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FILED: NEW YORK COUNTY CLERK 05/06/2022 03:23 PM INDEX NO. 153512/2022
NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 05/06/2022
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
JARDAN 520 LLC
Index No. 153512/2022
Petitioner,
v.
BVS ACQUISITION CO. LLC; M&T
BANK; AND 86 TH STREET LENDER,
LLP,
Respondents.
MEMORANDUM OF LAW IN OPPOSITION TO JARDAN 520 LLC’S PETITION FOR
RELIEF UNDER CPLR §§5525(b) AND 5227, AND CONFIRMATION OF
PRIORITY EXECUTION PURSUANT TO CPLR §5239
NAGEL RICE LLP
Bruce H. Nagel
(pro hac vice pending)
Greg M. Kohn
Bradley L. Rice
230 Park Avenue
Suite 1000
New York, New York 10029
Phone: (212) 551-1465
103 Eisenhower Parkway
Roseland, New Jersey 07068
Phone: (973) 618-0400
Facsimile: (973) 618-9194
(Please respond to the NJ
Office)
Attorneys for Defendant 86th
Street Lender, LLP
May 6, 2022
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TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES...........................................ii
PRELIMINARY STATEMENT...........................................1
SUMMARY OF ACTION AND PROCEDURAL HISTORY .......................2
I. THE BVS ACQUISITION CO. LLC JUDGMENTS......................2
II. 86TH STREET LENDER LLP’S JUDGMENT ENFORCEMENT ACTIONS ......4
III. BVS JUDGMENT CREDITORS ENTER INTO AN INTERCREDITOR
AGREEMENT AND SETTLEMENT AGREEMENT REGARDING THE
ENFORCEMENT OF ALL JUDGMENTS AGAINST BVS ACQUISITION.......5
IV. DESPITE EXECUTING THE INTERCREDITOR AGREEMENT AND
SETTLEMENT AGREEMENT, JARDAN SEEKS TO EXECUTE ITS JUDGMENT
AGAINST BVS FUNDS HELD BY M&T BANK.........................9
ARGUMENT.......................................................10
I. JARDAN MUST BE BOUND BY THE SETTLEMENT AGREEMENTS AND ITS
FILING OF THIS PETITION IS A BREACH OF ITS OBLIGATION TO
ACT IN GOOD FAITH UNDER THAT AGREEMENT....................10
II. JARDAN’S EXECUTION OF THE INTERCREDITOR AGREEMENT AND
SETTLEMENT AGREEMENT WAIVED ANY TURNOVER AND PRIORITY
RIGHTS....................................................12
CONCLUSION.....................................................13
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TABLE OF AUTHORITIES
Cases Page(s)
Fish King Enter v. Countrywide Ins. Co.,
88 A.D.3d 639 (2d Dep’t 2011) ............................... 12
Golfo v. Kycia Assoc., Inc.,
45 A.D.3d 531 (2d Dep’t 2007) ............................... 12
Metro Burak, Inc. v. Rosenthal & Rosenthal,
83 Misc. 2d 637 (Sup. Ct. Richmond Cnty. 1975) .............. 10
Mintz v Clavin & Co.,
4 A.D.2d 635 (1st Dep’t 1957) ............................... 10
Prudential Ins. Co. of Am. v. WestLB AG,
37 Misc. 3d 1208(A), 2012 WL 4854713 (Sup. Ct. N.Y. Cnty. Oct.
12, 2012) ................................................... 10
Terry v. Belfort,
70 A.D.3d 1028 (2d Dep’t 2010) (enforcing ................... 12
Rules
CPLR §5525................................................. 1, 12
CPLR §5227................................................. 1, 12
CPLR §5239..................................................... 1
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This memorandum of law is submitted by respondent 86th Street
Lender LLP (“86th Street”) in opposition to the Petition of
Petitioner Jardan 520 LLC (“Jardan”) Seeking Relief Under CPLR
§§5525(b) and 5227, and Confirmation of Priority Execution
Pursuant to CPLR §5239.
PRELIMINARY STATEMENT
Jardan’s petition asks this Court to ignore its agreements
and obligations under an intercreditor agreement (the
“Intercreditor Agreement”) and settlement agreement (the
“Settlement Agreement” and together with the Intercreditor
Agreement, the “Settlement Agreements”) with certain participating
creditors of judgment debtor BVS Acquisition Co. LLC (including
Jardan), which provided for the pari passu distribution of monies
to the creditor signatories to the Settlement Agreements. Despite
signing the Settlement Agreements whereby Jardan committed to be
treated equally among BVS’s judgment creditors, Jardan is now
asking the Court to condone its breach of those agreements and
permit it to unilaterally execute against BVS monies held by
respondent M&T Bank without any pro rata distribution to the other
signatories to the Settlement Agreement. Moreover, not only is
Jardan ignoring the rights of the other creditors to the Settlement
Agreements, Jardan is breaching its agreement to refrain from
seeking any lien, charging order or restraint against assets
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subject to the Settlement Agreements. This blatant breach should
not be permitted.
Despite the CPLR’s instruction that the first served
restraining notice gains priority, Jardan’s execution and entry
into the Settlement Agreements binds its hands, bars the relief
requested in the petition, and constitutes a waiver of any right
by Jardan to invoke the CPLR’s priority enforcement provisions.
New York law is clear that where a judgment creditor agrees to be
treated pari passu with other creditors under enforceable
contracts, those contracts govern the enforcement of the judgment
even if they contradict the CPLR’s general enforcement provisions.
