Article

Note: In exchange for payment of US$2,000,000, Developers, Paramount Pavilion Group LLC, assigned naming rights to an ice skating facility to RCN Corp. The payment was to be made in installments which were linked to various phases of the project.

One early payment was linked to Developer obtaining a loan commitment. Developer obtained an undertaking from Royal Bank of Pennsylvania that conditioned issuance of the loan on a cash deposit of $2,000,000 to be put in escrow or providing a letter of credit. When Developer read the commitment, it understood that the condition applied to Corporate Sponsor. Corporate Sponsor read the condition as applying to Developer.

When the condition was not met, the Bank withdrew its commitment and Developer lost its $50,000 loan application fee. Moreover, without the loan, Developer was not able to break ground in accordance with the agreement with Corporate Sponsor. Subsequently, Corporate Sponsor declared the agreement to be in default and demanded return of the installments that it had paid, totaling $300,000. When Developer refused, Corporate Sponsor sued for the full amount. On cross motions for summary judgment, the U.S. District Court of Pennsylvania, Smith, J., entered summary judgment for Corporate Sponsor.

The trial court ruled that the agreement was unambiguous and that requiring Corporate Sponsor to comply with the condition to post the escrow deposit or obtain an LC would defeat the obvious purpose for the installment arrangement.

[JEB/ss]

COPYRIGHT OF THE INSTITUTE OF INTERNATIONAL BANKING LAW & PRACTICE

The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.