U.S. Bank N.A. v. Bank of Am., N.A.
| Decision Date | 31 March 2021 |
| Docket Number | 15 Civ. 8153 (PGG) |
| Parties | U.S. BANK NATIONAL ASSOCIATION, as successor to Wells Fargo Bank, National Association; as Trustee for the Registered Holders of Citigroup Commercial Mortgage Trust 2007-06, Commercial Mortgage Pass-Through Certificates, Series 2007-C6; acting by and through its Special Servicer CWCapital Asset Management LLC, Plaintiff, v. BANK OF AMERICA, N.A., Defendant. |
| Court | U.S. District Court — Southern District of New York |
In this action, Plaintiff U.S. Bank National Association ("U.S. Bank") alleges breach of contract claims against Defendant Bank of America, N.A. ("Bank of America"), arising out of representations and warranties made in connection with the sale of commercial mortgage loans. On October 14, 2015, this case was transferred to this District by the United States District Court for the Southern District of Indiana. On January 27, 2016, Plaintiff moved to re-transfer this case to the Southern District of Indiana. (Dkt. No. 56) Defendant moved for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c). (Dkt. No. 54)
On September 20, 2016, this Court granted Defendant's motion for judgment on the pleadings and denied Plaintiff's motion to re-transfer the action. (Dkt. Nos. 75, 76); see also U.S. Bank Nat'l Ass'n v. Bank of Am. N.A., No. 15 Civ. 8153 (PGG), 2016 WL 5118298 (S.D.N.Y. Sept. 20, 2016). In granting Defendant's motion for judgment on the pleadings, this Court concluded that Plaintiffs' claims were time-barred under New York law. See U.S. Bank, 2016 WL 5118298, at *13-14. Plaintiff appealed. (Dkt. No. 77)
On February 15, 2019, the Second Circuit affirmed this Court's denial of Plaintiff's motion to re-transfer this action to the Southern District of Indiana, but vacated this Court's order granting Defendant judgment on the pleadings. (Dkt. No. 78); see also U.S. Bank Nat'l Ass'n v. Bank of Am. N.A., 916 F.3d 143, 152 (2d Cir. 2019). After remand from the Second Circuit, Defendant again moved for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c). (Dkt. No. 88)
For the reasons stated below, Defendant's motion for judgment on the pleadings will be denied.
In December 1999, Women's Physicians Group, LLC purchased a two-story commercial building located at 8081 Township Line Road, Indianapolis, Indiana (the "Property") from Galen Hospital Corporation, Inc. for $3,512,500. (Cmplt. (Dkt. No. 1) ¶¶ 9, 12) The Property is located on the campus of the Hospital. (Id. ¶ 14) In connection with the acquisition of the Property, Women's Physicians Group executed a special warranty deed (the "Deed") that contains title exceptions that run with the Property. (Id. ¶ 16) Paragraph 1 of the Deed contains the following use restriction:
The Property/Real Estate may be used and occupied only for an ambulatory surgery center and medical offices for the private practice of medicine and for no other purposes without the prior written consent of "Hospital" . . . , which consent may be withheld in Hospital's sole discretion. . . .
(Id. ¶ 17)
Paragraph 3 of the Deed sets forth the following right of first refusal:
If the owner of the Property/Real Estate (the "Owner") shall receive a bona fide offer from any third party for the purchase, acquisition or lease (for a term of more than fifteen (15) years) of the Property/Real Estate or any part thereof or interest therein, which offer the Owner desires to accept, or if Owner desire[s] to sell or transfer, or make a bona fide offer to sell, transfer or assign the Property/Real Estate or any part thereof or interest therein to a third party, Owner shall promptly deliver to Galen Hospital Corporation, Inc. (the "Grantor") . . . a written notice setting forth the full terms and conditions of the proposed transaction and, if available, a copy of such offer, in the case of a purchase or other transfer, or a copy of the proposed lease agreement, in the case of a lease or an assignment of any interest of Owner. Grantor may, within 30 days after receipt of such notice, elect to purchase, acquire or lease the Property/Real Estate or such portion thereof or interest therein which is subject to any offer as described above (the "Offer Property") on the same terms and conditions as those set forth in such notice.
