On January 7, 2022, Justice Reed of the New York County Commercial Division issued a decision in Ladder Capital Fin. LLC v. 1250 N. SD Mezz LLC, 2022 NY Slip Op. 50016(U), holding that a no oral modification clause barred a promissory estoppel claim, explaining:
The third claim relies on Ladder’s alleged assurance that it would not pursue any deficiency or other costs if it were the successful bidder at the public auction. It states that because 1250 North SD Mezz LLC relied on this assurance, promissory estoppel bars Ladder from seeking damages. It further suggests that absent this assurance, the Oak Coast Parties would have bid on the San Diego Hotel, resulting in a higher sales price, and reducing or eliminating the deficiency. The counterclaim alleges that promissory estoppel therefore applies. A promissory estoppel cause of action is stated where the claim alleges that there is a sufficiently clear, unambiguous promise, the reliance on that promise is reasonable, and the reasonable reliance causes injury. Ladder argues that dismissal is appropriate under CPLR §§ 3211 (a) (1) and (a) (7). It points to Section 11.4 of the mezzanine loan agreement, which states, in pertinent part:
“No modification, amendment, extension, discharge, termination or waiver of any provision of any Loan Document, nor consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in a writing signed by the party or parties against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the specific purpose, for which given.”
Citing Bank of NY v Spring Glen Assoc., Ladder states that the no-modification clause renders any alleged reliance unreasonable as a matter of law. Counterclaimant opposes by stating that Ladder’s argument is insufficient because of an exception to the general rule. Under Richter v Zabinsky, counterclaimant alleges, the no-modification clause does not apply because it would be unconscionable not to enforce this agreement [that is, Ladder’s alleged promise].
The court grants this prong of the motion, as the documentary evidence — that is, the loan documents — establish that counterclaimant’s reliance on the alleged promises was unreasonable. Any reliance upon Ladder’s alleged representations would not have been justified in light of the express provisions in the agreement that it may not be modified except through a signed writing.
Richter is not persuasive for a contrary determination. In Richter, the court rejected a party’s attempt to assert the statute of frauds as a defense where there was no written contract and the parties’ pattern of behavior evidenced their intent to honor the oral agreement. Here, on the contrary, there is a written agreement. Thus, the statute of frauds is not at issue, and the exception described in Richter is inapplicable. Moreover, counterclaimant, a sophisticated party represented by counsel, assumed the risk of this loss under the contract.
(Internal quotations and citations omitted).