JON O. NEWMAN, Circuit Judge.
This appeal presents the recurring issue of whether relevant documents are ambiguous, precluding their interpretation on a motion to dismiss, but the issue arises in the unusual context of an agreement for a loan from a lender to himself and his partner. A minor though intriguing issue, rarely if ever encountered in a judicial opinion, is whether the character "i" identifying a subparagraph in one of the documents is a lower case letter "i" or a lower case version of a Roman numeral "I," sometimes referred to as a romanette.
Plaintiffs-Appellants Shahab Karmely and SK Greenwich LLC appeal from the August 21, 2012, order of the United States District Court for the Southern District of New York (Robert P. Patterson, Jr., District Judge), granting the motion to dismiss by Defendants-Appellees Eitan Wertheimer, Ezra Dagmi, 443 Greenwich LLC, 443 Greenwich Partners, LLC, W. Family 1 Ltd., W-D Group (2006) LP, W-D Group NY1, LLC, and John Does 4-10.
We conclude that in two respects the documents are ambiguous, precluding dismissal
The following facts are taken from the Amended Complaint and assumed to be true for purposes of the motion to dismiss.
People and entities. Appellant Karmely is an experienced New York City real estate developer. Appellee Eitan Wertheimer is an Israeli citizen, and Appellee Ezra Dagmi is a dual citizen of Israel and the United Kingdom. Dagmi and Werthheimer are close friends and partners in real estate ventures. Dagmi and his family have had a close personal relationship with Karmely and his family for more than 35 years. Dagmi has repeatedly referred to this relationship as a "family relationship of trust."
The entities involved are:
In 2005, Wertheimer and Dagmi approached Karmely about developing a multi-billion dollar real estate portfolio. Karmely agreed to act as a developer for this venture, and instead of requiring a customary development fee, agreed to accept a percentage of the profits on each development as compensation for his services. In September 2006 SK Greenwich agreed with W-D Partner to form the Company to purchase and develop a building at 443-53 Greenwich Street, New York, N.Y. (the "Property"). SK Greenwich, i.e., Karmely, contributed approximately $5 million and W-D Partner, i.e., Wertheimer and Dagmi, contributed approximately $20 million of capital to the Company, for which they received 20 percent and 80 percent ownership interests, respectively, of the Company.
In September 2006, the Company created Greenwich Owner, which purchased the Property for $113 million. To fund the purchase and development of the Property, two loans were obtained. The Company obtained an $85 million mortgage loan from Anglo Irish Bank Corporation PLC (the "Anglo Senior Loan"), with a maturity date of October 1, 2008. SK Greenwich and W-D Partner obtained a $20 million mezzanine loan (the "Mezzanine Loan") from W-D Lender, with a maturity date of October 1, 2009.
The documents. Several documents are relevant to this litigation. We only identify them at this point and set forth their relevant terms in the paragraphs that follow:
All five documents are dated September 7, 2006.
The Mezzanine Loan was senior to the equity investments of SK Greenwich and W-D Partner in the Company, but subordinate to the Anglo Senior Loan. The Mezzanine Loan Agreement gave W-D Lender, upon an "Event of Default," the remedies provided by the Loan Documents, which included the Pledge Agreement. The Pledge Agreement gave W-D Lender the right to foreclose on the interests of either SK Greenwich or W-D Lender in the Company (hence in the Property) upon an "Event of Default." The Mezzanine Loan Agreement provided several definitions of an "Event of Default." A major issue on this appeal, discussed in detail below, is which of two of these definitions applied to nonpayment of the Mezzanine Loan. One definition identified nonpayment of the Promissory Note as an Event of Default only if there was Available Net Cash Flow.
The Promissory Note, evidencing the Mezzanine Loan, stated that it would mature on October 1, 2009. It was secured by 100 percent of the ownership interests of W-D Partner and SK Greenwich in the Company, i.e., their shares in the Company, which owned the Property through Greenwich Owner.
