Mass Op, LLC v U.S. Bank Natl. Assoc.

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Mass Op, LLC v U.S. Bank Natl. Assoc. 2012 NY Slip Op 31098(U) April 2, 2012 Sup Ct, Nassau County Docket Number: 15952/2011 Judge: Lawrence K. Marks Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. ----------------------------------------------------------------------------------------------------------------------------------------- ). [* 1] SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NASSAU MASS OP , LLC, et aI. Plaitiffs - against - Index No. 15952/2011 S. BANK NATIONAL ASSOCIATION , et al. Defendats. LAWRNCE K. MAS , 1. Plaintiffs Mass OP , LLC and Mass One , LLC moved for a temporar restraining order and a prelimina injunction against defendats U. S. Ban National Association (" S. Ban" Principal Global Investors , LLC ("Principal Global Investors ) and C- III Asset Management LLC (" III Asset Mangement" BACKGROUND This action involves a loan modification agreement entered into between plaintiffs and Ban of America on or about April 27, 2010 (the " Agreement"). Tuerk Aff 2. The Agreement modified a loan though which plaitiffs borrowed the principal sum of $65, 000 000 from the Principal Life Insurance Company on November 8 , 2006 (the " Loan ! As per both the ful caption and the Id. The Loan afdavit of counel in support of ths motion, U. trstee to Ban of America, Nationa Ban National Association is a defendat as successor Association (which is successor by merger to LaSalle Ban Nationa Association), as trustee for the holders of Bear Stears Commercial Mortgage Securties , Inc. , Commercial Mortgage PassThough Certificates, Series 2006 PWR14. Defendant C- III Asset Management , LLC was formally known as Centerline Servicing LLC. Tuerk Aff [* 2] itself was to refinance plaintiffs ' existing mortgage on a shopping center in Massapequa , New Id. York, known as 5500 Sunse Highway. The Loan contaned a Lockbox and Securty Agreement, centr to Exh C (the "Lockbox Agreement"). The the curent action. Lockbox Agreement provides tht to maitain a cert debt service coverage ratio ("DSCR" ). The Id. the propert needed DSCR is calculated by determinng the net operating income of the propert, an dividing it by the propert' s anual debt service. Under the Agreement, if the DSCR falls below the agreed upon ratio inter alia, required to, make payments to fud 2 plaintiffs are ta and insurance escrow accounts. Agreement 3.4. On Janua 11 2011 , Principal Global Investors notified plaintiffs tht the DSCR had fallen below the agreed upon ratio and a " Trigger Event" had therefore occured. Tuerk Af, Exh D. Shorty thereaer, by email that this was a mistae, issue. Id., and dated Janua 28, 2011 , Pricipal that the ' 'tggers have not been Global Investors acknowledged trggered at this time " for the loan at Exh E. On September 14 , 2011, Pricipal Global Investors again notified plaintiffs that the DSCR had fallen below the ageed upon ratio and, as such, a trgger event had occurred. Id. Exh F. Plaintiffs contend that, based on their calculations , the DSCR had not changed from the time of the Agreement, and certly had not chaged between Janua 28, 2011 - - when Pricipal Global Investrs acknowledged 2011. Mot Br at 2. Plaitiffs between Januar tht no trggering event ha occured assert tht the only thng that changed in this time period 28 and September 14 2011, is tht defendat C- III 2 The agreed upon ratio is 1. - - and September 05: 1. 00. Agreement Asset Mangement ha a 3.4; Lockbox Agreement, at 4. [* 3] dispute with an offcer of plaintiffs , in a negotiation regarding an unelated propert. Plaitiffs aver tht defendats Id. at 2- manufactued the purorted trgger event as " retrbution" for that separate dispute. Mot Br at 3. On November 1 plaintiffs tht 2011, Principal Global Investors sent a lettr uness they made payments for ta and insurance to plaintiffs , notifying impound reserves within five days, an event of default would occur under the Agreement. Tuerk Aff, Exh G , at 2. Should an event of default occur, C- III Asset Manement, as special servcer, would tae over from Principal Global Investors. Plaintiffs contend that this would enable C-III Asset Management to punsh" plaintiffs, in its efforts to gain leverage in the "unelated trsaction solely motivated by retrbution. " Mot Br at Plaintiffs moved by Order to Show Cause for a prelimnar injunction and a temporar restraining order. Pending the restraing order , retu date of plaitiffs ' motion, plaitiffs obtained a temporar that enjoined the defendants from declaring a default under the Agreement