LLC v. Scott Sharkey et al. (2009)

MEMORANDUM OF DECISION RE MOTION TO DETERMINE SUFFICIENCY (162.00)

In this hotly contested lawsuit the plaintiffs obtained the following prejudgment remedies:  (1) an attachment of $600,000 on the property of defendants Scott Sharkey and Sharkey Franchising Co., LLC (Sharkey Franchising);  (2) a garnishment of $600,000 on any amounts presently or becoming due to Scott Sharkey and Sharkey Franchising;  and (3) an attachment of $75,000 on the property of defendant Linda Sharkey.   See Memorandum of Decision by the Honorable David Tobin, January 14, 2009, Dkt. Entry 119.10.   Subsequently, the plaintiffs moved for an order that the defendants disclose assets.   The objections to these motions were sustained “only in part” by the Honorable John R. Downey who found the demand to disclose assets in three days too stringent.   See Dkt. Entries 126.00, 129.00.¹

In March 2009 the defendants moved that Scott Sharkey and Sharkey Franchising be permitted to substitute, in lieu of the disclosure of assets, the attachment of real property located at 37 Highland Road, Westport, Connecticut in the amount of $600,000.   This property is owned by Scott and Linda Sharkey.   The motion was granted by the Honorable Kevin Tierney on March 23, 2009, (Dkt. Entry 131.00) with the proviso that plaintiffs could appraise the property and move for additional security if the appraisal showed the property to be not sufficient to satisfy the attachment.   The plaintiffs have made such a motion, and evidence was heard in August and September 2009.

The evidence presented by the parties primarily consisted of testimony and appraisals by the real estate appraisers, and testimony by a Connecticut attorney experienced in real estate matters in Fairfield County, as well as experienced in foreclosures, and the work of foreclosure committees.

37 Highland Road is encumbered by a first mortgage in the amount of $1,630,000 established in March 2008.   Ex. 4. An appraiser, Megan Byrne, appraised the value of the property as of October 13, 2008 for Citibank at $2,650,000.   Ex. 1. She subsequently appraised the property as of February 25, 2009 for Mr. and Mrs. Sharkey at $2,450,000.   Ex. 2. On August 1, 2009 she appraised the property again, and found a value of $2,300,000.   Ex. A. Michael Gold appraised 37 Highland Road as of April 6, 2009 for the plaintiffs and found a value of $2,175,000.   Ex. 3. He testified in early August 2009 that the value of 37 Highland Road had decreased since April, and that the actual sale price ($2,000,000) of a house he used in his appraisal as a comparable house at a listed price of $2,200,000, would indicate an August 2009 value of 37 Highland Road to be $2,060,000.   Ms. Byrne testified that residential home prices had increased slightly in the months before August 2009.   Mr. Gold testified that in that period sales activity had increased, but prices had not.   In September 2009, Attorney Mary Badoyannis gave testimony concerning residential home prices in foreclosure sales and expenses incurred in home sales.

The court concludes that 37 Highland Road provides insufficient security for the prejudgment remedies awarded plaintiffs.   Those remedies include, as noted, a $600,000 attachment against Scott Sharkey and a $75,000 attachment against Linda Sharkey.   There was no evidence presented by the defendants as to the present principal amount of the outstanding mortgage.   While the court assumes there may have been some minimal principal repayment in the last eighteen months, there is no evidence the present mortgage debt is less than $1,625,000.   If the residence is valued at Byrne's most recent appraisal of $2,300,000, the property would barely provide security for $675,000 of attachments.   Gold's most recent appraisal shows only $435,000 of equity, less than two thirds of what is required to secure the attachments.   The court finds that the actual value of the subject residence to be less than $2,250,000 and not sufficient to secure the attachments.   In addition, there was evidence that should the mortgage be foreclosed on the property, the sale price at a foreclosure sale would be substantially lower than appraised value.   Closing costs associated with any sale, such as the conveyance tax, would further reduce the net proceeds.

For the foregoing reasons, the court finds 37 Highland Road insufficient to secure the prejudgment remedies, and orders that the defendants Scott Sharkey and Sharkey Franchising disclose assets to the plaintiffs within twenty days of the date of this decision.

TAGGART D. ADAMS

SUPERIOR COURT JUDGE

FOOTNOTES

FN1. The motions for disclosure of assets and the objections thereto (Dkt. Entries 126.00 though 129.00) were all marked “off” by Judge Tierney when he granted the defendants' motion for substitution discussed in the next paragraph..  FN1. The motions for disclosure of assets and the objections thereto (Dkt. Entries 126.00 though 129.00) were all marked “off” by Judge Tierney when he granted the defendants' motion for substitution discussed in the next paragraph.

Adams, Taggart D., J.