Further, were this Court to grant the turnover order requested by
Jardan, such an order would not only violate the terms of the
Settlement Agreements but would improperly encroach on the
province of the Connecticut Probate Court, which was designated
with exclusive jurisdiction over the distribution of assets.
Accordingly, for the reason set forth herein, Jardan’s
petition is wholly without merit and must be denied.
SUMMARY OF ACTION AND PROCEDURAL HISTORY
I. The BVS Acquisition Co. LLC Judgments
On or about October 13, 2020, Respondent 86th Street filed an
action (the “86th Street BVS Action”) by way of summons and notice
of motion for summary judgment in lieu of complaint seeking a
judgment for certain defendants’, including respondent BVS, breach
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of certain loans agreements with 86th Street. (See Index No.
655250/2020 and NYSCEF Nos. 1-21). On or about September 7, 2021,
the parties in the 86th Street BVS Action entered into a stipulation
that judgment shall be entered against defendants, including BVS
in the amount of $26,102,706.25, together with costs and
disbursements. (See Index No. 655250/2020 and NYSCEF No. 54). The
same day, another stipulation was entered in the 86th Street BVS
Action wherein the defendants stipulated to a judgment against
them, including against BVS, in the amount of $29,071,575.43,
together with costs and disbursements. (See Index No. 655336/2020
and NYSCEF No. 56. (collectively the “86th Street Judgments”)). The
86th Street Judgments were entered with the Clerk of the Court for
the Supreme Court of New York on September 21, 2021. (See Index
No. 655336/2020 and NYCEF Nos. 55 and 57).
In addition to the 86th Street Judgments, BVS and certain
other judgment debtors named in the 86th Street BVS Action are
indebted to several other creditors aside from 86th Street,
including petitioner Jardan and others. See Jardan 520, LLC v. BVS
Acquisition Co. LLC et al., No. 657143/2020 (Sup. Ct., N.Y.
Cnty.)(the “Jardan BVS Action”); JPMorgan Chase Bank, N.A. v. David
Novicki et al., No. 654708/2021 (Sup. Ct., N.Y. Cnty.).
Specifically, with respect to Petitioner Jardan, on or about
June 30, 2021, Jardan obtained a judgment against BVS and other
debtors, jointly and severally, in the Jardan BVS Action, in an
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amount of $17,952,875.64 (the “Jardan Judgment”). (See Index No.
657143/2020 NYSCEF No. 50). Following entry of the Jardan Judgment,
on December 13, 2021, Jardan served M&T Bank with a restraining
notice, information subpoena and other enforcement devices. (See
Affirmation of K. Heather Robinson (“Robinson Aff.”), NYSCEF No.
3, at Ex. B (NYSCEF No. 5)). In response, M&T Bank identified an
account owned by BVS holding funds in the amount of $3,287,432.77.
(Robinson Aff., Ex. C (NYSCEF No. 6)). According to Jardan, on or
about February 3, 2022, Jardan sought to levy on the BVS M&T Bank
account. (Robinson Aff., Ex. D (NSCEF No. 7). Upon receipt, M&T
bank advised Jardan that it would release the funds on or about
March 10, 2022). (Robinson Aff., ¶11).
II. 86th Street Lender LLP’s Judgment Enforcement Actions
On February 17, 2022, 86th Street filed an order to show cause
requesting the issuance of a charging order against certain LLC
membership interests owned by BVS and other related judgment
debtors. (See Index No. 655336/2020 and NYCEF No. 63). On February
24, 2022, Justice Andrea Masley, J.S.C. of the New York Supreme
Court, issued 86th Street’s requested charging order, including a
charge against the membership interests in BVS. (See Index No.
652250/2020 NYSCEF No. 70).
On March 2, 2022, 86th Street served M&T Bank with its own
restraining notice. (See Affirmation of Greg M. Kohn, Esq., dated
May 13, 2022 (“Kohn Aff.”), Ex. 1). In addition, on March 3, 2022,
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counsel for 86th Street wrote to M&T Bank advising that given the
competing judgments, the potential for bankruptcy, and the
potential impairment of 86th Street’s rights, M&T Bank should not
release any funds to any judgment creditor. (Kohn Aff., Ex. 2). As
such, M&T Bank has not released any funds to any judgment creditor
including 86th Street and Jardan.
III. BVS Judgment Creditors Enter Into An Intercreditor Agreement
And Settlement Agreement Regarding The Enforcement Of All
Judgments Against BVS Acquisition
Following M&T Bank’s receipt of the March 3, 2022 letter from
counsel for 86th Street, on March 25, 2022, two agreements were
executed. The Settlement Agreement and accompanying Intercreditor
Agreement, were entered into between members of the Ceruzzi Family,
the Trustee for Louis L. Ceruzzi’s last will and testament and the
following creditors of the Ceruzzi Estate, certain properties, and
BVS: (i) 86th Street Lender LLP and 86th Street REP II LP; (ii)
Industrial Bank of Korea, as the Trustee of PIA Private Real Estate
Investment Trust No. 6-1 and PIA Private Real Estate Investment
Trust No. 6-2; (iii) Jardan 520 LLC (the Petitioner in this
action)1; (iv) Tristate Capital Bank; and (v) JPMorgan Chase Bank,
1 Jardan 520 LLC signed both the Settlement Agreement and
Intercreditor Agreement, effective March 25, 2022, and had such
documents signed by Mickey Rabina, an Authorized Signatory on
behalf of Jardan. (Kohn Aff., Ex. 3 at pg. 19 3; Ex. 3 at pg. 27
3).
