Justia Contracts Opinion Summaries

Property owners who purchased through a foreclosure sale sued the bank that sold the house, alleging that they were mislead the bank’s deed of trust was the first deed of trust, when another remained on the property, and was not extinguished by the foreclosure sale. Wells Fargo assigned any claim against the title insurer it had to David and Lina Hovannisian (the property owners), and the Hovannisians sued First American Title Insurance Company, alleging breach of contract, negligent misrepresentation and breach of the implied covenant of good faith and fair dealing. First American moved for summary judgment, arguing its title insurance coverage had terminated, and no benefits were due. The motion was granted, and the Hovannisians appealed, arguing First American failed to establish that coverage did not continue under the title policy or there were no benefits due under the policy. They also contended triable issues of fact existed regarding their bad faith claim. The Court of Appeal affirmed, finding First American showed, based on the facts Wells Fargo and the Hovannisians presented before and after the underlying action was filed, that there was no potential for coverage under the policy. The Hovannisians did not learn about the first deed of trust until after they purchased the property at the foreclosure sale without warranty. Thus, the only potential claim they had against Wells Fargo was for the alleged misrepresentations for which there was no liability or loss under the policy. View "Hovannisian v. First American Title Ins. Co." on Justia Law

Under 42 U.S.C. 1485, the USDA's Rural Housing Service (RHS) makes loans for construction of affordable rental housing. From 1972-1982, each of 10 limited partnerships (with a common general partner, Olsen) entered into a 50-year loan agreement that stated that each borrower could pay off the loan and convert its properties to conventional housing after 15 or 20 years. The 1987 Emergency Low Income Housing Preservation Act, 42 U.S.C. 1472(c)), provided that before accepting prepayment, the USDA must attempt to enter into an agreement with the borrower. In 2002, Olsen was negotiating to sell to a nonprofit organization. He notified the RHS of “intent . . . to convert [some] units into conventional housing” and sought approval to pay off the mortgages. RHS responded with a checklist. Olsen did not proceed; the potential acquirer decided against purchasing the properties. In 2011, Olsen submitted more definite prepayment requests. RHS responded with an incentive offer concerning four properties, which Olsen accepted, remaining in the program. For three other properties, RHS informed Olsen that prepayment was not an option. Olsen purportedly believed that pursuing prepayment on any properties was futile. He did not submit additional applications. In 2013, the partnerships sued, alleging that the government, through the 1987 enactment or the 2011 correspondence, violated their prepayment rights. The Federal Circuit reversed the Claims Court's dismissal. The 2002 correspondence did not trigger the RHS’s duty to accept prepayment; RHS did not take any steps inconsistent with prepayment. The government did not breach its contractual obligation in 2002. Because the alleged breaches occurred no earlier than 2011, the contract claims are not barred by the six-year limitations period. The Claims Court implicitly premised the dismissal of takings claims on the same erroneous rationale. View "Airport Road Associates, Ltd. v. United States" on Justia Law

In 1999, Ayala, unable to qualify for a mortgage to buy a five-unit Vacaville residential property, sought assistance from Dawson, a real estate broker. According to Ayala, they orally agreed that Dawson would obtain the loan and buy the property in Dawson’s name for $330,000; Ayala would pay the 20% downpayment and pay Dawson a $200 per month fee, plus the monthly principal and interest on the mortgage. The parties executed a written contract provided by Dawson, which Ayala claims he understood to confirm an installment contract on terms the two had previously discussed. Ayala moved into one of the units and claims he spent hundreds of thousands of dollars improving the property. From 2000-2008, he paid Dawson $2,700 per month; from 2008-2012, he paid $2,900 per month. Ayala actually had signed a standard form lease/option; the option expired in 2004. In 2011 Dawson offered to sell Ayala the property for $330,000, with a credit for the down payment. In Dawson’s unlawful detainer action, Ayala defended by claiming he held equitable title. Dawson prevailed. In Ayala's separate action against Dawson for fraud, the court granted Dawson summary judgment. The court of appeal affirmed, stating that, under the doctrine of collateral estoppel, Ayala is barred from relitigating his fraud-in-the-inducement theory. View "Ayala v. Dawson" on Justia Law

The Fifth Circuit affirmed the dismissal of plaintiff's claims relating to his mortgage and the foreclosure of his home. The court held that the district court did not err in determining that diversity jurisdiction exists in this case; the district court did not err in dismissing plaintiff's claims for lack of standing to foreclose, quiet title, and breach of contract given that each of those claims was based on the assignment being void; in light of the district court's reasoning and the circumstances of this case, the district court did not abuse its discretion in denying plaintiff leave to replead his promissory estoppel claim; and plaintiff waived his argument that the district court erred in denying his motion to amend. View "Bynane v. The Bank of New York Mellon" on Justia Law

In this real estate purchase transaction the Supreme Court affirmed the court of appeal’s judgment reversing the trial court’s denial of an award of attorney fees. Here Seller brought a breach of contract action against Buyers for failing to purchase the subject property. The trial court concluded that Buyers were not liable under the purchase agreement because it had been superseded by the parties’ option agreement that granted Buyers the exclusive right, but not the obligation, to purchase the property. At issue before the Supreme Court was whether Buyers were entitled to attorney fees under the attorney fees provision in the option agreement. The Supreme Court held (1) Buyers’ assertion of the option agreement as an affirmative defense did not trigger the attorney fees provision in that agreement; but (2) under the circumstances of this case Buyers were nevertheless entitled to attorney fees under the attorney fees provision in the option agreement. View "Mountain Air Enterprises, LLC v. Sundowner Towers, LLC" on Justia Law

