SPT Chatsworth Holdings, L.L.C. v. HFZ 344 West 72nd Street LLC

Background

SPT Chatsworth, LLC succeeded to the rights of lenders under four loans connected to the development of residential cooperative units at 344 West 72nd Street. The borrower defendants were HFZ 344 West 72nd Street LLC, HFZ 344 West 72nd Street Mezz LLC, HFZ 344 West 72nd Street Holdco LLC, and HFZ 344 West 72nd Street Two LLC. HFZ Capital Group LLC, Ziel Feldman, and Helene Feldman guaranteed certain obligations and were also defendants. Chatsworth Realty Corporation had previously been dismissed by stipulation and order, and the court directed that it be removed from the caption.

The senior loan had a maximum principal amount of $152,000,000, the mezzanine loan had a maximum principal amount of $50,000,000, the unsecured loan had a maximum principal amount of $12,000,000, and the inventory loan had a maximum principal amount of $130,207,000. The loan documents identified January 31, 2020 as the maturity date for the senior, mezzanine, and unsecured loans. The borrowers failed to pay those loans by that date. The inventory borrower failed to make debt-service payments due by October 1, 2020, did not cure the default after notice, and did not pay the accelerated balance.

The guaranties covered the mandatory purchase obligation, the unsecured loan, and the inventory loan. The mandatory purchase guaranty required the guarantors, after a qualifying default and written notice, either to purchase the remaining unsold units or to pay their designated value. The parties stipulated that the aggregate designated value of the unsold units was $98,178,163. The guarantors did not make the required payments after receiving notice.

Summary-judgment standard

The court applied Rule 56 of the Federal Rules of Civil Procedure. Summary judgment is appropriate when there is no genuine dispute about a material fact and the moving party is entitled to judgment as a matter of law. After the moving party makes the required showing, the opposing party must provide admissible evidence showing a real factual issue for trial.

Claims against the borrowers

Applying New York law, the court explained that a plaintiff recovering on a promissory note must show an enforceable obligation to repay and the defendant’s failure to pay. The court found that SPT had succeeded to the lenders’ rights, that the loans were due, that the borrowers had not paid, and that SPT or its predecessor had provided notice of default.

The borrowers argued that a notice concerning the mandatory purchase of unsold units did not give them the required 45-day period. The court assumed, for purposes of its analysis, that this argument might be correct, but held that it did not eliminate the separate defaults based on failure to pay the senior, mezzanine, and unsecured loans at maturity. It also did not eliminate the inventory-loan default. Because the borrowers presented no facts establishing a genuine defense to repayment, the court granted summary judgment for SPT against the borrowers.

The court stated that, net of collateral sold and as of August 20, 2021, the amounts due were no less than $26,708,860.85 on the senior loan, $40,982,952.98 on the mezzanine loan, $10,810,198.58 on the unsecured loan, and $12,322,641.10 on the inventory loan. SPT was directed to submit a proposed judgment.

Claims against the guarantors

The court explained that recovery on a guaranty requires proof of the guaranty, the underlying debt, and the guarantor’s failure to perform. It held that the mandatory purchase guaranty was unconditional, primary, direct, and not dependent on the lender first pursuing remedies against the borrowers. The court concluded that the borrowers’ 45-day rights concerning unsold units did not negate the guarantors’ obligation, which arose 30 days after written notice of default. The court therefore granted summary judgment for SPT under the mandatory purchase guaranty in an amount of no less than $98,178,163.

The court also granted summary judgment for SPT under the unsecured-loan guaranty. It found that the unsecured borrower failed to pay at maturity, the guarantors received notice, and the guarantors did not pay. The court stated that the unpaid balance through August 20, 2021 was $10,810,190.58, including principal, interest, and default interest.

For the inventory-loan guaranty, the court found that the inventory borrower defaulted, failed to cure after notice, and did not pay the accelerated debt. The guarantors received notice of their obligations but made no payment. The court granted summary judgment for SPT under that guaranty in an amount of no less than $12,322,641.

Fees and disposition

The loan agreements and guaranties allowed SPT to recover reasonable attorneys’ fees, costs, and expenses. The court allowed SPT to file a motion for those amounts within 21 days after entry of judgment.

The court’s conclusion states that SPT’s motion for summary judgment against the borrowers and guarantors was GRANTED. It directed SPT to submit a proposed final judgment within seven days and allowed the defendants three days to respond. The Clerk was directed to terminate the motion and amend the caption to remove Chatsworth Realty Corporation as a defendant.