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N.A. (the “Creditors” and together, such Creditors constitute the
“Creditors Committee”) (See Kohn Aff., Ex. 3 at pg. 1, Ex. A).
As set forth in the Settlement Agreement’s whereas clauses,
the purpose of the settlement was to acknowledge that the judgment
debtor’s assets were insufficient to satisfy each of the judgment
creditor’s judgments and to “resolve the Dispute [among the
creditors seeking to execute upon the judgment debtors’ assets] by
mutual agreement to avoid the considerable expense and inherent
risk and uncertainty of litigation ….” (Ex. 3 at pg. 1).
With respect to the assets of BVS, Section 6 of the Settlement
Agreement sets forth how, subject to certain exemptions for the
family of the deceased, all “Estate Assets”, which by definition
included the interests and assets of BVS, will be “reserved for
the sole benefit of the Creditors.” Specifically, Section 6(d) of
the Settlement Agreement provides that “[t]he distribution and
transfer of the Estate Assets shall be structured in a manner
consistent with the Intercreditor Agreement and th[e] [Settlement]
Agreement, except as otherwise agreed to by unanimous consent of
the Creditors Committee ….” (Kohn Aff., Ex. 3 at §6(d); see also
Ex. 3 at pg. 48—49, Intercreditor Agreement Section 3(a)2).
2 “The Participating Creditors agree that on and from the
Restructuring Effective Date, Net Proceeds shall be collected and
distributed to Acquire Collateral LLC and Pledged Collateral LLC
pro rata in accordance with each such Collateral Company’s
Percentage Interest, in each case, such that each Participating
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More specifically, Section 6 of the Settlement Agreement
provides that each member of the Creditors Committee (including
Jardan) agreed that the distribution, transfer and/or disposition
of Estate Assets (that take place prior to the termination of the
Intercreditor Agreement) are distributed pro-rata to creditors who
executed the Intercreditor Agreement and Settlement Agreement,
subject to the unanimous written approval of the Creditors
Committee and the consent of the Connecticut Probate Court.
Importantly, Estate Assets is defined to include income derived
from BVS’s assets and therefore, includes the monies standing to
the credit of the relevant bank account at M&T Bank.
Moreover, pursuant to Sections 6(e) and 6(g) of the Settlement
Agreement, the Estate Assets at the Effective Date (i.e. March 25,
2022) are reserved for the sole benefit of the Creditors and any
disposition of Estate Assets from March 25, 2022 (i.e. during the
‘Interim Period’ as defined in the Settlement Agreement), shall
require the written consent of the Required Creditors (being
members of the Creditor Committee holding more than 50% of the
claims held by the members of the Creditor Committee) and any gross
proceeds shall be held in escrow in the name of and controlled by
the Creditors Committee and distributed pro rata to Creditors who
Creditor receives its portion of Net Proceeds in accordance with
its Pro Rata Share.”
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executed the Settlement Agreement and Intercreditor Agreement,
subject to unanimous written approval of the Creditor Committee
and the approval of the Connecticut Probate Court.
Further, Section 6(h) of the Settlement Agreement provides
that following its execution and before its approval by the
applicable probate court, no creditor, including Jardan, will
“request … and/or apply [for relief] … in accordance with that
creditor’s … claim, judgment, lien, charging order, or similar
restraint of assets, other than in accordance with this Agreement.”
In other words, upon execution of the Settlement Agreements, unless
permitted by the Settlements Agreements (i.e., with approval of
all creditors), no Creditor, including Jardan, is permitted to
enforce its judgment unilaterally.
Finally, pursuant to Section 2(C) of the Intercreditor
Agreement, each member of the Creditor Committee, including
Jardan, agreed to act in good faith and consents to the
Restructuring Steps set forth therein and to implement such steps
going forward.
Moreover, Sections 9 and 10 of the Settlement Agreement
provide that the Connecticut Probate Court retains the exclusive
jurisdiction for the approval of the Settlement Agreements, the
distribution of assets subject to the Settlement Agreements, which
includes BVS’s assets and funds held at M&T Bank, and the
resolution of any disputes between parties to the Settlement
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Agreements, including between creditors. (Kohn Aff., Ex. 3, pg.
10, Section 9 (“Connecticut Probate Court Approval/Retention of
Jurisdiction/Fiduciary’s Attorneys’ Fees”); pg. 11, Section 10
)(“The parties agree to work together to achieve resolution of any
disputed matters prior to the Approval Date. If a resolution is
not achieved, the Parties agree to submit such disputed matter to
the Connecticut Probate Court, with the right to appeal
therefrom.”)).
IV. Despite Executing the Intercreditor Agreement And Settlement
Agreement, Jardan Seeks To Execute Its Judgment Against BVS
Funds Held By M&T Bank
Jardan admits that by at least March 13, 2022, it was aware
that 86th Street had (i) asserted a charging order against BVS’s
membership interest; (ii) issued a restraining notice to M&T Bank;
and (iii) had instructed M&T Bank not to disperse any funds of BVS
to any judgment creditor. (Robinson Aff. Ex. G (NYSCEF No. 10)).
