Arthur-Nelson v. U.S. Bancorp Gov't Leasing & Fin. Inc., CIVIL ACTION NO. 1:19CV167
| Decision Date | 30 September 2020 |
| Docket Number | BANKRUPTCY NO. 1:17BK057,C/W 1:19CV168,CIVIL ACTION NO. 1:19CV167,C/W 1:19CV169 |
| Parties | CONSTANCE ARTHUR-NELSON, Appellant, v. UNITED STATES BANCORP GOVERNMENT LEASING AND FINANCE INC., as Trustee for the Benefit of COMM 2013-CCRE12 Mortgage Trust Commercial Mortgage Pass-through Certificates; and WELLS FARGO COMMERCIAL MORTGAGE SERVICING, Appellees, TARA RETAIL GROUP, LLC, Debtor. THE ELSWICK COMPANY, LLC, Appellant, v. UNITED STATES BANCORP GOVERNMENT LEASING AND FINANCE INC., as Trustee for the Benefit of COMM 2013-CCRE12 Mortgage Trust Commercial Mortgage Pass-through Certificates; and WELLS FARGO COMMERCIAL MORTGAGE SERVICING, Appellees, TARA RETAIL GROUP, LLC, Debtor. GEORGE LEESON and JACOB CRUM, Appellants, v. UNITED STATES BANCORP GOVERNMENT LEASING AND FINANCE INC., as Trustee for the Benefit of COMM 2013-CCRE12 Mortgage Trust Commercial Mortgage Pass-through Certificates; and WELLS FARGO COMMERCIAL MORTGAGE SERVICING, Appellees, TARA RETAIL GROUP, LLC, Debtor. |
| Court | U.S. District Court — Northern District of West Virginia |
(Judge Keeley)
The Plaintiffs-Appellants, Constance Arthur-Nelson, the Elswick Company, LLC d/b/a Anytime Fitness Elkview ("Elswick"), George Leeson and Jacob Crum (collectively, "the Plaintiffs"), appeal from an August 15, 2019 Memorandum Opinion and three orders of the United States Bankruptcy Court for the Northern District of West Virginia ("Bankruptcy Court") dismissing their adversary proceedings with prejudice.1 For the reasons that follow, the Court AFFIRMS the Bankruptcy Court's conclusion that the Plaintiffs' complaints fail to state a claim for which relief may be granted.
This matter arises out of the failure of a culvert that served as a bridge—and the only access point—to the Crossings Mall ("the Mall") in Elkview, West Virginia. The Mall is a multi-tenant commercial property with various retail and food-service establishments. The culvert collapsed during flooding in June 2016.
Three years prior to the culvert's collapse, UBS Real Estate Securities, Inc. ("UBS") lent $13,650,000.00 to Tara Retail Group, LLC ("Tara") to purchase the Mall property. Tara executed a Deed of Trust and an Assignment of Leases and Rents (the "ALR") to secure repayment of this debt. UBS subsequently assigned the loan agreement, Deed of Trust, the ALR, and other associated documents to Defendant U.S. Bancorp Government Leasing and Finance Inc. ("U.S. Bank"). Defendant Wells Fargo Commercial Mortgage Servicing ("Wells Fargo") services the loan and administers various escrow accounts, including one for Capital Expenditures, which the Loan Agreement defines as "the amounts expended for items required to be capitalized under GAAP (including expenditures for replacements,building improvements, major repairs, alterations, tenant improvements and leasing commissions.)" (Dkt. No. 4-13 at 3).
In January 2016, Gold Coast Partners LLC, an affiliate of Tara, contacted Wells Fargo and requested $24,000 to repair the culvert and a "dirt cliff" behind a tenant's store at the Mall. The record is silent as to whether Wells Fargo denied this request, but it is undisputed that the culvert had not been repaired prior to its collapse. The culvert was not replaced until 2017 (Dkt. No. 4-5 at 15).
The plaintiff, Arthur-Nelson, is a "customer, invitee[,] and licensee" of the Mall's tenants and owns land near the Mall (Dkt. No. 4-5 at 15-16). Her amended complaint alleges the following five counts: 1) breach of a duty under the loan documents, including the servicing standard; 2) breach of fiduciary duty; 3) breach of a duty of care under In re Flood; 4) breach of the general duty of care; and 5) a claim for punitive damages. Id. Arthur-Nelson also seeks to be designated as a class representative for those similarly situated. Id. at 20.
