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U.S. Bank National Association v. Pendleton Westbrook Spe, LLC

United States District Court, D. Maine

November 17, 2016

U.S. BANK NATIONAL ASSOCIATION, Plaintiff
v.
PENDLETON WESTBROOK SPE, LLC, et al., Defendants

          MEMORANDUM OF DECISION ON MOTION FOR APPOINTMENT OF RECEIVER

          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 on the property located at One Riverfront Plaza, Westbrook, Maine. The matter is before the Court on Plaintiff's request for the appointment of a receiver. (ECF Nos. 3, 1-5.)

         Following a review of the motion and related memoranda, and after consideration of the parties' arguments, I grant the motion.[2]

         Procedural Background

          Plaintiff filed suit in Maine Superior Court, Cumberland County, on July 12, 2016. (State Court Docket, ECF No. 12-1; see also Verified Complaint, ECF No. 1-4.) With its complaint, Plaintiff filed a motion for appointment of a receiver. (Motion, ECF No. 1-5.) Defendants oppose the appointment of a receiver. (ECF No. 1-8). Defendants also removed the matter to this Court citing the Court's diversity jurisdiction. (ECF No. 1.)

         Background Facts

         This action is based on, inter alia, Plaintiff's attempt to recover on a promissory note in the principal sum of 20 million dollars, which note Plaintiff currently holds through a series of allonges. The note is secured by a mortgage and security agreement pledging as collateral the borrowers' interest in certain real property located at One Riverfront Plaza, Westbrook, Maine, which mortgage and security interest Plaintiff now holds through a series of assignments. The original instruments were executed on November 21, 2005. (Verified Complaint ¶¶ 7 - 12.)

         As of the filing of the complaint, the property was vacant. The property includes a lease for up to 540 parking spaces in an adjacent parking garage. (Id. ¶¶ 13 - 14.)

         On or about January 12, 2016, Plaintiff provided Defendants with a notice of default, acceleration and demand for payment. (Id. ¶ 17.) 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, 17.)

         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. According to Mr. Hanson, the expense of appointing a receiver will unduly burden Defendants due to the lack of rental income. (Hanson Aff. ¶ 4.) Defendants have been working diligently to obtain tenants and were engaged in negotiations in August 2016, to rent space. (Id. ¶ 5.) Mr. Hanson suggests the appointment of a receiver could disrupt the process. (Id. ¶ 6.) Defendants continue to pay the expenses of the property and are adequately maintaining the property. (Id. ¶¶ 7 - 10.) Defendants are also providing and will continue to provide Plaintiff with all necessary records related to the property. (Id. ¶ 11.) Mr. Hanson attached to his affidavit a lease proposal with a ten-year term. The proposed occupancy date is October 1, 2018, with rents to commence six months later. (ECF No. 1-8, Ex. A.)

         In support of its request for the appointment of a receiver, Plaintiff filed an affidavit of Jeremy Zinn (ECF No. 21-1), asset manager for CWCapital Asset Management, the special servicer for Plaintiff. Mr. Zinn's affidavit, to which a payoff statement (ECF No. 21-2) and an appraisal of Riverfront Plaza (ECF No. 21-3) are attached, establishes a payoff amount of over 18 million dollars and an appraised property value of 10.5 million dollars. Mr. Zinn asserts that entities associated with Defendants' members (entities that have common “owners” as ...


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