Defendants contend that, regardless of any typographical errors in
plaintiff's complaint, it is Lend Lease, and not LaSalle, that is the real
party in interest. Defs.' Mem. at 11. Therefore, following the command of
Rule 17, Lend Lease must prosecute this action, and, as noted above, see
Part II.D., supra, the presence of Lend Lease would defeat diversity
jurisdiction. Plaintiff disputes defendants' assertion and maintains that
LaSalle is, indeed, the "real party in interest." Pl.'s Mem. in Opp'n at
9-10. We agree with plaintiff.
At the outset, it should be noted that the "question of which party is
the real party-in-interest is procedural, rather than substantive," and,
therefore, federal law governs the issue at hand. Brocklesby Transport
v. Eastern States Escort Services, 904 F.2d 131, 133 (2d Cir. 1990).
Before turning to whether Lend Lease is the real party in interest, we
note preliminarily that LaSalle, as trustee, "possesses certain customary
powers to hold, manage, and dispose of assets for the benefit of" the
certificateholders and, therefore, "is a real party to the controversy
for purposes of diversity jurisdiction." Navarro Savings Ass'n v. Lee,
446 U.S. 458, 464, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980). Thus, only the
citizenship of LaSalle, not that of the various certificateholders, is
relevant to the diversity inquiry. As LaSalle is diverse from both
defendants, diversity jurisdiction is proper, subject to the following
inquiry of whether Lend Lease is a "real party in interest" to the
Defendants argue that it is "clear from the express terms of the [PSA]
that it is the Special Servicer, Lend Lease — and not the nominal
trustee [LaSalle] — that has the power to manage, dispose of, and
maximize recovery of the loan at issue, including through litigation,"
and, therefore, Lend Lease, not LaSalle, is the real party in interest.
Defs.' Mem. at 11. A review of the PSA, however, does not support this
contention. Rather, it is clear that LaSalle is a traditional trustee who
simply contractually delegated some of its duties to Lend Lease.
Section 2.01 of the PSA states that ASC "does hereby sell, transfer,
assign, set over and otherwise convey to the Trustee [LaSalle] . . . all
the right, title, and interest" that ASC then held in the mortgages.
Clearly, LaSalle, as representative owner, is the real party in interest
to an action alleging breach of contractual terms relating to this
Defendants point to several sections of the PSA that they believe show
that Lend Lease had the "power to service or manage the loans, or make
decisions, including litigation decisions, concerning recovery of loans
that have defaulted," such as the hospital loan at issue here. Defs.'
Reply at 6-7; PSA at §§ 3.01(a), 3.11, 3.17, 3.18. It is true that the
PSA grants Lend Lease "power and authority" to take certain actions with
regard to servicing loans that are in or near default. PSA at §
3.17(b). On the other hand, however, Lend Lease must notify LaSalle upon
taking certain actions, see, e.g., PSA at §§ 3.09(a), must provide
LaSalle with certain documents, see, e.g., id. at 3.10(j), 3.26(b), and
must provide LaSalle with written notice and explanation of events that
would have a "material adverse effect of any of the mortgages that are
the subject of the PSA." Id. at § 3.13(d). In effect, LaSalle is the
master who has delegated some of its duties to its servant, Lend Lease.
Nevertheless, LaSalle remains the holder of legal title to the mortgage
package transferred pursuant to the PSA, including the hospital loan that
is the subject of this dispute. Lend Lease has no title or other
ownership interest in these mortgages, and is strictly limited in its
powers. See, e.g., PSA at §§ 3.09(d), 3.17(b), 3.28(0),
3.30(b)(vi) (all listing various activities in which Lend Lease "shall
not" engage). In addition, Lend Lease may be removed from its position as
Special Servicer "with or without cause" by a majority of the
certificateholders at any time. PSA at § 3.25(b).
Finally, defendants repeatedly assert that Lend Lease is specifically
granted power by the PSA to manage and direct litigation intended to
maximize recovery of loans that have defaulted, and that LaSalle lacks
this power. See, e.g., Defs.' Mem. at 11; Defs.' Reply at 6. Thus,
defendants assert, Lend Lease is "necessarily a real party to this
controversy." Defs.' Reply at 7.
The terms of the PSA demonstrate, however, that it is only LaSalle, and
not Lend Lease, who has the power and obligation to sue on behalf of the
REMIC certificateholders. First, Section 2.01 conveys "all the right,
title, and interest" in the mortgages to LaSalle as trustee. PSA at
§ 2.01 (emphasis supplied). The plain meaning of these words
ordinarily includes the power to bring suit to protect and maximize the
value of the interest thereby granted. Furthermore, there is no need to
rely on authority by implication, for the whole structure of the PSA
demonstrates that, while Lend Lease has the power and duty to attempt to
maximize recovery from defaulted loans or investments in many ways, it is
LaSalle alone who may "take such action as may be appropriate to enforce
such payment performance, including the institution and prosecution of
appropriate proceedings." PSA at § 3.07(c). For example, to obtain
judgment against a borrower, Lend Lease may "prepare" "any court
pleadings," but it is LaSalle alone who "shall execute" such pleadings.
Id. at § 3.11.
In sum, the mere fact that the PSA assigns certain duties to Lend Lease
in connection with maximizing recovery of defaulted loans does not affect
the basic premise, announced in Navarro, that a trustee of an express
trust is the real party in interest when suing on behalf of that trust.
E. Federal Question Jurisdiction
Because we find that this court has diversity subject matter
jurisdiction, we do not reach the question of whether federal question
subject matter jurisdiction exists in this case.
Defendants' motion to dismiss for lack of subject matter jurisdiction
is hereby denied.
IT IS SO ORDERED.