U.S. Home Corp. v. Settlers Crossing, LLC
33 F. Supp. 3d 596
D. Maryland2014Background
- U.S. Home (Purchaser) agreed to buy 1,250 acres Bevard property in Prince George’s County via a Purchase Agreement with Settlers Crossing and Washington Park Estates (WPE) (Seller).
- Sandler controlled Settlers Crossing and WPE and personally guaranteed Seller’s obligations; deposits totaling $20 million were paid.
- Schnabel, URS, and Hardin-Kight prepared Phase I ESAs and related reports prior to the contract; all were provided to Purchaser.
- Second Amendment (May 16, 2007) reduced price in exchange for Lennar (guarantor) ensuring close; Purchaser admitted no knowledge of misrepresentations, and pre-closing development work commenced.
- Bevard II amendments and related financing arrangements occurred; Purchaser sought access to perform investigations; Settlers Crossing and WPE resisted access amid concerns over closing strategy and alleged defenses.
- Purchaser ultimately terminated the agreement in July 2008 after a series of default notices and a court-ordered access ruling that Purchaser did not utilize; iStar later obtained Bevard property by foreclosure.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Seller breached environmental reps and warranties | Purchaser contends §12.2(d) misrepresented absence of Hazardous Materials | Seller argues reports disclosed conditions; no breach if material not present | No material breach; burden on Purchaser not met |
| Whether Seller’s denial of access breached §13(a) | Purchaser had contractual right to investigate and obtain access | Access denial was reasonable given preexisting distrust and posturing toward closing | Access denial was reasonable; no §13(a) breach |
| Whether §11(a) conditioning close on actual correctness of reps applied | Actual correctness required; failure to prove factual accuracy excuses closing | §11(a) not a rigid condition; permits testing but not nonperformance-based breaches | §11(a) not a true condition precedent; environmental breach must be material to use of land |
| Whether Purchaser can recover deposits under §15(b) | Breach of conditions precedent justifies termination and return of deposits | No breach; termination improper given court-ordered access and subsequent actions | Purchaser not entitled to deposits; iStar may pursue specific performance |
Key Cases Cited
- Poffenberger v. Risser, 290 Md. 631 (Md. 1981) (plaintiff on inquiry notice standard for discovery of facts relevant to contract)
- 7-Eleven, Inc. v. McEvoy, 300 F.Supp.2d 352 (D.Md.2004) (reasonableness of discretionary contract decisions; implied covenant)
- Gresham v. Lumbermen’s Mut. Cas. Co., 404 F.3d 253 (4th Cir.2005) (material breach analysis under contract law)
- Weichert Co. of Md., Inc. v. Faust, 419 Md. 306 (Md. 2011) (objective theory of contract interpretation; plain meaning controls)
- Nova Research, Inc. v. Penske Truck Leasing Co., 405 Md.435 (Md. 2008) (application of objective contract interpretation and reliance on ordinary meaning)
- Sachs v. Regal Sav. Bank, FSB, 119 Md.App. 276 (Md. 1998) (definition of material breach and contractual consequences)