Monday, June 22, 2015

Tough Foreclosure Court: Attorney Handcuffed, Jailed

No comment...

from the DBR:

Boca Raton lawyer was charged with battery on a law enforcement officer and resisting arrest with violence. The state attorney's office dropped the charges Jan. 7, noting the sentence imposed by Harrison.
A transcript from the hearing shows tense exchanges between the Golants and Harrison, with the lawyers accusing the judge of denying a motion "as a sanction" against the firm in GMAC Mortgage v. Philip Joseph Maszak et al.
The hearing erupted when Harrison set a trial date for a case the Golants insisted was not ready for trial. The lawyers claim the judge violated state law by pushing ahead on a rocket docket even though pleadings were still outstanding. Harrison dismissed their protests as "appellate law" and asked to "clear the front of the courtroom."
"You are refusing to hear us, and you're not even letting us make a record for appeal," Golant said.
"Step back," the judge said. "Step back, or you will be held in contempt of court."


Read on: http://www.dailybusinessreview.com/id=1202730009588/Tough-Foreclosure-Court-Attorney-Handcuffed-Jailed#ixzz3dp0a4XTy


http://www.dailybusinessreview.com/id=1202730009588/Tough-Foreclosure-Court-Attorney-Handcuffed-Jailed?slreturn=20150522152804

Thursday, June 18, 2015

Are Bank Servicers Right When They Ignore Borrower Requests Styled As QWRs?

Over and over again, I see that borrowers will send a bank servicer a letter that is titled "Qualified Written Request" or "QWR", only to receive from the bank a response that states that the request cannot be fulfilled because "it doesn't qualify as a QWR".  The most common reason asserted for such alleged failure to qualify is that the request does not state with specificity what servicing defect the borrower is asserting.

This is only a half-truth.  While the law does provide that a "qualified" written request for information is "written correspondence" that "includes a statement of the reasons for the belief of the borrower" why "the account is in error", this is NOT the only type of correspondence that qualifies.  A QWR can ALSO be a written request for information that "provides sufficient detail to the servicer regarding other information sought by the borrower".

Thus, as long as your written request seeks concrete information and provides sufficient detail to the servicer regarding the information sought by you as the borrower, your request is "qualified", and the servicer must respond to it and provide either the "information requested by the borrower or an explanation of why the information requested is unavailable or cannot be obtained by the servicer".  The bank's noncompliance with this requirement of the statute would most likely be actionable in court.

Happy QWRs...

Monday, June 15, 2015

U.S. Supreme Court in BOA v CAULKETT: we'd like to help debtors, but they didn't ask us to do so

The U.S. Supreme Court's reasoning basically boils down to this: "we made a mistake previously by not following the canons of statutory construction (because "policy considerations" threw us off, even though we are not Congress). To fix that error now, we would need to overrule our prior opinion containing said mistake, but since the debtors have asked us only to modify that opinion and not overrule it, we won't overrule it."

Lest there be any doubt that I am not putting words in the Court's mouth, here's the complete opinion below -- judge for yourself...

BANK OF AMERICA, N. A., PETITIONER
v.
DAVID B. CAULKETT

BANK OF AMERICA, N. A., PETITIONER
v.
EDELMIRO TOLEDO-CARDONA

No. 13-1421
No. 14-163

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 2014
Argued March 24, 2015
June 1, 2015*


        THOMAS, J., delivered the opinion of the Court, in which ROBERTS, C. J., and SCALIA, GINSBURG, ALITO, and KAGAN, JJ., joined, and in which KENNEDY, BREYER, and SOTOMAYOR, JJ., joined except as to the footnote.

Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.

ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

JUSTICE THOMAS delivered the opinion of the Court.**

        Section 506(d) of the Bankruptcy Code allows a debtor to void a lien on his property "[t]o the extent that [the] lien secures a claim against the debtor that is not an allowed secured claim." 11 U. S. C. §506(d). These consolidated cases present the question whether a debtor in a Chapter 7 bankruptcy proceeding may void a junior mortgage under §506(d) when the debt owed on a senior mortgage exceeds the present value of the property. We hold that a debtor may not, and we therefore reverse the judgments of the Court of Appeals.

I
        The facts in these consolidated cases are largely the

Page 4

same. The debtors, respondents David Caulkett and Edelmiro Toledo-Cardona, each have two mortgage liens on their respective houses. Petitioner Bank of America (Bank) holds the junior mortgage lien—i.e., the mortgage lien subordinate to the other mortgage lien—on each home. The amount owed on each debtor's senior mortgage lien is greater than each home's current market value. The Bank's junior mortgage liens are thus wholly underwater: because each home is worth less than the amount the debtor owes on the senior mortgage, the Bank would receive nothing if the properties were sold today.

        In 2013, the debtors each filed for Chapter 7 bankruptcy. In their respective bankruptcy proceedings, they moved to "strip off "—or void—the junior mortgage liens under §506(d) of the Bankruptcy Code. In each case, the Bankruptcy Court granted the motion, and both the District Court and the Court of Appeals for the Eleventh Circuit affirmed. In re Caulkett, 566 Fed. Appx. 879 (2014) (per curiam); In re Toledo-Cardona, 556 Fed. Appx. 911 (2014) (per curiam). The Eleventh Circuit explained that it was bound by Circuit precedent holding that §506(d) allows debtors to void a wholly underwater mortgage lien.

        We granted certiorari, 574 U. S. ___ (2014), and now reverse the judgments of the Eleventh Circuit.

II
        Section 506(d) provides, "To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void." (Emphasis added.) Accordingly, §506(d) permits the debtors here to strip off the Bank's junior mortgages only if the Bank's "claim"—generally, its right to repayment from the debtors, §101(5)—is "not an allowed secured claim." Subject to some exceptions not relevant here, a claim filed by a creditor is deemed "allowed" under §502 if no interested party

Page 5

objects or if, in the case of an objection, the Bankruptcy Court determines that the claim should be allowed under the Code. §§502(a)-(b). The parties agree that the Bank's claims meet this requirement. They disagree, however, over whether the Bank's claims are "secured" within the meaning of §506(d).

        The Code suggests that the Bank's claims are not secured. Section 506(a)(1) provides that "[a]n allowed claim of a creditor secured by a lien on property . . . is a secured claim to the extent of the value of such creditor's interest in . . . such property," and "an unsecured claim to the extent that the value of such creditor's interest . . . is less than the amount of such allowed claim." (Emphasis added.) In other words, if the value of a creditor's interest in the property is zero—as is the case here—his claim cannot be a "secured claim" within the meaning of §506(a). And given that these identical words are later used in the same section of the same Act—§506(d)—one would think this "presents a classic case for application of the normal rule of statutory construction that identical words used in different parts of the same act are intended to have the same meaning." Desert Palace, Inc. v. Costa, 539 U. S. 90, 101 (2003) (internal quotation marks omitted). Under that straightforward reading of the statute, the debtors would be able to void the Bank's claims.

        Unfortunately for the debtors, this Court has already adopted a construction of the term "secured claim" in §506(d) that forecloses this textual analysis. See Dewsnup v. Timm, 502 U. S. 410 (1992). In Dewsnup, the Court confronted a situation in which a Chapter 7 debtor wanted to "'strip down'"—or reduce—a partially underwater lien under §506(d) to the value of the collateral. Id., at 412-413. Specifically, she sought, under §506(d), to reduce her debt of approximately $120,000 to the value of the collateral securing her debt at that time ($39,000). Id., at 413. Relying on the statutory definition of " 'allowed secured

Page 6

claim' " in §506(a), she contended that her creditors' claim was "secured only to the extent of the judicially determined value of the real property on which the lien [wa]s fixed." Id., at 414.

        The Court rejected her argument. Rather than apply the statutory definition of "secured claim" in §506(a), the Court reasoned that the term "secured" in §506(d) contained an ambiguity because the self-interested parties before it disagreed over the term's meaning. Id., at 416, 420. Relying on policy considerations and its understanding of pre-Code practice, the Court concluded that if a claim "has been 'allowed' pursuant to §502 of the Code and is secured by a lien with recourse to the underlying collateral, it does not come within the scope of §506(d)." Id., at 415; see id., at 417-420. It therefore held that the debtor could not strip down the creditors' lien to the value of the property under §506(d) "because [the creditors'] claim [wa]s secured by a lien and ha[d] been fully allowed pursuant to §502." Id., at 417. In other words, Dewsnup defined the term "secured claim" in §506(d) to mean a claim supported by a security interest in property, regardless of whether the value of that property would be sufficient to cover the claim. Under this definition, §506(d)'s function is reduced to "voiding a lien whenever a claim secured by the lien itself has not been allowed." Id., at 416.

        Dewsnup's construction of "secured claim" resolves the question presented here. Dewsnup construed the term "secured claim" in §506(d) to include any claim "secured by a lien and . . . fully allowed pursuant to §502." Id., at 417. Because the Bank's claims here are both secured by liens and allowed under §502, they cannot be voided under the definition given to the term "allowed secured claim" by Dewsnup.

Page 7

III
        The debtors do not ask us to overrule Dewsnup,† but instead request that we limit that decision to partially—as opposed to wholly—underwater liens. We decline to adopt this distinction. The debtors offer several reasons why we should cabin Dewsnup in this manner, but none of them is compelling.

        To start, the debtors rely on language in Dewsnup stating that the Court was not addressing "all possible fact situations," but was instead "allow[ing] other facts to await their legal resolution on another day." Id., at 416-417. But this disclaimer provides an insufficient foundation for the debtors' proposed distinction. Dewsnup considered several possible definitions of the term "secured claim" in §506(d). See id., at 414-416. The definition it settled on—that a claim is "secured" if it is "secured by a lien" and "has been fully allowed pursuant to §502," id., at 417—does not depend on whether a lien is partially or wholly underwater. Whatever the Court's hedging language meant, it does not provide a reason to limit Dewsnup in the manner the debtors propose.

        The debtors next contend that the term "secured claim"

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in §506(d) could be redefined as any claim that is backed by collateral with some value. Embracing this reading of §506(d), however, would give the term "allowed secured claim" in §506(d) a different meaning than its statutory definition in §506(a). We refuse to adopt this artificial definition.

        Nor do we think Nobelman v. American Savings Bank, 508 U. S. 324 (1993), supports the debtors' proposed distinction. Nobelman said nothing about the meaning of the term "secured claim" in §506(d). Instead, it addressed the interaction between the meaning of the term "secured claim" in §506(a) and an entirely separate provision, §1322(b)(2). See 508 U. S., at 327-332. Nobelman offers no guidance on the question presented in these cases because the Court in Dewsnup already declined to apply the definition in §506(a) to the phrase "secured claim" in §506(d).

        The debtors alternatively urge us to limit Dewsnup's definition to the facts of that case because the historical and policy concerns that motivated the Court do not apply in the context of wholly underwater liens. Whether or not that proposition is true, it is an insufficient justification for giving the term "secured claim" in §506(d) a different definition depending on the value of the collateral. We are generally reluctant to give the "same words a different meaning" when construing statutes, Pasquantino v. United States, 544 U. S. 349, 358 (2005) (internal quotation marks omitted), and we decline to do so here based on policy arguments.

        Ultimately, embracing the debtors' distinction would not vindicate §506(d)'s original meaning, and it would leave an odd statutory framework in its place. Under the debtors' approach, if a court valued the collateral at one dollar more than the amount of a senior lien, the debtor could not strip down a junior lien under Dewsnup, but if it valued the property at one dollar less, the debtor could strip

Page 9

off the entire junior lien. Given the constantly shifting value of real property, this reading could lead to arbitrary results. To be sure, the Code engages in line-drawing elsewhere, and sometimes a dollar's difference will have a significant impact on bankruptcy proceedings. See, e.g., §707(b)(2)(A)(i) (presumption of abuse of provisions of Chapter 7 triggered if debtor's projected disposable income over the next five years is $12,475). But these lines were set by Congress, not this Court. There is scant support for the view that §506(d) applies differently depending on whether a lien was partially or wholly underwater. Even if Dewsnup were deemed not to reflect the correct meaning of §506(d), the debtors' solution would not either.

* * *
        The reasoning of Dewsnup dictates that a debtor in a Chapter 7 bankruptcy proceeding may not void a junior mortgage lien under §506(d) when the debt owed on a senior mortgage lien exceeds the current value of the collateral. The debtors here have not asked us to overrule Dewsnup, and we decline to adopt the artificial distinction they propose instead. We therefore reverse the judgments of the Court of Appeals and remand the cases for further proceedings consistent with this opinion.

        It is so ordered.


--------

Footnotes:

        *. Together with No. 14-163, Bank of America, N. A. v. Toledo-Cardona, also on certiorari to the same court.

        **. JUSTICE KENNEDY, JUSTICE BREYER, and JUSTICE SOTOMAYOR join this opinion, except as to the footnote.

        †. From its inception, Dewsnup v. Timm, 502 U. S. 410 (1992), has been the target of criticism. See, e.g., id., at 420-436 (SCALIA, J., dissenting); In re Woolsey, 696 F. 3d 1266, 1273-1274, 1278 (CA10 2012); In re Dever, 164 B. R. 132, 138, 145 (Bkrtcy. Ct. CD Cal. 1994); Carlson, Bifurcation of Undersecured Claims in Bankruptcy, 70 Am. Bankr. L. J. 1, 12-20 (1996); Ponoroff & Knippenberg, The Immovable Object Versus the Irresistible Force: Rethinking the Relationship Between Secured Credit and Bankruptcy Policy, 95 Mich. L. Rev. 2234, 2305-2307 (1997); see also Bank of America Nat. Trust and Sav. Assn. v. 203 North LaSalle Street Partnership, 526 U. S. 434, 463, and n. 3 (1999) (THOMAS, J., concurring in judgment) (collecting cases and observing that "[t]he methodological confusion created by Dewsnup has enshrouded both the Courts of Appeals and . . . Bankruptcy Courts"). Despite this criticism, the debtors have repeatedly insisted that they are not asking us to overrule Dewsnup.

Wednesday, June 10, 2015

Foreclosure-Related Laws: A Judge's Overview

Toelle
v. 
Greenpoint Mortgage Funding, Inc., et al.

C.A. No. S14C-05-035

SUPERIOR COURT OF THE STATE OF DELAWARE

April 20, 2015

T. HENLEY GRAVES RESIDENT JUDGE

Leo John Ramunno
Ramunno Law Office
5149 W. Woodmill Drive, Suite 20
Wilmington, Delaware 19808
Attorney for Plaintiffs

David A. Dorey
Adam V. Orlacchio
1201 N. Market Street, Suite 800
Wilmington, Delaware 19801
Attorneys for Defendant

This is a Corrected Order from the March 17, 2015 Signed Order

Dear Parties:

        Before the Court is US Bank, N.A.'s ("US Bank"),1 DLJ Mortgage Capital, Inc.'s, Credit Suisse First Boston Mortgage Securities Corporation's, Mortgage Electronic Registration Systems, Inc.'s ("MERS"), and Select Portfolio Servicing, Inc.'s ("SPS") (collectively the "Defendants") Motion to Dismiss pursuant to Delaware Civil Rule 12(b)(6) as to all ten of Scott and Carol Toelle's ("Plaintiffs") claims.2 Based on the following the Court GRANTS the Defendants' motion to

Page 2

dismiss all ten of Plaintiffs' causes of action.

Facts
        On June 16, 2000, Plaintiffs executed a promissory note ("Note") memorializing they borrowed a $400,000 loan from Greenpoint Mortgage Funding, Inc. ("Greenpoint").3 The Note was secured by a mortgage ("Mortgage"), recorded in the Register of Deeds of Sussex County, Delaware. Defendant MERS, as nominee for Greenpoint, its successor and assigns, was named as the mortgagee.

        In September 2010, MERS recorded an assignment of the Note, and the related mortgage, to US Bank. In July 2013, Plaintiffs defaulted on loan payments. When Plaintiffs defaulted, their loan servicer, Defendant SPS, notified Plaintiffs. Plaintiffs acknowledge they received SPS's notice. Currently, there is no foreclosure action pending against Plaintiffs.

        On May 31, 2014, Plaintiffs filed their complaint against the Defendants4 asserting not only that the Mortgage and Note are not enforceable, but also that Defendants owe Plaintiffs damages. Subsequently, Defendants filed the instant motion to dismiss.