(Id. ¶ 18)
On April 30, 2007, LaSalle Bank National Association ("LaSalle") made a $9 million commercial mortgage loan (the "Loan") to Women's Physicians Group. (Id. ¶¶ 8-9) Repayment of the Loan is secured by, among other things, a mortgage on the Property. (Id. ¶ 9) Bank of America became successor to LaSalle by merger. (Id. ¶ 5 n.1) On July 25, 2007, LaSalle sold the Loan along with other commercial mortgage loans (together, the "Series 2007-C6 Loan Pool") to Citigroup Commercial Mortgage Securities, Inc. ("Citigroup"). (Id. ¶¶ 5, 8) This sale was made pursuant to a Mortgage Loan Purchase Agreement ("MLPA"). (Id. ¶ 5) The parties to the MLPA are LaSalle, as seller, and Citigroup, as purchaser. (MLPA (Dkt. No. 24-3) at 2)1
In the Mortgage Loan Purchase Agreement, LaSalle made representations and warranties regarding the Loan, including Representation No. 8, which reads as follows:
Citigroup deposited the loans it purchased from LaSalle into a trust fund (the "Trust"), pursuant to a Pooling and Servicing Agreement ("PSA"). (Cmplt. (Dkt. No. 1) ¶¶ 6-7)3 Citigroup assigned all of its rights under the MLPA to the trustee for the Trust, pursuant to Section 2.01(a) of the PSA. (Id. ¶ 35) The PSA describes Citigroup as the depositor, Wells Fargo Bank, N.A. ("Wells Fargo") as the trustee, and LaSalle as certificate administrator. (PSA (Dkt. No. 24-4) at 2) Wells Fargo was the initial trustee of the Trust, and U.S. Bank subsequently became the trustee. (Id. ¶ 10) The PSA "supplemented" the MLPA, and "providedthat the purchaser would deposit the loans into the Trust and assign all of its rights under the MLPA to the Trust." U.S. Bank Nat'l Ass'n, 916 F.3d at 147.
(PSA (Dkt. No. 24-5) § 2.03(a)); see also Cmplt. (Dkt. No. 1) ¶ 44)
In April 2012, Women's Physician Surgery Center, LLC (the "Surgery Center") - which was the Property's major tenant - vacated the Property, eight years before its lease expired. (Id. ¶ 22) After the Surgery Center vacated the Property, Women's Physicians Group's efforts to secure a new tenant proved unsuccessful. (Id. ¶ 26) In August 2012, the Loan went into default. (Id. ¶ 27) On December 13, 2012, the Trust commenced a foreclosure action against Women's Physicians Group in Indiana state court. (Id. ¶ 28)
In March 2013, the state court appointed a receiver for the Property. (Id.) The receiver was unable to secure a tenant for the Property, however, due to the use restriction in the Deed. (Id. ¶ 29) The Hospital refused to waive or modify the use restriction, despite the receiver's requests. (Id. ¶¶ 30-32)
Believing that the use restriction and the right of first refusal in the Deed are contrary to Representation No. 8 in the MLPA, on October 18, 2013, the Trust notified Bank of America that it had violated Representation No. 8, and that the violation had "materially and adversely affected the value of the Loan." (Id. ¶¶ 36, 41) The Trust requested that Bank of America either cure the violation or repurchase the Loan within 90 days. (Id. ¶ 42) These arethe sole remedies available to the Trust under the MLPA and the PSA. (Id. ¶¶ 43-46) Bank of America has refused to cure the violation or repurchase the Loan. (Id. ¶¶ 47-49)
The Complaint was filed on September 12, 2014, in the United States District Court for the Southern District of Indiana. (Dkt. No. 1) On December 3, 2014, Defendant moved to dismiss for lack of personal jurisdiction and improper venue, pursuant to Federal Rules of Civil Procedure 12(b)(2) and (b)(3) or, in the alternative, to transfer the action to the Southern District of New York, pursuant to 28 U.S.C. §§ 1404(a), 1406, or 1631. (Dkt. No. 23)
On October 14, 2015, Judge Tanya Walton Pratt of the Southern District of Indiana granted Defendant's motion to transfer the action to the Southern District of New York, pursuant to...
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