47 Misc. 3d 544
N.Y. Sup. Ct.2014Background
- Multiple related actions by Cortlandt Street Recovery Corp. (Cortlandt) and Wilmington Trust Co. (WTC, indenture trustee) seek payment on PIK notes and subordinated notes issued by Hellas entities and allege fraudulent conveyances to private equity defendants (Apax/TPG).
- Cortlandt sued as assignee/agent for collection of large tranches of PIK and sub notes; WTC is trustee under the PIK indenture and moved for summary judgment in lieu of complaint under CPLR 3213.
- The indentures allow suits only by a registered "Holder" (definitive noteholder) or the Trustee; Cortlandt holds only assignments purporting to give a right to collect, not title to the claims.
- Cortlandt sought to amend the sub-note complaint to add its assignor (SPQR) and later addenda that purportedly transfer "all right, title and interest;" SPQR itself held only book‑entry (beneficial) interests and not definitive notes.
- Court found Cortlandt’s assignments were collection-only (not assignments of title), Cortlandt lacked standing and could not cure that defect by the proposed addendums because an assignee takes no greater rights than its assignor (SPQR lacked holder status).
- WTC, as trustee, established a prima facie CPLR 3213 claim on the PIK notes (default and acceleration occurred); court granted WTC judgment on the notes but denied trustee authority to pursue the fraudulent‑conveyance and other third‑party claims because the indenture did not authorize such broad tort claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Cortlandt have standing as assignee to sue on notes? | Assignment granted Cortlandt full rights to collect and to pursue remedies; thus it can sue. | Assignments gave only a power to collect; indenture permits only a registered Holder or trustee to sue. | Cortlandt lacks standing: assignments were collection-only, not transfers of title. |
| Can Cortlandt cure standing defect by amending assignments / SPQR addenda? | Addendums transferred "all right, title and interest" from SPQR to Cortlandt; liquidators granted SPQR creditor status. | SPQR never held definitive notes (only book-entry interests) so it could not assign holder rights; liquidator letter did not override indenture requirements. | Defect is curable in principle but not cured here; addendums ineffective because assignor (SPQR) lacked holder status. |
| May trustee (WTC) maintain fraudulent‑conveyance and other tort claims against third parties under indenture? | Indenture sections (6.03, 6.05, 6.06, 7.01, 11.04) authorize Trustee to pursue "any available remedy" and to act at direction of noteholders, so trustee can pursue those claims. | Indenture limits trustee to actions to collect on the Notes or enforce indenture provisions; fraudulent‑conveyance/tort claims are separate and could have been brought pre‑default by holders. | Trustee not authorized to maintain the fraudulent‑conveyance and related third‑party tort claims; Cortlandt lacked authority to direct trustee because it was not a holder. |
| Is CPLR 3213 summary judgment in lieu of complaint available to WTC on the PIK notes? | Notes and guaranty create unconditional obligations; default and acceleration occurred; amount is ascertainable from note terms. | Defendants assert CPLR 3213 is improper because calculation and entitlement require reference to indenture and extrinsic proof. | CPLR 3213 applies; WTC established prima facie entitlement and WTC was granted judgment on the PIK notes; hearing required to determine fees/expenses. |
Key Cases Cited
- Allen v. Brown, 44 N.Y. 228 (explains assignee must acquire title to the claim to be real party in interest)
- Weissman v. Sinorm Deli, 88 N.Y.2d 437 (CPLR 3213 requires instrument to show unconditional obligation to pay)
- Sprint Communications Co. v. APCC Services, Inc., 554 U.S. 269 (assignee standing requires transfer of title to claims)
- Quadrant Structured Prods. Co. v. Vertin, 23 N.Y.3d 549 (construes no‑action clauses and scope of holder claims vs. trustee authority)
- AG Capital Funding Partners v. State St. Bank & Trust Co., 11 N.Y.3d 146 (indenture trustee powers are defined by the indenture)
- Springwell Nav. Corp. v. Sanluis Corporacion, S.A., 81 A.D.3d 557 (beneficial holder lacks standing where indenture reserves suit to registered Holder)