SKW-B Acquisitions v. Stobba Residential ( 2023 )


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  • J-S27002-22
    NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
    SKW-B ACQUISITIONS SELLER C, LLC,              IN THE SUPERIOR COURT
    AS SUCCESSOR TO FS RIALTO 2019-FL                 OF PENNSYLVANIA
    1 HOLDER, LLC
    Appellant
    v.
    STOBBA RESIDENTIAL ASSOCIATES,
    L.P. AND STOBBA ASSOCIATES, L.P.
    Appellees                  No. 73 EDA 2022
    Appeal from Order dated December 13, 2021
    In the Court of Common Pleas of Philadelphia County,
    Civil Division, at No. 210501951
    _____________________________________________________________
    SKW-B ACQUISITIONS SELLER C, LLC,              IN THE SUPERIOR COURT
    AS SUCCESSOR TO FS RIALTO 2019-FL                 OF PENNSYLVANIA
    1 HOLDER, LLC
    Appellee
    v.
    STOBBA RESIDENTIAL ASSOCIATES,
    L.P. AND STOBBA ASSOCIATES, L.P.
    Appellants                No. 101 EDA 2022
    Appeal from Order dated December 13, 2021
    In the Court of Common Pleas of Philadelphia County,
    Civil Division, at No. 210501951
    BEFORE: STABILE, J., NICHOLS, J., and SULLIVAN, J.
    MEMORANDUM BY STABILE, J.:                        FILED MARCH 1, 2023
    FS-Rialto 2019-FL 1 Holder, LLC brought this action for breach of
    contract against Stobba Residential Associates, L.P. and Stobba Associates
    1
    J-S27002-22
    (collectively “Borrower”), alleging that Borrower defaulted under a promissory
    note and loan agreement. SKW-B Acquisitions Seller C, LLC (“Lender”) is the
    successor in interest to FS-Rialto 2019-FL 1 Holder, LLC.      Borrower is the
    owner of residential and commercial properties at 200-210 Lombard Street in
    Philadelphia. Lender moved for appointment of a receiver, asserting, inter
    alia, that Borrower failed to make monthly payments on the note and
    instructed Borrower’s commercial tenants to pay rent into Borrower’s bank
    account instead of the account specified in the loan agreement. On December
    13, 2021, following two evidentiary hearings, the court issued a memorandum
    and order in which it declined to appoint a receiver. The court did, however,
    order alternative relief by directing Borrower to instruct commercial tenants
    to pay ongoing rents into the account specified in the loan agreement and
    instructing Borrower to account for all rents deposited into Borrower’s account.
    Lender appeals the portion of the order denying its motion for
    appointment of a receiver. Borrower cross-appeals the portion of the order
    granting Lender alternative relief.1 For the reasons provided below, we vacate
    the court’s order and remand for further proceedings.
    On August 2, 2019, Borrower executed a loan agreement with FS CREIT
    Originator LLC (“Original Lender”) evidencing a $24,250,000 loan to Borrower.
    1The caption of Borrower’s notice of appeal listed FS-Rialto 2019-FL 1 Holder,
    LLC as Appellee. The proper appellee in this appeal should be SKW-B
    Acquisitions Seller C, LLC, successor in interest to FS-Rialto 2019-FL 1 Holder,
    LLC. We have corrected the caption accordingly in Borrower’s appeal at 101
    EDA 2022.
    2
    J-S27002-22
    The loan was evidenced by a promissory note dated August 2, 2019 that
    Borrower executed in favor of Original Lender. The Loan is secured by an
    open-end mortgage, assignment of leases and rents, security agreement and
    fixture filing, dated July 30, 2019 and effective as of August 2, 2019, from
    Borrower to Original Lender. The mortgage created a lien in favor of Original
    Lender on multiple residential condominium unit numbers in the Headhouse
    Flats Condominium located at 200-210 Lombard Street, Philadelphia,
    Pennsylvania (“the Property”) and on commercial condominium unit B in the
    Property.
