Justia Contracts Opinion Summaries

A major equity investor contributed $65 million to a joint venture formed to acquire and develop a luxury residential tower in New York City. The project was financed with significant loans, including a $325 million mezzanine loan from Apollo entities. After construction cost overruns put the mezzanine loan in default, Apollo and the joint venture entered a forbearance agreement splitting the loan and securing a portion with the joint venture’s equity. Apollo later assigned the junior mezzanine loan to Spruce Capital Partners, which then initiated a strict foreclosure under the Uniform Commercial Code. This process extinguished the joint venture’s equity—including the plaintiff’s investment—while allegedly allowing the project sponsor to retain a role and equity interest. The investor claimed that Apollo, Spruce, and the sponsor colluded to cut it out of the project’s value through assignment and foreclosure.The Supreme Court, New York County, dismissed the investor’s breach of implied covenant claim against Spruce but allowed the claim against Apollo to proceed, while dismissing tortious interference claims. The Appellate Division, First Department, reversed in part by dismissing the implied covenant claim against Apollo, holding that Apollo’s sole discretion to assign the loan foreclosed such a claim, and otherwise affirmed the dismissal of the tortious interference claims.The New York Court of Appeals held that a party’s sole discretion to assign a loan does not exempt it from the implied covenant of good faith and fair dealing. The Court concluded that the plaintiff sufficiently pleaded that Apollo may have exercised its assignment right as part of a bad faith scheme to deprive the investor of the benefit of its bargain, reviving the implied covenant claim against Apollo. The Court affirmed the dismissal of the tortious interference claims for insufficient pleading. The case was remitted to Supreme Court for further proceedings on the implied covenant claim. View "111 W. 57th Inv. LLC v 111 W57 Mezz Inv. LLC" on Justia Law

Aberdeen Developers, LLC obtained a $41 million loan secured by a mixed-use building in Chicago. The loan was governed by two agreements: a Loan Agreement and a Cash Management Agreement (CMA). During the COVID-19 pandemic, a major tenant filed for bankruptcy, which under the CMA allowed the loan servicer, LNR Partners, LLC, to trigger a Cash Sweep Event Period. As a result, building income was redirected to a special account controlled by LNR Partners. The dispute arose over how long LNR Partners could retain the excess revenue (Excess Cash Flow) in this account: Aberdeen Developers argued for monthly disbursement, while LNR Partners asserted that it could hold the funds until a specific cure event occurred, which had not and might never happen.The case was initially filed by Aberdeen Developers in Illinois state court, alleging breach of contract. The defendants removed the case to the United States District Court for the Northern District of Illinois. The district court concluded that the relevant agreements unambiguously allowed LNR Partners to retain the Excess Cash Flow until the end of the contract term and dismissed the complaint under Rule 12(b)(6).Upon appeal, the United States Court of Appeals for the Seventh Circuit reviewed the district court’s dismissal de novo. The Seventh Circuit determined that the language in the Loan Agreement and CMA was ambiguous because both parties’ interpretations were reasonable. The court held that ambiguity in the contract meant the case could not be resolved on a motion to dismiss and factual development was required to determine the parties’ intent. The Seventh Circuit therefore reversed the district court’s dismissal and remanded the case for further proceedings. View "Aberdeen Developers, LLC v Wells Fargo Bank, N.A." on Justia Law

