1141 Realty Owner, et al.,

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re: 	:
:
1141 REALTY OWNER LLC, 	:
: 	Chapter 11
: 	Case No. 18-12341 (SMB)
Debtor. 	:
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MEMORANDUM DECISION AND ORDER REGARDING TCG DEBT
ACQUISITION’S MOTION FOR PARTIAL SUMMARY JUDGMENT
A P P E A R A N C E S:
WOODS OVIATT GILMAN LLP
1900 Main Place Tower
Buffalo, New York 14202
John K. McAndrew, Esq.
William F. Savino, Esq.
Of Counsel
BACKENROTH FRANKEL & KRINSKY, LLP
800 Third Avenue
New York, New York 10022
Mark A. Frankel, Esq.
Of Counsel
Attorneys for TCG Debt Acquisitions 2 LLC
SILVERMAN ACAMPORA LLP
100 Jericho Quadrangle, Suite 300
Jericho, New York 11753
Kenneth P. Silverman, Esq.
Of Counsel
WILK AUSLANDER LLP
1515 Broadway, 43rd Floor
New York, New York 10036
Alan D. Zuckerbrod, Esq.
Of Counsel
Attorneys for Debtor, 1141 Realty Owner LLC
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STUART M. BERNSTEIN
United States Bankruptcy Judge:
The Debtor, 1141 Realty Owner, LLC, borrowed $25 million from the predecessor
of TCG Debt Acquisitions 2 LLC (“TCG”). TCG filed claims, described below, that
included, among other things, default interest on the loan and associated attorneys’ fees
and expenses. TCG now moves for partial summary judgment seeking a determination
that it is entitled to default interest as of no later than January 1, 2016 for several
reasons and is entitled to its attorneys’ fees and expenses in enforcing its rights.
(Memorandum of Law in Support of Motion for Partial Summary Judgment, dated
Dec. 13, 2019 (“Motion”) (ECF Doc. # 209).) For the reasons that follow, the motion is
granted as to the request for default interest but the amount of TCG’s attorneys’ fees and
expenses present disputed factual issues that must be determined in the course of future
proceedings.
BACKGROUND
Although the Debtor disagrees, the material facts relating to the default are
undisputed. 1 At all relevant times, the Debtor owned and operated the Flatiron Hotel
(the “Hotel”) located at 9 West 26th Street, New York, NY 10010 (the “Property”).
Jagdish Vaswani (“Vaswani”) owned 90% of the Debtor and You Gotta Have Faith LLC
1 	TCG submitted a lengthy, argumentative declaration by Michael K. Shah, a manager of TCG, that
purported to narrate the facts supporting the Motion. (See Declaration of Michael K. Shah in Support of
Motion for Partial Summary Judgment, dated Dec. 19, 2019 (“Shah Declaration”) (ECF Doc. # 207).)
With one exception relating to TCG’s acquisition of its interest, the pertinent events occurred before TCG
acquired its interest and Shah plainly lacks personal knowledge of the facts. Accordingly, and but for the
one exception, I have not considered its content on the matters discussed in this opinion. I have only
considered the exhibits attached to his declaration. This is not intended as a criticism of Shah but of
TCG’s counsel.
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(“YGHF”) owned the remaining 10%. Robert K.Y. “Toshi” Chan (“Chan”) owned 100%
of YGHF.
On April 16, 2015, the Debtor borrowed $25 million from TGC’s predecessor
(Rialto) evidenced by Note A in the amount of $22,500,000 and Note B in the amount
of $2,500,000, both secured by the Property. The documents (“Loan Documents”)
comprising this transaction included a Loan Agreement, 2 (Shah Declaration, Ex. 1), and
Mortgage Agreement. 3 (Shah Declaration, Ex. 3.) Rialto subsequently assigned its
interests to Wilmington Trust, N.A. (“Wilmington”) and RMEZZ Flatiron LLC and
RMEZZ Flatiron LLC and Wilmington transferred their interests to TCG on May 18,
2018 and April 18, 2019, respectively. (Shah Declaration at ¶ 16.)