    In connection with the Loan, Borrower executed a cash management
    agreement with Wells Fargo Bank, National Association (“Wells Fargo”), and a
    deposit account control agreement (“DACA”) with the Original Lender and
    Wells Fargo.   We will refer to the loan agreement, note, mortgage, cash
    management agreement, and DACA as the “Loan Documents.”
    Eric Blumenfeld is Borrower’s sole principal. Tenants at the Property
    include Giant Food Stores, Wawa, Rita’s Water Ice, South Philadelphia
    Pediatrics, LLC, Supercuts, TD Bank, and Target Park U.S. Inc.
    The loan agreement requires that “the Monthly Debt Service Payment
    Amount shall be paid by Borrower to Lender on each Payment Date.” Loan
    Agreement, § 2.2.3.     The loan agreement defines monthly debt service
    payment amount as meaning, “with respect to each Payment Date, an amount
    equal to all interest that is scheduled to accrue on the Outstanding Principal
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    Balance during the Accrual Period in which each such Payment Date occurs.”
    Loan Agreement, § 2.2.3.
    Pursuant to Section 1.1 of the mortgage, Borrower granted a security
    interest in the Property. Pursuant to Section 1.1(f) of the mortgage, Borrower
    also granted Lender a security interest in, inter alia, “all leases, subleases,
    rental agreement, letting, licenses, concessions and other agreements,
    whether or not in writing, affecting the use, enjoyment or occupancy of the
    Premises (“Leases”) … and all rents, additional rents, payments in connection
    with any termination, cancellation or surrender of any Lease, revenues, issues
    or profits (“Rents”).” Mortgage, Exhibit C, Section 1(f).
    To protect the security interest, the Loan Documents have several
    provisions requiring the deposit of rents and other revenues generated by the
    Property into specific accounts created and held for the benefit of Lender.
    Specifically, pursuant to the loan agreement, the DACA, and the cash
    management agreement, Borrower was required to have all Tenants deposit
    Rents into the DACA account at Wells Fargo. Rents in the DACA account would
    then be disbursed daily into Lender’s cash management account at Wells
    Fargo. See Loan Agreement, § 6.1.1; DACA §§ 1(a)-(b) and Sections 2-5;
    Cash Management Agreement § C and §§ 1(a) and 7-8. Section 6.1.2 of the
    loan agreement requires Borrower to deliver each commercial tenant a notice
    instructing it to pay Rent into the appropriate account. Section 4.1.4 of the
    loan agreement requires that Borrower provide monthly reports of Rents
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    collected from tenants and monthly operating statements of, inter alia, gross
    income, operating expenses and capital expenses.
    Section 7.1(i) of the Loan Agreement provides that it is an event of
    default under the Loan “if any portion of the Debt is not paid on or before the
    date same is due and payable or if the entire Debt is not paid on or before the
    Maturity Date.” Section 7.1(xii) of the loan agreement provides that it is an
    event of default under the loan “if Borrower shall continue to be in default
    under any other term, covenant or condition of this Agreement, the Note, the
    Security Instrument or the other Loan Documents not specified above [such
    as the obligation to instruct Tenants to deposit Rents into the Cash
    Management Account] for more than (y) ten (10) days after notice from
    Lender, in the case of any default which can be cured by the payment of a
    sum of money, or (z) thirty (30) days after notice from Lender, in the case of
    any other default.”
    Under Section 8.1(g) of the Mortgage, Borrower agreed that upon an
    Event of Default,
    Lender may take such action, without notice or demand, as it
    deems advisable to protect and enforce its rights against Borrower
    and in and to the Property, including, but not limited to, the
    following actions, each of which may be pursued concurrently or
    otherwise, at such time and in such order as Lender may
    determine, in its sole discretion, without impairing or otherwise
    affecting the other rights and remedies of Lender . . . apply for
    the appointment of a receiver, trustee, liquidator or conservator
    of the Property, without notice and without regard for the
    adequacy of the security for the Debt and without regard for the
    solvency of Borrower, any Guarantor or of any person, firm or
    other entity liable for the payment of the Debt.
