LEHIGH VALLEY 1 LLC v. WHITEHALL FIDUCIARY LLC, AS TRUSTEE OF WHITEHALL TRUST U/T/A DATED AUGUST 1, 2007
5:24-cv-02627
| E.D. Pa. | Aug 13, 2025Background
- Lehigh Valley 1 LLC filed two foreclosure actions on separate loans—both originally made by M&T Realty Capital, then successively assigned to HUD, Windstream Capital, and finally Lehigh—against Whitehall Fiduciary LLC and Saucon Trust, whose secured real properties are senior living facilities.
- Both defendants defaulted by failing to make payments since at least February 2021.
- Lehigh moved to dismiss defendants’ counterclaims (wrongful foreclosure, unjust enrichment, negligent misrepresentation) and to strike various affirmative defenses.
- Defendants filed answers asserting counterclaims and 34 affirmative defenses, challenging the validity of the mortgage assignments and raising additional defenses.
- The matters were consolidated, and a receiver was appointed to manage the properties.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to Challenge Loan Assignments | Defendants lack standing; only parties/beneficiaries to assignments can challenge validity | Assignments from HUD to Windstream and Windstream to Lehigh invalid for regulatory/license reasons, thus Lehigh lacks standing | Defendants lack standing; challenges must show assignments are void, not voidable, and assert actual injury |
| Wrongful Foreclosure as Counterclaim | Not recognized as a cause of action in PA; counterclaim beyond foreclosure action’s scope | Wrongful foreclosure should be recognized; claims derive from problematic assignments | Motion to dismiss granted; counterclaim exceeds proper scope, and its existence as a claim is doubtful |
| Unjust Enrichment Counterclaim | Relationship governed by express contracts, which bar unjust enrichment claims | Unjust enrichment claim for Lehigh’s supposed overreach | Motion to dismiss granted; express contracts govern the relationship |
| Negligent Misrepresentation Counterclaim | Barred by gist of the action doctrine, as claim arises from contractual duties | Claim not based in contract, but in independent tortious conduct | Motion to dismiss granted; claim barred by gist of the action doctrine |
| Motion to Strike Affirmative Defenses | Many defenses are conclusory or go to assignment validity and should be stricken | Defenses adequately put Lehigh on notice | Granted in part (striking conclusory and assignment-related defenses, some with leave to amend), denied in part (as to rest) |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (motion to dismiss standard—plausibility)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (motion to dismiss—pleading requirements)
- Bruno v. Erie Ins. Co., 106 A.3d 48 (Pa. 2014) (gist of the action doctrine—distinguishing tort/contract)
- Bash v. Bell Tel. Co., 601 A.2d 825 (Pa. Super. 1992) (explaining boundary between contract/tort actions)
- Green Tree Consumer Disc. Co. v. Newton, 909 A.2d 811 (Pa. Super. 2006) (scope of permissible counterclaims in mortgage foreclosure)
- Cunningham v. McWilliams, 714 A.2d 1054 (Pa. Super. 1998) (limits on counterclaims in foreclosure)
- Overly v. Kass, 554 A.2d 970 (Pa. Super. 1989) (set-offs/counterclaims not allowed unless tied to mortgage formation)
- Chrysler First Business Credit Corp. v. Gourniak, 601 A.2d 338 (Pa. Super. 1992) (misrepresentation in property purchase not allowed as foreclosure defense)
- Hershey Foods Corp. v. Ralph Chapek, Inc., 828 F.2d 989 (contract bars unjust enrichment claim)