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
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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NASSAU
MASS OP , LLC, et aI.
- against -
Index No. 15952/2011
S. BANK NATIONAL ASSOCIATION , et al.
LAWRNCE K. MAS
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 ("
Principal Global Investors , LLC ("Principal Global Investors ) and C- III Asset Management
III Asset Mangement"
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
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
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
itself was to refinance plaintiffs ' existing mortgage on a shopping center in Massapequa , New
York, known as 5500 Sunse Highway.
The Loan contaned a Lockbox and Securty Agreement, centr to
Exh C (the "Lockbox Agreement").
the curent action.
Lockbox Agreement provides tht
to maitain a cert debt service coverage ratio ("DSCR" ).
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
make payments to fud
2 plaintiffs are
ta and insurance escrow accounts. Agreement
On Janua 11 2011 , Principal Global Investors notified plaintiffs tht
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,
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
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
2011. Mot Br at 2. Plaitiffs
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.
dispute with an offcer of plaintiffs , in a negotiation regarding an unelated propert.
Plaitiffs aver tht defendats
manufactued the purorted trgger event as " retrbution" for that
separate dispute. Mot Br at 3.
On November 1
2011, Principal Global Investors sent a lettr
made payments for ta
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
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
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.
A movant seeking a preliminar injunction must demonstrate: (i) a likelihood of success
on the merts; (H)
equities is in its favor.
if the injunction is not granted; and (Hi) tht the balance of the
Aetna Ins. Co.
Confer Bethpage, LLC,
Capasso 75 N.
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
ha not been a "trgger
the implied covenants of good faith and fai
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
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.
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.
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
have failed to establish a likelihood of success on the merits.
As such, plaitiffs
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
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
clai in the
5 See also Twin Holdings of Del. LLCv. CWCapital, LLC
Misc. LEXIS 112 , at "'24- 25 (N. Y.
tht the plaintiffs ,
2d 784 , 2010 N.
Nassau Cty. Jan 19 2010) (where the cour found inter
having failed to provide documentar support for their allegations
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
contract does not preclude a findig of waiver.
a no-waiver provision in
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
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
to be a waiver of any other
or subsequent breach.
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.
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
intentiona abandonment of a known right."
Town of Hempstead
Vilage of Freeport,
15 A.D.3d 567, 569 (2d Dep t 2005). Waiver requies more than merely
having enforced tht
Dine- Mate, Inc.
2d 489, 491- 92 (2d
Dep t 2002). Where a no-waiver clause requires a wrtten stipulation to change the agreement
conduct does not result in waiver.
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.
Fed. Ins. Co. ,
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
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
Accordingly, it is
sequence #1 ,
motion of plaintiffs Mass OP , LLC and Mass One, LLC , motion
for a prelimina injunction is hereby denied in ful; and it is
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.
APR 18 2012
COUNTY CLERK' S OFFICE