Subsequent to receipt of 86th Street’s retaining notice, and in the
negotiation of the Settlement Agreement and Intercreditor
Agreement, Jardan did not seek to carve out the $3 million plus in
BVS funds held at M&T Bank from the pro rata distribution
envisioned by these agreements. (Kohn Aff., Ex. 3, Section 6).
Rather, Jardan negotiated, with the assistance of its counsel,
with all Ceruzzi Estate creditors, including creditors of BVS, to
execute the Settlement Agreement and Intercreditor Agreement.
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Notwithstanding the above, on April 25, 2022, one month after
executing the Settlement Agreement and Intercreditor Agreement,
Jardan filed the instant petition seeking a turnover of BVS funds
solely to Jardan and, in the alternative, a declaration that it
has a priority over such funds solely as a result of its first to
file restraining notice. Yet, Jardan omitted from its petition and
supporting papers that it agreed to be bound by the terms of the
Settlement Agreements.
ARGUMENT
I. JARDAN MUST BE BOUND BY THE SETTLEMENT AGREEMENTS AND ITS
FILING OF THIS PETITION IS A BREACH OF ITS OBLIGATION TO ACT
IN GOOD FAITH UNDER THAT AGREEMENT
“Creditors who enter into an agreement with a debtor are
required to observe good faith towards one another. This is
especially true as to a general creditor assuming to act as one of
a committee of creditors in negotiations with a debtor.” Metro
Burak, Inc. v. Rosenthal & Rosenthal, 83 Misc. 2d 637, 644 (Sup.
Ct. Richmond Cnty. 1975) (citing Mintz v Clavin & Co., 4 A.D.2d
635, 637 (1st Dep’t 1957)). Moreover, Courts in New York will
enforce inter-creditor agreements that are clear on their face and
where such agreements require pro rata distributions among the
creditors. See Prudential Ins. Co. of Am. v. WestLB AG, 37 Misc.
3d 1208(A), 2012 WL 4854713 at **4-5 (Sup. Ct. N.Y. Cnty. Oct. 12,
2012).
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Here, as set forth above, Jardan, along with 86th Street and
other creditors of the Ceruzzi Estate and BVS entered into valid,
binding agreements governing the collection and distribution of
the debtor’s assets on a pro rata basis and the standstill of any
individualized collection efforts other than those prescribed by
the Settlement Agreements. (See Kohn Aff., Ex. 3 at Settlement
Agreement Sections 6(d), 6(e), 6(g), and 6(h)). Through the filing
of this petition and seeking the turnover of BVS funds solely for
itself, however, Jardan is not abiding by its contractual and
common law duties to act in good faith. Thus, for this reason,
Jardan’s petition for a turnover order or request for priority
must be denied as inconsistent with the clear terms of the
Intercreditor Agreement and Settlement Agreement.
Moreover, if the Court were to grant Jardan’s turnover
request, such an order would not only be a breach of the Settlement
Agreements but would also improperly invade Section 9 of the
Settlement Agreement, which provides the Connecticut Probate Court
exclusive jurisdiction to order the distribution of Estate and BVS
assets and the resolution of all disputes between parties to the
Settlement Agreements. (See Kohn Aff., Ex. 3 at pg. 10, Section 9;
Pg. 11, Section 10).
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II. JARDAN’S EXECUTION OF THE INTERCREDITOR AGREEMENT AND
SETTLEMENT AGREEMENT WAIVED ANY TURNOVER AND PRIORITY RIGHTS
Jardan is also not entitled to a turnover order or declaration
of priority over the BVS funds held at M&T Bank because Jardan
expressly waived such rights. It is black letter New York law that
“[a] valid waiver requires no more than the voluntary and
intentional abandonment of a known right which, but for the waiver
would have been enforceable.” Golfo v. Kycia Assoc., Inc., 45
A.D.3d 531, 532-33 (2d Dep’t 2007); see also Fish King Enter v.
Countrywide Ins. Co., 88 A.D.3d 639, 641 (2d Dep’t 2011) (“Waiver
is an intentional relinquishment of a known right and should not
be lightly presumed.”); Terry v. Belfort, 70 A.D.3d 1028 (2d Dep’t
2010) (enforcing party’s waiver of right to pursue individual
judgment enforcement against debtor when creditor accepted
distributions procedures pursuant to a stipulation and order).