A dispute arose following a failed real estate transaction involving the sale of a hotel property in Warwick, Rhode Island. The property was to be sold by Shiva, LLC, of which Jay Patel was the registered agent, to LandingPartners LLC under a Purchase and Sale and Discounted Pay-Off Agreement. Centreville Bank held a mortgage on the property, which was in default. When Shiva, Airport Hospitality (another entity linked to Patel), and Patel failed to respond to an earlier lawsuit brought by LandingPartners, the Superior Court entered a default judgment against them, ordering specific performance of their obligations under the agreement and appointing a commissioner to facilitate the closing. Afterward, LandingPartners and Centreville Bank reached a consent order with new terms for the sale and discharged the mortgage, and the case was dismissed with prejudice.Shortly after the dismissal of the first case, Patel filed a new lawsuit in the Washington County Superior Court against LandingPartners, Centreville, and a related entity, 1850 Post Road Owner LLC. He alleged violations of the agreement, fraud, misrepresentation, unjust enrichment, and breach of the implied covenant of good faith and fair dealing. The defendants moved to dismiss, arguing the claims were barred by res judicata because they arose from the same transaction addressed in the prior litigation. The Superior Court agreed, finding that the parties or their privies were the same, the issues arose from the same transaction, and there was a final judgment in the first action.The Supreme Court of Rhode Island affirmed the Superior Court’s judgment. The Court held that res judicata barred Patel’s claims, as all issues now raised were or could have been raised in the initial suit, and the new claims concerned the same transaction. The dismissal of Patel’s complaint with prejudice was therefore upheld. View "Jay Patel v. LandingPartners LLC et al." on Justia Law

A regional airport authority undertook a project to remove a hill from land owned by a private property holder. Instead of purchasing the land outright, the parties entered into an agreement allowing the airport authority to remove the hill and, afterwards, to further lower the elevation of the property by overblasting, which would make future development easier for the owner. The airport authority completed the hill removal but failed to perform the overblasting. The landowner then sued for breach of contract, seeking damages for the incomplete work.The United States District Court for the Southern District of West Virginia found that the airport authority had breached the agreement and granted partial summary judgment to the landowner on liability. Both sides submitted expert reports concerning the cost to complete the required overblasting, ultimately agreeing that this cost was over $4 million. However, the district court held that the cost of completion was grossly disproportionate to the value of the property and applied the “gross disproportionality” rule, awarding only nominal damages because it found insufficient evidence of the property’s diminution in value. The landowner appealed, and the United States Court of Appeals for the Fourth Circuit certified to the Supreme Court of Appeals of West Virginia the question of whether, how, and by whom the gross disproportionality rule should be applied in such cases.The Supreme Court of Appeals of West Virginia held that, in breach of construction contract cases, the gross disproportionality rule may be applied to limit damages. The court clarified that gross disproportionality is calculated using the diminution in value approach, measuring the difference in value between the property as is and as it should have been if the contract had been fully performed. The court further held that the breaching party bears the burden of invoking and proving gross disproportionality. If the breaching party fails to meet this burden, the non-breaching party’s proven measure of damages applies. View "Corotoman, Inc. v. Central West Virginia Regional Airport Authority" on Justia Law

The dispute centers on foreclosure proceedings involving a residential property in West Warwick, Rhode Island. The plaintiffs purchased the property in 2006, executing a mortgage and promissory note with Long Beach Mortgage Company. After defaulting on the mortgage payment due July 1, 2022, Select Portfolio Servicing (SPS), the mortgage servicer, sent a notice of default and right to cure by certified mail in August 2022. The mortgage had previously been assigned to Deutsche Bank National Trust Company. Following further notices, including a notice of acceleration, the property was sold at foreclosure in April 2023. Plaintiffs then filed suit, alleging wrongful foreclosure based on purported defects in the required notices, specifically arguing that the notices failed to strictly comply with paragraph 22 of the mortgage contract, which governs the notice requirements prior to foreclosure.In Kent County Superior Court, the defendants moved for summary judgment, arguing that the notices strictly complied with the contractual requirements and properly informed plaintiffs of their rights, including the right to cure and reinstate. Plaintiffs objected, asserting that the notice of default contained inaccuracies regarding the cure date and that the notice of acceleration used language that was insufficiently unequivocal with respect to their right to reinstate. The hearing justice found no genuine issues of material fact and granted summary judgment in favor of defendants, concluding that the notices satisfied the requirements of the mortgage. Judgment was entered in February 2025.The Supreme Court of Rhode Island reviewed the case de novo. It held that the notice of default strictly complied with paragraph 22 of the mortgage, adequately informed plaintiffs of the required cure date, and unequivocally stated the right to reinstate after acceleration. The Court further determined that the notice of acceleration was not required to reiterate the right to reinstate in the same manner. The Court affirmed the judgment of the Superior Court. View "Diaz v. Select Portfolio Servicing" on Justia Law

