Medical Provider Fin. Corp. III v Parkway Acquisition I, LLC

[*1] Medical Provider Fin. Corp. III v Parkway Acquisition I, LLC 2012 NY Slip Op 50519(U) Decided on March 22, 2012 Supreme Court, Queens County Kitzes, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on March 22, 2012
Supreme Court, Queens County

Medical Provider Financial Corporation III, Plaintiff,

against

Parkway Acquisition I, LLC f/k/a Parkway Hospital ASSOCIATES, THE PARKWAY HOSPITAL, INC., Ian Gazes, chapter 7 trustee for the estate of The Parkway Hospital, Inc., ROBERT Aquino, Capitol Health Management Services Limited, Sprint Spectrum L.P., New York SMSA limited partnership d/b/a verizon wireless f/k/a Bell Atlantic Mobile, Omnipoint Communications, Inc., DIRECT CARE CORP., NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, SEGNA ELECTRIC INC., UNITY COOL CORP., prospect payment specialist, INC., healthpro nursing solutions, llc, nouveau elevator industries inc., Mary Andrea, Consolidated Edison Company of New York, Inc., "JOHN DOE No.1" through "JOHN DOE #20," the last twenty names being fictitious and unknown to plaintiff, the persons or parties intended being the tenants, occupants, persons or corporations, if any, having or claiming an interest in or lien upon the premises, described in the complaint, Defendants.



489/11

Orin R. Kitzes, J.

Plaintiff moves for an order awarding Plaintiff summary judgment on the causes of action in Plaintiff's Complaint and foreclosing the mortgages described in Plaintiff's moving papers; striking the affirmatives defenses of defendants Parkway Acquisition I, LLC f/k/a Parkway Hospital Associates ("PHA"), T-Mobile Northeast LLC ("T") incorrectly named herein as Omnipoint Communications, Inc., and Nouveau Elevation Industries Inc.; appointing a referee to compute amounts due to Plaintiff pursuant to CPLR 3212, CPLR Article 43 and Real Property Actions and Proceedings Law ("RPAPL") § 1321(1); adjudging defendants Robert Aquino and Capital Health Management Services Limited ("Capital") liable to pay any amounts owed pursuant to the Overline Guaranties; adjudging defendants Parkway, The [*2]Parkway Hospital Inc., Robert Aquino, and Capital Health Management Services Limited liable to pay any deficiency remaining after the sale of the Mortgaged Property; declaring that the Plaintiff is entitled to pursue defendant The Parkway Hospital Inc. in the United States Bankruptcy Court for the Southern District of New York, for a money judgment in the amount of the deficiency; and striking from the caption the names "JOHN DOE #1" through "JOHN DOE #20."

According to the Complaint, plaintiff is the owner and holder of certain mortgages and notes evidencing debts owed by Parkway to plaintiff ("MPFC") which are secured by a property located at 70-35 113th Street, Forest Hills, New York 11375 (the "Mortgaged Property"). Such mortgages include the Amended and Restated Mortgage and Security Agreement (the "Amended Term Mortgage") dated August 8, 2001 and the Amended and Restated Revolving Mortgage and Security Agreement (the "Amended Revolving Mortgage" and together with the Amended Term Mortgage the "Mortgages") dated August 8, 2001. These mortgages and notes stem from debt obligations PHA or its predecessors in title to the Mortgaged Premises made with various lenders, beginning in 1961, (the "Original Mortgages"). Each of the Original Mortgages was duly recorded in the Office of the Register of Queens County as a lien against the Mortgaged Premises and the requisite mortgage taxes and recording fees were paid. On October 18, 1994, defendant PHA entered into a Consolidation, Extension and Modification Agreement with Core States Bank, which, inter alia, consolidated the five Original Mortgages into a single lien against the Mortgaged Premises in the principal amount of eight million ($8,000,000.00) dollars plus interest (the "Original Consolidated Mortgage"). The Original Consolidated Mortgage was duly recorded in the Office of the Register of Queens County on November 4, 1995 in Reel 4013, Page 1544 and the required mortgage tax and recording fee were paid.

