Commercial Division Blog
Posted: March 1, 2016 / Categories Commercial, Contracts, Motion to Dismiss; Motion for Judgment on the Pleadings
Lender Had Right to Refuse to Close Financing Transaction
On February 25, 2016, the First Department issued a decision in MCAP Robeson Apartments L.P. v. MuniMae TE Bond Subsidiary, LLC, 2016 NY Slip Op. 01414, dismissing claims against a lender that refused to close on a financing transaction, explaining:
This action arises out of defendants' decision not to proceed to a closing on a refinance loan transaction with plaintiffs. The commitment agreement specified that the agreement could be terminated at defendants' discretion, with notice, if the refunding closing did not occur on or before December 31, 2006. It also provided that defendants' obligation to purchase the refunding bonds was expressly contingent upon, among other things, the absence of any material adverse changes in the factors on which defendant borrower underwrote the transaction.
In an August 29, 2007 email, the investment officer of defendant's affiliate advised plaintiffs that the refunding terms delineated in the commitment agreement were being withdrawn, because the property's operating statements showed that the property could not perform as originally underwritten, and that defendants would refinance only on different terms. Plaintiffs responded to this email immediately by threatening litigation.
. . . Plaintiffs do not allege, except in conclusory terms, that defendants' exercise of their discretion was arbitrary, irrational, or not in good faith.
(Internal quotations and citations omitted).