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TD Banknorth, N.A. v. Summers

February 25, 2009

TD BANKNORTH, N.A., PLAINTIFF,
v.
HUGH D. SUMMERS, DEFENDANT.



The opinion of the court was delivered by: Slomsky, J.

OPINION AND ORDER

I. INTRODUCTION

Before the Court is Plaintiff's Motion for Summary Judgment seeking a judgment of foreclosure on real property, and Defendant's Response. This action was brought by Plaintiff TD Banknorth, N.A. ("TD Banknorth") to foreclose on a $925,000.00 commercial mortgage note (the "Mortgage) issued to Defendant Hugh Summers in August, 1990, by TD Banknorth's predecessor in interest, The Bank of Chester County. (Pl. Compl. at 2.) The Mortgage was amended several times, but the terms relevant to this dispute were unchanged by the amendments.

The property covered by the Mortgage is located at 101 Love Road, Cumru Township, Berks County, Pennsylvania (the "Property"). (Id. at 4.) The Mortgage provides that upon the occurrence of one or more events of default, the entire unpaid balance of the principal, accrued interest, and all other amounts secured by the Mortgage shall, at the option of Plaintiff, become immediately due and payable. (Exh. C to Pl. Compl., Mortgage at ¶10.) The Mortgage further provides that Plaintiff shall be entitled to recover the cost of suit and other expenses, including attorneys fees, incurred in an action to enforce the Mortgage. (Id. at ¶10(a).) An event of default under the Mortgage includes, inter alia, the following: (1) "the failure to pay when due any installment of principal, interest, or any other sum required to be paid under the Note or Mortgage;" (2) "the institution of any proceedings under federal bankruptcy laws in which the Mortgagor is a named bankrupt;" and (3) "the placement of any lien or encumbrance upon the Property without the prior written consent of [Plaintiff]." (Id. at ¶9 and ¶10.)

When Defendant purchased the Property, Wachovia Bank ("Wachovia") had a lease with the prior owner to operate a branch office on the property, and Defendant assumed this lease. (Pl. Statement of Undisputed Material Facts, at 5.) Wachovia and Defendant, with the consent of Plaintiff and its predecessor bank, entered into an agreement that Wachovia would forward its monthly rent payments to Plaintiff in order to satisfy Defendant's monthly mortgage payments owed to Plaintiff. (Ex. DX-2 to Def. Ans., Assignment of Rents and Leases.) At some point during or after 1997, Defendant began having continuing problems with the Internal Revenue Service ("IRS"), which resulted over time and through the beginning of 2007 in IRS liens being placed on the Property. (Pl. Compl. at 5-6.) The IRS placed a levy on the rent payments, which Wachovia then sent to the IRS to cover Defendant's financial obligation to the IRS. (Pl. Statement of Undisputed Material Facts, at 7.) As a consequence, mortgage payments were not made to Plaintiff. These events triggered the events of default under the Mortgage that led to Plaintiff filing the foreclosure action before this Court.

Plaintiff has established that the following events occurred since the Mortgage was entered into:

(A) The United States of America filed tax liens against the Property on July 7, 1997 (which was refiled June 27, 2003), December 11, 2006, February 15, 2007, and August 15, 2007. (Exhs. F, G, H, I, and J to Pl. Compl., Tax Liens.) On December 17, 2003, the United States obtained a judgment against Defendant in the amount of $647,749.86. An Abstract of Judgment in that amount was filed against Defendant on June 28, 2006, subjecting the Property to a judgment lien. (Exh. K to Pl. Compl., Abstract of Judgment.)

(B) Defendant has failed to make principal and interest payments due to Plaintiff under the Mortgage for a number of months. As noted, Wachovia sent the rent payments to the IRS and not to Plaintiff, which caused the monthly mortgage obligation to be in default. Initially, Plaintiff was not paid from September 2007 until February 2008. The record is unclear as to exactly how many months' payment remain outstanding, as some payments may have been made after this action was instituted. However, Plaintiff has established that at least payments for September and October of 2007 were not paid, and remain outstanding. (Pl. Compl. at 4-5.)

Plaintiff alleges that each of the above events constitutes an event of default under the Mortgage, and entitles Plaintiff to Summary Judgment on its foreclosure claim.*fn1

Defendant claims that none of the above events constitute an event of default under the Mortgage, despite not producing any document relieving him of liability for acts of default under the Mortgage. Defendant claims that Plaintiff consented to placement of liens on the property by entering into a "Second Note Modification" with Defendant on February 23, 2005, after at least one lien was placed on the Property without Plaintiff's prior consent. (Def. Ans. at 2.) Defendant claims that by entering into the Second Note Modification after a lien was placed on the Property, Plaintiff waived its right to object to placement of liens on the Property. (Id.) Despite this contention, however, three of the four tax liens, and the sole judgment lien, were placed on the property after the parties entered into the Second Note Modification.

Defendant also argues that although the monthly payments for September and October of 2007 have not been paid, this does not constitute an event of default under the Mortgage. (Id. at 3.) As described above, when Defendant purchased the Property, the seller of the Property assigned to Defendant a commercial lease on the Property dated June 14, 1982, which permitted the lessee, Wachovia, to locate a branch office on the Property. (Pl. Statement of Undisputed Material Facts, at 5.) Under the various lease agreements entered into by Defendant and Wachovia, Wachovia is required to make a monthly rent payment directly to Plaintiff in order to satisfy the monthly mortgage payment owed by Defendant to Plaintiff. (Ex. DX-2 to Def. Ans., Assignment of Rents and Leases.) Defendant argues that because Defendant assigned the obligation to make rental payments to Wachovia, and the IRS improperly levied those payments, preventing the payments from being paid to Plaintiff, Defendant is freed from his obligation to make rental payments to Plaintiff. (Def. Ans. at 2.) Defendant claims that it was Plaintiff's obligation to take legal action to remove the IRS's allegedly wrongful levy, and that because Plaintiff failed to do so, Plaintiff's failure to receive the rental payments is not an event of default under the Mortgage. (Id.)

Plaintiff initially sued in this case the United States Government, as well as Mr. Summers, in order to remove the liens, but prior to filing its Motion for Summary Judgment, Plaintiff settled with the United States, and the United States is no longer a party to this action. (Pl. Mot. for Summary Judgment at 2-3).

Oral argument was heard on Plaintiff's Motion for Summary Judgment on November 13, 2008, and the issues presented in the ...


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