Thereafter, the holder of the Original Consolidated Mortgage, Core States Bank, merged into First Union National Bank ("FUNB"). As surviving entity of the merged entities FUNB became the holder of the Original Consolidated Mortgage. On August 8, 2001, FUNB assigned the Original Consolidated Mortgage and the debt due from PHA which was secured by the Original Consolidated Mortgage to Heller Healthcare Finance, Inc. ("Heller"). The Assignment was duly recorded with the Office of the Register of Queens County in Reel 6019, page 2429 and the requisite mortgage tax and recording fees were paid. On August 8, 2001, the Original Consolidated Mortgage was split into two liens, the Amended Term Mortgage and the Amended Revolving Mortgage which are the two mortgages sought to be foreclosed on in this action. The splitter agreement was duly recorded with the Office of the Register of Queens County in Reel 6019, page 2417 and the requisite mortgage tax and recording fees were paid.

The Mortgage Loan Agreement with Heller, as lender, provided for a loan of two million ($2,000,000.00) dollars (the "Term Loan") by Heller to the Borrowers (the "Term Loan Agreement"). The original maturity date of the Term Loan was August 9, 2003. Pursuant to the Term Loan Agreement, Borrowers would be in default if, among other things, (I) they failed to make any payments due under the Secured Term Note or the Revolving Credit Note (ii) they breached any Term Loan Covenant which was not cured within thirty (30) days following written notice thereof; (iii) Borrowers voluntarily filed a petition for relief under the Bankruptcy Code; (iv) a final judgment against the Borrowers was entered which was not paid [*3]or dismissed and remained un-stayed or was not bonded for a period of twenty (20) days; (v) the Borrower ceases a material portion of its business operations; or (vi) there existed a material adverse change in Borrowers' financial condition which was not cured within ten (l0) days following written notice thereof. The Term Loan Agreement further provided that upon the occurrence of an event of default, all payment obligations due from Borrowers to lender, shall, at lender's option, become immediately due and payable without notice. It further provides that in addition to the amount of the Term Loan, the Borrowers agree to pay all costs of collection of the Secured Term Note and enforcement of the Amended Term Mortgage and the Borrowers agree to indemnify and hold lender harmless as to all costs and expenses relating to the Mortgaged Premises and other collateral securing the debt; that PHA and Parkway Hospital Inc. ("PHI") are jointly and severally liable for all obligations under the Secured Term Note and the Term Loan Agreement. Finally, the Term Loan Agreement provides that all collateral given by PHA or PHI is cross-collateralized to secure the joint and several liability of each of the Borrowers under the Term Loan Agreement.

Defendants PHA and PHI, as Borrowers, also executed an Amended and Restated Secured Term Note and Security Agreement, in favor of Heller, as lender, they agreed to pay to Heller the principal sum of two million ($2,000,000.00) dollars with interest as set forth therein (the "Secured Term Note"). The Secured Term Note incorporates the provisions of the Term Loan Agreement. and further provided that as security for payment of all obligations under the Secured Term Note and all other Loan Documents, Borrowers grant to lender a security interest in various personal property including inter alia, all of Borrowers' accounts, accounts receivable, rights of payment of any kind and all proceeds of all of the above. The Secured Term Note further provided for events that would constitute a default and the consequences of such.

PHA's and PHI's obligations under the Secured Term Note were secured by an Amended and Restated Mortgage and Security Agreement (the "Amended Term Mortgage") dated August 8, 2001, which was duly executed, acknowledged and delivered by PHA, as mortgagor, to Heller, as mortgagee and which was duly recorded as a lien on the Mortgaged Premises in the Office of the Register of Queens County on September 21, 2001 at Reel 6019, Page 2362 and the requisite mortgage tax and recording fee were paid. The Amended Term Mortgage provides, inter alia, that it secures, among other things, all of Borrowers' obligations under the Term Loan Agreement and the Secured Term Note and as security for the due performance of their obligations under the Secured Term Note and Term Loan Agreement, the Borrowers grant and absolutely assign to lender a security interest in, among other things, all leases and rents affecting the Mortgaged Premises and all deposits, revenues, profits and proceeds thereof, and a default provision similar to the one set forth above.

