Wells Fargo Bank, N.A. v. CCC Atlantic, LLC
905 F. Supp. 2d 604
D.N.J.2012Background
- This is a commercial mortgage foreclosure action by Wells Fargo Bank, N.A. as Trustee for holders of Credit Suisse First Boston Mortgage Securities Corp. 2007-C5.
- The PSA creates a New York common law trust; Wells Fargo is the Trustee with control over trust assets, funds, and distributions for certificateholders.
- Cornerstone Commerce Center, Linwood, NJ, owned by CCC Atlantic, LLC, was the collateral securing a $41 million loan; A Note and B Note were involved; Wells Fargo holds the A Note.
- Escrow tax payments in 2011-2012 were short due to Linwood’s abatement program and CCC Atlantic’s cash flow; Wells Fargo advanced funds and issued cure notices.
- Event of Default occurred in September 2011 with acceleration in November 2011; foreclosure action filed January 27, 2012; dispute centers on jurisdiction and the appointment of a receiver.
- Wells Fargo seeks appointment of a receiver to collect rents and manage the property; CCC Atlantic challenges both jurisdiction and the necessity of a receiver.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether complete diversity exists for subject-matter jurisdiction | Wells Fargo is the active trustee; its SD citizenship controls. | Certificateholders' states may defeat diversity and Capmark's joinder may be required. | Complete diversity exists; Wells Fargo's citizenship (South Dakota) controls; Capmark not required for joinder. |
| Whether Wells Fargo is an active trustee for diversity purposes | PSA grants Wells Fargo control over trust assets and distributions; not a naked trustee. | Some authority suggests limited control through servicers could undermine active-trust status. | Wells Fargo is an active trustee; its state of citizenship governs diversity. |
| Whether Capmark must be joined as a party under Rule 19 | Capmark's interests are protected and joinder is not required to preserve jurisdiction. | Capmark may be a real party in interest; joinder could affect diversity. | Rule 19 does not require Capmark’s joinder; no impairment of jurisdiction. |
| Whether a receiver should be appointed in the foreclosure action | LR terms and default demonstrate risk to property; appointment is warranted to collect rents and operate the property. | Appointment of a receiver is drastic and should be avoided absent stronger showing. | Equity favors appointment; a receiver will be granted to manage and collect rents. |
Key Cases Cited
- Navarro Savings Association v. Lee, Jr., 446 U.S. 458 (1980) (active-trustee citizenship determines diversity authorities)
- Emerald Investors Trust v. Gaunt Parsippany Partners, 492 F.3d 192 (3d Cir.2007) (trustee's citizenship controls for diversity when trustees hold customary powers)
- Canada Life Assurance Co. v. LaPeter, 563 F.3d 837 (9th Cir.2009) (broad equitable factors support appointment of receiver in commercial foreclosures)
- Maxwell v. Enterprise Wall Paper Mfg. Co., 131 F.2d 400 (2d Cir.1942) (what form of equitable relief is determined by federal law in diversity)
- First Fidelity Bank, N.A. v. Jason Realty, L.P., 59 F.3d 423 (3d Cir.1995) (assignment of rents; enforceability and transfer of rights)
- The Chase Manhattan Bank, N.A. v. Tumbo Shopping Center, Inc., 683 F.2d 25 (1st Cir.1982) (receivership considerations in foreclosure contexts)
- Mintzer v. Arthur L. Wright & Co., Inc., 263 F.2d 823 (3d Cir.1959) (treatment of receivership in context of federal practice)