Highland Park CDO I Grantor Trust v. Wells Fargo Bank, N.A.

Highland Park CDO I Grantor Trust v. Wells Fargo Bank, N.A.

Opinion

MEMORANDUM AND ORDER

NAOMI REICE BUCHWALD

UNITED STATES DISTRICT JUDGE

Plaintiff Highland Park CDO I Grantor Trust, Series A ("Highland") brings this action against defendant Wells Fargo Bank, N.A. ("Wells Fargo") seeking a declaratory judgment that Highland, as the lender on a subordinated loan, has the right to bring suit against that loan's guarantors irrespective of whether a second, senior loan on which Wells Fargo is the lender has been fully repaid. Wells Fargo brings a counterclaim seeking a declaratory judgment that Highland is barred from asserting such a claim against the guarantors prior to full repayment of the senior loan. Both parties now have moved for summary judgment. For the reasons set forth below, Highland's motion  [*2] is denied, and Wells Fargo's motion is granted.

BACKGROUND

There is no dispute regarding the material facts giving rise to this dispute. On July 18, 2006, Morgan Stanley executed a loan agreement for a $ 28.5 million loan (the "senior loan") to Platinum Lodging, LLC (the "senior borrower"). ² (Highland 56.1 P 3.) On that date, four individuals signed an agreement whereby each pledged to personally guarantee the senior loan. (Id. at P 4.) On August 3, 2006, Morgan Stanley executed a second loan agreement titled the "Mezzanine Loan Agreement" with Platinum Lodging Mezz, LLC (the "mezzanine borrower") for $ 10.5 million (the "mezzanine loan"). (Id. at P 5.) On that date, the same four individuals who guaranteed the senior loan signed an agreement whereby  [*3] each likewise pledged to personally guarantee the mezzanine loan. (Id. at P 6.) The guaranty agreement on the mezzanine loan provides that the lender could "proceed directly and at once, without notice, against Guarantor to collect and recover the full amount of the liability hereunder or any portion thereof, without proceeding against Borrower or any other person." (Id. at P 7.)

On August 3, 2006, Morgan Stanley also executed the Intercreditor Agreement (the "agreement") specifying certain rights between the lender on the senior loan and the lender on the mezzanine loan. The agreement, which acknowledges that those lenders are "sophisticated" (Curtner Decl. Ex. A, at § 34), provides that it should be construed under New York law (id. at § 24) and includes an integration clause (id.). It also contains several provisions directly relevant to the instant dispute. First, under the heading "Subordination of Mezzanine Loan and Mezzanine Loan Documents," the agreement states:

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