Berhad v. Park Place Dev. Primary

• Decision Date: 18 November 2022
• Docket Number: Index No. 850083/2020
• Citation: 2022 NY Slip Op 33997 (U)
• Court: New York Supreme Court
• Parties: MALAYAN BANKING BERHAD, NEW YORK BRANCH, INTESA SANPAOLO S.P.A., NEW YORK BRANCH, WARBA BANK K.S.C.P., 45 PARK PLACE INVESTMENTS, LLC, Plaintiff, v. PARK PLACE DEVELOPMENT PRIMARY LLC, PARK PLACE PARTNERS DEVELOPMENT LLC, 45 PARK PLACE PARTNERS, LLC, SOHO PROPERTIES GENERAL PARTNER, LLC, SHARIF EL-GAMAL, STATE OF NEW YORK CIVIL RECOVERIES BUREAU, GILBANE RESIDENTIAL CONSTRUCTION LLC, U.S. CRANE & RIGGING LLC, CONSTRUCTION REALTY SAFETY GROUP INC., TRADE OFF PLUS, LLC, ALL-CITY METAL INC., PERMASTEELISA NORTH AMERICA CORP., NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE, TRANSCONTINENTAL STEEL CORP., ISMAEL LEYVA ARCHITECT, P.C., PERI FORMWORK SYSTEMS, INC., ULE GROUP CORP. D/B/A UNITED LIGHTING ELECTRICAL CORP., S&E BRIDGE & SCAFFOLD LLC, JOHN DOES 1-100, SOHO PROPERTIES INC., THE PACE COMPANIES NEW YORK, INC., PEAK MECHANICAL SOLUTIONS, INC., MEN OF STEEL REBAR FABRICATORS, LLC, GOTHAM DRYWALL, INC., TRANSCONTINENTAL STEEL CORP., ISMAEL LEYVA ARCHITECT. P C., PERI FORMWORK SYSTEMS, INC., ULE GROUP CORP. D/B/A UNITED LIGHTING ELECTRICAL CORP., S&E BRIDGE & SCAFFOLD LLC, Defendant.

2022 NY Slip Op 33997(U)

MALAYAN BANKING BERHAD, NEW YORK BRANCH, INTESA SANPAOLO S.P.A., NEW YORK BRANCH, WARBA BANK K.S.C.P., 45 PARK PLACE INVESTMENTS, LLC, Plaintiff,
v.
PARK PLACE DEVELOPMENT PRIMARY LLC, PARK PLACE PARTNERS DEVELOPMENT LLC, 45 PARK PLACE PARTNERS, LLC, SOHO PROPERTIES GENERAL PARTNER, LLC, SHARIF EL-GAMAL, STATE OF NEW YORK CIVIL RECOVERIES BUREAU, GILBANE RESIDENTIAL CONSTRUCTION LLC, U.S. CRANE & RIGGING LLC, CONSTRUCTION REALTY SAFETY GROUP INC., TRADE OFF PLUS, LLC, ALL-CITY METAL INC., PERMASTEELISA NORTH AMERICA CORP., NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE, TRANSCONTINENTAL STEEL CORP., ISMAEL LEYVA ARCHITECT, P.C., PERI FORMWORK SYSTEMS, INC., ULE GROUP CORP. D/B/A UNITED LIGHTING ELECTRICAL CORP., S&E BRIDGE & SCAFFOLD LLC, JOHN DOES 1-100, SOHO PROPERTIES INC., THE PACE COMPANIES NEW YORK, INC., PEAK MECHANICAL SOLUTIONS, INC., MEN OF STEEL REBAR FABRICATORS, LLC, GOTHAM DRYWALL, INC., TRANSCONTINENTAL STEEL CORP., ISMAEL LEYVA ARCHITECT. P C., PERI FORMWORK SYSTEMS, INC., ULE GROUP CORP. D/B/A UNITED LIGHTING ELECTRICAL CORP., S&E BRIDGE & SCAFFOLD LLC, Defendant.

Index No. 850083/2020

Supreme Court, New York County

November 18, 2022

Unpublished Opinion

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PRESENT: HON. FRANCIS KAHN, III Justice.

DECISION + ORDER ON MOTION

FRANCIS KAHN, III, A.J.S.C.

