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U.S. Bank National Association v. SRA Augusta SPE, LLC

United States District Court, D. Maine

November 17, 2016

SRA AUGUSTA SPE, LLC, et al., Defendants


          John C. Nivison U.S. Magistrate Judge

         In this removed action, Plaintiff U.S. Bank, N.A., asserts that Defendants, five special purpose entities, [1] breached a promissory note currently held by Plaintiff by failing to pay the balance of the note on or before its December 11, 2015, maturity date. The note is secured by a commercial mortgage trust and security instrument property located at Key Plaza, 286 Water Street, Augusta, Maine. The matter is before the Court on Defendants' request for reconsideration (ECF No. 1-8) of the Maine Superior Court's order (ECF No. 1-6) appointing a receiver to manage the property.

         Following a review of the motion and related filings, and after consideration of the parties' arguments, the motion is granted in part. The order of appointment will continue in effect. The Court, however, will convene a telephonic conference to discuss whether the terms of the order should be modified.[2]

         Procedural Background

         Plaintiff filed suit in Maine Superior Court, Kennebec County, on July 13, 2016. (State Court Docket[3], ECF No. 10-1; see also Verified Complaint, ECF No. 1-3.) With its complaint, Plaintiff filed a motion for appointment of receiver, a draft order appointing a receiver, and a request for expedited consideration of the motion. (Expedited Motion to Appoint Receiver, ECF No. 1-4.) The state docket reflects service on Defendants on July 21, 2016. On July 29, 2016, the Superior Court granted the motion and signed the draft order. (Order Appointing Receiver, ECF No. 1-6.)

         On August 8, 2016, Defendants filed their answer to the complaint (ECF No. 1-7), and a combined opposition to the motion for appointment of receiver and motion for reconsideration of the order appointing receiver (ECF No. 1-8). On August 11, 2016, Defendants filed their notice of removal (ECF No. 1), in which notice they invoked this Court's diversity jurisdiction.

         Background Facts

         This action arises from, inter alia, Plaintiff's efforts to collect the balance on a promissory note in the principal sum of 7.2 million dollars, which note Plaintiff currently holds through a series of allonges.[4] The note is secured by a mortgage and security agreement pledging as collateral the borrowers' interest in certain real property located at 286 Water Street, Augusta, Maine, which mortgage and security interest Plaintiff now holds through a series of assignments. The original instruments were executed on December 1, 2005. (Verified Complaint ¶¶ 7 - 12.)

         On or about January 12, 2016, Plaintiff provided Defendants with a notice of default, acceleration and demand for payment. (Id. ¶ 16.) Plaintiff cites as the basis of the default Defendants' failure to tender payment of the outstanding obligation on or before December 11, 2015, the maturity date of the promissory note. (Id. ¶ 9.)

         Article III of the mortgage specifies Plaintiff's remedies in the event of default. In addition to foreclosure, the remedies include acceleration, entry on the property, and collection of rents and profits. Subsection 3.1(d) of the remedies provision also authorized the appointment of a receiver.

Upon, or at any time prior or after, initiating the exercise of any power of sale, instituting any judicial foreclosure … or any other legal proceedings hereunder, ... [Mortgagee may] make application to a court of competent jurisdiction for appointment of a receiver for all or any part of the Property, as a matter of strict right and without notice to Mortgagor and without regard to the adequacy of the Property for the repayment of the indebtedness secured hereby ..., and Mortgagor does hereby irrevocably consent to such appointment, waives any and all notices of and defenses to such appointment and agrees not to oppose any application therefor by Mortgagee .... Any such receiver shall have all of the usual powers and duties of receivers in similar cases, including, without limitation, the full power to hold, develop, rent, lease, manage, maintain, operate and otherwise use or permit the use of the Property upon such terms and conditions as said receiver may deem to be prudent and reasonable under the circumstances as more fully set forth in Section 3.3 below. Such receivership shall, at the option of Mortgagee, continue until full payment of all the indebtedness secured hereby or until title to the Property shall have passed by foreclosure sale under the Mortgage or deed in lieu of foreclosure.

(Mortgage ¶ 3.1(d).)

         In opposition to the motion for appointment of a receiver, Defendants filed an affidavit of Peter Hanson (ECF No. 1-8), Defendants' agent.[5] According to Mr. Hanson, Defendants obtained commitment for new lending and “will close” within 60 days of his August 8, 2016, affidavit. (Hanson Aff. ¶¶ 4 - 5.) Mr. Hanson suggests that appointment of a receiver could prevent Defendants from acquiring refinancing, (Id. ¶ 6), and that Plaintiff's interest in the property is adequately secured without a receiver because Plaintiff controls all rents and income generated by the property, and because the monthly rents exceed Defendants' monthly payment obligation by almost $100, 000. (Id. ¶¶ 9 - 10.) Mr. Hanson further reports that Defendants have been paying the expenses associated with the property, have adequately maintained the property, have leased the property to capacity, and have provided to the proposed receiver all necessary record and access to the property. The proposed receiver is already serving as the property superintendent. (Id. ¶¶ 11 - 24.)

         In September 2016, Mr. Hanson asserted that refinancing appears likely. (Second Hanson Aff. ¶¶ 5, 8.) Mr. Hanson states that the existing receivership order will potentially interfere with closing because it precludes Defendants from pledging the property ...

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