BANK OF AM., N.A.v.PSW NYC LLC

Supreme Court of the State of New York, New York CountySep 16, 2010
651293/10. (N.Y. Misc. 2010)
651293/10.2010 N.Y. Slip Op. 51848

651293/10.

September 16, 2010.

Counsel for Plaintiff: Venable LLP by, Gregory A. Cross (pro hac vice), David E. Rice, Baltimore MD.

Atty for CW Capital: Michael K. Madden 1270 Avenue of the Americas, New York NY.

Counsel for PSW: Brown Rudnick LLP by Edward S. Weisfelner, David J. Molton, Diane M. Nardi, New York, NY and Joseph F. Ryan (pro hac vice), Cheryl B. Pinarchick (pro hac vice) Boston Mass.


In this action, plaintiffs Bank of America, N.A. and U.S. Bank National Association seek to enforce their rights under an Amended and Restated Intercreditor Agreement dated February 16, 2007 (Intercreditor Agreement). The two-count complaint asserts one cause of action for a declaration of plaintiffs' rights under the Intercreditor Agreement, and one cause of action for injunctive relief preventing defendant PSW NYC LLC (PSW) from acquiring or selling certain equity collateral without first paying plaintiffs outstanding indebtedness under a senior loan, and from causing the commencement of bankruptcy proceedings while the senior loan is outstanding.

Plaintiffs now move, by order to show cause, for a preliminary injunction that enjoins PSW from the conduct complained of in the second cause of action.

Facts

The material facts on this motion, which are not disputed by the parties, are taken from the following documents: the complaint; the affidavit of Andrew Hundertmark (Hundertmark), senior vice president of CWCapital Asset Management LLC (CWCAM), which is the entity acting as "Special Servicer" of the loan and mortgage that are the subject of this action; the affidavit of Michael Ashner (Ashner), the chairman and chief executive officer of Winthrop Realty Trust, an indirect owner and administrative manager of PSW; and the exhibits submitted with these papers. PSW does not dispute Hundertmark's assertion that CWCAM is responsible for administering the Senior Loan on behalf of the Senior Lenders (as these terms are defined below), and that CWCAM has the exclusive right and obligation to administer, service and make all decisions and determinations regarding the Senior Loan and to enforce the documents relating to the Senior Loan, including the Intercreditor Agreement.

In 2007, non-party Tishman Speyer Development Corp. (Tishman) purchased from non-party Metropolitan Tower Life Insurance Company the residential housing development known as Peter Cooper Village and Stuyvesant Town (Property) for $5.4 billion. Tishman created various related entities to complete the transaction, with PCV ST Owner LP and ST Owner LP (together, Borrowers) serving as the entities holding title to the Property. To finance the purchase, the Borrowers secured a loan in the amount of $3 billion (Senior Loan) from Wachovia Bank, N.A. (Wachovia) and Merrill Lynch Mortgage Lending, Inc. (Merrill). The terms of the Senior Loan are stated in an Amended and Restated Loan and Security Agreement, dated February 16, 2007 (Senior Loan Agreement), entered into by Borrowers, and by Wachovia and Merrill as co-lenders (together, Senior Lenders). On the same day, the Borrowers executed and delivered to the Senior Lenders six notes evidencing their indebtedness of $3 billion under the Senior Loan (Notes), each of which is currently held in a mortgage securitization trust (Trust). The plaintiffs are the trustees of those Trusts. The Borrowers also executed a First Amendment to Mortgage, Security Agreement, Assignment of Rents and Fixture Filing, whereby they granted to the Senior Lenders a security interest in the Property (Amended Mortgage).

In order to secure an additional $1.4 billion in financing, the direct and indirect parents of the Borrowers (Junior Borrowers) pledged their direct and indirect ownership interests in the Borrowers and their respective general partners in exchange for 11 mezzanine loans (Junior Loans) issued by various lenders (Junior Lenders), with priority running in sequential order from Junior 1 Loan, as most senior, to Junior 11 Loan, as most junior. Each of the Junior Loans was governed by a separate Mezzanine Loan Agreement (Mezzanine Loan Agreement), dated February 16, 2007. In addition, pursuant to separate Pledge and Security Agreements, also dated February 16, 2007, each Junior Lender was granted a first priority security interest in the corresponding Junior Borrower's ownership interest in the respective subsidiary Borrower or Junior Borrower and that entity's general partner (Equity Collateral). The Junior Lenders were not granted a security interest in the Property and are not creditors of the Borrowers.

Under the Intercreditor Agreement, Wachovia, Merrill and non-party Gramercy Warehouse Funding I LLC were "Junior Lenders." Intercreditor Agreement, Hundertmark Aff., Ex. E, at 1 and 11. Wachovia and Merrill were the original Junior Lenders on, among others, Junior Loans 1 — 3, each of which was in the original principal amount of $100 million. Thus, Wachovia and Merrill were both Senior Lenders and Junior Lenders. Hundertmark states that Junior Loans 1 — 3 were owned by non-parties AIB Debt Management Limited, Deutsche Genossenschafts-Hypothekenbank AG, Hartford Fire Insurance Company, Hartford Life Insurance Company, Concord Real Estate CDO 2006-1 LTD, and Wachovia.

Also on February 16, 2007, Wachovia and Merrill, in their capacities as Senior and Junior Lenders, entered into the Intercreditor Agreement. Plaintiffs identify several provisions of the Intercreditor Agreement that are relevant to their motion for a preliminary injunction. Section 9 is titled " Subordination of Junior Loans and Junior Loan Documents." Intercreditor Agreement, at 59 (emphasis in original). Subsection 9(a) provides, in pertinent part, as follows:

Each Junior Lender hereby subordinates and makes junior the Junior Loan held by such Junior Lender, the related Junior Loan Documents and the liens and security interests created thereby, and all rights, remedies, terms and covenants contained therein to (i) the Senior Loan and the applicable Senior Junior Loans, (ii) the liens and security interests created by the Senior Loan Documents and the applicable Senior Junior Loan Documents. . . . Id. at 59-60.