Standard of Review
        The standards for a Rule 12(b)(6) motion to dismiss in Delaware are clearly defined. The Court must accept all well pled allegations as true.5 "The Court must then determine whether a plaintiff may recover under any reasonable set of circumstances that are susceptible of proof."6

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Dismissal will not be granted if the complaint "gives general notice as to the nature of the claim asserted against the defendant."7 "A claim will not be dismissed unless it is clearly without merit, which may be either a matter of law or fact."8 Vagueness or lack of detail in the pleaded claim are insufficient grounds upon which to dismiss a complaint under Rule 12(b)(6).9 If there is a basis upon which the plaintiff may recover, the motion is denied.10

Discussion
        In order to understand the relationship between a promissory note, a negotiable instrument under Article III of the Delaware Uniform Commercial Code ("DUCC"), and a mortgage,11 as well as how the process of securitization affects them, the Court believes an analysis of the note-mortgage-securitization process is necessary. This discussion is a soup-to-nuts exegesis of the mortgage process, and how mortgages may be converted into securities.

Loan Process
        In a typical home finance scenario, the lender extends credit to the debtor in exchange for the debtor's promise, memorialized by a promissory note, to repay the principal and interest on the loan.12 A note represents the debt a debtor owes a lender, while a mortgage is "a conveyance of an estate, by way of pledge for the security of debt, [which becomes] void on payment of it."13 Without

Page 4

a mortgage to back it up, a promissory note is nothing more than "a mere unsecured promise to pay."14 Thus, "the borrower signs a debt instrument in the form of a promissory note reflecting the debt, and . . . separately executes a mortgage that secures the debt by creating a lien against the home."15 By the mortgage, the mortgagor binds his land specified in the mortgage agreement and obligates to pay a certain sum of money.16 If the mortgagor fails to keep the covenant contained in the mortgage, the mortgagee, who is usually the lender, is entitled to recover upon the obligation in accordance with the mortgage agreement's terms.17

Legal and Beneficial Interests of a Loan
        A mortgage loan requires the execution of two separate, but intimately related contracts: a promissory note and a mortgage.18 "The note embodies the borrower's promise to repay the lender (or in its stead, the noteholder),"19 while the mortgage, in a lien state such as Delaware,20 is nothing more than a lien allowing the lender to look to the property to satisfy the debt in the event of

Page 5

default.21 These two contracts separate the legal interest in the mortgage from the beneficial interest in the underlying debt memorialized by the note.22 Though a note and its related mortgage are most often held by the same entity because "[l]ogically, the right to enforce a mortgage would have to be based on ownership of the underlying debt,"23 "there is no technical reason why the interests [cannot] be separated in one way or another."24 Thus, a mortgagee may assign its mortgage to another party, and a noteholder may freely transfer its note as well.25 As such, it is irrelevant who owns or has an interest in the note or mortgage as long as it does not affect the debtor's ability to make payments.26

The Delaware Uniform Commercial Code
Negotiable Instruments Under the Delaware Uniform Commercial Code
        Under the DUCC, the person who signs or is identified in a note as a person undertaking to pay is known as the "maker."27 The term "promise" refers to a written undertaking to pay money signed by the person undertaking to pay.28 Further, a "negotiable instrument" is defined as:

[A]n unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise . . . if it: (1) [i]s payable to bearor or to order at the time it is issued or first comes into possession of a holder; (2) [i]s payable on demand or at a definite time; and (3) [d]oes not state any other undertaking or instruction by the [maker] to do any act in addition to the payment of
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money, but the promise . . . may contain (i) an undertaking or power to give . . . collateral to secure payment . . . .29
A promissory note is a negotiable instrument because it is a promise to pay a specified amount.30

Transfers, Negotiations, and Persons Entitled to Enforce an Instrument
        The DUCC defines negotiation as "a transfer of possession, whether voluntary or involuntary . . . ."31 "If an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder."32 The DUCC also notes "an instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving the person receiving delivery the right to enforce the instrument."33 "Transfer of an instrument, whether or not . . . [by] negotiation, vests in the transferee any right of the transferor to enforce the instrument (emphasis added) . . . ."34 Thus, the person entitled to enforce an instrument is: (1) the holder of the instrument;35 (2) a nonholder in possession of the instrument who has the rights of a holder; or (3) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 3-309 or 3-418(d).36

        Because a promissory note is a negotiable instrument under DUCC, it can be transferred

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freely to another entity via negotiation. Therefore, a transferee of a note can enforce it against a debtor.37 Based on contract principals, if a debtor is not a party to a transfer, not a third party beneficiary, or cannot show it sustained some type of legal harm as a result of the transfer, it does not have standing to challenge the transfer or enforcement of the note.38

Securitization
        Securitization is the process of pooling financial assets, such as loans, to create an investment instrument, i.e. a security.39 The process by which these mortgage-backed securities come into existence is relatively complicated, but has existed in this country for over a hundred years.40 Generally, one or more lenders sell substantial numbers of notes they have issued to a pool or trust.41 The notes are then consolidated into a single debt instrument.42 Interests in the pool or trust are then sold to investors, who receive certificates entitling them to share in the funds received as the underlying loans are repaid.43 The transfers and sales of these notes can occur multiple times and

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without any notice to the debtor-mortgagor.44

        The consolidation of several loans into a single debt instrument is accomplished through various interrelated contracts. Typically, a Pooling and Servicing Agreement ("PSA") is among them.45 PSAs set forth the rights and obligations of the participants in the securitization, and are crafted to ensure that the benefits of the securitization flow into the trusts.46 Numerous courts have found that a debtor lacks standing to challenge a securitized trust's authority to enforce a loan and mortgage based on purported violations of the relevant PSA.47 As explained in In re Walker:

[A] judicial consensus has developed holding that a borrower lacks standing to (1) challenge the validity of the mortgage securitization or (2) request a judicial determination that a loan assignment is invalid due to noncompliance with a [PSA], when the borrower is neither a party nor a third party beneficiary of the securitization agreement.48
Thus, absent a violation of the PSA affecting a debtor's ability to pay on the underlying loan, or the debtor being named a third party beneficiary to the PSA, the debtor lacks standing to contest the validity of an assignment of its note on the grounds that the PSA's terms were not followed by the parties involved in the transfer.49

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MERS
        MERS was formed by a consortium of residential mortgage lenders and investors to streamline the process of transferring ownership of mortgage notes to make the securitization process more efficient.50 "MERS is a private corporation which administers a national electronic registry that tracks the transfer of ownership interests and servicing rights in mortgage loans."51 Lenders may become a member of MERS by paying an annual fee and agreeing to the corporation's terms and conditions.52

        When mortgage loans are initially placed, member lenders will retain the underlying notes, but can arrange for MERS to be designated as the mortgagee on the mortgages backing the notes.53 This allows lenders to freely transfer their notes to other members of MERS via an assignment,54 without having to subsequently record the transfer of their interests in the mortgages backing the notes.55 However, the creation of MERS has made it difficult for mortgagors to identify the entity that actually controls their debt at any given time.56

        MERS's status as the entity owning the legal interest is the debtor's property is limited however. MERS "acts solely as a 'nominee' for the owner or servicer of the mortgage, including

Page 10

the owner's or servicer's successors and assigns."57 This means that MERS holds only the legal interest in the mortgage, but does not have a beneficial interest in it,58 making the relationship between the members and MERS one based on agency principals (emphasis added).59 The relationship that MERS has to [its members] is more akin to that of a straw man than to a party possessing all the rights given a buyer."60 As such, "MERS, as nominee, does not have any real interest in the underlying debt, or the mortgage which secured that debt. It acts simply as an agent or 'straw man' for the lender."61

        With that said, "Delaware Courts have shown little appetite for invalidating mortgage assignments merely because they were assigned by MERS."62

Application
        Virtually all of Plaintiffs' causes of action are related to their assertion that the securitization process render's their Note unenforceable. As explained in depth above, securitization is widely accepted as a legal activity that does not render a loan unenforceable.

Claim I
        Plaintiffs first assert the Defendants do not have standing to foreclose on their property and that any future foreclosure is wrongful. As explained above, it is well settled law that a mortgagor does not have standing to contest the assignment and transfer of its mortgage note because a

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mortgagor is not a party to the transfer and assignment, and in the case of a PSA is not a party to the contract. Therefore, it is not the Defendants that lack standing63 with regard to the securitization issue, but rather Plaintiffs.64 Further, even if Delaware recognized the tort of wrongful foreclosure, no injury has actually occurred, nor is imminent, as there is no pending foreclosure action that would make this first claim ripe. As such, the Defendants' motion to dismiss is GRANTED as to Claim I.

Claims II and III
        Plaintiffs argue both fraud in the concealment65 and fraud in the inducement.66 These claims require Plaintiffs prove the Defendants deliberately concealed that securitization was possible, or that the Defendants made false statements with regard to securitization and the ability to transfer interest in the Note. The record indicates Greenpoint, the originator of the loan, specifically included clauses in the Note and Mortgage documents explaining that securitization was possible. Section 1 of the Note states, "I understand that [Greenpoint] may transfer this Note. [Greenpoint] or anyone who

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takes this Note by transfer and who is entitled to receive payments under this Note is called the Note Holder."67 Section 20 of the Mortgage states, "[t]he Note or a partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to Borrower."68 Based on these facts, there was no concealment and there were no false statements to mislead Plaintiffs with regard to securitization. Likewise, there was no concealment or false statements explaining to Plaintiffs which entity they needed to make payments to, as SPS was servicing their loan and contacted them regarding both the loan transfer and their 2013 default. As such, Plaintiffs cannot factually establish elements of its two fraud claims. Therefore, Claims II and III are DISMISSED.

Claim IV
        Plaintiffs also maintain a Slander of Title69 cause of action in connection with the assignment of the Mortgage and other "undisclosed documents." As stated above, Plaintiffs lack standing to challenge the assignment of their Note to US Bank. However, assuming arguendo that Plaintiffs had standing, Plaintiffs are still unable to make out a viable slander of title claim. Maliciousness, an element of slander of title, requires that the Defendants acted with a wrongful or improper motive or with a wonton disregard of the Plaintiffs' rights.70 However, Plaintiffs have failed to allege any type of malicious intent by any of the Defendants, and seem only to rely on some notion that mere securitization is sufficient to evidence a malicious mental state on the part of the parties involved

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in the transfer and assignment of the Note. Thus, Claim IV is DISMISSED.

Claim V
        Next, Plaintiffs seek quiet title71 of the collateralized property in their favor. However, Plaintiffs are unable to prove that they have superior title to the property. They admit in their complaint that they encumbered their property with a mortgage in favor of MERS in order to secure the $400,000 loan they received from Greenpoint. Plaintiffs have not alleged they have paid off the loan, but rather claim that the loan is now unenforceable because it was securitized. As stated above, securitization is widely accepted in the courts, and does not invalidate a mortgage or the note it secures. Plaintiffs have not shown how they have superior title to the property, which requires the Court to GRANT the Defendants' motion as to Claim V.

Claim VI
        Additionally, Plaintiffs seek a declaratory judgment72 to determine who is entitled to enforce the Note and Mortgage, the validity of the assignment of the Note, and who owns the property in fee simple. The issues here are not ripe for review. First, a determination as to who is entitled to enforce the Note and Mortgage is not ripe because Plaintiffs lack standing to address the assignment and transfer of their Note. Second, a determination as to who owns the property in fee simple is not ripe since there is no foreclosure action currently pending. Therefore, the Defendants' motion to dismiss

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as to Claim VI is GRANTED due to lack of an actual controversy.

Claim VII and IX
        Plaintiffs' Claims VII and IX both relate to the TILA. Claim VII states Defendants violated the TILA by failing to disclose information regarding the Note and its transfer to US Bank, while Claim IX alleges Plaintiffs are entitled to rescind the Note. Both these claims are without merit. The TILA was created to "assure a meaningful disclosure of credit terms so that . . . consumer[s] will be able to compare more readily the various credit terms available to [them] and avoid the uninformed use of credit."73 A consumer has an absolute right to rescind the loan agreement for three business days after closing on the loan.74 If a lender fails to make the required disclosures before the loan is initiated, the three day restriction on the right of the rescission is tolled75 and, a consumer has until three days after he receives the last of the required disclosures to rescind the loan agreement.76 The right can only be exercised up to three years after the consummation of the loan, or upon the sale of the encumbered property, whichever occurs first.77

        First, Plaintiffs have not plead a TILA violation because all of the required disclosures were given when they consummated the loan with Greenpoint. As stated above, Section 1 of the Note

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explains that Greenpoint could transfer the Note at any time without notice to Plaintiffs. As long as Plaintiffs were aware of the possibility of a transfer, the required disclosures were made under the TILA. Because Plaintiffs signed the Note, they are presumed to have had knowledge of the possibility of a transfer at the time the Note was consummated.78

        Second, even if Plaintiffs had pled an adequate TILA claim, they are time barred from asserting such a claim under 15 U.S.C.A. §1635(f). Plaintiffs executed their promissory note in June of 2000. Plaintiffs asserted a violation of the TILA in May 2014. Because Plaintiffs filed their TILA claim 11 years beyond 15 U.S.C.A. §1635(f)'s statute of limitations date, they are unable to assert that the Defendants violated the TILA.79 Plaintiffs have failed to sufficient plead a TILA cause of action, and the statute of limitations for such a violation has elapsed. Claims VII and IX are therefore DISMISSED.

Claim VIII
        Plaintiffs next claim Defendants violated RESPA. RESPA "regulates the market for real estate 'settlement services,' . . . [which] include 'any service provided in connection with a real estate settlement,' such as . . . the origination of a federally related mortgage loan . . ., and the handling of the processing, and closing or settlement."80 The primary purpose of RESPA is to protect home buyers from material nondisclosures in settlement statements and abusive practices in

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the settlement process, including the servicing of federally related mortgage loans.81 12 U.S.C.A. §2605 states:

[e]ach person who makes a federally related mortgage loan shall disclose to each person who applies for the loan, at the time of application for the loan, whether the servicing of the loan may be assigned, sold, or transferred to any other person at any time while the loan is outstanding.
12 U.S.C.A. §2607 mandates that any fees charged to the borrowers be actually related to the services provided, while 12 U.S.C.A. §2614 ("Anti-Kickback" provision) prohibits the payment of unearned fees. However, an Anti-Kickback claim must be brought within one year of the alleged violation.82

        Plaintiffs state the Defendants failed to make "disclosures of additional income due to interest rate increases, Notices of Transfers of Servicing Rights, or the proper form and procedure in relation to the Borrower's Right to Cancel." However, under RESPA, the only disclosure that was required to be given Plaintiffs was a notice of transfer of servicing rights.83 Disclosures of additional income due to interest rates is not required, let alone referenced, under RESPA. The "Borrower's Right to Cancel" refers to the TILA's right of rescission. Such a right is not covered under RESPA. Although notices of transfer of servicing rights are required, US Bank was not servicing Plaintiffs' loan. US Bank is a trustee for a trust that merely owns Plaintiffs' promissory note. Defendant SPS is Plaintiffs' loan servicer, an entity whom Plaintiffs acknowledge they received notifications from.

        Plaintiffs also cannot receive any recourse through an Anti-Kickback claim because such a

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claim is time barred. The alleged violations occurred either in 2000 or 2010 (upon the transfer of the Note to US Bank). Plaintiffs did not assert their Anti-Kickback claim until May of 2014, well passed the one year statute of limitations. As such, it is time-barred, and thus DISMISSED.

Claim X
        Lastly, Plaintiffs assert a IIED84 claim against Defendants. In order to establish an IIED claim, the defendant must have engaged in conduct "so outrageous in character . . . as to go beyond all possible pounds of decency . . . ."85 Jurisdictions that have addressed similar cases have found that enforcement of a security agreement is typically not considered extreme and outrageous conduct for establishing an IIED claim.86

        Plaintiffs' claim fails for two reasons. First, the issue is not ripe because, Defendants have not attempted to foreclose the property, the only action which could even remotely be interpreted as extreme and outrageous for establishing this IIED claim. As of this point, the only action that has occurred with regard to the Note is securitization, which, as stated above, is a legal practice. Second, even if the issue was ripe and one of the Defendants with standing had initiated a writ of scire facias sur mortgage, courts that have addressed the issue have found that foreclosure of a mortgage is not extreme and outrageous conduct. Under the facts of the case, Plaintiffs did not sufficiently pled an IIED claim, and thus Claim X is DISMISSED.

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Conclusion
        Based on the above, Defendants' motion to dismiss is GRANTED as to all of Plaintiffs' claims.

IT IS SO ORDERED.

