On August 23, 2006, defendant Rich Albany Hotel, LLC (Rich Albany) borrowed $21,500,000 from Greenwich Capital Financial Products, Inc. to purchase a Holiday Inn hotel on Wolf Road, in the Town of Colonie, New York. The note was secured by a consolidated mortgage. In conjunction with the note and mortgage, the parties executed a Loan Agreement governing the repayment of the loan. In addition, defendants Madison Niche Opportunities Fund, LLC (Madison Niche), Aik Hon Tan and John Comunale executed a "Guaranty of Recourse Obligations". This Court has previously determined that since the Note and Mortgage were assigned to plaintiff, it has standing to pursue this action (see Decision and Order [Lynch, J.] dated November 11, 2012).

There is no factual dispute that Rich Albany defaulted on the loan payments in April, 2011. Plaintiff commenced this action in January, 2012 seeking to foreclose the mortgage and to obtain a deficiency judgment against Rich Albany and the guarantors. Before the Court is plaintiff's motion for an order of summary judgment granting the requested relief. In separate cross motions, as listed below, the defendants have opposed the application only insofar as plaintiff seeks monetary relief and cross moved to dismiss plaintiff's application for money damages against Rich Albany and the guarantors. Oral argument was held on

December 12, 2013.

As previously noted by the Court in the November 26, 2012 Decision and Order, the parties agree that the loan was non-recourse, subject to certain exceptions described as "Borrower's Recourse Liabilities" and "Springing Recourse Events". Absent the triggering of one of these exceptions, plaintiff acknowledges that its' sole recourse upon a default is to foreclose against the [*2]property, leaving the borrower and guarantors exempt from personal liability (see G3 Purves St., LLC v. Thomson Purves, LLC, 101 AD3d 37, 41). Notably, defendants readily acknowledge that plaintiff is entitled to foreclose on the mortgage. Accordingly, the Court hereby grants plaintiff's motion for an award of summary judgment granting foreclosure on the mortgage lien.

The real dispute here is whether plaintiff is entitled to any further relief granting money damages against Rich Albany and the guarantors. In particular, the question presented is whether plaintiff has demonstrated the occurrence of an exception giving rise to either loss recourse or full recourse liability for the deficiency, if any, due on the note.^[FN1]

On this motion, plaintiff relies upon only one "Borrower's Recourse Liabilities" category, to wit: the failure to pay taxes, for which plaintiff seeks loss recourse in the amount of $470,643.22 for taxes paid to date, and any additional taxes paid out of the foreclosure proceeds pursuant to RPAPL §1354(2). In response, Rich Albany has documented that plaintiff was fully reimbursed for this tax payment in February, 2013 — a point that plaintiff fails to respond to in its reply papers. As such, plaintiff's "Borrower's Recourse Liabilities" claim is rejected.

Plaintiff also seeks to obtain full recourse against the defendants contending three "Springing Recourse Events" have been triggered.

First, plaintiff maintains that the docketing of a Colorado State Court judgment against Rich Albany, in favor of Richfield Hospitality of New York, LLC (Richfield), a former operator of the hotel, constitutes an "event of default" as described in Section 8.1(d) of the Loan Agreement. The Richfield judgment was docketed in New York on April 27, 2012 in the amount of $349,400.68. By Decision and Order (Lynch, J.) dated October 1, 2012, the Court permitted Richfield to file a Notice of Appearance in this action.^[FN2] Plaintiff maintains that the Richfield judgment constitutes an "unpermitted transfer" and thus an "event of default" under Section 8.1 of the Loan Agreement, triggering a "springing [*3]recourse event" that makes Rich Albany and the Guarantors personally liable for the amount due on the note.

Under Section 8.1(d), an "event of default" is defined to include "a Transfer other than a Permitted Transfer". By definition, a "Transfer" involves "(i) any sale, conveyance, transfer, lease or assignment, or the entry into any agreement to sell, convey, transfer, lease or assign, whether by law or otherwise, of, on, in, or affecting (x) all or part of the Property — (including any legal or beneficial direct or indirect interest therein)...(see Exhibit "1" to D'Amanda Affirmation dated April 29, 2013, Loan Agreement at pp. 11-12). The Loan Agreement further defines "Permitted Transfers" to include "(iii) a Permitted Encumbrance" (Id p. 8). "Permitted Encumbrances" are defined as follows:

"Permitted Encumbrances: (i) the Liens created by the Loan Documents,

(ii) all Liens and other matters disclosed in the Title Insurance Policy, (iii) Liens,

if any, for Taxes or Other Charges not yet due and payable and not delinquent,

(iv) any workers', mechanics' or other similar Liens on the Property provided that

any such Lien is bonded or discharged within thirty (30) days after Borrower first

receives notice of such Lien, and (v) such other title and survey exceptions as

Lender approves in writing in Lender's discretion" (Id.).

