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Market Street Associates Limited Partnership v. Frey
United States Court of Appeals for the Seventh Circuit
941 F.2d 588 (1991)
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 25-year terms. Paragraph 34 of the lease entitled the lessee to request the lessor to finance the costs of construction of improvements to the property, 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). Market Street received an inquiry from a drugstore chain that wanted to open a store in the property, provided Market Street could construct the building. Market Street initially sought other financing for the project but was denied because it was only the lessee of the property. Market Street thus tried to buy the property back from the trust. The trust expressed interest in selling the property for $3 million, which Market Street considered too high. Market Street subsequently requested financing from the trust for $2 million. Market Street's financing request did not mention the lease. Market Street sent a second letter to the trust requesting the financing, again without specific reference to paragraph 34. The trust responded that it was only interested in financing loans of over $7 million, and 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 paragraph 34, but the trust refused to sell. Market Street brought suit to compel specific performance. The district court granted summary judgment to the trust, and Market Street appealed.
Rule of Law
Holding and Reasoning (Posner, J.)
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