        Very truly yours,

        T. Henley Graves


--------

Footnotes:

        1. US Bank, N.A. is the Trustee for Securitized Trust CSFB Mortgage-Backed Pass-Through Certificates, Series 2001-11.

        2. Plaintiffs assert ten causes of action: (1) lack of standing/wrongful disclosure; (2) fraud in the concealment; (3) fraud in the inducement; (4) slander of title; (5) quiet title; (6) declaratory relief; (7) violation of the Truth in Lending Act ("TILA"); (8) violation of the Real Estate Settlement Procedures Act ("RESPA"); (9) Contractual rescission; and (10) Intentional Infliction of Emotional Distress ("IIED"). All ten causes of action stem from Plaintiffs belief that the securitization of their loan renders the loan unenforceable.

        3. Greenpoint was the original lender (originator).

        4. Plaintiffs filed suit against several other entities other than Defendants. The Court recently dismissed Plaintiffs' claims against these other entities due to Plaintiffs' failure to provide service to them.

        5. Magnolia's at Bethany, LLC v. Artesian Consulting Engineers, Inc., 2011 WL 4826106, *2 (Del. Super. Sept. 19, 2011) (citing Spence v. Funk, 396 A.2d 967, 968 (Del. 1978)).

        6. Id.

        7. Diamond State Tel. Co. v. Univ. of Del., 269 A.2d 52, 58 (Del. 1970).

        8. Id.

        9. Magnolia's at Bethany, 2011 WL 4826106 at *2 (citing Diamond State, 269 A.2d at 58).

        10. Id.

        11. 25 Del. C. § 2101.

        12. Pension Trust Fund for Operating Engineers v. Mortgage Asset Securitization Transactions, Inc., 730 F.3d 263, 265 (3rd Cir. 2013).

        13. Handler Construction, Inc. v. Corestates Bank, N.A., 633 A.2d 356, 363 (Del. 1993) (quoting 4 Kent, Commentaries on American Law *135).

        14. Highlights for Children, Inc. v. Crown, 227 A.2d 118, 120 (Del. Ch. 1966).

        15. Quadrant Structured Products Company, Ltd. v. Vertin, 2013 WL 3233130, *7 (Del. Ch. Jun. 20, 2013) (citing 1 Mortgages and Mortgage Foreclosure in N.Y. § 4:8 (2012)).

        16. Borders v. Townsend Associates, 2002 WL 725266, *5, fn 3 (Del. Super. Apr. 17, 2002) (quoting Woolley on Del. Practice, Vol. 2, Scire Facias §1358 (1906)) (typically the amount borrowed plus interest and any additional fees or costs).

        17. Id. (Usually by filing a foreclosure action in either the Court of Chancery or Superior Court).

        18. Culhane v. Aurora Loan Services of Nebraska, 708 F.3d 282, 292 (1st Cir. 2013 ) (citing Easton v. Fed. Nat'l Mortgage Ass'n, 969 N.E.2d 1118, 1124 (Mass. 2012)).

        19. Id.

        20. In re Agostini, 33 A.2d 306, 309 (Del. Super. 1943) ("Many of the American jurisdictions have rejected the common law theory of a mortgage as a conveyance of title, and treat a mortgage as being merely a security for the payment of the debt, the title remaining in the mortgagor as if the mortgage had not been given. Delaware is among these jurisdictions.")

        21. Ciconte v. Barba, 161 A. 925, 926 (Del. Ch. 1932).

        22. Culhane, 708 F.3d at 292.

        23. Bank of New York v. Raftogianis, 13 A.3d 435, 448 (N.J. Ch. 2010).

        24. Id. (Though the two types of interests associated with a mortgage loan are related, they are also distinct in that one is a beneficial interest (the note) and the other is a legal interest in a property right (the mortgage). As such, both types of interests can be owned by two separate entities, similar to how a trust functions.)

        25. Culhane, 708 F.3d at 292 (citing U.C.C. §§ 3-205, 3-301).

        26. See In re Veal,450 B.R. 897, 912 (9th Cir. 2011).

        27. 6 Del. C. §3-103 (a)(5).

        28. 6 Del. C. §3-103 (a)(9).

        29. 6 Del. C. §3-104 (a)(1)-(3).

        30. 6 Del. C. §3-104 (e).

        31. 6 Del. C. §3-201 (a)-(b).

        32. Id.

        33. 6 Del. C. §3-203 (a)-(b).

        34. Id.

        35. "Holder" is defined as "the person in possession of a negotiable instrument that is payable either to bearor or to an identified person that is the person in possession . . . ." 6 Del. C. §1-201 (21)(a).

        36. 6 Del. C. §3-301.

        37. See In re Walker, 446 B.R. 271, 282 (Bankr. E.D. Pa. 2012); Citimortgage, Inc. v. Trader, 2011 WL 3568180, *1 (Del. Super. May 13, 2011) (citing 10 Del. C. §5061(a)) ("Delaware law specifically provides that an assignee of a mortgagee's interest has standing to bring a foreclosure action.")

        38. See Branch Banking and Trust Co. v. Eid, 2013 WL 3353846, *3 (Del. Super. Jun. 13, 2013); CitiMortgage, Inc. v. Bishop, 2013 WL 1143670 (Del. Super Mar. 4, 2013).

        39. Culhane, 708 F.3d at 295, fn 1.

        40. Raftogianis, 13 A.3d at 441 ("The securitization of mortgages has a long and somewhat involved history in this country, dating back to the nineteenth century. More recently, the federal government became involved in various forms of securitization through . . . 'Fannie Mae' and . . . 'Ginnie Mae.' Private institutions became more involved in securitization of mortgages . . . in the 1970s. Overtime the structuring and issuance of private mortgage-based securities became much more complex and widespread, contributing to the recent crisis in the financial markets.")

        41. Id.

        42. Culhane, 708 F.3d at 295, fn 1.

        43. Raftogianis, 13 A.3d at 441; Chase Manhattan Mortg. Corp. v. Advanta Corp., 2005 WL 2234608, *1 (D. Del. Sept. 8, 2005) ("In a . . . mortgage securitization, a number of mortgage loans are pooled together and sold into a trust by an 'originator.' Interests in the trust are in turn sold to investors . . . . The cash from the [investors] goes to the originator, and the originator can then use that cash to originate more loans. The [investors] receive monthly payments, constituting a pay down of their principal investment and interest on the investment.")

        44. See Raftogianis, 13 A.3d at 441; Culhane, 708 F.3d at 292; Byrd v. Meridian Foreclosure Service, 2011 WL 13 62135 (D. Nev. Apr. 8, 2011); Coleman v. American Home Mortgage Servicing, Inc., 2011 WL 6131309, at *4 (D. Nev. Dec. 8, 2011).

        45. Chase Manhattan Mortg. Corp. v. Advanta Corp., 2005 WL2234608, *1.

        46. Chase Manhattan Mortg. Corp., 2005 WL2234608, *1; County of Washington, Pa. v. U.S. Bank Nat. Ass'n, 2012 WL 3860474, *3 (W.D. Pa. Aug. 17, 2012).

        47. Walker, 466 B.R. at 284-85 (Many cases have arisen out of the same circumstances present in the instant case, i.e. the debtor initiated a lawsuit against the mortgagee seeking a determination that it lacked authority to enforce the subject note and mortgage).

        48. Id. at 285.

        49. Id. at 286.

        50. Culhane, 708 F.3d at 287 (citation omitted).

        51. Raftogianis, 13 A.3d at 440.

        52. Id.

        53. Raftogianis, 13 A.3d at 440; Culhane, 708 F.3d at 287.

        54. See 6 Del. C. §§ 3-201, 3-203

        55. Raftogianis, 13 A.3d at 440-41 (citing Mortgage Elec. Registration Sys., Inc. v. NE Dep't Banking, 704 N.W.2d 784 (Neb. 2005)) (This process allows lenders to avoid paying filing fees that might otherwise be required for an assignment of an interest in a mortgage).

        56. Id. at 441 (citing Landmark Nat'l Bank v. Kesler, 216 P.3d 158, 168 (Kan. 2009)).

        57. Culhane, 708 F.3d at 287.

        58. Id. (Thus, conceptually, MERS is really acting as a trustee for all of its members in holding their mortgages).

        59. Raftogianis, 13 A.3d at 449.

        60. Id. (quoting Landmark, 216 P.3d at 166).

        61. Id.

        62. Eid, 2013 WL 3353846 at *3.

        63. The Court points out that some of the Defendants, based on their relationship to the Note and Mortgage, may not have standing to foreclose on the property. However, Plaintiffs have not identified specifically which Defendants that might be and only makes a blanket assertion that all the Defendants lack standing, which is simply not true.

        64. To establish standing in Delaware, the plaintiff must, among other things, show an actual or imminent injury. See Dover Historical Soc. v. City of Dover Planning Comm'n, 838 A.2d 1103, 1110 (Del. 2003); Walker, 466 B.R. at 284 (rejecting a debtor's ability to contest foreclosure due to the transferor and transferee of a note not following the PSA).

        65. Fraud in the concealment requires a plaintiff prove: (1) deliberate concealment by the defendant of a material fact, or silence in the face of a duty to speak; (2) that the defendant acted with scienter; (3) an intent to induce plaintiff's reliance upon the concealment; (4) causation; and (5) damages due to the concealment. Nicolet, Inc. v. Nutt, 525 A.2d 14 6, 149 (Del. 1987).

        66. Fraud in the inducement requires a plaintiff prove: (1) the defendant made a false statement or representation; (2) the defendant had knowledge that the statement was false, or made a statement with a reckless indifference as to its truth; (3) the defendant intended to induce the plaintiff into action; (4) the plaintiff justifiably relied on the representation; and (5) the plaintiff suffered damages. Corkscrew Mon. Ventures, Ltd. v. Preferred Real Estate Investments, Inc., 2011 WL 704470, *4 (Del. Ch. Feb. 28, 2011).

        67. Def. App. p. 17.

        68. Def. App. p. 31.

        69. Slander of title requires a plaintiff to establish that the defendant maliciously published a false matter concerning the title of property which caused the plaintiff special damages. Rudnitsky v. Rudnitsky, 2000 WL 1724234, *12 (Del. Ch. Nov. 14, 2000).

        70. U.S. Bank Nat'l Ass'n v. Gunn, 2014 WL 1247085, *6 (D. Del. Mar. 25, 2014).

        71. In Delaware, a plaintiff seeking to quiet title property must show that he has superior title over the defendant with regard to the property at issue. See Marvel v. Barley Mill Rd. Homes, 104 A.2d 903, 911 (Del. Ch. 1954).

        72. Superior Court is authorized to entertain an action for a declaratory judgment if an actual controversy exists between the parties (emphasis added). An actual controversy requires: (1) that the controversy involve the rights or other legal relations of the party seeking relief; (2) the claim of right or other legal interest be asserted against one who has an interest in contesting the claim; (3) the parties in the dispute have both real and adverse interests; and (4) the issue be ripe for review. XI Specialty Ins. Co. v. WMI Liquidating Trust, 93 A.3d 1208, 1217 (Del. 2014).

        73. Sherzer v. Homestar Mortgage Services, 707 F.3d 255, 256 (3rd Cir. 2013) (citing 15 U.S.C.A. §1601(a)).

        74. 15 U.S.C.A. §1635 (a) ("[I]n the case of any consumer credit transaction . . . in which a security interest . . . is or will be . . . acquired in any property which is used as the principal dwelling of the person to whom credit is extended, the obligor shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required . . . together with a statement containing material disclosures required under this subchapter, whichever is later, by notifying the creditor, in accordance with regulations of the Bureau, of his intention to do so.").

        75. Sherzer, 707 F.3d at 256.

        76. 15 U.S.C.A. §1635 (a).

        77. See 15 U.S.C.A. §1635(f).

        78. See Pellaton v. Bank of New York, 592 A.2d 473, 476-77 (Del. 1991).

        79. Note that US Bank was not a party to the initial loan agreement between Greenpoint and Plaintiffs and thus could not have provided the adequate disclosures necessary within the statute of limitations period since US Bank did not acquire the Note until 2010.

        80. Freeman v. Quicken Loans, Inc., 132 S. Ct. 2034, 2037 (2012) (citing 12 U.S.C.A. §2602(3)).

        81. Geham v. Argent Mortg. Co. LLC, 726 F. Supp. 2d 533, 540 (E.D. Pa. 2010) (citing Jones v. Select Portfolio Servicing, Inc., 2008 WL 1820935, *9 (E.D. Pa. Apr. 22, 2008)).

        82. 12 U.S.C.A. §2614.

        83. 12 U.S.C.A. §2605.

        84. IIED requires a plaintiff to establish Defendant: (1) intentionally or recklessly; (2) engaged in extreme and outrageous conduct; and (3) the conduct caused severe emotional distress to the plaintiff. See Lee ex rel. B.L. v. Picture People, Inc., 2012 WL 1415471, *4 (Del. Super. Mar. 19, 2012).

        85. Lee, 2012 WL 1415471 at *4.

        86. See, e.g., Brown v. Udren Law Offices PC, 2011 WL 4011411, *4 (E.D. Pa. Sept. 9, 2011); Messer v. First Fin. Fed. Credit Union of Md., 2012 WL 3104604, *3 (E.D. Pa. Jul. 30, 2012).

Pooling and Servicing Agreements (PSAs): The Players, Who Does What, Standing Issues, Etc.

LNR PARTNERS, LLC, solely in its Capacity as Special Servicer, Plaintiff,
v.
C-III ASSET MANAGEMENT LLC, Defendant.

Civil Action No. 8472-VCP

COURT OF CHANCERY OF THE STATE OF DELAWARE

Date Submitted: September 3, 2013
Supplemental Submission: February 7, 2014
Date Decided: March 31, 2014

MEMORANDUM OPINION
James L. Holzman, Esq., J. Clayton Athey, Esq., PRICKETT, JONES & ELLIOTT, P.A., Wilmington, Delaware; Stephen L. Ascher, Esq., Ali M. Arain, Esq., JENNER & BLOCK LLP, New York, New York; Barbara R. Steiner, Esq., Stephen R. Brown, JENNER & BLOCK LLP, Chicago, Illinois; Attorneys for Plaintiff LNR Partners, LLC.

Stephen E. Jenkins, Esq., Phillip R. Sumpter, Esq., ASHBY & GEDDES, Wilmington, Delaware; Stephen B. Meister, Esq., Stacey Ashby, Esq., MEISTER, SEELIG & FEIN LLP, New York, New York; Attorneys for Defendant C-III Asset Management, LLC.

PARSONS, Vice Chancellor.

Page 2

        This action arises from a dispute between two companies that service commercial real estate mortgage loans. The dispute relates to which of the two companies is the rightful troubled loan servicer, or "special servicer," for a commercial mortgage securitization trust. The defendant has been acting as the trust's special servicer. The plaintiff asserts that it has been properly designated by its affiliate, a substantial investor in the trust, to replace the defendant in that role. The defendant maintains that the plaintiff's affiliate lacks the authority to designate the trust's special servicer and that the affiliate's attempted designation, therefore, was ineffectual.

        In its complaint, the plaintiff alleges that the defendant has breached its obligations under the trust agreement by refusing to cooperate in transitioning the special servicer role to the plaintiff. The plaintiff seeks a declaratory judgment that it is the trust's rightful special servicer and a decree of specific performance requiring the defendant to comply with its obligations under the trust agreement.

        The defendant has moved to dismiss the complaint for lack of subject matter jurisdiction and for failure to state a claim, on the grounds that the plaintiff lacks standing. The defendant has since dropped its challenge to the Court's jurisdiction. Concurrent with its opposition to the defendant's motion to dismiss, the plaintiff moved for summary judgment on the grounds that the trust agreement is unambiguous and it is entitled to the relief it seeks as a matter of law.

        This Memorandum Opinion reflects my rulings on these motions. For the reasons that follow, I deny both the defendant's motion to dismiss and the plaintiff's motion for summary judgment.

Page 3

I. BACKGROUND1

A. The Parties
        Plaintiff, LNR Partners, LLC ("LNR Partners"), is a Florida limited liability company that specializes in commercial real estate mortgage loan servicing. LNR Partners is a successor by statutory conversion to LNR Partners, Inc.2 LNR Partners is also an affiliate of nonparty LNR Securities Holdings, LLC ("LNR Securities"), which is an investor in the securitization trust to which this dispute relates.

        Defendant, C-III Asset Management, LLC ("C-III"), is a Delaware limited liability company that is engaged in the same line of business as LNR Partners. C-III is an affiliate of nonparty C3 Initial Assets, LLC ("C3 Initial Assets"), which is, or was until recently, also an investor in the securitization trust.

