Parties: Plaintiff/Appellant/Applicant/Tenant- Michael B. Joseph (Counsel: Terrance F. Gilheany) Defendant/Appellee/Beneficiary/Landlord- Solow Building Company, L.L.C. (Counsel: William J. Robbins, Steven A. Stadtmauer) Issuer- PNC Bank, N.A.

Underlying Transaction: Commercial lease agreement..55 2001 LC CASE SUMMARIES

LC: Standby LC. Silent as to amount. Silent as to governing rules.

Decision: The New York Supreme Court, Appellate Division, Rosenberger, J.P., affirmed the denial of applicant's motion for a preliminary injunction by the Supreme Court, New York County, Gammerman, J.

Rationale: Where a person falls within an acceptable range of the term "tenant," there is no misrepresentation justifying injunctive relief in presenting documents based on identifying that person as the "tenant."

Factual Summary: Tenant entered into a commercial lease with beneficiary that contained a provision allowing landlord/beneficiary to draw on a standby LC that was provided by a guarantor as security for any default. Under the terms of the lease, an element of default involved filing for bankruptcy protection and the term "tenant" in the lease was defined to include the guarantor. When the applicant/guarantor filed for bankruptcy, the beneficiary drew on the LC, claiming that the "tenant" defaulted. The applicant sought to enjoin the issuer from paying and the beneficiary from drawing on the LC. The applicant moved for summary judgment, and the trial court denied the motion. On appeal, afirmed.

Legal Analysis:

1.Fraud; Default: The applicant/guarantor argued that an injunction was proper because the beneficiary/landlord had misrepresented that the tenant was in default in its demand. The appellate court rejected this argument, noting that there was "no merit" to it since "the guarantor was deemed to be a "tenant" under the default provision of the lease and the filing of a bankruptcy petition by the "tenant" was plainly an "Event of Default" pursuant to...the lease."

2. Injunction: The appellate court, in affirming a denial of injunctive relief, indicated that in order to obtain an injunction against drawing, it was necessary to "demonstrate (1) a liklihood of success on the merits; (2) that they will suffer irreparable harm in the absence of injunctive relief; and (3) a balancing of the equities in their favor."


The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.