Preview
FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023
NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023
EXHIBIT '
FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023
NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
-------------------------------------- X
BOARD OF MANAGERS OF THE 610 PARK :
AVENUE CONDOMINIUM,
:
Plaintiff,
:
v.
16EF APARTMENT, LLC, MARA :
ENTERPRISES, AND “JOHN DOE” No. 1
through “JOHN DOE” No. 15, the true name of :
said defendants being unknown to plaintiff, the Index Nos. 151261/23
parties intended to be those persons having or (Kahn,,,, J.)
claiming an interest in the mortgaged premises
as described in the complaint by virtue of being
tenants, or occupants, or judgment-creditors, or [PROPOSED] COMPLAINT IN
lienors of any type of nature in all or part of INTERVENTION
said premises,
Defendants,
And
Banc of California, N.A.,
Proposed Intervenor
Plaintiff
-------------------------------------- X
Proposed Intervenor Plaintiff Banc of California, N.A. (“Banc” or the “Proposed
Intervenor”), by and through its undersigned counsel, as and for its complaint against Defendants
16EF Apartment, LLC, Mara Enterprises, and “John Doe” No. 1 through “John Doe” No. 15,
alleges as follows:
NATURE OF THE ACTION
1. Banc brings this action to protect its rights in light of a dire, and quickly escalating,
situation involving Banc, Defendant 16EF Apartment, LLC, the owner of residential unit PH16E
FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023
NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023
in the premises located at 610 Park Avenue, New York, New York 10065, and its managing
member, non-defendant Michael Strauss (“Strauss”).
2. Strauss has done extensive business with Banc through a group of mortgage-
banking and mortgage-originating companies he owns (the “Sprout Entities”) that have
collectively borrowed millions of dollars from Banc. In November 2021, and as a condition of
Banc’s continued relationship with Strauss, Strauss executed a personal guaranty (the “Personal
Guaranty”), expressly committing to personally repay any debt owed to Banc by the Sprout
Entities, regardless of whether Banc had attempted to obtain repayment from the Sprout Entities
themselves.
3. In the latter half of 2022, the Sprout Entities were abruptly shut down, with
significant outstanding debt still owed to Strauss. But with the Personal Guaranty in hand, Banc
held an unequivocal right to recover from Strauss directly and felt—for a fleeting moment—
assured that it would be made whole. Banc requested that Strauss fulfill his commitments and
repay the debt of the Sprout Entities.
4. That should have been the end of the matter. Strauss, however, was unwilling to
live up to his contractual obligations, and steadfastly refused to do so. As negotiations with Strauss
stalled and details of his financial difficulties began to come to light, Banc was forced to seek
recourse in the judicial system, and filed suit in California Superior Court (the “Banc Action”).
5. Since then, Strauss has only hardened in his obstinance. Not only has Strauss
continually failed to repay his debt to Banc, he has informed Banc that if he is able to sell the
Subject Property—Strauss’s primary asset, currently on the market at the asking price of $22.5
million—his claimed liabilities far outstrip the proceeds of any such sale, leaving Banc in the lurch.
2
FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023
NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023
6. Banc had no intention of letting Strauss’s disregard for his contractual relationships
stand. It consequently moved in the Banc Action for a preliminary injunction barring the sale of
the Subject Property, or any disposition of funds should a sale have already been pending. This
injunction was granted on May 1, 2023, and unequivocally prevents the sale of the Subject
Property, at least until Banc’s summary adjudication motion against Strauss in the Banc Action is
ruled upon.
7. For his part, Strauss has appeared in the Banc Action and is actively engaged in the
lawsuit. The same cannot be said in the action at hand. As of the date of this Complaint, Strauss’s
company, Defendant 16EF Apartment, LLC, has yet to appear, which recently resulted in the grant
of default judgment.
8. Unfortunately, the consequences of his absence redound beyond Strauss and 16EF
Apartment, LLC. In refusing to defend this litigation, Strauss necessarily failed to alert the parties
and this Court of a preliminary injunction entered by the Superior Court of the State of California,
which bars any sale of the Subject Property for the indefinite future (the “Preliminary Injunction”).
