The opinion
[Cite as Berkshire Bank v. Macedonia Hospitality, L.L.C., 2024-Ohio-2485.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT )
BERKSHIRE BANK C.A. No. 30613
Appellee
v. APPEAL FROM JUDGMENT
ENTERED IN THE
MACEDONIA HOSPITALITY, LLC, et al. COURT OF COMMON PLEAS
COUNTY OF SUMMIT, OHIO
Appellants CASE No. CV 2021-07-2067
DECISION AND JOURNAL ENTRY
Dated: June 28, 2024
FLAGG LANZINGER, Judge
{¶1} Macedonia Hospitality, LLC, (“Macedonia”) Dinaz Pooniwala (“Pooniwala”),
Burnsville Hospitality LLC (“Burnsville”), and Perdin L.L.C. (“Perdin”) (collectively
“Appellants”) appeal the judgment of the Summit County Court of Common Pleas, granting
summary judgment in favor of Berkshire Bank (“Berkshire”) on its foreclosure action. This Court
affirms.
I.
{¶2} On December 11, 2017, in exchange for a loan (“Loan”) of $2,000,000, Macedonia
executed a promissory note (“Note”) to Berkshire. The loan was secured by the Small Business
Administration (“SBA”). To secure repayment of the Loan, Macedonia executed and delivered a
mortgage (“Mortgage”) encumbering the property located at 311 East Highland Road, Macedonia,
OH 44056 (the “Property”). Berkshire has remained the holder of the Note and Mortgage since
their execution. As additional security for the Loan, Macedonia executed an assignment of leases
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and rents (“Assignment”) assigning its rights to all present and future leases, rents, and income for
the Property to Berkshire. Macedonia also executed a commercial security agreement granting
Berkshire a security interest in all accounts, inventory, equipment, furniture, fixtures, general
intangibles, chattel paper, and instruments (the “Collateral”). Berkshire perfected its security
interest in the Collateral with a properly filed and recorded UCC financing statement.
{¶3} Also on December 11, 2017, as additional security for the Loan, Appellants
Pooniwala, Burnsville, and Perdin (the “Guarantors”) executed an unconditional guarantee as
Guarantors of the Loan. The Guarantors guaranteed payment of all amounts owing under the Note.
{¶4} In 2020, during the COVID-19 pandemic, Macedonia began receiving 100%
monthly payment assistance through the United States Government. In January 2021, Macedonia’s
payment assistance was lowered to $9,000.00/month and Macedonia was responsible for the
remaining balance. On January 8, 2021, Macedonia made its January 1, 2021 payment in full. The
February 1 and March 1, 2021 payments were paid by Macedonia on May 13, 2021 (four and a
half and three and a half months after the payments were due). The April 1 and May 1, 2021
payments were paid by Macedonia on June 17, 2021 (two and a half and one and a half months
after the payments were due).
{¶5} On May 27, 2021, Berkshire delivered a demand letter to Macedonia. The letter
stated that Berkshire was accelerating the Loan and demanding the immediate repayment of the
total outstanding balance of the Loan because (1) payments on the Loan were past due and unpaid
from April 1, 2021, (2) Macedonia had failed to provide certain financial information required
pursuant to the Loan documents, (3) taxes on the Property were delinquent, and (4) hazard
insurance on the Property and Collateral had lapsed.
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{¶6} On July 2, 2021, Berkshire filed a complaint to obtain judgments against the
Appellants and to foreclose based upon (1) the Note and Mortgage against Macedonia, (2) the
Assignment, (3) the commercial security agreement against the Collateral, and (4) the
unconditional guarantees signed by the Guarantors.
{¶7} Berkshire moved for summary judgment. Appellants jointly filed a brief in
opposition to Berkshire’s motion for summary judgment. The trial court granted Berkshire’s
motion for summary judgment. The court issued a decree of foreclosure.
{¶8} Appellants have appealed raising one assignment of error for review.
II.
