Santander Bank, N.A. v. Baldw (In re in Realty, LLC)
| Decision Date | 17 April 2015 |
| Docket Number | Civil Action No. 13-13161-FDS |
| Parties | SANTANDER BANK, N.A., Plaintiff, v. BALDWIN REALTY, LLC; BRIAN J. STRASNICK; and CRAIG STRASNICK, in his capacity as Trustee of Cliff Road Realty Trust, Defendants. |
| Court | U.S. District Court — District of Massachusetts |
MEMORANDUM AND ORDER ON MOTION TO DISMISS
This action arises out of a commercial mortgage transaction. Plaintiff Santander Bank, N.A. seeks to recover a post-foreclosure deficiency balance allegedly owed under loan documents executed by defendant Baldwin Realty, LLC, and guaranteed individually by defendant Brian J. Strasnick.
On September 9, 2014, defendants filed a counterclaim with their answer to plaintiff's amended complaint. The counterclaim alleges intentional interference with advantageous contractual and business relations; breach of the implied covenant of good faith and fair dealing; breach of the mortgagee's duty of good faith in conducting a foreclosure sale; and violation of Mass. Gen. Laws ch. 93A. Plaintiff has moved to dismiss the counterclaim for failure to state a claim upon which relief can be granted. For the reasons set forth below, the motion will be granted in part and denied in part.
Unless otherwise noted, the following facts are presented as stated in the answer and the counterclaim.1
On July 27, 2006, Sovereign Bank (the predecessor to plaintiff Santander Bank, N.A.) provided a $2 million line of credit and an $800,000 term loan to Willow Medical Laboratories & Medical Center, a Massachusetts business trust. (Countercl. Ex. A). Baldwin Realty, LLC, guaranteed the obligations of Willow to the Bank. (Id.) The same day, Baldwin also executed a Term Promissory Note to the Bank in the principal amount of $4 million. The debts were secured, at least in part, by a mortgage on real estate located at 270 and 280 Union Street in Lynn, Massachusetts, which included a multi-tenant office building and two parking lots ("the Property"). (Id. Ex. A & ¶ 6). The lending arrangements were modified and revised multiple times. Beginning in 2010, defendant Brian Strasnick, the owner of Baldwin and Willow, guaranteed all of those debts in his individual capacity. (Id. Ex. A & ¶¶ 5, 7).
At some point, Willow went out of business. (Id. ¶ 5). In 2012, the Bank declared a default on the obligations of Baldwin and Willow under the agreements. (Compl. ¶ 31; Answer ¶ 31). On May 1, 2012, the parties executed a Forbearance and Modification Agreement. (Compl. ¶ 32; Answer ¶ 30). The agreement stated that it would terminate no later than July 15, 2012. (First Forbearance Agreement at 3).
On September 28, 2012, the Bank entered into a written agreement with defendantsBaldwin and Strasnick that relieved Willow of any further obligation to the Bank. (Compl. ¶ 30; Answer ¶ 30). That agreement did not relieve Baldwin or Strasnick of their obligations under the loans. (Compl. ¶ 30; Answer ¶ 30).
On October 31, 2012, following expiration of the first forbearance agreement, the parties executed a second such agreement. (Compl. ¶ 33; Answer ¶ 33). That agreement stated that it would terminate no later than September 30, 2013. (Second Forbearance Agreement at 2).
On October 4, 2013, an appraisal report of the Property was prepared for the Bank by Patriot Properties, Inc. (Countercl. at 39). The report appraised the Property at a value of $3.8 million. (Id.).
On March 27, 2014, the parties entered into a third forbearance agreement. (Compl. ¶ 36; Answer ¶ 36). That agreement stated that it would expire no later than June 26, 2014. (Third Forbearance Agreement at 5). On June 6, 2014, the agreement was amended to provide for an expiration date of July 30, 2014. (Compl. ¶ 37; Answer ¶ 37; Am. to Third Forbearance Agreement at 1). In addition, the amendment provided that, absent non-compliance with the terms of the agreement, the Bank would continue any foreclosure sale until August 6, 2014. (Am. to Third Forbearance Agreement at 2).
The amendment also states:
Obligors do hereby acknowledge that upon the expiration of the Forbearance Period or in the event of any default under the Forbearance Agreement or this Amendment, the outstanding balance of the Loans shall be immediately due and payable without any requirement of notice to Obligors or further demand by Lender and Lender shall have no continuing obligation to forbear under this Agreement. Obligors hereby acknowledge that Lender is not obligated to further negotiate the terms and conditions of such repayment and that Lender shall have the right to pursue its remedies without further delay, in its sole discretion.
(Id. at 2).