Plaintiff Board of Managers of the 610 Park Avenue Condominium (the “Board of Managers”),
presumably unaware of this judicial mandate, has swiftly moved this case toward its final act, with
its motion for foreclosure due in the upcoming months.
9. Banc can acutely relate to the situation of the Board of Managers: it too has been
damaged by Strauss, his misrepresentations, and his willful ignorance of his contractual
obligations. But the Board of Managers’ understandable desire for restitution cannot contravene
an enforceable court order, and the Preliminary Injunction plainly bars the relief the Board seeks.
Banc consequently brings suit for a declaratory judgment recognizing that the Preliminary
Injunction prevents the sale of the Subject Property or the disposition of any sale proceeds.
3
FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023
NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023
THE PARTIES
10. Banc is a national banking association, organized and existing under the laws of the
United States and authorized to conduct business in the State of California. Banc’s main office is
located in Santa Ana, California.
11. Plaintiff Board of Managers of the 610 Park Avenue Condominium is a
condominium acting on behalf of all unit owners located at 610 Park Avenue, New York, New
York.
12. Defendant 16EF Apartment LLC is, upon information and belief, a Delaware
limited liability company domiciled in and authorized to do business with the State of New York.
Michael Strauss is the managing member of 16EF Apartment LLC and is a resident of New York.
13. Defendant Mara Enterprises (“Mara Enterprises”) is, upon information and belief,
a California stock corporation authorized to do business in the State of New York.
JURISDICTION AND VENUE
14. This Court has jurisdiction over the subject matter of this action pursuant to
article VI, section 7 of the New York Constitution and New York Judiciary Law section 140-b.
15. This Court has personal jurisdiction pursuant to New York Civil Practice Law and
Rules section 302, as each of the parties regularly engages in business activities within the State
of New York.
16. Venue is proper in New York County pursuant to New York Civil Practice Law and
Rules section 503(a), as 16EF Apartment LLC is domiciled in this county.
FACTUAL ALLEGATIONS
17. Banc is a national bank headquartered in Santa Ana, California. Among its many
lines of business, Banc engages in warehouse lending, an industry term for a short-term revolving
4
FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023
NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023
line of credit is issued to mortgage loan originators. providing the initial funding for loans that
originator approves. In such arrangements, Banc provides the initial funding for loans approved
by the originator, and is ultimately repaid once the originator in turn sells the loan to a third party.
To further help facilitate the operations of its mortgage-lending clients, Banc also directly
purchases loans from originators pursuant to repurchase agreements, where the originator agrees
to buy a loan back after a specified length of time. Until the repurchase date, the loan and any
rights under the mortgage lien belong to Banc.
18. The Sprout Entities—Sprout Mortgage Corporation, Sprout LLC, Sprout Mortgage
Asset Trust, and Recovco Mortgage Management, LLC—are such originator clients. They are
collectively owned by Strauss, who likewise operated as CEO for several of these companies. The
Sprout Entities both drew on a warehouse line of credit and entered into repurchase agreements
with Banc. This resulted in significant accruals of debt that, until the incident at hand, were timely
paid.
19. On November 24, 2021, and given the volume of business Strauss engaged in with
Banc through the Sprout Entities, Strauss executed a personal guaranty in Banc’s favor for the
Sprout Entities’ liabilities. The Guaranty gives Banc a right to recover against Strauss for any
obligation of Sprout, whether or not Banc has tried to seek redress against Sprout or any other
party. Specifically, the Guaranty provides:
Guarantor jointly and severally and absolutely and unconditionally guarantees
full and punctual payment and satisfaction of the Obligations of Seller to Buyer,
and the performance and discharge of all Seller’s obligations under the [Master]
Repurchase Agreement and the other Repurchase Facility Documents. This is a
guaranty of payment and performance and not merely of collection, so Buyer
can enforce this Guaranty against Guarantor even when Buyer has not
exhausted Buyer’s remedies against anyone else obligated to pay the
Obligations or against any collateral securing the Obligations, this Guaranty or
any other guaranty of the Obligations.
5
FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023
NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023
20. Pursuant to the express provisions of the Guaranty, Strauss covenanted and
unconditionally guaranteed that he would pay Banc any debt obligations owed by the Sprout
Entities. The Guaranty does not require any pre-suit demand.
