The Court of Appeals’ November Session, which is full of appeals concerning the rights of criminal defendants, begins on Monday, November 14, 2016 at Court of Appeals Hall in Albany. Of the cases on the argument schedule (the Court’s case summaries can be found here), the most interesting is:
No. 191 Stonehill Capital Management, LLC v Bank of the West
In an auction of an $8.8 million debt held by Bank of the West, Stonehill Capital Management bid $2.4 million for the syndicated loan, which BOTW accepted subject to negotiation and execution of a mutually acceptable sale agreement. As the parties negotiated the terms of the sale agreement, Stonehill arranged with the defaulted borrowers to refinance the loan for an increased payoff of $4.2 million, $1.8 million more than BOTW had agreed to take in the auction. Upon learning of the refinancing deal, BOTW refused to close the sale, arguing that it was under no obligation to proceed because the parties had not yet executed the sale agreement and because it had reserved it right “to withdraw any or all of the assets from the loan sale, at any time” in the offering memorandum. BOTW ultimately received the $4.2 million payoff from the defaulted borrowers, and Stonehill commenced this breach of contract action.
Supreme Court granted summary judgment to Stonehill, holding that the material terms of the sale had been pre-negotiated before Stonehill’s bid, and thus when BOTW accepted the bid, the parties had entered a completed, enforceable contract for the sale of the syndicated loan. The Appellate Division, First Department, however, reversed and dismissed Stonehill’s complaint. The Appellate Division held that the conditions to a valid acceptance of Stonehill’s bid—an executed sale agreement and payment of a deposit—had not been satisfied before BOTW decided with withdraw the syndicated loan from the auction. Therefore, the Court held, no enforceable contract had been entered. The Court of Appeals will now be asked to decide, was the signed writing a valid condition precedent allowing BOTW to get out of the deal?
The Appellate Division, First Department’s decision below can be found here.
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