The principal amount due under the Secured Term Note was paid in full by PHA and PHI on August 1, 2003. However, the Amended Term Mortgage continues to secure the full payment of all unpaid amounts and obligations due under the Revolving Loan Agreement, the Revolving Credit Note and the Amended Revolving Mortgage. PHA and PHI, as borrowers, had entered into a Revolving Loan and Security Agreement (the "Revolving Loan Agreement") with Heller, as lender, whereby Heller agreed to make available to the PHA and PHI a revolving credit in the maximum amount of eight million dollars, ($8,000,000.00) (the [*4]"Revolving Loan"). The Revolving Credit Note incorporated by reference the terms, covenants and conditions set forth in the Term Loan Agreement, Secured Term Note, Amended Term Mortgage and Revolving Loan Agreement and its terms were extended periodically.

Borrowers' obligations under the Revolving Credit Note are secured by an Amended and Restated Revolving Mortgage and Security Agreement (the "Amended Revolving Mortgage") dated August 8, 2001 in the original principal amount of $8,000,000.00, which was duly executed, acknowledged and delivered by PHA, as mortgagor, to Heller as mortgagee, and which was duly recorded in the Office of the Register of Queens County on September 21, 2001 at Reel 6019, Page 2442 and the requisite mortgage tax and recording fee were paid. Pursuant to a Mortgage Modification Agreement dated May 24, 2005, recorded in the Office of the Register of Queens County on June 21, 2005, under City Register File Number ("CRFN") #2005000356382, the principal indebtedness of the Amended Revolving Mortgage was increased to $8,500,000 and Sections 16.6 and 16.7 of the Amended Revolving Mortgage were deleted. PHA and PHI provided security for this Mortgage in similar manner as outlined above. The default provisions were similar as well.

On May 24, 2005, GE HFS, as lender, and PHA and PHI, as borrowers, entered into a written letter agreement ("Fourth Overline Letter") whereby GE HFS advanced an Overline Loan in the amount of Five Hundred Thousand ($500,000.00) Dollars to Borrowers pursuant to the terms and conditions set forth in the Fourth Overline Letter On June 21,2005, GE HFS, as lender, and PHA and PHI, as borrowers, entered into another written letter agreement ("Fifth Overline Letter") whereby GE HFS advanced an additional Overline Loan in the amount of Two Hundred Thousand ($200,000.00) to Borrowers pursuant to the terms and conditions of the Fifth Overline Letter (the "Fifth Overline Loan"). The Fourth and Fifth Overline Loans, aggregating in a principal amount of Seven Hundred Thousand ($700,000.00) Dollars as set forth in the Fourth and Fifth Overline Letters, are expressly subject to the terms and provisions of the Revolving Loan Agreement and are additional Obligations thereunder secured by the Amended Revolving Mortgage. Payment of the Fourth and Fifth Overline Loans set forth in the Fourth and Fifth Overline Letters was finally due on or before August 15, 2005 and June 23, 2005, respectively. Upon information and belief, Borrowers have failed to pay the principal and accrued interest due to the lender under the Fourth and Fifth Overline Letters.

