2207 Pavilion Assoc., LLCv.Plato Foufas Co.

Supreme Court of the State of New York, New York CountyDec 21, 2007
604132/2005 (N.Y. Misc. 2007)
604132/2005856 N.Y.S.2d 272007 N.Y. Slip Op. 52484

604132/2005.

Decided December 21, 2007.


Plaintiffs 2207 Pavilion Associates, LLC ("Associates") and Pavilion Real Estate Holdings ("Holdings") seek a Temporary Restraining Order directing Defendant 2207 Pavilion Venture, LP ("Venture") to discharge or cancel a lis pendens filed in Missouri, which relates to the property known as the Pavilion Apartments in Maryland Heights, Missouri (the "Property"), and authorizing Holdings to enter into an agreement to refinance the Property, without the consent of Venture.

It is undisputed that Venture filed the lis pendens in December 2006, more than a year after its counterclaims, relating to its promotional interest in the Property, were filed in this action. As a result of this lis pendens, Holdings avers that it is now unable to obtain immediate refinancing upon favorable terms. Holdings claims such refinancing is essential to prevent a potential Event of Default under the loan documents.

At an earlier stage in this action, I required a $1.5 million undertaking to secure this promotional interest. (TRO H'rg Tr. Nov. 29, 2005.) Although on several occasions, including Dec. 14, 2006, Venture requested that I increase the amount of the undertaking, I refused. ( See Letter of William Charron, Dec. 14, 2006.) Thereafter, that same day, Venture filed this lis pendens. (Klepper Affirm. Exh. D.)

Missouri law places "no limitation or qualifications on the absolute privilege it accords lis pendens notices." Birdsong v. Bydalek, 953 S.W.2d 103, 114 (Mo.Ct.App. 1997). As Birdsong held, "motive" is not relevant to determining whether a lis pendens was authorized. Id. However, pursuant to the relevant Missouri statute, a lis pendens is only authorized in a civil suit "based on any equitable right, claim or lien, affecting or designed to affect real estate." Mo. Ann. Stat. § 527.260. Here, the counterclaims do not relate to such an equitable right, claim or lien. (Klepper Affirm. Exh. D.) Rather, they relate to the "promotional interest" of Venture ( id.), which is defined in the Operating Agreement, as the "right of Venture to receive Promotional Distributions pursuant to this Agreement" (Bergstein Aff. Exh. B ¶ 1.1, p. 13). Moreover, it is clear that Venture has no "ownership interest in any Company property in its individual name. (Id. at ¶ 13.15). I agree with Plaintiffs that this is an "action for damages and for declaratory relief concerning the parties' rights under the operable agreements." (Pl. Mem. of Law 3.)

According to Venture, the threshold issue before me is whether I have the power to discharge the Missouri lis pendens. While I certainly do not have the power to direct a Missouri official to discharge the lis pendens, it seems to be clear that, because I have personal jurisdiction over Venture, a party to this lawsuit, I have the power to direct it to take an act or acts related to this action. Iannazzo v. Stanson, 27 AD3d 272 (1st Dep't 2006).

The question, then, is the traditional one in considering whether to issue a TRO, i.e., has there been a showing of immediate and irreparable injury if the Defendant is not restrained prior to a hearing on the preliminary injunction application? This normally refers to maintenance of the status quo. Here, I recognize that if I grant the requested TRO, it would be tantamount to granting the relief sought by the preliminary injunction. Nonetheless, this is not, in and of itself, a basis to deny the requested relief.

There are two prongs to the requested provisional relief: (1) that I require discharge or cancellation of the lis pendens, and (2) that I authorize Holdings to enter into a refinancing agreement without the consent of Venture.

Turning to the second prong first, there is no reason for me not to grant this relief, inasmuch as Section 6.4 of the Operating Agreement provides that, "Holdings shall have the right, power and authority . . . to do or take without the consent of [Venture], any Major Decision," including the refinancing of the Senior Loan (Bergstein Aff. ¶¶ 6.4, 6.4.3, 6.4.6), and there is no opposition to this prong.

Turning now to the question of whether I should direct Venture to discharge or cancel the lis pendens, it is clear to me that this lis pendens filed under Missouri law was not authorized. This however, is not a determination that I have jurisdiction to discharge the lis pendens, which, of course, I do not. However, as noted above, I do have jurisdiction over Venture, with regard to issues in this litigation. It is in this context that I evaluate this request.

First, the act of Venture, after my denial of its request to increase the undertaking, demonstrates that this filing changed the existing status quo. It was not filed contemporaneously with the filing of the counterclaims, which punctures the argument that its filing was compulsory under Missouri law. This places the balance of equities squarely with the Plaintiff. Second, it appears that there is a likelihood of success on the claim that its filing is unauthorized under Missouri law, as there are no counterclaims which fall within the ambit of § 527.260. Third, to prevent the Plaintiff from refinancing upon favorable terms would cause immediate and irreparable injury: the real and undisputed possibility of an Event of Default under the lending agreement, and the possibility that it will not be extended. (Bergstein Aff. ¶ 7.) This eventuality may be one that would not be compensable in monetary terms.

I do not believe that an additional undertaking is necessary to secure Venture's promotional interest. Already in place is a substantial undertaking, which I have declined to increase. According to the letter of Defense counsel, Mr. Charron, dated Dec. 18, 2007, Venture was prepared to enter an agreement to "subordinate its lis pendens rights to the refinancing lender." This, of course, is a clear recognition that it would suffer little, if any, additional harm by permitting the refinancing, which undoubtedly will follow my granting this TRO.

For the foregoing reasons, the requested TRO is granted. The preliminary injunction hearing will be held on Thursday, January 3, 2008 at 3:00 p.m., or at such later time as may be convenient to the parties, following my approval.

Accordingly, it is

ORDERED that defendant 2207 Pavilion Venture, LP is to discharge or cancel the lis pendens filed in St. Louis County, Missouri relating to the property known as the Pavilion Apartments in Maryland Heights, Missouri; and it is further

ORDERED that plaintiff Pavilion Real Estate Holdings, LLC is authorized to enter into agreements to refinance the property known as the Pavilion Apartments in Maryland Heights, Missouri, without the consent of Defendant 2207 Pavilion Venture, LP.