The opinion of the court was delivered by: Magistrate Judge Carlson
MEMORANDUM OPINION AND ORDER
Plaintiff U.S. Bank National Association ("U.S. Bank" or "lender") initially brought suit to foreclose on a commercial mortgage given by Defendant Appalachian Self-Storage ("Appalachian" or "borrower") with respect to real property in Wilkes-Barre, Pennsylvania, which secured a commercial mortgage loan in the original principal amount of $2.4 million.
Now pending before the Court are two motions.
First, we must consider U.S. Bank's motion for summary judgment on the complaint, in which the lender seeks to have judgment entered against Plaintiff for outstanding unpaid amounts owed under the mortgage, to have the promissory note and mortgage between U.S. Bank and Appalachian foreclosed as to the real property subject to the mortgage, and to allow the mortgaged real property to be sold. The motion is fully briefed and ripe for disposition.*fn1 For the reasons discussed below, we find it to be undisputed that Defendant is in default of its obligations under the note and mortgage, and we find further that Defendant has presented no legitimate defense to this foreclosure action, or any dispute of material fact that would make the entry of summary judgment on Plaintiff's claim inappropriate.
Furthermore, for the reasons explained below, we reject Defendant's motion to strike certain evidence from the evidentiary record, or to enlarge the discovery period in this case, on the grounds that Plaintiff failed to timely produce relevant evidence as part of its initial and supplemental disclosures, or otherwise in response to discovery requests. In this regard, it is important to note that none of these discovery issues relate to the fact of the Defendant's default on this mortgage. Rather, it is entirely undisputed that the Defendant is, and has been, in default.
Instead, this discovery dispute relates simply to the adequacy of the proof of U.S. Bank's interest in this mortgage, a mortgage that is plainly in default.
We find no basis to disregard this evidence. We also find that Plaintiff has not shirked its discovery obligations to Defendant, and can perceive of no unfair prejudice to Defendant in considering these documents as part of our analysis of Plaintiff's summary judgment motion. Indeed, we find it would be inappropriate, and would serve no legitimate purpose, either to strike certain documents or to open discovery in an action where Defendant has conceded it that it is in default under the loans, and where foreclosure is plainly permissible. Furthermore, Defendant has not identified any facts that they believe they could discover that might create a genuine dispute of material fact regarding U.S. Bank's interest in this loan that would make summary judgment inappropriate. To the contrary, Defendant's motion to strike evidence, or enlarge discovery, seems nothing more than a last-ditch effort to delay the inevitable foreclosure on a mortgage on which Defendant has admittedly made no payments at all since April 2011. Since we find no basis to grant this relief, we will deny Defendant's motion and grant Plaintiff's motion for summary judgment.
Finally, we observe that while the summary judgment motion was pending, and around the time the parties were engaging in settlement negotiations with respect to this matter, U.S. Bank and Amerco Real Estate Company ("Amerco") jointly moved to have Amerco substituted as the plaintiff in this action pursuant to Federal Rule of Civil Procedure 25(c), following the assignment on June 5, 2012 of U.S. Bank's right, title, and interest in the loan, note, and mortgage that are at issue in this action. (Doc. 48.) Although Defendant has filed a brief opposing this motion, (Doc. 52.), that motion simply restated the Defendant's speculative assertion that U.S. bank may not possess sufficient interest in this loan which may be transferred to Amerco. Because we have rejected this speculative assertion on its merits, we further find there to be no reasonable basis to deny the requested relief, and Amerco will be substituted as the proper Plaintiff entitled to foreclose on the mortgage.
On or about December 28, 2006, LaSalle Bank National Association ("LaSalle") made a commercial mortgage loan to Appalachian in the amount of $2.4 million. The loan is evidenced by a promissory note in the principal amount of $2.4 million, which Appalachian executed on or about December 28, 2006, in favor of LaSalle "and its successors and assigns" (the "Note"). (Doc. 24-4, Affidavit of Alexander M. Killick ("Killick Aff."), Ex. A, Note.)
