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Juza v. Wells Fargo Bank N.A.

United States District Court, E.D. Wisconsin

June 5, 2019

THOMAS J. JUZA, Plaintiff,
v.
WELLS FARGO BANK, N.A., as Trustee for The Registered Holders of Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2006-C4 Trust, THE REGISTERED HOLDERS OF CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP., COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-C4 TRUST, KEYBANK NATIONAL ASSOCIATION, and KEYCORP, Defendants.

          DECISION AND ORDER GRANTING MOTION TO DISMISS

          William C. Griesbach, Chief United States District Judge.

         On November 26, 2018, Plaintiff Thomas J. Juza filed a complaint against Defendants Wells Fargo Bank, N.A. (Wells Fargo), as Trustee for The Registered Holders of Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2006-C4 Trust (Trust), the Trust, KeyCorp Real Estate Capital Markets, Inc. (KRECM), [1] and KeyCorp in Brown County Circuit Court, alleging breach of contract and breach of duty of good faith and fair dealing claims against the Trust as well as tortious interference with contract and tortious interference with prospective economic advantage claims against the Trust, KRECM (now KeyBank), and KeyCorp. The defendants removed the case to this court on January 4, 2019. The court has jurisdiction under 28 U.S.C. § 1332. Before the court is the defendants' motion to dismiss the complaint. For the reasons stated below, the defendants' motion will be granted.

         LEGAL STANDARD

         “A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges the viability of a complaint by arguing that it fails to state a claim upon which relief may be granted.” Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 736 (7th Cir. 2014); Fed.R.Civ.P. 12(b)(6). Surviving such a challenge requires that the plaintiff allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “Factual allegations must be enough to raise a right to relief about the speculative level.” Id. at 555. When reviewing a motion to dismiss for failure to state a claim or for lack of standing, a court must accept all well-pleaded facts as true and draw all reasonable inferences therefrom in the plaintiff's favor. Doe v. Vill. of Arlington Heights, 782 F.3d 911, 914-15 (7th Cir. 2015); Reid L. v. Ill. State Bd. of Educ., 358 F.3d 511, 515 (7th Cir. 2004). “[W]hen the allegations of the complaint reveal that relief is barred by the applicable statute of limitations, the complaint is subject to dismissal for failure to state a claim.” Logan v. Wilkins, 644 F.3d 577, 582 (7th Cir. 2011) (citations omitted).

         ALLEGATIONS OF THE COMPLAINT

         In April 2006, LaSalle National Bank (LaSalle), as lender, made a loan (the Loan) to Juza Investments II, LLC (Juza II or Borrower), as mortgager, for $17.575 million. The Loan was secured by mortgages (collectively, the Mortgage) upon six commercial properties (the Properties). Juza executed a personal guaranty (the Guaranty) for the benefit of La Salle, pursuant to which he personally guaranteed the obligations of the Borrower under the Loan in certain circumstances.

         In September 2006, La Salle assigned the Loan, Mortgage, and other loan documents to Wells Fargo, as Trustee for the Trust. The Trust is a special purpose investment vehicle utilized to pool commercial mortgage loans and to issue mortgage-backed securities therein on a tax-advantaged basis. A Pooling and Servicing Agreement (PSA) dated September 1, 2006, governed and continues to govern the actions of Trust participants, including Wells Fargo and KeyBank, the Trust's master servicer. As master servicer, KeyBank was charged with diligently administering and servicing the Trust's loans and defending any litigation against the Trust. KeyCorp is a bank holding company that controlled and directed the actions of KeyBank with respect to the administration and servicing of the Loan.

         In February 2008, Juza and Juza Investments III, LLC (Juza III)-an entity wholly owned by Juza, which, together with Juza II, owned the Properties collateralizing the Loan-entered into a Membership Interests Purchase Agreement (the Purchase Agreement) with Daniel A. Schmidt Properties, LLC (Schmidt LLC). The Purchase Agreement called for Schmidt LLC to pay $23 million, or $5, 739, 205 in excess of Juza II's then-current balance of the Loan, to acquire Juza's equity interests in Juza II. The purchase price was to be paid in three components: (1) Schmidt LLC agreed to assume the balance of the Loan ($17, 260, 795), (2) pay Juza $4, 739, 205 in cash, and (3) execute a promissory note to Juza for the balance of the purchase price. At all relevant times, Daniel A. Schmidt (Schmidt), the principal of Schmidt LLC, had a net worth far exceeding Juza's.

