Court Opinion

ID: 9927375
Source: CourtListenerOpinion
Date Created: 2024-01-26 21:07:41.227948+00
Date Added: 2024-06-11T09:25:14.378512
License: Public Domain

YS 541 Lexington Holdings LLC v DCH Lex Propco
                         Sub LP
               2024 NY Slip Op 30275(U)
                     January 22, 2024
           Supreme Court, New York County
        Docket Number: Index No. 653461/2022
                  Judge: Andrew Borrok
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
 Op 30001(U), are republished from various New York
 State and local government sources, including the New
  York State Unified Court System's eCourts Service.
 This opinion is uncorrected and not selected for official
                       publication.
 [FILED: NEW YORK COUNTY CLERK 01/22/2024 12:57 P~                                                                      INDEX NO. 653461/2022
  NYSCEF DOC. NO. 216                                                                                             RECEIVED NYSCEF: 01/22/2024

            SUPREME COURT OF THE STATE OF NEW YORK
            COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 53

            ----------------------------------------------------------------------------------- X

             YS 541 LEXINGTON HOLDINGS LLC,                                                         INDEX NO.         653461/2022

                                                          Plaintiff,
                                                                                                    MOTION DATE        10/16/2023
                                                - V -
                                                                                                    MOTION SEQ. NO.        003
             OCH LEX PROPCO SUB LP, OCH LEX OPCO SUB LP,
             DUNE REAL ESTATE FUND IV LP, AYNSLEY CAPITAL,
             L.P., STATE OF NEW YORK DEPARTMENT OF                                                   DECISION+ ORDER ON
             TAXATION AND FINANCE, NEW YORK CITY                                                           MOTION
             DEPARTMENT OF FINANCE, NEW YORK CITY
             ENVIRONMENTAL CONTROL BOARD, THE NEW YORK
             CITY WATER BOARD, JOHN DOES 1-100,

                                                          Defendant.
            ----------------------------------------------------------------------------------- X

            HON. ANDREW BORROK:

            The following e-filed documents, listed by NYSCEF document number (Motion 003) 89, 90, 91, 92, 93,
            94, 95, 96, 97, 98, 99,100,101,102,103,104,105,106,107,108,109,110,111,112,113,114,115,
            116,117,118,119,120,121, 122, 123, 124, 125,126,127,128, 129, 130, 131, 132,133,134,135,
            136, 137, 138, 139, 140, 141, 142, 143, 144, 145, 146, 147, 148, 149, 150, 151, 152, 171, 172, 173,
            174, 175, 176, 177, 178, 179, 180, 181, 182, 183, 184, 185, 186, 187, 188, 189, 190, 191, 192, 193,
            194,195,196,197,198,199,200,201,202,203,204,205,208
            were read on this motion to/for                                  SUMMARY JUDGMENT(BEFORE JOIND)

            The motion (Mtn. Seq. No. 003) for summary judgment is granted because it is undisputed that a

            maturity default occurred prior to any of the facts which form the basis of any of the

            counterclaims in this case.

            Reference is made to the following loan documents (collectively, the Loan Documents): (i) (a) a

            certain Acquisition Promissory Note (NYSCEF Doc. No. 133) in the maximum principal amount

            of $140,000,0000, (b) a certain Building Loan Promissory Note (NYSCEF Doc. No. 136) in the

            maximum principal amount of $9,440,000, and (c) a certain Project Loan Promissory Note

            (NYSCEF Doc. No. 139) in the maximum principal amount of $20,560,000, each dated May 9,

             653461/2022 YS 541 LEXINGTON HOLDINGS LLC vs. DCH LEX PROPCO SUB LP ET AL                                  Page 1 of 6
             Motion No. 003

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 [FILED: NEW YORK COUNTY CLERK 01/22/2024 12:57 P~                                             INDEX NO. 653461/2022
  NYSCEF DOC. NO. 216                                                                    RECEIVED NYSCEF: 01/22/2024

            2018, by Del Lex Propco Sub LP (Propco) and payable to the Loancore Capital Credit REIT

            LLC (Loancore), (ii) (a) a certain Acquisition Loan Agreement (NYSCEF Doc. No. 132), (b) a

            certain Building Loan Agreement (NYSCEF Doc. No. 135), and (c) a certain Project Loan

            Agreement (NYSCEF Doc. No. 138; the Acquisition Loan Agreement, the Building Loan

            Agreement and the Project Loan Agreement, hereinafter collectively, the Loan Agreements),

            each dated May 9, 2018, by and among Propco, DCH LEX OPCO SUB LP (OPCO) and

            Loancore, (iii) (a) a certain Acquisition Loan Fee and Leasehold Mortgage, Assignment of

