Facts

In June 2007, a syndicate of lenders ("Lenders") committed to provide $1.85 billion in financing to two limited partnerships (the "Borrowers") for the construction of the Fontainebleau Resort and Casino in Las Vegas, Nevada (the "Project") pursuant to a Credit Agreement ("Credit Agreement") providing for a $700 million term loan facility, a $350 million term loan delay draw facility and an $800 million revolving loan facility ("Revolver). In order to induce the Lenders to make the credit extensions, Turnberry Residential Limited Partner, L.P., an affiliate of the Project's developer ("Completion Guarantor"), entered into a Completion Guaranty ("Completion Guaranty") with, inter alia, representatives of the Lenders and a Disbursement Agent ("Disbursement Agent") under a Master Disbursement Agreement ("Disbursement Agreement") .

Pursuant to the terms of the Completion Guaranty, the Completion Guarantor provided a $50 million letter of credit which was drawn on and placed in a Completion Guaranty Proceeds Account ("CGPA") under the Disbursement Agreement. Under certain circumstances, the Completion Guarantor was required to deposit another $50 million in the account. The circumstances relating to the $50 million deposit obligation and the rights to the $50 million currently on deposit in the CGPA are the subject of this case.

Plaintiff seeks a declaratory judgment that the conditions for the use of the $50 million deposit have not been, and will not ever be, met and therefore the deposit should be returned to it. Defendant, in turn, asserts that plaintiff breached the Completion Guaranty and seeks a declaratory judgment that plaintiff must fund an additional $50 million into the CGPA and that defendant properly holds the $50 million now on deposit.

Plaintiff moves for summary judgment on its claim in the complaint, and defendant cross-moves to dismiss the complaint and on it counterclaims in this case.

In order to prevail on summary judgment, the moving party must establish the cause of action or defense sufficiently to warrant judgment as a matter of law. CPLR § 3212 (b). The plaintiff must establish that "there is no defense to the cause of action or that the defense . . . has no merit" to warrant the court to direct judgment in the plaintiff's favor. CPLR § 3212 (b); Bush [*2]v St. Claire's Hosp., 82 NY2d 738, 739, 602 NYS2d 324, 325 (1993); Winegard v New York Univ. Med. Ctr., 64 NY2d 851, 853, 487 NYS2d 316, 317 (1985). This standard requires the moving party to make a prima facie showing of entitlement to judgment as a matter of law, by advancing sufficient "evidentiary proof in admissible form" to demonstrate the absence of any material issues of fact. Winegard, 64 NY2d at 853, 487 NYS2d at 317; Zuckerman v City of New York, 49 NY2d 557, 562, 427 NYS2d 595, 597 (1980); Thomas v Holzberg, 300 AD2d 10, 11, 751 NYS2d 433, 434 (1st Dept 2003).

Summary judgment should not be granted when a triable issue of fact exists. DeLuc v Resnick, 224 AD2d 210, 211, 637 NYS2d 146, 147 (1st Dept 1996). The moving party must present evidence in "admissible form." Friends of Animals, Inc. v Associated Fur Mfrs., Inc., 46 NY2d 1065, 1067-68, 416 NYS2d 790, 791-92 (1979). The admissible form standard requires credible and probative evidence for summary judgment. Gonzalez v 98 Mag Leasing Corp., 95 NY2d 124, 129 711 NYS2d 131, 134 (2000).

The Completion Guaranty here is structured to require the Completion Guarantor to provide up to $100 million to pay the costs of completing the Project ("Completion Costs"). Completion Costs, however, does not include payment of debt service (principal, interest, etc.) with respect to any extension of credit under the Credit Agreement. The preamble to the Completion Guaranty is informative. It clearly states that the Completion Guaranty is being entered into to induce the Lenders to make the credit extensions contemplated by the Financing Arrangements. Parsing through the definition scheme of the Credit Agreement, it is clear that funding under the Completion Guaranty was intended to provide an inducement for the contemplated $1.85 billion credit extension, not just the credit extension under the Revolver.

Section 2.10 of the Disbursement Agreement provides the terms pursuant to which the Completion Guaranty may be utilized. Essentially, it provides for a waterfall of funding sources, each of which must be exhausted prior to utilizing the next succeeding funding source. They are, in relevant part:

"(b)the Current Available Resort Sources as of the Advance Date shall be applied to the Resort Request by applying the following order of priority and in each case until the relevant Resort Source is Exhausted (except to the extent otherwise limited below):

(ix)then, from funds then on deposit in the Bank Proceeds Account prior to giving effect to the requested Advance;

(x)then, from funds available to be drawn under the Bank Proceeds Credit Facility, until the aggregate amount of the Bank Revolving Availability has been reduced to $55,000,000;

(xi)then, only on and after the Initial Bank Advance Date, from the making of draws under the Completion Guaranties (subject to the proviso in Section 2.6.6); [*3]

(xii). . .; and

(xiii)then, only on and after the Initial Bank Advance Date, from the remainder of the Bank Credit Facility."