The plaintiff, Elswick, is a limited liability company doing business as Anytime Fitness Elkview and leases premises at the Mall(Case No. 1:19cv168, Dkt. No. 5-5 at 1, 23). Its second amended complaint alleges the following six counts: 1) breach of contract under the loan documents; 2) breach of a duty under the loan documents; 3) breach of fiduciary duty; 4) tortious interference with a business relationship; 5) breach of the general duty of care; and 6) a claim for punitive damages. Id. Elswick also seeks to be designated as class representative for similarly situated businesses. Id. at 25.
The plaintiff, Leeson, owns land near the Mall and alleges that his home was damaged due to flooding (Case No. 1:19cv169, Dkt. No. 5-5 at 6, 25). The plaintiff, Crum, was a customer of the Mall who was stranded overnight when the culvert collapsed. Id. at 23. Leeson and Crum's second amended complaint alleges four counts: 1) breach of the general duty of care as to Leeson and Crum; 2) breach of the duty of care under In re Flood; 3) breach of a duty to customers and invitees on the shopping center premises under the ALR; and 4) a claim for punitive damages. Id. Both Leeson and Crum seek to be designated as class representatives for similarly situated persons. Id. at 28.
The Mall property is secured as part of a large transaction known as the Comm 2013-CCRE 12 pass through mortgage (Dkt. No. 4-5 at 1-2). The basis for the Plaintiffs' claims against the Defendants is their assertion that the language in several documents related to the security granted in the Mall property establishes duties owed by Defendants to the Plaintiffs. Id. at 2. The relevant documents (collectively, the "Loan Documents") include:
UBS's Loan Agreement with Tara states, in pertinent part, that Id. at 7.
The Deed of Trust, in pertinent part, states:
Borrower does hereby irrevocably mortgage, grant, bargain, sell, pledge, assign, warrant, transfer, convey and grant with POWER OF SALE, a security interest to Trustee for benefit of lender, its successors and assigns, the following property rights, interests and estates and estates now owned or hereafter acquired by a Borrower (collectively, the "property"). . . All leases and other agreements affecting the use, enjoyment or occupancy of the Land and the Improvements heretofore or hereafter entered into . . . and all right, title and interest of Borrower, its successors and assigns therein and there under, including, without limitation[,] any Lease guaranties, letters of credit, cash or securities deposited thereunder to secure the performance by the leasees [sic] of their obligations thereunder and all rents, additional rents, revenues, issues and profits (including all oil and gas or other mineral royalties and bonuses) from the land and the improvements whether paid or accruing before or after the filing by or against Borrower of any petition for relief under the Bankruptcy Code (collectively[,] the "rents") and all proceeds form the sale or other disposition of the Leases and the right to receive and apply the rents to the payment of the Debt
The Pooling and Servicing Agreement provides that Wells Fargo is the Master Servicer and sets out the relevant standard of care for servicing and administering the pooled loans as follows:
[T]o diligently service and administer the Loans in the best interests of [and] for the benefit of all Certificate Holders . . . in accordance with applicable law, the terms of the Pooling Agreement, the applicable Loan Documents . . . [and in] the same manner in which, and with the same care, skill, prudence and diligence with which the Master Servicer or the Special Servicer . . . services and administers similar mortgage loans for other third-party portfolios.
Id. at 10 (emphasis added).
The Assignment of Rents and Leases ("ALR") states:
It is intended by Borrower that this Assignment constitute a present, absolute assignment of the Leases, Rents, Lease Guaranties and Bankruptcy Claims, and not an assignment for additional security only. Nevertheless, subject to the terms of this Section 2.1 and the Cash Management Agreement, Lender grants to Borrower a revocable license to collect, receive, use and enjoy the Rents, as well as other sums due under the Lease Guaranties. Borrower shall hold the Rents, as well as all sums received pursuant to any Lease Guaranty, or a portion thereof sufficient to discharge all current sums due on the Debt, in trust for the benefit of Lender for use in the payment of such sums.
Tara further granted an irrevocable power of attorney to U.S. Bank "to take any and all of the actions set forth in Section 3.1 of this Assignment and any or all other actions designated byLender for the proper management and preservation of the Property." Id.
According to the Lease Agreement between Tara and Elswick, "Landlord shall keep the structural portions of the premises and the Shopping Center, as applicable, in reasonable repair, provided that Tenant shall give Landlord written notice of the necessity of such repair as the same affects the premises." Id. at 38.
The Lease defines "Common Areas" as:
[T]hose areas including among other...
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