The Pledge and Security Agreement obligated SK Greenwich and W-D Partner to "pay or satisfy all of the Obligations" including the full amount of the Promissory Note.
The Intercreditor Agreement recited the agreement of Anglo Irish Bank to lend $85 million to Greenwich Owner. Paragraph 4(d) of the Intercreditor Agreement provided:
Despite the prohibition on payment of the Mezzanine loan prior to the full payment of the Anglo Senior Loan, the Intercreditor Agreement also provided that "upon the occurrence of an event of default under the Mezzanine Loan Documents," W-D Lender could commence an "Enforcement Action" to "enforce the Mezzanine Pledge or conduct a sale of the Ownership Interests pursuant to the Mezzanine Pledge." Id. ¶ 7(b). The Intercreditor Agreement also stated, "This agreement is for the sole benefit of the Anglo Senior Lender, Mezzanine Lender, and their respective successors and permitted assigns." Id. ¶ 22.
Extension of the Anglo Senior Loan. In the summer of 2008, a few months before the Anglo Senior Loan was to mature, the Company was preparing to spend more
Throughout 2009, SK Greenwich continued its efforts to redevelop the Property by meeting with designers, architects, and contractors. The Company again requested an extension of the Anglo Senior Loan. The Anglo Irish Bank agreed, but the extension was conditioned upon the Company's paying $1.2 million as an interest and carry reserve. SK Greenwich paid approximately $250,000 of that amount. In July 2010, Anglo Irish Bank again extended the maturity date of the loan, this time to December 31, 2010.
Default and sale of SK Greenwich's interests. On September 30, 2010, W-D Lender sent a letter to SK Greenwich and W-D Partner, stating that the principal and interest on the Mezzanine Loan, due on October 1, 2009, had not been paid and that an Event of Default had occurred under the Mezzanine Loan Agreement and the Pledge Agreement. On October 4, 2010, W-D Lender sent another letter to SK Greenwich, stating that W-D Lender intended to sell SK Greenwich's 20 percent interest in the Company at a public auction on October 20, 2010.
On October 12, 2010, SK Greenwich filed a complaint in New York State Supreme Court, seeking a declaratory judgment that SK Greenwich was not in default, and that no Event of Default could occur until (1) payments to W-D Lender were permitted under the Anglo Senior Loan documents, and (2) there was Available Net Cash Flow under the Operating Agreement. SK Greenwich also sought an order barring W-D Lender from selling SK Greenwich's interest in the Company. Appellees removed the case to the Southern District of New York. The Court denied the Appellants' motion for a temporary restraining order and a preliminary injunction. After the District Court's order, W-D Lender auctioned SK Greenwich's interest in the Company. The only participant in the auction was W-D Lender's representative, who successfully bid $100,000 for SK Greenwich's interest in the Company.
On January 4, 2011, Anglo Irish Bank declared the Company in default for failure to pay the Anglo Senior Loan on its extended maturity date of December 31, 2010. Shortly thereafter, a Wertheimer family company purchased the Anglo Senior Loan from Anglo Irish Bank. The W-D entities eventually sold the property for $150 million, realizing profits of more than $10 million, and without providing compensation to SK Greenwich for its capital contributions or work as an Operating Member.
The Appellants filed an Amended Complaint seeking monetary damages for (1)
Two aspects of the transaction at issue should be noted at the outset. First, Karmely, the party complaining of the foreclosure of its interests, and Dagmi, who, along with his partner Wertheimer, control the entity that foreclosed on Karmely's interests, have been close friends, in a "family relationship of trust," for more than 35 years. Second, unlike a typical loan transaction between a bank and a borrower, the Mezzanine Loan underlying the foreclosure of Karmely's interests was made by a lender to itself and the lender's partner. The lender was W-D Lender; the borrowers were SK Greenwich, i.e., Karmely, and W-D Partner, acting by W-D Lender, the sole member of W-D Partner.
