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TD Bank, N.A. v. Jay Jala Bapa, L.L.C.

United States District Court, M.D. North Carolina

January 17, 2018

TD BANK, N.A., Plaintiff,
JAY JALA BAPA, L.L.C., et al., Defendants.



         This case comes before the Court on the “Motion for Summary Judgment” (Docket Entry 16) (the “Summary Judgment Motion”) and “Plaintiff's Motion to Strike Affidavit of Bankim Rana” (Docket Entry 22) (the “Motion to Strike”) filed by TD Bank, N.A. (the “Plaintiff”). For the reasons that follow, the Court will grant in part and deny in part the Summary Judgment Motion and will deny the Motion to Strike.[1]


         On December 12, 2008, Jay Jala Bapa L.L.C. (the “LLC Defendant”) entered into a “Loan and Security Agreement” with Plaintiff regarding a $950, 000 loan. (Docket Entry 1-2 at 1.) In connection with the loan, LLC Defendant executed a “U.S. Small Business Administration Note” (Docket Entry 1-3) (the “Note”) and a “Deed of Trust, Security Agreement and Assignment of Leases and Rents” (Docket Entry 17-1) in favor of Plaintiff for 220 South Eastern Boulevard, Fayetteville, North Carolina 28301 (the “Motel Property”). In addition, Bankim Rana, Shila Bankim Rana, and Doli Rana (each, a “Guarantor”) each executed a “U.S. Small Business Administration Unconditional Guarantee” (each, a “Guarantee”), “unconditionally guarantee[ing] payment to [Plaintiff] of all amounts owing under the Note.” (Docket Entry 1-4 at 1, 7, 13.)[2]LLC Defendant ceased making payments on the Note after September 2015. (Docket Entry 1, ¶ 22; Docket Entry 10, ¶ 22; Docket Entry 17, ¶ 18.)

         On February 12, 2016, Plaintiff sent letters to LLC Defendant and Guarantors (collectively, the “Defendants”) notifying them that the Note “is seriously delinquent, ” and “has been accelerated, and payment in full is hereby demanded” (Docket Entry 17-2 (the “Demand Letters”) at 1, 3). The Demand Letters further informed Defendants that, “unless the outstanding balance on [the] Note is paid within five (5) days, ” Plaintiff would enforce the “provisions relative to payment of attorneys' fees” in the Note and Guarantees. (Id. at 1, 3.) More specifically, the Demand Letters stated that, pursuant to North Carolina General Statute Section 6-21.2, Plaintiff would seek attorney's fees equal to “15%[] of the outstanding balance on the Note when the action for collection is started” if the Note remained unpaid. (Id. at 1, 3.) Defendants made no payments on the Note in response to the Demand Letters. (See Docket Entry 10, ¶ 26.) On March 8, 2016, Plaintiff commenced foreclosure proceedings regarding the Motel Property. (See Docket Entry 17, ¶¶ 21-23; see also Docket Entry 17-3.) At a foreclosure sale on April 28, 2016, Plaintiff purchased the Motel Property for $215, 000. (See Docket Entry 1, ¶¶ 33-34; Docket Entry 1-6 at 1; Docket Entry 17, ¶¶ 24-25.) Following expiration of the upset bid period, this sale became final on May 9, 2016. (Docket Entry 17, ¶ 25; see also Docket Entry 1, ¶ 39.) Plaintiff also purchased the business assets contained in the Motel Property for $3, 824. (Docket Entry 1, ¶ 37; Docket Entry 17-9 at 1.)

         On June 29, 2016, Plaintiff initiated this action by filing a “Verified Complaint.” (Docket Entry 1 (the “Complaint”) at 1.) The Complaint asserts that Defendants owed a deficiency balance of $595, 447.97 as of June 13, 2016, with interest accruing at 4.5% per year or “$74.43 per day.” (Id., ¶ 41.) The Complaint seeks such deficiency balance “plus reasonable attorneys' fees for 15% of the outstanding indebtedness owing when suit is instituted.” (Id. at 6.)[3] In response to the Complaint, Defendants raised a defense under North Carolina's anti-deficiency statute, N.C. Gen. Stat. § 45-21.36, contending “that the fair market value of the [Motel P]roperty was equal to the amount of the indebtedness at the time and place of sale, or in the alternative, that the amount of [Plaintiff's] credit bid was substantially less than the fair market value of the [Motel P]roperty.” (Docket Entry 10 (the “Answer”), ¶ 44.)