.On May 25, 2005, Boro Medical P.C., Boro Health Care of Union P.C., Boro Medical of Westchester, Inc., Boro Medical of New York, Inc., Boulevard Surgical Center, Inc. f/k/a QSCC Acquisition Corp., Lifeco Medical P.C., Capitol Health Management Inc. and Capitol Health Management Services Limited (the "Corporate Guarantors") and Robert Aquino (the "Personal Guarantor", and together with the Corporate Guarantors, the "Guarantors"), as guarantors, executed and delivered to GE HFS, as guaranteed party, their Unconditional Guarantees of the Fourth Overline Loan ("Fourth Overline Guarantees") in the principal amount of Five Hundred Thousand ($500,000.00) Dollars plus interest and costs of collection, including reasonable attorney fees. On June 21, 2005 the Guarantors, as guarantors, executed and delivered to GE HFS, as guaranteed party, their Guarantees of the Fifth Overline Loan (the "Fifth Overline Guaranties") in the principal amount of Two Hundred Thousand ($200,000.00) Dollars plus interest and costs of collections, including reasonable attorney fees. The Overline Guarantees, provide, in pertinent part, that Guarantors "unconditionally" guaranty to lender the [*5]payment (and not merely the collection) of all principal, interest, costs and fees due under the Fourth and Fifth Overline Loans due to the lender. Upon information and belief, the principal amounts plus accrued interest due under the Fourth and Fifth Overline Loans as of July 2005 was $704,888.89. The Overline Guarantees further provide that Guarantors waive their rights, if any, to require the lender to proceed first against the Borrowers or against any collateral, waive their rights, if any, to participate in the proceeds of any collateral or for contribution or indemnity from lender, or to subrogate to lender's rights, and Guarantors waive all presentments, notices, protests and all other notices of dishonor of the obligations guaranteed. Guarantors also agree to pay the amounts guaranteed without set-off or counterclaim against lender.

On December 19, 2006, pursuant to a Loan Sale Agreement (the "Loan Sale Agreement"), GE HFS sold to Medical Capital Corp., as buyer, and Plaintiff as buyer designee, its right, title and interest in certain loan assets including the Term Loan Agreement, Secured Term Note, Revolving Loan Agreement, Revolving Credit Note, Fourth and Fifth Overline Letters and Overline Guarantees. Pursuant to an assignment dated May 21, 2009, recorded in the Office of the Register of Queens County on June 12, 2009, under CRFN #2009000178375, the Amended Term Mortgage was assigned by GE HFS to the Plaintiff. Pursuant to an assignment dated December 18, 2006 recorded in the Office of the Register of Queens County on March 2, 2007, under CRFN #2007000116515, the Amended Revolving Mortgage was assigned by GE HFS to the Plaintiff. Pursuant to an assignment dated May 29, 2007 recorded in the Office of the Register of Queens County on July 10, 2007, under CRFN #2007000351934, the Amended Revolving Mortgage was assigned by Plaintiff to Wells Fargo Bank. Pursuant to an assignment dated May 25, 2010 recorded in the Office of the Register of Queens County on June 9, 2010, under CRFN #2010000192223, the Amended Revolving Mortgage was assigned by Wells Fargo Bank to Plaintiff. By virtue of the foregoing, Plaintiff became and still is the owner and lawful holder of the Term Loan Agreement, Secured Term Note, Amended Term Mortgage, Revolving Loan Agreement, Revolving Credit Note, Amended Revolving Mortgage, Fourth and Fifth Overline Letters, and Overline Guarantees (collectively the "Loan Documents")

.On or about December 19, 2006, the outstanding principal and accrued interest owed on the Revolving Credit Note was in excess of $8.9 million. During or about September 2007, Borrowers ceased making payments of principal and interest in connection with the Loan Documents, and thereby defaulted under all of the Loan Documents. Upon information and belief, Borrower PHI voluntarily filed for bankruptcy relief under the Bankruptcy Code and final judgments (by various commercial and governmental creditors) have been entered against the Borrowers. Furthermore, during or about September 2008, the New York State Department of Health forced the hospital operated on the Mortgaged Premises to cease operating and has failed to make timely payments and/or withholding of payroll tax obligations in violation of the Loan Documents. Based on these events and others set forth, Plaintiff claims PAI and PHI have defaulted. Borrowers were sent notice of various defaults under the Loan Documents. As of December 2010, amount due under the Loan Documents is in excess of $11,608,491.42, including principal, accrued and unpaid interest and late charges. [*6]