The Debtor had the use of three liquor licenses (the “Liquor Licenses”) issued by
the New York State Liquor Authority (“SLA”) to Chan’s wholly-owned affiliates, 9 West
26 St. Rest., LLC or Toshi’s Penthouse, Inc. (the “Licensees”). 4 The Liquor Licenses
listed Chan, among others, as the principal of the corporate licensee. (See Zuckerbrod
Declaration, Ex. H.) Under a Management Agreement executed as part of the same
2 	A copy of the Loan Agreement, dated April 16, 2015, is annexed as Exhibit 1 to the Shah
Declaration.
3 	A copy of the Consolidated, Amended and Restated Mortgage, Assignment of Leases and Rents,
Fixture Filing and Security Agreement, dated April 16, 2015, is annexed as Exhibit 3 to the Shah
Declaration.
4 	Section 1.1.2 of the Loan Agreement defines “Liquor License”:
“Liquor License” shall mean, collectively, (i) Hotel Liquor License certificate License
Serial No. 1257575 issued to 9 WEST 26 ST. REST., LLC, a New York limited liability
company, on January 24, 2014, and expiring on January 31, 2016, (ii) License Serial No.
1266611 issued to 9 WEST 26 ST. REST., LLC, a New York limited liability company, on
February 1, 2014, and expiring on January 31,2016, and (iii) License Serial No. 1266607
issued to TOSHI’S PENTHOUSE INC., a New York corporation, on January 1, 2015, and
expiring on December 31, 2016, as each may be replaced, modified or extended.
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transaction, 5 the Debtor hired another Chan affiliate, You Gotta Have Faith Realty, LLC
(“Manager”), to manage the Property. The Management Agreement gave the Manager
the “exclusive supervision and control” of the operations “in consultation with and
oversight of the [Debtor].” (Id. at § 1.02.) Among other things, the Manager bore the
responsibility to provide food and beverage services. (Id. at § 1.03(10).) The
Management Agreement terminated on December 31, 2015, (id. at § 2.01), unless
terminated sooner upon written notice by one of the parties. (Id. at § 2.02.)
According to Chan, who is the principal of the Manager, he stopped providing
services under the Management Agreement in August 2015. In a declaration, dated
Sept. 29, 2017, submitted to the United States District Court for the Southern District of
New York in connection with his motion to intervene in a foreclosure action discussed
below, (see Shah Declaration, Ex. 13), Chan stated that Vaswani had terminated the
Management Agreement in August 2015, removed Chan at that time and Chan had not
functioned in any managerial capacity since then. (Id., Ex. 13, at ¶¶ 4, 6.) The Debtor
then took steps to cause the Liquor Licenses to be transferred to the Debtor but no
transfer had occurred as of the date of Chan’s declaration. (Id. at ¶¶ 7, 8.) There is no
dispute that Chan’s managerial role ended, if not in August, then no later than
December 31, 2015 when the Management Agreement terminated by its own terms and
was not extended or renewed.
Despite the termination of Chan’s managerial authority and the failure to transfer
the Liquor Licenses, the Debtor continued to sell liquor using Chan’s Liquor Licenses.
5 	A copy of the Management Agreement, dated April 16, 2015, is annexed as Exhibit 4 to the Shah
Declaration.
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In a September 11, 2017 email to Wilmington’s special servicer, Kevin Semon, Vaswani
stated that
1141 Broadway Restaurant and Penthouse Operations LLC is the entity
operating the F&B 90% Owned by Jagdish Vaswani and 10% owned by
Robert Chan. We are still operating under the hotel license issued to
Robert Chan under 9W 26 th Street LLC. Discussions to add my name to
the license are still ongoing.