21. By August 2022, between their obligation to Banc under their warehouse credit line
and various repurchase agreements, the Sprout Entities had incurred over $3.5 million in
outstanding obligations that were not timely paid. Contemporaneous to the debt accrual, Strauss
began to shutter the Sprout Entities, announcing massive layoffs that rendered the Sprout Entities
nonfunctional.
22. In light of the deteriorating situation of the Sprout Entities, Banc exercised its rights
under the Personal Guaranty and requested repayment of the Sprout Entities’ debt from Strauss.
23. Despite repeated requests on the part of Banc, Strauss has expressly refused to make
repayment. Instead, Strauss continued to amass further debt to Banc by refraining from
indemnifying Banc—as he was contractually obligated to do—for a lawsuit against Strauss in
which Banc was named solely in its capacity as Sprout LLC’s depository bank.
24. Following Strauss’s breach of the Personal Guaranty, Banc filed suit against Strauss
in California Superior Court, in an action entitled Banc of California, N.A. v. Planet Home Lending
LLC et al., Superior Court of the State of California, County of Orange.
25. As Banc’s investigation into Strauss’s breaches progressed, it learned of the
increasingly precarious state of Strauss’s financial and business dealings. Through its
investigation, Banc understands that the Subject Property is Strauss’s primary asset, and that the
Subject Property has been placed on the market with an asking price of $22.5 million. Banc has
also determined that Strauss and/or the Sprout Entities have been named as defendants in a number
of lawsuits that are currently pending, including the action at hand.
6
FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023
NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023
26. Armed with this additional information, Banc once again contacted Strauss’s
counsel to discuss repayment of his debts under the Personal Guaranty. These efforts were to no
avail. Not only did Strauss again refuse to fulfill his contractual obligations but he represented
that even if the Subject Property were sold, the proceeds of such a sale would not be sufficient to
satisfy his obligations to his other creditors. Put simply, Strauss had no intention of ever repaying
his debts.
27. Banc’s hand was forced. On April 3, 2023, it moved for a preliminary injunction
in the Banc Action barring Strauss from effecting the sale of the Subject Property or, should a sale
be pending at the time the preliminary injunction was granted, distributing any sale proceeds.
28. Following oral argument, the Banc Action court granted Banc’s request, and issued
the Preliminary Injunction on May 1, 2023.
29. In relevant part, the Preliminary Injunction mandates that:
Defendant Michael J. Strauss is ORDERED to refrain from
participating in effecting a sale, either in his individual capacity or
as managing member of 16EF Apartment LLC, of the property
located at 610 Park Avenue, Unit 16EF, New York, NY 10065 (the
“Park Avenue Property”), until the Court rules on Banc’s motion
for summary adjudication on its cause of action for breach of
guaranty.
If a sale of the Park Avenue Property is already pending, Defendant
Michael J. Strauss is ORDERED to refrain from dissipating the
proceeds of such sale, either in his individual capacity or as
managing member of 16EF Apartment LLC, until the Court rules on
Banc’s motion for summary adjudication on its cause of action for
breach of guaranty. (Emphasis added)
30. The Preliminary Injunction categorically bars the sale of the Subject Property until
at least the Banc Action court rules on Banc’s motion for summary adjudication against Strauss.
7
FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023
NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023
31. In the above-captioned action, on February 8, 2023, Plaintiff Board of Managers
filed a complaint that requested as relief, among other things, a judgment that the Subject Property
“may be decreed to be sold according to the law.”
32. Thereafter, on April 25, 2023, the Board of Managers moved for default judgment
against 16EF Apartment, LLC and Mara Enterprises. Neither has appeared in this case. Default
Judgment was granted by this Court on May 17, 2023.
33. In its May 17, 2023 Order, this Court directed the Board of Managers to submit a
“motion for judgment of foreclosure and sale” of the Subject Property within thirty days of receipt
of the court-appointed referee’s report. The Court, in turn, order the referee to “examine whether
the [Subject Property] can be sold in parcels.”
34. The Board of Managers’ requested relief, if granted, would directly and
impermissibly contravene the Preliminary Injunction order.