Plaintiff, the owner of a commercial property, filed suit against Defendant, a special servicer that handled the default side of loan servicing for its affiliate, after Plaintiff unsuccessfully sought to purchase a loan taken out to refinance existing debt on its property in an effort to avoid default. Plaintiff sought specific performance of a pre-negotiation agreement and injunctive relief to enjoin Defendant from foreclosing on the property until good faith negotiations occur under the pre-negotiation contract. The Court of Chancery granted Defendant’s motion to dismiss the complaint for failure to state a claim for relief, holding that each count of the complaint failed to state a claim for relief. View "Windsor I, LLC v. CWCapital Asset Management LLC" on Justia Law

Plaintiffs filed suit against the condo owners association after the foreclosure sale of their condo unit, alleging common law claims for breach of contract, wrongful foreclosure, negligent misrepresentation, and breach of fiduciary duty, as well as violations of the Federal Debt Collection Practices Act (FDCPA), Texas Fair Debt Collection Practices Act (TFDCPA), and Texas Deceptive Trade Practices Act (TDTPA). The Fifth Circuit affirmed the district court's grant of summary judgment on all claims, holding that regardless whether the district court abused its discretion, any evidentiary error the district court made was harmless. In this case, the issue whether the late fee increase was properly adopted by the Association was not dispositive of any claims, so it did not affect the outcome of the litigation and did not affect their substantial rights. The court also held that plaintiffs' could not maintain their suit for breaches of the Condominium Declaration when they have themselves been in default of the contract; there was no authority supporting plaintiffs' conclusion that an inaccurate balance included in a default notice constitutes a defect in the foreclosure proceedings; and plaintiffs failed to cite specific negligent misrepresentations by defendants. The court rejected plaintiffs' remaining claims. View "Mahmoud v. De Moss Owners Association, Inc." on Justia Law

The Supreme Court affirmed its decision in Narayan I, in which the court held that Plaintiffs, a group of individual condominium owners, could not be compelled to arbitrate claims arising from the financial breakdown of a condominium project. Specifically, the court held in Narayan I that the arbitration clause was unenforceable because the terms of the documents at issue were ambiguous with respect to Plaintiffs’ intent to arbitrate and that portions of the arbitration clause were unconscionable. The United States Supreme Court vacated and remanded Narayan I for further consideration in light of its recent decision in DIRECTV, Inc. v. Imburgia, 577 U.S. __ (2015), which held that state law must place arbitration agreements on equal footing with all other contracts. After recognizing this principle, the Hawaii Supreme Court held that that the arbitration clause at issue in the present case was unconscionable under common law contract principles. View "Narayan v. Ritz-Carlton Development Co." on Justia Law

The one-action rule, which generally requires a creditor seeking to recover debt secured by real property to proceed against the security prior to seeking recovery from the debtor personally, must be timely interposed as an affirmative defense in a party’s responsive pleadings or it is waived.Plaintiff contributed more than $2 million toward funding a loan that was secured by the personal residence of Defendant. When the borrower defaulted on the loan and Defendant refused to repay the loan under a personal guaranty agreement, Plaintiff filed a complaint to recover damages against Defendant. The jury entered a verdict in favor of Defendant. Thereafter, Plaintiff filed a motion for a new trial, which the district court granted based on Defendant’s failure to oppose the motion on the merits. Defendant moved to dismiss Plaintiff’s complaint, raising the one-action rule defense for the first time. The district court granted Defendant’s motion to dismiss based on the one-action rule. The Supreme Court reversed, holding that because Defendant failed to raise the one-action rule defense until prior to the commencement of the second trial in this case, Defendant failed timely to interpose the one-action rule defense. View "Hefetz v. Beavor" on Justia Law

Drilling operations commence when: (1) work is done preparatory to drilling; (2) the driller has the capability to do the actual drilling; and (3) there is a good faith intent to complete the well. It is not necessary that the drill bit actually penetrate the ground. GADECO, LLC, appealed a judgment and orders declaring its oil and gas lease with Laurie Abell was terminated, dismissing its counterclaim against Abell, and awarding Abell her costs and attorney fees. GADECO and Abell began negotiating a surface use and damage agreement in mid-November 2011. GADECO sent Abell a proposed agreement on December 26, 2011, and later attempted to contact Abell about the agreement, but she refused to execute it. GADECO applied for a well permit in early 2012, shortly before the primary term of the lease was set to expire, and the permit was approved on January 23, 2012. Two days later, Abell leased the same mineral interests to Kodiak Oil & Gas. Unable to secure a surface use and damage agreement from Abell, GADECO relocated the well off the subject property but within the spacing unit, and a producing oil and gas well was completed in 2013. After giving notice of termination, Abell brought this lawsuit seeking a determination that GADECO's lease had terminated and an award of costs and attorney fees. GAEDCO counterclaimed for breach of contract and damages. The North Dakota Supreme Court found that where the failure to produce oil or gas from leased land is due to the fault of the lessor, the lease is not terminated at the end of the primary term, since the lessor is not entitled to set up termination of the lease where she has prevented the lessee from conducting operations which might bring about an extension of the lease. The Court reversed and remanded, finding genuine issues of material fact precluding summary judgment, and remanded for further proceedings. View "Abell v. GADECO, LLC" on Justia Law