Market Street Associates Limited Partnership v. Frey
United States Court of Appeals for the Seventh Circuit
941 F.2d 588 (7th Cir. 1991)
To finance its growth, J.C. Penney entered into a sale-leaseback agreement with General Electric Pension Trust (defendant). J.C. Penney was to sell properties to the trust, which the trust leased back to J.C. Penney for twenty-five year terms. The lease entitled the lessee to request the lessor to finance the costs of construction of improvements to the properties, and the lessor agreed to reasonably consider providing the financing and to negotiate in good faith. If negotiations failed the lease permitted the lessee to repurchase the property. J.C. Penney assigned a lease to Market Street Associates Limited Partnership (Market Street) (plaintiff), which had received an inquiry from a drugstore chain that wanted to open a store in the property, provided that Market Street could construct the building. Market Street initially sought out other financing but was denied because Market Street was only the lessee of the property. Market Street tried to buy the property back from the trust. The trust quoted a price of $3 million, which Market Street considered too high. Market Street subsequently requested financing for $2 million, but the trust responded that it was only interested in financing loans of over $7 million. Market Street responded that it would seek financing elsewhere. When unable to do so, Market Street tried to exercise its option to purchase the property under the provision of the lease, but the trust refused to sell. Market Street brought suit to compel specific performance. Market Street appeals a grant of summary judgment to the pension trust.
Rule of Law
Holding and Reasoning (Posner, J.)
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