SKW-B Acquisitions v. Stobba Residential

CourtSuperior Court of Pennsylvania
DecidedMarch 1, 2023
Docket73 EDA 2022
StatusUnpublished

This text of SKW-B Acquisitions v. Stobba Residential (SKW-B Acquisitions v. Stobba Residential) is published on Counsel Stack Legal Research, covering Superior Court of Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
SKW-B Acquisitions v. Stobba Residential, (Pa. Ct. App. 2023).

Opinion

J-S27002-22

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37 SKW-B ACQUISITIONS SELLER C, LLC, IN THE SUPERIOR COURT AS SUCCESSOR TO FS RIALTO 2019-FL OF PENNSYLVANIA 1 HOLDER, LLC

Appellant

v.

STOBBA RESIDENTIAL ASSOCIATES, L.P. AND STOBBA ASSOCIATES, L.P.

Appellees No. 73 EDA 2022

Appeal from Order dated December 13, 2021 In the Court of Common Pleas of Philadelphia County, Civil Division, at No. 210501951 _____________________________________________________________

SKW-B ACQUISITIONS SELLER C, LLC, IN THE SUPERIOR COURT AS SUCCESSOR TO FS RIALTO 2019-FL OF PENNSYLVANIA 1 HOLDER, LLC

Appellee

STOBBA RESIDENTIAL ASSOCIATES, L.P. AND STOBBA ASSOCIATES, L.P.

Appellants No. 101 EDA 2022

Appeal from Order dated December 13, 2021 In the Court of Common Pleas of Philadelphia County, Civil Division, at No. 210501951

BEFORE: STABILE, J., NICHOLS, J., and SULLIVAN, J.

MEMORANDUM BY STABILE, J.: FILED MARCH 1, 2023

FS-Rialto 2019-FL 1 Holder, LLC brought this action for breach of

contract against Stobba Residential Associates, L.P. and Stobba Associates

1 J-S27002-22

(collectively “Borrower”), alleging that Borrower defaulted under a promissory

note and loan agreement. SKW-B Acquisitions Seller C, LLC (“Lender”) is the

successor in interest to FS-Rialto 2019-FL 1 Holder, LLC. Borrower is the

owner of residential and commercial properties at 200-210 Lombard Street in

Philadelphia. Lender moved for appointment of a receiver, asserting, inter

alia, that Borrower failed to make monthly payments on the note and

instructed Borrower’s commercial tenants to pay rent into Borrower’s bank

account instead of the account specified in the loan agreement. On December

13, 2021, following two evidentiary hearings, the court issued a memorandum

and order in which it declined to appoint a receiver. The court did, however,

order alternative relief by directing Borrower to instruct commercial tenants

to pay ongoing rents into the account specified in the loan agreement and

instructing Borrower to account for all rents deposited into Borrower’s account.

Lender appeals the portion of the order denying its motion for

appointment of a receiver. Borrower cross-appeals the portion of the order

granting Lender alternative relief.1 For the reasons provided below, we vacate

the court’s order and remand for further proceedings.

On August 2, 2019, Borrower executed a loan agreement with FS CREIT

Originator LLC (“Original Lender”) evidencing a $24,250,000 loan to Borrower.

1The caption of Borrower’s notice of appeal listed FS-Rialto 2019-FL 1 Holder, LLC as Appellee. The proper appellee in this appeal should be SKW-B Acquisitions Seller C, LLC, successor in interest to FS-Rialto 2019-FL 1 Holder, LLC. We have corrected the caption accordingly in Borrower’s appeal at 101 EDA 2022. 2 J-S27002-22

The loan was evidenced by a promissory note dated August 2, 2019 that

Borrower executed in favor of Original Lender. The Loan is secured by an

open-end mortgage, assignment of leases and rents, security agreement and

fixture filing, dated July 30, 2019 and effective as of August 2, 2019, from

Borrower to Original Lender. The mortgage created a lien in favor of Original

Lender on multiple residential condominium unit numbers in the Headhouse

Flats Condominium located at 200-210 Lombard Street, Philadelphia,

Pennsylvania (“the Property”) and on commercial condominium unit B in the

Property.

In connection with the Loan, Borrower executed a cash management

agreement with Wells Fargo Bank, National Association (“Wells Fargo”), and a

deposit account control agreement (“DACA”) with the Original Lender and

Wells Fargo. We will refer to the loan agreement, note, mortgage, cash

management agreement, and DACA as the “Loan Documents.”

Eric Blumenfeld is Borrower’s sole principal. Tenants at the Property

include Giant Food Stores, Wawa, Rita’s Water Ice, South Philadelphia

Pediatrics, LLC, Supercuts, TD Bank, and Target Park U.S. Inc.

The loan agreement requires that “the Monthly Debt Service Payment

Amount shall be paid by Borrower to Lender on each Payment Date.” Loan

Agreement, § 2.2.3. The loan agreement defines monthly debt service

payment amount as meaning, “with respect to each Payment Date, an amount

equal to all interest that is scheduled to accrue on the Outstanding Principal

3 J-S27002-22

Balance during the Accrual Period in which each such Payment Date occurs.”

Loan Agreement, § 2.2.3.

Pursuant to Section 1.1 of the mortgage, Borrower granted a security

interest in the Property. Pursuant to Section 1.1(f) of the mortgage, Borrower

also granted Lender a security interest in, inter alia, “all leases, subleases,

rental agreement, letting, licenses, concessions and other agreements,

whether or not in writing, affecting the use, enjoyment or occupancy of the

Premises (“Leases”) … and all rents, additional rents, payments in connection

with any termination, cancellation or surrender of any Lease, revenues, issues

or profits (“Rents”).” Mortgage, Exhibit C, Section 1(f).

To protect the security interest, the Loan Documents have several

provisions requiring the deposit of rents and other revenues generated by the

Property into specific accounts created and held for the benefit of Lender.

Specifically, pursuant to the loan agreement, the DACA, and the cash

management agreement, Borrower was required to have all Tenants deposit

Rents into the DACA account at Wells Fargo. Rents in the DACA account would

then be disbursed daily into Lender’s cash management account at Wells

Fargo. See Loan Agreement, § 6.1.1; DACA §§ 1(a)-(b) and Sections 2-5;

Cash Management Agreement § C and §§ 1(a) and 7-8. Section 6.1.2 of the

loan agreement requires Borrower to deliver each commercial tenant a notice

instructing it to pay Rent into the appropriate account. Section 4.1.4 of the

loan agreement requires that Borrower provide monthly reports of Rents

4 J-S27002-22

collected from tenants and monthly operating statements of, inter alia, gross

income, operating expenses and capital expenses.

Section 7.1(i) of the Loan Agreement provides that it is an event of

default under the Loan “if any portion of the Debt is not paid on or before the

date same is due and payable or if the entire Debt is not paid on or before the

Maturity Date.” Section 7.1(xii) of the loan agreement provides that it is an

event of default under the loan “if Borrower shall continue to be in default

under any other term, covenant or condition of this Agreement, the Note, the

Security Instrument or the other Loan Documents not specified above [such

as the obligation to instruct Tenants to deposit Rents into the Cash

Management Account] for more than (y) ten (10) days after notice from

Lender, in the case of any default which can be cured by the payment of a

sum of money, or (z) thirty (30) days after notice from Lender, in the case of

any other default.”

Under Section 8.1(g) of the Mortgage, Borrower agreed that upon an

Event of Default,

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Bluebook (online)
SKW-B Acquisitions v. Stobba Residential, Counsel Stack Legal Research, https://law.counselstack.com/opinion/skw-b-acquisitions-v-stobba-residential-pasuperct-2023.