(Shah Declaration, Ex. 16.) Moreover, Vaswani admitted in his Declaration of
Jagdish Vaswani, dated Sept. 25, 2017 (attached to the Zuckerbrod Declaration
as Ex. C), submitted in the foreclosure action in opposition to the motion by
Wilmington Trust, N.A., TCG’s immediate predecessor, two years after Chan’s
termination, that liquor sales accounted for one-third of the food and beverage
revenues, and “even if the Hotel stopped serving alcohol,” it would not affect the
lender’s collateral which was otherwise fully protected. (Id., Ex. C, at ¶ 9 n. 2.)
Chan’s termination underlies the underlies the Debtor’s default. An Event of
Default occurs under section 7.1(xii) of the Loan Agreement “if, without Lender’s prior
written consent, any required license, permit, including, without limitation the Liquor
License, relating to the Property ceases to be in full force and effect.” (Loan Agreement
§ 7.1(xii).) This Event is non-curable. Wilmington took the position that as a result of
the termination of Chan as Manager, the “Liquor License . . . relating to the Property
cease[d] to be in full force and effect” because the Debtor could no longer use the Liquor
Licenses to sell liquor. As a result, Wilmington’s counsel sent a Notice of Default/Notice
of Termination, dated Sept. 15, 2017, (Shah Declaration, Ex. 27), stating that the Debtor
was in default under the Loan Documents “in that, among other things, Borrower has
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failed to maintain valid and effective liquor licenses issued by the New York Liquor
Authority permitting Borrower to serve alcoholic beverages at the Property.”
Three days later, Wilmington commenced an action in the United States District
Court, Southern District of New York, No. 17-cv-7081 (the “Foreclosure Action”),
seeking to foreclose on the Property on the grounds that “Borrower’s failure to maintain
valid and effective liquor licenses issued by the SLA permitting Borrower to serve
alcoholic beverages at the Property constitutes an Event of Default under the Loan
Documents.” (Verified Complaint at ¶ 31, Wilmington Trust, N.A. v. 1141 Realty Owner
LLC, No. 1:17-cv-07081-LGS-SLC (S.D.N.Y. Sept. 18, 2017), ECF Doc. # 1.)
The Bankruptcy
On July 31, 2018, the Debtor filed this chapter 11 case, staying the foreclosure
action. On November 2, 2018, Wilmington filed Claim No. 14 in the amount of
$32,048,285.29.6 The claim included, inter alia, default interest on the two notes in the
aggregate sum of $3,155,801.16. (Objection Declaration, Ex. A at ECF p. 9 of 19.) 7 TCG
subsequently transmitted an “Updated Payoff Amount” calculation to Debtor on April
25, 2019, seeking default interest in the sum of $4,136,924.62. (Id., Ex. C, at ECF p. 2 of
19 (ECF Doc. # 186-5.) Finally, on June 14, 2019, TCG filed Claim No. 17 asserting an
administrative claim for post-petition interest ($2,144,942.92) and legal fees
($419,860.64). (Id., Ex. B, at ECF p. 7 of 31.) In the meantime, on May 9, 2019, the
6 	A copy of Claim No. 14 is annexed as Exhibit A to the Declaration of Alan D. Zuckerbrod, in
Support of Objection of Reorganized Debtor, 1141 Realty Owner LLC, to Pre-Petition Claims and
Administrative Claims of TCG Acquisitions 2 LLC, dated Sept. 11, 2019 (“Objection Declaration”) (ECF
Doc. # 186).)
7 	“ECF p.” refers to the pagination imprinted at the top of every page of a document filed on the
Court’s CM/ECF system.
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Court confirmed the Debtor’s plan. (“Plan”). 8 (ECF Doc. # 159.) The Plan provided for
the payment of the TCG’s lien claims in full. (See Plan § 3.06.)
The Debtor objected to Claim Nos. 14 and 17 as well as the Updated Payoff Letter
on numerous grounds on September 11, 2019. (Objection of Reorganized Debtor, 1141
Realty Owner LLC, to Pre-Petition Claims and Administrative Claims of TCG
Acquisitions 2 LLC, dated Sept. 11, 2019 (“Claim Objection”) (ECF Doc. # 186).) During
a hearing held on November 13, 2019, the Court instructed the parties to file the instant
motion for summary judgment to narrow the issues.