As set forth above, Jardan, after having secured a preferred
priority position with respect to the BVS funds held at M&T Bank,
and receiving notice of the 86th Street’s own restraining notice
and notice for non-disbursement of funds to M&T Bank, nonetheless
negotiated and executed the Intercreditor Agreement and Settlement
Agreement. As set forth in the Intercreditor Agreement and
Settlement Agreement, there can be no dispute that Jardan
knowingly, willingly, and voluntarily agreed to waive its turnover
Preview
FILED: NEW YORK COUNTY CLERK 05/06/2022 03:23 PM INDEX NO. 153512/2022 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 05/06/2022 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK JARDAN 520 LLC Index No. 153512/2022 Petitioner, v. BVS ACQUISITION CO. LLC; M&T BANK; AND 86 TH STREET LENDER, LLP, Respondents. MEMORANDUM OF LAW IN OPPOSITION TO JARDAN 520 LLC’S PETITION FOR RELIEF UNDER CPLR §§5525(b) AND 5227, AND CONFIRMATION OF PRIORITY EXECUTION PURSUANT TO CPLR §5239 NAGEL RICE LLP Bruce H. Nagel (pro hac vice pending) Greg M. Kohn Bradley L. Rice 230 Park Avenue Suite 1000 New York, New York 10029 Phone: (212) 551-1465 103 Eisenhower Parkway Roseland, New Jersey 07068 Phone: (973) 618-0400 Facsimile: (973) 618-9194 (Please respond to the NJ Office) Attorneys for Defendant 86th Street Lender, LLP May 6, 2022 1 of 17 FILED: NEW YORK COUNTY CLERK 05/06/2022 03:23 PM INDEX NO. 153512/2022 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 05/06/2022 TABLE OF CONTENTS Page TABLE OF AUTHORITIES...........................................ii PRELIMINARY STATEMENT...........................................1 SUMMARY OF ACTION AND PROCEDURAL HISTORY .......................2 I. THE BVS ACQUISITION CO. LLC JUDGMENTS......................2 II. 86TH STREET LENDER LLP’S JUDGMENT ENFORCEMENT ACTIONS ......4 III. BVS JUDGMENT CREDITORS ENTER INTO AN INTERCREDITOR AGREEMENT AND SETTLEMENT AGREEMENT REGARDING THE ENFORCEMENT OF ALL JUDGMENTS AGAINST BVS ACQUISITION.......5 IV. DESPITE EXECUTING THE INTERCREDITOR AGREEMENT AND SETTLEMENT AGREEMENT, JARDAN SEEKS TO EXECUTE ITS JUDGMENT AGAINST BVS FUNDS HELD BY M&T BANK.........................9 ARGUMENT.......................................................10 I. JARDAN MUST BE BOUND BY THE SETTLEMENT AGREEMENTS AND ITS FILING OF THIS PETITION IS A BREACH OF ITS OBLIGATION TO ACT IN GOOD FAITH UNDER THAT AGREEMENT....................10 II. JARDAN’S EXECUTION OF THE INTERCREDITOR AGREEMENT AND SETTLEMENT AGREEMENT WAIVED ANY TURNOVER AND PRIORITY RIGHTS....................................................12 CONCLUSION.....................................................13 i 2 of 17 FILED: NEW YORK COUNTY CLERK 05/06/2022 03:23 PM INDEX NO. 153512/2022 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 05/06/2022 TABLE OF AUTHORITIES Cases Page(s) Fish King Enter v. Countrywide Ins. Co., 88 A.D.3d 639 (2d Dep’t 2011) ............................... 12 Golfo v. Kycia Assoc., Inc., 45 A.D.3d 531 (2d Dep’t 2007) ............................... 12 Metro Burak, Inc. v. Rosenthal & Rosenthal, 83 Misc. 2d 637 (Sup. Ct. Richmond Cnty. 1975) .............. 10 Mintz v Clavin & Co., 4 A.D.2d 635 (1st Dep’t 1957) ............................... 10 Prudential Ins. Co. of Am. v. WestLB AG, 37 Misc. 3d 1208(A), 2012 WL 4854713 (Sup. Ct. N.Y. Cnty. Oct. 12, 2012) ................................................... 10 Terry v. Belfort, 70 A.D.3d 1028 (2d Dep’t 2010) (enforcing ................... 12 Rules CPLR §5525................................................. 1, 12 CPLR §5227................................................. 1, 12 CPLR §5239..................................................... 1 -ii- 3 of 17 FILED: NEW YORK COUNTY CLERK 05/06/2022 03:23 PM INDEX NO. 153512/2022 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 05/06/2022 This memorandum of law is submitted by respondent 86th Street Lender LLP (“86th Street”) in opposition to the Petition of Petitioner Jardan 520 LLC (“Jardan”) Seeking Relief Under CPLR §§5525(b) and 5227, and Confirmation of Priority Execution Pursuant to CPLR §5239. PRELIMINARY STATEMENT Jardan’s petition asks this Court to ignore its agreements and obligations under an intercreditor agreement (the “Intercreditor Agreement”) and settlement agreement (the “Settlement Agreement” and together with the Intercreditor Agreement, the “Settlement Agreements”) with certain participating creditors of judgment debtor BVS Acquisition Co. LLC (including Jardan), which provided for the pari passu distribution of monies to the creditor signatories to the Settlement Agreements. Despite signing the Settlement Agreements whereby Jardan committed to be treated equally among BVS’s judgment creditors, Jardan is now asking the Court to condone its breach of those agreements and permit it to unilaterally execute against BVS monies held by respondent M&T Bank without any pro rata distribution to the other signatories to the Settlement Agreement. Moreover, not only is Jardan ignoring the rights of the other creditors to the Settlement Agreements, Jardan is breaching its agreement to refrain from seeking any lien, charging order or restraint against assets 1 4 of 17 FILED: NEW YORK COUNTY CLERK 05/06/2022 03:23 PM INDEX NO. 153512/2022 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 05/06/2022 subject to the Settlement Agreements. This blatant breach should not be permitted. Despite the CPLR’s instruction that the first served restraining notice gains priority, Jardan’s execution and entry into the Settlement Agreements binds its hands, bars the relief requested in the petition, and constitutes a waiver