United States District Court, S.D. New York
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. (f/k/a THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION), AS TRUSTEE FOR MORGAN STANLEY CAPITAL I INC., COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-IQ14, Plaintiff,
PETER H. GEBERT, et. al., Defendants.
MEMORANDUM AND ORDER
P. KEVIN CASTEL, District Judge.
Plaintiff, The Bank of New York Mellon Trust Company ("BoNY"), brings this action for breach of contract, fraud, and conversion against defendants Peter H. Gebert, Ellen Gebert, Hampton Randolph, and Evelyn Randolph ("the Guarantors") as guarantors of a loan upon which the borrower defaulted. The Guarantors move to dismiss the case for improper venue, or, in the alternative, transfer venue to the Eastern District of Pennsylvania, where all defendants reside. The guarantors also move to dismiss BoNY's fraud and conversion claims and demand for punitive damages. For the reasons set forth below, the Guarantors' motion to transfer venue is granted. The Court does not reach the merits of the Guarantors' other motions.
BoNY is a national banking association organized under the National Bank Act and is deemed to be a citizen of the state of California and has its principal place of business in Los Angeles, California. (Compl. ¶ 1.) Defendants Peter H. Gebert and Ellen 1. Gebert are individuals who reside at 51 Windermere Drive, Bluebell, Pennsylvania 19422. (Compl. ¶¶ 3-4.) Defendants Hampton C. Randolph and Evelyn Randolph are individuals who reside at 956 Limekiln Pike, Ambler, Pennsylvania, 19002. (Compl. ¶¶ 5-6.) Subject matter jurisdiction is alleged to be based upon diversity of citizenship, 28 U.S.C. § 1332.
In 2007, Wells Fargo issued a loan of $9, 000, 000 to CenterPointe Office Associates, L.P. (Compl. ¶ 9.) The loan was negotiated by Joe Lebano, whose office is based in Pennsylvania. (Gebert Decl. ¶ 3.) The closing occurred in Broad Axe, Pennsylvania. (Gebert Decl. ¶ 4.) Center Pointe issued a promissory note in favor of Wells Fargo and provided MERS, Wells Fargo's nominee, with the mortgage and assignment of rents and leases. (Compl. ¶ 10.) Pursuant to the mortgage, Center Pointe provided MERS a first priority mortgage lien on CenterPointe Office Center, Jacksonville Road, Warminster, Bucks County, Pennsylvania. (Compl. ¶ 11.) The mortgage and assignment of leases and rents provided that upon the occurrence of a default, Center Pointe's license to collect and receive payments would be automatically revoked and MERS would be immediately entitled to possession of the payments, regardless of if MERS enters upon or takes control of the CenterPointe Office Center. (Compl. ¶ 14.) Defendants Peter Gebert and Hampton Randolph are officers of CenterPointe Office Center. (Compl. ¶ 15.) They are both shareholders and officers of Franklin Services Corporation, the general partner of Center Pointe. (Compl. ¶¶ 16-17.) They are also both officers and own partnership interests in Franklin Growth Partners, L.P., the limited partner of Center Pointe. (Compl. ¶¶ 18-19.)
The Guarantors executed a limited guaranty in favor of Wells Fargo, in which they agreed to guarantee the repayment of certain amounts for which Center Pointe is liable to Wells Fargo, including with respect to fraud or willful misrepresentation and failure to apply payments from CenterPointe Office Center to the payments to MERS. (Compl. ¶¶ 21-22.) Foreclosure on the property is not necessary for the lender to collect from the Guarantors, and the lender may exercise its rights against Center Pointe and the Guarantors concurrently. (Compl. ¶¶ 23-24.) The guaranty has a forum selection provision, which provides that "Guarantor... consent[s] to the jurisdiction of any Federal or State Court within the State of New York having proper venue and also consent to service of process by any means authorized by New York or Federal law." (Compl. Exhibit E ¶ 13.) The guaranty also provides that the contract is governed by New York law. (Compl. Exhibit E ¶ 13.)
In 2012, Wells Fargo assigned its rights under the loan and all related documents to BoNY. (Compl. ¶ 28.) By letter dated May 4, 2012, BoNY notified Center Pointe and the Guarantors of Center Pointe's default and the requirements to cure. (Compl. ¶ 31.) By letter dated May 25, 2012, BoNY notified Center Pointe of its failure to cure the defaults, accelerated all amounts due and owing under the loan documents, and demanded payment in full. (Compl. ¶ 32.) BoNY filed a complaint in Mortgage Foreclosure against Center Pointe on August 23, 2012 in the Court of Common Pleas in Bucks County, PA. This action is currently pending. (Compl. ¶ 33.) The Pennsylvania Court appointed NAI Geis Realty Group, Inc. as the receiver for CenterPointe Office Center. (Compl. ¶ 34.)
Upon the default, Center Pointe did not remit the payments to BoNY as required by the mortgage and assignment of rents and leases, and instead continued to retain the payments for its own benefit and transfer the benefits to Franklin Services Corporation, Franklin Growth Partners, and other entities controlled by the Guarantors. (Compl. ¶¶ 37-43.) BoNY alleges that Center Pointe made misrepresentations and material omissions of fact to BoNY in connection with misappropriation of the payments arising from CenterPointe Office Center. (Compl. ¶ 47.)
On a motion to dismiss for improper venue under Rule 12(b)(3), Fed. R. Civ. P, "[i]f the court chooses to rely on pleadings and affidavits, the plaintiff need only make a prima facie showing of venue." Gulf Insurance Co. v. Glasbrenner, 417 F.3d 353, 355 (2d Cir. 2005). The applicable venue statute provides that:
A civil action may be brought in-
(1) a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located;
(2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated; or
(3) if there is no district in which an action may otherwise be brought as provided in this section, any judicial district in which any defendant is subject to the court's ...