TCG filed the Motion on December 13, 2019. It contends, inter alia, that default
interest started to accrue as early as December 31, 2015 or January 1, 2016, when the
Management Agreement terminated by its own terms and Chan ceased managing the
Debtor’s food and beverage services. (Motion at 5, 13-15, 19-21.) At that point, the
Liquor Licenses were no longer “in full force and effect” “relating to the Property” within
the meaning of the Loan Agreement. 9 	(Motion at 20-21.) Any subsequent sale of
alcohol by the Debtor, an affiliate of the Debtor or Vaswani constituted illegal “availing”
in contravention of New York Alcoholic Beverage Control Law (“ABC”) § 111. (Motion at
13-15.) The Debtor responds that the Liquor Licenses never “cease[d] to be in full force
and effect” because the SLA never revoked, cancelled, or suspended them. (Opposition
at 7-9.)
8 	First Amended Plan of Reorganization for 1141 Realty Owner LLC and Flatironhotel Operations
LLC Under Chapter 11 of the Bankruptcy Code, dated February 20, 2019 (ECF Doc. # 159-1).
9 	TCG asserted additional objections that it included in the Motion but it is unnecessary to reach
those arguments in light of the disposition of the Motion.
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DISCUSSION
A. Standard Governing the Motion
The Loan Agreement is governed by New York law. (Loan Agreement § 9.3.)
When asked to interpret contractual language, the question under New York law is
“whether the contract is unambiguous with respect to the question disputed by the
parties.” Law Debenture Tr. Co. of N.Y. v. Maverick Tube Corp., 595 F.3d 458, 465 (2d
Cir. 2010) (quoting Int’l Multifoods Corp. v. Commercial Union Ins. Co., 309 F.3d 76,
83 (2d Cir. 2002)). Ambiguity presents a question of law. Id. A contract is ambiguous
if it “could suggest more than one meaning when viewed objectively by a reasonably
intelligent person who has examined the context of the entire integrated agreement and
who is cognizant of the customs, practices, usages and terminology as generally
understood in the particular trade or business.” Int’l Multifoods, 309 F.3d at 83
(internal quotation marks and citation omitted); accord Cont’l Ins. Co. v. Atl. Cas. Ins.
Co., 603 F.3d 169, 180 (2d Cir. 2010); Maverick Tube, 595 F.3d at 466. An agreement is
not ambiguous if it has a definite and precise meaning, and unambiguous language does
not become ambiguous because a party urges a different interpretation that strains the
language beyond its ordinary meaning. Maverick Tube, 595 F.3d at 467; Seiden Assocs.,
Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir. 1992). Where the dispute
concerns a provision of the contract, the Court must consider the contract “as a whole to
ensure that undue emphasis is not placed upon particular words and phrases,” Bailey v.
Fish & Neave, 868 N.E.2d 956, 959 (N.Y. 2007); accord Maverick Tube, 595 F.3d at
468, and “seek to give ‘[e]ffect and meaning . . . to every term of [a] contract.’” XL
Specialty Ins. Co. v. Level Glob. Inv’rs, L.P., 874 F. Supp. 2d 263, 284 (S.D.N.Y. 2012)
(quoting Reda v. Eastman Kodak Co., 649 N.Y.S.2d 555, 557 (N.Y. App. Div. 1996)).
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If the contract is ambiguous, “‘the court may accept any available extrinsic
evidence to ascertain the meaning intended by the parties during the formation of the
contract.’” Morgan Stanley Grp. Inc. v. New England Ins. Co., 225 F.3d 270, 275-76
(2d Cir. 2000) (quoting Alexander & Alexander Servs., Inc. v. These Certain
Underwriters at Lloyd’s, London, 136 F.3d 82, 86 (2d Cir. 1998)). If no extrinsic
evidence exists, the court may determine the meaning of the contract as a question of
law. Revson v. Cinque & Cinque, P.C., 221 F.3d 59, 66 (2d Cir. 2000); Hartford Acc. &
Indem. Co. v. Wesolowski, 305 N.E.2d 907, 909 (N.Y. 1973) (“[I]f the equivocality must
be resolved wholly without reference to extrinsic evidence the issue is to be determined
as a question of law for the court.”).