An Oklahoma company, formed to acquire mineral rights in Appalachia, alleged that two Texas parties failed to convey certain West Virginia mineral interests as contractually agreed. The Oklahoma company, which included non-Texas owners and participants, had funded the purchase of these rights, but a number of mineral deeds were recorded in the name of the Texas seller rather than the buyer. As a result, royalties from those mineral rights were paid to the seller. The Oklahoma plaintiff sought to compel the Texas defendants to reform the deeds, perform their contractual obligations, declare the plaintiff’s entitlement to the royalties, and enjoin the defendants from transferring the disputed interests.The 141st District Court in Tarrant County, Texas, denied the defendants’ plea to the jurisdiction and ultimately granted summary judgment for the plaintiff, awarding specific performance, deed reformation, declaratory relief, an injunction, and monetary relief. The court found it had jurisdiction over the parties and the contract, even though the mineral rights were located in West Virginia. On appeal, the Court of Appeals for the Second District of Texas reversed, holding that Texas courts lacked subject-matter jurisdiction because the suit’s gravamen was the adjudication of title to foreign (West Virginia) real property.The Supreme Court of Texas reviewed the matter and disagreed with the appellate court’s application of the so-called “gist” rule. The Supreme Court held that Texas courts with personal jurisdiction over the parties may issue in personam judgments concerning contractual obligations to convey out-of-state real property, as long as the judgment binds only the parties and does not purport to establish or alter title to the property by the court’s own force. The Supreme Court reversed the appellate court’s judgment and remanded for consideration of remaining issues. View "BRAXTON MINERALS III, LLC v. BAUER" on Justia Law

A real estate transaction in Shelby County, Alabama, gave rise to this dispute. In 2007, a property owner named Ellison financed the purchase of her home with a loan secured by a mortgage, which was eventually sold to U.S. Bank Trust National Association and serviced by SN Servicing Corporation. After Ellison defaulted, U.S. Bank bought property at a foreclosure sale. Due to confusion over addresses and a lack of a survey, U.S. Bank and its agent mistakenly believed they were selling the Ellison property, a valuable bricked double-wide trailer, to Marco J. Bonilla. Bonilla purchased the property for $95,000, but later discovered that the deed conveyed a different and less valuable property. He was unable to resell the property he believed he owned.Bonilla sued U.S. Bank and SN Servicing in the Shelby Circuit Court, asserting claims for conversion, breach of contract, negligence, wantonness, and sought rescission of the deed. Both sides moved for summary judgment. The circuit court granted summary judgment for Bonilla on all claims, rescinded the transaction, ordered Bonilla to execute a quitclaim deed returning the property, and awarded him $114,000 in compensatory damages, $14,913.70 in interest, and $75,000 in punitive damages for wantonness. The court denied the defendants’ postjudgment motion without a hearing.On appeal, the Supreme Court of Alabama affirmed summary judgment for Bonilla on his claims for conversion, breach of contract, and negligence, as well as the compensatory and interest awards. However, the Court reversed the summary judgment on the wantonness claim and the award of punitive damages, holding that wantonness involves disputed factual issues concerning the defendants’ mental state that should be determined by a jury. The case was remanded for further proceedings on wantonness and punitive damages. View "U.S. Bank Trust National Association v. Bonilla" on Justia Law