Section 6 is titled " Foreclosure of Separate Collateral." Id. at 54 (emphasis in original). Subsection 6(d) provides as follows:

To the extent that any Qualified Transferee acquires the Equity Collateral pledged to a Junior Lender pursuant to the Junior Loan Documents in accordance with the provisions and conditions of this Agreement (including, but not limited to Section 12 hereof), such Qualified Transferee shall acquire the same subject to (i) the Senior Loan and the terms, conditions and provisions of the Senior Loan Documents and (ii) the applicable Senior Junior Loans and the terms, conditions and provisions of the applicable Senior Junior Loan Documents, in each case for the balance of the term thereof, which shall not be accelerated by Senior Lender or the related Senior Junior Lender solely due to such acquisition and shall remain in full force and effect; provided, however, that (A) such Qualified Transferee shall cause, within ten (10) days after the transfer, (1) Borrower and (2) the applicable Senior Junior Borrowers, in each case to reaffirm in writing, subject to such exculpatory provisions as shall be set forth in the Senior Loan Documents and the related Senior Junior Loan Documents, as applicable, all of the terms, conditions and provisions of the Senior Loan Documents and the related Senior Junior Loan Documents, as applicable, on Borrower's or the applicable Senior Junior Borrower's, as applicable, part to be performed and (B) all defaults under (1) the Senior Loan and (2) the applicable Senior Junior Loans, in each case which remain uncured or unwaived as of the date of such acquisition have been cured by such Qualified Transferee or in the case of defaults that can only be cured by the Junior Lender following its acquisition of the Equity Collateral, the same shall be cured by the Junior Lender prior to the expiration of the applicable Extended Non-Monetary Cure Period.

Id. (emphasis added).

Section 11(d) is titled " Bankruptcy" ( id. at 66 [emphasis in original]), and subsection (ii) provides, in pertinent part, as follows:

For as long as the Senior Loan shall remain outstanding, none of the Junior Lenders shall solicit, direct or cause Borrower or any other entity which Controls Borrower . . . or any other Person to: (1) commence any Proceeding against Borrower or any SPE Constituent Entity; (2) institute proceedings to have Borrower or any SPE Constituent Entity adjudicated a bankrupt or insolvent; (3) consent to, or acquiesce in, the institution of bankruptcy or insolvency proceedings against Borrower . . . or (9) take any action in furtherance of any of the foregoing. The terms and provisions of this Section 11(d) apply to each Junior Lender solely in its respective capacity as a Junior Lender. If any Junior Lender commences an Equity Collateral Enforcement Action against any Junior Borrower, and pursuant to such Equity Collateral Enforcement Action, such Junior Lender takes title to the Equity Collateral of such Junior Borrower, from and after the date title to such Equity Collateral is vested in such Junior Lender (as applicable), such Junior Lender shall be bound by the terms and provisions of the respective organizational documents of such Junior Borrower regarding bankruptcy and all matters requiring the vote of the independent directors/managers/members of such Junior Borrower.

Id. (emphasis added).

On January 8, 2010, the Borrowers defaulted on the Notes by failing to pay the monthly installments required thereunder (Default). By letter dated January 8, 2010, CWCAM notified the Borrowers of the Default and demanded that they pay all unpaid amounts then due. Also on January 8th, CWCAM notified the Junior Lenders of the Default, which afforded the Junior Lenders the opportunity to cure under section 12(a) of the Intercreditor Agreement ( id. at 68), but none of the Junior Lenders exercised their rights to cure the Default. By letter dated January 29, 2010, CWCAM notified the Borrowers and the Junior Lenders that the unpaid debt outstanding under the Notes was accelerated, making all amounts immediately due and payable, for failure to cure the Default (Acceleration). As a result of the Default and Acceleration, the full outstanding principal balance of the Senior Loan, all accrued and unpaid interest thereon and all other sums owing under the Senior Loan documents became due and payable.

On February 16, 2010, CWCAM, on behalf of the Senior Lenders, filed a complaint (as amended by the filing of an amended complaint on February 18th) in the United States District Court for the Southern District of New York, seeking foreclosure of the Property. On June 21, 2010, the District Court entered a Judgment of Foreclosure and Sale of the Property, in favor of the Senior Lenders, in the amount of $3,666,734,464.70, which is the amount due and owing to plaintiffs under the Notes, the Amended Mortgage, and the related Senior Loan documents (Indebtedness). Bank of America, N.A. et al. v PCV ST Owner LP et al., 10-Civ-1178 (SD NY, June 21, 2010).

By letter dated August 6, 2010, Wells Fargo, as successor by merger to Wachovia, notified, among others, the Senior Lenders, that it transferred its interest in Junior Loans 1 — 3 to PSW (Hundertmark Aff., Ex. K), thereby placing PSW directly behind the Senior Lenders in structural priority and entitling PSW to receive any value of the Property above the amounts owed on the Senior Loan (PSW Opp. Brief, at 6; Ashner Aff., ¶ 8). The Wells Fargo notice certified that PSW is a "Qualified Transferee" as that term is defined in the Intercreditor Agreement. Id. As discussed above, these loans have a combined face value of $300 million but were acquired by PSW for $45 million. Also on August 6th, PSW executed a "REPRESENTATION CERTIFICATE," whereby it notified, among others, the Senior Lenders, that it "agree[d] to be bound by [the] Intercreditor Agreement" with respect to Junior Loans 1 — 3, stating that PSW "does hereby remake, for the benefit of the Senior Lenders and the Junior Lenders, each of the representations in the Intercreditor Agreement which are applicable to the Mezzanine 1 Loan, Mezzanine 2 Loan and Mezzanine 3 Loan. . . ." Id., Ex. M.