The ultimate issue is whether the relevant documents unambiguously accord W-D Lender a right to foreclose on SK Greenwich's 20 percent interest in the Property for failure to pay the Promissory Note at maturity. W-D Lender did not sue the Appellants for nonpayment of the Mezzanine Loan, but instead foreclosed on SK Greenwich's collateral securing the loan. SK Greenwich's pending lawsuit seeks damages for what it contends was an unauthorized foreclosure.
In considering whether the Appellants' Amended Complaint was properly dismissed, we do not decide whether the relevant
The Promissory Note itself does not contain a foreclosure remedy in the event of nonpayment of the principal. Its one reference to an "event of default" is in section 2, which provides that the failure of the Borrower (SK Greenwich and W-D Partner) to pay W-D Lender any equity distributions while the Note remains outstanding is an "event of default." The Pledge Agreement and the Mezzanine Loan Agreement both provide foreclosure remedies upon an "Event of Default." Subparagraph I(ii) of Schedule D of the Pledge Agreement includes as an "Event of Default" failure to make timely payment of any amounts due under "the Loan."
We focus on the items in the section 3 list for two reasons. First, "specific language in a contract will prevail over general language where there is an inconsistency between two provisions." Paneccasio v. Unisource Worldwide, Inc., 532 F.3d 101, 111 (2d Cir.2008). As we discuss below, the repayment obligation, failure of which constitutes an "Event of Default," is more restrictive in the Mezzanine Agreement than in the Pledge Agreement. Second, the Appellees' notice of default to SK Greenwich asserted that an Event of Default had occurred under one of the default provisions of section 3 of the Mezzanine Agreement, specifically, paragraph 3.1(c).
Section 3.1 of the Mezzanine Agreement contains two definitions of an "Event of Default," the choice of which is at the heart of the current controversy.
Paragraph 3.1(a) provides:
Paragraph 3.1(c) provides:
A principal issue is whether 3.1(a), with its Available Net Cash Flow limitation on the Borrower's payment obligation, or 3.1(c), without such a limitation, applies, not to SK Greenwich's repayment obligation, but to W-D Lender's right to foreclose as a remedy for nonpayment, in other words, whether "an Event of Default" permitting foreclosure occurred.
The Appellees argue that they were entitled to foreclose by virtue of the definition of an "Event of Default" in subparagraph 3.1(c) of the Mezzanine Agreement. The Appellants argue that subparagraph
The District Court rejected the Appellants' argument for two reasons. First, Judge Patterson read subparagraph 3.1(a) to apply only to timely nonpayment of any installment of principal and not to the obligation to pay the principal amount at maturity, leaving subparagraph 3.1(c) to apply to nonpayment of the principal amount at maturity. See Karmely, 2012 WL 3583141, at *10-11. He cited the Black's Law Dictionary definition of "installment" as "a periodic partial payment of a debt." Id. at *10 (citing Black's Law Dictionary 868 (9th ed.2009)). Second, he reasoned that the Appellants' argument, precluding default for nonpayment in the absence of available net cash flow, could lead to the perpetual nonpayment of the principal amount if the project did not generate revenue, a prospect he thought sophisticated parties would not have agreed to. Id. at *10.
