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Citibank, N.A. v. Ltd.

decided: February 10, 1988.

CITIBANK, N.A., PLAINTIFF-APPELLEE,
v.
NYLAND (CF8) LTD., NEW YORK LAND COMPANY A/K/A GREAT NECKERS REALTY, INC., THE REPUBLIC OF THE PHILIPPINES, THE CITY OF NEW YORK, THE NEW YORK CITY DEPARTMENT OF FINANCE, THE PEOPLE OF THE STATE OF NEW YORK, THE UNITED STATES OF AMERICA AND JOHN DOE #1 THROUGH JOHN DOE #900 INCLUSIVE, THE NAMES OF THE LAST 900 DEFENDANTS BEING FICTITIOUS, THE TRUE NAMES OF SAID DEFENDANTS BEING UNKNOWN TO PLAINTIFF, IT BEING INTENDED TO DESIGNATE ANY SUBTENANTS OF THE MORTGAGED PREMISES WHO ARE IN DEFAULT OF THE PAYMENT OF RENT FOR WHICH A PROCEEDING IS NOW PENDING BROUGHT BY THE MORTGAGOR AND/OR OTHER PERSONS OR PARTIES HAVING OR CLAIMING AN INTEREST IN OR A LIEN UPON THE MORTGAGED PREMISES SUBORDINATE TO THAT OF THE MORTGAGEE, IF THE AFORESAID INDIVIDUAL DEFENDANTS ARE LIVING, AND IF ANY OR ALL OF SAID INDIVIDUAL DEFENDANTS BE DEAD, THEIR HEIRS AT LAW, NEXT OF KIN, DISTRIBUTEES, EXECUTORS, ADMINISTRATORS, TRUSTEES, COMMITTEES, DEVISEES, LEGATEES AND THE ASSIGNEES, LIENORS, CREDITORS AND SUCCESSORS IN INTEREST OF THEM, AND GENERALLY ALL PERSONS HAVING OR CLAIMING UNDER, BY, THROUGH OR AGAINST THE SAID DEFENDANTS NAMED AS A CLASS, ANY RIGHT, TITLE, OR INTEREST IN OR LIEN UPON THE PREMISES DESCRIBED IN THE COMPLAINT HEREIN, DEFENDANTS, NEW YORK LAND COMPANY AND NYLAND (CF8) LTD., DEFENDANTS-APPELLANTS



Appeal from a preliminary injunction of the United States District Court for the Southern District of New York, Knapp, Judge, enjoining appellant New York Land Company from interfering with the rendering of exclusive management and leasing services by appellee Cushman & Wakefield which previously had been appointed receiver of the building known as 40 Wall Street.

Lumbard and Miner, Circuit Judges, and Kaufman, District Judge.*fn*

Author: Lumbard

LUMBARD, Circuit Judge:

Appellants, New York Land Company and Nyland, Ltd., appeal from a preliminary injunction order, announced on February 27, 1987 and entered on April 24, 1987 by Judge Whitman Knapp, of the United States District Court for the Southern District of New York. The order (1) restrained and enjoined appellant New York Land Company from interfering in any manner with the rendering of exclusive management and leasing services by the court-appointed receiver, Cushman & Wakefield, Inc., in connection with the premises at issue, 40 Wall Street, New York City, and (2) clarified appellee Cushman & Wakefield's authority as the exclusive managing and leasing agent for 40 Wall Street. New York Land claims that the district court erred in granting this injunction by failing to recognize New York Land's entitlement to manage and lease premises pursuant to a management and development agreement entered into on August 1, 1983 between it and Nyland, the owner of a long-term leasehold on the premises. We affirm.

I.

On January 20, 1984, Citibank and Nyland entered into a mortgage agreement under which Citibank loaned Nyland $39,225,000 on a second mortgage on Nyland's leasehold interest in 40 Wall Street. When this action was commenced, Nyland owed Citibank $38,341,232.87.

The mortgage was negotiated on behalf of Nyland by the firm of Bernstein Carter & Deyo, and signed by Joseph Bernstein, a senior partner, as managing director of Nyland. In the event of a default, as defined by the mortgage, the mortgage provided for the appointment of a receiver without notice and empowered Citibank to remove Nyland and its agents from the property and take over the management and leasing of the property. The only obligations listed as superior to Citibank's second mortgage are a first mortgage held by the New York State Teacher's Retirement Fund and the ground lease.

Nyland's managing agent for the property was New York Land. New York Land's duties as agent were delineated in a Management and Development Agreement signed on behalf of Nyland by Joseph Bernstein, and on behalf of New York Land by his brother, Ralph Bernstein (a paralegal at the Bernstein firm). Joseph Bernstein, in addition to being a managing director of Nyland, was and continues to serve as president of New York Land.

During the next two and one-half years, Nyland's interest payments to Citibank and the payment of New York City real estate taxes for 40 Wall Street were late. By mid-November of 1986, interest in the amount of $424,957.84 and late payment penalties of $16,450.68 due November 1, 1986 remained unpaid to Citibank. Also unpaid was $2,102,958 of real estate taxes due July 1, 1986. Citibank alleged, and the district court found, that the failures to make those payments constituted events of default under the mortgage.

During this same period, Nyland also failed to provide Citibank with a rehabilitation report that Citibank had requested Nyland to prepare to advise Citibank of the status of various physical problems associated with the premises; it never provided Citibank with certified annual financial reports that were required under the mortgage; and it failed to deposit with Citibank advance installments of the annual real estate taxes as required under the mortgage.

On November 19, 1986, Citibank accelerated the debt due under the mortgage as provided by that agreement and commenced this action in New York Supreme Court, New York County, to foreclose the mortgage. Simultaneously with the commencement of the action, Citibank moved on notice for the appointment of a temporary receiver. Citibank requested that either William A. White, Tishman East, Inc., or Cushman & Wakefield, Inc. be appointed receiver. The Republic of the Philippines, a defendant in this action, joined in Citibank's request for a receiver.*fn1

On November 25, 1986, New York Land filed a Notice of Cross-Motion to Dismiss the Action and In Opposition to the Appointment of a Receiver. In the memorandum of law submitted in support of that motion, New York Land maintained that "Citibank was not entitled to institute a receivership remedy auxiliary to this foreclosure proceeding because it would have the effect of abrogating the superior contractual management rights of The New York Land Company." On November 26, 1986, defendant Republic of the Philippines removed the action to the District Court for the Southern District, where it was initially assigned to Judge Leval.

On December 1, 1986, Citibank submitted a Reply Memorandum to support its motion for the appointment of a temporary receiver and again asserted that a receiver was being sought to assure that the building would be run properly. Citibank also argued that New York Land's right to manage the property could be no greater than Nyland's right to do so since any interest New York Land might have in the premises necessarily must be derivative of Nyland's right because New York Land was merely serving as Nyland's agent.

After a hearing on December 9, 1986, Judge Leval granted Citibank's motion and appointed ...


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