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Antonucci v. Small Business Administration

United States District Court, D. Connecticut

September 30, 2018

RICHARD ANTONUCCI Plaintiff,
v.
SMALL BUSINESS ADMINISTRATION, et. al. Defendants.

          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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