Decl. ¶ 14.) On October 4, 1978, HUD and Hamilton Equities entered into a regulatory agreement (the " Hamilton Regulatory Agreement" ) in consideration of HUD's insurance of the mortgage obtained by Hamilton on the leased property. (See HUD Mem. Supp. Mot. Dismiss Interpleader Compl. Ex. B (" Hamilton Reg. Agmt." ); HUD R. 56.1 Stmt. ¶ 3; HE Resp. ¶ 3.) Under section 2(a) of the Hamilton Regulatory Agreement, Hamilton Equities is required to make frequent payments into an escrow fund known as the " Reserve For Replacement Fund" (" the Reserve Fund" or " the Fund" ):

[Hamilton Equities] shall establish or continue to maintain a reserve fund for replacements by the allocation to such reserve fund in a separate account with the mortgagee or in a safe and responsible depository designated by the mortgagee . . . Such funds . . . shall at all times be under the control of the mortgagee. Disbursements from such fund, whether for the purpose of effecting replacement of structural elements, and mechanical equipment of the project or for any other purpose, may be made only after receiving the consent in writing of the [HUD] Secretary. In the event of a default in the terms of the mortgage, pursuant to which the loan has been accelerated, the Secretary may apply or authorize the application of the balance in such fund to the amount due on the mortgage debt as accelerated.

(Hamilton Reg. Agmt. § 2(a); Liebman Decl. ¶ ¶ 14-15.)

On the same day that HUD and Hamilton Equities entered into the Hamilton Regulatory Agreement, HUD also entered into a regulatory agreement with Grand

Page 411

Manor (the " Grand Manor Regulatory Agreement" ). (HUD Mem. Supp. Mot. Dismiss Interpleader Compl. Ex. C (" Grand Manor Reg. Agmt." ).) Grand Manor entered into the agreement " [i]n consideration of the consent of the Commissioner to the leasing of the aforesaid project by Hamilton Equities Company [to Grand Manor] . . . ." (Grand Manor Reg. Agmt. at 1.) Section 2 of the Grand Manor Regulatory Agreement provides that " [Grand Manor] shall make payments under lease when due." (Grand Manor Reg. Agmt. § 2.) Section 3 of the Agreement provides that under certain circumstances, HUD can require Hamilton Equities and Grand Manor to renegotiate the amounts due under the lease:

Payments by the lessee to the lessor shall be sufficient to pay all mortgage payments including payments to reserves for taxes, insurance, etc., payments to the Reserve for Replacements, and to take care of necessary maintenance. If at the end of any calendar year, or any fiscal year . . . payments under the lease have not been sufficient to take care of the above items, [Hamilton Equities] and [Grand Manor] upon request in writing from the Commissioner shall renegotiate the amounts due under the lease so that such amounts shall be sufficient to take care of such items . . . ."

(Grand Manor Reg. Agmt. § 3.) Section 4 further provides that Grand Manor " shall not sublease the project . . . without consent of [HUD]." (Grand Manor Reg. Agmt. § 4.) Section 10 of the Grand Manor Regulatory Agreement provides that " [t]he lease may be cancelled upon thirty days written notice by the Commissioner given to the lessor and the lessee for a violation of any of the above provisions unless the violation is corrected . . . within said thirty day period." (Grand Manor Reg. Agmt. § 10.) Hamilton Equities is not a signatory to the Grand Manor Regulatory Agreement.

On August 28, 1978, Hamilton Equities and Grand Manor executed an amendment to the lease. (HUD Mem. Supp. Mot. Dismiss Interpleader Compl. Ex. D (" Lease Am." ).) The Lease Amendment provides that contributions to the Reserve Fund are to be split between Grand Manor and Hamilton Equities:

[T]he parties hereto agree that so long as an escrow fund is required . . . [the lessor and lessee] will contribute to the fund on a monthly basis as follows: (i) Two-thirds of such required monthly payments shall be paid by [Grand Manor]; and (ii) One-third of such monthly payment shall be paid by [Hamilton Equities].

(See Lease Am. § 25.1.) The agreement vests the right to withdraw money from the Fund with Grand Manor " for the purposes for which such fund is established" but provides that " at the time [Grand Manor] shall withdraw any amount from [the Reserve Fund] . . . it shall pay over to [Hamilton Equities] within ten days from such withdrawal one-third of the amount withdrawn." (Lease Am. § 25.2.) Furthermore, the Lease Amendment provides that " [i]n the event of any inconsistency with respect to the terms, provisions and conditions of this Agreement and the . . . HUD regulatory agreements, the . . . HUD regulatory agreements will prevail and govern the rights of the parties." (Lease Am. § 27.1.)

Berkadia is the successor mortgagee to the mortgage with Hamilton Equities and holder of the Reserve Fund. (HUD R. 56.1 Stmt. ¶ 10; HE Resp. ¶ 10.) Section 3 of the mortgage between Berkadia and Hamilton Equities provides that " the Regulatory Agreement . . ...


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