B. Facts

1. The Citigroup Commercial Mortgage Trust 2006-C5
        At issue in this case are certain loan servicing rights to the pool of commercial mortgage loans held by the Citigroup Commercial Mortgage Trust 2006-C5 ("CGCMT 2006-C5" or the "Trust"). CGCMT 2006-C5 is a securitization trust that issues

Page 4

commercial mortgage-backed securities ("CMBS"). The Trust is governed by a pooling and servicing agreement dated November 1, 2006 (the "PSA"), which is over 300 pages long and contains over 100 pages of definitions.3 The PSA is governed by New York law.4 Concurrent with execution of the PSA, the Trust issued CMBS "Certificates,"5 which represent beneficial ownership interests in the pool of mortgage loans held by the Trust. The Certificates were backed by commercial real estate mortgage loans with an aggregate principal value of $2,238,772,692.6

a. Allocation of distributions and losses to Certificateholders
        Investors in the Trust, or "Certificateholders," are entitled to receive monthly distributions from the cash flows generated by the Trust's underlying pool of commercial mortgage loans, to the extent of available funds.7 The Certificates issued by the Trust are arranged in 27 tranches, or "Classes," which have differing levels of seniority, ranging progressively from most senior to most junior.8 Distributions are made to Certificateholders in the most senior Class first, until all required payments of principal

Page 5

or accumulated interest have been made.9 Certificateholders in the next most senior Class are paid next, and so on as to the remaining Classes, in "waterfall" fashion, until there are no funds left to distribute.

        Under certain circumstances, the Classes will suffer "Realized Losses." Losses, as defined by the PSA, are realized when the amount ultimately recovered on one of the Trust loans is less than the amount owed on the loan plus the expenses incurred in obtaining the recovery.10 For example, Realized Losses will accrue if a property underlying one of the loans in the Trust pool is foreclosed upon and sold for less than the amount owed on the loan plus the costs of foreclosure.

        Because Certificateholders in the most subordinate outstanding Class are the last in line to receive distributions, they are the first to be affected by Realized Losses. Specifically, Realized Losses reduce the underlying loan principal that one or more Classes of Certificates is ultimately entitled to receive—i.e., the "Class Principal Balances"—in reverse order of seniority.11 In that regard, Realized Losses are first applied to the most junior outstanding Class until its Class Principal Balance has been reduced to zero. They are then applied to the next most junior Class in the same manner, and so on as to the remaining Classes, until all Realized Losses have been allocated.12 If

Page 6

the Class Principal Balance for a given Class has been fully eroded by Realized Losses, that Class is "out of the money" and is no longer entitled to receive distributions from the Trust.13

b. Administration of troubled loans by the Special Servicer
        The PSA bifurcates the administration, or servicing, of performing and nonperforming, or troubled, Trust loans.14 Performing loans are administered by a Master Servicer. Nonperforming loans, by contrast, are administered by a Special Servicer. Nonperforming loans include, among others, loans for which there has been a default or material payment deficiency, loans to borrowers who have been declared bankrupt or insolvent, or loans secured by property that has become subject to foreclosure proceedings.15

        Once a mortgage loan qualifies as nonperforming under the PSA, the Master Servicer transfers the loan to the Special Servicer.16 The Special Servicer is broadly authorized to take whatever actions it deems necessary or desirable to maximize the recovery on a troubled loan.17 Among other options at its disposal, the Special Servicer

Page 7

can negotiate a modification, extension, or early payoff of the loan, foreclose on the property securing the loan, or sell the loan.18

        In executing their duties, the Master Servicer and the Special Servicer are obliged to abide by a contractually defined "Servicing Standard."19 Under that standard, the Master Servicer and the Special Servicer are required to service and administer the mortgage loans for which they are responsible:

in the same manner in which, and with the same care, skill, prudence and diligence with which, such Master Servicer or the Special Servicer, as the case may be, generally services and administers similar mortgage loans with similar borrowers and/or similar foreclosure properties, as applicable, (i) for other third parties, giving due consideration to customary and usual standards of practice of prudent institutional commercial mortgage loan servicers servicing and administering mortgage loans and/or foreclosure properties for third parties, as applicable, or (ii) held in its own portfolio, whichever standard is higher . . . .20
        As compensation for its work on behalf of the Trust, the Special Servicer is paid a monthly special servicing fee.21 The Special Servicer also is entitled to liquidation and workout fees, which are based on the Special Servicer's efforts as to specific nonperforming loans.22

Page 8

c. The Controlling Class
        As noted previously, Realized Losses are applied in reverse order of seniority, with new Realized Losses reducing first the Class Principal Balance of the most junior Class whose Class Principal Balance has not yet been fully eroded. Thus, the most junior Class with a positive Class Principal Balance will be the first to suffer from the realization of additional losses. For this reason, most pooling and servicing agreements, including the PSA, designate the Class inhabiting or soon to be inhabiting the most junior outstanding position the "Controlling Class" and provide it with certain special authority, discussed infra.23

        Under the PSA, the Controlling Class is defined as "the most subordinate . . . outstanding Class of Sequential Pay Certificates, that has a Class Principal Balance that is greater than 25% of the Original Class Principal Balance thereof."24 Thus, the Controlling Class is the most junior Class that has greater than 25% of its original Class Principal Balance remaining. Once the Class Principal Balance of the Controlling Class drops below 25% of its original value, the next most junior Class becomes the new Controlling Class.

Page 9

        The Controlling Class has certain contractually established representatives, including the "Majority Controlling Class Certificateholder" and the "Controlling Class Representative." The PSA defines the "Majority Controlling Class Certificateholder" as:

any single Holder . . . of Certificates . . . entitled to greater than 50% of the Voting Rights allocated to the Controlling Class; provided, however, that if there is no single Holder . . . of Certificates entitled to greater than 50% of the Voting Rights allocated to such Class, then the Majority Controlling Class Certificateholder shall be the single Holder . . . of Certificates with the largest percentage of Voting Rights allocated to such Class.25
Thus, the Majority Controlling Class Certificateholder is the majority holder of the Voting Rights allocated to the Controlling Class or, if there is no such majority holder, the plurality holder of those Voting Rights. Under the PSA, the "Controlling Class Representative" is defined simply as "[t]he representative designated as such by the Majority Controlling Class Certificateholder."26

d. The Controlling Class's control over the Special Servicer
        The actions of the Special Servicer have a significant influence on when and to what extent losses on the mortgages underlying the Trust will be realized. For this reason, the PSA enables the Controlling Class, via its representatives and Certificateholders, to exercise control over the Special Servicer in various ways. There are two primary means for the Controlling Class to exert its influence.

Page 10

        First, the Controlling Class can influence the Special Servicer through the Controlling Class Representative, to which the PSA gives a qualified veto power over the conduct of the Special Servicer.27 Specifically, the Controlling Class Representative, by filing an objection in writing, can prevent the Special Servicer from taking any of a list of actions enumerated in Section 6.11(a) of the PSA. The listed actions include, among others: (1) foreclosing upon a mortgage property; (2) modifying the principal terms of a Trust mortgage loan; (3) selling property owned by the Trust for less than the purchase price; (4) releasing collateral, or accepting substitute collateral, for a Trust mortgage loan; or (5) accepting an assumption agreement releasing a mortgagor from liability under a Trust mortgage loan. The Controlling Class Representative also is authorized to "direct the Special Servicer to take, or to refrain from taking, such other actions . . . as the Controlling Class may deem advisable."28 The Special Servicer is entitled to disregard, however, any direction or objection that would cause it "to violate any applicable law, [or] any provision of [the PSA]," or that would require it "to act, or fail to act, in a manner which in the reasonable judgment of . . . the Special Servicer is not in the best interest of the Certificateholders or is inconsistent with the Servicing Standard."29

Page 11

        Second, Certificateholders in the Controlling Class that meet certain requirements may designate a person to serve as Special Servicer, thereby replacing the existing Special Servicer. Specifically, Section 6.09(a) of the PSA provides that:

the Holder or Holders of the Certificates evidencing a majority of the Voting Rights allocated to the Controlling Class may at any time and from time to time designate a Person . . . to serve as Special Servicer hereunder and to replace any existing Special Servicer without cause or any Special Servicer that has resigned or otherwise ceased to serve in such capacity . . . .
Thus, the power to designate the Special Servicer (the "Designation Power") is vested in "the Holder or Holder of the Certificates evidencing a majority of the Voting Rights allocated to the Controlling Class." The precise definition of "Voting Rights" in the context of this provision is, therefore, crucial to determining who is entitled to exercise the Designation Power and is the major point of dispute between the parties.

        The PSA defines "Voting Rights," in relevant part, as follows:

The portion of the voting rights of all of the Certificates which is allocated to any Certificate. At all times during the term of this Agreement, 100% of the Voting Rights shall be allocated . . . . [T]he Voting Rights shall be allocated among the various Classes of the Principal Balance Certificates in proportion to the respective Class Principal Balances of such Classes of Certificates; [Proviso 1] provided that, solely for the purpose of determining the respective Voting Rights of the various Classes of Principal Balance Certificates, the aggregate Appraisal Reduction Amount allocated to the respective Classes of the Principal Balance Certificates in accordance with Section 4.04(d) shall be treated as Realized Losses with respect to the calculation of the Certificate Principal Balances thereof; and [Proviso 2] provided, further, that the aggregate Appraisal Reduction Amount shall not reduce the Class Principal Balance of any Class for purposes of determining the Controlling Class, the Controlling Class
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Representative or the Majority Controlling Class Certificateholder. . . . Voting Rights allocated to a Class of Certificateholders shall be allocated among such Certificateholders in standard proportion to the Percentage Interests evidenced by their respective Certificates.30
        The Voting Rights definition includes the term "Percentage Interest." A Certificate's Percentage Interest is roughly equal to the percentage of the Class Principal Balance corresponding to that Certificate.31 The Voting Rights definition also makes reference to the "Appraisal Reduction Amount." The Appraisal Reduction Amount reflects the extent to which a given mortgage loan is underwater because the value of the real estate securing the loan is insufficient to ensure its repayment. It is approximately equal to the amount by which the balance owed on a mortgage loan exceeds 90% of the appraised value of the underlying collateral.32 Appraisal Reduction Amounts, which represent as-of-yet unrealized losses, are assessed when a loan becomes subject to a "Required Appraisal."33 A Required Appraisal is triggered, among other circumstances, when a loan becomes delinquent, the loan's payment terms are lowered by the Special Servicer, or the borrower of a loan declares bankruptcy.34 Under Section 4.04(d) of the PSA, Appraisal Reduction Amounts are distributed to the Classes in reverse order of

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seniority (from most junior to most senior), up to the amount of each Class's Class Principal Balance. The aggregate Appraisal Reduction Amount for the Trust mortgages is referred to in this Memorandum Opinion as the "ARA."

2. C-III Replaces LNR Partners as Special Servicer
        LNR Partners, Inc. was the original Special Servicer of CGCMT 2006-C5 and began serving as Special Servicer for the Trust at its inception in November 2006.35 At some later point, LNR Partners, Inc. underwent a statutory conversion to become LNR Partners, LLC (the Plaintiff).36 Because it is not apparent from the record precisely when that conversion occurred, I refer to LNR Partners, Inc. and LNR Partners, LLC collectively as "LNR Partners" for purposes of this subsection.

        LNR Partners served as Special Servicer for the Trust continuously from November 2006 until late 2012.37 On October 25, 2012, C3 Initial Assets, an affiliate of C-III, notified LNR Partners and the trustee of CGCMT 2006-C5 (the "Trustee") that it had become the Trust's Majority Controlling Class Certificateholder.38 C3 Initial Assets had attained that position due to its ownership of a majority of the Certificates in Class G,

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which was the Trust's Controlling Class at the time.39 In the Notification, C3 Initial Assets, citing Section 6.09(a) of the PSA and its status as Majority Controlling Class Certificateholder, terminated LNR Partners as Special Servicer and designated C-III as the replacement Special Servicer.40

        The PSA provides that a "resigning Special Servicer shall cooperate with the Trustee and the replacement Special Servicer in effecting the termination of the resigning Special Servicer's responsibilities and rights."41 After receiving the October 25, 2012 termination notice from C3 Initial Assets, LNR Partners cooperated in transferring its Special Servicer rights and responsibilities to C-III.42 LNR Partners and C-III also executed a customary fee-sharing agreement for Special Servicing work that LNR Partners had commenced before being terminated.43 The appointment of C-III as Special Servicer became effective on November 9, 2012.44

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3. LNR Securities Attempts to Re-Designate LNR Partners as Special Servicer
        In January 2013, LNR Partner's affiliate, LNR Securities, obtained ownership of a majority of the Certificates in Class G—the Controlling Class—and therefore replaced C3 Initial Assets as the Majority Controlling Class Certificateholder.45 On January 11, 2013, LNR Securities provided notification to C-III and the Trustee that it had become "the Holder of the Certificates evidencing a majority of the Voting Rights allocated to the Controlling Class."46 LNR Securities' notice further indicated that it was terminating C-III as Special Servicer and was designating LNR Partners as C-III's replacement.

        After receiving the January 11, 2013 notice from LNR Partners, the Trustee sent a notification letter to various rating agencies, namely, Moody's Investor Services, Inc. ("Moody's") and Fitch, Inc. ("Fitch") (collectively, the "Rating Agencies"). That letter disclosed that "the Holders of Certificates evidencing a majority of the Voting Rights allocated to the Controlling Class have designated LNR Partners, LLC to serve as the Special Servicer."47 Under the PSA, one of the prerequisites to an entity serving as Special Servicer is receipt by the Trustee of confirmation from the Rating Agencies that the appointment of that entity as Special Servicer would not result in a credit downgrade

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of any of the Classes of Certificates in the Trust.48 I note, however, that no such rating agency confirmation (or "RAC") is required from Fitch for entities that are "rated at least 'CSS2' by Fitch as a special servicer," as is LNR Partners.49 Thus, in the same letter, the Trustee requested from Moody's, but not from Fitch, a RAC to verify that LNR Partners' appointment would not result in a credit downgrade.50

4. C-III Asserts that LNR Securities Lacks the Designation Power and Refuses to Resign
        After receiving the January 11, 2013 termination notice from LNR Securities, C-III asserted that LNR Securities lacked the authority to terminate C-III and to designate a replacement Special Servicer.51 C-III does not appear to have disputed that LNR Securities held a majority of the Certificates in the Controlling Class.52 As previously noted, however, under Section 6.09(a) of the PSA, the Designation Power is vested in "the Holder or Holders of the Certificates evidencing a majority of the Voting Rights allocated to the Controlling Class." C-III argued that, for purposes of Section 6.09(a), the ARA must be taken into account when calculating the Voting Rights that are allocated to the Controlling Class.53 According to C-III, when the ARA properly is considered, LNR

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Securities and the Controlling Class had no Voting Rights, and LNR Securities, therefore, was not entitled to exercise the Designation Power.54

        Based on its interpretation of the PSA, C-III refused to recognize LNR Partners as a properly designated replacement Special Servicer. In addition, C-III declined to negotiate a fee-sharing agreement with LNR Partners, which, at the time, was a precondition to Moody's issuing a RAC.55 LNR Partners also alleges, and C-III has not disputed, that C-III refused to transfer to LNR Partners the special servicing working files and the cash amounts held in the accounts administered by the Special Servicer,56 the latter of which the PSA specifically requires a terminated Special Servicer to transfer, within two days, to its designated replacement.57

C. Procedural History
        On April 12, 2013, LNR Partners commenced this action by filing a verified complaint (the "Complaint") against C-III. The Complaint asserts two causes of action. The first is for C-III's alleged breach of the PSA through its failure to cooperate with LNR Partners in its efforts to replace C-III as Special Servicer. To remedy C-III's alleged breach, LNR Partners seeks a decree of specific performance requiring C-III to comply with its obligations under the PSA. The second cause of action asserted in the

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Complaint is for a declaratory judgment that LNR Partners is the rightful Special Servicer of the Trust.

        On May 21, 2013, C-III moved to dismiss the Complaint under Court of Chancery Rules 12(b)(1) and 12(b)(6). On June 28, 2013, LNR Partners filed a motion for summary judgment, concurrent with its opposition to C-III's motion to dismiss. After full briefing on those motions, I heard oral argument on them on September 3, 2013.

