In re Wansdown Properties Corporation N.V.

Wansdown Properties Corporation N.V. (Wansdown) (plaintiff) entered into an agreement to sell a townhouse to 29 Beekman Corp. (Beekman) (defendant) in conjunction with Wansdown’s bankruptcy proceeding. The contract contained a condition precedent in which Wansdown represented that the sale proceeds would be sufficient to satisfy all of the claims against Wansdown’s estate in bankruptcy. This representation was required to be accurate at closing to trigger Beekman’s obligation to complete the sale. As the closing date approached, Beekman learned that Wansdown was unable to go through with the closing as originally planned. Although the contract provided for alternative methods of closing outside of the bankruptcy proceeding, Beekman anticipatorily breached the contract by backing out of the sale. The contract contained a liquidated-damages provision entitling Wansdown to the down payment if Beekman breached the contract. Although Wansdown subsequently sold the townhouse to another purchaser at a higher price, Wansdown filed a breach-of-contract complaint against Beekman seeking a determination of its entitlement to the down payment. Both parties moved for summary judgment, and the bankruptcy court denied both motions. To determine if Beekman breached the contract, the court considered whether Wansdown would have been able to go through with the sale, including Wansdown’s ability to satisfy the proceeds-representation condition, had Beekman not backed out of the sale. The court concluded that factual questions remained regarding whether enforcement of the proceeds-representation condition would cause a disproportionate forfeiture to Wansdown by depriving Wansdown of the down payment. Beekman moved for, and the court granted, reconsideration of the disproportionate-forfeiture question.