The Court recognizes that the docketing of the judgment effects a lien against the property (CPLR 5018(a); 5203). But where, as here, the judgment is docketed after commencement of the action, the judgment has no priority and will be voided by a foreclosure judgment (see RPAPL §1311[3]). In this context, the Court agrees with Rich Albany, that the docketing of the Richfield judgment does not constitute a defined "Transfer" under the Loan Documents. While Section 5.27 of the Loan Agreement expressly provides the Borrower shall not permit any "Liens" against the property without the Lender's prior written consent, defendant correctly points out that the breach of section 5.27 is not included as a "springing recourse event" under Section 10.1 (compare G3 - Purves Street, LLC v. Thomson Purves, LLC, supra., 101 AD3d 37, 39) [the carve out language included liens]. Moreover, the triggering events in the G3-Purves case actually led to the acceleration of the debt (Id 41). That is not the situation here.

Next, plaintiff maintains that Rich Albany's failure to make the regular debt service payments due on the subject note has triggered a "springing recourse event" under Section 10.1. Under Section 8.1[f], an "event of default" occurs when the Borrower "shall generally not be paying its debts as they become due" (see Loan Agreement p. 58) (emphasis added). The parties differ as to whether the underscored term, "debts", includes the subject note. Defendant maintains that such a construction would effectively nullify the non-recourse structure of this [*4]agreement. The Court agrees.

In Greenfield v. Phillies Records (98 NY2d 562), the Court of Appeals stated the core principles of contract construction as follows:

"The fundamental neutral precept of contract interpretation is that

agreements are construed in accord with the parties' intent. The best evidence

of what parties to a written agreement intend is what they say in their writing.

Thus, a written agreement that is complete, clear and unambiguous on its face

must be enforced according to the plain meaning of its terms.

Extrinsic evidence of the parties' intent may be considered only if the

agreement is ambiguous, which is an issue of law for the courts to decide. A

contract is unambiguous if the language it uses has a definite and precise

meaning, unattended by danger of misconception in the purport of the

agreement itself, and concerning which there is no reasonable basis for a

difference of an opinion. Thus, if the agreement on its face is reasonably

susceptible of only one meaning a court is not free to alter the contract to

reflect its personal notions of fairness and equity (Id at 569-570 [internal

quotations and citations omitted]).

Correspondingly, contracts should be interpreted to give effect to each provision, and to avoid a construction that renders a clause meaningless (see Union Carbide Corp. v. Affiliated FM Ins. Co., 68 AD3d 534, 536; 22 NY Jur 2d Contracts §249). A court is authorized to reconcile apparently conflicting provisions when it is reasonably possible to do so (22 NY Jur 2d Contracts §250). Read literally, the reference to "debts" in §8.1[f] would include the subject note as asserted by plaintiff. Such a construction, however, completely nullifies the non-recourse structure of this loan. Since the purpose of the recourse carve-out is to protect the lender's investment, while shielding the borrower from personal liability, it is reasonable to conclude that the reference to "debts" in §8.1[f] speaks to other "debts" incurred by the borrowers. In this way, the parties' respective interests are preserved and the non-recourse structure of this loan is implemented (cf. 51382 Gratiot Avenue Holdings, LLC v. Chesterfield Development Company, LLC, et al., 835 F Supp 2d 384, 393-397). Accordingly, this aspect of plaintiff's motion is denied.

Next, plaintiff maintains that Rich Albany's failure to maintain its status as a "Single Purpose Bankruptcy Remote Entity" constitutes a "springing recourse event". Under Section 5.13 of the Loan Agreement, Rich Albany was required to be a "Special Purpose Bankruptcy Remote Entity" as defined in Schedule 5. Under Schedule 5, subpart (x), Rich Albany was required to "remain solvent" and [*5]"maintain adequate capital in light of its contemplated business operations". Rich Albany was also prohibited from incurring "indebtedness other than Permitted Indebtedness"(subpart xxi).

Plaintiff maintains that Rich Albany violated these requirements because it has failed to make the debt payments due on the note, and has not maintained adequate capital based on an appraisal showing a loan-to-value ratio of approximately 159% (see Smith Affidavit at pp. 10-11). In addition, plaintiff points to the Richfield Judgment as unauthorized indebtedness under subpart xxi.

The Court agrees with Rich Albany's position that the failure to repay the subject loan does not, of itself, trigger the "no insolvency" provisions defining the obligations of a Single Purpose Bankruptcy Remote Entity. To hold otherwise, as with the definition of "debt" under Section 8.1[f] would render the non-recourse structure of this agreement meaningless. Plaintiff has not demonstrated "insolvency" on any other evidentiary basis.

Section 5.22 of the Loan Agreement defines "Indebtedness" as follows:

"5.22 Indebtedness. Borrower shall not directly or indirectly create,

incur or assume any indebtedness other than (i) the Debt and (ii) unsecured

trade payables incurred in the ordinary course of business relating to the

ownership and operation of the Property, which in the case of such unsecured

trade payables (A) are not evidenced by a note, (B) do not exceed, at any time,

a maximum aggregate amount of two percent (2%) of the original amount of

the Principal, and (C) are paid within sixty (60) days of the date incurred"

(collectively, "Permitted Indebtedness").

Plaintiff maintains that since the Richfield Judgment does not qualify as "permitted indebtedness" Rich Albany compromised its status as a "Single Purpose Bankruptcy Remote Entity", triggering full recourse liability under Section 10.1 of the Loan Agreement.