The following e-filed documents, listed by NYSCEF document number (Motion 004) 278, 279, 280, 281, 282, 283, 284, 285, 286, 287, 288, 289, 290, 291,292, 293, 294, 295, 296, 297, 298, 299, 300, 301, 302, 303, 304, 305, 306, 307, 308, 309, 310, 311, 312, 313, 314, 315, 316, 317, 318, 319, 320, 321, 322, 323, 324, 325, 326, 327, 328, 329, 330, 331, 332, 333, 334, 335, 336, 337, 338, 339, 340, 341, 342, 343, 344, 345, 346, 347, 348, 349, 350, 351, 352, 353, 354, 355, 356, 357, 358, 359, 360, 361, 362, 363, 364, 365, 366, 367, 368, 369, 370, 371, 372, 373, 375, 376, 377, 380, 381, 382, 383, 385, 390, 393, 396, 403, 411, 418, 422, 426, 430, 433, 434, 435, 436, 437, 438, 439, 440, 441,442, 443, 444, 445, 446, 447, 448, 449, 450, 451,452, 453, 454, 455, 456, 457, 458, 459, 460, 461, 462, 463, 464, 465, 466, 467, 468, 469, 470, 471,472, 473, 474, 475, 476, 478, 492, 495, 496, 497, 498, 499, 500, 501, 502, 503, 504, 505, 506, 508, 514, 515, 516, 517, 518, 519, 520, 521, 522, 523, 524, 525, 526, 527, 528, 529, 530, 531, 532, 534, 535, 536, 537, 538, 539, 540, 541,542, 543, 544, 545, 546, 547, 548, 549, 550, 551, 552, 553, 555, 556, 557, 558, 559, 560, 561, 562, 563, 564, 565, 566, 567, 568, 569, 570, 571, 572, 573, 574,

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577, 578, 579, 580, 581, 582, 583, 584, 585, 586, 587, 588, 589, 590, 591, 592, 593, 594, 595, 596, 597, 598,599,600,601,602 were read on this motion to/for PARTIAL SUMMARY JUDGMENT.

Upon the foregoing documents, the motion and cross-motions are determined as follows:

This is an action to, inter alia, foreclose on two mortgages, both dated May 17, 2016, given by Defendant Park Place Development Primary LLC ("Borrower") to Plaintiff Malayan Banking Berhad, New York Branch ("Plaintiff') which encumber a parcel of real property located at 43 - 47 Park Place, New York, New York (Block 126, Lot 8) ("Borrower Premises"). One mortgage, a Building Facility Mortgage ("Building Mortgage"), secures a loan in the original principal amount of $162,112,896.16, and the other, a Project Facility Mortgage ("Project Mortgage"), secures a loan with an original principal amount of $11,887,103.84. Approximately a month prior to the execution of these mortgages, Plaintiff and Borrower entered into a Building Facility Agreement ("Building Agreement") and a Project Facility Agreement ("Project Agreement"), both dated April 26, 2016. The purpose of these agreements was to facilitate Borrower's construction of a 43-story condominium tower at 43 Park Place, New York, New York ("43 Park Project"). Pursuant to these contracts, notes memorializing the loans were also executed by Borrower. It is undisputed that Defendant Park Place Partners Development LLC ("Museum Owner") is not a party to any of the above agreements. By deed dated the same day as the Building and Project Agreements, Borrower took assignment of the Borrower Premises from Museum Owner, the title holder of a contiguous parcel of property located at 49 - 51 Park Place, New York (Block 126, Lot 9) ("Museum Premises") and the former owner of Borrower Premises.

Concomitantly with the 43 Park Project, non-party Park Place Development Secondary LLC ("Park Place Secondary") entered a Mezzanine Facility Agreement ("Mezzanine Agreement"), dated May 17, 2016, with non-party Berni ("Berni"), a financier. The Mezzanine Agreement states that Park Place Secondary's "affiliate", Borrower, proposed construction of 50 residential condominium units at a premises identified as 45 Park Place, New York, New York ("45 Park Project"), contained within the Borrower Premises. Park Place Secondary' was, at the time, the sole member of Borrower. The agreement provided that Berni would provide a maximum of $65,250,000.00 to finance the 45 Park Project. Unlike the Building and Project transactions which were secured by mortgages on Borrower Premises (Lot 8), the collateral for this loan was principally Park Place Secondary's interest in both Borrower and a payment reserve account to be established by Park Place Secondary. Thereafter, Park Place Secondary and Berni entered two amendments of the Mezzanine Agreement, dated October 31, 2017, and July 24, 2018, respectively. The First Amendment modified Section 7.33 and Schedule 6, which related to the payment reserve account. The Second Amendment changed the Mezzanine Facility maximum to $76,462,329.00, an increase of $ 11,212,329.00.