Although the terms of subparagraph 3.1(c) itself are not ambiguous, we see several ambiguities in the Mezzanine Loan Agreement, starting with an initial ambiguity as to whether subparagraph 3.1(a) or subparagraph 3.1(c) applies to the determination of whether an "Event of Default" had occurred. Comparison of the wording of 3.1(a) and 3.1(c) reveals a textual argument favoring application of 3.1(a), or, at least creating ambiguity as to whether 3.1(c) applies. 3.1(a) defines an "Event of Default" as "the failure of the Borrower to pay any installment of principal, interest, or other payments," whereas 3.1(c) defines an "Event of Default" as "the failure of the Borrower to observe or perform any agreement, covenant, or obligation." Mezzanine Loan Agreement, ¶¶ 3.1(a), (c) (emphases added). This variation in the emphasized wording suggests that 3.1(a) applies to all requirements to pay money and 3.1(c) applies to requirements to do things other than pay money. The Loan Documents impose on the Borrower many requirements other than the payment of money, e.g., to furnish financial data, Mezzanine Loan Agreement ¶ 2.20, to give the Lender prompt notice of damage to the property, id. ¶ 2.17, to comply with Environmental Laws, id. ¶ 2.32(c), and to deliver to the lender copies of insurance policies, Pledge Agreement ¶ 5(b). Having separately stated requirements to make payments and to perform obligations not requiring payments is not unusual. See, e.g., Abundance Partners LP v. Quamtel, Inc., 840 F.Supp.2d 758, 761 (S.D.N.Y.2012); Greystone Bank v. Skyline Woods Realty, LLC, 817 F.Supp.2d 57, 60 (N.D.N.Y.2011); In re Cabrini Medical Center, No. 09-14398, 2009 WL 7193578, at *9 (Bankr.S.D.N.Y. July 30, 2009).
Even if a comparison of the wording of 3.1(a) and 3.1(c) favors making 3.1(a) the applicable definition of an "Event of Default," the wording of 3.1(a) itself creates a further ambiguity as to its applicability. There is an ambiguity in the phrase of 3.1(a) requiring the Borrowers "to pay any installment of principal, interest, or other payments required under the Note when due." One interpretation of that phrase is that "installment" applies to each of the three items in the series, i.e., "principal," "interest," and "other payments." A second interpretation is that "installment" applies only to "principal," and does not apply to "interest" or "other payments." The District Court ruled that
Courts encountering the issue whether an adjective modifying the first word of a series modifies all the words in the series have yielded varying results.
In the pending case, the arguments for not reading "an installment of" to modify "other payments" are that (a) principal is often repaid in installments, and partial repayments of principal were explicitly contemplated, see Promissory Note ¶ 1(C); (b) interest was specified to be paid quarterly, see id. first ¶, and installment payments of quarterly interest payments would be unusual; and (c) there is nothing in the documents to suggest that "other payments required under the Note when due" were to be paid in installments.
Under the Appellants' interpretation, limiting "installment" to partial payments of principal, payment of the entire principal at maturity would be an example of "other payments required under the Note when due." Judge Patterson expressed the view that the "other payments" phrase applied to any equity distributions that the
The Appellants cite a Delaware District Court decision that lends considerable support to their interpretation of 3. 1(a). See Falco v. Alpha Affiliates, Inc., No. CIV. A.97-494, 1999 WL 222464 (D.Del. Mar. 24, 1999). A lease provided for immediate termination "[i]n the event of any default of Tenant in paying any installment of Basic Rental, additional rent or other sums payable hereunder." Id. at *1, *7. For other defaults, the tenant had 30 days to cure. See id. The dispute concerned failure to pay a security deposit. The Court ruled that all "monetary defaults" entitled the landlord to immediate termination and that failure to pay the security deposit was a monetary default. See id. at *7. The Court implicitly applied the word "installment" only to the first of the three listed items. There was no claim that the security deposit was to be paid in installments. By reading the phrase "other sums payable" not to be modified by the word "installment," the Court favored the reading advanced by the Appellants in our case. The Appellees here attempt to distinguish Falco by pointing out that the document in that case was a lease, rather than a loan, but they offer no reason why that should make any difference. The Delaware District Court's interpretation of similar language gives the Appellants here at least sufficient support to render the wording of 3.1(a) ambiguous.
Even if the phrase "other payments" in 3. 1(a) is modified by "installment," that interpretation would not necessarily carry the day for the Appellees. Such an interpretation would create a tension between the unlikelihood that payment of the entire principal at maturity would be considered an installment and the comparison of the wording of 3.1(a) and 3.1(c) that makes only 3.1(a) applicable to obligations to pay money. Judge Patterson resolved that tension by deeming 3.1(c) applicable. That is one way but not the only plausible way to resolve the ambiguity.