Given, as noted above, that the Richfield judgment lacks priority and will be nullified with a judgment of foreclosure, it is difficult to accept plaintiff's thesis that this judgment compromises Rich Albany's status as a "Single Purpose Bankruptcy Remote Entity". This is not to say that the Court accepts Rich Albany's characterization of the Richfield judgment as a "trade payable" and thus a "permitted indebtedness". While Richfield's claim is apparently based on services it rendered as an operator of the hotel, the claim was not paid within sixty (60) days and thus is not a "Permitted Indebtedness" as defined in section 5.22. As discussed above, the docketing of the judgment did create a lien on the property. Section 5.27 of the loan agreement requires the borrower to either bond [*6]or discharge the lien within thirty (30) days after borrower first receives notice of the lien. Notably, Section 8.1[m] defines an "event of default" where "a default shall be continuing under any of the other terms, covenants or conditions of this Agreement or any other Loan Document not otherwise specified in this Section 8.1, for ten (10) days after notice to Borrower (and Guarantors, if applicable) from Lender". Since Section 5.27 is not "otherwise specified in Section 8.1", the plaintiff was required to provide notice of the asserted breach to both Rich Albany and the Guarantors. This holds true with respect to both the entry of the Richfield Judgment in Colorado on February 28, 2012 and the docketing of the judgment in New York. There is no indication in the submissions that any such notice was provided.

In reply, plaintiff explains that its actual thesis is that the entry of the Richfield Judgment in Colorado on February 28, 2012, and not the docketing of the lien in New York, is the operative event triggering full recourse liability. Specifically, plaintiff maintains the Colorado judgment constitutes indebtedness under Section 5.13, Schedule 5, subparagraph (xxi) of the Loan Agreement, since the judgment is not "permitted indebtedness" under section 5.22. This event occurred, however, after the commencement of this action, and as noted above, did not precipitate acceleration of the debt. As such, the Court rejects plaintiff's assertion that the entry of the Richfield Judgment in Colorado triggered full-recourse liability.

Plaintiff also seeks a determination confirming that certain representations and warranties relating to the environmental condition of the property survive a judgment of foreclosure in their favor (see Loan Agreement §4.21 and 5.20). In this regard, it is worth noting that in paragraph 29[e] of the complaint, plaintiff asserted upon information and belief that it "has or will incur Indemnified Liabilities'...concerning the Mortgaged Property's compliance with Environmental Laws..." And yet, as noted at the outset of this decision, plaintiff has limited this summary judgment motion for "Borrower's Recourse Liabilities" based on the payment of taxes. No claim has been made here identifying any actual environmental issue. As such, the Court agrees with Rich Albany's point that the requested relief would be advisory. Accordingly, this aspect of plaintiff's motion is denied.

Given the above, the Court grants plaintiff's motion for summary judgment only to the extent of foreclosure against the property; the motion for monetary damages under Section 10.1 as against Rich Albany and the guarantors is denied in its entirety, and the defendants' respective cross motions to dismiss the [*7]monetary claims are granted, all without costs. The cross motion of Tan and Communale for reformation of the Loan Agreement need not be addressed. In view of this decision, the separate Notice of Motion to Compel by defendants Rich Albany and Madison Niche, returnable April 30, 2013 is dismissed as academic.

This Memorandum constitutes the Decision and Order of the Court. This original Decision and Order is being returned to the attorneys for plaintiff . The original papers are being sent to the Albany County Clerk. The signing of this Decision and Order shall not constitute entry or filing under CPLR 2220. Counsel is not relieved from the provision of that rule regarding filing, entry, or notice of entry.

SO ORDERED!

ENTER.

Dated: Albany, New York

December, 2013

_________________________________________Michael C. Lynch

Justice of the Supreme Court

Papers Considered:

1.Notice of Motion initially returnable May 28, 2013, with Affirmation of John

D'Amanda, Esq. dated April 29, 2013, and Exhibits "1" - "4"; Affidavit of

David Smith dated April 10, 2013 with Exhibits "1" - "4"; Plaintiff's Memo

of Law dated May 2, 2013; Plaintiff's Reply Memo of Law dated June 27, 2013;

2.Notice of Cross-Motion by Defendants Rich Albany and Madison Niche [*8]

returnable June 28, 2013; with Affidavit of David Lionette dated June 21,

2013, and Exhibits "A" - "I"; Memorandum of Law dated June 21, 2013;

3.Notice of Cross-Motion by defendants Aik Hong Tan and John Comunale

returnable June 28, 2013, with Affirmation of Warren Rosenbaum, Esq. dated

June 20, 2013; Affidavit of John Comunale dated June 14, 2013, with Exhibits

"A" - "B"; Affidavit of Aik Hong Tan dated June 19, 2013 with Exhibits "A"

- "B"; Memorandum of Law dated June 20, 2013; and

4.Notice of Motion to Compel by defendants Rich Albany and Madison Niche

returnable April 30, 2013, with Affirmation of Christian Soller, Esq. (undated)

filed April 23, 2013, with Exhibits "A" - "D"; Memorandum of Law dated

April 22, 2013.