pursuat to the November 1 , 2011 letter (the "TRO"). At the argument on the preliminar injunction motion, plaintiffs requested that the TRO remain in place until the resolution of this motion. Defendants consented to ths request, and the TRO was extended. Plaintiffs now seek a prelimi injunction to: (1) enjoin and restrain defendants from tang any action to interfere with plaintiffs ' rights under the Agrement; (2) enjoin and restrain defendats from declarg a default under the Agreement; (3) staying and/or reinstating the cure period, to prevent the alleged event of default; (4) declarg tht there has been no violation of the DSCR; and (5) declarng the relative rights and obligations of the paries under the Agrement. Order to Show Cause , at 2. [* 4] DISCUSSION A movant seeking a preliminar injunction must demonstrate: (i) a likelihood of success on the merts; (H) ireparble ha equities is in its favor. Inc. v. if the injunction is not granted; and (Hi) tht the balance of the Aetna Ins. Co. 81 A. Confer Bethpage, LLC, v. Capasso 75 N. Ths, they J.J.K. Tennis, 3d 629, 629- 30 (2d Dep t 2011). Thus , as a first step, plaintiffs must establish tht on their underlying clais. 2d 860 , 862 (1990); they are likely to succeed , on the merits have wholly failed to do. In the underlying Complait , plaintiffs seek: a determination by this Court that they are not in violation of the D8CR provisions of the Agreement, Loan and Lockbox Agreement (the first cause of action); a judgment of specific performance from defendants, requiring defendants to acknowledge tht there ha not been a "trgger the implied covenants of good faith and fai event, " as a result of defendants ' breaches of deaing in the Agreement, Loan and Lockbox Agreement (the second cause of action); a declaration from the Cour preliminarly staying and/or reinstating the cure period , while the merits of the pares ' underlying dispute are determined by the Cour (the thrd cause of action); and what appears to be a contention that defendants' fabrication " of a trgger event constitutes a tort (the four cause of action). Compl , ~~ 24 , 33 , 42-44. Most fata to their motion, plaitiffs have not identified any errors in Principal Global Investors ' DSCR calculation 3 nor have they provided defendats - - or the Cour - - with 3 Principal Global Investors calculated the DSCR to be 101.65 , also expressed as 1.0165 which was below the 1. 05: 1. 00 ratio required by the Agreement and Lockbox Agreement. LeSher Aff, ~ 39; leSher Aff, Exh L. [* 5] plaintiffs ' own calculation. The accuracy of Principal Global Investors ' DSCR calculation is central to at least the first thee of plaintiffs ' four causes of action. Indeed , although plaintiffs assert that the DSCR has not changed from the time of the Agreement, they have offered no supportng evidence of this position. As the Second Deparent has stated: The decision to grant or deny a prelimin injunction rests in the sound discretion of the Supreme Cour. Where the movant does not demonstrate a likelihood of success on the merits , irreparable damage, and a balance of the equities in his or her favor, the motion should not be granted. ' Whle the existence of issues of fact alone will not justify denial of a motion for a prelimina injunction, the motion should not be granted where there are issues that subvert the plaintiffs likelihood of success on the merits. . . to such a degree that it canot be said tht the plaintiff established a clear right to relief. Here , the plaintiffs failed to demonstrate their entitlement to the drastic remedy of a preliminar injunction. Cooper v. 89 A. D.3d 669 , 669 (2d Dep t 2011) (internal Board of White Sands Condominium, citations omitted). Since the plaintiffs in the instat matter have not demonstrated that the DSCR calculation was incorrect, or even offered any proof that would support such a contention , they have not established a " likelihood of success on the merits (and) ' it canot be said that the plaitiffs) established a clear right' to preliminar omitted). S have failed to establish a likelihood of success on the merits. As such, plaitiffs injunctive relief." Id. (internal citations 4 Plaintiffs aver that , as their four cause of action does not provide an independent basis for the relief sought in this motion , its merits are not addressed. Mot Br , n2. Without addressing the sufciency of plaintiffs ' position on ths , the Cour notes that plaitiffs are contending in their four cause of action that the trgger event was fabricated; the accuracy of the DSCR calculation would therefore appear relevant to ths clai , even if the plaintiffs are opting to not address ths clai in the instat motion. 