State Supreme Court to hear condo case
The Wisconsin Supreme Court has agreed to hear a court case involving a $9 million loan to a Milwaukee condominium developer from Town Bank.
The Supreme Court was asked to interpret the meaning of a contract between Town Bank of Milwaukee and City Real Estate Development, the developer of a condominium project at the Wisconsin Tower property on the northwest corner of North 6th Street and West Wisconsin Avenue in downtown Milwaukee.
The Wisconsin Court of Appeals in Town Bank vs. City Real Estate Development agreed with the bank that the “parol evidence rule” barred the introduction into evidence of the terms of the bank’s loan commitment letter.
The Appeals Court concluded that even if the loan commitment letter were admissible, City Real Estate failed to meet its conditions, thereby repudiating the loan agreement.
A decision by the Supreme Court would clarify the interpretation financing agreement integration clauses.
On May 27, 2004, Town Bank issued a loan commitment letter indicating it would provide City Real Estate Development LLC, with financing for its condominium project in the amount of $9 million in two phases. In phase one, the bank provided $2.5 million initial financing for the acquisition of a Milwaukee office building and for the completion of demolition, engineering, asbestos removal and marketing. The phase two aspect of the loan included $6 guaranteed unsecured personal loan.5 million for the construction of condominium units.
The closing of the loan was contingent upon terms and conditions, which included a first mortgage on the subject property, and a requirement that City Real Estate would contribute $900,000 in equity capital prior to closing.
After the $2.5 million loan was issued, Town Bank and City Real Estate continued negotiating the financing regarding the construction phase. Later in 2004, Town Bank informed City Real Estate that it would not proceed with the phase two portion of the loan contemplated in the loan commitment letter.
The question being explored by the Supreme Court is whether the loan agreement is the only evidence to be used in determining whether the loan phases are integrated, or, as City Real Estate contends, if evidence, such as the commitment letter, also may be considered under Wisconsin law.
The Milwaukee County Circuit Court denied Town Bank’s summary judgment motion, concluding that the term credit agreement was ambiguous as to whether it was a stand-alone transaction. The Court of Appeals concluded the circuit court erroneously denied Town Bank summary judgment on its claim that the bank had fully performed its loan obligations to City Real Estate.
Filed under: money by John