B. 	“Availing”
ABC § 111 is central to the parties’ dispute. It provides in pertinent part:
A license issued to any person . . . for any licensed premises shall not be
transferable to any other person or to any other premises or to any other
part of the building containing the licensed premises except in the
discretion of the authority. It shall be available only to the person therein
specified, and only for the premises licensed and no other except if
authorized by the authority. . . .
A violation of ABC § 111 constitutes “availing.” See Hacker v. State Liq. Auth. of State of
N.Y., 225 N.E.2d 512, 516 (N.Y. 1967) (“the allowing of someone not mentioned in the
application or license to avail himself of the license . . . is an actual substantive violation
of the Alcoholic Beverage Control Law which did not occur solely at the time of the
licensee’s application, but rather continued throughout the entire duration of the license
(§ 111)”). “The principal purpose of section 111 has been said to be the prevention of
undesirable persons, ineligible to secure a license, from operating a liquor business
through another licensee as a blind.” Cleveland Place Neighborhood Ass’n v. New York
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State Liquor Auth., 709 N.Y.S.2d 12, 15-16 (N.Y. App. Div. 2000) (quotations omitted)
(citing Potter v. New York State Liq. Auth., 322 N.Y.S.2d 829, 831 (N.Y. App. Div.
1971)). The key to availing is not ownership of the licensed premises, but rather
“direction, supervision or oversight” of liquor sales. See Alla Capital Dev. Corp. v. New
York State Liq. Auth., 74 N.Y.S.3d 810, 812 (N.Y. App. Div. 2018) (“licensee may not
make its liquor license available to another by leaving the licensed premises under the
control of an individual or entity without ‘direction, supervision or oversight,’ even
where that person receives no financial benefit”).
Under ABC § 111, a liquor license is limited to the particular licensee and the
specific premises. Thus, the licensee cannot use it at another location and a non-
licensee cannot use it at the premises named in the license. Furthermore, the ABC
focuses on the individuals behind the corporate licensee. See ABC § 126(4) (precluding
the issuance of a license to a corporation unless the principal officers and directors
satisfy the individual requirements and are not subject to the disqualifying limitations
set forth therein). A corporate licensee operated by an undisclosed principal without the
SLA’s permission violates the ABC. Shore Haven Lounge, Inc. v. New York State
Liquor Auth, 332 N.E.2d 883, 884 (N.Y. 1975) (citing ABC § 99-d(2));10 see Dumbarton
Oaks Restaurant & Bar, Inc. v. New York State Liquor Auth, 446 N.E.2d 128, 129 (N.Y.
1983) (a licensee cannot permit someone not named in the license to avail himself of the
10 	ABC § 99-d(2) provides, in pertinent part:
Before any change in the members of a limited liability company or the transfer or
assignment of a membership interest in a limited liability company or any corporate
change in stockholders, stockholdings, alcoholic beverage officers, officers or
directors, . . . can be effectuated for the purposes of this chapter, there shall be filed with
the liquor authority an application for permission to make such change . . . .
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license); Happy Landing Lounge, Inc. v. State Liquor Auth., 631 N.Y.S.2d 466, 466-67
(N.Y. App. Div. 1995) (sole principal of corporate licensee who “provided no direction,
supervision or oversight of the business during his sojourns, leaving the affairs and
finances of the bar in the unfettered discretion of” his friends was held to permit his
friends “to avail themselves of its liquor license in contradiction of Alcohol Beverage
Control Law § 111”); De Leon v. New York State Liquor Auth., 582 N.Y.S.2d 4, 5 (N.Y.