The next day, August 7th, PSW notified, among others, the Senior Lenders, that it intended to sell the Equity Collateral at a UCC public sale on August 25, 2010. On August 8th, the New York Times published a "NOTICE OF PUBLIC SALE OF COLLATERAL" for Junior Loans 1 — 3, scheduled for August 25, 2010, and in these notices PSW "reserve[d] the right to credit bid at the auction and to assign its bid," and "to adjourn, continue or cancel the auction without further notice" (UCC Sale). Id., Ex. Q.

By letter dated August 10, 2010, counsel for the Senior Lenders requested that PSW provide support for its conclusion that it is a "Qualified Transferee" under the Intercreditor Agreement, and that PSW confirm that it will cure the Senior Loan Default as a condition to any acquisition or transfer of the Equity Collateral, as required under section 6(d) of the Intercreditor Agreement. In a response letter dated August 11th, PSW characterized the Senior Lenders' statements about section 6(d) as "ludicrous," and informed the Senior Lenders that section 6(d) "of the Intercreditor Agreement does not require the payment of the Senior Loan as a condition to a transferee acquiring the Equity Collateral." Id., Ex. T. Thereafter, plaintiffs filed the instant motion for a preliminary injunction.

Discussion

"The three prerequisites for obtaining a preliminary injunction are likelihood of success on the merits, irreparable injury in the absence of such injunctive relief, and balancing of the equities." Seitzman v Hudson Riv. Assoc., 126 AD2d 211, 213 (1st Dept 1987); Alexandru v Pappas , 68 AD3d 690 , 691 (2d Dept 2009) (plaintiffs need only make "a prima facie showing" of their right to relief).

Likelihood of Success

Plaintiffs seek a declaration that, pursuant to sections 6(d)(B)(1) and (2) of the Intercreditor Agreement, PSW, or any purchaser of the auctioned Equity Collateral, is required to cure all Senior Loan defaults prior to acquiring the Equity Collateral. Plaintiffs also seek a declaration that section 11(d)(ii) of the Intercreditor Agreement prohibits PSW from orchestrating a Borrower's bankruptcy unless the Senior Loan is paid off in full. PSW counters that section 6(d) does not impose a pre-condition to the acquisition of Equity Collateral, but rather, applies only after the acquisition; that section 6(d) pertains to acceleration of the Senior Loan, which is irrelevant because that loan has already been accelerated and PSW is not seeking to prevent acceleration; and that the collateral it intends to sell at the UCC Sale consists of its equity ownership in the Senior Borrowers, which is different from the collateral — that is, the Property itself — that secures the Senior Loan, and that because there is no overlap in collateral, there can be no breach of the Intercreditor Agreement.

"[T]he primary purpose of declaratory judgments is to adjudicate the parties' rights before a wrong' actually occurs in the hope that later litigation will be unnecessary" ( NY County Lawyers' Assn. v State of New York, 294 AD2d 69, 74 [1st Dept 2002] [internal quotation marks and citation omitted]), and to accomplish "the complete and final settlement of the rights and legal relations of the parties with respect to the matters in controversy" ( Barry v Ready Reference Pub. Co., 25 AD2d 827 [1st Dept 1966]). To succeed on its cause of action for a declaratory judgment, plaintiffs must demonstrate that "an actual controversy exists, i.e., that they have a valid interest in securing a declaration and present, in an adversary context, a controversy with the [defendant] concerning that interest.'" Matter of Guild of Admin. Officers of Suffolk County Community Coll. v County of Suffolk, 126 AD2d 725, 728 (2d Dept 1987) (emphasis in original). "A declaratory judgment action may be an appropriate vehicle for settling justiciable disputes as to contract rights and obligations." Kalisch-Jarcho, Inc. v City of New York, 72 NY2d 727, 731 (1988); see also M A Oasis, Inc. v MTM Assocs., L.P., 307 AD2d 872, 872-73 (1st Dept 2003) ("[a] preliminary injunction enjoining defendants from selling the Property was properly granted to assure the efficacy of any declaratory judgment").

"[W]here the language [of a contract] is clear, unequivocal and unambiguous, the contract is to be interpreted by its own language," and the "writing should as a rule be enforced according to its terms." R/S Assoc. v New York Job Dev. Auth., 98 NY2d 29, 32 (2002) (internal quotation marks and citations omitted). "Unless the court finds ambiguity, the rules governing the interpretation of ambiguous contracts do not come into play." Id. at 33. "[C]ourts may not by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing." Vermont Teddy Bear Co. v 538 Madison Realty Co. , 1 NY3d 470 , 475 (2004) (internal quotation marks and citation omitted). "Interpretation of the contract is a legal matter for the court." 805 Third Ave. Co. v M.W. Realty Assoc., 58 NY2d 447, 451 (1983).

Here, the Intercreditor Agreement is unambiguous. Its plain language obligates PSW to cure all Senior Loan defaults if PSW acquires the Equity Collateral, which includes the $3.6 billion Indebtedness resulting from the Default. Specifically, section 6(d) provides that,

