Gaia House Mezz LLC v. State St. Bank & Trust Co., No. 12-2481 (2d Cir. 2013)
Annotate this CaseGaia and State Street were bound by a mezzanine loan agreement with Lehman Brothers to help finance the construction of a residential building in Manhattan. At issue on appeal was whether equitable estoppel, principles of good faith and fair dealing, or general principles of equity prevented State Street from keeping the Accrued Interest. The court concluded that Gaia could not rely on equitable estoppel to recover the Accrued Interest because Gaia did not demonstrate an omission or misrepresentation by State Street on which Gaia reasonably relied to its substantial detriment; State Street was entitled to act in its own self-interest and require payment of the Accrued Interest, even if such action lessened Gaia's anticipated profits, because State Street acted consistently with the contract and did not violate a presumed obligation or Gaia's reasonable expectations; State Street's actions were not taken in bad faith; State Street did not unlawfully demand payment of the Accrued Interest and it was not liable for the Doral damages; and the Professional Fee provision applied in this action and State Street was entitled to Professional Fees incurred as a result of this litigation. Accordingly, the court reversed and remanded.
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