{¶9} Before turning to the merits, we must consider whether this appeal is properly
before us. “Mootness presents a question of jurisdiction * * *.” Tavenner v. Pittsfield Twp. Bd.
of Trustees, 9th Dist. Lorain No. 22CA011831, 2022-Ohio-4444, ¶ 7, quoting Brown v. Dayton,
2d Dist. Montgomery No. 24900, 2012-Ohio-3493, ¶ 10. It “prevents courts from deciding cases
in which no controversy remains.” C.S. v. M.S., 9th Dist. Summit No. 29672, 2021-Ohio-1943, ¶
3. “After the rights and obligations of the parties have been extinguished through satisfaction of
the judgment, a judgment on appeal becomes moot because it ‘cannot have any practical effect
upon the issues raised by the pleadings.’” Bankers Trust Co. of California, N.A. v. Tutin, 9th Dist.
Summit No. 24329, 2009-Ohio-1333, ¶ 8, quoting Sedlak v. Solon, 104 Ohio App.3d 170, 178 (8th
Dist.1995).
{¶10} In issuing a decree of foreclosure, the trial court found Appellants liable to
Berkshire for $2,108,914.09. Appellants moved the trial court to stay the execution of its
judgment, but the trial court denied their motion. The Property sold during the pendency of this
appeal.
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{¶11} Following the sale of the Property, this Court issued a show cause order. We
ordered the parties to respond as to whether the appeal was moot due to the sale of the Property.
At that point, the sale had yet to be confirmed and the proceeds had yet to be distributed. Berkshire
argued the appeal would become moot once the proceeds were distributed. Appellants argued a
live controversy remained because the sale left a deficiency judgment. Within days of the parties
responding to our show cause order, the trial court entered an order confirming the sale of the
Property and ordering a distribution of the sale proceeds. Appellants moved the trial court to stay
the distribution of the proceeds, but the trial court denied their motion. The Property sold for
$536,000.00.
{¶12} “In foreclosure cases, as in all other civil actions, after the matter has been
extinguished through satisfaction of the judgment, the individual subject matter of the case is no
longer under the control of the court and the court cannot afford relief to the parties to the action.”
Tutin, 2009-Ohio-1333, at ¶ 16. Generally, “satisfaction of judgment occurs when the subject
property has been sold and the proceeds of the sheriff’s sale have been distributed.” Bayview Loan
Servicing, L.L.C. v. Salem, 9th Dist. Summit No. 27460, 2015-Ohio-2615, ¶ 7. Here, however, a
deficiency judgment exists. The trial court entered judgment in favor of Berkshire for
$2,108,914.09. The Property sold for $536,000.00. “Because there is an unsatisfied deficiency
judgment in this case, the mootness doctrine is not determinative of all of the issues * * *.” U.S.
Bank, N.A. v. Poff, 9th Dist. Wayne No. 14AP0023, 2016-Ohio-2874, ¶ 16. The appeal remains
viable to the extent it challenges the money judgment the trial court imposed upon Appellants. See
id. That portion of the appeal represents a live controversy. Accordingly, we have jurisdiction to
address it.
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ASSIGNMENT OF ERROR
THE TRIAL COURT ERRED BY IMPROPERLY GRANTING SUMMARY
JUDGMENT FOR BERKSHIRE BANK.
{¶13} In their sole assignment of error, Appellants argue that the trial court erred by
granting Berkshire’s motion for summary judgment on Berkshire’s foreclosure action because
genuine issues of material fact exist. For the following reasons, this Court disagrees.
{¶14} Initially we note, while Berkshire asserts this Court’s May 17, 2023 order extended
only Pooniwala’s deadline to submit an appellate brief and did not extend the deadline for the other
appellants, Local Rule 14(C) states “[w]hen one party receives an extension of time, * * * the
extension shall apply to all other parties on that side.” Therefore, all Appellant’s briefs are timely.
{¶15} Under Civil Rule 56(C), summary judgment is appropriate if:
(1) [n]o genuine issue as to any material fact remains to be litigated; (2) the moving
party is entitled to judgment as a matter of law; and (3) it appears from the evidence
that reasonable minds can come to but one conclusion, and viewing such evidence
most strongly in favor of the party against whom the motion for summary judgment
is made, that conclusion is adverse to that party.
