Misle Props. v. LBUBS 2004-C2 Cranberry Retail GP

Misle Properties, LLC, Plaintiff, v. LBUBS 2004-C2 Cranberry Retail GP, LLC, trading asLBUBS 2004-C2 Cranberry Retail Limited Partnership, et al., Defendants.

4:18-CV-3121

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEBRASKA

September 30, 2019

MEMORANDUM AND ORDER

This case is before the Court on the defendants' motion to dismiss or, in the alternative, to change venue. Filing 25. The Court will deny their motion.

I. BACKGROUND

The plaintiff, Misle Properties, is a Nebraska LLC that bought a property interest in a Pennsylvania shopping center and assumed liability for a promissory note that had been used to finance the seller's purchase of the property. Filing 17 at 1-3. Defendant "LBUBS 2004-C2 Cranberry Retail GP, LLC" apparently held the promissory note. Filing 17 at 1, 3-4. Defendant LNR Partners is a Florida LLC engaged in property and investment management that, according to the plaintiff, acted as a "special servicer" for the Pennsylvania property and has "through the creation of various shell corporations and/or alter egos, assigned and/or transferred the rights of the parties . . . in such a manner as to be the real party in interest on behalf of all the Defendants in this dispute." Filing 17 at 1-2, 4.

The plaintiff's allegations regarding the sequence of events and financial transactions that led to this case are somewhat hard to follow—but, perhaps that's the point. At some point, the plaintiff allegedly defaulted on the note and other obligations under the original debt agreements associated with the property. Filing 17 at 4. The plaintiff disputed the default, but continued to receive monthly statements on the debt and continued to make the monthly payments. Filing 17 at 4. LNR Partners made its first appearance at that point, and sent the plaintiff a statement assessing past-due default interest that the plaintiff disputed. Filing 17 at 4.

The plaintiff then defaulted on its next monthly payment, allegedly in an effort to invoke "work-out provisions" of the debt agreements. Filing 17 at 4-5. LNR Partners refused to cooperate, and according to the plaintiff, LNR Partners' refusal to provide the plaintiff with information about the balance of the debt frustrated the plaintiff's ability to seek refinancing. Filing 17 at 5.

LNR Partners, either for itself or on behalf of LBUBS, sued to foreclose on the property. Filing 17 at 5. In response, the plaintiff filed a Chapter 11 petition in the Bankruptcy Court for the District of Nebraska. Filing 17 at 5. The plaintiff kept making monthly payments to LNR Partners pursuant to a protection order. Filing 17 at 5. But according to the plaintiff, LNR Partners didn't credit those payments to the plaintiff's debt. Filing 17 at 5-6. Instead, the plaintiff alleges that LNR Partners "held those funds in a suspense account without interest, while the underlying debt continued to accumulate interest, late fees and penalties." Filing 17 at 6.

The plaintiff's bankruptcy proceeding was dismissed, and the plaintiff kept making monthly payments, but LBUBS again pursued foreclosure in Pennsylvania. Filing 17 at 6. The parties tried to mediate the debt and settle the dispute, but failed. Filing 17 at 6. The plaintiff alleges that LNR Partners, for itself or on LBUBS' behalf, "unreasonably delayed the resolution of the litigation." Filing 17 at 6. Under the debt agreements, the plaintiff was obligated to pay the legal fees of LBUBS or LNR Partners in matters relatingto enforcement of the agreements—meaning that, according to the plaintiff, their dilatory litigation tactics were unreasonably running up the plaintiff's tab. See filing 17 at 6.

The plaintiff managed to secure refinancing, and demanded that LNR Partners account for additional charges it had allegedly tacked on to the plaintiff's debt. Filing 17 at 7. LNR Partners refused. Filing 17 at 7. So on June 8, 2016, the plaintiff, allegedly under "protest and duress," paid the amount demanded by LNR Partners for pay-off of the note. Filing 17 at 7. Then, on June 12, 2018, the plaintiff filed this action in state court seeking, in essence, to recover the disputed amounts of its debt. Filing 1-2. The defendants removed the action to this Court. Filing 1.

II. DISCUSSION

The plaintiff's operative pleading asserts seven claims, some of which present multiple theories of recovery:

1) Breach of contract and assumpsit for recovery of payments the plaintiff made that allegedly weren't credited to its debt. Filing 17 at 7-8.

2) Breach of contract and assumpsit for alleged overpayment of the principal amount of the original debt. Filing 17 at 9.

3) Breach of contract and assumpsit for improperly charged late fees. Filing 17 at 9-10.

