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Note: Riverside Warehouse Partners, LLC (Borrower) borrowed USD 3.5 million from Lender, providing a mortgage as security. When Lender declared the loan to be in default, Borrower brought an action seeking a declaration that it was not in default. After this action was dismissed, Borrower sought leave to serve an amended complaint. The Supreme Court of New York, New York County, O. Peter Sherwood, J., granted Lender's motion to dismiss.

One of the claims made by Borrower was that its failure to post a USD 252,000 standby LC did not constitute a default event under the contract. Borrower argued that "the purpose of the Letter of Credit was to cover re-leasing costs after the Property becomes vacant. Thus, since [Lender] had not vacated the Leased premises, [Borrower] had no obligation to post the Letter of Credit." The Judge rejected this argument, noting that the agreement also provides "'[i]f at any time during the term of the Loan . . . [Lender] . . . gives any notice of termination, intent to vacate or physically vacates its respective leased premises.' Because that event occurred here, [Borrower] was required to post a Letter of Credit within fifteen (15) days thereafter."

[MSD/jbb]

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This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.