United States District Court, D. Connecticut
RULING ON MOTION TO DISMISS AND MOTION FOR SUMMARY
JUDGMENT
Michael P. Shea, U.S.D.J.
I.
Introduction
Richard
Antonucci appeals a decision by the defendant United States
Small Business Administration (“SBA”) regarding a
wage garnishment action by defendant United States Department
of Treasury Bureau of the Fiscal Services
(“Treasury”). Mr. Antonucci agreed to guarantee
the repayment of a loan in the amount of $430, 000.00 for his
business. The lender was the Home Loan Investment Bank,
F.S.B. (“HLIB”). The loan was secured by a
mortgage on real property owned by his business. The SBA in
turn guaranteed the loan up to an amount of seventy-five
percent of its value. When Mr. Antonucci's business
defaulted on the loan, HLIB foreclosed upon the property. The
property was eventually sold through a private sale. The net
proceeds recovered from that sale did not fully satisfy the
delinquent principal and interest on the loan. As a result,
the SBA commenced subsequently its own administrative
collection action against Antonucci by way of an
administrative wage garnishment of Mr. Antonucci's wages.
Mr.
Antonucci challenged the garnishment action in an
administrative hearing. The hearing officer ruled against
him. He appeals that decision in this lawsuit. Now before me
is the defendants' motion to dismiss or in the
alternative for summary judgment regarding Mr.
Antonucci's claims against the Treasury and for summary
judgment with respect to his claims against the
SBA.[1]
(ECF No. 15). For the reasons set forth below, the
defendants' motion is granted.
II.
Background
A. SBA
Loan and Foreclosure
The
following facts, which are taken from the parties' Local
Rule 56(a) Statements and the exhibits, are undisputed unless
otherwise indicated.
“On
or about May 21, 2007, the [SBA] approved and authorized a
federally guaranteed small business loan (hereinafter
‘the loan').” (ECF No. 15-2, Defendants'
Local Rule 56(a)1 Statement (“Def.'s L.R. 56(a)1
Stmt.”) at ¶ 1; ECF No. 17-1, Plaintiff's
Local Rule 56(a)2 Statement (“Pl.'s L.R. 56(a)2
Stmt.”) at ¶ 1.) “The Lender of the loan was
[HLIB], and the Borrower was Robrich Associates, LLC”
(“Robrich”). (Id.) Robrich's
“Operating Company and co-borrower was Annexed Used
Cars, Inc.” (Id.) The loan from HLIB
“was in the original principal amount of $430, 000, and
the SBA guaranteed 75% of that principal loan amount.”
(Id.) The loan was secured by a “Promissory
Note, an Unconditional Guarantee and a Standby Creditor's
Agreement, ” all of which were signed by Mr. Antonucci.
(Def.'s L.R. 56(a)1 Stmt. At ¶¶
2.)[2]
The guarantee agreement provided as follows with respect to
Mr. Antonucci's obligations under the loan:
Guarantor unconditionally guarantees payment to Lender of all
amounts owing under the Note. This Guarantee remains in
effect until the Note is paid in full. Guarantor must pay all
amounts due under the Note when Lender makes written demand
upon Guarantor. Lender is not required to seek payment from
any other source before demanding payment from Guarantor.
(ECF No. 14, Administrative Record (“AR”) at 46.)
HLIB declared the loan in default on April 1, 2008.
(Def.'s L.R. 56(a)1 Stmt. at ¶ 6.)
“On
August 21, 2009, [HLIB] commenced a foreclosure action
against [Robrich] in the State of Connecticut Superior
Court” concerning the property that secured the loan.
(Def.'s L.R. 56(a)1 Stmt. at ¶ 7; ECF No. 15-3 at 3
(case docket).). On December 11, 2009, HLIB filed a motion
for judgment, and the Connecticut Superior Court entered a
Judgment of Strict Foreclosure ten days later. (Def.'s
L.R. Stmt. at ¶ 8; ECF No. 15-3 at 3) “The
Judgment of Strict Foreclosure set a law day of February 22,
2010, at which time each equity owner would have an
opportunity to redeem their respective interest in the
subject property on successive days.” (Def.'s L.R.
Stmt. at ¶ 8.) On February 23, 2010, Robrich
“filed a Chapter 11 bankruptcy petition, ” which
“temporarily stayed the foreclosure action.”
(Def.'s L.R. Stmt. at ¶ 9.) HLIB “filed a
motion to reset law days, and a second Judgment of Strict
foreclosure was entered by the Connecticut Superior Court on
June 15, 2010.” (Def.'s L.R. 56(a)1 Stmt. at ¶
10.)
“Over
the next two years, from August, 2010 through June, 2012 the
parties in the foreclosure action engaged in a motion
practice whereby [HLIB] would obtain successive Judgments of
Strict Foreclosure, and [Robrich] would file and be granted
successive Motions to Open Judgment and Extend Law
Day.” (Def.'s L.R. 56(a)1 Stmt. at ¶ 11.) On
April 6, 2012, HLIB “assigned to ‘147 & 157
Main Street, New Haven, LLC' a mortgage given by
[Robrich] to secure the loan. The mortgage was dated June 15,
2007-coinciding with the execution dates of the Promissory
Note, the Unconditional Guarantee and a Standby
Creditor's Agreement.” (Def.'s L.R. 56(a)1
Stmt. at ¶ 12.) On May 14, 2012, HLIB
“successfully moved to substitute ‘147 & 157
Main Street, New Haven, LLC' as the plaintiff in the
foreclosure action.” (Def.'s L.R. 56(a)1 Stmt. at
¶ 13) On September 7, 2012, 147 & 157 Main Street,
New Haven LLC (“147 Main Street”) “conveyed
title to the subject property to a third party, Annex
Management, LLC, in consideration of a payment in the amount
of” $275, 000.[3] (Def.'s L.R. 56(a)1 Stmt. at ¶
14.) “On September 24, 2012, [147 Main Street] filed
[a] Motion for Deficiency Judgment in Connecticut Superior
Court against [Robrich]. The Motion for Deficiency Judgment
was the last entry on the Connecticut Superior Court's
docket sheet.” (Def.'s L.R. 56(a)1 Stmt. at ¶
15.)