4) Breach of contract and assumpsit for improperly charged legal fees. Filing 17 at 11.

5) Breach of the implied covenant of good faith and fair dealing in refusing to negotiate in good faith to restructure the debt or cure the default. Filing 17 at 12.

6) Unjust enrichment as to all alleged overpayments. Filing 17 at12-13.

7) Accounting for how payments were allocated to the debt. Filing 17 at 13.

The defendants have moved to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6). Filing 25. In the alternative, they seek a change of venue to the Western District of Pennsylvania. Filing 25.

1. MOTION TO DISMISS

A complaint must set forth a short and plain statement of the claim showing that the pleader is entitled to relief. Fed. R. Civ. P. 8(a)(2). This standard does not require detailed factual allegations, but it demands more than an unadorned accusation. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The complaint need not contain detailed factual allegations, but must provide more than labels and conclusions; and a formulaic recitation of the elements of a cause of action will not suffice. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). For the purposes of a motion to dismiss a court must take all of the factual allegations in the complaint as true, but is not bound to accept as true a legal conclusion couched as a factual allegation. Id.

And to survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a complaint must also contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. Iqbal, 556 U.S. at 678. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. Where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but has not shown—that the pleader is entitled to relief. Id. at 679.

Determining whether a complaint states a plausible claim for relief will require the reviewing court to draw on its judicial experience and commonsense. Id. The facts alleged must raise a reasonable expectation that discovery will reveal evidence to substantiate the necessary elements of the plaintiff's claim. See Twombly, 550 U.S. at 545. The court must assume the truth of the plaintiff's factual allegations, and a well-pleaded complaint may proceed, even if it strikes a savvy judge that actual proof of those facts is improbable, and that recovery is very remote and unlikely. Id. at 556.

(a) Voluntary Payment Doctrine

The defendants' primary argument is that most of the plaintiff's claims are barred by the voluntary payment doctrine. Under Pennsylvania law,¹ "one who has voluntarily paid money with full knowledge, or means of knowledge of all the facts, without any fraud having been practiced upon him cannot recover it back by reason of the payment having been made under a mistake or error as to the applicable rules of law." Liss & Marion, P.C. v. Recordex Acquisition Corp., 983 A.2d 652, 661 (Pa. 2009); see Bordoni v. Chase Home Fin. LLC, 374 F. Supp. 3d 378, 387-88 (E.D. Pa. 2019); Dobson Park Mgmt. v. Prop. Mgmt., 203 A.3d 1134, 1140 (Pa. Commw. Ct. 2019). According to the defendants, the plaintiff voluntarily paid off the debt in 2016, so it cannot recover any alleged overpayment. Filing 26 at 8-13.

But the voluntary payment doctrine does not apply when the plaintiff chose to pay without full knowledge of the facts, or because of the other party's fraud, or under some type of duress. Bordoni, 374 F. Supp. 3d at 388. That's because the decision to pay in the first two circumstances would not be fully informed, and a payment made under duress would not be voluntary. Id.²

The plaintiff has pled facts here that suggest both ignorance of the facts and the possibility of duress. In fact, a lack of full knowledge of the facts is the essence of the plaintiff's claim: the plaintiff claims that the defendants misrepresented the true amount of its debt in a number of ways, resulting in a breach of contract. Because the plaintiff did not pay off its debt under a mistake of law, but rather under a purported mistake of fact occasioned by the defendants' alleged misrepresentations, the voluntary payment defense does not apply. See Liss & Marion, 983 A.2d at 662.

Furthermore, in Pennsylvania, economic duress or business compulsion may exist where there is a pressure of circumstances which compels the injured party to involuntarily or against its will execute an agreement which results in economic loss. Nat'l Auto Brokers Corp. v. Aleeda Dev. Corp., 364 A.2d 470, 474 (Pa. Super. Ct. 1976); see Universal Atl. Sys. v. Honeywell Int'l, 388 F. Supp. 3d 417, 432 (E.D. Pa. 2019); Hopkins v. New Day Fin., 643 F. Supp. 2d 704, 715 (E.D. Pa. 2009).³ The plaintiff claims to have been under such pressure, and the Court takes that allegation as true for purposes of a motion to dismiss. It is true that for duress to be found, the injured party must not have had an immediate legal remedy. Nat'l Auto Brokers, 364 A.2d at 474. The defendants argue that the plaintiff had such a remedy in 2016: resist theforeclosure. But it is far from clear that all of the arguments the...