Based on these failures to make payments, on August 30, 2011, Plaintiff commenced the instant action for Foreclosure of Mortgage. Thereafter, Plaintiff made the instant motion, which is opposed by Defendants.In moving for summary judgment in an action to foreclose a mortgage, a plaintiff establishes its case as a matter of law through the production of the mortgage, the unpaid note, and evidence of default. Wells Fargo v. Webster, 61 AD3d 856, 856 (2d Dept. 2009), citing Republic Natl. Bank of NY v. O'Kane, 308 AD2d 482, 482 (2d Dept. 2003), quoting Village Bank v. Wild Oaks Holding, 196 AD2d 812, 812 (2d Dept. 1993). In Wells Fargo, supra, the Second Department held that plaintiff bank sustained its initial burden of demonstrating its entitlement to judgment as a matter of law by submitting proof of the existence of the note, mortgage, and consolidation agreement, and the defendants' default in payment. Id. Once plaintiff's burden has been met, it becomes incumbent on the defendants to demonstrate, by admissible evidence, the existence of a triable issue of fact as to a bona fide defense. Id.

Here, the Court finds that Plaintiff has made a prima facie showing of entitlement to judgment as a matter of law on its claims for foreclosure of the Mortgage, and demonstrated that there are no material issues of fact in dispute with respect to these claims. More specifically, Plaintiff has submitted to the Court copies of the duly executed, Notes, Mortgages, Guaranties, and their respective Assignments, and other loan documents, and affidavit of Thomas A. Seaman. Mr. Seaman is the court-appointed permanent receiver for Medical Capital Holdings, Inc., Medical Capital Corporation and Medical Provider Funding Corporation VI, and their subsidiaries and affiliates, including Medical Provider Financial Corporation III ("MPFC"), appointed by the Honorable David O. Carter, U.S. District Judge in Securities and Exchange Commission v. Medical Capital Holdings, Inc.; Medical Capital Corporation; Medical Provider Funding Corporation VI; Sidney M. Field; and Joseph Lampariello, U.S. Dist. Ct. (C.D.Cal.), No. 8:09-cv-0818-DOC (RNBx). He has reviewed the applicable documents relating to the subject Loans and confirms the facts set forth above. Plaintiff has established that it is the holder of the mortgages and unpaid notes, and that PAI and PHA are in default, thereby demonstrating its entitlement to a judgment of foreclosure as a matter of law. Mahopac Nat'l Bank v. Baisley, 244 AD2d 466 (2nd Dep't 1997.) Consequently, the burden shifts to the defendants to come forward with competent evidence of any defenses to raise issues of fact. Fleet Nat'l Bank v. Olasov, 16 AD3d 374, 374 (2nd Dep't 2005.) Defendants PHA and PHI oppose this motion and claim that Plaintiff is not the owner and holder of the Loan Documents. Specifically, Parkway argues that (1) the Revolving Credit Note was not indorsed by GE HFS to Plaintiff, (2) the Revolving Credit Note was not delivered to Plaintiff; and (3) the indorsement and delivery of the Revolving Credit Note did not occur prior to the commencement of the action. They also claim that Plaintiff failed to attach certain documents to its motion in bad faith.As set forth above, Plaintiff has established it is owner and lawful holder of the Loan Documents including the Revolving Loan Agreement, Revolving Credit Note, Amended Revolving Mortgage. All necessary assignments regarding the Mortgages were duly filed and any applicable recording tax was duly paid. Furthermore, as set forth in each assignment, the assignment of the Mortgages also includes assignments of the related notes, including the Revolving Credit Note and the Secured Term Note. Finally, Plaintiff is the owner and lawful holder of the Loan Documents and has standing to foreclose [*7]on the Mortgages. Wells Fargo Bank, N.A. v. Marchione, 69 AD3d 204, 207, 887 N.Y.S.2d 615, 617 (2d Dep't 2009) Additionally, there is no question that the assignment, indorsement and delivery of the Loan Documents occurred prior to January 6, 2011, the date this action was commenced.Additionally, PAI and PHA's claims that the mortgage accompanying the Term Loan Agreement and Secured Term Note was never