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ANTHRACITE CAPITAL, INC. v. MP-555 WEST FIFTH MEZZANINE

Jan 6 2004

ANTHRACITE CAPITAL, INC., Plaintiff, -v- MP-555 WEST FIFTH MEZZANINE, LLC; MP-808 SOUTH OLIVE MEZZANINE, LLC; ROBERT MAGUIRE, III; and "ABC Corp. No. 1" through "ABC Corp. No. 100", the last one hundred names being fictitious and unknown to plaintiff, the person or parties intended being the persons, companies, or corporations, if any, having or claiming an interest in certain collateral described in the First Amended Complaint, Defendants


The opinion of the court was delivered by: DENISE COTE, District Judge

MEMORANDUM OPINION AND ORDER
On July 15, 2003, Anthracite Capital, Inc. ("Anthracite") filed this action against MP-555 West Fifth Mezzanine, LLC; MP-808 Page 2 South Olive Mezzanine, LLC (together, the "Borrowers"); and Robert Maguire, III ("Maguire") (collectively, "Defendants"). An amended complaint ("Complaint") was filed on August 12. Anthracite owned a securitized tranche of an approximately $60 million loan ("Loan") obtained by the Borrowers and alleges claims for breach of contract, breach of the implied covenant of good faith and fair dealing, foreclosure, conversion, fraudulent transfer, and declaratory judgment resulting from Defendants' failure to pay Anthracite a $2 million fee due when the Loan was prepaid under specified conditions (the "Supplemental Exit Fee"). Defendants have moved to dismiss the Complaint, arguing primarily that it fails to state a cause of action for breach of contract. For the reasons that follow, Defendants' motion is denied.

  Background

  The facts in this Opinion are taken from the Complaint and the documents upon which the Complaint relies. This action arises from a series of complex transactions related to the financing of commercial office property in Los Angeles, California (the "Project"). At all relevant times, the Project was owned by Maguire through a series of transaction-created companies owned directly or indirectly by him, including the Borrowers, special purpose entities formed in connection with the refinancing of the Project in December 2000. On December 20, the Borrowers obtained a $61,600,000 loan from Credit Suisse First Boston Mortgage Capital LLC and German American Capital Corporation, governed by the loan agreement executed on that date ("Loan Agreement") and Page 3 personally guaranteed in part by Maguire. Anthracite purchased a securitized tranche of the Loan.

  On or about June 27, 2003, the Project was sold to entities owned and controlled by Maguire Partnership, LP, which was controlled by Maguire Properties, Inc., a Real Estate Investment Trust. The entities to which the Project was sold were created as part of an integrated transaction in which Maguire Properties was taken public in an initial public offering under a prospectus dated June 23, 2003 ("Prospectus"). Bank of America, which loaned the money to refinance the Project in connection with the sale to Maguire Properties and the IPO, had commissioned an appraisal of the Project several months earlier. The Project was appraised at $450 million. The Borrowers received approximately $280 million, and Maguire (or entities under his control or direction) received cash, stock, partnership interests and a reduction of personal liabilities approximately equal to approximately $170 million.

  Section 2.6 of the Loan Agreement dictates the circumstances under which the Borrowers could prepay the Loan. Section 2.6(k), excerpted in the Complaint, provides for the payment of the

  Supplemental Exit Fee as follows:

  Borrowers*fn1 shall pay to Mezzanine Lender*fn2 . . . a supplemental exit fee ("the Supplemental Mezzanine Component A Exit Fee"), payable upon one or more sales Page 4 of all or any portion of the Property by the Companies*fn3 (each, a "Supplemental Exit Fee Triggering Event"); provided, however, that no such Supplemental Mezzanine Component A Exit Fee shall be due from Borrowers unless and until, at the time the particular Supplemental Exit Fee Triggering Event occurs, the sum of (i) the Supplemental Exit Fee Purchase Price then due, (ii) any prior Supplemental Exit Fee Purchase Price previously paid to the Companies and (iii) the value of the portion of the Property remaining after the current Supplemental Exit Fee Triggering Event . . . is equal to or greater than $425,000,000 . . . For the purposes of the foregoing, "Supplemental Exit Fee Purchase Price" means the gross purchase price of all or a portion of the Property, including without limitation all cash proceeds, non-cash proceeds, any over-market purchase money financing or any other consideration to the Companies or the Borrowers (provided that any and all consideration received shall be payable only to the Companies or the Borrowers) that is reasonably attributable to the Property. . . .

 (emphasis supplied). On June 27, the Borrowers tendered prepayment of the Loan but did not include the Supplemental Exit Fee of $2 million.

  Discussion

  Rule 8(a) requires that a complaint contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Rule 8(a)(2), Fed.R.Civ.P. Pleadings under the Federal Rules are to give "fair notice of the claim asserted," so as to enable the opposing party to answer and prepare for trial. Simmons v. Abruzzo, 49 F.3d 83, 86 (2d Cir. 1995).*fn4 Page 5

  A court may dismiss an action pursuant to Rule 12(b)(6) only if "it appears beyond doubt, even when the complaint is liberally construed, that the plaintiff can prove no set of facts which would entitle him to relief." Jaghory v. New York State Dep't of Educ., 131 F.3d 326, 329 (2d Cir. 1997) (citations omitted). In construing the complaint, the court must "accept all factual allegations in the complaint as true and draw interferences from those allegations in the light most favorable to the plaintiff." Id. "Given the Federal Rules' simplified standard for pleading, a court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Swierkiewicz v. Sorema, N.A., 534 U.S. 506, 514 (2002).

  In addition to the pleadings, the court may consider "any written instrument attached to [the complaint] as an exhibit or any statements or documents incorporated in it by reference." Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir. 2000) (citation omitted). A court need not credit general, conclusory allegations if they "are belied by more specific allegations of the complaint." Hirsch v. Arthur Andersen & Co., 72 F.3d 1085, 1092 (2d Cir. 1995).

  It is undisputed that the Loan Agreement is governed by New York law, which dictates that a contract is unambiguous when it has a "definite and precise meaning, unattended by danger of misconception in the purport of the contract itself, and Page 6 concerning which there is no basis for a difference of opinion." Krumme v. West Point Stevens, 238 F.3d 133, 139 (2d Cir. 2000). Unambiguous contract terms "are given their plain meaning." Id. On the other hand, contract language is ambiguous if it is "capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement." Id.

  The Complaint's first and second claims for relief allege that the Borrowers and Maguire, respectively, breached the Loan Agreement and related documents by failing to pay Anthracite the $2 million Supplemental Exit Fee. Section 2.6(k) of the Loan Agreement requires payment of the Supplemental Exit ...


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