        On January 30, 2014, counsel for LNR Partners submitted a letter notifying the Court that certain contractual prerequisites to LNR Partners assuming the role of Special Servicer had now been fulfilled, including the issuance of a RAC from Moody's.58 Sometime after the filing of this action, Moody's modified its RAC policy so that execution of a fee-sharing agreement between the incoming and outgoing Special Servicers was no longer a necessary prerequisite to the issuance of a RAC.59 Under the new policy, a RAC also could be issued if a prospective Special Servicer agreed to indemnify the relevant trust for any losses that might result from disputes as to fee splits in the absence of a fee-sharing agreement.60 After LNR Partners learned of this new policy, it agreed to provide such an indemnification, and Moody's issued a RAC.61 The issuance of the Moody's RAC enabled LNR Partners to fulfill several other contractual

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prerequisites to becoming Special Servicer, including obtaining an opinion of counsel confirming that its appointment would be in compliance with the PSA.62

        On the same day LNR Partners submitted its letter to the Court, C-III filed a motion for a temporary restraining order. C-III's motion sought to prevent LNR Partners from unilaterally changing the status quo ante and taking over the role of Special Servicer, while the pending motions to dismiss and for summary judgment still were sub judice. After full briefing, I heard argument on C-III's motion for a temporary restraining order on February 7, 2014.

        At that oral argument, the parties agreed to resolve the motion for a temporary restraining order by extending the expiration date of a previously stipulated status quo order until such time as the Court issued its ruling on the pending motions for dismissal and summary judgment.63 Under the resulting amended status quo order, C-III remains the acting Special Servicer, but is precluded from taking certain enumerated actions without first obtaining LNR Partners' written agreement.64 The order also precludes C-III from paying itself fees for work performed as Special Servicer after January 27, 2014. Instead, the fees to which the Special Servicer otherwise would be entitled are to be recorded by C-III, with the question of who is entitled to the fees to be determined later by agreement of the parties or by order of the Court.

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        Thus, the only motions currently before the Court are C-III's motion to dismiss and LNR Partner's motion for summary judgment. C-III's motion for a temporary restraining order and LNR Partners' supplemental submissions in January and early February 2014 related at least tangentially to the pending motion for summary judgment, and the operative status quo order depends to some extent on the resolution of that motion. As a result, I have considered some of the additional evidence and argument of counsel presented in late January and February in addressing the two pending motions.

D. Parties' Contentions
        C-III initially sought dismissal of this action both under Court of Chancery Rule 12(b)(1), because the Court lacked subject matter jurisdiction, and under Rule 12(b)(6), because LNR Partners lacked standing to bring its claims. After C-III itself requested equitable relief in the form of a temporary restraining order in January 2014, however, C-III withdrew its challenge to the subject matter jurisdiction of this Court.65 The sole remaining basis for C-III's motion to dismiss, therefore, is its assertion that LNR Partners lacks standing. In that regard, C-III argues that LNR Partners lacks standing to bring a claim for breach of the PSA or to seek specific performance of that agreement because LNR Partners is neither a party to the PSA nor an intended third party beneficiary. According to C-III, because LNR Partner's non-viable breach of contract claim provides the predicate for its declaratory judgment claim, the latter claim also fails. For these

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reasons, C-III argues that both causes of action asserted in the Complaint should be dismissed.

        In opposing C-III's motion to dismiss, LNR Partners argues that, under the PSA, it has standing to bring its claims. Specifically, LNR Partners contends that it has standing to enforce the PSA either as a "successor" Special Servicer and, therefore, a party to the PSA, or as one of the PSA's enumerated third party beneficiaries. Thus, LNR Partners urges the Court to deny C-III's motion to dismiss.

        In support of its motion for summary judgment, LNR Partners maintains that its interpretation of the PSA is the only reasonable interpretation of the agreement and that the PSA is, therefore, unambiguous. In that regard, LNR Partners argues that C-III's interpretation of the PSA conflicts with the relevant contractual language, would lead to absurd results, and is inconsistent with the course of performance of the parties to the PSA. LNR Partners further asserts that, under its interpretation of the PSA, it is entitled to the relief it seeks as a matter of law.

        In opposition to LNR Partner's motion for summary judgment, C-III contends that the PSA is either ambiguous or unambiguously supports C-III's proposed interpretation. Specifically, C-III argues that LNR Partner's interpretation of the PSA is inconsistent with the language of the agreement and violates several canons of construction. C-III thus asserts that, if its motion to dismiss is denied, genuine issues of material fact exist that would preclude the Court from granting summary judgment.

        Initially, C-III also opposed LNR Partner's motion on the grounds that, even if LNR Partner's interpretation of the PSA were correct, LNR Partners would not be

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entitled to serve as Special Servicer because it failed to satisfy certain contractual preconditions to serving in that position, including obtaining a RAC from Moody's. As discussed supra, however, due to a change in Moody's policies, LNR Partners eventually was able to obtain a RAC from Moody's.66 This also enabled LNR Partners to fulfill the other contractual preconditions that C-III originally asserted had not been satisfied, including obtaining an opinion of counsel confirming that LNR Partners' appointment as Special Servicer would comply with the PSA.67 Thus, C-III has conceded that LNR Partners no longer is precluded from becoming Special Servicer due to its failure to satisfy those preconditions.68

II. ANALYSIS

A. Motion to Dismiss69
        For purposes of a motion to dismiss under Court of Chancery Rule 12(b)(6), the Court will "assume the truthfulness of the well-pled allegations of the complaint"70 and

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afford the plaintiff "the benefit of all reasonable inferences."71 If the well-pled allegations in the complaint would entitle the plaintiff to relief under any "reasonably conceivable" set of circumstances, the Court must deny the motion to dismiss.72 The Court, however, need not "accept conclusory allegations unsupported by specific facts."73 Moreover, failure to plead an element of a claim precludes entitlement to relief and, therefore, is grounds to dismiss that claim.74 Nonetheless, the Court must "accept even vague allegations as 'well pleaded' if they give the opposing party notice of the claim."75 Generally, on a motion to dismiss under Rule 12(b)(6), the Court will consider only the complaint and the documents integral to or incorporated by reference into it.76

        In its motion to dismiss, C-III challenges LNR Partners' standing to assert a claim for breach of contract. Under New York law, which governs the PSA,77 the general rule

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is that "privity or its equivalent [is] a predicate for imposing liability for nonperformance of contractual obligations."78 Nevertheless, "an obligation rooted in contract may engender a duty owed to those not in privity when . . . the subject matter of a contract is intended for the benefit of others."79 Thus, in order to maintain a cause of action for breach of contract under New York law, the plaintiff typically must be either a party to the contract or an intended third party beneficiary.80 Similarly, under Delaware law, "only parties to a contract and intended third party beneficiaries may enforce the contract terms."81

        C-III argues that LNR Partners lacks standing to assert its cause of action for breach of contract because LNR Partners is neither a party to nor a third party beneficiary of the PSA. C-III asserts that LNR Partners is not a party to the PSA because it is not the Special Servicer of the Trust, and that is the only one of the PSA's enumerated

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contractual parties that LNR Partners potentially could be. In that regard, Defendant notes that the crux of LNR Partner's breach of contract claim is that C-III improperly has blocked LNR Partners from becoming the Special Servicer. According to C-III, that fact in itself constitutes an admission that LNR Partners is not currently the Special Servicer. C-III avers that LNR Partners also is not a third party beneficiary of the PSA because the PSA includes an exclusive list of the contract's third party beneficiaries and that list does not include putative Special Servicers such as Plaintiff.

        LNR Partners disputes C-III's contentions and argues that it has standing under the PSA as a party to the contract or, alternatively, as a third party beneficiary. LNR Partners notes that the PSA's definition of Special Servicer specifically includes "any successor special servicer appointed as herein provided."82 LNR Partners asserts that it is a properly designated "successor" Special Servicer and thus qualifies as a party to the PSA. Plaintiff avers, moreover, that the only reason it is not currently the acting Special Servicer is because C-III has failed to perform its obligations under the PSA and that the law precludes C-III from benefitting from its own failure to perform. In the alternative, LNR Partners contends that it qualifies as a third party beneficiary under the PSA. In that regard, Plaintiff notes that the section of the PSA that addresses third party beneficiaries specifically states that the agreement will inure to the benefit of the parties' "successors and assigns."83 LNR Partners argues that, even if it does not qualify as a direct party to

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the PSA, it nonetheless would fit within the successors and assigns category of third party beneficiaries.

        For the reasons that follow, I conclude that LNR Partners has pled facts from which it is at least reasonably conceivable that LNR Partners could show that it has standing to enforce the PSA, either as a party to the PSA or as a third party beneficiary. I consider these two possibilities in turn.

1. Standing As a Party to the Contract
        The parties to the PSA are the Depositor, the Master Servicer, the Special Servicer, the Trustee, and the Certificate Administrator.84 It is undisputed that LNR Partners is not the Depositor, Master Servicer, Trustee, or Certificate Administrator. Thus, whether LNR Partners is a contractual party depends upon whether it qualifies as a Special Servicer under the PSA. The PSA defines "Special Servicer" as "LNR Partners, Inc., its successor in interest, or any successor special servicer appointed as herein provided."85 As the Trust's original Special Servicer, Plaintiff's predecessor entity, LNR Partners, Inc., is included in the definition of Special Servicer. Plaintiff has conceded, however, that LNR Partners, Inc. is no longer the Special Servicer, and Plaintiff has not argued that it has standing based on its predecessor's inclusion in the Special Servicer definition. Rather, LNR Partners argues that it qualifies as a Special Servicer because it is a "successor special servicer appointed" in accordance with the PSA.

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        Specifically, LNR Partners alleges that, in January 2013, LNR Partners' affiliate, LNR Securities, became the holder of a majority of the Certificates in the Trust's Controlling Class. In that capacity, LNR Partners avers that LNR Securities was entitled to designate the Trust's Special Servicer and that it exercised that authority to terminate C-III as Special Servicer and to appoint LNR Partners as the replacement Special Servicer, through a notification letter dated January 11, 2013. As discussed in greater detail in my ruling infra on LNR Partners' motion for summary judgment, the PSA is ambiguous as to whether LNR Securities possessed the Designation Power at the relevant time. Drawing all reasonable inferences in favor of Plaintiff, however, I assume for purposes of this motion to dismiss that LNR Securities held the Designation Power and properly designated LNR Partners as Special Servicer pursuant to Section 6.09(a) of the PSA. At a minimum, it is conceivable that LNR Partners will be able to show that based on the allegations in the Complaint.

        C-III argues, however, that even if LNR Partners properly was designated as Special Servicer by LNR Securities, it never became a "successor" Special Servicer because it never actually took over the Special Servicer position. In that regard, C-III notes that LNR Partners' breach of contract claim is premised on the allegation that LNR Partners has been precluded improperly from becoming Special Servicer, which C-III asserts is an admission that LNR Partners never became the "seated" Special Servicer.

        It may be true that LNR Partners never took over as the seated, or acting, Special Servicer, but I conclude, nonetheless, that C-III's argument is without merit. Section 6.09(a) of the PSA provides that a "resigning Special Servicer shall cooperate with the

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Trustee and the replacement Special Servicer in effecting the termination of the resigning Special Servicer's responsibilities and rights hereunder." Once C-III received a termination notice and LNR Partners properly was designated as the replacement Special Servicer, this provision arguably imposed a contractual duty on C-III to cooperate in enabling LNR Partners to take over as Special Servicer.86 The well-pled allegations in the Complaint support a reasonable inference that, apart from the dispute over who holds the Designation Power, which turns on provisions that I find ambiguous, the only reason LNR Partners had not become the "seated" Special Servicer, as of the time the Complaint was filed, was due to C-III's failure to comply with its contractual obligation under Section 6.09(a) to cooperate. Among other things, C-III's refusal to cooperate in negotiating and executing a fee-sharing agreement with LNR Partners initially precluded LNR Partners from obtaining a RAC from Moody's, which was a contractual prerequisite to LNR Partners being able to take over as Special Servicer. LNR Partners' inability to

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obtain a Moody's RAC also prevented it from satisfying other prerequisites, including obtaining an opinion of counsel confirming that its appointment would fully comply with the PSA.

        It is an established principle of New York law "that a party to a contract cannot rely on the failure of another to perform a condition precedent where he has frustrated or prevented the occurrence of the condition."87 Here, C-III effectively is attempting to rely on the non-occurrence of certain conditions precedent to LNR Partners becoming the seated Special Servicer to deny it standing as a Special Servicer. Drawing all reasonable inferences in favor of LNR Partners, however, it was C-III's own breach of its contractual obligations that frustrated the occurrence of these conditions precedent and prevented LNR Partners from replacing it. Under these circumstances, I find that it is likely New York law would preclude C-III from denying LNR Partners' standing to sue as a party under the PSA and thereby benefitting from its own failure to perform. Thus, for purposes of its motion to dismiss, C-III has failed to demonstrate that LNR Partners lacks standing as a party to the PSA.88

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2. Standing As a Third Party Beneficiary
        Alternatively, even if, for standing purposes, LNR Partners did not qualify as a party to the PSA at the time it filed suit, I find that it is at least reasonably conceivable that it qualified as a third party beneficiary. Under New York law, "a third party is an intended . . . beneficiary of a contract 'if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and . . . the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.'"89 "In determining whether the parties intended to benefit the third party, a court should consider the circumstances surrounding the transaction as well as the actual language of the contract."90

        Section 11.09 of the PSA, entitled "Successors and Assigns; Beneficiaries," provides:

The provisions of this Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto, and all such provisions shall inure to the benefit of the Certificateholders. . . . No other person,
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including, without limitation, any Mortgagor, shall be entitled to any benefit or equitable right, remedy or claim under this Agreement; provided that (i) each B-Noteholder is an intended third-party beneficiary hereunder with respect to those provisions of this Agreement that affect its interest in the related A/B Loan Combination and its rights under the related Co-Lender Agreement, (ii) each Mortgage Loan Seller is an intended third-party beneficiary hereunder with respect to those provisions of this Agreement that affect its rights and obligations under the related Mortgage Loan Purchase Agreement, and (iii) the Outside Master Servicer in respect of the Outside Serviced Trust Mortgage Loan shall be a third-party beneficiary to this Agreement with respect to its rights as specifically provided for herein and under the related Co-Lender Agreement.
        C-III asserts this section of the PSA explicitly limits the intended third party beneficiaries of the PSA to: (1) Certificateholders; (2) B-Noteholders; (3) Mortgage Loan Sellers; and (4) the Outside Master Servicer. According to C-III, because LNR Partners brings this action solely in its capacity as a claimed successor Special Servicer, it does not fall into any of these enumerated categories and cannot qualify as an intended third party beneficiary under the PSA. In making this argument, however, C-III wholly disregards the very first clause of Section 11.09, which provides that "[t]he provisions of this Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto." The subsequent sentence, beginning "No other person," applies equally to the "successors and assigns" of the parties to the PSA, which would include the Special Servicer, and to Certificateholders, without differentiating between them. Thus, a reasonable inference is that both groups are intended to be third party beneficiaries under the PSA.

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        As discussed previously, C-III argues that LNR Partners failed to qualify as a party to the PSA due to the non-occurrence of certain conditions precedent to it becoming a seated Special Servicer. Although I find C-III's argument unpersuasive for the reasons previously stated, even if C-III were correct, it is reasonably conceivable that LNR Partners nonetheless would qualify as a successor or assign of the Special Servicer for purposes of being a third party beneficiary.

        The extension of third party beneficiary rights to "successors and assigns" of the parties, including the Special Servicer, reasonably can be interpreted as being broader than the extension of definitional Special Servicer status to "any successor special servicer appointed as herein provided [i.e., in accordance with the PSA]."91 The "appointed as herein required" language could be construed as requiring a properly designated Special Servicer to fulfill all of the prerequisites to becoming the seated or acting Special Servicer before it will be a "Special Servicer" for purposes of the PSA. The section of the PSA addressing third party beneficiaries does not include this language, however, and I find it reasonable to infer that the drafters of the PSA intended a properly designated Special Servicer to have third party beneficiary status, as the successor or assign of a contracting party, even before it fulfilled all of the conditions precedent to taking over as Special Servicer.

        As noted previously, Section 6.09(a) of the PSA provides that a "resigning Special Servicer shall cooperate with the Trustee and the replacement Special Servicer in

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effecting the termination of the resigning Special Servicer's responsibilities and rights hereunder." The outgoing Special Servicer's contractual duty arising from this provision arguably comes into being as soon as the Certificateholders entitled to exercise the Designation Power properly have designated the replacement Special Servicer, even if the remaining conditions precedent, such as obtaining a RAC from Moody's, have not yet been satisfied.92 Under New York law, "[w]here performance is to be rendered directly to a third party under the terms of an agreement, that party must be considered an intended beneficiary."93 Thus, a terminated Special Servicer's obligation to cooperate in transferring its responsibilities and rights to a designated replacement Special Servicer, such as LNR Partners, is compelling evidence that a designated replacement Special Servicer qualifies as a third party beneficiary under the PSA.

