A developer obtained a construction loan from a lender secured by a trust deed lien on several lots. The lender and the developer entered into a partial release agreement, the lender agreeing to release individual lots from the trust deed lien on receipt of the release price listed for each lot. The construction loan was refinanced with the same lender but the partial release agreement was not made a part of the new loan documents. The developer defaulted on the loan and the lender began foreclosure proceedings. During foreclosure, the lender emailed the developer confirming revised lot release prices. The developer filed a Chapter 11 bankruptcy petition, seeking to sell individual lots clear of the lender’s lien in accordance with the lot release prices. A request for a partial release was made on the lender, which was rejected. The lender claimed a partial release agreement did not exist since the written lot release agreement was not made part of new loan documents when the construction loan was refinanced. The developer claimed an enforceable release agreement existed since the lender emailed him the revised lot release prices after the refinancing was completed. The United States bankruptcy court held the lot release agreement between the lender and the developer did exist as part of the documentation for the lender’s refinancing and the developer was entitled to sell individual lots of land clear of the lender’s lien on payment of the release price since the lender acknowledged the existence of the lot release agreement under the refinanced loan by emailing the developer the revised lot release prices. [In re East Airport Development, LLC (January 5, 2011) _ BR _]
Related first tuesday Forms: 280 – Partial release addendum
