Wells Fargo Bank, National Association v. Barrington Park Owner LLC

Background

On February 6, 2024, the court entered an interim order appointing a Receiver. The Receiver took exclusive possession and control of 27 multifamily apartment complexes in Alabama, Arkansas, Florida, Mississippi, Louisiana, Ohio, Tennessee, and Texas. The receivership estate included the real property identified in the loan documents and all other collateral securing Wells Fargo’s commercial loan.

The Receiver was authorized to seek instructions from the court about the estate and the Receiver’s powers and duties. The Receiver later requested discovery to determine the scope of the estate. The dispute concerned the Shadow Creek Apartments, which included two properties: Tract 1 at 2807 Daniel McCall Drive and Tract 2 at 3100 Daniel McCall Drive, both in Lufkin, Texas.

Parties’ Positions

The Receiver argued that discovery was needed to determine whether Tract 2 was part of Wells Fargo’s secured collateral and therefore part of the receivership estate. Wells Fargo supported that request. The defendants initially did not respond, so the court treated the request as unopposed and directed the parties to propose a schedule.

The defendants later requested a conference and objected to discovery. They argued that discovery was premature, that Wells Fargo had not stated in a pleading what relief it sought concerning Tract 2, and that the court might not have jurisdiction over the dispute.

The Receiver responded that evidence suggested Tract 2 should have been conveyed to Shadow Creek. The opinion states that, after the Receiver notified Shadow Creek’s counsel that it would seek court instructions regarding Tract 2, the property was transferred by a special warranty deed to a grantee created in April 2024. The deed stated that the property had been in the grantee’s or its affiliates’ possession and control since June 19, 2019. Joseph Chetrit signed the deed for the grantee, and the opinion states that he was also a principal of Shadow Creek.

Court’s Analysis

The court concluded that discovery was appropriate to determine the scope of the receivership estate. It stated that the estate included Wells Fargo’s secured collateral, including Shadow Creek’s real and personal property. Although the current owner of Tract 2 was not a party to the lawsuit, the court stated that it had jurisdiction to determine the scope of the estate and that Shadow Creek was a defendant.

The court relied on Federal Rule of Civil Procedure 26(b)(1), which permits discovery of nonprivileged information relevant to a claim or defense and proportional to the needs of the case. The court also cited its authority to manage its docket and its broad discretion over pretrial discovery.

Ruling and Schedule

The court denied the defendants’ request for a conference. It granted the Receiver and Wells Fargo’s joint letter-motion and adopted a discovery and briefing schedule:

Discovery

Briefing

- Opposition to the instruction motion was due two weeks after the supporting papers were filed. - Any reply was due one week after an opposition was filed. - Supporting papers were due two weeks after discovery ended.

The court directed the Clerk of Court to close ECF Nos. 88 and 89. The order authorized discovery and set schedules; it did not resolve whether Tract 2 is Wells Fargo’s secured collateral or part of the receivership estate.