Facts

Defendant SPUS05 Corona Summit LP (SPUS05) is a single purpose entity created by CB Richard Ellis Investors, a wholly owned subsidiary of CB Richard Ellis. In December 2007, SBUSO5 entered into a "forward purchase" contract with plaintiff Corona Summit, LLC (Corona Summit), by which SPUSO5 agreed to buy three office buildings along Freeway 91 in Corona upon completion of construction by Corona Summit.

By early 2009, the value of the buildings had fallen by approximately half of the $68 million contract price. In March 2009, shortly prior to the anticipated close of escrow, SPUSO5 terminated the purchase agreement.

Corona Summit and intervenor U.S. Bank (which had loaned Corona Summit $60 million in construction funding for the project) both sued SPUSO5 for damages and specific performance.

PLAINTIFF'S CONTENTIONS:
Plaintiff contended the contracting parties never discussed any option allowing the buyers to opt-out of the contract if the market value of the buildings declined within two years of signing of the contract, there was no such option, and that the remedy of specific performance was available notwithstanding a liquidated damages clause for $13 million (based on Civil Code Section 3389) and the wording of the contract provisions.

PLAINTIFF-IN-INTERVENTION'S CONTENTIONS:
U.S. Bank based its complaint on a separate "tri-party agreement" among the Bank, Corona Summit, and SPUSO5. U.S. Bank contended that SPUSO5 was obligated to purchase the buildings upon completion and that the parties had never contemplated SPUSO5 having an option to "opt out" of the contract if the market value of the buildings declined prior to the close of escrow.

DEFENDANTS'

Result

The court found that SPUSO5 misinterpreted the contract clause and ordered it to purchase the buildings at the contract purchase price ($69 million) plus pay incidental compensation and interest to plaintiff and the Bank totaling more than $11 million. According to defense counsel: In the alternative, there could be a third-party sale subject to reconciliation.

Other Information

On Sept. 8, 2010, the Court of Appeal entered an order temporarily staying enforcement of the judgment and order of specific performance, pending further order from the Court of Appeal.