         Thereafter, Plaintiff moved for summary judgment. (See Docket Entry 16.) In its Summary Judgment Motion, Plaintiff requests “$510, 345.24 plus interest at the annual rate of 4.50% after May 30, 2017, which equates to $60.86 per day, ” as well as “reasonable attorneys' fees of $73, 493.57, which is 15% of the outstanding indebtedness when [Plaintiff] instituted this action on June 29, 2016 ($489, 957.14).” (Id. at 1.)[4] Defendants oppose the Summary Judgment Motion. (See Docket Entries 20, 21.) In turn, Plaintiff seeks to strike the affidavit (Docket Entry 21) (the “Rana Affidavit”) upon which Defendants rely in opposing summary judgment. (See Docket Entries 22, 23, 25.) Defendants similarly oppose the Strike Motion. (See Docket Entry 24.)


         I. Preliminary Matters

         Federal courts bear an “independent obligation” to assess whether subject-matter jurisdiction exists in every action. Constantine v. Rectors & Visitors of George Mason Univ., 411 F.3d 474, 480 (4th Cir. 2005); see also Fed.R.Civ.P. 12(h)(3) (“If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.”). No presumption of jurisdiction applies, Pinkley, Inc. v. City of Frederick, Md., 191 F.3d 394, 399 (4th Cir. 1999); instead, federal courts must determine if a valid jurisdictional basis exists and “dismiss the action if no such ground appears, ” In re Bulldog Trucking, Inc., 147 F.3d 347, 352 (4th Cir. 1998). Generally, federal courts possess jurisdiction over “actions arising under the Constitution, laws, or treaties of the United States, ” 28 U.S.C. § 1331 (i.e., federal question jurisdiction), as well as actions involving disputes of a value of $75, 000 or more between “citizens of different States, ” 28 U.S.C. § 1332(a)(1) (i.e., diversity jurisdiction). Facts supporting jurisdiction typically must appear in the complaint, see Pinkley, 191 F.3d at 399, and the party asserting federal jurisdiction bears the burden of “show[ing] that jurisdiction does, in fact, exist, ” Davis v. Pak, 856 F.2d 648, 650 (4th Cir. 1988) (internal quotation marks omitted).

         In this case, the Complaint fails to specify the jurisdictional basis upon which it rests. (See Docket Entry 1, ¶ 6 (stating only that “[t]his Court has jurisdiction over the parties to this action and the subject matter of the claims set forth”).) However, the parties treat this action as arising under the Court's diversity jurisdiction, and no discernable basis for federal question jurisdiction appears in the record. (See generally Docket Entries 1, 10, 19, 20, 23-25 (relying on state substantive law).) The Court therefore examines the availability of diversity jurisdiction, remaining mindful that “diversity jurisdiction does not exist unless each defendant is a citizen of a different State from each plaintiff, ” Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373 (1978) (emphasis in original).

         According to the Complaint, Plaintiff “is a national banking association organized and existing under the laws of the United States” and “is co-headquartered in Maine and New Jersey and conducts business in North Carolina.” (Docket Entry 1, ¶ 1.) The Complaint further describes LLC Defendant as “organized and existing under the laws of the State of North Carolina with a principal place of business in Cumberland County, North Carolina.” (Id., ¶ 2.) Finally, the Complaint maintains that each Guarantor “is a resident of Lodi, New Jersey.” (Id., ¶¶ 3-5.)[5] Because the Complaint provided insufficient information for “assessing the citizenship of Plaintiff and [LLC] Defendant” (Docket Entry 26 at 1), the Court ordered the parties to file notices supplying certain citizenship information (see id. at 1-2). According to these notices, Plaintiff's “main office, as designated in its articles of association, is located in the State of Delaware” (Docket Entry 27 at 1) and LLC Defendant “is a North Carolina limited liability company, ” whose members - the Guarantors - all qualify as residents and citizens of New Jersey (Docket Entry 28 at 1-2).