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    Section 9.19 of the mortgage provides, “Borrower hereby waives the
    right to assert a counterclaim, other than a compulsory counterclaim, in any
    action or proceeding brought against it by Lender or its agents.” In addition,
    Section 9.15 of the mortgage provides:
    Any assignee of Lender’s interest in and to this Agreement, the
    Note and the other Loan Documents shall take the same free and
    clear of all offsets, counterclaims or defenses which are unrelated
    to such documents which Borrower may otherwise have against
    any assignor of such documents, and no such unrelated
    counterclaim or defense shall be interposed or asserted by
    Borrower in any action or proceeding brought by any such
    assignee upon such documents and any such right to interpose or
    assert any such unrelated offset, counterclaim or defense in any
    such action or proceeding is hereby expressly waived by Borrower.
    The loan and loan documents were assigned several times between
    2019 and 2021 and ultimately were assigned to Lender.
    On May 21, 2021, Lender filed an action for breach of contract against
    Borrower alleging that Borrower defaulted on the loan by (1) failing to make
    monthly payments required under the loan documents and (2) diverting its
    tenants’ rents into its own account at TD Bank instead of depositing rents into
    the DACA account specified in the loan documents. On June 4, 2021, Lender
    filed a motion seeking appointment of a receiver. Lender did not request any
    other form of relief in its motion.    Borrower filed an answer along with
    counterclaims asserting that Lender committed the first material breach of
    contract by causing one of Borrower’s tenants, Giant Food Stores, to stop
    paying   rent   to   Borrower.   In   response   to   Borrower’s   answer   and
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    J-S27002-22
    counterclaims, Lender alleged that Section 9.15 of the mortgage precluded
    Borrower from raising a counterclaim that Lender committed the first material
    breach, and Section 9.19 precluded Borrower from raising a defense of first
    material breach against an assignee such as Lender.
    The trial court held two days of evidentiary hearings on Lender’s petition
    for appointment of a receiver. Lender furnished evidence that Borrower failed
    to make loan payments in all but one month between December 2020 and
    November 2021, and that at Borrower’s direction, two of Borrower’s tenants
    (WaWa and TD Bank) paid rent into Borrower’s operating account instead of
    the DACA account specified in the loan documents. Other tenants—Target
    Park, Supercuts, Rita’s and South Philadelphia Pediatrics—paid less than the
    full rent due for several months. During 2021, however, Borrower transferred
    over $112,000.00 from its operating account into an account controlled by
    Borrower’s president.     Borrower also made other payments out of the
    operating account totaling almost $100,000.00 without divulging the reason
    for these payments. Appellee’s Brief at 18-20 (summarizing evidence with
    record citations).
    At the conclusion of the hearings, the court asked Lender what other
    remedies it proposed besides appointment of a receiver, N.T., 11/18/21, at
    42, even though a receivership was the only relief that Lender sought in its
    motion.    Lender proposed that the court appoint a receiver or, in the
    alternative, order Borrower to instruct its tenants to deposit all rents into the
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    J-S27002-22
    DACA account and direct Borrower to provide an accounting of all rents that
    Borrower deposited into its own account at TD Bank. Subsequently, Lender
    submitted proposed findings of fact and conclusions of law that made the same
    requests for a receiver or alternative relief.
    On December 13, 2021, the trial court issued a memorandum and order
    denying Lender’s motion for a receiver.          Although the court found that
    Borrower failed to make monthly payments, it stated that appointment of a
    receiver is a “drastic” remedy, and that Lender had “fallen extremely short”
    of proving any need for a receiver. Trial Court Memorandum, 12/13/21, at 6.
    With regard to Lender’s claim that Borrower had diverted all rents, the court
    claimed that Borrower had paid part of the management fees due under the
    loan documents. In addition, the court observed, “[Borrower] contends that
    these payments are excused because of [Lender’s] breach on several fronts.