[t]o the extent that any Qualified Transferee acquires the Equity Collateral pledged to a Junior Lender pursuant to the Junior Loan Documents in accordance with the provisions and conditions of this Agreement. . ., such Qualified Transferee shall acquire the same subject to (i) the Senior Loan and the terms, conditions and provisions of the Senior Loan Documents. . . .Intercreditor Agreement, at 54. Subsection (ii) goes on to require that any such acquisition is also subject to any applicable Senior Junior Loans, and states that neither the Senior Lender nor any Senior Junior Lender may accelerate outstanding loans solely as a result of a Qualified Transferee's acquisition of Equity Collateral. Id. Subsection 6(d)(A) conditions the acquisition of Equity Collateral upon the Qualified Transferee affirming that it is bound by the Senior and related Senior Junior Loan Documents. Id. Subsection 6(d)(B) conditions the acquisition of Equity Collateral upon the Qualified Transferee curing " all defaults under (1) the Senior Loan and (2) the applicable Senior Junior Loans, in each case which remain uncured or unwaived as of the date of such acquisition," but allowing "defaults that can only be cured by the Junior Lender following its acquisition of the Equity Collateral" to "be cured by the Junior Lender prior to the expiration of the applicable Extended Non-Monetary Cure Period." Id. (emphasis added). Because the Default existing under the Senior Loan is not a default that can " only be cured . . . following [PSW's] acquisition of the Equity Collateral," PSW must cure the Default "as of the date of [its] acquisition" of the Equity Collateral. Id. Thus, PSW's argument that section 6(d) is not a pre-condition to acquisition of Equity Collateral is undermined by the plain language of the contract.

This interpretation is confirmed by section 10 of the Intercreditor Agreement. Section 10 is titled " Payment Subordination" ( id. at 61 [emphasis in original]), and section 10(d) states that "a Junior Lender may, in its sole and absolute discretion without Senior Lender's or any Senior Junior Lender's consent, take any Equity Collateral Enforcement Action or Separate Collateral Enforcement Action," but this provision is expressly "[s]ubject to the terms and provisions of Section 6," above ( id. at 63 [emphasis in original]).

PSW, a Junior Lender under the Intercreditor Agreement, has made clear its intention to acquire the Equity Collateral at the UCC Sale. In addition, in its letter dated August 11, 2010, counsel for PSW characterized its obligations under section 6(d) as "ludicrous" and expressly notified plaintiffs' counsel that "the Intercreditor Agreement does not require the payment of the Senior Loan as a condition to a transferee acquiring the Equity Collateral." Hundertmark Aff., Ex. T. This letter evidences PSW's renouncement of any intent to cure the Senior Loan defaults. Therefore, plaintiffs have "show[n] a likelihood of success on the merits by showing that [their] claims have prima facie merit." Matter of Witham v VFinance Invs., Inc. , 52 AD3d 403 , 403 (1st Dept 2008).

PSW's argument that section 6(d) is designed to prevent the Senior Lenders from accelerating the Senior Loans due to a transfer of the Equity Collateral is not grounded in the terms of the Intercreditor Agreement. The last clause of section 6(d)(ii) prevents the Senior Lender and the related Senior Junior Lender from accelerating the Senior Loan or outstanding Senior Junior Loans solely due to a Qualified Transferee's acquisition of Equity Collateral. However, nothing in section 6(d) suggests that this provision is focused solely, or even primarily, upon acceleration. Rather, the clause relating to acceleration in section 6(d) merely harmonizes the Intercreditor Agreement with the Senior Loan Agreement, which provides in section 9.02 that "a Transfer in connection with an exercise of remedies by a Mezzanine Lender shall not be prohibited hereunder, provided such Transfer is done in accordance with any intercreditor agreement that such Mezzanine Lender and Lender are party to in connection with the Loan and the Mezzanine Loan." Senior Loan Agreement, Hundertmark Aff., Ex. B, at 89. Contrary to PSW's argument, this interpretation is consistent with the plain language of the Intercreditor Agreement, and it is the only reasonable interpretation of this agreement.

Indeed, section 9.02 of the Senior Loan Agreement clarifies the Senior Lenders' reliance upon "the expertise of the Borrower . . . in owning and operating properties such as the Property in agreeing to make the Loan" and plaintiffs' continuing reliance "on Borrower's ownership of the Property as a means of maintaining the value of the Property as security for repayment of the Debt. . . ." Senior Loan Agreement, Hundertmark Aff., Ex. B, at 89. This is consistent with section 6(d) of the Intercreditor Agreement, which requires the Senior Lenders to be paid — that is, for any defaults to be cured — prior to transfer of the Equity Collateral, thereby protecting the priority interests of the Senior Lenders.

PSW's argument concerning the doctrine of the last antecedent does not support a different result. The last antecedent doctrine provides that "[r]elative or qualifying words or clauses . . . ordinarily are to be applied to words or phrases immediately preceding, and are not to be construed as extending to others more remote, unless the intent clearly indicates otherwise." Duane Reade, Inc. v Cardtronics, LP , 54 AD3d 137 , 141 (1st Dept 2008). PSW argues that the acceleration language in section 6(d) immediately precedes the conditions of reaffirmation in section 6(d)(A) and cure in 6(d)(B), and that, therefore, these conditions are limited in applying solely to acceleration. In other words, PSW argues that "cure is a pre-condition to preventing acceleration and is not a pre-condition to acquisition of the Equity Collateral." PSW's Opp. Brief, at 15 (emphasis in original). However, section 6 pertains to " Foreclosure of Separate Collateral," as its heading suggests, not to acceleration. Intercreditor Agreement, at 52-54. PSW's reading of section 6(d) cherry-picks the acceleration language while ignoring all of the additional language preceding the semicolon, which applies more generally to an acquisition of Equity Collateral. PSW's interpretation of section 6(d) was clearly not intended by the parties.

PSW argues that subsection 6(d)(A), which allows a Qualified Transferee to wait 10 days after the transfer to reaffirm its obligations under the Senior Loan Documents, supports the conclusion that section 6(d) is not a pre-condition to the UCC Sale. However, subsections 6(d)(A) and (B) are written in the conjunctive, requiring that both provisions be satisfied. In other words, the fact that (A) allows a Qualified Transferee 10 days to reaffirm does not vitiate the past-tense requirement in (B) that all defaults under the Senior Loan "as of the date of such acquisition have been cured." Id. at 54 (emphasis added). Therefore, PSW's argument is unpersuasive.

