United States District Court, E.D. New York
In re OLYMPIA OFFICE LLC Debtor, MLMT 2005-MCP1 Washington Office Properties, LLC, as assignee of Wells Fargo Bank N.A., as Trustee for the Registered Holders of Merrill Lynch Mortgage Trust 2005-MCP1 Commercial Mortgage Pass-Through Certificates, Series 2005-MCP1 and U.S. Bank, N.A., as Successor-Trustee to LaSalle Bank N.A., as Trustee for the benefit of the Certificate Holders of Commercial Mortgage Pass-Through Certificates, Series MCCMT 2004-C2D, Appellant,
OLYMPIA OFFICE LLC Appellee.
M. Feld, Esq., Thomas Monahan, Esq., Of Counsel Attorneys for
S. Maniscalco, Esq., Jordan C. Pilevsky, Esq., Jordan D.
Weiss, Esq., Of Counsel Attorneys for the Appellee
MEMORANDUM OF DECISION & ORDER
D. SPATT United States District Judge
December 15, 2016, MLMT 2005-MCPI Washington Office
Properties, LLC (the “Appellant” or
“MLMT”) filed an appeal from a December 1, 2016
order (the “EDNY Bankruptcy Court Order”) by the
United States Bankruptcy Court, Eastern District of New York
(the “EDNY Bankruptcy Court”) (Trust, J.). The
EDNY Bankruptcy Court Order ruled that (1) the automatic stay
issued in the underlying EDNY bankruptcy proceeding applied
to seven properties located in the State of Washington (the
“Washington Properties”); (2) the Appellant's
motion pursuant to 11 U.S.C. § 362(d) seeking entry of
an order determining that the automatic stay does not apply
or, in the alternative, granting relief from the automatic
stay to continue with a series of motions before the United
States Bankruptcy Court for the Western District of
Washington (the “Washington Bankruptcy Court”) is
denied; (3) the Appellant may not proceed with its motions
before the Washington Bankruptcy Court concerning the
Washington properties; and (4) the request for a preliminary
injunction filed by Olympia Office LLC is denied as moot.
reasons set forth below, the EDNY Bankruptcy Court Order is
vacated and this case is remanded to the EDNY Bankruptcy
Court for further proceedings consistent with this order.
The Underlying Facts
The CDC Bankruptcy and the Washington Properties
February 10, 2011, CDC Properties I LLC, a Delaware limited
liability company (“CDC”) filed a voluntary
petition for reorganization pursuant to Chapter 11 of the
Bankruptcy Code in the Washington Bankruptcy Court and was
assigned case number 11-41010 (the “CDC Bankruptcy
time of CDC's petition, it was the owner of the
Washington Properties, which consist of: (1) 5000 Capital
Boulevard Southeast, Tumwater, WA 98502; (2) 640 Woodland
Square Loop Southeast, Lacey, WA 98503; (3) 637 Woodland
Square Loop Southeast, Lacey, WA 98503; (4) 629 Woodland
Square Loop Southeast, Lacey WA 98503; (5) 4565
7th Avenue Southeast, Lacey, WA 98503; (6) 645
Woodland Square Loop Southeast, Lacey, WA 98503; (7) 805
South Mission Street, Wenatchee, WA 98801; (8) 8830
25th Avenue Southwest, Seattle, WA 98106; and (9)
1620 South Pioneer Way, Moses Lake, WA 98837.
Washington Properties were allegedly subject to Deeds of
Trust with Security Agreement, Assignment of Leases and Rents
and Fixture Filings (the “Deeds of Trust”) as
well as an Assignments of Leases and Rents and Security
Deposits (the “Assignment of Rents”) that
resulted from a $43, 257.50 loan to CDC on or about September
29, 2004. A deed of trust is “[a] deed conveying title
to real property to a trustee as security until the grantor
repays a loan. This type of deed resembles a mortgage.”
Black's Law Dictionary 502 (10th ed. 2014).
Merrill Lynch Mortgage Lending, Inc. (the “Original
Lender”) provided the loans (the “CDC
Loans”) in the form of two promissory notes, Note A and
Note B (together, the “Notes”). The Deeds of
Trust and the Assignment of Rents for the Washington
Properties were provided to the Original Lender as security.
On or about September 30, 2005, the Original Lender allegedly
assigned Note A to Wells Fargo Bank N.A. (“Wells
Fargo”) and Note B to U.S. Bank N.A. (“U.S.
Bank”). The Appellant is the assignee of both Wells
Fargo and U.S. Bank and is the holder of both Notes.
November 2011, the Washington Bankruptcy Court confirmed
CDC's plan of reorganization (the “CDC
Plan”). Under the CDC Plan, the CDC Loans were
allegedly restructured with the Notes, Deeds of Trust, and
Assignments of Rents remaining in effect with new maturity
dates and revised payment amounts. The Appellant alleges that
the CDC Plan also prohibits the transfer of the Washington
Properties unless the CDC Loans are fully repaid: “The
Reorganized Debtor may sell or refinance the [Washington
Properties], or any component thereof, at any time if the
proceeds of the sale or refinance are sufficient to pay all
Allowed Claims in Classes 1-5 …” CDC Plan.
Allegedly, the Deeds of Trust also prohibits the transfer of
the Washington Properties without the prior written consent
of the Appellant.
Plan also allegedly specifically addresses the Washington
Bankruptcy Court's retention of jurisdiction:
Following the Confirmation Date, the Bankruptcy Court shall
retain jurisdiction over the Reorganized Debtor and the
Assets until the Plan is fully consummated and an order
closing the Case is entered by the Bankruptcy Court. The
Bankruptcy Court's retained jurisdiction shall give it
authority to hear matters for purposes of administering the
Plan, including without limitation: . . . 5. To issue orders
in aid of execution of the Plan and to issue injunctions or
take such other actions or make such other orders as may be
necessary or appropriate to restrain interference with the
Plan or its execution or implementation by any entity; . . .
8. To determine any disputes arising in connection with the
interpretation, implementation, execution or enforcement of
the Plan, the Confirmation Order, or any other order of the
Bankruptcy Court; 9. To recover all Assets, wherever located.
Plan. The Washington Bankruptcy Court closed the CDC
Bankruptcy Case on February 15, 2012.
Post CDC Bankruptcy
the Appellant alleges that CDC defaulted under the CDC Plan
and the Deeds of Trust, the Appellee disputes that claim. On
March 11, 2016, the Appellant commenced non-judicial
foreclosure proceedings involving the Washington Properties.
On May 19, 2016, a Washington State court appointed JSH
Properties, Inc. (the “Receiver”) as the Receiver
over the Washington Properties. This appointment was done at
the request of the Appellant and by the commencement of a
state court suit.
non-judicial foreclosure sale of the Washington Properties
was scheduled for October 21, 2016. Three days prior to the
scheduled sale, Wells Fargo and ...