App. Div. 1992) (petitioner-licensee who sold the licensed premises to vendee who
operated the premises without licensee’s involvement was guilty of availing); see
generally 3 N.Y. J UR . 2d, Alcoholic Beverages § 25 (“Allowing someone not mentioned
in either the application for a liquor license or the license itself to avail himself of the
license constitutes . . . an actual substantive violation of the [ABC § 111].”) Accordingly,
the principal named in the application or the license must manage the operations.
The Debtor does not dispute that the Property is the licensed premises of the
Liquor Licenses or that Chan, the principal named in the Licensees, is the person
authorized to use the Liquor Licenses issued to his corporations at the Property. In
addition, there is no contention that the Debtor used the Liquor Licenses to sell liquor at
other premises. Hence, the sole question is whether the Liquor Licenses ceased to be in
“full force and effect” within the meaning of the Loan Agreement once the Debtor
terminated Chan as Manager even if the Liquor License were not revoked by the SLA.
I conclude that TGC’s interpretation of the Loan Agreement is reasonable, the
Debtor’s is not, and accordingly, an Event of Default occurred when Chan ceased to
manage the operations of the Debtor, and specifically, the food and beverage service. At
that point, the new managers of the Debtor, whoever they were, could not sell liquor at
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the Property. They did not have a liquor license of their own and they could not use
Chan’s license. Thus, although the Liquor Licenses had not been revoked by the SLA
and Chan could arguably have returned to manage the food and beverage service
thereby allowing the Debtor to sell liquor at the Property, the Liquor Licenses were not
effective to sell liquor at the Property without Chan.
The Debtor’s interpretation, which equates the absence of “full force and effect”
with revocation, is unreasonable. Obviously, the Liquor Licenses would not be in full
force and effect at any location if they were revoked. But that was not the only
circumstance that rendered them ineffective at the Property. As noted, the Debtor could
not hire another manager and use Chan’s Liquor Licenses. The Debtor’s basic
argument, that the parties contemplated a distinction between Liquor Licenses that had
been revoked and unrevoked Liquor Licenses that could not be used to sell liquor at the
premises, is untenable.
Indeed, the Agreement Regarding Liquor Licenses, dated Apr. 16, 2015 (“Liquor
Licenses Agreement”), (see Shah Declaration, Ex. 6), among the Debtor, the Licensees,
and Rialto, demonstrates the parties’ focus on the importance of effective liquor
licenses. As noted, liquor sales generated revenue needed to repay the loan. Through
the Liquor Licenses Agreement, executed as “additional consideration for the making of
the Loan by [Rialto],” the Debtor and the Licensees agreed that in the event Rialto
acquired the Hotel through foreclosure, they would provide cooperation and assistance
to Rialto to continue to use the existing Liquor Licenses and any other liquor licenses
subsequently acquired under which alcoholic beverages were served at the Hotel and to
obtain new licenses as required by law. (Id. at ¶ F, § 2, at 2.) If Rialto could have used
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the unrevoked Liquor Licenses, Rialto would not have required the Debtors’ and the
Licensees’ cooperation to continue using the Liquor Licenses.
Nor was this Event of Default covered by a different default provision, requiring
notice and an opportunity to cure, to the exclusion of section 7.1(xii). The Debtor
covenanted under the Loan Agreement to comply generally with all Legal Requirements
as defined therein and specifically to “keep in full force and effect all material licenses,
permits and applicable governmental authorizations necessary for the continued use
and operation of the Property.” (Loan Agreement § 4.1.1.) The Debtor contends that the
illegal sale of liquor and availing violated section 4.1.1, the Loan Agreement must be
strictly construed, and accordingly, no Event of Default occurred absent notice and an
opportunity to cure. (See Opposition at 9, 11.)
