ECF North Ridge Associates, L.P. v. ORIX Capital Markets, L.L.C.
336 S.W.3d 400
Tex. App.2011Background
- ECF North Ridge Associates, L.P. and TCI Wilshire Boulevard, Inc. own Dallas apartment and Los Angeles medical building collateral in CMBS loans serviced by ORIX Capital Markets, L.L.C.
- ORIX, as master/special servicer, monitors insurance and defaults and demanded certified terrorism insurance under the loan documents.
- Post-9/11, terrorism insurance exclusions arose; ORIX notified borrowers in 2002–04 that certified terrorism insurance was required under TRIA.
- ECF and TCI refused certified terrorism insurance; ORIX declared defaults and pursued suit for breach of contract and related relief.
- ECF later obtained terrorism insurance in 2005 and paid default interest; trial court awarded ORIX default interest and fees; ECF/TCI appealed.
- Court granted rehearing, modified judgment: ORIX had standing; insured obligation upheld; and default interest accrual date adjusted to reflect a five-day cure period (May 18, 2004).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| standing of ORIX to sue | ORIX as servicer has standing under PSA to sue | TCI contends servicer lacks standing as not holder of note | ORIX had standing under PSA and could sue (in its own name or as special servicer) |
| obligation to procure certified terrorism insurance | ECF/TCI failed to obtain required terrorism insurance per 'other insurance' provisions | Insurance was required; statistics show common coverage for similar properties | Evidence legally and factually sufficient; breach established; 보험 required under 'other insurance' provisions |
| calculation of default interest accrual | Default interest began at ORIX's May 13, 2004 letter | Cure periods delay accrual; indulgences may extend cure period | Default interest accrues after expiration of the five-day cure period; modified to May 18, 2004 start date and adjusted amount |
Key Cases Cited
- CWCapital Asset Mgmt., LLC v. Chicago Props., LLC, 610 F.3d 497 (7th Cir. 2010) (servicer standing and authority under PSA to sue; trustee authorization principles)
- Trinity Indus., Inc. v. Ins. Co. of N. Am., 916 F.2d 267 (5th Cir. 1990) (definitions of all-risk insurance and TRIA context)
- BFP 245 Park Co. v. GMAC Commercial Mortg. Corp., 12 A.D.3d 330 (N.Y. App. Div. 2004) (commonality of insurance coverage for CMBS collateral justified by broad industry practice)
- Adams v. First Nat. Bank of Bells/Savoy, 154 S.W.3d 859 (Tex. App.—Dallas 2005) (contractual interpretation of cross-referenced loan documents; cure periods)
- Croucher v. Croucher, 660 S.W.2d 55 (Tex. 1983) (legal/ factual sufficiency standards; standard of review)