While the Senior Loan and PSW's Junior Loan are secured by different collateral, nothing contained in the Intercreditor Agreement permits PSW to acquire its Equity Collateral without complying with section 6(d). For example, PSW cites the Intercreditor Agreement in support of its argument that its "right . . . to foreclose on [its] separate collateral finds expression in many provisions, including Sections 2(n) and 9(a)(A)." PSW's Opp. Brief, at 16. However, section 2(n) merely prohibits the Senior Loan from constituting a lien on the separate collateral that secures a Junior Loan, and prevents a Senior Lender from declaring any such interest in the separate collateral. In this regard, section 2(n) confirms that the Senior and Junior Loans are secured by different collateral. However, plaintiffs are not asserting a lien on, or a security interest in, PSW's collateral. Significantly, nothing contained in section 2(n) exempts PSW from section 6(d). Section 9(a) generally reinforces that Junior Lenders' loans are subordinate to the Senior Loan. And although section 9(a)(A) permits a Junior Lender to "exercise . . . remedies and realization upon such Separate Collateral," this subsection is expressly subject to section 6(b) (Intercreditor Agreement, at 60 [stating terms of subsection 9(a)(A), "except as set forth in Section 6(b)" (emphasis in original)]), which states that "[n]othing contained herein shall limit or restrict the right of any Junior Lender to exercise its rights and remedies, in law or in equity, or otherwise, in order to realize on any of its Separate Collateral that is not Equity Collateral" ( id. at 53 [emphasis added]). Here, PSW seeks to foreclose on its Equity Collateral, which is governed by section 6(d), as discussed above.

PSW argues that section 6(a) of the Intercreditor Agreement recognizes the right of a Junior Lender to foreclose upon its Equity Collateral, and that, if the parties had so intended, section 6(a) would have expressly stated that curing a default on the Senior Loan was a pre-condition to a Junior Lender's foreclosure. Section 6(a) requires a Junior Lender to comply with seven requirements before "complet[ing] a foreclosure or otherwise realiz[ing] upon any of its Equity Collateral. . . ." Id. at 52. However, as discussed above, section 6 pertains to " Foreclosure of Separate Collateral," and none of the subsections to section 6 are individually titled. Id. at 52-54. In substance, all of these subsections relate to foreclosure of separate collateral, and each subsection includes different obligations, conditions and rights. The fact that the requirements of subsection (d) are stated in their own subsection, rather than in subsection (a), does not serve to vitiate subsection (d). If anything, the implication is that the parties considered subsection (d) worthy of treatment in its own subsection. Therefore, PSW's argument is contradicted by the plain language of the Intercreditor Agreement.

PSW also argues that sections 10(a) and (d) "provide that a Junior Lender's rights to foreclose upon its own Equity Collateral is exempted from the general provisions regarding payment subordination that CWCAM cites in its papers." PSW Opp. Brief, at 16; PSW's Sur-Reply Brief, at 6. However, the first clause of section 10(a) states, "Except (i) as otherwise expressly provided in this Agreement," and, as discussed above, the first clause of section 10(d) makes this subsection "[s]ubject to the terms and provisions of Section 6," thereby undermining PSW's argument. PSW also ignores that section 10 deals generally with " Payment Subordination," as its title suggests, and section 10(b)(ii) provides, in pertinent part, as follows:

If . . . there shall have occurred and be continuing an Event of Default under the Senior Loan Documents, after giving effect to Junior Lender's cure rights pursuant to Section 12, except as expressly otherwise provided herein, Senior Lender shall be entitled to receive payment and performance in full of all amounts due or to become due to Senior Lender before any Junior Lender is entitled to receive any payment (including any payment which may be payable by reason of the payment of any other indebtedness of Borrower being subordinated to the payment of the Junior Loans) on account of any Junior Loan.

Intercreditor Agreement, at 61 (emphasis added). Here, the Senior Loan is indisputably in default. The court recognizes the distinction between the separate collateral securing the parties' investments, and that the Intercreditor Agreement permits PSW to foreclose on its own collateral. However, plaintiffs have made a prima facie showing that PSW must comply with section 6(b) of the Intercreditor Agreement before doing so.

PSW argues that there is no justiciable controversy, that the complaint impermissibly seeks an advisory opinion as to whether PSW is in violation of the Intercreditor Agreement based upon a series of contingencies which have not yet and may not occur, such as PSW being the winning bidder at the UCC Sale and PSW forcing the Borrowers into bankruptcy or taking actions consistent therewith. However, at a minimum, PSW has expressly renounced the applicability of section 6(d) in its letter dated August 11, 2010, claiming that this section does not require a purchaser of the Equity Collateral to pay off the Senior Loan and describing any such obligation as "ludicrous." Hundertmark Aff., Ex. T. PSW's intention to acquire the Equity Collateral, notwithstanding the requirements of section 6(d), is also evidenced by PSW's public notices of the UCC Sale and the formation of six shell entities, on August 18, 2010, for which plaintiffs submit the Certificates of Formation certified by the Delaware Secretary of State. Hundertmark Supplemental Aff., Ex. C. Thus, there is clearly a justiciable controversy here, where plaintiffs are seeking "to adjudicate the parties' rights before a wrong' actually occurs in the hope that later litigation will be unnecessary [internal quotation marks and citation omitted]." NY County Lawyers' Assn., 294 AD2d at 74; see also Swift Co. v U.S., 276 US 311, 326 (1928) ("a suit for an injunction deals primarily, not with past violations, but with threatened future ones; and that an injunction may issue to prevent future wrong, although no right has yet been violated"); Kalisch-Jarcho, Inc., 72 NY2d at 731 ("[a] declaratory judgment action may be an appropriate vehicle for settling justiciable disputes as to contract rights and obligations"); M A Oasis, Inc., 307 AD2d at 872-73 ("[a] preliminary injunction enjoining defendants from selling the Property was properly granted to assure the efficacy of any declaratory judgment"); Highland Park CDO I Grantor Trust, Series A v Wells Fargo Bank, N.A., 2009 WL 1834596, *5, 2009 US Dist LEXIS 53272 (SD NY 2009) (granting senior lender injunctive relief against junior mezzanine holder, concluding that "Intercreditor Agreement bars [junior lender] from recovering on the mezzanine loan until the senior loan is repaid in full").