of any right by Jardan to invoke the CPLR’s priority enforcement provisions. New York law is clear that where a judgment creditor agrees to be treated pari passu with other creditors under enforceable contracts, those contracts govern the enforcement of the judgment even if they contradict the CPLR’s general enforcement provisions. Further, were this Court to grant the turnover order requested by Jardan, such an order would not only violate the terms of the Settlement Agreements but would improperly encroach on the province of the Connecticut Probate Court, which was designated with exclusive jurisdiction over the distribution of assets. Accordingly, for the reason set forth herein, Jardan’s petition is wholly without merit and must be denied. SUMMARY OF ACTION AND PROCEDURAL HISTORY I. The BVS Acquisition Co. LLC Judgments On or about October 13, 2020, Respondent 86th Street filed an action (the “86th Street BVS Action”) by way of summons and notice of motion for summary judgment in lieu of complaint seeking a judgment for certain defendants’, including respondent BVS, breach -2- 5 of 17 FILED: NEW YORK COUNTY CLERK 05/06/2022 03:23 PM INDEX NO. 153512/2022 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 05/06/2022 of certain loans agreements with 86th Street. (See Index No. 655250/2020 and NYSCEF Nos. 1-21). On or about September 7, 2021, the parties in the 86th Street BVS Action entered into a stipulation that judgment shall be entered against defendants, including BVS in the amount of $26,102,706.25, together with costs and disbursements. (See Index No. 655250/2020 and NYSCEF No. 54). The same day, another stipulation was entered in the 86th Street BVS Action wherein the defendants stipulated to a judgment against them, including against BVS, in the amount of $29,071,575.43, together with costs and disbursements. (See Index No. 655336/2020 and NYSCEF No. 56. (collectively the “86th Street Judgments”)). The 86th Street Judgments were entered with the Clerk of the Court for the Supreme Court of New York on September 21, 2021. (See Index No. 655336/2020 and NYCEF Nos. 55 and 57). In addition to the 86th Street Judgments, BVS and certain other judgment debtors named in the 86th Street BVS Action are indebted to several other creditors aside from 86th Street, including petitioner Jardan and others. See Jardan 520, LLC v. BVS Acquisition Co. LLC et al., No. 657143/2020 (Sup. Ct., N.Y. Cnty.)(the “Jardan BVS Action”); JPMorgan Chase Bank, N.A. v. David Novicki et al., No. 654708/2021 (Sup. Ct., N.Y. Cnty.). Specifically, with respect to Petitioner Jardan, on or about June 30, 2021, Jardan obtained a judgment against BVS and other debtors, jointly and severally, in the Jardan BVS Action, in an -3- 6 of 17 FILED: NEW YORK COUNTY CLERK 05/06/2022 03:23 PM INDEX NO. 153512/2022 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 05/06/2022 amount of $17,952,875.64 (the “Jardan Judgment”). (See Index No. 657143/2020 NYSCEF No. 50). Following entry of the Jardan Judgment, on December 13, 2021, Jardan served M&T Bank with a restraining notice, information subpoena and other enforcement devices. (See Affirmation of K. Heather Robinson (“Robinson Aff.”), NYSCEF No. 3, at Ex. B (NYSCEF No. 5)). In response, M&T Bank identified an account owned by BVS holding funds in the amount of $3,287,432.77. (Robinson Aff., Ex. C (NYSCEF No. 6)). According to Jardan, on or about February 3, 2022, Jardan sought to levy on the BVS M&T Bank account. (Robinson Aff., Ex. D (NSCEF No. 7). Upon receipt, M&T bank advised Jardan that it would release the funds on or about March 10, 2022). (Robinson Aff., ¶11). II. 86th Street Lender LLP’s Judgment Enforcement Actions On February 17, 2022, 86th Street filed an order to show cause requesting the issuance of a charging order against certain LLC membership interests owned by BVS and other related judgment debtors. (See Index No. 655336/2020 and NYCEF No. 63). On February 24, 2022, Justice Andrea Masley, J.S.C. of the New York Supreme Court, issued 86th Street’s requested charging order, including a charge against the membership interests in BVS. (See Index No. 652250/2020 NYSCEF No. 70). On March 2, 2022, 86th Street served M&T Bank with its own restraining notice. (See Affirmation of Greg M. Kohn, Esq., dated May 13, 2022 (“Kohn Aff.”), Ex. 1). In addition, on March 3, 2022, -4- 7 of 17 FILED: NEW YORK COUNTY CLERK 05/06/2022 03:23 PM INDEX NO. 153512/2022 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 05/06/2022 counsel for 86th Street wrote to M&T Bank advising that given the competing judgments, the potential for bankruptcy, and the potential impairment of 86th Street’s rights, M&T Bank should not release any funds to any judgment creditor. (Kohn Aff., Ex. 2). As such, M&T Bank has not released any funds to any judgment creditor including 86th Street and Jardan. III. BVS Judgment Creditors Enter Into An Intercreditor Agreement And Settlement Agreement Regarding The Enforcement Of All Judgments Against BVS Acquisition Following M&T Bank’s receipt of the March 3, 2022 letter from counsel for 86th Street, on March 25, 2022, two agreements were executed. The Settlement Agreement and accompanying Intercreditor Agreement, were entered into between members of the Ceruzzi Family, the Trustee for Louis L. Ceruzzi’s last will and testament and the following creditors of the Ceruzzi Estate, certain properties, and BVS: (i) 86th Street Lender LLP and 86th Street REP II LP; (ii) Industrial Bank of Korea, as the Trustee of PIA Private Real Estate Investment Trust No. 6-1 and PIA Private Real Estate Investment Trust No. 6-2; (iii) Jardan 