Judge Patterson offered an additional reason for rejecting the possibility that 3.1(a), with its Available Net Cash Flow limitation, applied to SK Greenwich's payment obligation and consequent exposure to the foreclosure remedy. He reasoned that sophisticated parties would not agree to a loan agreement that might never be paid.
An Appellate Division decision has noted that "the most persuasive evidence of the agreed intention of the parties in those circumstances [where agreements are not clear] is what the parties did when the circumstances arose." Webster's Red Seal Publications, Inc. v. Gilberton World-Wide Publications, Inc., 67 A.D.2d 339, 341, 415 N.Y.S.2d 229 (N.Y.App.Div.1979), aff'd, 53 N.Y.2d 643, 438 N.Y.S.2d 998, 421 N.E.2d 118 (N.Y.1981). The Appellants contend that after October 9, 2009, at a time when the Appellees say that an "Event of Default" permitting foreclosure had occurred, the Appellees continued to deal with Karmely as an operating member of the partnership, insisted that he help obtain extensions of the Anglo Senior Loan, that he make additional capital contributions, and that he extend his $10 million personal guarantees of the Anglo Senior Loan, and that these dealings with Karmely continued after the alleged "Event of Default."
In view of all of these considerations, we believe that on appeal of a ruling dismissing the Amended Complaint there is sufficient ambiguity to require a remand. The ambiguities are sufficient to let the Appellants present whatever extrinsic evidence they might offer on remand to resolve these ambiguities and show, at summary judgment or trial, that the Appellees' foreclosure remedy (as distinguished from a suit on the Promissory Note) was not intended to be used in the absence of Available Net Cash Flow to pay the Note.
A second issue, distinct from the issue whether the Available Net Cash Flow limitation of 3.1(a) applies to limit W-D Lender's foreclosure remedy, is whether any provisions of the Intercreditor Agreement benefit the Appellants. That issue turns initially on whether all of the documents, including the Intercreditor Agreement, can be looked at as one set of integrated transactions. The documents were all executed on the same date, September 7, 2006, and relate to the same real estate development, and they should be construed together.
The Appellants begin their invocation of the Intercreditor Agreement by citing section 4.27 of the Mezzanine Loan Agreement, which states that its terms and those of the Mezzanine Loan "are expressly made subject to the terms and provisions of the Intercreditor Agreement," and section 26 of the Pledge Agreement, which contains virtually identical language. From the Intercreditor Agreement itself the Appellants rely primarily on paragraph 4(d), which provides that until the Anglo Senior Loan has been paid, "no payment whatsoever shall be made to Mezzanine Lender by ... Mezzanine Borrower...."
Judge Patterson rejected the Appellants' reliance on paragraph 4(d) for several reasons. First, he interpreted it not to prohibit payments by the Mezzanine Borrower to the Mezzanine Lender. See Karmely, 2012 WL 3583141, at *9. Although the prohibitory language of paragraph 4(d) seems clear, he pointed out that paragraph 4(d) also contains language obliging the Mezzanine Borrower to hold in trust and pay to the Anglo Senior Lender any payments received by the Mezzanine Borrower on the Mezzanine Loan. See id. From this language he concluded that "the terms of the Intercreditor Agreement contemplated that W-D Lender might receive payments from the Borrower, and outlined W-D Lender's obligations if such a situation came to pass."
Judge Patterson also ruled that nothing in the Intercreditor Agreement could benefit the Appellants because they were neither parties to that Agreement nor third-party beneficiaries of it, and because, as he interpreted the Agreement, several of its provisions preserved the obligation of the borrowers of the Mezzanine Loan to repay the loan at maturity and also preserved W-D Lender's enforcement remedies in the event of nonpayment. See Karmely, 2012 WL 3583141, at *8-9. He cited paragraphs 4(c), 7(b), "8 (h)(i)," and section 22. We consider each of these provisions separately.
