On February 14, 2022, Justice Borrok of the New York County Commercial Division issued a decision in U.S. Bank N.A. v. 342 Prop. LLC, 2022 NY Slip Op. 30488(U), holding that in the absence of an intercreditor agreement, a mezzanine lender could not prevent a senior lender from foreclosing on a loan, explaining:
The Mezzanine Lender was structurally subordinate to the Mortgage Lender’s position. In the absence of an intercreditor agreement (i.e., an agreement between the Mortgage Lender and the Mezzanine Lender) providing otherwise, the Mezzanine Lender simply has no basis to contest the Mortgage Lender’s right to foreclose on the real property. This is the nature of holding the mezzanine position. It does not matter that the borrower under the mezzanine loan documents may have violated the mezzanine loan documents by consenting to the foreclosure of the Mortgage. The Mortgage Lender is not a party to that agreement and the Mezzanine Lender does not aver that there is an intercreditor agreement preventing foreclosure by the Mortgage Lender. Stated differently, although the Mezzanine Lender may have bargained for the right to pay off the Loan or conduct a UCC sale, the Mezzanine Lender did not bargain for the ability to prevent the Mortgage Lender from foreclosing on the real property. It only bargained for the rights set forth in the mezzanine loan documents and the intercreditor agreement including its ability to pursue its recourse claims against the Borrower to the extent that the Borrower may be in breach of the mezzanine loan documents. This it may do.
(Internal citations omitted).