In order to secure its obligations under the Note, Appalachian also executed an Open-End Mortgage, Security Agreement and Fixture Filing (the "Mortgage") in favor of LaSalle "and its successors and assigns as holders of the Note". (Killick Aff., Ex. B, Mortgage.) The Mortgage secures the property Defendant owned and operated as "Appalachian Self Storage" situated at 3 Heinz Drive in Wilkes-Barre, Pennsylvania, and was recorded with the Recorder of Deeds for Luzerne County, Pennsylvania on January 3, 2007, as Instrument Number 5743525, in Book 3007, Page 2310. (Id.) The Note and Mortgage contained provisions that authorized LaSalle to sell or assign the loan, including the servicing rights under the loan, the Note, the Mortgage, and other loan documents, and to do so without Appalachian's consent, stating in clear and precise terms that:
Lender may, at any time and without the consent of Borrower or and Guarantor, grant participations in or sell, transfer, securitize, assign and convey all or any portion of its right, title, and interest in and to the Loan, the servicing of the Loan, this Note, the Mortgage, and the other Loan Documents, any guaranties given in connection with the Loan and any collateral given to secure the Loan. (Killick Aff., Ex. A, Note § 8; Killick Aff., Ex. B, Mortgage § 42.)
The following year, the Loan was assigned as part of a Pooling and Servicing Agreement between a number of financial institutions, including CitiGroup Commercial Mortgage Securities Inc., which was responsible for placing mortgage loans in an investment vehicle in which third-party investors could purchase interests, and Wells Fargo Bank, National Association, which served as the Trustee. Included among the mortgage loans that were included in this investment vehicle were loans held by LaSalle, including the Appalachian Self Storage Loan. (Killick Aff., Ex. I, Pooling and Servicing Agreement, Schedule I.)
The Pooling and Service Agreement, and other related documents, provided for LaSalle to assign its subject loans, including the Appalachian Self Storage Loan, to Wells Fargo as the Trustee. (Id.) In accordance with these assignment provisions, on March 29, 2007, LaSalle completed an allonge to the notes that were being assigned, and assigned each mortgage to "Wells Fargo, National Association, as trustee for the registered holders of CD 2007-CD4 Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series CD 2007-CD4." (Killick Aff., Ex. J, LaSalle Mortgage Loan Purchase Agreement §§ 2(c)(I), 2(c)(iv).) The Appalachian Self Storage Loan, including the Note and Mortgage, were assigned in accordance with the assignment provisions set forth in the Pooling and Servicing Agreement, and the related LaSalle Mortgage Loan Purchase Agreement. The documents evidencing the assignment of the Mortgage were recorded with the Recorder of Deeds for Luzerne County, Pennsylvania, on January 7, 2008, as Instrument No. 5802144, in Book 3008, Page 4012. (Killick Aff., Ex. E.)
On June 30, 2009, U.S. Bank replaced Wells Fargo as the Trustee for the Trust. (Killick Aff., Ex. L, M.) In accordance with this transfer of the trustee duties to U.S. Bank, and in accordance with the provisions of the Pooling and Service Agreement, Wells Fargo executed in favor of U.S. Bank documents to effect the assignment of the Loan, an allonge for the Note, and an assignment of the Mortgage. (Killick Aff., Ex. F, G, H.) The mortgage assignment was subsequently recorded with the Recorder's Office of Luzerne County, Pennsylvania on June 28, 2010, as Instrument No. 5920772, in Book 3010, Page 107161. (Killick Aff., Ex. H.)
In accordance with the terms of the Note and the Mortgage, Plaintiff was obligated to pay to U.S. Bank on the first of each month principal and interest in the amount of $14,683.69, (Killick Aff., Ex. A, Note § 1), together with other charges due to be paid under the Mortgage for taxes, insurance, and replacement reserves, (Killick Aff., Ex. B, Mortgage § 3). Other than the replacement reserve monthly payment, which is $695.75, the mortgage does not provide the specific amounts that are due to be paid each month for taxes and insurance. However, Defendant admitted in its answer that the aggregate monthly payment had been $20,408.83 until August 2010, when Defendant unilaterally reduced its payment to the lender to $14,683 -- a payment that only covered the required principal and interest charges. (Doc. 10, Answer ¶ 13(ii).)
