Osprey-Troy Officentre L.L.C. v. World Alliance Financial Corp.

822 F. Supp. 2d 700, 2011 U.S. Dist. LEXIS 112585, 2011 WL 4537086
CourtDistrict Court, E.D. Michigan
DecidedSeptember 30, 2011
DocketCase No. 10-11337
StatusPublished
Cited by3 cases

This text of 822 F. Supp. 2d 700 (Osprey-Troy Officentre L.L.C. v. World Alliance Financial Corp.) is published on Counsel Stack Legal Research, covering District Court, E.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Osprey-Troy Officentre L.L.C. v. World Alliance Financial Corp., 822 F. Supp. 2d 700, 2011 U.S. Dist. LEXIS 112585, 2011 WL 4537086 (E.D. Mich. 2011).

Opinion

ORDER

JULIAN ABELE COOK, JR., District Judge.

The Plaintiff, Osprey-Troy Officentre, L.L.C. (“Osprey”), initiated this lawsuit in an effort to obtain a declaratory judgment and damages against the Defendant, World Alliance Financial Corporation, formerly known as Vertical Lend, Inc. (“World Alliance”) for (1) the breach of a commercial lease, (2) its silent fraud in connection therewith, and (3) a violation of its rights as a third-party beneficiary to a sublease between the Lear Corporation and World Alliance. On April 1, 2011, World Alliance filed a motion for a summary judgment with this Court, pursuant to Fed.R.Civ.P. 56 which will now be evaluated.

I.

On December 12, 2003, two non-parties to this litigation entered into an agreement to lease the first five floors of a commercial office building at 300 East Big Beaver Road in Troy, Michigan. According to their agreement, these five floors were leased by the original landlord, 485 Properties, LLC, to the original tenant, the Lear Corporation (“Lear”). In December of 2006, the original landlord assigned its rights in the lease to Osprey. Several months later (June 5, 2007), Lear executed a sublease agreement relating to the fourth floor of the office building with World Alliance. Osprey, although a non-signatory to the sublease, expressed its written approval of the sublease agreement, in a “Consent to Sublease” document ten days later.

Several provisions of the sublease appear to be relevant to the evaluation of the currently pending motion by the Court. First, in ¶ 17 of its sublease with Lear, World Alliance appears to have acknowledged the existence of certain property commitments and restrictions under the original lease:

Subtenant has received and reviewed the [original lease]____ Except as provided below in Section 47, Subtenant agrees to undertake and be bound to Sublandlord and Landlord by all obligations, covenants, agreements, indemnities and restrictions which are set forth in the [original lease] in the same manner as these obligations, covenants, agreements, indemnities and restrictions are binding upon Sublandlord, as Tenant under the [original lease], except as expressly modified by this Sublease.

(Sublease at ¶ 17). In turn, Section 47 of the Sublease has exempted these two parties (Lear and World Alliance) from certain portions of the original lease in the following manner:

Notwithstanding anything herein to the contrary, Section 4.01, 4.02, 6.01, 6.04 (as it relates to operating expenses) and 6.05 of the [original lease] shall not apply to the Subtenant or be deemed a part of this Sublease.

[703]*703Id. at ¶47. These above-referenced portions in the original lease all relate to Lear’s payment obligations to Osprey, such as the base rent amount, operating expenses, and the payment of property taxes. Moreover, certain provisions of the original lease govern the rights and responsibilities of the parties. In Osprey’s view, this provision also incorporates ¶ 13.03 which grants it the right to collect rents directly from World Alliance in the event of a default by Lear:

Upon the occurrence of an Event of Default, as defined under Section 18, if all or any part of the Premises are then sublet or assigned, Landlord, in addition to any other remedies provided by this [original lease] or by law, may, at its option, collect directly from the sublessee or assignee all rent becoming due to Landlord by reason of the subleting or assignment. Any collection by Landlord from the subleases or assignee shall not be construed to constitute a waiver or release of Tenant from the further performance of its obligations under this [original lease] or the making of a new Lease with such sublessee or assignee.

(Original lease at ¶ 13.03).

A similar provision appears in ¶ 7 of the “Consent to Sublease” which was signed by Osprey, Lear, and World Alliance:

In accordance with Section 13.03 of the Lease, Subtenant and Tenant acknowledge and agree that upon the occurrence of an Event of Default under the Lease, the rent and other sums due under the Sublease shall be paid directly to the Landlord upon written notification by Landlord to Subtenant and Tenant. In the event Landlord declares the Tenant in default under the terms of the Lease, Landlord shall provide Subtenant with notice of the default (which shall not be construed to create an opportunity to cure on the part of the Subtenant nor shall it be considered to create a grace period) within a reasonable period of time after declaring such default.

(Consent to Sublease at ¶ 7).

According to ¶ 6 of the “Consent to Sublease,” World Aliance — as the subtenant— also “acknowledge[d] and agree[d] to provide all covenants, agreements and indemnifications to and for the benefit of the Landlord as set forth in the [original lease] as they relate to the Subpremises. Nevertheless, ¶ 1 within the “Consent to Sublease” also indicated that “[n]othing contained in the Sublease shall be construed to create privity of estate or of contract between Subtenant and Landlord and Landlord shall not be bound to any of the terms, agreements, or provisions of the Sublease.” Id. at ¶ 1.

In July 2009, Lear filed for Chapter 11 bankruptcy protection in the Southern District of New York. Lear also asked the bankruptcy court to reject its obligation to comply with the facially binding terms of the original lease. Osprey expressed its opposition to this request, contending, inter alia, that Lear had not vacated its lease space and continued to be in arrears with its financial obligations under their lease agreement. On October 22, 2009, the Bankruptcy Court granted Lear’s request, along with the entry of an order that was made retroactive to September 1, 2009.

The effect of the decision by the Bankruptcy Court on this case continues to be disputed by the parties. It is the position of World Aliance that, in contravention of the terms within the “Consent to Sublease” document, Osprey never submitted a written request for the direct payment of the alleged lease arrearage. Thus, this claimed failure — in World Aliance’s opinion — negated its obligation to make its payments directly to Osprey. Further, World Aliance submits that Osprey was paid $600,000 — an amount that was based [704]*704on Lear’s contractual obligations under the original lease. World Alliance also asserts that $456,484.60 of the above-listed amount reflects a payment for its occupancy of the leased space between the filing date of the bankruptcy petition and the decision by the Bankruptcy Court.

Osprey disagrees, contending that Lear’s rejection of the original lease (1) operated as a breach (rather than a termination) of the parties’ agreement, and (2) failed to relieve World Alliance of its obligations under the “Consent to Lease,” the sublease, and the original lease agreement.

Less than five months after the decision by the Bankruptcy Court, Osprey initiated this lawsuit in the Oakland County (Michigan) Circuit Court in an effort to recoup those monies, to which it claims an entitlement under the terms of its agreements with World Alliance. On April 5, 2010, World Alliance caused the case to be removed to this federal court.

II.

According to Fed.R.Civ.P.

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822 F. Supp. 2d 700, 2011 U.S. Dist. LEXIS 112585, 2011 WL 4537086, Counsel Stack Legal Research, https://law.counselstack.com/opinion/osprey-troy-officentre-llc-v-world-alliance-financial-corp-mied-2011.