Bank of America N.A. v. PSW NYC LLC

29 Misc. 3d 1216 (2010)

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Bank of America N.A. v. PSW NYC LLC

New York Supreme Court
29 Misc. 3d 1216 (2010)

LJ

Facts

In 2007 a development corporation (the borrower) acquired property financed with $3 billion in senior loans and $1.4 billion in junior loans. The senior loans were funded by Wachovia Bank N.A. and Merrill Lynch Mortgage Lending, Inc. (collectively, the senior lenders) with notes held in trust with Bank of America N.A. (plaintiff) as trustee. The junior loans were divided into 11 mezzanine loans, with the senior lenders also holding the three highest-priority junior loans. The senior lenders and junior lenders entered into an intercreditor agreement. The agreement contained a provision stating that a qualified transferee that acquired or sold equity collateral that was pledged to a junior lender would be subject to the senior loan and its terms and conditions. In 2010 Bank of America filed a motion for default against the borrower, requiring the payment of the senior loans. The default was not cured, and the debt was accelerated and declared due. Bank of America filed in the United States District Court for the Southern District of New York to foreclose on the property, and the court entered a judgment of foreclosure. In August 2010, Wachovia transferred its interests in the three highest-priority junior loans to PSW NYC LLC (PSW) (defendant) as a qualified transferee in accordance with the terms of the intercreditor agreement, and PSW became subject to its terms. PSW then provided notice by publication that it intended to sell the equity collateral for the junior loans at a public sale pursuant to the Uniform Commercial Code (UCC). The senior lenders sent PSW a letter to confirm PSW’s intent to cure the senior-loan default prior to acquiring or transferring the equity collateral, as required by the intercreditor agreement. PSW responded that it was not required by the agreement to satisfy the senior loans. Bank of America filed suit against PSW seeking a declaration of rights under the intercreditor agreement and an injunction preventing PSW from acquiring or selling the equity collateral without first satisfying the senior loans.

Rule of Law

Issue

Holding and Reasoning (Lowe, J.)

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