520 LLC (the Petitioner in this action)1; (iv) Tristate Capital Bank; and (v) JPMorgan Chase Bank, 1 Jardan 520 LLC signed both the Settlement Agreement and Intercreditor Agreement, effective March 25, 2022, and had such documents signed by Mickey Rabina, an Authorized Signatory on behalf of Jardan. (Kohn Aff., Ex. 3 at pg. 19 3; Ex. 3 at pg. 27 3). -5- 8 of 17 FILED: NEW YORK COUNTY CLERK 05/06/2022 03:23 PM INDEX NO. 153512/2022 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 05/06/2022 N.A. (the “Creditors” and together, such Creditors constitute the “Creditors Committee”) (See Kohn Aff., Ex. 3 at pg. 1, Ex. A). As set forth in the Settlement Agreement’s whereas clauses, the purpose of the settlement was to acknowledge that the judgment debtor’s assets were insufficient to satisfy each of the judgment creditor’s judgments and to “resolve the Dispute [among the creditors seeking to execute upon the judgment debtors’ assets] by mutual agreement to avoid the considerable expense and inherent risk and uncertainty of litigation ….” (Ex. 3 at pg. 1). With respect to the assets of BVS, Section 6 of the Settlement Agreement sets forth how, subject to certain exemptions for the family of the deceased, all “Estate Assets”, which by definition included the interests and assets of BVS, will be “reserved for the sole benefit of the Creditors.” Specifically, Section 6(d) of the Settlement Agreement provides that “[t]he distribution and transfer of the Estate Assets shall be structured in a manner consistent with the Intercreditor Agreement and th[e] [Settlement] Agreement, except as otherwise agreed to by unanimous consent of the Creditors Committee ….” (Kohn Aff., Ex. 3 at §6(d); see also Ex. 3 at pg. 48—49, Intercreditor Agreement Section 3(a)2). 2 “The Participating Creditors agree that on and from the Restructuring Effective Date, Net Proceeds shall be collected and distributed to Acquire Collateral LLC and Pledged Collateral LLC pro rata in accordance with each such Collateral Company’s Percentage Interest, in each case, such that each Participating -6- 9 of 17 FILED: NEW YORK COUNTY CLERK 05/06/2022 03:23 PM INDEX NO. 153512/2022 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 05/06/2022 More specifically, Section 6 of the Settlement Agreement provides that each member of the Creditors Committee (including Jardan) agreed that the distribution, transfer and/or disposition of Estate Assets (that take place prior to the termination of the Intercreditor Agreement) are distributed pro-rata to creditors who executed the Intercreditor Agreement and Settlement Agreement, subject to the unanimous written approval of the Creditors Committee and the consent of the Connecticut Probate Court. Importantly, Estate Assets is defined to include income derived from BVS’s assets and therefore, includes the monies standing to the credit of the relevant bank account at M&T Bank. Moreover, pursuant to Sections 6(e) and 6(g) of the Settlement Agreement, the Estate Assets at the Effective Date (i.e. March 25, 2022) are reserved for the sole benefit of the Creditors and any disposition of Estate Assets from March 25, 2022 (i.e. during the ‘Interim Period’ as defined in the Settlement Agreement), shall require the written consent of the Required Creditors (being members of the Creditor Committee holding more than 50% of the claims held by the members of the Creditor Committee) and any gross proceeds shall be held in escrow in the name of and controlled by the Creditors Committee and distributed pro rata to Creditors who Creditor receives its portion of Net Proceeds in accordance with its Pro Rata Share.” -7- 10 of 17 FILED: NEW YORK COUNTY CLERK 05/06/2022 03:23 PM INDEX NO. 153512/2022 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 05/06/2022 executed the Settlement Agreement and Intercreditor Agreement, subject to unanimous written approval of the Creditor Committee and the approval of the Connecticut Probate Court. Further, Section 6(h) of the Settlement Agreement provides that following its execution and before its approval by the applicable probate court, no creditor, including Jardan, will “request … and/or apply [for relief] … in accordance with that creditor’s … claim, judgment, lien, charging order, or similar restraint of assets, other than in accordance with this Agreement.” In other words, upon execution of the Settlement Agreements, unless permitted by the Settlements Agreements (i.e., with approval of all creditors), no Creditor, including Jardan, is permitted to enforce its judgment unilaterally. Finally, pursuant to Section 2(C) of the Intercreditor Agreement, each member of the Creditor Committee, including Jardan, agreed to act in good faith and consents to the Restructuring Steps set forth therein and to implement such steps going forward. Moreover, Sections 9 and 10 of the Settlement Agreement provide that the Connecticut Probate Court retains the exclusive jurisdiction for the approval of the Settlement Agreements, the distribution of assets subject to the Settlement Agreements, which includes BVS’s assets and funds held at M&T Bank, and the resolution of any disputes between parties to the Settlement -8- 11 of 17 FILED: NEW YORK COUNTY CLERK 05/06/2022 03:23 PM INDEX NO. 153512/2022 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 05/06/2022 Agreements, including between creditors. (Kohn Aff., Ex. 3, pg. 10, Section 9 (“Connecticut Probate Court Approval/Retention of Jurisdiction/Fiduciary’s Attorneys’ Fees”); pg. 11, Section 10 )(“The parties agree to work together to achieve resolution of any disputed matters prior to the Approval Date. If a