Town Bank v. City Real Estate Development

• Decision Date: 28 October 2009
• Docket Number: No. 2008AP1845.,2008AP1845.
• Citation: 2009 WI App 160,777 N.W.2d 98
• Parties: TOWN BANK, A Wisconsin Banking Corporation, Plaintiff-Appellant, v. CITY REAL ESTATE DEVELOPMENT, LLC, Defendant-Respondent.<SMALL><SUP>&#x2020;</SUP></SMALL>
• Court: Wisconsin Court of Appeals

777 N.W.2d 98

2009 WI App 160

TOWN BANK, A Wisconsin Banking Corporation, Plaintiff-Appellant, v. CITY REAL ESTATE DEVELOPMENT, LLC, Defendant-Respondent.^†

No. 2008AP1845.

Court of Appeals of Wisconsin.

Submitted on Briefs May 19, 2009.

Opinion Filed October 28, 2009.

On behalf of the plaintiff-appellant, the cause was submitted on the briefs of Paul R. Erickson and Kari H. Race of Gutglass, Erickson, Bonville & Larson, S.C., Milwaukee.

On behalf of the defendant-respondent, the cause was submitted on the brief of Thad W. Jelinske, Jennifer S. Walther, and Michael J. Anderson of Mawicke & Goisman, S.C., Milwaukee.

Before NEUBAUER, P.J., ANDERSON and BRENNAN, JJ.

¶ 1 ANDERSON, J

Town Bank, A Wisconsin Banking Corporation, filed a complaint for declaratory relief against City Real Estate Development, LLC (CRED) asking the trial court to grant declaratory relief and find that the parties entered into a stand-alone $2.5 million loan and that Town Bank fully performed its obligations under that loan. Town Bank moved the trial court to grant summary judgment on its complaint and for dismissal of CRED's counterclaims on the grounds that the only loan obligations Town Bank had were under a Term Credit Agreement (TCA) and an incorporated $2.5 million note and that Town Bank fully performed those obligations. CRED contended that Town Bank was also obligated to provide an additional $6.5 million loan under a prior loan commitment and the TCA. Town Bank responded that the TCA's integration clause and the parole evidence rule precluded consideration of any prior agreement in construing the TCA. The trial court denied Town Bank's motion finding that the TCA was ambiguous as to whether it was a stand-alone transaction. The case was tried to the jury, and the judgment was entered, ordering that CRED recover from Town Bank the sum of $600,000, as claimed delay damages arising from Town Bank's failure to provide the additional loan amount of $6.5 million, plus statutory fees and costs in the amount of $20,359.48.

¶ 2 Town Bank appeals, asking the court to reverse the judgment and remand this case to the trial court with instructions to enter judgment granting the declaratory relief sought by Town Bank and dismissing the counterclaims. Upon review, we hold that the TCA was an unambiguous stand-alone agreement between the parties and the only agreement under which Town Bank had loan obligations to CRED. Therefore, we conclude that the trial court erred in denying Town Bank summary judgment.

¶ 3 In early 2004, a member of CRED, David Leszcyzinski, approached Town Bank for financing for a condominium project entailing the acquisition and renovation of a Milwaukee office building known as the Wisconsin Tower. On April 13, 2004, Town Bank issued a letter outlining the construction financing that the parties had been negotiating. Such letter indicated that it was subject to final approval of all terms, conditions, and covenants from the Town Bank loan committee and participant bank. On May 27, 2004, Town Bank made revisions to the April letter and drafted the commitment letter at issue (Commitment), which indicated that the letter dated April 13, 2004, was superseded. The Commitment outlined a credit facility in the total amount of $9 million. Under the Commitment, Town Bank was to provide CRED with a financing commitment in two phases: $2.5 million initial funding for acquisition of the building and completion of demolition, engineering, asbestos removal and marketing; and $6.5 million additional funding for the construction of condominium units as presales dictate. The Commitment had conditions upon which closing of the loan at issue was contingent. The Commitment included the following terms and conditions among others:

I. Credit Facility

$9,000,000 Construction Line

A) $2,500,000 initial funding for acquisition of building and completion of demolition, engineering, asbestos removal and marketing.

B) $6,500,000 additional funding for the construction of condominium units as pre-sales dictate. Bank financing will be based on 75% of the pre-sold units.

. . . .

VI. Collateral

1st R/E mortgage on Subject Property—606 West Wisconsin Avenue

1st Lien Security Agreement on Fixtures and Other Assets

Assignment of Rents and Leases and Developer's Contracts

. . . .