With respect to plaintiffs' cause of action for a declaration that section 11(d)(ii) of the Intercreditor Agreement prohibits PSW from orchestrating a Borrower's bankruptcy unless the Senior Loan is paid off in full, plaintiffs claim that PSW has retained Kirkland Ellis LLP as bankruptcy counsel to represent the Borrowers once the UCC Sale is complete. However, PSW admits in its opposition brief that "presently, and so long as it is a Junior Lender, its ability to solicit, direct or cause the Senior Borrowers to institute bankruptcy proceedings is restricted by Section 11(d)(ii). . . ." PSW Opp. Brief, at 17 n 13; see also PSW Sur-Reply Brief, at 1 (conceding that PSW "does not now speak for or control the Borrowers, nor has it retained [nor could it retain] anyone on their behalf"); and PSW Sur-Reply Brief, at 12-13 (stating that "PSW does not speak for, does not control and cannot and has not retained anyone on behalf of any of the Borrowers [whether Senior Borrowers or Junior Borrowers]"). This is consistent with the last sentence of section 11(d)(ii), which pertains to the situation where a Junior Lender acquires title to the Equity Collateral of a Junior Borrower, thereby becoming "bound by the terms and provisions of the respective organizational documents of such Junior Borrower regarding bankruptcy and all matters requiring the vote of the independent directors/managers/members of such Junior Borrower." In other words, PSW's argument focuses on what it could do as an owner of the Borrowers once a transfer of the Equity Collateral occurs, claiming that, thereafter, "PSW would no longer be subject to the restrictions set forth in Section 11(d)(ii)" ( id. at 17) and that, "if PSW were to successfully complete the UCC Sale and thereby acquire title to the Equity Collateral, the Intercreditor Agreement would terminate with respect to PSW" ( id. at 18). Moreover, according to Ashner, PSW has not retained Kirkland Ellis, but has merely "communicated with K E's attorneys about this matter." Ashner Supp. Aff., ¶ 6. The Intercreditor Agreement does not prevent PSW, as a Junior Lender, from seeking legal advice or planning for future contingencies. Plaintiffs fail to make a prima facie showing that PSW has taken any action in violation of section 11(d)(ii).

Furthermore, there has been no transfer of Equity Collateral. Nor could there be without PSW's compliance with section 6(d), as discussed above. In short, PSW concedes that, as a Junior Lender, it must comply with the restrictions set forth in section 11(d)(ii) of the Intercreditor Agreement. Given PSW's admission, and the fact that the court is granting plaintiffs' motion for preliminary injunctive relief with respect to section 6(d), plaintiffs' request to enjoin PSW concerning section 11(d)(ii) of the Intercreditor Agreement is moot, and the purported hazard posed by plaintiffs is "speculative and abstract," and, therefore, nonjusticiable. Matter of New York State Inspection, Sec. Law Enforcement Empls., Dist. Council, 82, AFSCME, AFL-CIO v Cuomo, 64 NY2d 233, 240 (1984) ("[w]here the harm sought to be enjoined is contingent upon events which may not come to pass, the claim to enjoin the purported hazard is nonjusticiable as wholly speculative and abstract"). Accordingly, plaintiffs' motion for a preliminary injunction is denied with respect to section 11(d)(ii) of the Intercreditor Agreement.

Irreparable Harm

"Irreparable harm is the single most important prerequisite for the issuance of a preliminary injunction. To prevail, the movant must establish not a mere possibility that it will be irreparably harmed, but that it is likely to suffer irreparable harm if equitable relief is denied." Natsource LLC v Paribello, 151 F Supp 2d 465, 469 (SD NY 2001) (internal citations and quotation marks omitted); see also Golden v Steam Heat, Inc., 216 AD2d 440, 442 (2d Dept 1995) ("the irreparable harm must be shown by the moving party to be imminent, not remote or speculative").

In appropriate circumstances, the loss of a bargained-for contractual right of control can constitute irreparable harm. See CanWest Global Communications Corp. v Mirkaei Tikshoret Ltd. , 9 Misc 3d 845, 872 (Sup Ct, NY County 2005); see also Wisdom Imp. Sales Co. v Labatt Brewing Co., 339 F3d 101, 114-15 (2d Cir 2003) ("[c]onduct that unnecessarily frustrates efforts to obtain or preserve the right to participate in the management of a company may also constitute irreparable harm"); Citibank, N.A. v Nyland (CF8) Ltd., 839 F2d 93, 97 (2d Cir 1988) (finding irreparable harm if bank was unable to appoint a receiver to control and manage the subject property, pursuant to a contractual provision, after the default of a mortgage loan).

For example, in Oracle Real Estate Holdings I LLC v Adrian Holdings Co. I, LLC ( 582 F Supp 2d 616 [SD NY 2008]), the parties entered into a contract to develop real estate. When the defendant defaulted on its loan obligations, the plaintiff moved for a preliminary injunction directing the defendant, pursuant to the parties' agreement, "to transfer 100% of its ownership interests in [Adrian II, a defendant entity that held ownership interests in the relevant properties], including the right to select the management of the Company, during the pendency of this action." Id. at 624. The court granted the preliminary injunction to enforce the plaintiff's "unique, bargained-for contractual remedy: the right to meaningful control of Adrian II," and the court concluded that "this injury would constitute irreparable harm." Id. at 625. The court reasoned that "the contract right ha[d] intrinsic value' that cannot easily be quantified," thereby permitting "the bargained-for provisions [to] provide a basis for injunctive relief." Id. The court was also persuaded by the fact that "the value of control over Adrian II is almost entirely a function of the skill and resources of the party who exercises control." Id. at 626.