35. Consequently, Banc hereby moves this Court for judgment declaring that the
Preliminary Injunction bars the sale of the Subject Property and that, consequently, Plaintiff Board
of Managers is barred from obtaining its requested relief for the duration of the Preliminary
Junction.
FIRST CAUSE OF ACTION
(Declaratory Judgment Pursuant to N.Y. C.P.L.R. § 3001)
36. Banc hereby incorporates each preceding and successive paragraph as though set
forth fully within.
37. Banc seeks a declaratory judgment to resolve questions concerning the respective
rights, obligations, and duties of the parties to this case concerning the Subject Property and under
the Preliminary Injunction.
8
FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023
NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023
38. An actual case or justiciable controversy exists between the parties concerning the
Subject Property and the parties’ respective rights thereto.
39. The issuance of declaratory relief by this Court will terminate some or all of the
existing controversy between the parties, and will provide certainty of their rights and obligations
concerning the Subject Property and the Preliminary Injunction.
40. By reasons of the foregoing, Banc is entitled to a declaratory judgment establishing
the rights and obligations of the parties concerning the Subject Property and the Preliminary
Injunction.
41. Banc therefore requests a declaration by this Court that the Preliminary Injunction
bars the sale of the Subject Property, by Defendant 16EF Apartment, LLC or otherwise, and that,
for the duration of the Preliminary Injunction, Plaintiff Board of Managers is barred from obtaining
its requested relief, namely the sale of the Subject Property and the disposition of proceeds from
that sale.
PRAYER FOR RELIEF
42. WHEREFORE, Banc respectfully requests that this Court:
a. Enter a declaratory judgment finding that the sale of the Subject Property is barred
for the duration of the Preliminary Injunction; and
b. Award further relief it may deem just and proper.
9
FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023
NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023
Dated: June 2, 2023
New York, New York
By: /s/ Martin C. Geagan
Martin C. Geagan
WINSTON & STRAWN LLP
200 Park Ave.
New York, NY 10012
Telephone: (212) 294-6700
Facsimile: (212) 294-4700
mgeagan@winston.com
Gregory A. Ellis (pro hac vice forthcoming)
WINSTON & STRAWN LLP
333 S. Grand Ave.
Los Angeles, CA 90071
Telephone: (213) 615-1700
Facsimile: (213) 615-1750
gaellis@winston.com
10
Preview
FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023 NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023 EXHIBIT ' FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023 NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK -------------------------------------- X BOARD OF MANAGERS OF THE 610 PARK : AVENUE CONDOMINIUM, : Plaintiff, : v. 16EF APARTMENT, LLC, MARA : ENTERPRISES, AND “JOHN DOE” No. 1 through “JOHN DOE” No. 15, the true name of : said defendants being unknown to plaintiff, the Index Nos. 151261/23 parties intended to be those persons having or (Kahn,,,, J.) claiming an interest in the mortgaged premises as described in the complaint by virtue of being tenants, or occupants, or judgment-creditors, or [PROPOSED] COMPLAINT IN lienors of any type of nature in all or part of INTERVENTION said premises, Defendants, And Banc of California, N.A., Proposed Intervenor Plaintiff -------------------------------------- X Proposed Intervenor Plaintiff Banc of California, N.A. (“Banc” or the “Proposed Intervenor”), by and through its undersigned counsel, as and for its complaint against Defendants 16EF Apartment, LLC, Mara Enterprises, and “John Doe” No. 1 through “John Doe” No. 15, alleges as follows: NATURE OF THE ACTION 1. Banc brings this action to protect its rights in light of a dire, and quickly escalating, situation involving Banc, Defendant 16EF Apartment, LLC, the owner of residential unit PH16E FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023 NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023 in the premises located at 610 Park Avenue, New York, New York 10065, and its managing member, non-defendant Michael Strauss (“Strauss”). 2. Strauss has done extensive business with Banc through a group of mortgage- banking and mortgage-originating companies he owns (the “Sprout Entities”) that have collectively borrowed millions of dollars from Banc. In November 2021, and as a condition of Banc’s continued relationship with Strauss, Strauss executed a personal guaranty (the “Personal Guaranty”), expressly committing to personally repay any debt owed to Banc by the Sprout Entities, regardless of whether Banc had attempted to obtain repayment from the Sprout Entities themselves. 