Teachers Insurance & Annuity Association of America v. Butler
United States District Court for the Southern District of New York
626 F. Supp 1229 (1986)
One City Centre Associates and its partners, including David Butler (the Butler group) (defendants) sought to construct an office building. Teachers Insurance and Annuity Association of America (Teachers) (plaintiffs) agreed to provide the real estate financing to the Butler group. The parties executed a commitment letter stating that Teachers agreed to lend $20,000,000 for a 35-year term at a fixed interest rate of 14.25 percent per annum. The letter also stated Teachers was entitled to rental returns over the life of the loan (the kicker provision) and the Butler group could not prepay the loan during the first 17 years. During the 19 months before closing, interest rates were available at 12 percent without a kicker provision. Almost immediately after the letter was signed, the Butler group tried to convince Teachers not to go through with the loan and started seeking other loans with more favorable conditions. Four days before closing, the Butler group refused to sign the deed of trust because it contained a provision that prevented the Butler group from accelerating the maturity date of the loan by defaulting. Teachers sued the Butler group for breach of contract for failing to negotiate in good faith. The Butler group counterclaimed, arguing that the commitment letter did not contain the deed of trust’s acceleration provision and that Teachers breached the contract by insisting this provision be included.
Rule of Law
Holding and Reasoning (Weinfeld, J.)
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