QSI-Fostoria D.C., LLC v. General Electric Capital Business Asset Funding Corp.

389 F. App'x 480
CourtCourt of Appeals for the Sixth Circuit
DecidedJuly 29, 2010
Docket08-4593
StatusUnpublished
Cited by4 cases

This text of 389 F. App'x 480 (QSI-Fostoria D.C., LLC v. General Electric Capital Business Asset Funding Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
QSI-Fostoria D.C., LLC v. General Electric Capital Business Asset Funding Corp., 389 F. App'x 480 (6th Cir. 2010).

Opinion

OPINION

McKEAGUE, Circuit Judge.

This case arises out of a dispute between QSI-Fostoria D.C., LLC (“QSI”) and General Electric Capital Asset Business Funding Corporation (“GE”) for damages resulting from GE’s failure to timely remove leased equipment from QSI’s property. The loss of rental income allegedly caused QSI to default on its mortgage, and QSI entered into a Deed in Lieu of Foreclosure Agreement with the mortgagee, BACM 2001-1 Central Park West, LLC (“BACM”). The Deed in Lieu of Foreclosure Agreement purported to transfer to BACM all of the property belonging to QSI. However, QSI retained its action against GE for breach of contract and trespass without explicitly disclosing it to BACM. QSI and GE eventually settled for $1.5 million. In the meantime, BACM had intervened and asserted an interest in QSI’s action against GE. The district court ultimately awarded summary judgment to BACM, holding that QSI breached the “all property” warranty in the Deed in Lieu by not disclosing and conveying its interest in the action against GE. The court awarded the $1.5 million to BACM as damages for the breach. QSI has raised three issues on appeal, contending that: (1) the district court erred in holding that QSI breached the “all property” warranty; (2) there are triable issues of fact concerning whether BACM waived its right to strict enforcement of the warranty; and (3) there are questions of fact relating to BACM’s recoverable damages. For the reasons that follow, we affirm the district court’s judgment.

I

On December 13, 2000, QSI obtained an $8.5 million loan from Bridger Commercial Funding, LLC (“Bridger”) to purchase property, including several buildings, lo *483 cated at 130 West Jones Road, in Fostoria, Ohio. After purchasing the Fostoria property, QSI entered into a lease agreement with Quality Farm & Fleet, which operated a warehouse and distribution center at the site. Quality Farm & Fleet, in turn, leased material handling equipment for its operations from GE. As part of the lease agreement between GE and Quality Farm & Fleet, GE and QSI entered into a “Landlord’s Agreement and Waiver,” by which GE agreed to remove its equipment within 60 days after written notice from QSI.

Quality Farm & Fleet filed for bankruptcy shortly after signing the lease, which prompted QSI to demand that GE remove its equipment on March 27, 2002. GE did not remove the equipment until June 15, 2003, approximately 13 months late. In the meantime, QSI filed a complaint against GE on August 28, 2002, seeking $126,041.67 per month for storage fees/rent for GE’s failure to remove its equipment. On November 19, 2003, the district court ruled that QSI was entitled to compensation from GE, but held that there were outstanding questions of fact as to damages.

As a result of Quality Farm & Fleet’s bankruptcy and subsequent cessation of rent payments, QSI defaulted on its mortgage. Bridger had by then transferred the QSI loan to a securitized pool of commercial mortgage loans, of which Wells Fargo Bank Minnesota, N.A. (“Wells Fargo”) was the trustee. Lennar Partners, Inc. (“Lennar”) was the special servicer for the pool of loans. Penina Tannenbaum was the Lennar employee in charge of administering and monitoring the QSI loan. Bob Gersten was Tannenbaum’s primary contact person at QSI.

After QSI defaulted on its mortgage, it entered into negotiations with Lennar for execution of a Deed in Lieu of Foreclosure Agreement (“Deed in Lieu”). At this time, Lennar formed BACM to take assignment of Wells Fargo’s interest in the QSI loan, to sign the Deed in Lieu, and to take title to the property being conveyed by QSI. In turn, BACM sold the property to a third party, in a transaction not material to the issues presented in this appeal.

Negotiations for the Deed in Lieu began in June 2003 when Suzanne Amaducci, an attorney working for Lennar, sent a proposed agreement to QSI. Penina Tannen-baum had briefed Amaducci in preparation for the negotiations. Although Tannen-baum had previously been informed by QSI’s Bob Gersten that QSI had a claim against GE for lost rents, she did not inform Amaducci of any pending litigation against GE. Tannenbaum later explained that she had either forgotten that Gersten mentioned the claim nine months earlier or that she “really didn’t think much of it. Nobody ever told [her] about potential large claims for money on it.” R. 235, Tannenbaum dep. at 126-27.

Indeed, months before the negotiations began, Gersten had sent e-mail communications to Tannenbaum about the dispute with GE. However, these messages gave no indication that QSI expected a substantial monetary recovery. On August 19, 2002, Gersten claimed to have sent Tannenbaum a letter stating that QSI had filed suit against GE to recoup storage fees/rent, and asked that any recovery “be used to pay for [QSI’s] operating costs and legal expenses. Any excess monies would then go toward debt service.” R. 204, Gersten dep. at 37, 50. Tannenbaum claimed not to have received this letter. R. 235 Tannenbaum dep. at 89-92. On September 4, 2002, Gersten sent, and Tannenbaum received, a list of QSI’s monthly expenses. Attached to this list was a note indicating that the list did not include legal fees associated with the GE *484 lawsuit. However, the note did not describe the lawsuit and Tannenbaum did not subsequently inquire about it.

Attorney Daniel LaValley negotiated the Deed in Lieu on behalf of QSI. The Deed in Lieu agreement was finalized and executed in July 2003. It contained, among other things, a provision that purported to convey all of QSI’s property to BACM:

Borrower intends to convey to Lender all of Borrower’s right, title and interest in and to the Project and this transaction is not intended as a mortgage, trust conveyance, deed of trust or security interest of any kind. After the closing, Borrower will not have any further interest (including rights of redemption) or claims in and to the Project or to the proceeds and profits that may be derived therefrom. The Project being transferred to Lender represents all of the property, real or personal, owned by the Borrower and after the Closing Borrower shall have no debts or liabilities to any party. This Agreement and the transaction to occur hereunder are Borrower’s free and voluntary acts, and Borrower is not acting under duress, under influence, misapprehension or misrepresentation by Lender.

R. 236 Ex. E, Deed in Lieu of Foreclosure Agreement § 9C). 1 This “all property” warranty was QSI’s representation that the property listed in § 1 of the Deed in Lieu constituted all the real and personal property interests owned by QSI. However, neither the § 1 listing nor the § 9 “all property” warranty included any express reference to QSI’s already pending action against GE. During the course of negotiations of several drafts of the Deed in Lieu, LaValley, though “fully conscious” of the existence of the action against GE, never informed Amaducci that the “all property” provision in the drafts did not include QSI’s claims against GE. Further, LaVal-ley admitted that he knew these claims constituted property. In any discussions about QSI’s action against GE, LaValley limited his comments to the non-monetary purpose of the lawsuit, i.e., to force GE to remove the equipment.

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Bluebook (online)
389 F. App'x 480, Counsel Stack Legal Research, https://law.counselstack.com/opinion/qsi-fostoria-dc-llc-v-general-electric-capital-business-asset-funding-ca6-2010.