    Reasons that debt service has not been paid is to be determined by another
    court hearing and [is] the subject of another court proceeding.” Id.
    Although the court denied Lender’s request for a receiver, it accepted
    Lender’s proposed alternate remedy because it “recogniz[ed] the fundamental
    unfairness of [Borrower] not paying the interest due and sporadically
    providing financial and other information that is required under the loan
    documents while simultaneously having the tenants pay rent into [Borrower’s]
    operating account.” Id. at 7. The court entered the following order:
    [Borrower shall]
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    a. Within 20 business days of the docketing of this Order, instruct
    all Tenants to pay Rents pursuant to the requirements of the Loan
    Agreement, the Deposit Account Control Agreement (the “DACA”),
    and the Cash Management Agreement (including but not limited
    to requiring the Tenants pay their Rents into the DACA Account at
    Wells Fargo), and provide proof to [Lender] and the Court that
    this instruction has been given;
    b. Within 30 business days of the docketing of this Order, provide
    [Lender] and the Court an accounting of all Rents paid directly into
    [Borrower’s] operating account at TD Bank since January 1, 2021
    (the “Accounting”), and within fifteen (15) business days of
    submission of the Accounting, transfer all such Rents previously
    paid to [Borrower’s] operating account at TD Bank into the Cash
    Management Account at Wells Fargo, and provide proof that this
    transfer has been completed;
    c. For the month of October 2021 and forward, provide [Lender]
    with the financial information required by Section 4.1.4 of the
    Loan Agreement, as well as monthly operating activity reports
    regarding the rent collections, leasing activity, and the most
    current rent rolls to be provided on the fifteenth (15th) day of
    each month (starting with December 15, 2021) regarding the rent
    collections, leasing activity, and rent roll for the prior month.
    Order, 12/13/21.
    Borrower timely appealed the order to this Court, and Lender timely
    cross-appealed. One day after Lender’s appeal, the court granted Borrower’s
    motion for stay of the court’s order pending the outcome of the appeals.
    Lender and Borrower complied with Pa.R.A.P. 1925, but the court did not file
    a Pa.R.A.P. 1925 opinion.
    On January 24, 2023, during the pendency of these appeals, the court
    entered an order granting Lender’s motion for summary judgment on
    Borrower’s counterclaims on the ground that Section 9.19 of the mortgage
    prohibited Borrower from raising these counterclaims in this action.
    9
    J-S27002-22
    Borrower raises the following issues in its appeal:
    1. Did the trial court err as a matter of law and/or abuse its
    discretion by awarding [Lender] relief where, as the trial court
    found, [Lender] (i) “has fallen extremely short of meeting its
    burden in appointing a receiver,” (ii) “did not present evidence of
    any emergency, loss, waste, injury, dissipation of the property or
    abuse of funds”, and (iii) its allegations of default based upon the
    “divergence and misappropriation of rented from the Property”
    were “incorrect, inaccurate, and unproven”?
    2. Did the trial court err as a matter of law and/or abuse its
    discretion by awarding [Lender] equitable relief where [Lender]
    has adequate remedies at law available?
    3. Did the trial court err as a matter of law and/or abuse its
    discretion in ordering [Borrower] to direct the tenants to pay their
    rents to the DACA Account and ordering appellants to transfer all
    rents previously paid to it into the Cash Management Account on
    the grounds that (i) such relief constitutes prejudgment
    attachment which is not permitted under Pennsylvania law, (ii)
    even if it was permitted, such relief is not warranted given that
    (a) there is no allegation/claim of fraud and (b) the trial court
    expressly found that [Lender] “did not present evidence of any
    emergency, loss, waste, injury, dissipation of the property or
    abuse of funds”, and (iii) awarding such relief substantially
    interferes with appellants’ ability to effectively manage the subject
    property and would negatively impact the tenants of the property?