Temple v. Wean United, Inc., 50 Ohio St.2d 317, 327 (1977). To succeed on a motion for summary
judgment, the party moving for summary judgment must first be able to point to evidentiary
materials that demonstrate there is no genuine issue as to any material fact, and that it is entitled
to judgment as a matter of law. Dresher v. Burt, 75 Ohio St.3d 280, 292 (1996). If the movant
satisfies this burden, the nonmoving party “must set forth specific facts showing that there is a
genuine issue for trial.” Id. at 293, quoting Civ.R. 56(E). This Court reviews an award of summary
judgment de novo. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105 (1996).
{¶16} In a foreclosure action, the plaintiff moving for summary judgment must present:
evidentiary-quality materials showing: (1) the movant is the holder of the note and
mortgage, or is a party entitled to enforce the instrument; (2) if the movant is not
the original mortgagee, the chain of assignments and transfers; (3) the mortgagor is
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in default; (4) all conditions precedent have been met; and (5) the amount of
principal and interest due.
The Bank of New York Mellon v. Bridge, 9th Dist. Summit No. 28461, 2017-Ohio-7686, ¶ 10,
quoting Bank of Am., N.A. v. Edwards, 9th Dist. Lorain Nos. 15CA010848, 15CA010851, 2017-
Ohio-4343, ¶ 10. Here, Appellants only dispute the 4th prong. Appellants raise multiple issues
relating to different conditions precedent which the Appellants assert remain genuine questions of
material fact.
{¶17} This Court’s review of the record indicates that Berkshire met its initial summary-
judgment burden by pointing to evidentiary materials demonstrating that there was no genuine
issue as to any material fact regarding its foreclosure action, and that they were entitled to judgment
as a matter of law. Dresher, 75 Ohio St.3d at 292. Berkshire presented evidence indicating that:
(1) Berkshire is the holder of the Note and Mortgage for the Property; (2) Berkshire had not
assigned the Note and Mortgage, and therefore no chain of assignments was pertinent to this case;
(3) Macedonia failed to pay its February, March, April, and May payments. After Macedonia failed
to timely make its payments, pursuant to the Loan agreement’s acceleration clause, Berkshire
delivered a demand letter indicating it was accelerating the Loan and demanded immediate
repayment of the total outstanding balance of the Loan. At the time of the initiation of the
foreclosure action, Macedonia did not pay the full accelerated amount owed and Macedonia was
in default of the Mortgage; (4) Berkshire provided notice to Macedonia of default and acceleration
of the Loan via a letter delivered by certified mail. Additionally, the Loan agreement and Mortgage
did not include any curative clause for Macedonia to cure default; and (5) the specific amounts of
principal and interest due total $2,265,322.71.
{¶18} Appellants dispute that all conditions precedent have been met. Appellants raise
three arguments relating to different conditions precedent which the Appellants assert remain
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genuine questions of material fact: (1) Berkshire did not submit a litigation plan to the SBA; (2)
Berkshire did not mitigate its damages when it refused to sell the Property following the filing of
the foreclosure action to a ready, willing, and able buyer for approximately $1.8 million; and (3)
Berkshire failed to mitigate its damages when it failed to contact any of the Guarantors to attempt
to recover the amounts owing under the Note.
{¶19} First, a significant portion of Appellants’ appellate brief relates to Berkshire’s
failure to file a litigation plan with the SBA. Appellants argue that Berkshire did not meet all the
conditions precedent for filing for default because it did not submit a litigation plan in accordance
with its agreement with the SBA and pursuant to 13 C.F.R. 120.540(c). Appellants also assert that
Berkshire was required pursuant to 13 C.F.R. 120.540(e) to suspend its foreclosure action and
submit a litigation plan to the SBA upon learning that the matter was contested, and therefore
“non-routine.” Appellants also assert that Berkshire failed to mitigate its damages pursuant to 13
C.F.R. 120.540, which requires lenders of SBA loans to work with small businesses to avoid
foreclosure.