As of June 17, 2014, Baldwin and Willow owed $2,151,083.67 in principal and a total of $3,505,65.60 including interest and fees. (Countercl. ¶ 9).
The third forbearance period expired on July 31, 2014, with an outstanding balance still owed under the loan agreements. (Compl. ¶ 38).2
On August 6, 2014, either Charles Patsios or a company known as Delphi Realty Associates made a written offer to Baldwin to purchase the Property for $3,250,000. (Countercl. ¶ 12).3 According to the counterclaim, Delphi is a real estate brokerage and investment company with a current portfolio of properties worth approximately $14 million. (Id.). Delphi's offer contained no financing contingency; however, the offer was subject to contingencies for "full structural building inspection and review of title." (Id. & Ex. F). Patsios made a deposit of only $1,000, which would be forfeited if he did not fulfill his obligations under the agreement. The offer provided that a purchase and sale agreement was to be signed by September 11, 2014, and that Patsios would put down an additional $99,000 at the time of the purchase and sale. (Id. ¶¶ 12, 13 & Ex. F). Baldwin accepted the offer on August 7, 2014. (Id. ¶ 13 & Ex. F).
Upon accepting the Delphi offer, Baldwin and Strasnick informed the Bank of the offer and sought a further forbearance agreement. (Id. ¶ 15). As consideration, they offered additional security, including a mortgage on Strasnick's personal residence and two other properties. (Id.). The Bank rejected that offer and did not make a counteroffer. (Id. ¶ 16). Strasnick then offered to pay the Bank $25,000 per month until the sale to Delphi closed, in exchange for a forbearance through November 15, 2014. (Id. ¶ 17). The Bank rejected that offerand did not make a counteroffer. (Id. ¶ 18).
On August 15, 2014, a notice appeared in the Lynn Item, a local newspaper, that the Bank would be selling the Property at foreclosure. (Id. ¶ 21). According to the counterclaim, Patsios saw the notice. (Id. ¶ 14, 21). The counterclaim alleges that Patsios was "disappointed" that the Bank would be foreclosing, because a foreclosure would prevent him from buying the property directly. (Id. ¶ 21). It further alleges that he remained interested in purchasing the property (through Delphi) at the foreclosure sale, in part because he recognized that the purchase price might be lower than that to which he had previously agreed. (Id. ¶ 22).
After reading the notice in the newspaper, Patsios contacted Sullivan & Sullivan Auctioneers, LLC, the company that was scheduled to conduct the foreclosure sale, in order to learn more about the Property and the foreclosure sale. (Id. ¶ 23). Patsios learned through Sullivan that a company called PBE Companies, LLC, had conducted an environmental study on the Property. (Id. ¶ 24). On August 14, 2014, the day before the scheduled foreclosure sale, he obtained a summary of the findings of that study through Sullivan. (Id.). The summary noted the existence of an alleged reportable environmental condition on the Property, but it did not specify the impact or extent of that alleged condition or indicate the potential cost that might would be required to remediate the alleged condition. (Id.). Patsios asked Sullivan for more detailed information about the environmental condition of the Property, but Sullivan did not provide him with any additional information. (Id. ¶ 33). Neither the Bank nor PBE provided Patsios with any estimate of the cost required to address the condition. (Id. ¶ 30).4
The documents provided to Patsios included a statement by PBE that it had no obligationto report the condition to the Massachusetts Department of Environmental Protection, because it was neither the owner of the Property nor the lender. (Id. ¶ 25). Through his own independent research, Patsios allegedly discovered that PBE is a subsidiary of the Bank. (Id. ¶ 26).5 Patsios allegedly concluded that it was "disingenuous" for the Bank to have commissioned an environmental study through its own subsidiary and then allowed the subsidiary to contend that it had no obligation to report the environmental condition because it was not the lender. (Id. ¶ 27). He did not know whether "the failure of PBE to report the reportable condition" could result in any liability, but he considered the risk of such liability to be "serious." (Id.). Further, he understood both from his own real estate experience and from Sullivan that the buyer of the Property would assume any liability associated with the Property. (Id. ¶ 28).
On August 15, 2014, the bank held a foreclosure sale of the Property. (Id. ¶ 31). The sale was attended by multiple potential bidders, each of whom was required to make a deposit of $75,000 to participate. (Id. ¶¶ 32, 35). In addition, the bank stipulated that the high bidder would be required to pay 10% of the final bid within five days of the sale and to pay the balance within 30 days. (Id. ¶ 35). According to the counterclaim, the typical deposit requirement for sales of similar properties was $10,000 to $15,000, and such sales were typically required to be closed within 45 days. (Id.).6
At the foreclosure sale, one potential bidder asked the bank's representative whether there were any water or sewer liens on the Property. (Id. ¶ 36). The representative allegedlyresponded...
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