        For the foregoing reasons and on the basis of the facts alleged in the Complaint, I find that it is likely LNR Partners had standing to sue under the PSA, at the time the Complaint was filed, as either a contractual party or a third party beneficiary. I also note that a contrary result would lead to the peculiar outcome that a terminated Special Servicer could breach its contractual obligations in order to prevent its designated

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replacement from taking over and, in so doing, deprive its replacement of standing to sue for that breach. It is highly unlikely that the drafters of the PSA intended this counterintuitive result.

        Thus, C-III has failed to demonstrate that LNR Partners could not have standing to pursue the claims that it asserts in its Complaint under any reasonably conceivable set of circumstances. I therefore deny C-III's motion to dismiss.

B. Motion for Summary Judgment
        Summary judgment is appropriate if the moving party demonstrates, based on the record before the Court, that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.94 When considering a motion for summary judgment, the evidence and the inferences drawn from the evidence are to be viewed in the light most favorable to the nonmoving party.95

        LNR Partners' motion for summary judgment concerns the proper interpretation of the PSA. Under New York law, which governs the PSA,96 "[t]he construction and interpretation of an unambiguous written contract is an issue of law within the province of the court, as is the inquiry of whether the writing is ambiguous in the first instance."97

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When a contract is unambiguous, "the intent of the parties must be found within the four corners of the contract,"98 and extrinsic evidence should not be considered.99 For these reasons, summary judgment is the appropriate means for resolving disputes as to the interpretation of an unambiguous contract governed by New York law.100

        By contrast, under New York law, "interpretation of ambiguous contract language is a question of fact,"101 for which the Court may consider extrinsic evidence.102 Where a contract is ambiguous and the Court must rely on extrinsic evidence to resolve its meaning, summary judgment generally is not appropriate unless "the moving party's record is not prima facie rebutted so as to create issues of material fact."103 In other

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words, consistent with the general standard on a motion for summary judgment that requires the moving party to demonstrate the absence of a genuine issue of material fact, "summary judgment may not be awarded if the language is ambiguous and the moving party has failed to offer uncontested evidence as to the proper interpretation."104

        Under New York's approach to contract construction, "[t]he primary objective of a court in interpreting a contract is to give effect to the intent of the parties as revealed by the language of their agreement."105 The "words and phrases [in a contract] should be given their plain meaning, and the contract should be construed so as to give full meaning and effect to all of its provisions."106

        New York follows the general rule that a contract is not ambiguous merely because the parties disagree as to its meaning.107 Rather, 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."108 By contrast, no ambiguity exists where the contract language has "a definite and precise

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meaning, unattended by danger of misconception in the purport of the [contract] itself, and concerning which there is no reasonable basis for a difference of opinion."109

        The central issue remaining in this litigation is whether, under the PSA, LNR Securities had the authority to designate LNR Partners to replace C-III as Special Servicer. In that regard, since the filing of the Complaint, C-III has conceded that the other preconditions to LNR Partners becoming Special Servicer have been satisfied.110 Thus, if LNR Securities' designation of LNR Partners as Special Servicer was valid, then LNR Partners would be the Trust's rightful Special Servicer and would be entitled to relief on its claims against C-III. If, on the other hand, LNR Securities did not have the authority to designate LNR Partners as Special Servicer, then LNR Partners' claims against C-III, as currently framed in the Complaint, would fail.

        In support of its motion for summary judgment, LNR Partners argues that its proposed interpretation of the PSA—according to which LNR Securities was entitled to exercise the Designation Power to appoint it as Special Servicer—is the only reasonable interpretation of the agreement and that the PSA is, therefore, unambiguous. For this reason, LNR Partners asserts that it is entitled to the relief it seeks as a matter of law.

        In opposition, C-III contends that the PSA is either ambiguous or unambiguously supports C-III's proposed interpretation, pursuant to which LNR Securities did not

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possess the Designation Power at the relevant time. C-III thus asserts that a genuine issue of material fact remains in this case and the motion for summary judgment should be denied.

        In this section, I first consider whether the PSA is ambiguous by comparing and assessing the parties' competing interpretations of the provisions relevant to this dispute. I ultimately conclude that the PSA is ambiguous and that it is unclear whether LNR Securities was entitled to designate LNR Partners as Special Servicer. I then consider whether the extrinsic evidence of record is sufficient to resolve the PSA's ambiguity as a matter of law and conclude that it is not. I therefore deny LNR Partners' motion for summary judgment.

1. The PSA is Ambiguous

a. Relevant provisions
        Section 6.09(a) of the PSA vests the power to designate the Special Servicer in "the Holder or Holders of the Certificates evidencing a majority of the Voting Rights allocated to the Controlling Class." Thus, the proper interpretation of "Voting Rights" is fundamental to this dispute. In Section 1.01 of the PSA, "Voting Rights" are defined, in relevant part, as follows:

The portion of the voting rights of all of the Certificates which is allocated to any Certificate. At all times during the term of this Agreement, 100% of the Voting Rights shall be allocated . . . . [T]he Voting Rights shall be allocated among the various Classes of the Principal Balance Certificates in proportion to the respective Class Principal Balances of such Classes of Certificates; [Proviso 1] provided that, solely for the purpose of determining the respective Voting Rights of the various Classes of Principal Balance Certificates, the
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aggregate Appraisal Reduction Amount allocated to the respective Classes of the Principal Balance Certificates in accordance with Section 4.04(d) shall be treated as Realized Losses with respect to the calculation of the Certificate Principal Balances thereof; and [Proviso 2] provided, further, that the aggregate Appraisal Reduction Amount shall not reduce the Class Principal Balance of any Class for purposes of determining the Controlling Class, the Controlling Class Representative or the Majority Controlling Class Certificateholder. . . . Voting Rights allocated to a Class of Certificateholders shall be allocated among such Certificateholders in standard proportion to the Percentage Interests evidenced by their respective Certificates.111
        As discussed in greater detail in the following sections, the parties have widely divergent views as to the correct interpretation and practical implications of these provisions. C-III maintains that, after the aggregate Appraisal Reduction Amount, or ARA, is taken into account, the Controlling Class has no Voting Rights. According to C-III, there are, therefore, no Certificateholders with a majority of the Voting Rights allocated to the Controlling Class. As a consequence, C-III contends that there are no Controlling Class Certificateholders qualified to exercise the Designation Power, including LNR Securities, which it concedes holds a majority of the Certificates in the Controlling Class.112

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        By contrast, LNR Partners contends that, regardless of the ARA, the Controlling Class does have Voting Rights, at least for purposes of determining the Controlling Class Certificateholders entitled to exercise the Designation Power. LNR Partners asserts that LNR Securities therefore holds "Certificates evidencing a majority of the Voting Rights allocated to the Controlling Class" and was entitled to exercise the Designation Power to appoint LNR Partners as Special Servicer. I consider, in turn, C-III's and LNR Partners' proposed interpretations of Section 6.09(a) and the Voting Rights definition.

b. C-III's proposed interpretation
        The PSA's definition of Voting Rights states that "Voting Rights shall be allocated among the various Classes of the Principal Balance Certificates in proportion to the[ir] respective Class Principal Balances."

        C-III argues that Proviso 1 of the Voting Rights definition, which follows that initial language, simply means that the ARA will be taken into account for purposes of determining Voting Rights—i.e., the ARA will be treated like Realized Losses that reduce the Class Principal Balances. In that regard, according to C-III, the phrase in Proviso 1 "for the purpose of determining the respective Voting Rights of the various classes of Principal Balance Certificates" should be read to mean for the purpose of determining the Voting Rights corresponding to the various classes of Principal Balance Certificates. C-III avers that the word "solely" preceding that phrase in Proviso 1 merely

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clarifies that the ARA is considered only when calculating Class Principal Balances of the Certificates to determine Voting Rights, and is not considered when calculating the Class Principal Balances for other purposes called for in the Agreement, such as to determine the monetary distributions to which each Class or Certificateholder is entitled.113

        Invoking the Latin maxim inclusio unius est exclusio alterius (the inclusion of one is the exclusion of another), C-III contends that Proviso 2 of the Voting Rights definition specifies the only three circumstances under which the ARA will not be considered for purposes of calculating Voting Rights, namely, when determining the Controlling Class, the Controlling Class Representative, or the Majority Controlling Class Certificateholder. Because Proviso 2 does not list determining who holds the Designation Power as a determination for which the ARA will not be considered, C-III argues that the ARA must be taken into account when calculating Voting Rights for that purpose.

        The Designation Power, established in Section 6.09(a) of the PSA, is vested in "the Holder or Holders of the Certificates evidencing a majority of the Voting Rights allocated to the Controlling Class." C-III emphasizes that, after the ARA is taken into account, the current Controlling Class loses its entire outstanding Class Principal Balance and thus is not entitled to any Voting Rights. Specifically, the outstanding Class Principal Balance of Class G, the Controlling Class, is approximately $18 million, while

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the ARA is currently over $83 million.114 Thus, if the ARA is treated like Realized Losses for purposes of calculating Voting Rights, as C-III contends it should be, then the ARA is sufficient to eliminate the Controlling Class's remaining Class Principal Balance. Because Voting Rights are allocated to the Classes in proportion to their Class Principal Balances, if the Class Principal Balance of the Controlling Class is reduced to zero, then it will not be entitled to any Voting Rights.

        Thus, according to C-III, no one currently holds "Certificates evidencing a majority of the Voting Rights allocated to the Controlling Class." C-III contends, therefore, that no Controlling Class Certificateholders presently can exercise the Designation Power, including LNR Securities, which owns a majority of the Certificates in the Controlling Class.115 For this reason, C-III asserts that LNR Securities' attempt to designate LNR Partners as Special Servicer was ineffectual and that LNR Partners has no right to replace it.

        C-III notes that if the PSA's drafters had wanted to avoid this result, they could have vested the Designation Power in one of the parties named in Proviso 2 of the Voting Rights definition, such as the Majority Controlling Class Certificateholder or the Controlling Class Representative. C-III contends that the fact that the drafters chose not to do this indicates that they intended the ARA to be considered for purposes of determining who could exercise the Designation Power.

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        C-III also contends that its proposed interpretation makes sense in terms of the structure and economics of the PSA. C-III characterizes the ARA as losses "in the pipeline."116 C-III argues that it is sensible for the Controlling Class to lose the Designation Power when the ARA is larger than the Controlling Class's outstanding Class Principal Balance, because these circumstances indicate that the current Controlling Class shortly will be out of the money. If the Controlling Class keeps the Designation Power under these circumstances, C-III suggests that the Controlling Class would be tempted to appoint a Special Servicer who would avoid making necessary write-downs to keep the Controlling Class in power, to the detriment of the other Classes. C-III also notes that losing the Designation Power does not leave the Controlling Class helpless to protect its interests, as the Majority Controlling Class Certificateholder retains the right to appoint the Controlling Class Representative,117 who has a qualified veto power over the Special Servicer.118

        Thus, C-III asserts that its proposed interpretation is supported by both the text and purpose of the PSA.

c. LNR Partners' proposed interpretation
        In contrast to C-III, LNR Partners contends that the Voting Rights definition distinguishes between the calculation of the Voting Rights of the various Classes in

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proportion to one another, on the one hand, and the calculation of the Voting Rights within a single Class, on the other.

        In that regard, LNR Partners emphasizes that Proviso 1 of the Voting Rights definition specifies that the ARA is considered "solely" when determining the "respective Voting Rights of the various Classes." According to LNR Partners, this means the ARA is considered only when calculating the Voting Rights of the various Classes in relation to one another, such as for purposes of a deal-wide vote across all of the Classes. LNR Partners points out the difference between this approach and a subsequent clause of the Voting Rights definition that provides that for Voting Rights "allocated to a Class," the allocation "among such Certificateholders" is in proportion to the Certificateholders' "Percentage Interests"—that is, roughly speaking, in proportion to the percentage of the Class Principal Balance held by each Certificateholder.119 LNR Partners underscores that this clause makes no mention of the ARA and asserts that it implies, when read in conjunction with Proviso 1, that the ARA is not considered when calculating the Voting Rights within a single Class.

        Because PSA Section 6.09(a) addresses the authority of Certificateholders within a single Class—namely, the Controlling Class—to exercise the Designation Power, LNR Partners maintains that the ARA was not intended to be considered for calculating the Voting Rights referenced in that section. If the ARA is not considered, then the Controlling Class has a positive outstanding Class Principal Balance and, consequently,

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has a positive allocation of Voting Rights. LNR Partners therefore asserts that LNR Securities, as the holder of a majority of the certificates in the Controlling Class,120 is also the "Holder . . . of the Certificates evidencing a majority of the Voting Rights allocated to the Controlling Class" and is entitled to exercise the Designation Power. On that basis, LNR Partners contends that LNR Securities properly exercised its authority to designate LNR Partners as Special Servicer and that it is entitled to replace C-III.

        LNR Partners also argues that it makes sense, in terms of the structure and economics of the PSA, for the ARA to be considered in allocating Voting Rights across the various Classes as part of a deal-wide vote, but not when calculating votes within a single Class. LNR Partners notes that the PSA provides for deal-wide votes to decide, for example, whether to declare or waive an event of default on one of the Trust's underlying loans.121 This vote determines whether the loans will be liquidated and the proceeds distributed to the outstanding Certificateholders. If the ARA (which represents appraised losses that have not yet been realized) is sufficient to offset the Controlling Class's remaining interest in the Trust, then the Certificateholders in the Controlling Class would receive nothing in a liquidation in that situation. Under those circumstances, LNR Partners acknowledges that it makes sense for the Controlling Class not to have a say in

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deciding whether to declare or waive an event of default because, if it did, it could hold out and prevent more senior, fully collateralized holders from protecting their interests.

        By contrast, LNR Partners contends that it would not make sense for the ARA to be considered when determining which Certificateholders in the Controlling Class have the power to designate the Special Servicer. Proviso 2 of the Voting Rights definition specifies that the ARA will not be considered when determining the Controlling Class or various of its contractually defined representatives. In that regard, LNR Partners argues that if the ARA were considered for purposes of determining which Certificateholders within the Controlling Class are entitled to exercise the Designation Power, the purpose of Proviso 2 would be substantially undermined because the Controlling Class could be deprived of its most essential authority. LNR Partners further asserts that the very reason why the Controlling Class is given the Designation Power in the first place is because it has the greatest incentive to minimize the realization of potentially avoidable unrealized losses, which is the Special Servicer's primary purpose. For this reason, LNR Partners avers that a Controlling Class's right to replace the Special Servicer does and should terminate only when it loses its status as the Controlling Class. That occurs when the Class Principal Balance of the Controlling Class drops below 25% of its original value, but that would be the result of Realized Losses, not appraised losses that have yet to be realized.122

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        For these reasons, LNR Partners, similarly to C-III, asserts that its proposed interpretation is supported by both the text and the purpose of the PSA.

d. The PSA is ambiguous as to who may exercise the Designation Power
        Having reviewed the contractual interpretations proposed by the two sides, I find each to be plausible. As discussed below, however, I also find each interpretation to be potentially problematic. Ultimately, therefore, I conclude that neither proposed interpretation is clearly correct and that the PSA is ambiguous.

        Regarding C-III's proposed interpretation, one factor that makes it less persuasive is that it leads to questionable practical consequences that do not appear to be acknowledged in the PSA. According to C-III, when the ARA is larger than the outstanding Class Principal Balance of the Controlling Class, then the Controlling Class has no Voting Rights for purposes of determining who may exercise the Designation Power. Thus, under those circumstances, C-III contends that no Certificateholders within the Controlling Class will be entitled to exercise the Designation Power because none will qualify as holding a majority of the Voting Rights in the Controlling Class. Section 6.09 of the PSA, which addresses the Designation Power, directly or indirectly mentions "the Holder or Holders of the Certificates evidencing a majority of the Voting Rights allocated to the Controlling Class" over ten times. Yet, it never mentions the possibility of such Holder or Holders not existing due to the Controlling Class not having any Voting Rights. If the drafters had intended to create a system in which the Controlling Class could lose the Designation Power because the ARA eliminated its Voting Rights,

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one would expect that possibility to be mentioned at least once in the relevant section, but it is not.

        C-III's proposed interpretation also has consequences that arguably are absurd. The original Class Principal Balance of Class G, the current Controlling Class, was approximately $21 million;123 the current ARA is over $83 million.124 According to C-III's interpretation, if, as here, the ARA is larger than the original Class Principal Balance of a Controlling Class, no Certificateholders of that Controlling Class ever will be able to exercise the Designation Power. This is because that Class will not be entitled to Voting Rights at any point during its tenure as the Controlling Class. Importantly, barring special circumstances such as the resignation of the Special Servicer, the PSA vests the Designation Power exclusively in the Certificateholders of the Controlling Class.125 Thus, if they cannot exercise the Designation Power to replace the Special Servicer, no one can.