B. SBA
Collection Action and Subsequent Appeal
“SBA's
records show that the net proceeds recovered from the sale of
the subject property to Annex Management, LLC totaled $223,
420.000, which were applied to the principal portion of the
loan on September 11, ” 2012.[4] (Def.'s L.R. 56(a)1
Stmt. at ¶ 16.) “By letter dated January 13, 2016,
the [Treasury] provided notice to Antonucci that the SBA had
submitted his debt owed to SBA to Treasury to pursue an
administrative wage garnishment against Antonucci's
wages.” (Def.'s L.R. 56(a)1 Stmt. at ¶ 17.) On
February 1, 2016, “Antonucci executed a Hearing Request
and returned it to Treasury.” (Def.'s L.R. 56(a)1
Stmt. at ¶ 18.) In a subsequent letter to Treasury,
“Antonucci raised two issues, the first concerning the
calculation of the amount owed; and second, that no
deficiency judgment was rendered in the underlying
foreclosure case and the statues [sic] has expired as to all
State and Federal Statutes to enforce the guaranty.”
(Def.'s L.R. 56(a)1 Stmt. at ¶ 20 (internal
quotation marks and alterations omitted).)
The
Hearing Officer issued her decision on June 5, 2017. (See
Def.'s L.R. 56(a)1 Stmt. at ¶ 22[5]; ECF No. 14-5,
Hearing Officer's Decision (“Decision”) at
14.) “The Decision found that Antonucci's debt to
SBA was enforceable by the SBA, and that the administrative
wage garnishment action could proceed.” (Def.'s
L.R. 56(a)1 Stmt. at ¶ 22; Decision at 14). “The
Decision addressed Antonucci's claim that the debt was
unenforceable due to the lack of a deficiency judgment,
” noting that “‘the failure of a lender to
obtain a deficiency judgment against the borrower does not
prevent the lender from thereafter pursuing other loan
obligors, such as guarantors, for the balance
due.'” (Def.'s L.R. 56(a)1 Stmt. at ¶ 22
(quoting Decision at 5).) “The Decision also
distinguished Antonucci as a guarantor, finding that
guarantors such as Antonucci are not proper parties to a
claim seeking the foreclosure of a mortgage and their
obligations are not limited by the extinguishment of the
mortgagor's rights and obligations.” (Def.'s
L.R. 56(a)1 Stmt. at ¶ 22 (internal quotation marks
omitted); Decision at 7-8). The Decision concluded that
“[t]herefore, the guarantors could not be parties to
the foreclosure as required by [Conn. Gen. Stat.] ¶
49-1.” (Def.'s L.R. 56(a)1 Stmt. at ¶ 22
(internal quotation marks omitted); Decision at 11.).
“The Decision also addressed Antonucci's general
claim that a state or federal statute of limitation barred
administrative collection, ” noting that
“‘the instant federal administrative wage
garnishment proceeding is not-time barred by any statute of
limitations.'” (Def.'s L.R. 56(a)1 Stmt. at
¶ 22 (quoting Decision at 12).) Finally, the Hearing
Officer “reviewed the debt calculation of
Antonucci's debt, ” and “found that the
application of Antonucci's payments ‘appears to be
consistent with the terms of the Notice and Debtor has not
provided any reason or evidence from which to conclude that
payments should have been applied differently . .
.'” (Def.'s L.R. 56(a)1 Stmt. at ¶ 22
(quoting Decision at 12).)
Mr.
Antonucci appealed the hearing officer's decision on June
10, 2017. (ECF No. 1.) The defendants filed the certified
administrative record on the docket on February 8, 2018. (ECF
No. 14.) Mr. Antonucci does not contest the accuracy of the
administrative record filed on the docket in any of his
papers.
C.
Plaintiff's Complaint
Mr.
Antonucci's complaint alleges that the Hearing
Officer's “finding is in error and not based on the
facts and evidence provided.” (ECF No. 1
(“Complaint”) at ¶ 14.) In particular, he
claims that the Hearing Officer erred in declining to credit
towards his obligation under the loan the value of the
property set by the Connecticut Superior Court during
foreclosure proceedings- $350, 000-, as opposed to “the
amount that the property was ultimately sold for post
judgment.” (Id. at ¶ 16.) Mr. Antonucci
also contends “that upon foreclosure, the SBA or its
predecessor/Assignor, failed to seek a deficiency judgment
for any balance[] owed in the foreclosure action” and
that, as a result, “the Plaintiff was not given the
opportunity to argue the balance due on the debt, if any,
after title to the property was transferred.”
(Id. at ¶ 18.) Finally, Mr. Antonucci
“alleges that the SBA failed to provide any notice
regarding outstanding balance (sic) due upon the Plaintiff
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