This case involves two individuals who guaranteed loans for their business by executing promissory notes and trust deeds, which conveyed several real properties as security to a bank. After the business defaulted on the loans and entered bankruptcy, the bank sold both the business and the individuals’ properties through judicial foreclosure and trustee sales. The bank subsequently sought a deficiency judgment against the guarantors for the remaining debt, asserting that they owed over $3 million, while the guarantors argued that they should receive credit for the fair market value of the properties sold, in accordance with Nebraska’s antideficiency statute.The District Court for Johnson County granted summary judgment to the bank, finding the guarantors liable under their guarantees without credit for the property values. The court relied on a waiver provision in the guarantees, which stated that the guarantors waived any defense based on the bank not obtaining the fair market value of the collateral. The court also denied the guarantors’ motion for reconsideration or new trial, prompting the guarantors to appeal.The Nebraska Supreme Court reviewed the case de novo. It held that the antideficiency statute, Neb. Rev. Stat. § 76-1013, applies not only to borrowers but also to guarantors when their obligation is secured by a trust deed and a trustee sale occurs. The court determined that the waiver provision in the guarantees was unenforceable as a matter of public policy, given the legislative mandate of § 76-1013. Furthermore, the court found that evidence such as assessed values and appraisals raised a genuine issue of material fact regarding the fair market value of the properties at the time of the trustee sales. The court reversed the district court’s grant of summary judgment and remanded for further proceedings. View "American Exch. Bank v. Topp" on Justia Law

BMK Enterprises purchased a commercial property from Bailey Enterprises in 2018. As part of the transaction, the parties agreed to a provision granting BMK a right of first refusal if Bailey decided to sell the adjacent Bolinger Property, which contained storage units. In 2019, Bailey informed BMK of its intent to sell the Bolinger Property, but BMK did not purchase it at that time. Bailey later sold the Bolinger Property to a third party in 2021 without further notice to BMK. BMK subsequently filed suit against Bailey for breach of contract and breach of the implied covenant of good faith and fair dealing, alleging that Bailey failed to honor the right of first refusal provision. BMK also sued the real estate broker and agent involved in the sale, but those claims were dismissed and are not part of this appeal.The District Court of the Eighteenth Judicial District granted summary judgment in favor of Bailey. It concluded that the right of first refusal provision was unenforceable as a matter of law because it inadequately described the property subject to the right and failed to specify the price, rendering the contract provision ambiguous and void. The court declined to consider extrinsic evidence to clarify the parties’ intent, reasoning that the ambiguity could not be resolved through legal canons or extrinsic evidence.The Supreme Court of the State of Montana reviewed the District Court’s decision de novo. It held that while the provision was ambiguous, the District Court erred by not considering extrinsic evidence to ascertain the parties’ intent and resolve the ambiguity. The Supreme Court reversed the District Court’s grant of summary judgment and remanded the case for further proceedings to determine whether extrinsic evidence could clarify the object of the contract and render the right of first refusal enforceable. View "BMK Enterprises v. Bailey" on Justia Law

A dispute arose between a commercial landlord and tenant after government emergency orders during the COVID-19 pandemic required non-essential businesses in New York City to close. The tenant, operating a retail clothing store in Manhattan, stopped paying rent, arguing that the lease excused rent payments when government actions prevented it from operating its business. The landlord disagreed, terminated the lease for nonpayment, and sought damages for breach of contract. The tenant vacated the premises and counterclaimed, alleging the landlord wrongfully terminated the lease and wrongfully kept two payments made after termination.The United States District Court for the Southern District of New York granted summary judgment in favor of the landlord, finding that the government’s orders did not constitute a “taking” under the lease because the tenant was not fully deprived of the use or occupancy of the premises. The district court also rejected the tenant’s counterclaims for breach of contract and unjust enrichment, holding that the notice-and-cure provision applied and that the unjust enrichment claim was duplicative. The court awarded damages to the landlord, though the landlord cross-appealed, asserting the award was insufficient.The United States Court of Appeals for the Second Circuit reviewed the case. It held that the district court misinterpreted the lease’s takings provision, which excused the tenant from paying rent when it was unable to operate its business due to government orders. The appellate court reversed the summary judgment for the landlord on its breach of contract claim and concluded the tenant was entitled to summary judgment on both its own breach of contract counterclaim and its claim that the landlord improperly terminated the lease. The court further vacated the judgment on the unjust enrichment counterclaim and remanded for further proceedings. The landlord’s cross-appeal on damages was dismissed as moot. View "Delshah 60 Ninth, LLC v. Free People of PA LLC" on Justia Law