        One of the consequences of C-III's interpretation, therefore, is that a previously appointed Special Servicer, including one appointed by Certificateholders who no longer have any interest in the Trust, could remain in power indefinitely. Even though the Special Servicer is constrained somewhat by the contractually defined Servicing Standard

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and the Controlling Class Representative's qualified veto power,126 the Special Servicer still has broad discretion regarding how to deal with the nonperforming loans held by the Trust.127 It seems unlikely, therefore, that the drafters of the PSA intentionally created a Designation Power that could lapse indefinitely in this manner, resulting in the possible permanent entrenchment of a previously designated Special Servicer.

        LNR Partners' interpretation of the PSA, unlike C-III's, averts the arguably absurd result of the Designation Power lapsing indefinitely. According to LNR Partner's interpretation, the ARA is not considered when calculating Voting Rights for purposes of determining who may exercise the Designation Power. Thus, under that interpretation, the holder or holders of a majority of the Certificates in the Controlling Class always are entitled to exercise the Designation Power.

        Despite producing an outcome that appears more reasonable, LNR Partners' interpretation of the PSA also is problematic. As an initial matter, the clause of the Voting Rights definition to which LNR Partners cites regarding how Voting Rights are calculated within a Class does not appear to stand for the proffered proposition—i.e., that the Voting Rights of a single Class are calculated without reference to the ARA. That clause states that "Voting Rights allocated to a Class of Certificateholders shall be allocated among such Certificateholders in standard proportion to the Percentage Interests evidenced by their respective Certificates." Based on the Court's best reading, this clause

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merely seems to address how Voting Rights that have already been allocated to a Class should be further allocated among the Class's Certificateholders—"in standard proportion to the[ir] Percentage Interests." The clause appears to be equally relevant to determining how Voting Rights allocated to Classes for deal-wide votes will be distributed to those Classes' Certificateholders as it is to determining how Voting Rights allocated to a single Class will be distributed.

        This apparent misreading is not fatal, however, to the bifurcated approach to the calculation of Voting Rights that LNR Partners asserts is required by the PSA. Under that approach, the ARA is considered when calculating the Voting Rights of the various Classes in proportion to one another but not when calculating the Voting Rights within a single Class. Rather, LNR Partners' interpretation arguably is supported by other parts of the Voting Rights definition, including by Proviso 1 and the clause directly preceding it. The clause preceding Proviso 1 states: "Voting Rights shall be allocated among the various Classes of the Principal Balance Certificates in proportion to the respective Class Principal Balances of such Classes of Certificates." Class Principal Balances typically are calculated without reference to the ARA,128 so this language can be interpreted as creating a default rule that Voting Rights are allocated without consideration of the ARA.

        Proviso 1 then states that "solely for the purpose of determining the respective Voting Rights of the various Classes of Principal Balance Certificates, the [ARA] . . . shall be treated as Realized Losses with respect to the calculation of the Certificate

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Principal Balances." LNR Partners' interpretation of Proviso 1, which I find textually plausible, is that it provides that the ARA is only taken into account when calculating the Voting Rights of the various Classes in proportion to one another. Under this interpretation, the determination of Voting Rights within a single Class would not be subject to Proviso 1 and, instead, arguably would be subject to the default rule established by the preceding clause, pursuant to which the ARA would not be considered in allocating Voting Rights. Thus, LNR Partners' proposed interpretation remains plausible, despite its questionable reading of one of the subsequent clauses in the Voting Rights definition.

        Another undesirable feature of LNR Partners' proposed interpretation is that it appears to violate at least one canon of construction, namely, the presumption against surplusage. As previously noted, in New York, a "contract should be construed so as to give full meaning and effect to all of its provisions."129 In that regard, an interpretation that "has the effect of rendering at least one clause superfluous or meaningless . . . is not preferred and will be avoided if possible."130 According to LNR Partners, even if Proviso 2 is ignored, Proviso 1 of the Voting Rights definition and the other clauses within that definition are sufficient to establish that the ARA is only considered when calculating the Voting Rights of the various Classes in proportion to one another. Proviso 2 specifies

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that the ARA "shall not reduce the Class Principal Balance of any Class for purposes of determining the Controlling Class, the Controlling Class Representative or the Majority Controlling Class Certificateholder." LNR Partners' interpretation, however, appears to render Proviso 2 superfluous, because the determinations it enumerates do not involve calculating Voting Rights across multiple Classes, but rather involve, at most, calculating the Voting Rights within the single Controlling Class.

        In that regard, however, I also note that even under C-III's interpretation, the inclusion of Controlling Class and Controlling Class Representative in Proviso 2 is superfluous. Both parties agree that, pursuant to Proviso 1 of the Voting Rights definition, the only circumstances under which the ARA is deducted from Class Principal Balances is when calculating Voting Rights (although LNR Partners further restricts those circumstances to the calculation of Voting Rights across multiple Classes). Yet, the determination of the Controlling Class and the Controlling Class Representative does not require calculating Voting Rights.131 Thus, even according to C-III's interpretation of the Voting Rights definition, it is superfluous for Proviso 2 to specify that the ARA would not be considered for purposes of determining the Controlling Class and Controlling Class Representative.

        C-III also alleges that LNR Partners' proposed interpretation violates the canon of inclusio unius est exclusio alterius. In that regard, C-III notes that Proviso 2 of the

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Voting Rights definition expressly lists three circumstances under which the ARA is not to be considered for purposes of calculating Voting Rights, namely, when determining the Controlling Class, the Controlling Class Representative, or the Majority Controlling Class Certificateholder. That list does not include determining the Certificateholders within the Controlling Class entitled to exercise the Designation Power. Thus, under the inclusio unius canon, C-III argues that the Court should infer, by negative implication, that the drafters of the PSA intended for the ARA to be taken into account when calculating Voting Rights to determine who is entitled to exercise the Designation Power.

        At this relatively early stage of this litigation, however, I do not accord much weight to the inclusio unius canon. The force of the inclusio unius canon depends upon context and carries the greatest weight when the language or structure of the contract itself suggests that what was included in a list was intended to be exclusive. For example, in Uribe v. Merchants Bank of New York,132 the New York Court of Appeals applied inclusio unius where the relevant contractual provision stated "[t]he safe is leased solely for the purpose of keeping securities, jewelry, valuable papers, and precious metals only."133 Similarly, in Two Guys from Harrison-N.Y., Inc. v. S.F.R. Realty Associates,134 the New York Court of Appeals applied inclusio unius only after concluding that the title of the paragraph at issue "indicate[d] that it was intended to be a comprehensive

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treatment of that subject."135 Due to the absence of language suggestive of exclusivity in Proviso 2, such as "solely" or "only," the inclusio unius canon is not conclusive on the question of exclusivity. Indeed, the fact that "solely" was used in Proviso 1, but not in Proviso 2, arguably indicates that the drafters did not intend Proviso 2 to be exclusive. Therefore, at this stage of the proceedings, I assign minimal weight to C-III's inclusio unius argument.

        For the foregoing reasons, I conclude that both sides' proposed interpretations of the PSA, while plausible, are problematic. Specifically, C-III's interpretation leads to consequences that do not appear to be contemplated by the PSA and arguably are absurd. LNR Partners' interpretation would produce consequences that appear more reasonable, but it is not clearly supported by the text of the contract. Moreover, both interpretations do violence, to varying degrees, to one or more canons of construction. Faced with two plausible but problematic interpretations of the PSA and no clear basis to conclude one is superior to the other, I am unable to say that either proposed interpretation is the only reasonable interpretation of the contract. I therefore find that the PSA lacks "a definite and precise meaning, unattended by danger of misconception,"136 and conclude that the contract is ambiguous.

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2. The Extrinsic Evidence Does Not Resolve the Ambiguity As a Matter of Law
        Once a contract has been deemed ambiguous, the Court "may consider extrinsic evidence to ascertain the parties' intent at the formation of the contract."137 LNR Partners filed its motion for summary judgment at an early stage of this litigation, concurrent with its opposition to C-III's motion to dismiss. Thus, the factual record has yet to be developed fully and contains only limited extrinsic evidence relevant to the proper interpretation of the PSA. I find that the extrinsic evidence currently before the Court is insufficient to resolve the ambiguity in the PSA as a matter of law.

        To undermine C-III's proposed interpretation of the PSA and support its own, LNR Partners relies most significantly on extrinsic evidence related to the course of performance of the agreement. In the fall of 2012, C3 Initial Assets appointed C-III to be Special Servicer, and C-III asserted its right to assume that position, on the grounds that C3 Initial Assets had become the Majority Controlling Class Certificateholder.138 Then, as now, however, if the ARA were taken into account in determining the Voting Rights of the Controlling Class, the Controlling Class would not have had any Voting Rights.139 Thus, according to C-III's present interpretation of the contract, C3 Initial Assets would not have qualified as the holder of the Certificates "evidencing a majority of the Voting Rights allocated to the Controlling Class" and thus would not have had the Designation

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Power.140 Yet LNR Partners, the Trustee, C3 Initial Assets, and C-III itself treated C3 Initial Assets' designation as binding under the PSA and permitted C-III to be appointed Special Servicer.141 LNR Partners asserts that this course of performance directly contradicts C-III's proposed interpretation of the agreement and proves that the parties did not intend the ARA to be considered for purposes of determining who has the Designation Power.

        When questioned on this subject at oral argument on C-III's related motion for a temporary restraining order, counsel for C-III effectively conceded that, according to the interpretation of the PSA that C-III now advances, C3 Initial Assets did not have the power to designate C-III as Special Servicer when it did.142 Counsel for C-III argued,

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however, that C3 Initial Assets' mistaken assertion of its right to exercise the Designation Power resulted from an unintentional error. Specifically, counsel suggested that C3 Initial Assets incorrectly had assumed that the PSA, like many pooling and servicing agreements, simply vested the Designation Power in the Majority Controlling Class Certificateholder.143 C3 Initial Assets was the Majority Controlling Class Certificateholder when it appointed C-III as Special Servicer,144 and it referenced that status as its basis for exercising the Designation Power in its contemporaneous communications with LNR Partners and the Trustee.145

        According to counsel for C-III, it was only later that C-III realized that, under the PSA, the Designation Power actually is vested in the "the Holder or Holders of the Certificates evidencing a majority of the Voting Rights allocated to the Controlling Class."146 Counsel attributed the failure of C3 Initial Assets and C-III to realize their mistake earlier to the length and complexity of the PSA.147 Counsel emphasized, however, that C-III's initial error does not contradict its current interpretation of how Voting Rights are calculated for purposes of the Designation Power, because neither C3

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Initial Assets nor C-III ever claimed that the former held a majority of the Voting Rights in the Controlling Class.148

        To counter LNR Partners' suggestion that this course of performance demonstrates, among other things, that the Trustee has endorsed LNR Partners' interpretation of the PSA, C-III submitted an email chain between C-III and the Trustee. In that regard, C-III sent an email to the Trustee on January 30, 2013, informing it of C-III's interpretation of the relevant provisions of the PSA and requesting that it suspend a previously issued letter acknowledging LNR Securities' designation of LNR Partners as Special Servicer.149 Corporate counsel for the Trustee responded as follows:

We are in receipt of your email . . . and are aware of the divergent positions being asserted by the various parties. As I informed you yesterday, the Trustee was unaware of this litigation as neither party, either LNR or C-III, deemed it advisable to notify U.S. Bank, in its capacity as Trustee about the pending action. As I stated yesterday, we are reviewing the matter and we are not in a position to make any determination until we have had an adequate opportunity to review the Trustee's obligations and rights with respect to this matter.150
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The record contains no later communications on this subject from the Trustee. C-III argues that the response quoted above indicates, at a minimum, that the Trustee has not yet made a substantive determination as to the contract construction issue being disputed in this litigation. Thus, C-III submits that any past actions taken by the Trustee should not be viewed as providing any confirmation of LNR Partners' proposed interpretation of the PSA.

        Having reviewed the somewhat truncated record before me, I find that the course of performance evidence submitted by LNR Partners may support its interpretation of the PSA. If the Trustee, the parties to this litigation, and their affiliates had applied, in the fall of 2012, the interpretation of the PSA that C-III presently advances, C3 Initial Assets' designation of C-III as Special Servicer would have been deemed ineffectual, and C-III would not have been permitted to become Special Servicer. On the other hand, the parties' course of performance under the PSA in the fall of 2012 comports with LNR Partners' interpretation of the PSA.

        Nonetheless, I cannot say that all the relevant evidence on this issue is undisputed or that it is conclusive, as a matter of law, as to the proper construction of the contested provisions of the PSA. On a motion for summary judgment, the evidence and the inferences drawn from the evidence are to be viewed in the light most favorable to the nonmoving party.151 C3 Initial Assets invoked its status as the Majority Controlling

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Class Certificateholder in its notification letter terminating LNR Partners as Special Servicer and appointing C-III to that role. Viewing that evidence in the light most favorable to C-III, it ultimately may support a finding that C3 Initial Assets mistakenly believed that the Designation Power was vested in the Majority Controlling Class Certificateholder, not that C3 Initial Assets held the view that the ARA is not to be considered when calculating Voting Rights for purposes of the Designation Power. Moreover, one plausible inference that can be drawn from the Trustee's response to counsel for C-III's correspondence, quoted supra, is that the Trustee previously had not focused on the question at issue in this litigation and only perfunctorily approved C-III's designation—and later LNR Partners' re-designation—as Special Servicer.

        Finally, I note that the purpose of contract construction is to effectuate the intention of the contracting parties at the time the contract was executed.152 While the proffered evidence as to the course of performance of the parties to the PSA six years after its execution may be probative of the drafters' original intent, I do not consider it conclusive under the circumstances of this case. Moreover, the Court would benefit from further development of the evidence regarding, among other things, the negotiation of the PSA, the broader implications of each parties' interpretation for the Trust and its Certificateholders, and customary drafting practices for pooling and servicing agreements, including, in particular, as they relate to the provisions at issue in this case.

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        For the foregoing reasons, I conclude that genuine issues of material fact exist as to the proper interpretation of the relevant PSA provisions. I therefore deny LNR Partners' motion for summary judgment.

III. CONCLUSION
        For the reasons stated in this Memorandum Opinion, C-III's motion to dismiss and LNR Partner's motion for summary judgment are denied. The stipulated status quo order approved by the Court on February 12, 2014, which was set to expire upon the issuance of this ruling, is hereby extended by ten days. The parties are to confer and advise the Court, within ten days, whether they agree to keep the existing status quo order in place pending further order of the Court, stipulate to a new proposed status quo order, or are unable to agree on an appropriate status quo order going forward. I further direct the parties, in that same time frame, to confer and submit a proposed schedule for a prompt trial on the merits of this action.

        IT IS SO ORDERED.


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Notes:

        1. Unless otherwise noted, the facts set forth in this Memorandum Opinion are undisputed and are drawn from the operative complaint and from the affidavits, exhibits, and other evidence submitted to the Court. Because the complaint is verified, it constitutes part of the factual record for purposes of LNR Partners' motion for summary judgment. See Jackson Walker L.L.P. v. Spira Footwear, Inc., 2008 WL 2487256, at *1 n.4 (Del. Ch. June 23, 2008); Weber v. Kirchner, 2003 WL 23190392, at *3 (Del. Ch. Dec. 31, 2003).

        2. Compl. Ex. C at 1.

        3. PSA (attached to the complaint as Exhibit A).

        4. PSA § 11.04.

        5. PSA §§ 2.06-2.07.

        6. PSA at 3.

        7. PSA § 4.01.

        8. PSA at 3.

        9. PSA § 4.01.

        10. PSA § 1.01 (definition of "Realized Loss").

        11. PSA § 4.04.

        12. Id.

        13. PSA § 4.01.

        14. PSA §§ 1.01 (definition of "Specially Serviced Mortgage Loan"), 3.01(a).

        15. PSA § 1.01.

        16. PSA § 3.21(a).

        17. PSA § 3.01(b).

        18. PSA §§ 3.01, 3.18, 3.20.

        19. PSA § 1.01.

        20. Id. (emphasis added).

        21. PSA § 3.11(c).

        22. Id.

        23. See Jason H.P. Kravitt and Robert E. Gordon, Securitization of Financial Assets § 16.02 ("While the first loss class in a CMBS transaction has the most credit risk in the transaction, the first loss class usually is the class (the "controlling class") that has the right to control certain matters with respect to the mortgage pool and has certain other rights.")