3. In the latter half of 2022, the Sprout Entities were abruptly shut down, with significant outstanding debt still owed to Strauss. But with the Personal Guaranty in hand, Banc held an unequivocal right to recover from Strauss directly and felt—for a fleeting moment— assured that it would be made whole. Banc requested that Strauss fulfill his commitments and repay the debt of the Sprout Entities. 4. That should have been the end of the matter. Strauss, however, was unwilling to live up to his contractual obligations, and steadfastly refused to do so. As negotiations with Strauss stalled and details of his financial difficulties began to come to light, Banc was forced to seek recourse in the judicial system, and filed suit in California Superior Court (the “Banc Action”). 5. Since then, Strauss has only hardened in his obstinance. Not only has Strauss continually failed to repay his debt to Banc, he has informed Banc that if he is able to sell the Subject Property—Strauss’s primary asset, currently on the market at the asking price of $22.5 million—his claimed liabilities far outstrip the proceeds of any such sale, leaving Banc in the lurch. 2 FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023 NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023 6. Banc had no intention of letting Strauss’s disregard for his contractual relationships stand. It consequently moved in the Banc Action for a preliminary injunction barring the sale of the Subject Property, or any disposition of funds should a sale have already been pending. This injunction was granted on May 1, 2023, and unequivocally prevents the sale of the Subject Property, at least until Banc’s summary adjudication motion against Strauss in the Banc Action is ruled upon. 7. For his part, Strauss has appeared in the Banc Action and is actively engaged in the lawsuit. The same cannot be said in the action at hand. As of the date of this Complaint, Strauss’s company, Defendant 16EF Apartment, LLC, has yet to appear, which recently resulted in the grant of default judgment. 8. Unfortunately, the consequences of his absence redound beyond Strauss and 16EF Apartment, LLC. In refusing to defend this litigation, Strauss necessarily failed to alert the parties and this Court of a preliminary injunction entered by the Superior Court of the State of California, which bars any sale of the Subject Property for the indefinite future (the “Preliminary Injunction”). Plaintiff Board of Managers of the 610 Park Avenue Condominium (the “Board of Managers”), presumably unaware of this judicial mandate, has swiftly moved this case toward its final act, with its motion for foreclosure due in the upcoming months. 9. Banc can acutely relate to the situation of the Board of Managers: it too has been damaged by Strauss, his misrepresentations, and his willful ignorance of his contractual obligations. But the Board of Managers’ understandable desire for restitution cannot contravene an enforceable court order, and the Preliminary Injunction plainly bars the relief the Board seeks. Banc consequently brings suit for a declaratory judgment recognizing that the Preliminary Injunction prevents the sale of the Subject Property or the disposition of any sale proceeds. 3 FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023 NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023 THE PARTIES 10. Banc is a national banking association, organized and existing under the laws of the United States and authorized to conduct business in the State of California. Banc’s main office is located in Santa Ana, California. 11. Plaintiff Board of Managers of the 610 Park Avenue Condominium is a condominium acting on behalf of all unit owners located at 610 Park Avenue, New York, New York. 12. Defendant 16EF Apartment LLC is, upon information and belief, a Delaware limited liability company domiciled in and authorized to do business with the State of New York. Michael Strauss is the managing member of 16EF Apartment LLC and is a resident of New York. 13. Defendant Mara Enterprises (“Mara Enterprises”) is, upon information and belief, a California stock corporation authorized to do business in the State of New York. JURISDICTION AND VENUE 14. This Court has jurisdiction over the subject matter of this action pursuant to article VI, section 7 of the New York Constitution and New York Judiciary Law section 140-b. 15. This Court has personal jurisdiction pursuant to New York Civil Practice Law and Rules section 302, as each of the parties regularly engages in business activities within the State of New York. 16. Venue is proper in New York County pursuant to New York Civil Practice Law and Rules section 503(a), as 16EF Apartment LLC is domiciled in this county. FACTUAL ALLEGATIONS 17. Banc is a national bank headquartered in Santa Ana, California. Among its many lines of business, Banc engages in warehouse lending, an industry term for a short-term revolving 4 FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023 NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023 