You may have heard that Younan Properties did not close on the acquisition of 180 North LaSalle in Chicago. There had already been three months of extensions granted and apparently Prime Group Realty Trust had had enough.
In anticipation of being unable to meet the latest deadline Younan filed an action in the Chancery Division of the Cook County Circuit Court apparently seeking the return of its $6 million in earnest money. The case is 2009-CH-06451 if you want to see the docket.
According to Crain's,
Mr. Younan filed the lawsuit Feb. 13, claiming he was unable to close the $124-million deal after the global recession and frozen credit markets prompted a key lender to back out of talks to finance the purchase. Prime Group issued a statement Thursday saying the deal, due to close by Feb. 18, was terminated and that the Chicago-based REIT was entitled to keep the earnest money. Mr. Younan’s lawsuit says the credit freeze means the “doctrine of impossibility and the impracticability of performance” should void the purchase contract and therefore the $6 million should be returned.Impossibility and impracticability are two of those contract defenses you read about in the first year of law school and while preparing for the bar exam. In short, there has to be no way for the contract to be completed for performance to be excused. As I recall the growing trend is to excuse performance if it is objectively impossible to perform and not just impossible for a given party to perform.
Presumably Younan's argument will be that no one can do this deal right now with the credit markets frozen. And with a lot of money on the line, I'm sure Neal Gerber (Younan's counsel, and where I have a few former colleagues) will fight hard to get that money back or work out a settlement and Prime's lawyers will fight equally hard to keep it. (No title company was listed as a defendant or real party in interest, so perhaps the money was at some point paid to Prime as a deposit. I have seen many deals where that happens.) This could be an interesting case, and I will try to monitor the developments.
Have a good weekend!
UPDATE: With thanks to Doug Cornelius, I should have pointed out the striking similarity between this case and the Donald Trump defense over at Trump Tower Chicago. Thanks again, Doug.