Here, plaintiffs have shown that the Property is owned by single-purpose entities that own no other assets, and the plaintiff trustees can look only to the Property to recover the $3.6 billion Indebtedness. Significantly, the Property is comprised of approximately 11,000 units, 25,000 residents, and 550 employees. Hundertmark Aff., ¶ 46. According to Hundertmark, the 550 employees at the Property include 350 union employees represented by seven unions, some of which have expired collective bargaining agreements, and an 80-person private security force that is integrated with the New York City Police Department. Hundertmark Supplemental Aff., ¶ 3. Millions of dollars have been spent rebuilding the information technology systems at the Property, which plaintiffs claim is critical to the preservation of rent records, the administration of repairs and maintenance, and oversight of the private security force. Id. According to plaintiffs, months have been consumed and hundreds of thousands of dollars spent recruiting a new senior management team to replace the employees that will be redeployed away from the Property, and seven months have been spent evaluating and working through environmental issues at the Property. Id. In short, plaintiffs have spent nine months and millions of dollars working with the Borrowers to ensure a smooth transition of the Property. Id.

The Senior Lenders bargained for the right to control the management of the Property, and they have spent the last nine months working with the Borrowers to transition management of the Property, which impacts tens of thousands of New York City residents. As discussed above, section 9.02 of the Senior Loan Agreement expressly acknowledges the Senior Lenders' reliance upon "the expertise of the Borrower . . . in owning and operating properties such as the Property in agreeing to make the Loan" and acknowledges plaintiffs' continuing reliance "on Borrower's ownership of the Property as a means of maintaining the value of the Property as security for repayment of the Debt. . . ." Senior Loan Agreement, at 89. Indeed, the element of irreparable harm dovetails with the analysis of section 6(d) of the Intercreditor Agreement, above, in that the Senior Lenders expressly bargained for this contractual provision, which prohibits Junior Lenders like PSW from acquiring ownership and control of the Equity Collateral unless they pay any outstanding indebtedness under the Senior Loan, thereby ensuring that ownership and control over the Equity Collateral is not transferred from the Junior Borrowers to the Junior Lenders at a time when the Senior Loan is in default. Any loss of control is in violation of the Intercreditor Agreement and would constitute irreparable harm to plaintiffs.

Section 34 of the Intercreditor Agreement reinforces this conclusion. This section is titled " Injunction" and provides as follows:

Each party to this Agreement acknowledges (and waives any defense based on a claim) that monetary damages are not an adequate remedy to redress a breach by the other hereunder and that a breach by any party hereunder would cause irreparable harm to any other party to this Agreement. Accordingly, each party to this Agreement agrees that upon a breach of this Agreement by any other party, the remedies of injunction, declaratory judgment and specific performance shall be available to such non-breaching party.

Intercreditor Agreement, at 103 (emphasis in original). PSW's "REPRESENTATION CERTIFICATE" expressly notified, among others, the Senior Lenders, that PSW "agree[d] to be bound by Intercreditor Agreement" with respect to Junior Loans 1 — 3 (Hundertmark Aff., Ex. M), thereby evidencing that PSW contemplated the irreparable harm that would result from a breach of the Intercreditor Agreement and agreed that monetary damages would not serve as an adequate remedy at law. Thus, the parties "set down their agreement in a clear, complete document," and, therefore, "their writing should . . . be enforced according to its terms." Vermont Teddy Bear Co. v 538 Madison Realty Co. , 1 NY3d 470 , 475 (2004). This rule has "special import in the context of real property transactions, where commercial certainty is a paramount concern, and where . . . the instrument was negotiated between sophisticated, counseled business people negotiating at arm's length.'" Id. at 475. New York courts have routinely enforced nearly identical contractual provisions. See e.g. Highland Park CDO I Grantor Trust, Series A, 2009 WL 1834596, at *5, 2009 US Dist LEXIS 53272 (granting injunctive relief "as provided for under Section 33 of the Intercreditor Agreement," the terms of which are nearly identical to contractual provision in the instant action); Roswell Capital Partners LLC v Alternative Constr. Tech., 2009 WL 222348, *17, 2009 US Dist LEXIS 7690 (SD NY 2009) ("terms throughout the contracts at issue specify that a default constitutes irreparable harm entitling Plaintiffs to injunctive relief to cure breaches," which, "[w]hile not dispositive, [may be viewed by] courts . . . as evidence of an admission that irreparable harm has occurred"). For the foregoing reasons, plaintiffs have shown that they will suffer irreparable harm if injunctive relief is not granted.

Balancing of the Equities

In balancing the equities, the court must weigh the harm suffered by the plaintiff if the injunction were denied against the harm suffered by the defendant if the injunction were granted. Edgeworth Food Corp. v Stephenson, 53 AD2d 588 (1st Dept 1976) (court balanced "convenience and relative hardship — the harm to plaintiff from denial of the injunction as against the harm to defendant from granting it"). "Further, when the court balances the equities in deciding upon injunctive relief, it must consider the enormous public interests involved [citation omitted].'" Seitzman v Hudson Riv. Assoc., 126 AD2d at 214.

Here, the balance clearly tips in favor of plaintiffs, who merely seek to hold PSW, as a Junior Lender, to its contractual obligations under the Intercreditor Agreement. See Gramercy Co. v Benenson, 223 AD2d 497, 498 (1st Dept 1996) ("balance of the equities tilts in favor of plaintiffs, who merely seek to maintain the status quo"). In contrast, PSW's position will not be changed, as it will remain bound by the terms of the Intercreditor Agreement as it applies to the rights of Junior Lenders. Moreover, the public interest is served by maintaining stability in what PSW concedes "is the largest residential property in Manhattan and home to a significant portion of the city's moderate income housing." PSW Opp. Brief, at 23. "This result is entirely consistent with the recognition that subordinated loans are inherently more risky than their senior counterparts — a reality of which [the Junior Lender], as a sophisticated party, was no doubt aware when it acquired the mezzanine loan here." Highland Park CDO I Grantor Trust, Series A, 2009 WL 1834596, at *5, 2009 US Dist LEXIS 53272.