line of credit is issued to mortgage loan originators. providing the initial funding for loans that originator approves. In such arrangements, Banc provides the initial funding for loans approved by the originator, and is ultimately repaid once the originator in turn sells the loan to a third party. To further help facilitate the operations of its mortgage-lending clients, Banc also directly purchases loans from originators pursuant to repurchase agreements, where the originator agrees to buy a loan back after a specified length of time. Until the repurchase date, the loan and any rights under the mortgage lien belong to Banc. 18. The Sprout Entities—Sprout Mortgage Corporation, Sprout LLC, Sprout Mortgage Asset Trust, and Recovco Mortgage Management, LLC—are such originator clients. They are collectively owned by Strauss, who likewise operated as CEO for several of these companies. The Sprout Entities both drew on a warehouse line of credit and entered into repurchase agreements with Banc. This resulted in significant accruals of debt that, until the incident at hand, were timely paid. 19. On November 24, 2021, and given the volume of business Strauss engaged in with Banc through the Sprout Entities, Strauss executed a personal guaranty in Banc’s favor for the Sprout Entities’ liabilities. The Guaranty gives Banc a right to recover against Strauss for any obligation of Sprout, whether or not Banc has tried to seek redress against Sprout or any other party. Specifically, the Guaranty provides: Guarantor jointly and severally and absolutely and unconditionally guarantees full and punctual payment and satisfaction of the Obligations of Seller to Buyer, and the performance and discharge of all Seller’s obligations under the [Master] Repurchase Agreement and the other Repurchase Facility Documents. This is a guaranty of payment and performance and not merely of collection, so Buyer can enforce this Guaranty against Guarantor even when Buyer has not exhausted Buyer’s remedies against anyone else obligated to pay the Obligations or against any collateral securing the Obligations, this Guaranty or any other guaranty of the Obligations. 5 FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023 NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023 20. Pursuant to the express provisions of the Guaranty, Strauss covenanted and unconditionally guaranteed that he would pay Banc any debt obligations owed by the Sprout Entities. The Guaranty does not require any pre-suit demand. 21. By August 2022, between their obligation to Banc under their warehouse credit line and various repurchase agreements, the Sprout Entities had incurred over $3.5 million in outstanding obligations that were not timely paid. Contemporaneous to the debt accrual, Strauss began to shutter the Sprout Entities, announcing massive layoffs that rendered the Sprout Entities nonfunctional. 22. In light of the deteriorating situation of the Sprout Entities, Banc exercised its rights under the Personal Guaranty and requested repayment of the Sprout Entities’ debt from Strauss. 23. Despite repeated requests on the part of Banc, Strauss has expressly refused to make repayment. Instead, Strauss continued to amass further debt to Banc by refraining from indemnifying Banc—as he was contractually obligated to do—for a lawsuit against Strauss in which Banc was named solely in its capacity as Sprout LLC’s depository bank. 24. Following Strauss’s breach of the Personal Guaranty, Banc filed suit against Strauss in California Superior Court, in an action entitled Banc of California, N.A. v. Planet Home Lending LLC et al., Superior Court of the State of California, County of Orange. 25. As Banc’s investigation into Strauss’s breaches progressed, it learned of the increasingly precarious state of Strauss’s financial and business dealings. Through its investigation, Banc understands that the Subject Property is Strauss’s primary asset, and that the Subject Property has been placed on the market with an asking price of $22.5 million. Banc has also determined that Strauss and/or the Sprout Entities have been named as defendants in a number of lawsuits that are currently pending, including the action at hand. 6 FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023 NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023 26. Armed with this additional information, Banc once again contacted Strauss’s counsel to discuss repayment of his debts under the Personal Guaranty. These efforts were to no avail. Not only did Strauss again refuse to fulfill his contractual obligations but he represented that even if the Subject Property were sold, the proceeds of such a sale would not be sufficient to satisfy his obligations to his other creditors. Put simply, Strauss had no intention of ever repaying his debts. 