OAKS, LP v. CITIBANK, NA

• Decision Date: 30 May 2000
• Citation: 272 A.D.2d 258,710 N.Y.S.2d 319
• Parties: BRISTOL OAKS, L.P., et al., Appellants,<BR>v.<BR>CITIBANK, N. A., et al., Respondents.
• Court: New York Supreme Court — Appellate Division

272 A.D.2d 258

710 N.Y.S.2d 319

BRISTOL OAKS, L.P., et al., Appellants,

v.CITIBANK, N. A., et al., Respondents.

05-30-2000

Concur — Sullivan, P. J., Nardelli, Wallach, Lerner and Buckley, JJ.

Plaintiffs are the subsidiaries formed by the plaintiffs in the companion appeal (Steinhardt Group v Citicorp, 272 AD2d 255 [decided herewith]) for the actual purchase of the assets in question. The pricing model took into consideration the performance history of these loans and mortgaged properties (payments, property repairs, etc.), but also necessitated a determination of the value of the properties. The formula for determining the value of the assets to be purchased was left vague in the contract, allowing defendants to rely, in large measure, on the opinions of independent, licensed real estate brokers in the area. But these Broker Price Opinions (BPOs) were simply "drive-by valuations" which did not involve inspection of the interiors, and relied on unverified assumptions as to the condition of the properties. Plaintiffs had agreed to purchase some 4,000 mortgage loans and properties, many of which were identified by defendants only two days before closing. The parties thus negotiated that defendants would provide appraisals for each of the properties. The term "Appraised Value" was defined in the agreement as based on "(a) an appraisal made in connection with the origination of the related Mortgage Loan as the value of the Mortgaged Property or, if later (b) the latest appraisal relating to the Mortgaged Property by a Qualified Appraiser."^[*] More often than not, the valuations were based on outdated "origination" appraisals of the property, even when more recent appraisals were available. This, it is alleged, skewed defendants' pricing model, resulting in a vastly inflated purchase price.

Plaintiffs argue that the use of latest appraisals was clearly essential to their understanding of the contract. Defendants counter that the contract did not require such a formula, and that plaintiffs could have opted to verify the pricing model before closing. Indeed, the sales agreement required defendants to repurchase any assets whose prices were based on misrepresentation. Defendants did repurchase a number of these debts (fully reimbursing many of the bondholders who had bought into plaintiffs' enterprise, although not covering plaintiffs' original capital investment, let alone any anticipated profits), but not until after plaintiffs had commenced litigation,...