         For diversity jurisdiction purposes, the Court attributes to a limited liability company “the citizenship of all of its members.” Central W.Va. Energy Co. v. Mountain State Carbon, LLC, 636 F.3d 101, 103 (4th Cir. 2011). Thus, notwithstanding its establishment under North Carolina law, LLC Defendant remains a citizen of New Jersey. As to Plaintiff, “national banking associations shall, ” for cases of this sort, “be deemed citizens of the States in which they are respectively located.” 28 U.S.C. § 1348. According to the United States Supreme Court, one “‘locates'” a bank for Section 1348 purposes “in the State designated in its articles of association as its main office.” Wachovia Bank v. Schmidt, 546 U.S. 303, 318 (2006).[6] That view establishes Plaintiff as a citizen of Delaware. (See Docket Entry 27 at 1.) The parties therefore qualify as diverse, bringing this case within the Court's diversity jurisdiction.[7]

         II. Relevant Motion Standards

         “The [C]ourt shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A genuine dispute of material fact exists “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The movant bears the burden of establishing the absence of such dispute. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In analyzing a summary judgment motion, the Court “tak[es] the evidence and all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party.” Henry v. Purnell, 652 F.3d 524, 531 (4th Cir. 2011) (en banc). In other words, the nonmoving “party is entitled ‘to have the credibility of his evidence as forecast assumed, his version of all that is in dispute accepted, [and] all internal conflicts in it resolved favorably to him.'” Miller v. Leathers, 913 F.2d 1085, 1087 (4th Cir. 1990) (en banc) (brackets in original) (quoting Charbonnages de France v. Smith, 597 F.2d 406, 414 (4th Cir. 1979)). If, applying this standard, the Court “find[s] that a reasonable jury could return a verdict for [the nonmoving party], then a genuine factual dispute exists and summary judgment is improper.” Evans v. Technologies Applications & Serv. Co., 80 F.3d 954, 959 (4th Cir. 1996).

         In evaluating a summary judgment motion, the Court can consider any “material[] in the record, ” Fed.R.Civ.P. 56(c)(3), including any affidavits, Fed.R.Civ.P. 56(c)(1)(A). Affidavits used to support or oppose summary judgment “must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant . . . is competent to testify on the matters stated.” Fed.R.Civ.P. 56(c)(4). “A party may object that the material cited to support or dispute a fact cannot be presented in a form that would be admissible in evidence.” Fed.R.Civ.P. 56(c)(2).[8]

         “In resolving a motion to strike [an allegedly noncompliant affidavit], the Court should use ‘a scalpel, not a butcher knife' to strike portions of an affidavit that do not satisfy the requirements of Rule 56([c]).” Gardner v. Group Health Plan, No. 5:09-cv-152, 2011 WL 1321403, at *3 (E.D. N.C. Apr. 4, 2011) (quoting Upshaw v. Ford Motor Co., 576 F.3d 576, 593 (6th Cir. 2009)). Furthermore, “the papers of a party opposing summary judgment are usually held to a less exacting standard than those of the moving party and doubts regarding admissibility are resolved in favor of the party opposing summary judgment.” Owle v. Solomon, No. 5:16cv25, 2017 WL 2262419, at *3 (W.D. N.C. May 23, 2017) (internal quotation marks omitted); see also Salami v. North Carolina Agric. & Tech. State Univ., 394 F.Supp.2d 696, 706 (M.D. N.C. 2005) (“[T]he Court will evaluate [the] motions to strike while considering that the papers of a party opposing summary judgment are usually held to a less exacting standard than those of the moving party.” (internal quotation marks omitted)), aff'd, 191 F. App'x 193 (4th Cir. 2006). Finally, the Court may disregard noncompliant portions of an affidavit “without formally entering an order striking them.” Kirkman v. Tison, No. 1:09cv886, 2012 WL 4891624, at *7 (M.D. N.C. Oct. 15, 2012); see also Salami, 394 F.Supp.2d at 706 (“Therefore, although the Court will not address each specific statement [the d]efendant objects to, to the extent that this Court conclusively finds that any statement is not based on an affiant's first-hand knowledge, the Court will disregard that statement in making the summary judgment determination.”).

         III. Deficiency Analysis

         As an initial matter, no dispute exists regarding either the validity or the breach of the Note and Guarantees, as

Defendants concede that the Plaintiff has established the existence of binding contracts in the form of the promissory [N]ote and personal [G]uarantees, that such contracts were breached as a result of the Defendants' failure to pay the indebtedness when due, and that the Plaintiff received less than the full amount of its indebtedness at the foreclosure sale in which Plaintiff obtained ownership of the [Motel] Property.