            Leases and Rents and Security Agreement (NYSCEF Doc. No. 134), (b) a certain Building Loan

            Fee and Leasehold Mortgage, Assignment of Leases and Rents and Security Agreement

            (NYSCEF Doc. No. 137), and (c) a certain Project Loan Fee and Leasehold Mortgage,

            Assignment of Leases and Rents and Security Agreement (NYSCEF Doc. No. 140), each dated

            May 9, 2018, by and among Propco, Opco and Loancore, (iv) a certain Assignment of Leases

            and Rents (NYSCEF Doc. No. 141), dated as of May 9, 2018, by and among Propco, Opco and

            Loancore, and (v) a certain Guaranty of Recourse Obligations (NYSCEF Doc. No. 142) made by

            Dune Real Estate Fund IV LP (Dune) and Aynsley Capital, L.P. (Aynsley) in favor of Loancore.

            Pursuant to the Loan Agreements, the stated maturity date for the loans made pursuant to the

            Loan Documents was May 9, 2021. In June of 2018, LoanCore assigned its interests in the loans

            made pursuant to the Loan Documents to LLC Warehouse I LLC (Warehouse) (NYSCEF Doc.

            Nos. 143-146).

            When the maturity date came and passed without repayment of the loans, pursuant to a letter

            (NYSCEF Doc. No. 147), dated May 18, 2021, from Warehouse to Propco, Opco, Dune and

            Aynsely, Warehouse, among other things, declared a default based on the fact that the borrower

             653461/2022 YS 541 LEXINGTON HOLDINGS LLC vs. DCH LEX PROPCO SUB LP ET AL         Page 2 of 6
             Motion No. 003

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 [FILED: NEW YORK COUNTY CLERK 01/22/2024 12:57 P~                                                INDEX NO. 653461/2022
  NYSCEF DOC. NO. 216                                                                     RECEIVED NYSCEF: 01/22/2024

            had failed to pay the Loan and Other Loans ( as such terms are defined in the Building Loan

            Agreement) and that as such an Event of Default had occurred on the Maturity Date (i.e., May 9,

            2021) and interest continued to accrue at the Default Rate ($40,178.98 per day) from the date of

            the Event of Default and demanded payment in respect thereof.

            In early March of 2022 (and after a maturity default had already occurred), Warehouse assigned

            its interests to YS 541 Lexington Holdings LLC (the Lender) (NYSCEF Doc. Nos. 149-151).

            Subsequently, the Lender brought this lawsuit. Now, the Lender has brought this motion seeking

            summary judgment and foreclosure and sale of the property pursuant to the Loan Documents. It

            is undisputed that the loans were not paid at any time prior to that Maturity Date and that the

            amounts due remain outstanding (NYSCEF Doc. No. 128 ,i,i 32, 36). Thus, the Lender is

            entitled to summary judgment on its claim based upon the maturity default.

            As discussed above, the Lender also seeks dismissal of the counterclaims which the Court will

            address in tum below.

            The counterclaim (NYSCEF Doc. No. 35) for breach of a certain letter agreement (the

            Confidentiality Agreement; NYSCEF Doc. No 36), dated May 25, 2021, by and between

            Propco and Solid Rock Advisors East, LLC (Solid Rock) asserted against the Lender both is not

            a bar to the grant of summary judgment based on the maturity default and otherwise is dismissed.

            As an initial matter, the Confidentiality Agreement was entered into after the maturity default

             653461/2022 YS 541 LEXINGTON HOLDINGS LLC vs. DCH LEX PROPCO SUB LP ET AL            Page 3 of 6
             Motion No. 003

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 [FILED: NEW YORK COUNTY CLERK 01/22/2024 12:57 P~                                                 INDEX NO. 653461/2022
  NYSCEF DOC. NO. 216                                                                      RECEIVED NYSCEF: 01/22/2024

            occurred and thus even if breached does not provide any defense to the grant of summary

           judgment based on the maturity default.

            The counterclaim for breach of the Confidentiality Agreement asserted against the Lender also is

            not a bar to the granting of summary judgment in favor of the Lender and is otheiwise dismissed.

            Simply put, the Lender is not a party to the Confidentiality Agreement. Nor is the Lender

            alleged to be an agent or affiliate of Solid Rock. The Lender is also not a third-party beneficiary

            of the Confidentiality Agreement. It is identified nowhere in the Confidentiality Agreement, and

            there is no expressed intent that it would run to the Lender's benefit. (Mandarin Trading Ltd. v

            Wildenstein, 16 NY3d 173, 182 [2011]). Even if the Lender were a third-party beneficiary, New

            York does not recognize a cause of action against a third-party beneficiary based on alleged

            breaches of an agreement to which the third-party beneficiary never agreed (NF. Goza Corp. v

            Kiselman, 38 Misc 3d 48, 51 [2d Dept 2012]). If a cause of action here lies, it lies against Solid

            Rock for failing to cause the Lender to agree to the Confidentiality Agreement.