        24. PSA § 1.01.

        25. Id.

        26. Id.

        27. PSA § 6.11(a).

        28. Id.

        29. Id.

        30. PSA § 1.01.

        31. PSA § 1.01 (definition of "Percentage Interest").

        32. PSA § 1.01 (definition of "Appraisal Reduction Amount").

        33. Id.

        34. PSA § 1.01 (definition of "Required Appraisal Trust Mortgage Loan").

        35. Compl. ¶ 41; PSA at 1; id. § 1.01 (definition of "Special Servicer").

        36. Compl. Ex. C at 1.

        37. Compl. ¶ 41.

        38. Compl. Ex. B.

        39. See Erbstein Aff. ¶¶ 6, 9-10. In October 2012, C3 Initial Assets owned its Certificates in Class G indirectly through its controlling interest in an entity that is not a party to this litigation. See id.; Compl. ¶ 45, Ex. B.

        40. Compl. Ex. B.

        41. PSA § 6.09(a).

        42. Erbstein Aff. ¶ 7.

        43. Compl. Ex. C.

        44. Erbstein Aff. ¶ 8.

        45. Id. ¶ 10. LNR Securities initially acquired these certificates indirectly, by taking over the controlling interest in the nonparty entity referred to supra in note 39. Id. LNR Securities later purchased the Class G Certificates from the nonparty entity and now holds them in its own name. Compl. ¶ 49 n.2.

        46. Compl. Ex. F.

        47. Compl. Ex. G.

        48. PSA § 6.09(a).

        49. Ascher Supplemental Transmittal Aff. Exs. C, D.

        50. Compl. Ex. G.

        51. Erbstein Aff. ¶ 13.

        52. See Compl. ¶ 64.

        53. Erbstein Aff. ¶ 13.

        54. Id.

        55. Id. ¶¶ 19, 22.

        56. Compl. ¶ 62.

        57. PSA § 6.09(a).

        58. Docket Item ("D.I.") No. 34.

        59. Erbstein Aff. ¶¶ 22-23.

        60. Id.

        61. Id. ¶¶ 24, 27-28.

        62. See Erbstein Aff. ¶¶ 31-36, Ex. 10.

        63. TRO Arg. Tr. 28, 36.

        64. D.I. No. 49.

        65. TRO Arg. Tr. 5 (C-III's counsel responding to question regarding whether subject matter jurisdiction is still at issue by acknowledging that "we're not pressing the jurisdiction argument at this point.").

        66. See supra notes 58-61 and accompanying text.

        67. See D.I. No. 34; Erbstein Aff. ¶¶ 31-36, Ex. 10.

        68. TRO Arg. Tr. 5-6 (C-III's counsel responding to question regarding whether the contractual preconditions are still at issue by conceding that "we do not think, at this time—as distinguished from previously—there is an issue on the conditions, because we now have the Moody's agency confirmation.").

        69. Unless otherwise noted, the facts referenced in this section are drawn exclusively from the well-pled allegations of the Complaint, and from the PSA and other documents attached to the Complaint as exhibits, and are presumed true for the purposes of C-III's motion to dismiss.

        70. Superwire.com, Inc. v. Hampton, 805 A.2d 904, 908 (Del. Ch. 2002) (citing Solomon v. Pathe Commc'ns Corp., 672 A.2d 35, 38 (Del. 1996)).

        71. Id. (quoting In re USACafes, L.P. Litig., 600 A.2d 43, 47 (Del. Ch. 1991)) (internal quotation marks omitted).

        72. Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531, 536 (Del. 2011); see also Winshall v. Viacom Int'l, Inc., 76 A.3d 808, 813 n.12 (Del. 2013).

        73. Price v. E.I. duPont de Nemours & Co., Inc., 26 A.3d 162, 166 (Del. 2011) (citing Clinton v. Enter. Rent-A-Car Co., 977 A.2d 892, 895 (Del. 2009)).

        74. See Crescent/Mach I P'rs, L.P. v. Turner, 846 A.2d 963, 972 (Del. Ch. 2000) (Steele, V.C., by designation).

        75. Cent. Mortg., 27 A.3d at 535.

        76. See Allen v. Encore Energy P'rs, 72 A.3d 93, 96 n.2 (Del. 2013).

        77. PSA § 11.04. See Postorivo v. AG Paintball Hldgs., Inc., 2008 WL 343856, at *4 (Del. Ch. Feb. 7, 2008) ("[C]onsistent with the Restatement and well-settled Delaware precedent, because the [agreement] designates New York law and neither party challenges the applicability of that designation, I analyze the issues presented under New York law.")

        78. Van Vleet v. Rhulen Agency Inc., 578 N.Y.S.2d 941, 943 (N.Y. App. Div. 1992).

        79. Id.

        80. See Logan-Baldwin v. L.S.M. Gen. Contractors, Inc., 942 N.Y.S.2d 718, 722 (N.Y. App. Div. 2012) (denying summary judgment on breach of contract claim where "plaintiffs raised a triable issue of fact whether they were intended third-party beneficiaries of the contract"); Marino v. Dwyer-Berry Constr. Corp., 597 N.Y.S.2d 466, 467 (N.Y. App. Div. 1993) (granting motion to dismiss breach of contract claim where contractual privity did not exist and "the fundamental requirements for a finding of intended third-party beneficiary status [we]re not present").

        81. Bromwich v. Hanby, 2010 WL 8250796, at *2 (Del. Super. July 1, 2010) (citing Smith v. Mattia, 2010 WL 412030 (Del. Ch. Feb. 1, 2010)).

        82. PSA § 1.01.

        83. PSA § 11.09.

        84. PSA at 1.

        85. PSA § 1.01 (emphasis added).

        86. C-III argues that, under the PSA, an outgoing Special Servicer's duty to cooperate with a properly designated replacement Special Servicer is triggered only "once the new Special Servicer has been seated and the old Special Servicer has 'resigned.'" Reply Br. in Supp. of Mot. to Dismiss 21. At least one reasonable interpretation of PSA Section 6.09(a), however, is that the duty to "cooperate . . . in effecting the termination of the resigning Special Servicer's responsibilities and rights" arises as soon as the replacement Special Servicer has been properly designated. Under this interpretation, the outgoing Special Servicer's duty to cooperate would include an obligation to cooperate with the replacement Special Servicer's efforts to fulfill the contractual preconditions to it becoming the seated Special Servicer, such as obtaining any necessary RAC. On a motion to dismiss, all reasonable inferences must be drawn in favor of the nonmoving party; therefore, I adopt LNR Partners' interpretation of the outgoing Special Servicer's duty to cooperate for purposes of this motion.

        87. Kooleraire Serv. & Installation Corp. v. Bd. of Ed. of City of New York, 268 N.E.2d 782, 784 (N.Y. 1971); see also A.H.A. Gen. Constr., Inc. v. New York City Hous. Auth., 699 N.E.2d 368, 374 (N.Y. 1998) (noting that it is "well-settled . . . that a party cannot insist upon a condition precedent, when its non-performance has been caused by himself); 13 Williston on Contracts § 39:17 (4th ed., rev. vol. 2013) ("[I]f one party to a contract prevents the happening or performance of a condition precedent that is part of the contract, the condition precedent is eliminated").

        88. This conclusion is based on the facts alleged in the Complaint and related documents as of the time this action was filed on April 12, 2013. If I consider the supplemental information submitted by LNR Partners more recently in further support of its motion for summary judgment, it is even more clear that LNR Partners is a successor Special Servicer. Indeed, as previously noted, apart from C-III's ongoing contention that LNR Partners was not properly designated by LNR Securities as Special Servicer, C-III now concedes that the contractual preconditions to LNR Partners becoming the Special Servicer have been satisfied. See supra note 68 and accompanying text.

        89. Levin v. Tiber Hldg. Corp., 277 F.3d 243, 248 (2d Cir. 2002) (quoting Restatement (Second) of Contracts § 302 (1979)).

        90. Bayerische Landesbank, N.Y. Branch v. Aladdin Capital Mgmt. LLC, 692 F.3d 42, 52 (2d Cir. 2012) (internal quotation marks omitted).

        91. Compare PSA § 11.09, with PSA § 1.01 (definition of "Special Servicer").

        92. See supra note 86.

        93. Flickinger v. Harold C. Brown & Co., 947 F.2d 595, 600 (2d Cir. 1991) (quoting Cauble v. Mabon Nugent & Co., 594 F. Supp. 985, 991 (S.D.N.Y. 1984)); see also Levin, 277 F.3d at 249 (holding that a third party was a third party beneficiary where the contract "specially included [the third party] as a direct beneficiary" and a contract signatory "rendered performance of its obligations directly to [the third party]").

        94. Ct. Ch. R. 56(c). See Twin Bridges L.P. v. Draper, 2007 WL 2744609, at *8 (Del. Ch. Sept. 14, 2007).

        95. GMG Capital Invs., LLC v. Athenian Venture P'rs I, L.P., 36 A.3d 776, 779 (Del. 2012); Judah v. Del. Trust Co., 378 A.2d 624, 632 (Del. 1977).

        96. See supra note 77.

        97. Estate of Hatch by Ruzow v. Nyco Minerals Inc., 666 N.Y.S.2d 296, 298 (N.Y. App. Div. 1997).

        98. In re Coudert Bros., 487 B.R. 375, 389 (S.D.N.Y. 2013) (quoting Howard v. Howard, 740 N.Y.S.2d 71 (N.Y. App. Div. 2002)).

        99. JA Apparel Corp. v. Abboud, 568 F.3d 390, 397 (2d Cir. 2009); Alexander & Alexander Servs., Inc. v. These Certain Underwriters at Lloyd's, London, England, 136 F.3d 82, 86 (2d Cir. 1998).

        100. Concord Real Estate CDO 2006-1, Ltd. v. Bank of Am. N.A., 996 A.2d 324, 330 (Del. Ch. 2010), aff'd, 15 A.3d 216 (Del. 2011).

        101. Compagnie Financiere de CIC et de L'Union Europeenne v. Merrill Lynch, Pierce, Fenner & Smith Inc., 232 F.3d 153, 158 (2d Cir. 2000).

        102. JA Apparel Corp., 568 F.3d at 397; Alexander & Alexander Servs., Inc., 136 F.3d at 86.

        103. Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232-33 (Del. 1997). Although the PSA is governed by New York law, the applicable standard for granting summary judgment is procedural, not substantive, in nature and is therefore governed by Delaware law. See MPEG LA, L.L.C. v. Dell Global B.V., 2013 WL 812489, at *3 (Del. Ch. Mar. 6, 2013) ("[A]s a general rule in Delaware, when the law of a foreign state is applied to substantive issues, the law of Delaware is usually applied to procedural issues.") (quoting Monsanto Co. v. Aetna Cas. & Sur. Co., 1994 WL 317557, at *4 (Del. Super. Apr. 15, 1994)).

        104. GMG Capital Invs., LLC v. Athenian Venture P'rs I, L.P., 36 A.3d 776, 784 (Del. 2012).

        105. Compagnie Financiere, 232 F.3d at 157.

        106. Olin Corp. v. Am. Home Assurance Co., 704 F.3d 89, 99 (2d Cir. 2012) (quoting LaSalle Bank Nat'l Ass'n v. Nomura Asset Capital Corp., 424 F.3d 195, 206 (2d Cir. 2005)) (internal quotation marks omitted).

        107. Metro. Life Ins. Co. v. RJR Nabisco, Inc., 906 F.2d 884, 889 (2d Cir. 1990).

        108. Olin Corp., 704 F.3d at 99 (quoting Nowak v. Ironworkers Local 6 Pension Fund, 81 F.3d 1182, 1192 (2d Cir. 1996)).

        109. Law Debenture Trust Co. of New York v. Maverick Tube Corp., 595 F.3d 458, 467 (2d Cir. 2010) (quoting Hunt Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d 1274, 1277 (2d Cir. 1989)) (internal quotation marks omitted).

        110. See supra note 68.

        111. PSA § 1.01.

        112. In the briefing on the pending motions, the parties occasionally seemed to use the term "the Certificates in a Class" as if it corresponded to an equivalent Percentage Interest and the holder of a majority of the Certificates in a Class would also, therefore, be the holder of Certificates evidencing a majority of the Percentage Interests in that Class. The Court thus understands the phrase "the majority of the Certificates in the Controlling Class" to be a shorthand reference to the majority of the Percentage Interests evidenced by the Certificates in the Controlling Class. For the sake of brevity, the Court adopts the same shorthand reference.

        113. See PSA § 4.01.

        114. Unell Aff. ¶ 4.

        115. Erbstein Aff. ¶ 10.

        116. Defs.' Opening TRO Br. ¶ 29.

        117. PSA § 1.01 (definition of "Controlling Class Representative").

        118. PSA § 6.11(a).

        119. See PSA § 1.01 (definition of "Percentage Interest").

        120. Erbstein Aff. ¶ 10.

        121. See PSA § 7.01(b) ("Holders of Certificates entitled to at least 25% of the Voting Rights" can declare an event of default); PSA § 7.04 ("Holders representing at least 66 2/3% of the Voting Rights allocated to the Classes of Certificates affected by any Event of Default" can waive an event of default).

        122. See PSA § 1.01 (definitions of "Controlling Class" and "Class Principal Balance").

        123. Erbstein Aff. Ex. 4.

        124. Unell Aff. ¶ 4.

        125. See PSA § 6.09(a).

        126. PSA §§ 1.01 (definition of "Servicing Standard"), 6.11(a).

        127. See supra notes 17-18 and accompanying text.

        128. See PSA § 1.01 (definition of "Class Principal Balance").

        129. Olin Corp. v. Am. Home Assurance Co., 704 F.3d 89, 99 (2d Cir. 2012) (quoting LaSalle Bank Nat'l Ass'n v. Nomura Asset Capital Corp., 424 F.3d 195, 206 (2d Cir. 2005)) (internal quotation marks omitted).

        130. Id.

        131. See PSA § 1.01 (definitions of "Controlling Class" and "Controlling Class Representative").

        132. 91 N.Y. 2d 336 (1998).

        133. Id. at 338, 340-41 (emphasis added).

        134. 63 N.Y. 2d 396 (1984).

        135. Id. at 403-04.

        136. Law Debenture Trust Co. of New York v. Maverick Tube Corp., 595 F.3d 458, 467 (2d Cir. 2010) (citations and internal quotation marks omitted).

        137. Olin Corp. v. Am. Home Assurance Co., 704 F.3d 89, 99 (2d Cir. 2012).

        138. Compl. Ex. B.

        139. Erbstein Aff. ¶ 15, Ex. 4.

        140. See PSA § 6.09(a). One implication of this circumstance is that if the Court ultimately determines that C-III's interpretation of the PSA is correct, LNR Partners may be able to challenge the validity of C-III's installation as Special Servicer in November 2012. LNR Partners has not directly asserted such a claim in this litigation, however, nor has it briefed the issue of whether, if C-III's interpretation of the contract ultimately is found to be correct, the initial appointment of C-III as Special Servicer could be deemed void retroactively and, if so, what the consequences would be—e.g., whether the role of Special Servicer would revert back to LNR Partners, or whether the Trustee would be entitled to designate a replacement. C-III, therefore, has not had the occasion to assert any affirmative defenses it might have to an improper installation claim, including, for example, acquiescence or waiver. For these reasons, I express no opinion as to the validity of C-III's appointment as Special Servicer on LNR Partners' pending motion for summary judgment. Instead, I have considered evidence of the circumstances surrounding C-III's appointment solely as course of performance evidence relevant to the proper interpretation of the PSA.

        141. See, e.g., Erbstein Aff. ¶ 7; Compl. Ex. C.

        142. See TRO Arg. Tr. 19-25.

        143. Id. at 22.

        144. See Erbstein Aff. ¶¶ 6, 10; Compl. ¶ 45.

        145. Compl. Ex. B.

        146. See TRO Arg. Tr. 23.

        147. TRO Arg. Tr. 22.

        148. Id. at 24-25.

        149. See Jenkins Transmittal Aff. Ex. A. Exhibit A to the Jenkins Transmittal Affidavit, as recorded in the docket, mistakenly excludes the content of the email from C-III's counsel to the Trustee. See D.I. No. 46. Counsel for C-III provided the Court and opposing counsel with a complete copy of the relevant correspondence at argument on C-III's motion for a temporary restraining order.

        150. Jenkins Transmittal Aff. Ex. A.

        151. GMG Capital Invs., LLC v. Athenian Venture P'rs I, L.P., 36 A.3d 776, 779 (Del. 2012); Judah v. Del. Trust Co., 378 A.2d 624, 632 (Del. 1977).

        152. Evans v. Famous Music Corp., 807 N.E.2d 869, 872 (N.Y. 2004) ("It is well settled that our role in interpreting a contract is to ascertain the intention of the parties at the time they entered into the contract").