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Bank of America, N.A. v. Malkin

United States District Court, D. Connecticut

January 30, 2018

BANK OF AMERICA, N.A., Plaintiff,
v.
JONATHAN MALKIN, PHILIPPA MALKIN, and COUNTRY BANK, Defendants.

          MEMORANDUM AND ORDER

          MICHAEL P. SHEA, U.S.D.J.

         Plaintiff Bank of America, N.A. (“BOA”) brought this action against Defendants Jonathan Malkin and Philippa Malkin (“the Malkins”) and Country Bank (“Country”), seeking to foreclose a mortgage given by the Malkins to secure a Note given by them and to recover damages arising from the alleged default on the Note. See Second Amended Complaint (ECF No. 35.)

         The Malkins failed to appear or respond to the Second Amended Complaint, and on October 11, 2016, the Court granted BOA's motion for entry of default, entered default with respect to the Malkins under Federal Rule of Civil Procedure 55(a), and directed BOA to file a motion for default judgment under Federal Rule of Civil Procedure 55(b). (ECF No. 37.) On April 18, 2017, BOA moved for judgment of strict foreclosure. (ECF No. 42.) Country responded to BOA's motion, indicating that while it did not object to the entry of judgment of foreclosure, Country requested that the Court enter judgment of foreclosure by sale, rather than strict foreclosure. (ECF Nos. 46, 47.)

         For the reasons discussed below, the motion for judgment of strict foreclosure is DENIED and Country's motion for judgment of foreclosure by sale is GRANTED.

         I. Factual Background

         The following facts are taken from the Second Amended Complaint and the exhibits. (ECF No. 35.) On June 19, 1997, Mr. Malkin became indebted to NationsBank, N.A. (“NationsBank”) in the amount of $1, 190, 000.00, with interest thereon (“the $1.19 MM Loan”), evidenced by a note executed by Mr. Malkin (“the $1.19 MM Note”). (Id. ¶¶ 9-10.) As security for the $1.19 MM Loan and Note, Mr. Malkin granted to NationsBank a mortgage (“the Mortgage”) encumbering his interest in the premises located at 177 Roxbury Road, Washington Depot, Connecticut (“the Property”). (Id. ¶¶ 8, 12; ECF No. 35-1.) The Mortgage was recorded on June 13, 1997, in the Washington, Connecticut Land Records. (ECF No. 35 ¶ 13.) NationsBank later merged with BOA and assigned the Mortgage to BOA. (Id. ¶ 15.)

         On September 13, 1999, Mr. Malkin entered into a Modification and Extension Agreement with NationsBank agreeing to modify certain terms of the $1.19 MM Note and the Mortgage, which was recorded in the Land Records. (Id. ¶¶ 16-17; ECF No. 35-2.) The Malkins entered into a second Modification and Extension Agreement with BOA on January 23, 2002, again agreeing to modify certain terms under the $1.19 MM Note and Mortgage. (ECF No. 35 ¶ 18.) The second modification agreement was recorded in the Land Records. (Id. ¶ 19; ECF No. 35-3.) Under the second modification agreement, the principal amount of the Malkins' debt to BOA was increased to $1, 500, 000.00 (“the $1.5 MM Loan”). (ECF No. 35 ¶ 21.) The Malkins executed a note evidencing the $1.5 MM Loan (“the $1.5 MM Note”). (Id. ¶ 22; ECF No. 35-4.) The $1.5 MM Note provided that all of the terms, covenants, and conditions contained in the Mortgage were made to protect BOA from a potential default. (ECF No. 35 ¶ 24.)

         Between October 1, 2002 and March 1, 2009 the Malkins entered into four modification agreements with BOA, agreeing to modify certain terms under the $1.5 MM Note and the Mortgage. (ECF No. 35 ¶¶ 28-37; ECF Nos. 35-5 to 35-8.) The fourth modification agreement was recorded on April 21, 2009 in the Land Records. (ECF No. 35 ¶ 37.) Under the fourth modification agreement, the interest rate was modified to an annual rate of 4.45% and the maturity date was extended to March 1, 2014. (Id. ¶ 36.) The interest rate could change on March 1, 2012 and every twelfth month thereafter, but could never be greater than 10.45% or less than 2.75%. (Id.)

         The Malkins failed to pay the then-outstanding balance of the principal and all accrued and unpaid interest, and all other charges on the maturity date, as required by the $1.5 MM Note. (ECF No. 35 ¶¶ 38-39.) Under Section 6 of the 1.5 MM Note, the Malkins' failure to pay these amounts constitutes a default. (Id. ¶ 39.)

         BOA sent the Malkins a letter notifying them that they had defaulted on the $1.5 MM Loan on January 23, 2015. (Id. ¶ 40; ECF No. 35-9.) BOA informed the Malkins that they could cure the default by paying $1, 476, 758.52 by February 23, 2015. (ECF No. 35 ¶ 41.) BOA also informed the Malkins that if they did not cure the default by paying the amount due in full by that date, then BOA would continue to pursue its rights and remedies, including a foreclosure action and sale of the Property. (Id.) The Malkins remained in default and the past due amount, additional interest, and costs remained unpaid. (Id. ¶ 42.)

         BOA elected to declare the entire unpaid balance of the principal sum immediately due and payable. As of March 9, 2016, the Malkins owed the principal sum of $1, 438, 637.00 plus $85, 465.68 in interest accruing at the default rate, plus fees, late charges, and attorneys' fees and expenses. (Id. ¶ 43.)

         II. Legal Standard

         In light of the Malkins' default, the Court must “accept[] as true all of the factual allegations of the complaint, except those relating to damages.” Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981). The Court must draw all reasonable inferences in the plaintiff's favor. Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009). The plaintiff seeking default judgment has the burden to establish damages with reasonable certainty. Norcia v. Dieber's Castle Tavern, Ltd., 980 F.Supp.2d 492, 500 (S.D.N.Y. 2013).

         III. ...


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