Staying of Foreclosure and Bond

PSW argues that, if the preliminary injunction motion is granted, the court should require CWCAM to agree to stay its mortgage foreclosure action pending final adjudication of the instant action, and to post a bond in the full principal amount of $300 million that is owed to PSW. PSW's request for a stay of foreclosure is contained on page 23 of its opposition brief. PSW has not moved for any such relief. Therefore, PSW's request is not properly before the court. In any event, PSW fails to cite any legal authority in support of its request that this state court enjoin or stay a federal court judgment. See Matter of Frontier Ins. Co. , 27 AD3d 274 , 275 (1st Dept 2006) ("New York courts must give full faith and credit to a federal court judgment"). Accordingly, PSW's request for a stay in the mortgage foreclosure action is denied.

PSW's request for a bond is governed by CPLR 6312, which provides that "the plaintiff shall give an undertaking in an amount to be fixed by the court, that the plaintiff, if it is finally determined that he or she was not entitled to an injunction, will pay to the defendant all damages and costs which may be sustained by reason of the injunction." CPLR 6312(b). "The fixing of the amount of an undertaking is a matter within the sound discretion of the court." Lelekakis v Kamamis, 303 AD2d 380, 380 (2d Dept 2003).

In the event that PSW is ultimately successful in demonstrating that plaintiffs are not entitled to injunctive relief, PSW is entitled to an undertaking that is "rationally related to the amount of the defendant's potential liability if the preliminary injunction later proves to be unwarranted, and not based upon speculation." Id. at 380-81 (internal citations omitted). Although the Junior Loans purchased by PSW — that is, Junior Loans 1, 2 and 3 — were each in the principal amount of $100 million, it is undisputed that PSW purchased these loans for only $45 million. Therefore, plaintiffs' undertaking is limited to the amount of this purchase price.

Due deliberation having been had, and it appearing to this court that a cause of action exists in favor of the plaintiffs and against the defendant and that the plaintiffs are entitled to a preliminary injunction on the ground that the defendant threatens or is about to do, or is doing or procuring or suffering to be done, an act in violation of the plaintiffs' rights respecting the subject of the action and tending to render the judgment ineffectual, as set forth in the aforesaid decision, it is

ORDERED that the undertaking is fixed in the sum of $ 4,500,000.00 conditioned that the plaintiffs, if it is finally determined that they were not entitled to an injunction, will pay to the defendant all damages and costs which may be sustained by reason of this injunction; and it is further

ORDERED that defendant, its agents, servants, employees and all other persons acting under the jurisdiction, supervision and/or direction of defendant, are enjoined and restrained, during the pendency of this action, from doing or suffering to be done, directly or through any attorney, agent, servant, employee or other person under the supervision or control of defendant or otherwise, any of the following acts:

(a)acquiring or selling PCV ST MEZZ 1 LP's limited partnership interests in PCV ST Owner LP and/or from acquiring or selling PCV ST MEZZ 1 LP's limited liability company interests in PCV ST Owner GP LLC, whether by foreclosure sale or otherwise, without prior payment of the total outstanding indebtedness (in excess of $3,666,000,000) in connection with the senior loan extended to PCV ST Owner LP and ST Owner LP by Wachovia Bank, N.A. and Merrill Lynch Mortgage Lending, Inc. to finance Tishman Speyer Development Corp.'s acquisition of Stuyvesant Town and Peter Cooper Village (Senior Loan);

(b)acquiring or selling ST MEZZ 1 LP's limited partnership interests in ST Owner LP and/or from acquiring or selling ST MEZZ 1 LP's limited liability company interests in ST Owner GP LLC, whether by foreclosure sale or otherwise, without prior payment of the total outstanding indebtedness (in excess of $3,666,000,000) in connection with the Senior Loan;

(c)acquiring or selling PCV ST MEZZ 2 LP's limited partnership interest in PCV ST MEZZ 1 LP and/or from acquiring or selling PCV ST MEZZ 2 LP's limited liability company interests in PCV ST MEZZ 1 GP LLC, whether by foreclosure sale or otherwise, without prior payment of the total outstanding indebtedness (in excess of $3,666,000,000) in connection with the Senior Loan;

(d)acquiring or selling ST MEZZ 2 LP's limited partnership interest in ST MEZZ 1 LP and/or from acquiring or selling ST MEZZ 2 LP's limited liability company interests in ST MEZZ 1 GP LLC, whether by foreclosure sale or otherwise, without prior payment of the total outstanding indebtedness (in excess of $3,666,000,000) in connection with the Senior Loan;

(e)acquiring or selling PCV ST MEZZ 3 LP's limited partnership interest in PCV ST MEZZ 2 LP and/or from acquiring or selling PCV ST MEZZ 3 LP's limited liability company interests in PCV ST MEZZ 2 GP LLC, whether by foreclosure sale or otherwise, without prior payment of the total outstanding indebtedness (in excess of $3,666,000,000) in connection with the Senior Loan;

(f)acquiring or selling ST MEZZ 3 LP's limited partnership interest in ST MEZZ 2 LP and/or from acquiring or selling ST MEZZ 3 LP's limited liability company interests in ST MEZZ 2 GP LLC, whether by foreclosure sale or otherwise, without prior payment of the total outstanding indebtedness (in excess of $3,666,000,000) in connection with the Senior Loan; and the motion is otherwise denied.