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Wells Fargo Bank, N.A. v. CCC Atlantic, LLC

United States District Court, D. New Jersey

November 20, 2012

WELLS FARGO BANK, N.A., as Trustee for the Registered Holders of Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2007-C5, Plaintiff,

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[Copyrighted Material Omitted]

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Dinsmore & Shohl LLP By Richard A. O'Halloran, Esq., Alyson H. Ricker, Esq., Princeton, NJ, for Wells Fargo Bank, N.A. as Trustee.

Silverang & Donohoe, LLC By Mark S. Haltzman, Esq., Philip S. Rosenzweig, Esq., Saint Davids, PA, for CCC Atlantic, LLC.


IRENAS, Senior District Judge:

This suit is a commercial foreclosure action. Before the Court are Plaintiff's Motion to Appoint a Receiver (Dkt. No. 8), and Defendant's Motion to Dismiss for

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Lack of Subject Matter Jurisdiction (Dkt. No. 14). For the reasons stated below, the Court concludes that complete diversity of citizenship exists, and that Plaintiff is entitled to the appointment of a receiver. Accordingly, Defendant's Motion will be denied and Plaintiff's Motion will be granted.


A. Facts relevant to the jurisdictional analysis

The mortgage sought to be foreclosed upon in this action is an asset held by Plaintiff Wells Fargo Bank, N.A. as Trustee for Holders of Credit Suisse First Boston Mortgage Securities Corp. Commercial Mortgage Pass-Through Certificates, Series 2007-C5. The " Pooling and Servicing Agreement, Dated as of November 1, 2007" (Wells Fargo brief, Ex. 2) (the " PSA" )— a 311-page document (excluding the 51 exhibits thereto)— is the focus of the parties' and the Court's attention.

In transactions " dated as of November 1, 2007," Column Financial, Inc.; KeyBank National Association; and Capmark Finance Inc., sold " certain mortgage loans" to Credit Suisse First Boston Mortgage Securities Corp. for the purpose of creating a pool of assets (i.e., mortgages) in which investors could invest by purchasing mortgage pass-through certificates (also known as " private label mortgage-backed securities" [1]). (PSA, p. 1) As of November, 2007, the mortgage loans had an aggregate principal balance of over $2.7 billion. (PSA, p. 6)

PSA Section 2.01, entitled " Conveyance of Original Trust Mortgage Loans," provides, in relevant part,

(a) It is the intention of the parties hereto that a common law trust be established under the laws of the State of New York.... Wells Fargo is hereby appointed, and does hereby agree to act, as Trustee hereunder and, in such capacity, to hold the Trust Fund in trust for the exclusive use and benefit of all present and future Certificate holders....
The Depositor [Credit Suisse First Boston Mortgage Securities Corp.], concurrently with the execution and delivery hereof, does hereby assign, sell, transfer, set over and otherwise convey to the Trustee, without recourse, for the benefit of the Certificate holders all the right, title and interest of the Depositor, ... in, to and under (i) the Original Trust Mortgage Loans.... The transfer of the Original Trust Mortgage Loans and the related rights and property accomplished hereby is absolute ... and is intended by the parties to constitute a sale.

(PSA, p. 107)

In addition to creating a trust in which the mortgages are held, the PSA establishes the procedures for " administration and servicing of the trust fund." (See generally PSA, Article III, pp. 122-219) Relevant to the instant case, the PSA provides that the Master Servicer(s) and Special Servicer " shall service and administer the Mortgage Loans ... on behalf of the Trustee and in the best interests of an for the benefit of the Certificate-holders. " (PSA, § 3.01(a), p. 122)(emphasis added).

The Master Servicer [2] collects, among other things, payments on account of principal

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and interest on the Trust Mortgage Loans and deposits them into the Collection Account. (PSA, § 3.04(a), p. 133) [3] Thereafter, the PSA provides that the " Master Servicer shall deliver to the Trustee each month" a certain amount of money " then on deposit in the Collection Account" for the Trustee to deposit into the Distribution Account, which account holds the funds to be distributed by the Trustee to the Certificate holders, in order of priority. (§ 3.04(b), p. 134; § 3.05(b), p. 148) (emphasis added).[4] Thus, the Master Servicer collects mortgage loan payments (on the Trustee's behalf) which the Trustee ultimately distributes to the trust beneficiaries (the Certificate holders).

Similarly, when a mortgage is in default, the PSA directs that the Special Servicer [5] " shall exercise reasonable efforts to foreclose upon the ownership of any property securing such Mortgage Loans." (§ 3.09(a), p. 163) Any money collected by the Special Servicer in a foreclosure action must be remitted " to the applicable Master Servicer for deposit into the Collection Account," (PSA, § 3.04(a)(viii), p. 134), which, as described above, is later deposited into the Trustee's Distribution Account.

Finally, if either the Master Servicer or Special Servicer resigns or is terminated, the Trustee must take on " all the responsibilities [and] duties" of the servicer, unless, or until, a new servicer is appointed. (PSA, § 7.02, p. 264; § 8.01(a), p. 267)

B. Facts giving rise to the parties' dispute

The property at issue in this suit— the Cornerstone Commerce Center in Linwood, New Jersey (owned at all relevant times by Defendant CCC Atlantic, LLC)— originally secured a commercial mortgage loan in the amount of $41 million. Approximately seven months after the original mortgage transaction took place, the Original Note was bifurcated into an A Note, with a principal amount of $36.9 million; and a B Note, with a principal amount of $4.1 million. Both the A Note and B Note were originally payable to Capmark Bank.

As described above, Plaintiff Wells Fargo came to be the current holder of the A Note when, in 2007, Capmark sold the A Note to Credit Suisse First Boston Mortgage Securities Corp., who in turn, sold it to Wells Fargo as Trustee for the Holders of the Commercial Mortgage Pass-Through Certificates, Series 2007-C5.[6]

In September, 2011, CCC Atlantic's tax escrow account balance undisputedly was not sufficient to pay the entirety of its municipal property taxes. But CCC Atlantic contends that the escrow shortfall

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was simply the result of an " anomalous" situation resulting from the expiration of the tax abatement on the property at issue.

The Cornerstone Commerce Center was " developed ... in a specially designated redevelopment zone in Linwood" thereby allowing CCC Atlantic to take advantage of Linwood's " graduated tax abatement program whereby the increased [tax] assessment for the Property occasioned by the redevelopment and construction of the [Commerce Center] would not be fully taxed for a period of five years." Karman Aff. ¶ 6. Thus, in year one of the abatement period, CCC Atlantic paid no taxes on the higher assessed value of the redeveloped property (approximately $17 million in improvements) but rather only paid taxes on the original assessment of $4.8 million. In year two of the abatement period, CCC Atlantic paid 20% of the additional assessment; in year three, 40%; in year four, 60%; and in year five, 80%. Id. ¶ 7.

The parties do not dispute that Linwood billed Wells Fargo for the taxes due on the original assessment, but as to the additional payments due in years two through five of the abatement program, Linwood billed CCC Atlantic directly. Apparently CCC Atlantic expected this practice to continue after the abatement program expired, and therefore its escrow account with Wells Fargo never had enough money to pay the entire tax bill. This practice, however, did not continue. After the abatement program's expiration, Linwood sent one tax bill to Wells Fargo for all of the property taxes due for August, 2011.

Upon receiving the bill, Wells Fargo used all of the funds then available in the escrow account ($57,144.39) and advanced the difference of $272,385.67 on August 3, 2011. Wells Fargo sent CCC Atlantic a cure notice giving it ten days in ...

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