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Willow Grove, Ltd. v. Federal National Mortgage Association

United States District Court, Tenth Circuit

December 31, 2013

WILLOW GROVE, LTD., Plaintiff,



Plaintiff Willow Grove, Ltd. ("Plaintiff") brings this action against Pillar Multifamily, LLC ("Pillar") as successor in interest to Bulls Capital Partners, LLC ("Bulls Capital") (together the "Broker Defendants"), Federal National Mortgage Associate ("Fannie Mae") and Federal Housing Finance Agency ("FHFA") as its conservator (together the "Government Defendants") (collectively "Defendants"). Before this Court are Pillar's Motion to Dismiss Plaintiff's Complaint ("Pillar Motion") (ECF No. 14), and the Government Defendants' Motion to Dismiss ("Government Motion"). (ECF No. 15.) For the foregoing reasons, the Pillar Motion and the Government Motion are both granted.


The following allegations, contained in Plaintiff's operative Complaint and the attached exhibits, are accepted as true for purposes of Defendants' Motions to Dismiss.

Plaintiff owned Willow Grove Village Apartments (the "Willow Grove Property"), a multifamily apartment complex located in Fort Collins, Colorado. (ECF No. 21 at 1.) Plaintiff needed refinancing on a Willow Grove Property loan that was scheduled to come due on or about April 1, 2009. (Compl. (ECF No. 3) ¶ 7.) Plaintiff, through its general partner, initiated discussions with various mortgage brokers, and decided to conduct the refinancing process with Bulls Capital. ( Id. ¶ 15.)

Plaintiff obtained a conditional commitment for a loan refinancing package from Bulls Capital on or about March 20, 2009. ( Id. ¶ 17.) The loan refinancing package included a Multifamily Note ("Note") (ECF No. 7-1) and a Multifamily Deed of Trusts, Assignment of Rents, and Security Agreement ("Deed of Trust") (ECF No. 7-2). Plaintiff committed to entering into a ten-year loan that required Plaintiff to pay a "prepayment premium, " including a yield maintenance prepayment penalty, in the event Plaintiff prepaid the secured debt. (Note pp. 5-6 & Schedule A.) Plaintiff was aware of the prepayment premium before obtaining the conditional commitment for the loan refinancing package. ( Id. ¶ 19.)

Between signing the conditional commitment and executing the loan refinancing package, Plaintiff asked Bulls Capital about the yield maintenance prepayment penalty. (Compl. ¶ 35.) A Bulls Capital representative explained that the formula used to calculate the prepayment penalty was difficult to explain, but that the prepayment penalty would be at least one percent. (Compl. ¶ 35.) Plaintiff indicated that it might sell the Willow Grove Property within five years, and that it did not want to enter into a ten-year loan. (Compl. ¶ 36). Bulls Capital told Plaintiff that there were a limited number of loans available, and if Plaintiff wanted the loan it had to agree to the loan's terms. ( Id. ¶ 37.)

The loan was executed on April 3, 2009 (the "Loan"). (Note p. 1 & Deed of Trust p. 1.) When the Loan closed, Bulls Capital assigned the Loan documents to Fannie Mae. (Compl. ¶ 52.) In 2010, Pillar purchased all of Bulls Capital's assets and became its successor in interest on the Loan. ( Id. ¶ 4.)

On July 13, 2012, Plaintiff entered into a contract to sell the Willow Grove Property. ( Id. ¶ 53.) As a condition to the sale, Plaintiff was required to obtain a release of the deed of trust held by Fannie Mae in order to pass title to the buyers without encumbrance. ( Id. ¶ 54.) Plaintiff notified Fannie Mae that it intended to sell the Willow Grove Property, and requested to prepay the remainder of the loan. ( Id. ¶ 55.) When the Willow Grove Property sale closed on December 31, 2012, Plaintiff paid Fannie Mae the remaining principal of $2, 560, 913.23 and a prepayment penalty of $737, 508.29, which was nearly 30% of the loan principal. ( Id. ¶¶ 55, 59.)

On February 28, 2013, Plaintiff filed this action against Defendants bringing four claims for relief: (1) fraudulent concealment and/or nondisclosure against the Broker Defendants; (2) unconscionable contract against all Defendants; (3) liquidated damages against all Defendants; and (4) unjust enrichment against the Government Defendants. (Compl. pp. 4-8.) The Complaint was filed in the District Court for Larimer County, Colorado. (ECF No. 1-1a.) The Government Defendants removed the action to federal court on March 19, 2013. (ECF No. 1.)


The Government Defendants move to dismiss the claims against them on the basis that the Court does not have subject matter jurisdiction.

A. Legal Standard

Rule 12(b)(1) empowers a court to dismiss a complaint for lack of jurisdiction over the subject matter. Fed.R.Civ.P. 12(b)(1). Dismissal under Rule 12(b)(1) is not a judgment on the merits of a plaintiff's case. Rather, it calls for a determination that the court lacks authority to adjudicate the matter, attacking the existence of jurisdiction rather than the allegations of the complaint. See Castaneda v. INS, 23 F.3d 1576, 1580 (10th Cir. 1994) (recognizing federal courts are courts of limited jurisdiction and may only exercise jurisdiction when specifically authorized to do so). The burden of establishing subject matter jurisdiction is on the party asserting jurisdiction. Basso v. Utah Power & Light Co., 495 ...

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