    4. Did the trial court err as a matter of law and/or abuse its
    discretion by entering an order, in the nature of a mandatory
    injunction, compelling [Borrower’s] performance under loan
    documents where (i) there exists an adequate remedy of law for
    appellee, (ii) this is not a “clear case” for contract enforcement,
    (iii) [Lender’s] averments of default under the loan documents is
    the ultimate issue in the case, and (iv) [Borrower’s] performance
    under the loan documents was/is excused by [Lender’s] pre-
    occurring material breaches of the loan documents?
    Borrower’s Brief at 4-5.
    Lender raises the following issues in its cross-appeal:
    1. Whether the appointment of a receiver was warranted, where
    the governing loan documents specifically provide for the
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    appointment of a receiver upon default, and the Borrower
    admitted to payment default.
    2. Whether the appointment of a receiver was warranted, where
    the Borrower admitted to diverting Rents and other proceeds from
    the Property to the Borrower’s own operating account rather than
    the Cash Management Account as required, thereby threatening
    the Lender’s security interest in the Property and Rents?
    3. Whether the appointment of a receiver was warranted based
    upon the Borrower’s mismanagement of the Property?
    4. Whether in light of the Borrower’s demonstrated and admitted
    payment default, and the recognized “fundamental unfairness of
    [Borrower] not paying the interest due and sporadically providing
    financial and other information that is required under the loan
    documents while simultaneously having the tenants pay rent into
    [Borrower’s] operating account,” the trial court appropriately
    exercised its discretion in awarding alternative relief?
    Lender’s Brief at 6-7.
    In essence, Lender appeals the portion of the order denying its motion
    for receivership, and Borrower appeals the portion of the order requiring the
    alternate remedies directing ongoing deposits of rents into the DACA account,
    an accounting, and monthly financial reports. Pa.R.A.P. 311(a)(2) provides
    that an interlocutory appeal may be taken as of right from “an order
    confirming . . . or refusing to confirm [a] . . . receivership or similar matter
    affecting the possession or control of property,” except for matters arising in
    divorce proceedings not relevant here.       Under Rule 311(a)(2), we have
    jurisdiction over Lender’s appeal as one from an order refusing to confirm a
    receivership, and we have jurisdiction over Borrower’s appeal as one from an
    order affecting the possession or control of property.
    11
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    At the outset, we vacate the court’s determination to award alternative
    relief.     The only relief requested in Lender’s motion was an order for a
    receivership. Therefore, the court should have limited its decision to granting
    or denying this request. By asking Lender for alternative remedies during the
    hearings, the court deprived Borrower of its right to file written objections to
    alternative relief in advance of the hearings. More importantly, the court failed
    to explain what doctrine it applied—equitable, legal or otherwise—as the basis
    for awarding relief.      Perhaps the court intended to award Lender specific
    performance under the Loan Documents, but we cannot tell for certain,
    because there was no claim of specific performance before the court, and
    because the court’s justification for its decision, “fundamental fairness,” is
    untethered to any specific principle.          We hold that there is no proper
    foundation in the record for alternative relief.
    Turning to the court’s decision to deny a receiver, our first step is to
    determine the proper standard of review.             Lender contends that it is
    contractually entitled to a receiver under the terms of the loan agreement;
    Borrower contends that common law standards for appointment of a receiver
    apply. We agree with Borrower that common law standards apply.
    At common law, the appointment of a receiver is a “severe, and may be
    termed an heroic, remedy,” and “the court . . . will act with the utmost caution”
    before making this appointment. McDougall v. Huntingdon & Broad Top
    R. & C. Co., 
    143 A. 574
    , 577-78 (Pa. 1928).            Receivership of a solvent
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    corporation is a “drastic remedy,” and should only be granted when “(1) the
    right to a receivership is free from doubt, and (2) a receivership is clearly
    required by the facts and circumstances and equities of the case.” Tate v.