            The counterclaim for tortious interference with contract also does not prevent the granting of

            summary judgment in Lender's favor at this time and otheiwise fails for three separate reasons.

            As an initial matter, the Court notes that the Confidentiality Agreement at issue was executed

            after the maturity default had occurred. Equally importantly, tortious interference with contract

            requires (i) the existence of a valid contract with a third party, (ii) the defendant's knowledge of

            that contract, (iii) the defendant's intentional and improper procuring of a breach, and (iv)

            damages (White Plains Coat & Apron Co., Inc. v Cintas Corp., 8 NY3d 422,426 [2007]). First,

            the defendants fail to sufficiently allege that the Lender even knew of the Confidentiality

             653461/2022 YS 541 LEXINGTON HOLDINGS LLC vs. DCH LEX PROPCO SUB LP ET AL             Page 4 of 6
             Motion No. 003

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 [FILED: NEW YORK COUNTY CLERK 01/22/2024 12:57 P~                                               INDEX NO. 653461/2022
  NYSCEF DOC. NO. 216                                                                    RECEIVED NYSCEF: 01/22/2024

            Agreement's existence. The Complaint's sole reference to this element (Complaint ,i 22) is

            vague, conclusory, and supported by mere speculation. (Carlyle, LLC v Quik Park 1633 Garage

            LLC, 160 AD3d 476,477 [1st Dept 2018].) Second, the Lender had an economic interest in

            acquiring the Loans in any event. Third, the defendants fail to allege that the Lender engaged in

            any malicious or illegal conduct of any kind. ( Collins v E-Magine, LLC, 291 AD2d 350, 351

            [1st Dept 2002].)

            As to the declaratory judgment counterclaim, although the defendants are correct that the power

            of attorney provision in Sections 8.2.3 of the Loan Agreements must be strictly construed and

            can not be used by the Lender to execute documents on behalf of parties that did not grant the

            power of attorney, this does not mean that the defendants did not breach their obligation to

            execute additional documentation necessary to sever the loans pursuant to Section 9.2 of the

            Loan Agreements (see NYSCEF Doc. No. 135 § 9.2; NYSCEF Doc. No. 132 § 9; NYSCEF Doc.

            No 138 § 9). As such, the defendants are not entitled to a declaration that they are not required

            to execute additional documentation under Loan Documents as they agreed to do and are only

            entitled to a declaration that the Lender may not execute documents on behalf of entities that did

            not grant them a power of attorney.

            Accordingly, it is hereby

            ORDERED that the Plaintiffs motion for summary judgment granted; and it is further

            ORDERED that the Plaintiff shall serve judgment on notice; and it is further

             653461/2022 YS 541 LEXINGTON HOLDINGS LLC vs. DCH LEX PROPCO SUB LP ET AL           Page 5 of 6
             Motion No. 003

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 !FILED: NEW YORK COUNTY CLERK 01/22/2024 12:57 PM!                                                 INDEX NO. 653461/2022
  NYSCEF DOC. NO. 216                                                                         RECEIVED NYSCEF: 01/22/2024

            ORDERED that the Defendants' counterclaims for breach of the NDA and for tortious

            interference with contract are dismissed; and it is further

            ORDERED that the Defendants' counterclaim for declaratory judgment is dismissed to the

            extent that they are not entitled to a declaration that they are not required to execute additional

            documents under the Loan Agreements; and it is hereby

            ORDERED that the Defendants' counterclaim for declaratory judgment is granted solely to the

            extent that they are entitled to a declaration that the Lender may not execute documents on behalf

            of entities that did not grant the Lender a power of attorney.

                    1/22/2024
                      DATE                                                       ANDREW BORROK, J.S.C.
             CHECK ONE:                  CASE DISPOSED                    NON-FINAL DISPOSITION

                                         GRANTED         □ DENIED         GRANTED IN PART          □ OTHER
             APPLICATION:                SETTLE ORDER                     SUBMIT ORDER

             CHECK IF APPROPRIATE:        INCLUDES TRANSFER/REASSIGN      FIDUCIARY APPOINTMENT    □ REFERENCE

             653461/2022 YS 541 LEXINGTON HOLDINGS LLC vs. DCH LEX PROPCO SUB LP ET AL              Page 6 of 6
             Motion No. 003

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