5 See also Twin Holdings of Del. LLCv. CWCapital, LLC Misc. LEXIS 112 , at "'24- 25 (N. Y. alia tht the plaintiffs , 906 N. Sup. , 2d 784 , 2010 N. Nassau Cty. Jan 19 2010) (where the cour found inter having failed to provide documentar support for their allegations [* 6] At the oral arguent , plaintiffs raised the issue of whether defendants had waived their right to enforce the DSCR provisions. The Cour gave counsel the opportity to submit supplementa papers, if they wished , on that issue. The pares in this action do not dispute that the Lockbox Agreement contans a no-waiver provision. This clause provides that any waivers must be in wrting, waivers of a breach will not be deemed to waive other or later breaches , and a failure to enforce a right will not constitute a waiver of that right. Plaintiffs argu that, even if defendants are correct and the DSCR is not in compliance defendants waived the requiement when defendats acknowledged tht no trgger event existed in Janua 2011, and plaintiffs continued to operate for almost ten months thereafter. PI Supp Br at 3. Plaintiffs aver tht, durng ths time , they operated in reasonable reliance on defendants Janua 2011 representation. Id. at 3-4. Plaintiffs also contract does not preclude a findig of waiver. Id. argue tht a no-waiver provision in at 2- regarding the relevant financial ratio at issue in their cae, had failed to show a likelihood of success as to their clais and their motion for a prelimi injunction was denied). 6 The Cour notes tht affIrmation, but defendant Principal Global Investors submitted a supplemental tht it did not address the waiver issue. Supp LeSher Aff. As such, the Cour declines to include that afrmation in its considerations. 7 Specifically, the provision holds tht: Agreement must be in signed by the par against whom such waiver is sougt to be enforced. No waiver of any breach hereunder shal be deemed Waivers of any term or condition of ths wrtig and to be a waiver of any other or subsequent breach. Except as otherwse provided in ths Agrement, failure by any of the parties hereto to insist upon or enforce any rights herein shall not constitute a waiver thereof. Lockbox Agreement, ~ 23. [* 7] Defendats U. S. Ban and C- III Asset Management counter that they did not waive any of their contractu rights. They are correct in asserting that the law regards waiver as "the volunta and intentiona abandonment of a known right." v. Town of Hempstead Incorporated Vilage of Freeport, 15 A.D.3d 567, 569 (2d Dep t 2005). Waiver requies more than merely having enforced tht right. v. Id.; DeCapua Dine- Mate, Inc. not 2d 489, 491- 92 (2d 292 A. Dep t 2002). Where a no-waiver clause requires a wrtten stipulation to change the agreement conduct does not result in waiver. Kendall v. Kendall 44 A.D. 3d 827, 829 (2d Dep t 2007). Indeed , the Cour of Appeals stated that waiver requires " an intentional relinquishment of a known right and should not be lightly presumed. N. Y.2d 966 , Gilbert Frank Corp. v. Fed. Ins. Co. , 70 968 (1988). Defendats argue tht, far from waiving their rights , their conduct evidences that they exercised their rights at the first opportty, which they claim they were not able to do until the very notices at issue in ths litigation. US BanC-III Asset Mangement Suppl Br at 2. There is insuffcient support for plaintiffs ' contention that the defendants waived any of their rights with regard to the DSCR. Waiver is, therefore , not a basis for determining that the DSCR calculation is anytng less than critical to the issues in the underlying claims. Thus , it remains tht, when plaitiffs failed to demonstrate an error in the DSCR calculation or proffer a DSCR calculation of their own, plaintiffs failed to establish a likelihood of success on the merits of their underlying claims. Plaintiffs are, as such, not entitled to a preliminar injunction. The Cour has considered the paries ' other arguents , and fids them unavailing. [* 8] Accordingly, it is ORDERED tht sequence #1 , the motion of plaintiffs Mass OP , LLC and Mass One, LLC , motion for a prelimina injunction is hereby denied in ful; and it is ORDERED tht the fuer temporar restrainig order, issued on November 10 , 2011 , is hereby vacated; and it is fuher ORDERED that the remainder of the action shal continue. Ths constitutes the Decision and Order of the Cour. Dated: April 2012 ENTER: ENTI=RED APR 18 2012 NASSAU COUNTY COUNTY CLERK' S OFFICE

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