Central Southwest Texas Development, L.L.C. v. JPMorgan Chase Bank, National Ass'n
780 F.3d 296
5th Cir.2015Background
- Central Southwest Texas Development (Central) signed a lease in Nov. 2007 to build a WaMu branch on land it had contracted to buy but had not yet closed; WaMu would pay rent once the branch was delivered.
- WaMu failed on Sept. 25, 2008; the FDIC became receiver and entered a Purchase & Assumption (P&A) Agreement under which Chase could accept or decline assignment of certain "Bank Premises" leases within 90 days; FDIC could repudiate declined "burdensome" leases.
- Chase and the FDIC told Central the lease was Bank Premises and could be rejected/repudiated; Central asked to be released because of anticipated rejection; Chase rejected and FDIC repudiated; Central closed on the land, failed to find a replacement tenant, sold the property at a profit, then sued Chase for breach claiming the lease was "Other Real Estate" and passed to Chase.
- The district court held the lease was Other Real Estate (so assigned to Chase), created privity of estate permitting Central to sue, found Chase’s rejection an anticipatory breach, and rejected defendants’ contention that Central’s emails constituted mutual termination; it awarded Central damages, interest, and fees.
- On appeal, Chase and the FDIC argued (1) Central lacks prudential standing/privity because it never possessed title pre-failure, and (2) Central’s communications constituted a mutual termination of the lease.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Prudential standing / privity of estate to enforce P&A conveyance | Central: P&A effected a present conveyance of the lease to Chase creating privity of estate; Central can enforce the lease | FDIC/Chase: Central never owned/possessed the land before repudiation (it only had a purchase contract/option), so it lacks privity and cannot enforce assignment | Court: Declined to reach merits of this defense—issue was not raised below; Excel Willowbrook supports privity theory and district court’s ruling stands |
| Proper characterization of lease (Bank Premises vs Other Real Estate) | Central: Lease was not Bank Premises because no banking facilities were occupied or built at failure; thus it passed to Chase | Chase/FDIC: Lease qualified as Bank Premises so Chase could decline and FDIC could repudiate | Held: District court (and affirmed) found lease was Other Real Estate and assigned to Chase; Central had standing to sue under privity of estate theory |
| Whether Central’s emails amounted to mutual termination/rescission of lease | Central: Emails sought only expedited rejection/repudiation based on its (mistaken) understanding of P&A rights—not a mutual rescission | Chase/FDIC: Central’s emails asked to be released and thus mutually terminated the lease | Held: Trial court’s factual finding sustained—emails did not request contractual rescission; affirmed (no mutual termination) |
| Negligent misrepresentation / estoppel as defense or basis for relief | Central: FDIC/Chase negligently misrepresented legal effect of P&A; Central reasonably relied; alternatively, defendants estopped from asserting termination | Chase/FDIC: Statements were opinions about law and cannot support misrepresentation; reliance unreasonable | Held: Court relied on negligent-misrepresentation findings to explain context but decision rests on finding that emails did not request termination; estoppel also applied at district court; appellate court affirmed without deciding all misrepresentation questions |
Key Cases Cited
- Excel Willowbrook, L.L.C. v. JPMorgan Chase Bank, N.A., 758 F.3d 592 (5th Cir. 2014) (P&A assignment can create privity of estate giving landlords standing to sue assignee)
- Interface Kanner, LLC v. JPMorgan Chase Bank, N.A., 704 F.3d 927 (11th Cir. 2013) (discusses limits on third-party enforcement and privity arguments in similar disputes)
- Hillside Metro Assocs., LLC v. JPMorgan Chase Bank, N.A., 747 F.3d 44 (2d Cir. 2014) (reached different conclusion on landlords’ rights under the P&A framework)
- GECCMC 2005-C1 Plummer St. Office Ltd. P’ship v. JPMorgan Chase Bank, N.A., 671 F.3d 1027 (9th Cir. 2012) (addressed landlords’ claims against Chase under WaMu P&A)
- One Beacon Ins. Co. v. Crowley Marine Servs., Inc., 648 F.3d 258 (5th Cir. 2011) (bench-trial standard of review: factual findings for clear error, legal issues de novo)
- Noble Energy, Inc. v. Bituminous Cas. Co., 529 F.3d 642 (5th Cir. 2008) (summary judgment standard reviewed de novo)
- State Indus. Prods. Corp. v. Beta Tech., Inc., 575 F.3d 450 (5th Cir. 2009) (issues not raised below are forfeited on appeal absent extraordinary circumstances)