resolution is not achieved, the Parties agree to submit such disputed matter to the Connecticut Probate Court, with the right to appeal therefrom.”)). IV. Despite Executing the Intercreditor Agreement And Settlement Agreement, Jardan Seeks To Execute Its Judgment Against BVS Funds Held By M&T Bank Jardan admits that by at least March 13, 2022, it was aware that 86th Street had (i) asserted a charging order against BVS’s membership interest; (ii) issued a restraining notice to M&T Bank; and (iii) had instructed M&T Bank not to disperse any funds of BVS to any judgment creditor. (Robinson Aff. Ex. G (NYSCEF No. 10)). Subsequent to receipt of 86th Street’s retaining notice, and in the negotiation of the Settlement Agreement and Intercreditor Agreement, Jardan did not seek to carve out the $3 million plus in BVS funds held at M&T Bank from the pro rata distribution envisioned by these agreements. (Kohn Aff., Ex. 3, Section 6). Rather, Jardan negotiated, with the assistance of its counsel, with all Ceruzzi Estate creditors, including creditors of BVS, to execute the Settlement Agreement and Intercreditor Agreement. -9- 12 of 17 FILED: NEW YORK COUNTY CLERK 05/06/2022 03:23 PM INDEX NO. 153512/2022 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 05/06/2022 Notwithstanding the above, on April 25, 2022, one month after executing the Settlement Agreement and Intercreditor Agreement, Jardan filed the instant petition seeking a turnover of BVS funds solely to Jardan and, in the alternative, a declaration that it has a priority over such funds solely as a result of its first to file restraining notice. Yet, Jardan omitted from its petition and supporting papers that it agreed to be bound by the terms of the Settlement Agreements. ARGUMENT I. JARDAN MUST BE BOUND BY THE SETTLEMENT AGREEMENTS AND ITS FILING OF THIS PETITION IS A BREACH OF ITS OBLIGATION TO ACT IN GOOD FAITH UNDER THAT AGREEMENT “Creditors who enter into an agreement with a debtor are required to observe good faith towards one another. This is especially true as to a general creditor assuming to act as one of a committee of creditors in negotiations with a debtor.” Metro Burak, Inc. v. Rosenthal & Rosenthal, 83 Misc. 2d 637, 644 (Sup. Ct. Richmond Cnty. 1975) (citing Mintz v Clavin & Co., 4 A.D.2d 635, 637 (1st Dep’t 1957)). Moreover, Courts in New York will enforce inter-creditor agreements that are clear on their face and where such agreements require pro rata distributions among the creditors. See Prudential Ins. Co. of Am. v. WestLB AG, 37 Misc. 3d 1208(A), 2012 WL 4854713 at **4-5 (Sup. Ct. N.Y. Cnty. Oct. 12, 2012). -10- 13 of 17 FILED: NEW YORK COUNTY CLERK 05/06/2022 03:23 PM INDEX NO. 153512/2022 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 05/06/2022 Here, as set forth above, Jardan, along with 86th Street and other creditors of the Ceruzzi Estate and BVS entered into valid, binding agreements governing the collection and distribution of the debtor’s assets on a pro rata basis and the standstill of any individualized collection efforts other than those prescribed by the Settlement Agreements. (See Kohn Aff., Ex. 3 at Settlement Agreement Sections 6(d), 6(e), 6(g), and 6(h)). Through the filing of this petition and seeking the turnover of BVS funds solely for itself, however, Jardan is not abiding by its contractual and common law duties to act in good faith. Thus, for this reason, Jardan’s petition for a turnover order or request for priority must be denied as inconsistent with the clear terms of the Intercreditor Agreement and Settlement Agreement. Moreover, if the Court were to grant Jardan’s turnover request, such an order would not only be a breach of the Settlement Agreements but would also improperly invade Section 9 of the Settlement Agreement, which provides the Connecticut Probate Court exclusive jurisdiction to order the distribution of Estate and BVS assets and the resolution of all disputes between parties to the Settlement Agreements. (See Kohn Aff., Ex. 3 at pg. 10, Section 9; Pg. 11, Section 10). -11- 14 of 17 FILED: NEW YORK COUNTY CLERK 05/06/2022 03:23 PM INDEX NO. 153512/2022 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 05/06/2022 II. JARDAN’S EXECUTION OF THE INTERCREDITOR AGREEMENT AND SETTLEMENT AGREEMENT WAIVED ANY TURNOVER AND PRIORITY RIGHTS Jardan is also not entitled to a turnover order or declaration of priority over the BVS funds held at M&T Bank because Jardan expressly waived such rights. It is black letter New York law that “[a] valid waiver requires no more than the voluntary and intentional abandonment of a known right which, but for the waiver would have been enforceable.” Golfo v. Kycia Assoc., Inc., 45 A.D.3d 531, 532-33 (2d Dep’t 2007); see also Fish King Enter v. Countrywide Ins. Co., 88 A.D.3d 639, 641 (2d Dep’t 2011) (“Waiver is an intentional relinquishment of a known right and should not be lightly presumed.”); Terry v. Belfort, 70 A.D.3d 1028 (2d Dep’t 2010) (enforcing party’s waiver of right to pursue individual judgment enforcement against debtor when creditor accepted distributions procedures pursuant to a stipulation and order). As set forth above, Jardan, after having secured a preferred priority position with respect to the BVS funds held at M&T Bank, and receiving notice of the 86th Street’s own restraining notice and notice for non-disbursement of funds to M&T Bank, nonetheless negotiated and executed the Intercreditor Agreement and Settlement Agreement. As set forth in the Intercreditor Agreement and Settlement Agreement, there can be no dispute that Jardan knowingly, willingly, and voluntarily agreed to waive its turnover