Wilmington Trust v. 31 Prince Street

Background

Wilmington Trust, National Association, acting as trustee for the identified trust, sued 31 Prince Street, LLC, Wah Kok Realty Corp., and others after a $41 million loan went into default. The loan was secured by mortgages on properties at 31 Prince Street, 46 Prince Street, and 48 Spring Street in New York, New York. The borrowers failed to make the required payment due April 6, 2020, stopped making all payments in October 2020, and the loan was accelerated in April 2022.

Judge John G. Koeltl previously granted Wilmington Trust summary judgment on its foreclosure claims. Summary judgment is a decision that resolves claims when the court determines there is no material factual dispute requiring a trial. He also referred the case to United States Magistrate Judge Barbara Moses to calculate the amount owed. The magistrate judge’s March 25, 2025 document is a report and recommendation addressed to Judge Koeltl.

Parties’ Positions

Wilmington Trust submitted calculations seeking the unpaid principal, ordinary interest, default interest, late-payment charges, property-related advances and fees, attorneys’ fees and costs, special servicing fees, a yield-maintenance premium, and a liquidation fee. The borrowers generally did not dispute the mathematical calculations. They argued, however, that the debt’s increase from $41 million to more than $62 million was unfair and asked the court to reduce the default interest under its equitable powers. They also challenged the documentation supporting attorneys’ fees and costs.

Court’s Analysis and Recommended Amounts

Magistrate Judge Moses concluded that the borrowers had not shown that the loan agreement was unconscionable. Unconscionability requires both an absence of meaningful choice when the contract was made and terms that were unreasonably favorable to the other party. The borrowers provided no evidence supporting either requirement. The report therefore assessed the requested amounts under the loan documents.

The report recommended awarding:

- $41,000,000 in unpaid principal; - $6,665,506.67 in ordinary interest at 5.34% per year through May 6, 2024, plus additional ordinary interest through entry of the foreclosure judgment; - $10,078,098.02 in accumulated default interest through May 6, 2024, but no additional default interest because Wilmington Trust had not provided a sufficiently certain calculation for a later date; - $368,219.54 in late-payment charges; - $1,730,374.86 in tax advances, other property-protection advances, and fees, without interest on those sums; - $179,219.40 in attorneys’ fees and $14,565.33 in costs, plus additional fees and costs incurred through entry of the foreclosure judgment, if properly supported; - $351,916.74 in special servicing fees through May 6, 2024, plus additional fees through entry of the foreclosure judgment; and - $2,050,000 as the yield-maintenance premium.

The report recommended no award for the $995,493.37 in interest allegedly accrued on advances. Wilmington Trust’s submissions did not adequately explain which advances generated that interest, what rate was used, or how the interest was calculated.

For attorneys’ fees, the report found that the number of hours worked was reasonable and that the attorneys’ hourly rates were reasonable, but reduced the rates for non-attorneys to $150 per hour. For costs, it allowed the documented expenses, including the $12,743 audit charge, but disallowed three inadequately documented items: a $105 notice-of-pendency filing fee, a $137.50 “service of court” fee, and $154.14 in delivery charges. It also recommended denying the requests for $35,000 in anticipated legal fees and $2,500 in anticipated sale-publication costs because those services and expenses had not yet been incurred. The report stated that Wilmington Trust could renew those requests after the costs were actually incurred and documented.

The report also recommended that the liquidation fee be determined after the foreclosure sale rather than awarded immediately. If the auction proceeds were sufficient, the fee would be 1% of specified amounts, including the principal, accumulated ordinary interest, certain advances and fees, special servicing fees, and the yield-maintenance premium.

Disposition and Review

Magistrate Judge Barbara Moses recommended entry of a foreclosure judgment awarding the amounts listed above, with the stated limitations. The recommendation was not itself the final foreclosure judgment. The parties were given 14 days to file written objections with Judge Koeltl, unless they received the report solely by mail, in which case they had 17 days. The opinion states that failing to object on time would waive objections and preclude appellate review.