United States District Court, D. Maryland
WILMINGTON TRUST, NATIONAL ASSOCIATION as Trustee for the Benefit of the holders of CoreVest American Finance 2018-2 Trust Mortgage Pass-Through Certificates
HOMES4FAMILIES, LLC, et al.
DEBORAH K. CHASANOW UNITED STATES DISTRICT JUDGE.
pending and ready for resolution in this breach of contract
case are the motion for entry of default, (ECF No. 13), and
the motion for appointment of receiver, (ECF No. 3), filed by
Plaintiff Wilmington Trust, National Association. The issues
have been briefed, and the court now rules, no hearing being
deemed necessary. Local Rule 105.6. For the following
reasons, the motion for entry of default will be denied in
part and granted in part, and the motion for appointment of
receiver will be denied.
27, 2019, Plaintiff Wilmington Trust, National Association
(“Plaintiff”) filed a complaint against Defendant
Homes4Families, LLC (“Defendant Homes4Families”),
Defendant MRV Investments, LLC (“Defendant MRV
Investments”), and Defendant Northwest Bank
(“Defendant Northwest”) (collectively,
“Defendants”). (ECF No. 1). Plaintiff filed the
presently pending motion for appointment of receiver on the
same day. (ECF No. 3). Defendants failed to file a timely
answer, pleading, or other valid defense to the complaint.
(ECF No. 13, at 3 ¶ 9). Defendants also failed to file a
timely opposition or other response to the motion for
appointment of receiver. (Id. ¶ 10). Plaintiff
filed the presently pending motion for entry of default on
September 5, 2019. (Id., at 3).
complaint asserts two claims against Defendant
Homes4Families: breach of contract and appointment of
receiver.(ECF No. 1, at 6-7). The breach of contract
claim arises out of a $743, 250.00 loan agreement, dated
October 18, 2018, evidenced by a promissory note (the
“Note”) and secured by a deed of trust,
assignment of leases and rents, security agreement, and
fixture filing (the “Deed of Trust”). (ECF No. 1,
at 3-6; ECF No. 1-1; ECF No. 1-3, ECF No. 1-5). Plaintiff
“is the current holder of the Note through a series of
[a]llonges endorsing over the Note” and is the current
holder of the Deed of Trust through “a series of
assignments[.]” (ECF No. 1, at 3; ECF No. 1-2; ECF No.
1-4). The Deed of Trust creates a security interest in all
income, including rents, generated by Defendant
Homes4Families's “sole assets” - nine
Maryland properties (the
“Properties”).(ECF No. 1, at 2-4; ECF No. 1-3, at
3-7). Plaintiff contends that Defendant MRV Investments and
Defendant Northwest “have interests recorded in the
chain of title of the subject realty, and as such are
necessary parties to this litigation.” (ECF No. 1, at
Homes4Families owes $7, 351.85 monthly to Plaintiff. (ECF No.
1, at 4 ¶ 15). Plaintiff alleges that Defendant
Homes4Families “never made a full or timely
payment.” (Id., at 5 ¶ 16). Defendant
Homes4Families “failed to make the first payment. . .
when due, and has made no subsequent full, monthly
payments.” (Id.). Instead, Defendant
Homes4Families made only four partial payments: (1) $2, 500
on January 14, 2019; (2) $3, 000 on March 6, 2019; (3) $1,
000 on March 29, 2019; and (4) $3, 000 on April 29,
2019.” (Id., ¶ 17).
Homes4Families's “failure to pay is an Event of
Default” under the loan agreement “and results in
full acceleration of the debt.” (ECF No. 1, at 5 ¶
18; ECF No. 1-5, at 15). Plaintiff “sent a Notice of
Default and Acceleration to [Defendant Homes4Families] on
March 8, 2019” (the “Default Notice”). (ECF
No. 1, at 5 ¶ 19; ECF No. 1-6). The Default Notice
instructed Defendant Homes4Families to hold all rents in
trust for Plaintiff. (ECF No. 1-6, at 3). The Default Notice
also informed Defendant Homes4Families that failure to remit
the outstanding balance of the loan may result in Plaintiff
pursuing its remedies, including receivership, as assented to
by Defendant Homes4Families in the Deed of Trust. (ECF No.
1-6, at 3; ECF No. 1-3, at 17).
Homes4Families has not cured the default, has not responded
to Plaintiff's attempts to communicate regarding the
default, has not provided any information regarding the
status of the Properties, and has not provided an accounting
of rents collected. (ECF No. 1, at 5 ¶ 21). Since the
default, Defendant Homes4Families “has refused to turn
over a rent roll or otherwise account for post-default rental
income of $87, 900.00, the monthly market value of rent for
the collateral properties being $14, 650.00.”
(Id., ¶ 22). Plaintiff calculates that it
“is owed no less than $1, 108, 436.54 on the Note as of
June 7, 2019.” (Id., ¶ 23).
Homes4Families's untimely answer asserts that it
“is not a signatory to the note” and that
“[t]he note [bears] a forged signature[.]” (ECF
No. 14, at 3 ¶ 16). Defendant Homes4Families suggests
that it knows the identity of the third party that
purportedly forged the signature. (Id., at 7 ¶
38). Despite Defendant Homes4Families's contention that a
third party forged its manager's signature on the
promissory note, Defendant Homes4Families denies that it
“never made a full payment” and denies that it
made only four, partial payments. (Id., at 4 ¶
25-26). Despite these denials, Defendant Homes4Families
admits it failed to cure the default. (Id., at 5
Entry of Default
Fed.R.Civ.P 55(a), “[w]hen a party against whom a
judgment for affirmative relief is sought has failed to plead
or otherwise defend, and that failure is shown by affidavit
or otherwise, the clerk must enter the party's
default.” Generally, “[a] defendant must serve an
answer. . . within 21 days after being served with the
summons and complaint[.]” Fed.R.Civ.P. 12(a).
summons and complaint were served upon Defendant
Homes4Families on July 30, 2019. (ECF No. 8). On August 27,
2019, the court ordered Plaintiff to “file and serve
[on Defendants] a motion for entry of default by the
Clerk[.]” (ECF No. 10). On September 5, 2019, Plaintiff
filed the presently pending motion for entry of default. (ECF
No. 13). In the motion, Plaintiff contends that the time for
Defendant Homes4Families to plead or otherwise defend expired
no later than September 3, 2019. (ECF No. 13, at 3 ¶ 8).
On November 1, 2019, Defendant Homes4Families filed an
untimely answer. (ECF No. 14). In its answer, Defendant
Homes4Families vaguely challenges Plaintiff's service.
(Id., at 6 ¶ 37). Although Defendant
Homes4Families did not seek leave to file its untimely
answer, Plaintiff's motion for entry of default against
Defendant Homes4Families will be denied at this time because
there is a “strong policy that cases be decided on
their merits” within the United States Court of
Appeals for the Fourth Circuit. United States v. Shaffer
Equip. Co., 11 F.3d 450, 453 (4th Cir. 1993).
Defendant MRV Investments and ...