U.S. Bank National Association v. 33-34 Vancortland Realty Partners LLC

Background

U.S. Bank National Association, acting as trustee for certificate holders, sued 33-34 Vancortlandt Realty Partners LLC to collect rents from property covered by a mortgage loan. The defendant had borrowed $1,258,000 under loan documents executed on August 9, 2017. The loan and related documents were later assigned to Freddie Mac and then to U.S. Bank.

U.S. Bank alleged that the defendant defaulted by failing to make monthly payments beginning September 1, 2019, among other alleged defaults. The loan documents provided that, after an event of default, the lender could collect the property’s rents. The defendant did not dispute that it was in default on its monthly payments.

The defendant asserted one counterclaim, alleging that U.S. Bank breached the implied duty of good faith and fair dealing. The defendant characterized U.S. Bank’s continued effort to pursue the rent-collection claim as an invalid and meritless claim. U.S. Bank responded that it was exercising remedies provided by the loan documents.

The caption spells the defendant’s name as “Vancortland,” but a footnote states that the correct spelling is “Vancortlandt” and directs the Clerk to update the docket.

Legal standard

The court applied the summary-judgment standard under Federal Rule of Civil Procedure 56. Summary judgment is appropriate when there is no genuine dispute about a material fact and the moving party is entitled to judgment under the law. The court considered the facts in the light most favorable to the defendant, which was the nonmoving party on the counterclaim.

Analysis

The court explained that New York law implies a duty of good faith and fair dealing in every contract. That duty prevents a party from destroying or injuring the other party’s right to receive the benefits of the agreement. But the duty cannot add a new obligation that conflicts with the contract’s express terms.

The mortgage agreement authorized the lender, after an event of default, to collect, sue for, and compromise rents. It also provided that the borrower’s permission to collect rents would automatically end and that the lender would be entitled to rents as they became due. Because the defendant admitted that it was in default on its monthly payments, the court concluded that U.S. Bank was entitled to enforce those contractual provisions.

The court held that exercising rights granted by the contract did not breach the implied duty of good faith and fair dealing. It also stated that it was irrelevant, for purposes of this motion, whether the defendant was in default for additional reasons involving a lien and a notice of pendency, because the monthly-payment default was undisputed. The court declined to address other issues that the defendant acknowledged were not directly before it.

Disposition

Judge Kenneth M. Karas granted U.S. Bank’s Motion for Summary Judgment on the defendant’s counterclaim. The Clerk was directed to terminate the pending motion.