Liberty Bell Capital II L.P. v. Warren Hospital ( 2018 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 17-3353
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LIBERTY BELL CAPITAL II, L.P.,
Appellant
v.
WARREN HOSPITAL; WH MEMORIAL PARKWAY INVESTORS;
TWO RIVERS ENTERPRISES, INC.; WARREN HEALTHCARE ALLIANCE
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Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil Action No. 3-13-cv-04241)
District Judge: Honorable Brian R. Martinotti
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Argued June 12, 2018
Before: AMBRO, JORDAN, and HARDIMAN, Circuit Judges
(Opinion filed August 31, 2018)
Alan L. Frank, Esquire (Argued)
Evan L. Frank, Esquire
Christopher R. King, Esquire
Alan L. Frank Law Associates
135 Old York Road
Jenkintown, PA 19046
Counsel for Appellant
Norman E. Greenspan, Esquire (Argued)
Lyndsay E. Rowland, Esquire
Starfield & Smith
1300 Virginia Drive, Suite 325
Fort Washington, PA 19034
Kimberly G. Krupa, Esquire
Gross McGinley
33 S. Seventh Street
Allentown, PA 18101
Counsel for Appellees
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OPINION*
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AMBRO, Circuit Judge
Defendant Warren Hospital is a not-for-profit hospital, and defendants Warren
Health Care Alliance, P.C., WH Memorial Parkway Investors, L.L.C. ("WHMPI"), and
Two Rivers Enterprises, Inc., are affiliates of Warren Hospital (all defendants are referred
to, for convenience, as the “Hospital”). To purchase a nearby medical office (the facility
and the land on which it stands are referred to as the “Office”), the Hospital formed
Hillcrest Medical Plaza, L.L.C. (the “Partnership”), a partnership between WHMPI and
InMed Investors, L.L.C. (“InMed”), a commercial real estate development firm. The
Partnership borrowed $12,300,000 (the “Debt”) from Wachovia Bank, which took as
security a mortgage on the Office (the “Mortgage”). Wells Fargo later succeeded
Wachovia (by merger) and acquired its interest in the Debt and the underlying Mortgage.
*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
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The Hospital experienced financial distress and stopped making rent payments to
the Partnership on the former’s lease of the Office. The Partnership, in turn, stopped
making payments on the Debt, and Wells Fargo filed to foreclose on the Mortgage. The
Superior Court of Warren County, New Jersey, entered a $12,351,492 foreclosure
judgment in Wells Fargo’s favor. To satisfy the judgment, the Office was to be auctioned
at a sheriff’s sale.
Titan Loan Investment Fund LP, a company in the business of buying distressed
real estate loans, bought the Debt for $10,250,000, then transferred it to the newly formed
Liberty Bell Capital II, L.P. (“Liberty Bell”), the plaintiff. At the sheriff’s sale, Liberty
Bell was the sole bidder and took the Office subject only to the Partnership’s right of
redemption, which in New Jersey means that a mortgagor has until 10 days after a
sheriff’s sale to redeem its property by paying the debt in full and thereby to keep the
property. Hardyston Nat. Bank v. Tartamella, 267 A.2d 495, 497 (1970).
InMed, the Partnership’s passive partner, all along wished to redeem the Office,
but only the Partnership could do so, and it was controlled by the Hospital. At the
eleventh hour, InMed offered to settle concurrent litigation with the Hospital over the
missed lease payments if the latter would relinquish its controlling interest in the
Partnership. Although InMed was unsuccessful in moving to delay the sheriff’s sale, it
nonetheless gained control of the Partnership in time to redeem the Office. See
Defendants’ Br. at 11–12.
Meanwhile, St. Luke’s University Health Network (“St. Luke’s”) had entered into
a Definitive Agreement to purchase the Hospital (the “St. Luke’s Agreement”). The
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conditions to closing were that (1) Wells Fargo or any party that obtained title to the
Office sign new leases with the Hospital, (2) the Hospital’s past due rent be forgiven, and
(3) the InMed litigation be resolved to St. Luke’s satisfaction. To satisfy some of the
conditions, Wells Fargo entered into a Post-Foreclosure Agreement with the Hospital (the
“Wells Fargo PFA”). It terminated when Wells Fargo sold the Debt to Liberty Bell.
