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LLC v. Swan Creek Limited Partnership

United States District Court, E.D. Michigan, Southern Division

January 9, 2015

WBCMT 2003-C9 ISLAND LIVING, LLC, Plaintiff,
v.
SWAN CREEK LIMITED PARTNERSHIP, Defendant.

ORDER GRANTING PLAINTIFF'S REQUEST FOR APPOINTMENT OF RECEIVER AND DIRECTING PLAINTIFF TO SUBMIT PROPOSED RECEIVER CANDIDATE(S)

MATTHEW F. LEITMAN, District Judge.

On November 4, 2014, Plaintiff WBCMT 2003-C9 Island Living ("Island Living") filed an ex parte motion for a preliminary injunction and the appointment of a receiver to manage and control a mobile home community currently operated by Defendant Swan Creek Limited Partnership ("Swan Creek") at 23379 Island Drive, New Boston, Michigan (the "Property"). ( See the "Motion, " ECF #2.) The Court declined to grant ex parte relief and ordered responsive briefing and oral argument. ( See ECF #5.) Having now received briefing and heard argument from both parties, the Court GRANTS Island Living's request for the appointment of a receiver.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

On or about November 6, 2003, Swan Creek obtained a $4.35 million loan (the "Loan") from LaSalle Bank, N.A. ("LaSalle") to purchase the Property. ( See ECF #1-4.) Swan Creek executed three documents in connection with the Loan: a promissory note establishing a repayment schedule (the "Note, " id. ); a mortgage as security for the Loan (the "Mortgage, " ECF #1-5); and an "Assignment of Leases and Rents" (the "Assignment of Rents, " ECF #1-6) (collectively, the "Loan Documents"). Island Living later acquired LaSalle's interests in the Loan Documents through a series of assignments. ( See the First Amended Complaint, hereinafter the "Complaint, " ECF #11, at ¶¶18-20; see also ECF #1-8.)

Both the Mortgage and Assignment of Rents provide that Island Living is entitled to the appointment of a receiver if Swan Creek defaults on its payment obligations under the Note. Specifically, the Mortgage provides as follows:

If an Event of Default is continuing or if Lender shall have accelerated the Indebtedness, Lender, upon application to a court of competent jurisdiction, shall be entitled as a matter of strict right, without notice, and without regard to the occupancy or value of any security for the Indebtedness, without any showing of fraud or mismanagement on the part of Borrower or the insolvency of any party bound for its payment, to the appointment of a receiver or the immediate appointment of Lender to take possession of and to operate the Property, and to collect and apply the rents, issues, profits, and revenues thereof.

(Mortgage at § 24, Pg. ID 74.) In addition, the Assignment of Rents provides as follows:

Upon or at any time after the occurrence of... an Event of Default... Lender shall immediately be entitled to possession of all Rents and sums due under any lease Guaranties, whether or not Lender enters upon or takes control of the Property. In addition, Lender may, at its option... without notice and without regard to the adequacy of the security for the Debt, either in person or by agent, nominee or attorney, with or without bringing any action or proceeding, or by a receiver appointed by a court (which such appointment of receiver shall, upon application to a court of competent jurisdiction, be a matter of strict right, without notice) dispossess Borrower and its agents and servants from the Property... and take possession of the Property and all books, records and accounts relating thereto and have, hold, manage, lease and operate the Property on such terms and for such period of time as Lender may deem proper....

(Assignment of Rents at § 3.1, Pg. ID 97.) In addition, the Mortgage provides that upon a default by Swan Creek, Island Living may, among other things, exclude Swan Creek from the Property and access Swan Creek's books and records regarding the Property. ( See Mortg. at § 21.)

Island Living now alleges that Swan Creek has defaulted on its payment obligations under the Note ( see the Compl. at ¶¶22-26). At oral argument, Swan Creek conceded that it is in default under the Note. Island Living has commenced foreclosure-by-advertisement proceedings on the Property. ( See ECF #12.)

In its Motion, Island Living seeks to enforce the covenants in the Loan Documents entitling it to the appointment of a receiver. Specifically, Island Living seeks "an order requiring that a receiver be appointed to manage and control" the Property and a preliminary injunction to "protect [Island Living's] interest in the [P]roperty and income therefrom." (Mot. at 1, Pg. ID 156.) Island Living is concerned that, without these remedies, Swan Creek will fail to maintain the Property and collect rents while foreclosure proceedings are pending. ( See id. at 12-13, Pg. ID 174-75.) Swan Creek opposes the requested relief. ( See Resp. Br.)

ANALYSIS

"There is a split of authority over whether the parties' advance consent to the appointment of a receiver in the mortgage documents is dispositive to the issue of appointment, or whether it is simply one factor among the others that a court must consider." Fed. Nat'l Mortgage Ass'n v. Mapletree Investors Ltd. P'ship, No. 10-10381, 2010 WL 1753112, at *3 (E.D. Mich. Apr. 30, 2010) (collecting cases). Under either approach, however, Island Living has established its right to relief.

Assuming, without deciding, that Swan Creek's advance consent to the appointment of a receiver in the Loan Documents is dispositive, Island Living is plainly entitled to such relief. Indeed, Swan Creek expressly agreed in the Mortgage and Assignment of Rents that Island Living would be entitled as "a matter of strict right" to the appointment of a receiver to operate the Property if Swan Creek defaulted on its payment obligations. (Mortg. at § 24; Assignment of Rents at § 3.1.) Here, it is undisputed that Swan Creek has failed to satisfy its payment obligations and, therefore, is in default under the terms of the Loan Documents. Accordingly, under this approach, Island Living is now entitled to the appointment of a receiver based on the unambiguous language of the Mortgage and Assignment of Rents. See, e.g., Fed. Nat'l Mortgage Ass'n v. Maple Creek Gardens, LLC, No. 09-14703, 2010 WL 374033, at *3 (E.D. Mich. Jan. 25, 2010) ("[Borrower's] agreement in the Mortgage to the appointment of a receiver upon its default alone is sufficient to conclude that [Lender] is entitled ...


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