27. Banc’s hand was forced. On April 3, 2023, it moved for a preliminary injunction in the Banc Action barring Strauss from effecting the sale of the Subject Property or, should a sale be pending at the time the preliminary injunction was granted, distributing any sale proceeds. 28. Following oral argument, the Banc Action court granted Banc’s request, and issued the Preliminary Injunction on May 1, 2023. 29. In relevant part, the Preliminary Injunction mandates that: Defendant Michael J. Strauss is ORDERED to refrain from participating in effecting a sale, either in his individual capacity or as managing member of 16EF Apartment LLC, of the property located at 610 Park Avenue, Unit 16EF, New York, NY 10065 (the “Park Avenue Property”), until the Court rules on Banc’s motion for summary adjudication on its cause of action for breach of guaranty. If a sale of the Park Avenue Property is already pending, Defendant Michael J. Strauss is ORDERED to refrain from dissipating the proceeds of such sale, either in his individual capacity or as managing member of 16EF Apartment LLC, until the Court rules on Banc’s motion for summary adjudication on its cause of action for breach of guaranty. (Emphasis added) 30. The Preliminary Injunction categorically bars the sale of the Subject Property until at least the Banc Action court rules on Banc’s motion for summary adjudication against Strauss. 7 FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023 NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023 31. In the above-captioned action, on February 8, 2023, Plaintiff Board of Managers filed a complaint that requested as relief, among other things, a judgment that the Subject Property “may be decreed to be sold according to the law.” 32. Thereafter, on April 25, 2023, the Board of Managers moved for default judgment against 16EF Apartment, LLC and Mara Enterprises. Neither has appeared in this case. Default Judgment was granted by this Court on May 17, 2023. 33. In its May 17, 2023 Order, this Court directed the Board of Managers to submit a “motion for judgment of foreclosure and sale” of the Subject Property within thirty days of receipt of the court-appointed referee’s report. The Court, in turn, order the referee to “examine whether the [Subject Property] can be sold in parcels.” 34. The Board of Managers’ requested relief, if granted, would directly and impermissibly contravene the Preliminary Injunction order. 35. Consequently, Banc hereby moves this Court for judgment declaring that the Preliminary Injunction bars the sale of the Subject Property and that, consequently, Plaintiff Board of Managers is barred from obtaining its requested relief for the duration of the Preliminary Junction. FIRST CAUSE OF ACTION (Declaratory Judgment Pursuant to N.Y. C.P.L.R. § 3001) 36. Banc hereby incorporates each preceding and successive paragraph as though set forth fully within. 37. Banc seeks a declaratory judgment to resolve questions concerning the respective rights, obligations, and duties of the parties to this case concerning the Subject Property and under the Preliminary Injunction. 8 FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023 NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023 38. An actual case or justiciable controversy exists between the parties concerning the Subject Property and the parties’ respective rights thereto. 39. The issuance of declaratory relief by this Court will terminate some or all of the existing controversy between the parties, and will provide certainty of their rights and obligations concerning the Subject Property and the Preliminary Injunction. 40. By reasons of the foregoing, Banc is entitled to a declaratory judgment establishing the rights and obligations of the parties concerning the Subject Property and the Preliminary Injunction. 41. Banc therefore requests a declaration by this Court that the Preliminary Injunction bars the sale of the Subject Property, by Defendant 16EF Apartment, LLC or otherwise, and that, for the duration of the Preliminary Injunction, Plaintiff Board of Managers is barred from obtaining its requested relief, namely the sale of the Subject Property and the disposition of proceeds from that sale. PRAYER FOR RELIEF 42. WHEREFORE, Banc respectfully requests that this Court: a. Enter a declaratory judgment finding that the sale of the Subject Property is barred for the duration of the Preliminary Injunction; and b. Award further relief it may deem just and proper. 9 FILED: NEW YORK COUNTY CLERK 06/02/2023 05:50 PM INDEX NO. 151261/2023 NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 06/02/2023 Dated: June 2, 2023 New York, New York By: /s/ Martin C. Geagan Martin C. Geagan WINSTON & STRAWN LLP 200 Park Ave. New York, NY 10012 Telephone: (212) 294-6700 Facsimile: (212) 294-4700 mgeagan@winston.com Gregory A. Ellis (pro hac vice forthcoming) WINSTON & STRAWN LLP 333 S. Grand Ave. Los Angeles, CA 90071 Telephone: (213) 615-1700 Facsimile: (213) 615-1750 gaellis@winston.com 10