Wilmington Trust, National Association v. Aevri Salina Meadows LLC

Background

Wilmington Trust, National Association, acting as trustee for the benefit of certificate holders and through its special servicer, Rialto Capital Advisors, LLC, brought a foreclosure action against Aevri Salina Meadows LLC, Moshe Rothman, the New York State Department of Taxation and Finance, and various John Doe defendants. The action concerns a commercial property known as the Salina Meadows Office Park, located at 200, 220, and 231 Salina Meadows Parkway and 301 Plainfield Road in Syracuse, New York.

According to the complaint and the materials supporting the motion, the Bank of Montreal made a $25 million commercial mortgage loan to Aevri Salina Meadows LLC in February 2022. The mortgage gave the lender a security interest in the office park and authorized the lender, after a default, to seek appointment of a receiver without notice and without regard to the adequacy of the property’s security or the borrower’s solvency. Wilmington Trust alleged that it became the current owner, holder, and beneficiary of the loan documents through assignments made in April 2022.

Wilmington Trust alleged several defaults, including failure to make required payments, failure to comply with cash-management requirements, failure to provide required financial and rent information, and refusal to replace the property manager. It also presented evidence that the property’s rent roll and value had declined and that two tenants had left. Wilmington Trust later reported that the current property manager threatened to leave because of increasing concerns about nonpayment, which Wilmington Trust said could leave the property and its tenants without needed on-site attention.

Motion and lack of opposition

Wilmington Trust moved to appoint William C. Colucci as receiver. A receiver is a person appointed by a court to manage or protect property during a lawsuit. After Wilmington Trust requested immediate action, the court directed Aevri Salina Meadows LLC and Rothman to state whether they opposed the appointment. The opinion states that neither defendant, nor their counsel, submitted a response, and the court therefore treated the request as unopposed.

Court’s analysis

The court explained that appointing a receiver is an extraordinary remedy used cautiously when necessary to protect a party’s interest in property. Relevant considerations include fraudulent conduct, imminent danger that property will be lost or diminished in value, the inadequacy of ordinary legal remedies, the comparative harm to the parties, the plaintiff’s likely success, and the possibility of irreparable injury. Fraud is not required.

The court found that the mortgage’s receiver provision strongly supported appointment because Wilmington Trust presented uncontested evidence of several defaults. The court also found that Wilmington Trust had a high probability of success in the underlying foreclosure action because that action was based on the same alleged defaults.

The court further found an imminent danger that the property would lose value and that Wilmington Trust would suffer irreparable injury. It relied on the evidence concerning the borrower’s debt, the declining rent roll, the drop in the property’s assessed value, and the current manager’s threat to leave. The court determined that Colucci was suitable because he had more than thirty-five years of experience in asset management, advisory services, and office-property receiverships, and was registered to serve as a court-appointed receiver under New York rules.

Disposition

Judge John P. Cronan granted Wilmington Trust’s motion to appoint a receiver and ordered Colucci’s immediate appointment for the Salina Meadows Office Park during the foreclosure action or until further order. The order was without prejudice to defendants challenging Colucci’s appointment after they appear in the case. The opinion decided the receiver issue; it did not enter a final foreclosure judgment or resolve the separate claims for foreclosure and judgment on Rothman’s guaranty.