(Docket Entry 20 at 7-8.) Nevertheless, relying on North Carolina's anti-deficiency statute, N.C. Gen. Stat. § 45-21.36, Defendants maintain that summary judgment remains improper because “there is a genuine factual dispute with respect to the value of the collateral at the time of the foreclosure sale.” (Id. at 8.)[9]

         A. Anti-deficiency Statute

         A “depression era law[] designed to protect debtors, ” High Point Bank & Tr. Co. v. Highmark Properties, LLC, 368 N.C. 301, 305, 776 S.E.2d 838, 842 (2015), the anti-deficiency statute provides a defense to a defendant in a deficiency action brought by a mortgagor who obtains the defendant's property in a foreclosure sale, see N.C. Gen. Stat. § 45-21.36.[10] More specifically, this statute “provides the method of calculating th[e] amount [of the ‘indebtedness']” owed the plaintiff. High Point Bank, 368 N.C. at 305, 776 S.E.2d at 841. As the North Carolina Supreme Court explained, under this statute,

when the creditor has elected to become the purchaser of the property conveyed by the mortgage or deed of trust at a sale made under a power of sale contained in the mortgage or deed of trust, and thereafter, pursuant to such sale and purchase, acquires title to the property, he shall not recover judgment against his debtor for any deficiency, after the application of the amount of his bid as a payment on the debt, without first accounting to his debtor for the fair value of the property at the time and place of the sale, and that such value shall be determined by the court. In such case, the amount bid by the creditor at the sale, and applied by him as a payment on the debt, is not conclusive as to the value of the property.

Richmond Mortg. & Loan Corp. v. Wachovia Bank & Tr. Co., 210 N.C. 29, 185 S.E. 482, 485 (1936), aff'd, 300 U.S. 124 (U.S. 1937).[11] In actions implicating this statute, the fair market value of the relevant property at the time of the foreclosure sale constitutes a “material fact.” Wachovia Realty Invs. v. Housing, Inc., 292 N.C. 93, 112, 232 S.E.2d 667, 679 (1977).

         B. The Parties' Contentions

         For purposes of the Summary Judgment Motion, Plaintiff maintains that the fair market value of the Motel Property constituted $320, 000 or less on May 9, 2016, the date the foreclosure sale became final. (See Docket Entry 17, ¶¶ 28, 39, 40; Docket Entry 19 at 4.) Plaintiff bases the $320, 000 amount on an appraisal it obtained of the Motel Property in October 2015, which “determined that the [Motel P]roperty had an ‘as-is' fee simple market value of $320, 000” (Docket Entry 17, ¶ 28). (See id., ¶ 40; see also Docket Entry 17-4 (the “Appraisal”) at 3.) According to the Appraisal, the “highest and best use of the [Motel P]roperty is to continue hotel operations on an interim basis, ” and “the ‘as is' market value of the going concern hotel as of October 15, 2015[, ] is . . . $320, 000.” (Docket Entry 17-4 at 2-3.)

         Defendants dispute this assessment. (See generally Docket Entry 21.) Bankim Rana (“Rana”), “the primary person responsible for the day-to-day management and operations of the [Motel] Property” (id., ¶ 1), submitted the Rana Affidavit contesting certain “factual inaccuracies” in the Appraisal (id., ¶ 5; see id., ¶¶ 6, 9-11) and opining on the Motel Property's value (see, e.g., id., ¶¶ 8, 16). In particular, Rana averred that, solely as an operating motel, the Motel Property held a value of at least $700, 000. (Id., ¶ 8.) Further, according to Rana, “the value of [the] underlying land was greater than the value . . . based upon an operating motel.” (Id.) Specifically, “[i]t is [his] opinion that the value of the [Motel] Property on the date of the foreclosure sale was approximately $900, 000.” (Id., ¶ 16.) The Rana Affidavit identifies four factors underlying this opinion: (i) the Motel Property's $995, 600 tax value “at the time of the foreclosure[;]” (ii) its listing “in the months prior to the foreclosure” for sale at $999, 000 based on a determination by “an experienced commercial real estate brokerage firm[;]” (iii) its purchase for ...

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