Stonehill Capital Mgmt. LLC v. Bank of the W.
Decision Date | 20 December 2016 |
Citation | 68 N.E.3d 683,28 N.Y.3d 439 |
Parties | STONEHILL CAPITAL MANAGEMENT LLC et al., Appellants, v. BANK OF THE WEST et al., Respondents. |
Court | New York Court of Appeals Court of Appeals |
Law Offices of Martin Eisenberg, New York City (Martin Eisenberg of counsel), for appellants.
Katten Muchin Rosenman LLP, New York City (David A. Crichlow and Gregory C. Johnson of counsel), for Bank of the West, respondent.
Hoguet Newman Regal & Kenney, LLP, New York City (Damian R. Cavaleri, Laura B. Hoguet and Jeffrey A. Miller of counsel), for Mission Capital Advisors, LLC, respondent.
Richard Kibbe & Orbe LLP, New York City (Brian S. Fraser, Robyn H. Frumkin, Katherine Kern Harrington and Rachel S. Mechanic of counsel), for Loan Syndications and Trading Association, amicus curiae.
Plaintiffs Stonehill Capital Management LLC, Stonehill Institutional Partners, L.P. and Stonehill Master Fund Ltd. (collectively Stonehill) are affiliated commercial entities that seek to enforce the auction sale of a syndicated loan against defendant Bank of the West (BOTW). BOTW concedes that it accepted Stonehill's bid and then refused to transfer the loan, but claims it had no legal obligation to do so because the parties never executed a written sales agreement and Stonehill failed to submit a timely cash deposit. However, these prerequisites are not conditions precedent to formation of the parties' contract and do not render their agreement unenforceable. Therefore, Stonehill has established its entitlement to summary judgment.
BOTW, a lender of various nonperforming mortgage loans, retained codefendant Mission Capital Advisors, LLC to manage a competitive online sealed-bid auction of several of these loans. As part of the bid process, in March 2012 Mission issued an Offering Memorandum (Memorandum), which announced its solicitation of indicative bids for the purchase of the loans, individually or in any combination, and invited non-contingent final offers. The auction portfolio included a syndicated loan—with an aggregate principal value of $8,787,141—known to the parties as the "Goett Loan." The Goett Loan is the underlying subject of the parties' dispute.
The asset sale agreement would be made available for review to final bidders. The Memorandum also included the following disclaimer:
(capitalization modified).
After Stonehill expressed an interest in the Goett Loan, Mission forwarded a proposed asset sale agreement, referred to as the "Loan Sale Agreement" (LSA). Two days later, on April 18, Stonehill submitted to Mission a $2,363,142 final bid on the Goett Loan. The same day, by separate correspondence, Stone-hill informed Mission that the LSA was not the proper document to effectuate a syndicated loan transfer, and offered to "either make the minor modifications required to that document to account for the agent's approval process, etc, or use an LSTA syndicated loan document, whichever the Seller prefers."1
Mission notified Stonehill by telephone on April 20 that it had submitted the winning bid for the Goett Loan. On April 23, Stonehill sent Mission a modified redlined version of the proposed LSA, purportedly at Mission's request, containing what Stonehill considered to be the necessary technical changes that would enable the LSA to effectuate the sale and assignment of the Goett syndicated loan. Mission's representative replied that it was Then, on April 24, BOTW's counsel sent Mission an email stating that if the Goett Loan was a syndicated credit "the LSTA form agreement is actually pretty good," to which Mission's representative responded that he was "99.9% certain that [Stonehill is] right about this being a syndicated credit."
On Friday, April 27, Mission emailed Stonehill written confirmation that BOTW agreed to the Stonehill bid. The correspondence stated:
The email also included wiring instructions for the deposit and closing.
That same day, BOTW's counsel sent Stonehill an email in which counsel explained that he was previously unaware that the Goett Loan was syndicated and that he "prefer[red] to use LSTA documentation for syndicated credits." He pushed for an early May closing on the loan transfer because "[m]ost trade agents won't approve trades at the end of the month" and said that he would send the trade agreements the following week.
On Friday, May 4, BOTW's counsel was still preparing the documents and initiated a series of email exchanges to move the deal ahead. Counsel first informed Stonehill that he was working on sending the documents by Monday and requested that, "[i]n the meantime," Stonehill send him the term sheet from a previous trade specified by counsel. Stonehill wrote back that the requested term sheet was confidential but that Stonehill would provide an LSTA form reflecting the terms of the Goett Loan transaction, stressing, "[w]e hope that this arrangement will be acceptable to you and will enable us to move forward to close quickly." BOTW's counsel responded that he "assumed as much" and it was "fine to proceed as [Stonehill] indicated."
As promised, two days later Stonehill sent the LSTA form to BOTW's counsel with the terms for the loan transaction and related documents. In this same correspondence, Stonehill informed counsel that it was forwarding the credit agreement transfer forms to Wells Fargo, the credit agreement agent, and this was a necessary step to complete and record the transfer of the Goett Loan to Stonehill.
On May 8, Stonehill informed BOTW's counsel that Wells Fargo approved the credit transfer forms. Under the credit agreement, Stonehill needed the promissory note endorsed in order to close on the Goett Loan, so Stonehill also sent counsel a standard allonge form for the promissory note on the Goett Loan issued to BOTW.
It further stated that Stonehill had proceeded with various steps to finalize the refinancing and Stonehill funding was highly likely.
On May 14, Stonehill contacted BOTW's counsel for an update. Counsel, apparently surprised by Stonehill's inquiry, forwarded the email to Mission. Then on May 16, Mission informed Stonehill by telephone that BOTW would not proceed with the trade. Over a week later, on May 25, Mission forwarded to Stonehill a May 18 email from BOTW to Mission declaring that it would not sell to Stonehill:
As a consequence of the refinancing and the cancellation of the sale to Stonehill, on June 21 BOTW received $4,197,441 on the Goett Loan, an excess of approximately $1.8 million over Stonehill's bid.2
Stonehill commenced the present action against BOTW and Mission, alleging breach of contract and breach of the implied covenant of good faith and fair dealing, and seeking indemnification. In its amended complaint, Stonehill added a cause of action for unjust enrichment and demanded $1.5 million in damages.
Supreme Court denied BOTW's motion to dismiss and cross motion for summary judgment, and granted Stonehill's motion for summary judgment on the breach of contract cause of action (Stonehill Capital Mgt., LLC v. Bank of the W., 2014 N.Y. Slip Op. 30751[U], 2014 WL 1219093 [Sup.Ct., N.Y.County 2014] ). Supreme Court held that because the purchase and sale agreement was pre-negotiated, BOTW's acceptance of Stonehill's bid created a binding contract. BOTW appealed and the Appellate Division reversed,...
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