recorded and was not submitted with plaintiff's motion papers is belied by the record and, as such is without merit. As is their claim that there was a satisfaction or release of the Amended Term Mortgage. In any event, any disputes of the amounts due and owed under the Loan Documents do not raise an issue of fact. Rather, the amount due is simply a matter to be determined by the referee. See Long Island Sav. Bank of Centereach, FS.B. v. Denkensohn, 222 AD2d 659 (2nd Dep't 1995.) Accordingly, PAI and PHA have failed to raise any issue of fact and the branch of the motion seeking summary judgment against these defendants is granted.T-Mobile opposes the motion by claiming that the motion record is devoid of any competent proof that Plaintiff's alleged interest in the subject property is paramount to T-Mobile's leasehold interest. It claims that Plaintiff fails to submit any purported mortgage or note that pre-dates the lease agreement (the "Lease") between T-Mobile's predecessor, Omnipoint Communications Inc. ("Omnipoint") and Parkway Hospital Associates ("Parkway") dated September 6, 1996. Rather, it claims that the sole documents submitted by Plaintiff in support of the Motion consist of alleged mortgage agreements, assignments, and guarantees that were allegedly signed and recorded years after the Lease and the commencement of T-Mobile's occupancy of its leasehold at the Property. T-Mobile argues that Plaintiff has not shown a sufficient amount of the public record regarding the history of the mortgages to prove that the mortgages recorded prior to the Lease existed and are traceable to the Mortgages being foreclosed herein.The Court finds that T-Mobile has failed to raise an issue of fact. Initially, it does not dispute that its First, Second and Third affirmative defenses are baseless, unsupportable and fail to raise an issue of fact. Nor does T-Mobile dispute that Plaintiff has standing to bring this foreclosure action. In essence, T-Mobile's only argument is that its 1996 lease (the "Lease") is superior to the Mortgages. Contrary to T-Mobile's claim, Plaintiff has produced a sufficient summary of what is set forth in the public record, citing specifically to the exact location of each such record in the Office of the Register of Queens County. This evidence is admissible and properly set the chain of title and established that the original mortgage encumbrances were duly recorded and assigned and predate the 1996 Lease. See Ed Guth Realty, Inc. v. Gingold, 34 NY2d 440 (1974) ("the voluminous writings' exception permits the admission of summaries of voluminous records or entries where, if requested, the party against whom it is offered can have access to the original data.") T-Mobile had access to the public record yet it does not specifically dispute the accuracy of Plaintiff's summary of the public record or raise any specific issue in connection with the chain of title or the history of the mortgages. Accordingly, Plaintiff has sufficiently established that its interest in the Mortgaged Premises is superior to T-Mobile and T-Mobile has failed to raise an issue of fact.Based on the above, Plaintiff's motion seeking summary judgment (1) foreclosing the Mortgages; (2) striking the affirmative defenses of defendants Parkway, T-Mobile, and Nouveau Elevation Industries Inc. ("Nouveau"); (3) appointing a referee to compute amounts due to Plaintiff pursuant to CPLR 3212, CPLR Article 43, and Real Property Actions and Proceedings Law ("RPAPL") § 1321(1); (4) adjudging defendants [*8]Robert Aquino and Capital Health Management Services Limited liable to pay any amount owed pursuant to the Overline Guaranties; (5) adjudging defendants Parkway, The Parkway Hospital Inc., Robert Aquino, and Capital Health Management Services Limited liable to pay any deficiency remaining after the sale of the Mortgaged Property; (6) declaring that the Plaintiff is entitled to pursue defendant The Parkway Hospital Inc. in the United States Bankruptcy Court for the Southern District of New York, for a money judgment in the amount of the deficiency; and (7) striking from the caption the names "JOHN DOE #1" through "JOHN DOE #20." is granted.

Settle order

ORIN R. KITZES, J.S.C.