Complicating this multifaceted development project was the nature of the financing underlying the above transactions. As the parties are adherents to Islamic Shariah Law, charging interest in return for borrowed sums is prohibited. The structure of the financing is referred to as a Murabaha which usually translates to a cost-plus markup sale. It is described in Article 4 of the Building and Project Facility Agreements and in a document called a Shariah Pronouncement, which is a religious approval of the transaction. In this case, that pronouncement was issued by Maybank Islamic on March 30, 2016. The Mezzanine Agreement contains a similar scheme involving the purchase of "Commodities". Distilled to its essence, in lieu of paying interest, pursuant to Article 4 of the Facility Agreements, titled "Revolving Purchase Facility", the Borrower and Plaintiff would engage in a purchase and sale of "Metals" whereby the amount of profit was agreed in advance. In practice, Plaintiff, on behalf of non-

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parties Malayan Banking Berhad, London Branch, Intesa Sanpaolo S.P.A., New York Branch, Warba Bank K.S.C.P., and 45 Park Place Investments, LLC ("Financiers"), supplied funding to Borrower upon receipt of requests for the purchase of "Metals" which would fund the construction at issue. Subsequently, Borrower was obligated to repay the funds to Plaintiff via a deferred sale price, calculated by adding the purchase price of the Metals earlier advanced by Plaintiff plus, in lieu of interest, an agreed profit on the sales. This sum, as well as a supplemental profit, if applicable, and all other sums due and payable under the Notes and the other agreements, was due on April 26, 2019, the Termination Date.

Both the Project and Mezzanine Agreements reference and adopt terms from the Building Agreement. For instance, the Project agreement expressly adopts, inter alia, the recitals, numerous definitions and the financing structure (Article 4) contained in the Building Agreement. The Mezzanine Agreement states: "All initially capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Building Facility Agreement (as defined below)". The Building Agreement also references the Mezzanine Agreement and states under Section 13.1 [u] that Borrower and Park Place Secondary, as sole member of same, shall not, without the prior written consent of Plaintiff "create, incur, assume or suffer to exist any obligations of either Obligor or Sole Member (whether personal or nonrecourse, secured or unsecured, subordinate or otherwise), except for (i) the Facility, (ii) any trade credit incurred in the ordinary course of Obligor's business, and (iii) the Mezzanine Facility".

When the loans matured, the Borrower defaulted in repayment, one of several claimed defaults. Plaintiff commenced the within action against Borrower and filed a complaint, later amended, which contained four causes of action, to wit: [1] foreclosure of the mortgages, [2] foreclosure on the security agreements, [3] enforcement, or alternatively, foreclosure of assignment of rents and leases and [4] a deficiency judgment. Also joined as parties were various entities which Plaintiff alleged had subordinate liens against the mortgaged premises, eleven of which appeared. These entities provided materials, labor and/or services related to the construction of the residential building on the Borrower Premises and filed mechanic's liens pursuant to the Lien Law.

Gilbane Residential Construction LLC ("Gilbane") answered and pled nine affirmative defenses as well as six crossclaims and a counterclaim. The sixth crossclaim and counterclaim seek foreclosure of its mechanic's lien, a determination of the extent and priority of each lien and a determination that Gilbane's mechanic's lien is superior to all other liens on the premises, including Plaintiff's mortgage.

Permasteelisa North America Corp. ("PNA") answered and pled seven affirmative defenses as well as six crossclaims and a counterclaim. The fourth crossclaim and counterclaim seek foreclosure on its mechanic's lien, a determination of the extent and priority of each lien and, ostensibly, a determination that PNA's mechanic's lien...