Paragraph 4(c) provides:
Paragraph 4(c) is not entirely clear. It first bars the Mezzanine Lender from exercising its remedies upon default under the Mezzanine Loan, then permits the Mezzanine Lender to exercise its rights under the Mezzanine Pledge, never defines "default" by cross-reference or otherwise, and finally makes the permission to exercise rights subject to "the limitations set forth herein," which might well include paragraph 4(d) if "herein" means the entire document.
Paragraph 7(b) also does not resolve the controversy. It appears to contemplate an enforcement action against the Appellants as long as five days' notice is given to the Senior Lender, but its precise meaning is to specify that, as long as notice is given, "no consent [of Anglo Irish Bank] shall be required for Mezzanine Lender to institute or enforce an Enforcement Action ... upon the occurrence of an event of default under the Mezzanine Loan Documents...." That language, however, does not authorize an enforcement action, nor override paragraph 4(d). And even if paragraph 7(b) implies the availability of an Enforcement Action by Mezzanine Lender, such an action is tied to "an event of default under the Mezzanine Loan Documents," which brings into play the ambiguities of the Mezzanine Agreement, discussed in Part I above.
What Judge Patterson referred to as paragraph or section "8(h)(i)" is set forth in an unnumbered and unlettered subparagraph placed within paragraph 8(h) of the Intercreditor Agreement. That subparagraph provides:
Whether this subparagraph precludes application of paragraph 4(d) turns initially on the coverage of the words "foregoing" and "herein," and resolution of the coverage issue requires, regrettably, an elaborate examination of the structure of the Intercreditor Agreement and the numbering and lettering of its sections, paragraphs, and subparagraphs. The Agreement has 14 numbered sections, most of which include several paragraphs designated with a lower-case letter. The language quoted by Judge Patterson is the second of two subparagraphs placed within paragraph (h) of section 8. The first subparagraph is designated "(i)"; the second subparagraph is not designated at all.
Judge Patterson referred to this second subparagraph as "paragraph[] 8(h)(i)," Karmely 2012 WL 3583141, at *9, *10 n. 9, or "Section 8(h)(i)," id. at *12, and ruled that the words "foregoing" and "herein" in that subparagraph applied to the entirety of the Intercreditor Agreement. This is apparent because he ruled that what he called "8(h)(i)" denied the Appellants the benefit of paragraph 4(d) of the Agreement, a paragraph appearing in the document several pages before section 8. By repeatedly citing the subparagraph as "8(h)(i)," Judge Patterson obviously thought that the provision was a subparagraph within paragraph (h) of section 8,
However, from the face of the Agreement and in the absence of extrinsic evidence of intent, we conclude, at this stage of the litigation, that there is no ambiguity in the proper interpretation of the "(i)" that designates the first subparagraph within paragraph 8(h), and that it is a lower case letter and not a romanette. Several aspects of the typographical construction of the Intercreditor Agreement make this clear, and also make clear that the second subparagraph within paragraph 8(h), is not to be understood as a subparagraph of section 8(h), but instead as the concluding text of section 8. First, every paragraph within every section of the Agreement is designated with a lower case letter, and the lettered paragraphs, other than paragraph 8(h), consist of only one paragraph. Second, in every section, including section 8, the text at the beginning (before all lettered paragraphs) and at the end (after all lettered paragraphs) is set flush left at the left margin, and the text of all lettered paragraphs is set flush left with a single left indentation, whereas the text of both subparagraphs placed within paragraph 8(h) is set flush left with a double left indentation. Third, the second subparagraph placed within paragraph 8(h) is the only subparagraph not identified at all, i.e., not introduced with a character that could be either a lower case letter or a romanette. Fourth the entire text of the second subparagraph placed within paragraph 8(h) is identical to the text at the end of section 9, text that is placed at the left margin with no indentation and with no designating by either a lower case letter or a romanette, making it clear that this second paragraph should have been printed flush left at the left margin and that double indentation was a printer's error. Fifth, elsewhere in the Intercreditor Agreement, in subparagraphs that are obviously identified by a romanette, the "(i)" and the "(ii)" that identify these subparagraphs are triple-indented, see subparagraphs 6(b)(i), (ii), 11(c)(i), (ii), 12(c)(i), (ii), whereas the "(i)" that identifies the first subparagraph within paragraph 8(h) is double-indented just like all the lower case letters that identify other subparagraphs of the Agreement.