In April 2009, the Lenders under the Revolver notified the Borrowers that events of default had occurred and they terminated their commitment under the Credit Agreement. The developer then filed for bankruptcy protection, which act, by itself, also terminated the Lenders commitment under the Credit Agreement, including the Revolver. The Project subsequently was sold for an amount which was not sufficient to pay outstanding indebtedness under the Credit Agreement and unpaid Completion Costs. At the time the commitments were terminated, the Lenders had extended Term Loans ("Term Loans") in the principal amount of $1.0365 billion and loans under the Revolver of $13 million.

The issue to be addressed by the court here is whether the terms of the Disbursement Agreement quoted above permit the defendant to draw under the Disbursement Agreement pursuant to Section 2.10.1(b)(xi) thereof in circumstances where actual draws under the Revolver prior to the events of default thereunder did not reduce the amount remaining to be drawn to $55 million. This involves an analysis of the interplay of the defined term "Exhausted" in the introduction of Section 2.10.1(b) with the sequential funding sources referred to in the Section. The term Exhausted is defined in Exhibit A to the Disbursement Agreement with respect to the Revolver as " . . . the time at which the lending commitments under [the Revolver] have been fully utilized . . ." It is not until then that the Completion Guaranty can be drawn upon under 2.10.1(b)(xi).

Plaintiff contends that the words in Section 2.10.1(b)(x) "until the aggregate amount of the [$800 million] Bank Revolving Availability has been reduced to $55,000,000" requires that actual drawings in an amount equal to $745,000,000 must have been made before draws can be made under the Completion Guaranty. The defendant counters that at the point commitments were terminated under the Revolver due to events of default, including the filing of a bankruptcy petition which reduced the lending commitments to zero, they were thus fully utilized even though the actual draws under the Revolver were only $13 million.

The court finds defendant's position to be clearly correct. The Completion Guaranty was entered into to induce the Lenders to extend credit of $1.85 billion for a substantial real estate development - the Project. It was put in place to ensure that the costs associated with the Project, other than debt service, would be provided for. Typically, in such credit facilities, an event of default involving circumstances far less dire than the filing of a bankruptcy petition immediately terminates any outstanding lending commitment and the lenders are free to exercise contractually agreed upon remedies. There is no longer access to credit, or availability, under the lending facility. Guaranties, completion, or payment, also are immediately triggered.

Here, the term utilized as it appears in the definition of Exhausted and as it relates to 2.101(b)(x) of the Disbursement Agreement must be given its plain meaning - which is that the borrower no longer has access to credit or, put another way, financing availability is extinguished. To find otherwise would be to ignore the purpose of the overall credit arrangement. [*4]

Plaintiff relies on an expansive reading of the phrase "until the aggregate amount of the Bank Revolving Availability has been reduced to $55,000,000" in Section 2.10(b)(x) of the Disbursement Agreement. It is clear, however, that, absent this phrase, in circumstances involving the filing of a bankruptcy petition, an event of default with its attendant termination of commitments would exist and the lending commitments would be unarguably fully utilized. This would be so even if there had been no draw at all under the Revolver. Thus, the wording relied upon by plaintiff must be seen as impacting the ability to draw on the Completion Guaranty only in the case where there is not present an event of default. In fact, the Disbursement Agreement anticipates that in a non-default scenario, other accounts will be accessed after the Completion Guaranty is fully drawn upon and the Lenders themselves will make available the remainder of their commitment.

Section 2.10.1(b)(x) of the waterfall in the Disbursement Agreement must be read in its entirety. It provides that draws under the Revolver are to be "from funds available to be drawn under the [Revolver] . . ." As the events of default terminated the borrower's ability to draw under the Revolver, there are clearly no funds available to be drawn. Accordingly, the terms of the Disbursement Agreement provide that in such circumstances draws under the Completion Guaranty are then available to be made.

Finally, an examination of the waterfall of Section 2.10.1(b) clearly shows that, in circumstances not involving an event of default with its attendant termination of commitments, the Revolver was to be drawn down until only $55 million remained thereunder at which time draws then were to be made under the Completion Guaranty until it was Exhausted (fully utilized) and then further draws were to be made under the Revolver. This protocol was immediately interrupted by the occurrence of an event of default with the termination of commitments under the Revolver. Plaintiff would have this interruption also apply to utilization of the Completion Guaranty. If such an unusual result had in fact been negotiated by the parties to the Revolver, Section 2.10.1(b)(xi) would have been clearly worded to emphasize this point. It was not.

Plaintiff further contends that the sale of the Project to an unrelated third party frustrates the purpose of the Completion Guaranty, as there is no Project to complete. This argument ignores the fact that the draws under the Completion Guaranty are to be made pursuant to a Resort Request ("Resort Request"). A Resort Request references Project Costs which, in turn, are defined as "all costs incurred . . . in connection with the development, design, engineering, procurement, construction, installation, opening and completion of the Project . . ." It is clear that the draws under the Completion Guaranty may be made to pay accrued Project Costs even though the Project, as it was contemplated by the Credit Agreement, is no longer extant. Thus, the purpose of the Completion Guaranty clearly has not been frustrated.

Accordingly, it is

ORDERED that plaintiff's motion for summary judgment is denied and defendant's cross-motion for summary judgment is granted.

Settle Order.

Dated:September 16, 2011 [*5]

ENTER:

/s/Melvin L. Schweitzer

J.S.C.