{¶20} Courts have frequently held that an SBA agreement is “between the bank and the
SBA and creates no right in the Defendants.” United States v. Martin, 344 F.Supp. 350, 356
(E.D.Mich. 1972); see also Id., quoting United States v. Fay T. Garner, et al., Civil No. 67-C-48
(D.Colo. 1968). (“The Participation Agreement * * * was clearly an agreement between the Bank
and the Small Business Administration for their mutual benefit and created no legal rights or duties
in the Defendants. The Defendants are not parties to the Agreement, nor are they third-party
beneficiaries of the Agreement.”); Hudson v. Sun Natl. Bank, Nos. CIV.A. 10-6401, 10-5481, 11-
0432, 2014 WL 3700147, *3 (E.D.Pa. July 25, 2014), fn. 29 (“But what appears to have always
been true is the SBA’s guarantees–of those funds lent to borrowers by banks–have been
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agreements between the lending institutions and the SBA, and have been entirely independent of,
and have created no rights in, the borrowers.”); United States v. Healy, 923 F.Supp. 1424, 1429
(D.Kan. 1996) (“The provisions of the Loan agreement * * * were for the benefit of the SBA. * *
*Any benefits that the personal guarantors derived from the Loan agreement were merely
incidental.”)
{¶21} Here, the loan at issue was secured with a guarantee from the SBA and Macedonia
was able to secure a $2,000,000.00 commercial loan due to the SBA guarantee. However, the Loan
agreement and Mortgage do not require Berkshire to submit a litigation plan to the SBA prior to
initiating a foreclosure action. Berkshire’s agreement with the SBA, and any requirements outlined
within 13 C.F.R. 120.540, do not benefit Appellants. We agree with the trial court’s finding that
Berkshire did not fail to satisfy a condition precedent when it (1) did not submit a litigation plan
to the SBA prior to initiating its foreclosure action, and (2) did not submit a litigation plan to the
SBA once the foreclosure action was contested and non-routine. Appellants’ various arguments
relating to any agreement between Berkshire and the SBA have no merit.
{¶22} Second, Appellants argue that Berkshire did not meet all the conditions precedent
for filing its foreclosure action because it did not mitigate its damages prior to filing. Appellants
argue that Berkshire failed to mitigate its damages when it refused to sell the Property following
the filing of the foreclosure action to a ready, willing, and able buyer for approximately $1.8
million. This Court notes that the Appellants did not challenge the refusal to sell the Property
following the filing of the foreclosure action to a ready, willing, and able buyer in the Appellants’
motion for summary judgment. Appellants cannot challenge the refusal to sell for the first time on
appeal. See State ex rel. Perkins v. Medina Cty. Bd. of Commrs., 9th Dist. Medina No. 19CA0051-
M, 2020-Ohio-3913, ¶ 16 (providing that a party cannot raise a new argument for the first time on
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appeal when the party failed to raise that argument in its brief in opposition to a dispositive
motion).
{¶23} Third, Appellants argue that Berkshire failed to mitigate its damages when it failed
to contact any of the Guarantors to attempt to recover the guaranteed payment of all amounts owing
under the Note. Appellants’ argument that Berkshire failed to mitigate its damages by not
contacting the Guarantors, or providing the Guarantors with a written demand, is not supported by
the record. Each unconditional guarantee executed by the Guarantors states that “Guarantor waives
any notice of * * * demand[.]” Given the terms outlined within the unconditional guarantee,
Berkshire was not required to provide prior notice to the Guarantors before initiating its foreclosure
action against Macedonia. Appellants’ arguments relating to Berkshire’s failure to notify the
Guarantors or mitigate its damages via the Guarantors have no merit.
{¶24} Having reviewed the record, this Court concludes that Appellants failed to meet
their reciprocal summary-judgment burden of setting forth specific facts showing that there was a
genuine issue for trial. Dresher, 75 Ohio St.3d at 293; Civ.R. 56(E). The trial court, therefore, did
not err when it granted summary judgment in favor of Berkshire on Berkshire’s foreclosure action.
Accordingly, Appellants’ assignment of error is overruled.