From all of these circumstances, we conclude that no reasonable person, considering only the text and typesetting of the Agreement, could fail to conclude that the "(i)" that designates the first subparagraph placed within paragraph 8(h) is a lower case letter, not a romanette; that this first subparagraph is really paragraph 8(i), designated with a lower case letter, following, and not included within, paragraph 8(h) of section 8 and the text of this subparagraph should have been set with a single left indentation, like all the other paragraphs designated with a lower case letter in section 8; and that the text of the second subparagraph, not designated with any letter or number and placed within paragraph 8(h), is really the ending text of
With the paragraph containing the words "foregoing" and "herein" properly understood as the ending text of section 8, it is clear from the text, at this stage of the litigation, that these words apply only to all of the paragraphs of section 8, and not to the entirety of the document. If this ending text, with the word "foregoing," was meant to apply to the entire document, it would have been placed at the end of the document, and there would have been no need to repeat the identical text at the end of section 9. Furthermore, when the parties wanted language in a paragraph to apply to the entirety of the document in which the paragraph appears, they knew how to say that. Paragraph 4.26(c) of the Mezzanine Agreement states: "Nothing in this Agreement or in the Note shall affect the obligation of the Borrower to pay the Debt in the manner and at the time and place therein respectively expressed."
Paragraph 22 of the Intercreditor Agreement provides in part:
(emphases added).
Although the emphasized words appear to make clear that the payment obligation of the Borrowers under the Mezzanine Loan remains unaffected by the Intercreditor Agreement, the qualifying phrase of paragraph 22, "except as otherwise expressly set forth herein," might preserve the force of paragraph 4(d), which prohibits any payment to the Mezzanine Lender while the Anglo Senior Loan remains unpaid. As with the interpretation of the "(i)" discussed above, if extrinsic evidence of intent as to the coverage of "herein" and "foregoing" is presented on remand, the resulting factual issue will be a matter for determination in the district court.
Our review of the various provisions of the Intercreditor Agreement leaves us perplexed. It is difficult to understand how the Mezzanine Loan can be "expressly made subject to" the terms of the Intercreditor Agreement, with one of those terms, paragraph 4(d), providing that "no payment shall be made to Mezzanine Lender by ... Mezzanine Borrower" until the Anglo Senior Loan has been paid, while at the same time section 22 that the Intercreditor Agreement states that it "is for the sole benefit of the Anglo Senior Lender, Mezzanine Lender, and their respective successors and assigns." [A261] If the Appellants, though "subject to" the Intercreditor Agreement, cannot benefit from it, paragraph 4(d) would prohibit only W-D Partner, as the only other Mezzanine Borrower, from paying itself, as Mezzanine Lender, while the Anglo Senior Loan remains unpaid. That seems odd, to say the least, and nothing in the record thus far
We do not agree with Judge Patterson, that on a motion to dismiss, the contradictory nature of the provisions that both prohibit the Appellants from making payments and also deny them any benefit from that prohibition can be reconciled by interpreting paragraph 4(d) as mainly a prohibition on retention of payments and as "contemplat[ing] that W-D Lender might receive payments from the Borrower." Karmely, 2012 WL 3583141, at *9. A contractual clause that prohibits a payment and then provides a turnover requirement in the event payment is made contrary to the prohibition, is not, facially at least, a negation of the payment prohibition.
In sum, it remains unclear whether, in light of paragraph 4(d), an event of default occurred permitting foreclosure. This uncertainty also requires a remand.
The judgment is vacated, and the case is remanded for further proceedings.
or