Section 7.1 of the Note defines an "Event of Default" to include, inter alia, the borrower's "failure to pay any amounts owed pursuant to this Note within five (5) days after such payment is due." (Killick Aff., Ex. 1, Note § 7.1.) The Mortgage similarly defines an "Event of Default" to include "Borrower's failure to pay . . . within five (5) days of the due date, any of the Indebtedness, including any payment due under the Note." (Killick Aff., Ex. 2, Mortgage § 21(a).)
In addition to the foregoing default provisions, the Note provides for late charges and a default interest rate upon a payment default, and both the Note and the Mortgage contain acceleration clauses that provide for the outstanding indebtedness due under the Note and Mortgage to become due and payable immediately. (Killick Aff., Ex. 1, Note § 7.2; Ex. 2, Mortgage § 22.) The Mortgage also authorizes the lender to "institute and maintain an action of mortgage foreclosure against any of the Property, through judicial proceedings or by advertisement, at the option of Lender, pursuant to the applicable statutes, ordinances, or rules of civil procedure." (Killick Aff., Ex. 2, Mortgage § 49(b).)
By letter dated March 22, 2011, Plaintiff's counsel sent the borrower
a "Notice of Default and Acceleration," which contained a formal
demand for "the immediate and full payment of the entire Indebtedness,
including, without limitation, all unpaid principal and accrued and
unpaid interest, late charges and default interest." *fn2
(Killick Aff., Ex. N, Notice of Default at 2.) Appalachian did not respond to
the demand, and instead entirely discontinued making any payments
under the Note and Mortgage beginning in April 2010.*fn3
(Compl. ¶ 14; Answer ¶ 14.)
As a result of Defendant's default and continued delinquency, as of February 1, 2012, the amount the lender claimed to be due and owing under the Loan was $2,655,084.90, with interest continuing to accrue at the contractual default rate in the amount of $707.35 per day.*fn4
Plaintiff commenced this foreclosure action by filing a complaint in the United States District Court for the Eastern District of Pennsylvania on May 3, 2011. (Doc. 1.) The case was subsequently transferred to this Court, and Appalachian filed its answer and affirmative defenses on July 26, 2011. (Doc. 10.) Fact discovery ended on December 12, 2011, and Plaintiff moved for summary judgment on February 13, 2012. (Doc. 26.) The motion is fully briefed (Docs. 26-1, 30, 31, 32, 33, 35.) and is ripe for disposition.
On the same day Plaintiff moved for summary judgment, Defendant moved to strike certain documents Plaintiff relies on in its summary judgment papers, on the grounds that the documents were not timely produced to Defendant's counsel as part of Plaintiff's initial disclosures, or pursuant to discovery requests. (Doc. 26.) This motion is also fully briefed (Docs. 27, 29, 34.) and is ripe for disposition.
On April 10, 2012, the Court heard oral argument on Plaintiff's motion for summary judgment, and on Defendant's related motion to strike documents, or for an alternative enlargement of the discovery period. Following this hearing, the parties engaged in settlement negotiations in an attempt to mediate a resolution of this dispute.
On May 1, 2012, the parties wrote to the Court to request that they be provided additional time to continue their settlement talks (Doc. 45.), and the Court entered an order directing the parties to report back to the Court by June 2, 2012, regarding the status of the settlement discussions. (Doc. 46.) At the parties' request, the Court subsequently entered an order directing the parties to report back by July 2, 2012, on the status of their negotiations.
Those negotiations ultimately proved unsuccessful, and upon consideration of the pending motions, the Court now finds that Plaintiff is entitled to summary judgment in its favor, and that Defendant's motion to strike, or to enlarge the discovery period is without merit, and would serve no meaningful purpose in a case where the undisputed facts demonstrate that the borrower has been in default of its obligations under the Note and Mortgage for two years.
In addition, upon consideration of the recently filed motion to substitute Amerco as the proper plaintiff in this action pursuant to Rule 25 of the Federal Rules of Civil Procedure, that motion will be granted. The Court finds Plaintiff's arguments that U.S. Bank and Amerco have not demonstrated standing, or have somehow not authenticated the documents identifying the loan documents and their assignments to U.S. Bank and from U.S. Bank to Amerco to be ...