III.
{¶25} Appellants’ assignment of error is overruled. The judgment of the Summit County
Court of Common Pleas is affirmed.
Judgment affirmed.
There were reasonable grounds for this appeal.
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We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the period
for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is instructed to
mail a notice of entry of this judgment to the parties and to make a notation of the mailing in the
docket, pursuant to App.R. 30.
Costs taxed to Appellants.
JILL FLAGG LANZINGER
FOR THE COURT
HENSAL, P. J.
CONCURS.
CARR, J.
CONCURRING IN PART, AND DISSENTING IN PART.
{¶26} While I concur in the majority’s determination that this matter is not moot, I
respectfully dissent regarding the resolution of the Appellants’ sole assignment of error. In
granting summary judgment, the trial court concluded that the requirement to file a litigation plan
set forth in 13 C.F.R. 120.540(c) does not establish a condition precedent. In reaching this
conclusion, the trial court observed that the SBA litigation regulations were germane only to the
SBA’s relationship with the lender and had no bearing on the lender’s ability to accelerate the loan
and file suit upon a breach of the terms of the note.
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{¶27} The overarching purpose of the SBA regulations are “to aid, counsel, assist, and
protect the interest of small business concerns as well as to help victims of disasters.” Ameritrust
Co. Natl. Assn. v. J & J Soap Box, Inc., 10th Dist. Franklin No. 90AP-1086, 1991 WL 4930, *2
(Jan. 17, 1991). “Hence, one of the primary functions of the SBA is to make loans to small
business[es] * * * who do not otherwise qualify for loans by traditional banking standards, either
directly or pursuant to a guarantee agreement with a financial institution.” Id.
{¶28} 13 C.F.R. 120.540(c) provides that “[a]n [a]uthorized * * * [l]ender must obtain
SBA’s prior approval of a litigation plan before proceeding with any [n]on-[r]outine [l]itigation[.]”
Furthermore, the SBA’s Standard Operating Procedure contains a provision stating that “[l]enders
must obtain SBA’s prior written approval before taking any [l]oan [a]ction that involves a[] * * *
[l]itigation [p]lan and any amendments to a [l]itigation [p]lan for [n]on-[r]outine [l]itigation[.]”
S.B.A. S.O.P. 50 57 (Third Edition), Chapter 3, Section C(3)(l), 2023 WL 5036027. 13 C.F.R.
120.540(c)(1) defines non-routine litigation as “(i) [a]ll litigation where factual or legal issues are
in dispute and require resolution through adjudication; (ii) [a]ny litigation where legal fees are
estimated to exceed $10,000; (iii) [a]ny litigation involving a loan where a [l]ender or [a]uthorized
CDC [l]iquidator has an actual or potential conflict of interest with SBA; and (iv) [a]ny litigation
involving a 7(a) or 504 loan where the [l]ender or CDC has made a separate loan to the same
borrower which is not a 7(a) or 504 loan.” The requirement to obtain written consent prior to
accelerating the loan and suing on the note is consistent with the overarching purpose of the
regulations. J & J Soap Box, Inc. at *3. “The general duty to service the loan does not grant the
lender the authority to unilaterally accelerate or to sue upon an SBA guaranteed loan which is in
default. This interpretation is consistent with the policy of the SBA and is necessary to effectuate
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the stated purposes of the SBA to protect and to aid small businesses in their relationship with
financial institutions.” Id.
{¶29} Here, I would hold that the trial court erred in concluding that the requirement to
file a litigation plan set forth in 13 C.F.R. 120.540(c) does not establish a condition precedent to
filing suit upon an SBA loan that was in default. To hold otherwise would be to disregard the core
public policy consideration underpinning the SBA regulatory scheme. Accordingly, I would
sustain the Appellants’ sole assignment of error and reverse the trial court’s summary judgment
order.
APPEARANCES:
MARISSA K. VARCHO and TROY J. DOUCET, Attorneys at Law, for Appellants.
ROBERT L. DAWSON and JOHN R. WIRTHLIN, Attorneys at Law, for Appellee.