This argument lacks merit. Section 4.1.1 lists the Debtor’s loan covenants, not the
Events of Default. Section 7.1 lists the Events of Default and addresses the specific
situation where the Liquor Licenses, a defined term in the Loan Agreement, (see Loan
Agreement at § 1.1, at pp. 6-7), cease to be of “full force and effect.” (Loan Agreement §
7.1(xii)). Furthermore, section 7.1 identifies other Events of Default that do require
notice and an opportunity to cure. (E.g., Loan Agreement at §§ 7.1(viii), (ix).) “It is
axiomatic that courts construing contracts must give specific terms and exact terms . . .
greater weight than general language.” County of Suffolk v. Long Island Lighting Co.,
266 F.3d 131, 139 (2d Cir. 2001) (quotations omitted) (citing Restatement (Second) of
Contracts § 203(c) (1981)). Here, section 7.1 deals with Events of Default and the
specific language in section 7.1(xii) lists ineffective Liquor Licenses as an Event of
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Default not requiring notice and an opportunity to cure. 11 (See also Loan Agreement at
§ 9.11.)12 This specific language trumps section 4.1.1’s covenants which have nothing to
do with Events of Default. Thus, no notice was required. That Wilmington gave notice
in September 2017 prior to foreclosing and accelerating the debt does not mean that an
Event of Default did not occur until then. Further, default interest began to run until
the default was cured or the debt was fully paid. (Loan Agreement at § 2.2.1 (“The
Default Rate shall be computed from the occurrence of the Event of Default until the
earlier of the date upon which the Event of Default is cured or the date upon which the
Debt is paid in full.”).) The record does not reflect whether or when this particular
default was cured.
Finally, the Debtor’s authorities are distinguishable. It cites Kelly v. Casale, 695
N.Y.S.2d 184 (N.Y. App. Div.), lv. to appeal denied, 723 N.E.2d 89 (N.Y. 1999 (Table)
for the “undisputed” proposition that a liquor license remains in “full force and effect”
unless it has been revoked. (Opposition at 7.) There, the SLA revoked Kelly’s liquor
license for allowing the licensed premises to become disorderly in violation of ABC
11 	The Debtor implies that it did not sell liquor after Chan ceased operating the food and beverage
service, (Opposition at 10-11), although Vaswani’s September 2017 email and declaration show otherwise.
In any case, whether the Debtor did or did not sell liquor without Chan is immaterial. The Event of
Default occurred when the Liquor Licenses ceased to be of full force and effect at the Property, not when
the Debtor thereafter illegally sold liquor.
12 	Loan Agreement § 9.11 provides:
Waiver of Notice. Borrower shall not be entitled to any notices of any nature
whatsoever from Lender except with respect to matters for which this Agreement or the
other Loan Documents specifically and expressly provide for the giving of notice by
Lender to Borrower and except with respect to matters for which Borrower is not,
pursuant to applicable Legal Requirements, permitted to waive the giving of notice.
Borrower hereby expressly waives the right to receive any notice from Lender with
respect to any matter for which this Agreement or the other Loan Documents do not
specifically and expressly provide for the giving of notice by Lender to Borrower.
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§ 106(6). Kelly v. Casale, 695 N.Y.S.2d at 185. Kelly brought an Article 78 proceeding
to review the revocation, arguing, among other things, that the six-year delay between
the cited violations and the revocation caused him prejudice. Specifically, he
maintained that he had expended substantial sums to renovate the premises during the
six years relying on the fact that his license had been renewed in the interim. Id. The
court rejected the claim of prejudice because the renewal of Kelly’s license had allowed
him to continue in business. Id. Importantly, the case did not involve availing. Kelly
did not let someone else use his license to sell liquor at his premises.
Here, Debtor violated a different provision, ABC § 111, which allows only those
persons specified in the license to sell liquor at the specified premises. While the
licensee in Kelly v. Casale was allowed to operate his business until the license was
revoked, it does not follow that the Debtor could sell alcohol at the Hotel until Chan’s
Liquor Licenses were revoked. Once Chan’s management ceased, the Liquor Licenses
were not in “full force and effect” at the premises within the meaning of the Loan
Agreement.