         Section 15 of the Mortgage contained a “due on sale” clause, which restricted the right of Juza II to transfer the Properties while the Loan was outstanding and contained limitations on the transfer of equity interests in Juza II to a third-party purchaser. Section 15(c) of the Mortgage provided that a sale of the Properties and assumption of the Loan “may be permitted during the term of the Note to any entity, subject to Lender's prior written consent, which shall not be unreasonably withheld or delayed, ” provided that certain terms and conditions were satisfied. Dkt. No. 1-2 at ¶ 14. On March 6, 2008, in an effort to comply with Section 15(c) of the Mortgage, Juza sent a letter to KeyBank with the Purchase Agreement as an attachment, requesting on an expedited basis that KeyBank, on behalf of the Trust, consent to Juza's assignment of his equity interests in Juza II to Schmidt LLC.

         On April 2, 2008, through a series of emails, KeyBank responded, informing Juza that his request would be reviewed and that KeyBank required various information from Juza and Schmidt LLC related to the request. On April 21st and 22nd, respectively, Juza and Schmidt LLC, through counsel, provided all of the requested information. KeyBank continued to make “unending requests” for further information, and despite Juza and Schmidt LLC providing the requested information, KeyBank, on May 21st and via a different representative than was previously involved in the approval process, sent an “intentionally dilatory, obfuscatory and purposely deceptive” email to Schmidt LLC's counsel communicating KeyBank's concern that Schmidt LLC was “not putting any cash into the deal, he's simply assuming all of Mr. Juza's debts.” Id. at ¶¶ 30-31.

         Despite believing that their initial Purchase Agreement addressed KeyBank's concern, Juza and Schmidt LLC entered into an Amendment to the Purchase Agreement (Amended Purchase Agreement) in an attempt to meet KeyBank's “illusory, bad faith demands.” Id. at ¶ 34. The Amended Purchase Agreement provided that Schmidt LLC would put $5, 739, 205 in cash into the deal, part of which would be used to satisfy outstanding obligations of Juza II and Juza III, and the remainder of which would be paid directly to Juza. In email exchanges between KeyBank and Schmidt LLC's counsel from May 28th to June 4th, KeyBank demanded to know how Schmidt LLC intended to pay the cash amount, counsel indicated that Schmidt's employer would arrange to pay him a bonus sufficient to cover the down payment, and KeyBank stated “KeyBank's approval will be conditioned upon the payment of the bonus.” Id. at ¶ 40.

         KeyBank then demanded further information from Juza and Schmidt LLC and, for the first time, informed them that “[i]f and when KeyBank approves the case it will go to the Special Servicer” and the “Directing Certificateholder, ” who would have twenty business days to review the case and make their recommendation on consent. Id. at ¶ 41. In a June 16th email to Schmidt's counsel, KeyBank warned that the transaction would be rescinded if KeyBank did not receive the requested information by June 20th. On June 23rd, KeyBank issued a termination letter to Juza and Schmidt LLC, stating that their request for consent was rescinded and that they could resubmit their request in the future if they choose. As a result of KeyBank's delay and eventual rescission, Schmidt terminated the Amended Purchase Agreement, causing Juza to suffer millions of dollars of damages.

         At some point after Juza and Schmidt LLC's proposed deal fell through, Juza II defaulted on the Loan, which resulted in Wells Fargo instituting an action in Wisconsin state court, Brown County Circuit Court No. 10-CV-2340 (the Prior Action), against Juza II for foreclosure on the Properties that collateralized the Mortgage and against Juza for a money judgment pursuant to his Guaranty. Juza filed a counterclaim against Wells Fargo in the Prior Action, alleging that Wells Fargo and the Trust, through KeyBank, unreasonably delayed and failed to approve the assignment of his equity interests in Juza II to Schmidt LLC, in breach of its loan agreement with him and Juza II.

         On November 29, 2010, Wells Fargo moved for summary judgment. By orders filed on November 10 and 22, 2011, the state court granted summary judgment to Wells Fargo on the foreclosure claims against Juza II but denied summary judgment against Juza. Following the denial of summary judgment, Wells Fargo and Juza entered into a Stipulation to Dismiss Certain Claims Without Prejudice (Stipulation), which was filed on June 12, 2012. On November 28, 2012, based on the Stipulation, the court filed an Order Dismissing Certain Claims and Thomas J. Juza Without Prejudice (Dismissal Order). The Dismissal Order dismissed without prejudice “Mr. Juza's counterclaim against [Wells Fargo]” ...


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