United States District Court, D. Minnesota
Forest Lake Facilities, LLC, Forest Lake, MN, Limited Partnership, Plaintiffs,
Wells Fargo Bank, N.A., Defendant.
M. Koneck, Esq., and Kyle W. Ubl, Esq., Fredrikson &
Byron, PA, counsel for Plaintiffs.
R. Shedlock, Esq., Christopher P. Parrington, Esq., and
Jeremy D. Peck, Esq., Kutak Rock LLP, counsel for Defendant.
MEMORANDUM OPINION AND ORDER
DONOVAN W. FRANK UNITED STATES DISTRICT JUDGE.
plaintiffs in this case are commercial borrowers who filed
suit after the defendant refused to consent to a lease
modification as needed under the mortgage agreement. Without
the modification, the plaintiffs could not make their loan
payments, and the defendant foreclosed on the property. The
plaintiffs now move for a preliminary injunction to extend
the redemption period until the end of the litigation to
leave open their ability to recover the property. For the
reasons discussed below, the Court denies the plaintiffs'
2006, Plaintiffs Forest Lake Facilities, LLC and Forest Lake,
MN, Limited Partnership (collectively, “Forest
Lake”) executed a mortgage with CIBC, Inc. for
real property at 1943 West Broadway Avenue, Forest Lake,
Minnesota (the “Mortgaged Property”) in exchange
for a $5.75 million promissory note. (The Court will refer to
the note and the mortgage collectively as the “Loan
Documents”). The Loan Documents contained a balloon
payment due on July 1, 2016. Payments under the Loan
Documents were “absolute and unconditional.”
(Doc. No. 1-2, . § 2.05.) Subsequently, Defendant Wells
Fargo Bank, N.A. became the registered trustee of the
the balloon payment, Forest Lake needed to sell the Mortgaged
Property. Forest Lake had leased the Mortgaged Property to
Home Depot, and the lease was set to expire on April 30,
2018. In late 2015, Forest Lake began negotiating a lease
extension, which would boost the Mortgaged Property's
modify the lease, Forest Lake needed Wells Fargo's
consent. The Loan Documents contained two relevant provisions
in § 1.10:
(a) Entering Into Leases. Borrower will not enter
into, modify, amend, consent to cancellation of or terminate
any Lease, whether now existing or hereafter entered into,
without the prior written consent of Lender, which consent
may be granted or withheld at Lender's sole discretion. .
(c) Amendments to Leases. Borrower shall not,
without the prior written consent of Lender, amend, modify or
waive the provisions of any Lease or terminate, reduce rents
under, accept a surrender of space under, or shorten the
terms of, any Lease (including any guaranty, letter of credit
or other credit support with respect thereto) (the foregoing,
collectively, a “Lease Modification”).
Lake requested a modification, but the request was ultimately
denied. Without the modification, Forest Lake was unable to
sell the Mortgaged Property to make the balloon payment.
Wells Fargo foreclosed on the Mortgaged Property. Forest Lake
contends that Wells Fargo denied the modification in bad
faith because Wells Fargo wanted to seize the Mortgaged
Property. Forest Lake has brought five claims: (1) breach of
the mortgage; (2) breach of the implied covenant of good
faith and fair dealing; (3) declaratory judgment; (4)
tortious interference with a prospective contract; and (5)
the filing of this action, Wells Fargo held a sheriff's
sale, and Wells Fargo submitted the winning bid for the
Mortgaged Property. Forest Lake has until November 30, 2017,
to redeem the property. Also after filing this action, Home
Depot executed an option to extend the lease, and Forest Lake
has contracted to sell the Mortgaged Property, with a closing
scheduled for November 27, 2017. ...