Central SW Texas Devel, L.L.C. v. JP Morgan Chase, No. 12-51083 (5th Cir. 2015)
Annotate this CaseCentral Southwest Texas Development, LLC and Washington Mutual Bank (WaMu) entered into a lease agreement in November 2007: Central was to construct a WaMu bank branch in Austin, and deliver it to WaMu by January 1, 2008, after which WaMu would owe rent to Central for the twenty-year term of the lease. Central did not yet have fee simple ownership of the property, but had contracted to purchase it and had deposited earnest money in escrow. After a number of extensions of the deadline, Central had not yet closed on the property at the time of WaMu’s collapse in September 2008. WaMu was declared insolvent and the FDIC was appointed as its receiver. JPMorgan Chase Bank acquired most of WaMu’s assets and liabilities under a Purchase and Assumption (P&A) Agreement with the FDIC. If Chase declined, the FDIC would have been authorized to repudiate “burdensome” leases if doing so would “promote the orderly administration of [WaMu’s] affairs.” Having determined that Chase was unlikely to accept the lease based on the proximity of Chase branches to the leased property, a Central executive emailed the FDIC and asked to be “release[d] . . . from the Lease obligation in order to pursue other options.” Central was soon notified by Chase of its rejection of the lease and by the FDIC of its repudiation. Central subsequently closed on the property. Having failed to find a replacement tenant, Central sold the property the same day a little more than it paid. Central later concluded that the lease did not qualify as "Bank Premises" under the P&A Agreement because no banking facilities were occupied (or even built) by the time of WaMu’s failure. With this new understanding of the lease’s status, Central filed this lawsuit against Chase for breach. After Central moved for summary judgment, the district court held that the lease was not a Bank Premises lease, and therefore that Chase could not decline assignment under the P&A Agreement. Consistent with the Fifth Circuit's ruling in "Excel Willowbrook, LLC v. JPMorgan Chase Bank, NA (758 F.3d 592 (2014)), the district court also held that this assignment created privity of estate between Central and Chase, and therefore that Central had standing to assert its interpretation of the P&A Agreement. Chase also moved for summary judgment on the ground that the email communications between the parties constituted a mutual termination of the lease. ROA 2048. The case proceeded to a bench trial, and the district court ruled that Chase’s attempted rejection of the lease was an anticipatory breach, entitling Central to contract damages and excusing it from further performance. Chase and the FDIC appealed. After review, the Fifth Circuit found "no reason to disturb the trial court's finding" that no mutual termination occurred. Accordingly, the Court affirmed the district court.
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