Karmely v. Wertheimer
737 F.3d 197
2d Cir.2013Background
- This appeal challenges a district-court dismissal of a complaint over foreclosures tied to a Mezzanine Loan in a complex intercreditor structure.
- The Mezzanine Loan was made by a lender to itself and its partner, with SK Greenwich and W-D Partner as borrowers and W-D Lender as lender.
- Intercreditor Agreement restricted payments on the Mezzanine Loan until the Anglo Senior Loan was paid, but also outlined enforcement options.
- The Operating Agreement and related documents tie the Mezzanine Loan to company ownership interests and distributions, with the Property at 443 Greenwich Street as collateral.
- Disputes center on whether the 3.1(a) (with Available Net Cash Flow) or 3.1(c) (broader) definition of Event of Default permits foreclosure, and whether the Intercreditor Agreement benefits the appellants; the court remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 3.1(a) or 3.1(c) controls the Event of Default | Karmely argues 3.1(a) applies with Available Net Cash Flow. | W-D Lender argues 3.1(c) governs, without the Available Net Cash Flow cap. | Ambiguity exists; remand for extrinsic evidence. |
| Whether the Intercreditor Agreement can benefit the appellants | Intercreditor provisions (e.g., 4(d)) can insulate from foreclosure. | Intercreditor terms do not confer a benefit on appellants and preserve lender remedies. | Ambiguity remains; remand for factual resolution. |
Key Cases Cited
- Mellon Bank, N.A. v. United Bank Corp. of New York, 31 F.3d 113 (2d Cir. 1994) (breach may exist but default question governs remedies)
- Paneccasio v. Unisource Worldwide, Inc., 532 F.3d 101 (2d Cir. 2008) (specific contract language prevails over general when inconsistent)
- Abundance Partners LP v. Quamtel, Inc., 840 F. Supp. 2d 758 (S.D.N.Y. 2012) (principles of ambiguity and integrated transaction construction apply)
- Clarkson v. Town of Florence, 198 F. Supp. 2d 997 (W.D. Wis. 2002) (interpretation of modifying phrases in a series; statutory-like drafting issues)