However, as required by the St. Luke’s Agreement, the Hospital entered into a Post-
Foreclosure Agreement with Liberty Bell (the “PFA”) that was identical in all material
respects to the Wells Fargo PFA. Both agreements contained the covenant that Liberty
Bell’s claim relied on—the agreement that “the Hospital [e]ntities shall not contest, cause
the stay of, or otherwise delay the [f]oreclosure [p]roceeding, any [s]heriff’s [s]ale or the
[c]ash [c]ollateral [a]ctions.” PFA § 2.1; Wells Fargo PFA § 2.5. PFA § 2.1 also states
that the Hospital “shall take such actions in or with respect to the [f]oreclosure
[p]roceeding, any [s]heriff’s [s]ale, or the [c]ash [c]ollateral [a]ctions as [Liberty Bell]
may reasonably request to effect[] the terms and provisions and purposes of this
Agreement.” It is undisputed that Liberty Bell never requested the Hospital do anything.
JA 1484–92; JA 1373–80; JA 1382–89.
PFA § 3 contemplates Liberty Bell becoming the Hospital’s landlord (and
honoring the leases), an event that would not occur without Liberty Bell acquiring the
Office.
STANDARD OF REVIEW
New Jersey law governs, PFA § 5.8, so when the terms of a contract are clear and
unambiguous, the construction and effect of the contract are matters of law that must be
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resolved by the court, Mango v. Pierce-Coombs, 851 A.2d 62, 74 (N.J. App. Div. 2004).
For a contract dispute, granting a motion for summary judgment is appropriate when “the
contract is so clear it can only be read one way.” Pennbarr Corp. v. Insurance Co. of No.
Am., 976 F.2d 145, 149 (3d Cir. 1992). We must give effect to the intent of the parties as
“made known in some way in the writing” and “are not at liberty to introduce and effect[]
some supposed unrevealed intention.” Newark Publishers’ Assoc. v. Newark
Typographical Union, 126 A.2d 348, 353 (N.J. 1956).
DISCUSSION
I. The case was ripe for summary judgment.
The parties filed cross motions for summary judgment. “At oral argument [in the
District Court], the parties agreed no material facts were in dispute and the case was ripe
for adjudication.” Liberty Bell Capital II, L.P. v. Warren Hosp., No. 3:13-CV-4241-
BRM-TJB, 2017 WL 4330359, at *1 n.1 (D.N.J. Sept. 29, 2017). “It’s my view that once
Your Honor decides what the contract says,” the Hospital’s counsel explained, “that will
then determine the result of this case.” Id. at *7 n.2. Liberty Bell “really d[id] jointly
agree that [the Court] should make the call, ball or strike.” Id. The Court called a ball for
Liberty Bell’s motion, but the Hospital’s pitch was true.
Liberty Bell claims the District Court erred under Facenda v. N.F.L. Films, Inc.,
542 F.3d 1007 (3d Cir. 2008), because “parties may not stipulate to forgoing a trial when
genuine issues of material fact remain that prevent either side from succeeding on a
motion for summary judgment.” Id. at 1023. Liberty Bell has not shown a Facenda error.
“[N]o party base[d] its motion on the existence of questions of fact,” and “the disputed
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facts [were not] material.” Liberty Bell Capital II, L.P., 2017 WL 4330359, at *7.
Moreover, Liberty Bell does not challenge the Court’s assessment of the truth or
materiality of any fact.
