NY Appeals Court Wipes Out Ski Resort Contract Battle (Law360)
By Lana Bribriar
A New York appeals court dismissed a suit Thursday alleging four European banks crippled a massive Colorado ski resort development when they stopped doling out money they had agreed to lend under a $520 million deal, finding the developer couldn't win money damages under its contract.
The appeals court found that the limitation of remedies provision in the parties' loan agreement clearly and unambiguously barred Base Village Owner LLC, an affiliate of real estate developer The Related Cos. LP, from winning money damages if it thought the banks had reneged on their loan obligations, allowing for only declaratory or injunctive relief.
"In light of defendants' alleged economic self-interest, the provision was not rendered ineffective by allegations of misconduct that 'smack' of intentional wrongdoing or willful, malicious or bad faith conduct," the opinion said.
The judges also found that the declaratory relief claim should have been dismissed earlier and that injunctive relief would be moot since Base Village is now in foreclosure.
The dispute stemmed from a complex agreement to develop a new Base Village in the ski town of Snowmass, Colo., with condominiums, hotels and retail space.
Base Village borrowed some $520 million from a consortium of banks that included Hypo Real Estate Capital Corp., Danske Bank A/S, KBC Bank NV and DekaBank Deutsche Girozentrale. The banks agreed to release their funds piecemeal as various phases of the project were completed and sold, with the proceeds going to pay off the loan balance.
But, the Related affiliate alleged, the banks pulled the plug on their construction lending obligations in 2009 to shore up their own finances as they were rocked by the financial crisis — a drastic move that doomed the complicated, multiphase project.
Without the banks' funding, the Related affiliate couldn't fulfill its plans to develop each part of the village in turn and sell it to pay off the underlying loans, it said.
After the Related affiliate defaulted on a land component of the loans, it entered into construction loan advance agreements with the banks to get $83 million more in advances instead of seeking declaratory or injunctive relief as allowed by the contract. The banks argued that Base Village could not claim the banks had rejected the contract and still collect funds.
But counsel for Base Village said that the $83 million was solely to finish a massive, 225-unit condominium-hotel complex called the Viceroy in the development — and it already had $110 million in executed sales contracts whose proceeds went to the banks when it was finished. Only when the banks got that money did they stop paying, the Related affiliate argued.
A lower court judge previously tossed the Related affiliate's demands for monetary relief on a motion to dismiss, ruling that it could seek only injunctive or declaratory relief under the loan contracts.
Representatives for the parties were not immediately available to comment Thursday.
Justices Leland G. DeGrasse, John W. Sweeny Jr., David Friedman, Nelson S. Roman and Dianne T. Renwick sat on the panel for the appeals court.
Base Village Owner LLC is represented by Adrienne B. Koch of Katsky Korins LLP.
Hypo Real Estate Capital Corp. is represented by Celia Goldwag Barenholtz of Cooley LLP. DekaBank Deutsche Girozentrale is represenetd by Paul A. Straus of King & Spalding LLP. Danske Bank A/S is represented by Michael K. Madden of Venable LLP. KBC Bank is represented by Sarah L. Reid of Kelley Drye & Warren LLP.
The case is Base Village Owner LLC v. Hypo Real Estate Capital Corp. et al., case number 651222/2010, in the Supreme Court of the State of New York, Appellate Division, First Judicial Department.
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