The Debtor also argues that the SLA must hold a hearing before it can revoke,
cancel, suspend a license or subject a licensee to a monetary penalty. See ABC § 119(1)-
(3); see also Brenner v. Bruckman, 3 N.Y.S.2d 265, 268 (N.Y. App. Div. 1938), appeal
dismissed, 278 N.Y. 503 (1938); Yates v. Mulrooney, 281 N.Y.S. 216, 218-19 (N.Y. App.
Div. 1935). However, as discussed above, the Liquor Licenses were not in “full force and
effect” at the Hotel without regard to whether the SLA held a hearing or actually revoked
the Liquor Licenses.
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C. 	Attorneys’ Fees
The Loan Documents generally permit TCG to recover the reasonable attorneys’
fees and expenses incurred in enforcing its rights. 13 The Debtor contends that
Wilmington’s pre-petition attorneys’ fees incurred in its “improper” foreclosure action
should be disallowed in their entirety but does not dispute TCG’s reasonable post-
petition attorneys’ fees if the acceleration was justified. (Opposition at 33.) The Debtor
also incorporates by reference its previous objection to TCG’s claims concerning the
unreasonableness and excessiveness of TCG’s attorneys fees. (See Claim Objection at ¶¶
80-104.)
The Court has concluded that an Event of Default occurred no later than January
1, 2016 when the Liquor Licenses ceased to be of full force and effect. That Event of
Default (as well as others) formed the basis for the foreclosure action. The foreclosure
action was not “improper.” Accordingly, TCG is entitled to its reasonable pre-petition
13 	Section 9.13 of the Loan Agreement requires the Debtor to reimburse Lender:
for all reasonable costs and expenses (including reasonable attorneys’ fees and
disbursements) incurred by Lender in connection with (i) Borrower’s ongoing
performance of and compliance with Borrower’s agreements and covenants contained in
the Loan Documents . . . ; (v) enforcing or preserving any rights . . . in each case against,
under or affecting [Debtor], the Loan Documents, the Property or any other security
given for the Loan; and (vi) enforcing any Obligations of or collecting any payments due
from [Debtor] . . . under the Loan Documents . . . in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the nature . . .
of any Bankruptcy Action . . . .
Under Section 5.6 of the Mortgage Agreement, Debtor agreed to pay Lender:
reasonable legal expenses and attorneys’ fees, incurred or paid by Lender in protecting its
interests in the Property or in collecting any amount payable hereunder or in enforcing its
rights hereunder with respect to the Property (including commencing any foreclosure
action), whether or not any legal proceeding is commenced . . . , together with interest
thereon at the Default Rate from the date paid or incurred by Lender until such expenses
are paid by Borrower.
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attorneys’ fees and expenses incurred in connection with the foreclosure suit.
Furthermore, because TCG is oversecured, the portion of its Claims for attorneys’ fees
and expenses is secured. See 11 U.S.C. § 506(b). However, the reasonableness of those
fees as well as the post-petition fees, and hence, the allowed amount to be paid under
the Plan, requires the Court to consider the sufficiency of TCG’s (and its predecessors’)
contemporaneous time records and any other evidence bearing on the question of
reasonableness. This determination must await further proceedings.
CONCLUSION
The Motion is granted to the extent of declaring that the Debtor was in default
under section 7.1(xii) of the Loan Agreement no later than January 1, 2016 and default
interest ran from that date. In light of this determination, the Court does not address
the other alleged defaults identified by TCG. In addition, TCG is entitled to the
reasonable attorneys’ fees and expenses to the extent provided by the Loan Documents,
including those reasonable attorneys’ fees and expenses incurred in connection with the
foreclosure action, but the liquidation of that part of TCG’s claims must also await
another day. The Court has considered the Debtor’s remaining arguments and
concludes that they lack merit.
So ordered.
Dated: New York, New York
March 17, 2020
/s/ Stuart M. Bernstein
STUART M. BERNSTEIN
United States Bankruptcy Judge
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