II. The PFA does not support Liberty Bell’s claim.
The Hospital claims the PFA is about what would happen to its Office leases if
Liberty Bell came to be its landlord. Liberty Bell claims the Hospital intended that it
acquire the Office, and thus the PFA is not about what will occur if but rather when the
Hospital fulfills its duty. That deduction is faulty, as it is normal to condition contractual
terms on an event occurring without also agreeing to make that event happen. See, e.g.,
PFA Recital ¶ Q (“[I]n the event [Liberty Bell] acquires the Property at the Sheriff’s Sale,
. . . .”); PFA § 3.1 (same); Id. § 3.2(b) (“[I]n the event . . . [Liberty Bell] is not the
winning bidder . . . .”); Id. § 4.1 (“[I]f [Liberty Bell] acquires title to the property
pursuant to any Sheriff’s Sale[,] . . . .”). Hence the Hospital’s knowledge that Liberty
Bell intended to acquire the Office does not prove the Hospital intended to agree to make
that happen.
Turning to the contract’s terms, through PFA § 2.1 the Hospital agreed not to
“contest . . . any [s]heriff’s [s]ale[.]”1 That sale, Liberty Bell claims, includes both an
auction and the ten-day statutory redemption period that follows, so the Hospital’s
transfer of control during the redemption period at least concerned a sheriff’s sale.
1
As noted, the PFA also prohibited the Hospital from causing a delay in, or stay of,
the Sheriff’s Sale. Liberty Bell does not claim the Hospital did either. See Liberty Bell’s
Reply Br. at 2.
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Though the Hospital did not dispute this interpretation, neither party offered an
explanation of what it is to “contest” that process.
We do know Liberty Bell’s contemporaneous actions were inconsistent with its
current view. In the foreclosure proceeding, InMed had moved to put off the sheriff’s
sale so it could arrange to exercise the Partnership’s statutory redemption right. It
informed Liberty Bell, the Hospital, and the Court that it was ready to settle its litigation
with the Hospital in exchange for the Hospital’s interest in the Partnership. At the
hearing, the Superior Court Judge restated that InMed was “absolutely” prepared to settle
if it was “allowed to . . . redeem the property [on behalf of the Partnership].” True
enough, Liberty Bell opposed InMed’s motion, but it did so by arguing that there was “no
harm” to proceeding apace because InMed still had the “opportunity” to exercise the
Partnership’s right of redemption if InMed’s plan came together. Unless it meant to dupe
the Court with an illusory solution (which we doubt), Liberty Bell must not have believed
the PFA prevented the Hospital’s transfer of control to InMed. There is no other way to
take its argument.
Further, Liberty Bell did not assert its purported contractual right when the
Hospital twice telephoned to say it might transfer its interest in the Partnership to InMed.
As noted, Liberty Bell could make reasonable requests “to effect[] the terms and
provisions and purposes” of the agreement. It did not do so. Nor did it take any
immediate legal action. It allowed the Hospital to ring that bell, and it is not at liberty to
un-ring it now.
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To put matters in an even worse light for Liberty Bell, after the redemption it
reported the successful investment to its partners: “We are pleased to inform you . . . the
Borrower [i.e., the Partnership] redeemed the commercial loan asset . . . . Based on the
distribution made to all the [p]artners today, [there was] an Internal Rate of Return of
73.48% and the investors earned a Net Multiple of 1.144x on their investment.” The
statement refers to the investment as a concluded matter, and not as one in which there
was more to be done. It did not try to boost the return by suing the Hospital until 18
months later.
Liberty Bell has not said why the Hospital’s transfer was a “contest” of the
sheriff’s sale. At oral argument we asked the company’s counsel to show us the way. He
answered that “at a minimum” the action was prohibited by some different agreement.
Oral Argument Recording 00:03:26-00:03:46. However, when pressed, he conceded (as
he must) the other agreement did no such thing. Id. at 00:03:58-00:04:00. That is not an
adequate rationale, and we will not ourselves recast a different one.
Finally, Liberty Bell urges us to find the PFA contains an implied covenant that
the Hospital will not “interfere” with the Sheriff’s Sale. Nothing in the document implies
such an agreement, and the Hospital’s knowledge of the result Liberty Bell desired does
not suffice to support Liberty Bell’s contention.
* * * * *
Long after celebrating the redemption in full to its partners, Liberty Bell sought a
windfall by disputing that redemption. It has not supported its claim with relevant
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agreement language, direct or implied. Thus the judgment of the District Court is
affirmed.
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