Madeleine L.L.C. v. Street
757 F. Supp. 2d 403
S.D.N.Y.2010Background
- Madeleine provided a mezzanine loan up to $275 million to Borrowers for Biscayne Landing development.
- Collateral consisted of Pledge Agreements tying ownership interests in Property Owners to the Borrowers, plus a Recourse Carves Guaranty by Street and Cohen.
- Section 2.2(b)(i) of the Guaranty makes guarantors liable for the full loan upon an Event of Default caused by transfer/encumbrance of collateral uncured after 10 days.
- Pledge Agreement defines Pledgor as North Miami Land Holdings, Ltd. (NMLH); BLIA Developers is an Issuer, not a Pledgor.
- Escrow deposits for Biscayne Landing were partially transferred to a management company; Madeleine alleged this triggered an Event of Default.
- Madeleine sent cure demands; Street and Cohen refused; the case proceeded to cross-motions for summary judgment on the second claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did a Pledge Agreement Event of Default occur | Madeleine contends transfers violated Section 9(a)(i) of Pledge Agreement. | Guarantors argue Section 9(a)(i) only covers Pledgor actions (NMLH), not BLIA transfers. | No Event of Default under Section 9(a)(i). |
| Can a Loan Agreement Event of Default trigger the Guaranty | Section 8.1(f) under Loan Agreement could show a default that triggers the Pledge Event of Default. | Loan Default does not by itself create a Pledge Default unless translated to the Pledge Agreement. | Loan Agreement defaults cannot be used to create a Pledge Agreement Event of Default absent translation. |
| Does Section 9(a)(vii) convert Loan Document Defaults to Pledge Defaults | Section 9(a)(vii) renders any Loan Document Default a Pledge Default. | Definition confines to Pledgor defaults; BLIA/NMLH distinction defeats translation. | No; Section 9(a)(vii) applies only to Pledgor activity, not BLIA transfers. |
| Is the Guaranty enforceable if no Event of Default occurred | If an Event of Default occurred, full recourse would apply. | No Event of Default under the Pledge Agreement means no full recourse liability. | Guaranty not enforceable for full recourse absent an Event of Default under the Pledge Agreement. |
Key Cases Cited
- K. Bell & Assocs., Inc. v. Lloyd's Underwriters, 97 F.3d 632 (2d Cir. 1996) (contract interpretation is a matter of law; unambiguous terms give effect to the writing)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. Supreme Court, 1986) (summary judgment standard; genuine disputes require material factual issues)