    Phila. Transp. Co., 
    190 A.2d 316
    , 317 (Pa. 1963). Appointment of a receiver
    “is not to be undertaken lightly,” and “the decision to appoint is within the
    sound discretion of the trial court.” Abrams v. Uchitel, 
    806 A.2d 1
    , 8 (Pa.
    Super. 2002).    Despite this demanding standard, the trial court has the
    discretion to appoint a receiver when assets are wasted or dissipated, Hankin
    v. Hankin, 
    493 A.2d 675
    , 677 (Pa. 1985), or when a borrower defaults on its
    loan payments. See Metropolitan Life Insurance Co. v. Liberty Center
    Venture, 
    650 A.2d 887
    , 890-91 (Pa. Super. 1994) (mortgagee entitled to
    appointment of receiver where mortgagor unilaterally made payments at
    interest rate of 10% instead of 14½ and 15% required under notes).
    Lender argues that Section 8.1(g) of the mortgage governs instead of
    common law. Section 8.1(g) states that “[u]pon the occurrence of any Event
    of Default, Borrower agrees that Lender may . . . apply for the appointment
    of a receiver, trustee, liquidator or conservator of the Property . . .” [emphasis
    added]. Lender reads this text too expansively. “May apply” merely entitles
    Lender to request appointment of a receiver in the event of default, but it does
    not automatically entitle Lender to appointment of a receiver without more.
    The court retains the discretion to grant or deny Lender’s request. Authority
    relied upon by Lender does not require a different result. In three of the cases
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    J-S27002-22
    cited by Lender, the parties expressly agreed that in the event of a default,
    the lender “shall have” the right “to apply [for] . . . and obtain” a receiver, or
    “shall be entitled to” appointment of a receiver, or are entitled to a receiver
    “as a matter of right,” materially different language from the text in this case.
    See Metropolitan Life Ins. Co., 
    650 A.2d at 891
     (“If an Event of Default
    shall have occurred and be continuing, Mortgagee, upon application to a court
    of competent jurisdiction, shall be entitled . . . to the appointment of a
    receiver(s) . . . ”); Wells Fargo Bank, N.A. v. InSite Dunmore (O’Neil),
    LLC, 
    2015 WL 5074421
    , *5 (CCP Lackawanna Cty. 2015) (mortgage entitled
    lender to appointment of receiver “as a matter of right” and borrower
    “irrevocably consent[s]” to appointment); City Nat. Bank v. 728 Market
    Street, LP, 
    2012 WL 781185
    , *5 (CCP Philadelphia Cty. 2012) (“The Lender
    [City National Bank] shall have the absolute and unconditional right to apply
    to any court having jurisdiction and obtain the appointment of a receiver or
    receivers of the Property”).   In the fourth case, MSCI 2006-IQ11 Logan
    Boulevard Ltd. P’ship v. Greater Lewistown Shopping Plaza, L.P., 
    2017 WL 485958
     (M.D. Pa. 2017), the loan agreement provided that “[Lender] may
    apply for the appointment of a receiver to manage and operate the property,”
    but it also provided that the borrower “consents, to the extent permitted by
    applicable law, to the appointment of a receiver.” Id. at *2; see also City
    Nat. Bank, 
    2012 WL 781185
    , at *5 (borrower “irrevocably consent[s]” to
    appointment). Here, in contrast, Lender does not identify any text in which
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    J-S27002-22
    Borrower consents to the appointment of a receiver without more; nor can we
    find any. The final two cases cited by Lender are unpublished decisions of this
    Court from 2014 and 2016. The Rules of Appellate Procedure prohibit us from
    taking into account any unpublished decision from this Court filed before May
    2, 2019. Pa.R.A.P. 126(b).
    Without a contractual entitlement or right to have a receiver appointed
    here, Lender may still seek appointment of a receiver but bears the burden of
    satisfying common law standards to obtain this relief. Although there are no
    citations to relevant law in the trial court’s memorandum, it appears that the
    court applied common law standards to this case, given its use of such terms
    as “waste, injury, dissipation of the property or abuse of funds.” Trial Court
    Memorandum at 6; see Hankin, 493 A.2d at 677 (waste or dissipation of
    assets provides cause for appointment of receiver). Several aspects of the
    court’s decision, however, create concern that it misapplied these standards.