VIII. Additional Terms & Conditions

Closing of this loan is contingent upon but not limited to the following:

A. Subject to satisfactory review of appraisal, title commitment, Environmental report, construction plans, and final review of loan documents by the Bank's legal counsel.

B. Borrower agrees to contribute $900,000 in up front equity capital prior to closing.

C. Borrower agrees to pay closing costs, including title, filing and documentation.

D. Borrower and guarantors agree to provide annual personal financial statements and tax returns.

. . . .

In order to be effective in any regard, this letter must be properly executed and returned to the Bank by June 11, 2004. This commitment may be terminated at the sole option of Town Bank if the credit agreement is not executed by June 25, 2004.

¶ 4 During June and July 2004, Leszcyzinski represented to Town Bank the progress on the Wisconsin Tower project. In particular, it was presented to Town Bank that Ruth's Chris Steak House, a major commercial tenant, would not sign a letter of intent until CRED owned the building and that CRED's option to buy the Wisconsin Tower was about to expire. In July 2004, Town Bank issued a $2.5 million loan pursuant to the TCA and a Business Note (Note) dated July 15, 2004, and the TCA was signed by two members of CRED. Town Bank claims that the TCA was issued to enable CRED to purchase the property and close the deal with Ruth's Chris. Among other terms and conditions, the TCA included the following:

1. Term Loan. (Check (a) or (b): only one shall apply)

. . . .

(b) Multiple Notes; Multiple Advances. If checked here, and in consideration of extensions of credit from Lender to Customer from time to time, Lender and Customer agree that section 4 through 19 of this Agreement shall apply to each such extension of credit unless evidenced by a document which states it is not subject to this Agreement. The term "Loan" includes all such extensions of credit. The term "Note" includes each promissory note evidencing Customer's obligation to repay an extension of Credit. This Agreement does not constitute a commitment by Lender to make such extensions of credit to Customer.

. . . .

14. Entire Agreement. This Agreement, including the Exhibits attached or referring to it, the Note and the Security Documents, are intended by Customer and Lender as a final expression of their agreement and as a complete and exclusive statement of its terms, there being no conditions to the full effectiveness of their agreement except as set forth in this Agreement, the Note and the Security Documents.

The Note included the following clause among others:

9. Interpretation. This Note is intended by Maker and Lender as a final expression of this Note and as a complete and exclusive statement of its terms, there being no conditions to the enforceability of this Note. This Note may not be supplemented or modified except in writing. This note benefits Lender, its successors and assigns, and binds Maker and Maker's heirs, personal representatives, successors and assigns. The validity, construction and enforcement of this Note are governed by the internal laws of Wisconsin. Invalidity or unenforceability of any provision of this Note shall not affect the validity or enforceability of any other provisions of this Note.

¶ 5 Town Bank and CRED continued their negotiations regarding the construction financing after the July $2.5 million acquisition loan was completed. On November 19, 2004, and on December 28, 2004, Town Bank sent CRED letters informing that Town Bank was no longer willing to proceed with the loan agreement proposed in the Commitment. On December 23, 2005, counsel for CRED sent a letter to Town Bank stating that CRED would file a complaint if CRED did not receive a substantial settlement proposal with respect to additional funds to be provided under the Commitment. In response thereto, Town Bank filed an action for declaratory judgment, asking the court to find that the parties had entered into a stand-alone $2.5 million short-term loan agreement, and that Town Bank had fully performed its obligations under that loan agreement. CRED filed an answer and counterclaims arguing, inter alia, that Town Bank breached an agreement to finance an additional $6.5 million of construction financing under the Commitment and that Town Bank's failure to perform caused CRED delay damages.

¶ 6 Town Bank initially filed a motion for summary judgment on October 13, 2006, claiming that any and all loan obligations with regard to CRED were set forth in the TCA and such obligations were fully performed by the bank when it issued the Note. The trial court denied the motion, noting that the matter might be ripe for summary judgment at a later date after additional discovery. Town Bank filed another motion for summary judgment on October 19, 2007. However, the trial court again denied the motion, finding that the TCA was ambiguous as to whether it was a stand-alone agreement. It ordered the case to proceed to a jury trial.

¶ 7 Town Bank argues that its motion for summary judgment was erroneously denied because the TCA is unambiguous and constitutes the only and entire agreement between the parties. CRED claims that the TCA is not the sole agreement between the parties and that the trial court properly denied a motion for summary judgment because there are disputed issues of fact as to whether the Commitment is part of the terms of the agreement set forth in the TCA. With respect to the Commitment, Town Bank argues that the parol evidence rule bars the introduction of the Commitment to construe the terms of the TCA. Town Bank...