    First, it appears that the court misinterpreted the evidence. The court
    stated that Lender failed to prove the need for a receiver because it could not
    demonstrate that Borrower diverted or mismanaged funds.         Borrower, the
    court continued, did not divert or mismanage funds, because it “presented
    testimony of a sum of partial management fees being paid to the manager,
    EB Management Corp. (“EBRM”), for providing management services at the
    Property.”   Trial Court Memorandum at 6.       The evidence demonstrates,
    however, that EBRM is solely owned by Blumenfeld, Borrower’s sole principal.
    15
    J-S27002-22
    Tr., 11/18/21, at 19. Between January and September 2021, Borrower paid
    EBRM $112,686.13 in management fees. Tr. 11/12/21, at 31-33. By paying
    EBRM, Blumenfeld effectively paid himself at the same time he failed to pay
    the debt service owed on the loan. Tr. 11/12/21, at 36-37 (“Q: You’re paying
    the alleged arrearages to your management company, but not your lender,
    correct? A: (No answer.) Q: Is that correct? A: That is correct”). This evidence
    suggests that Borrower diverted monies to a company owned by its principal
    instead of making payments towards the loan.
    Next, there appears to be an inconsistency in the court’s analysis. On
    page 6 of its memorandum, the court denied a receivership because it found
    no abuse of funds or diverting of rents by Borrower. Trial Ct. Memorandum
    at 6.    On page 7, however, the court found that Borrower refrained from
    paying the loan while “simultaneously having the tenants pay rent . . . into
    [Borrower’s] operating account,” id. at 7, text which indicates that Borrower
    intentionally failed to pay the loan while simultaneously diverting or
    mismanaging rents. Additionally, on page 6, the court denied a receivership
    because it found that Borrower might have viable defenses, such as
    Borrower’s contention that Lender committed the first material breach by
    interfering with Borrower’s business relationship with Giant.    Id. at 6. On
    page 7, however, the court “recogniz[ed] the fundamental unfairness” of
    Borrower not paying the loan.      Id. at 7.   It is difficult to harmonize the
    determination that non-payment by Borrower is “fundamentally unfair” with
    16
    J-S27002-22
    the determination that Borrower might have meritorious defenses for non-
    payment.
    Next, the court’s statement that Lender failed to present evidence of the
    proposed receiver’s qualifications or course of action is belied by the record.
    Lender’s petition (1) recommended Stephen Resinski and his organization,
    Colliers International, as the receiver, (2) listed Resinski’s qualifications, (3)
    proposed a plan for improving tenant satisfaction, maintaining and upgrading
    the Property, reducing costs, and otherwise improving the operation of the
    Property, and (4) submitted a schedule of Resinski’s and Colliers’ proposed
    fees. Lender’s Petition For Appointment of Receiver, ¶¶ 57-58 & exhibits 5,
    6.
    Finally, the court’s decision on January 24, 2023 to dismiss Borrower’s
    counterclaims calls into question whether Borrower has any viable defenses
    to Lender’s action, since Borrower’s defenses appear to rest on the same
    theory as its counterclaims (namely, Lender committed the first material
    breach).
    These concerns require remand for further proceedings as to whether
    appointment of a receiver is warranted under common law.
    Order vacated. Case remanded for further proceedings in accordance
    with this memorandum. Jurisdiction relinquished.
    17
    J-S27002-22
    Judgment Entered.
    Joseph D. Seletyn, Esq.
    Prothonotary
    Date: 3/01/2023
    18
    

Document Info

Docket Number: 73 EDA 2022

Judges: Stabile, J.

Filed Date: 3/1/2023

Precedential Status: Precedential

Modified Date: 3/1/2023