Prepaid rents for foreclosed property litigated – $29,219 Verdict

The case arose out of the foreclosure of the Palatine building in Arlington. William Casterline was the foreclosure trustee. MR Troy Street Holdings LLC was the former owner of the building. 1301 N. Troy LLC purchased the building at a foreclosure sale for $90 million. After the sale, the purchaser claimed that it was entitled to approximately $324,000 in rents prepaid by tenants for time periods after the closing date. The prior owner disputed the amount of the prepaid rents and contended that the amount of prepaid rents was only $29,219. As a result, the trustee Casterline filed an interpleader action and deposited the sum of $324,000 into the court.

During the foreclosure sale process, the lender marketed the property for sale. On the broker’s website, the lender had placed reports from the property manager. The reports indicated that there were prepayments of approximately $273,000, without further explanation. However, the property manager was combining both rental concessions made to induce tenants to rent the property along with actual prepaid rents, rents paid in advance of the due date, into this report. After the sale, the purchaser also believed it was additional sums as prepaid rents, that were rental concessions incurred between the foreclosure sale date and the closing on the property. The property manager prepared a revised report removing the rental concessions from the calculation which stated the actual amount of the prepaid rent was $29,219.

In its response to the interpleader action, the purchaser asserted that the amount of the prepaid rents was $324,000, but if the amount was less than $324,000, that the former property owner should be estopped from denying the amount of the prepaid rents because of the alleged misrepresentation by the property manager prior to the foreclosure sale regarding “prepayments.”

The parties agreed that the purchaser was the “plaintiff” and the former owner was the “defendant” for purposes of trial.

After the purchaser presented its case in chief, the former property owner moved to strike the estoppel argument due to a lack of clear and unequivocal evidence of estoppel. The purchaser consented to the striking of the estoppel argument. Thereafter, the former property owner rested without adducing any further evidence.

As a result of the waiver of the estoppel argument, the only issue before the trial court was the exact amount of prepaid rents. The trial court decided that the amount of prepaid rent was $29,219. The parties had agreed pre-trial on a “low” award, so the foreclosure sale purchaser will receive the sum of $30,000 and the former property owner will receive the remainder of the funds deposited into the court, approximately $290,000.

[11-T-148]

Type of action: Real Estate
Name of case: Casterline, 1301 N. Troy, LLC v. MR Troy Street Holdings LLC
Court: Arlington Circuit Court
Case no.: CL 10-798
Tried before: Judge
Judge: William T. Newman Jr.
Date: Oct. 24, 2011
Demand: $160,000 – 1301 N. Troy, LLC demanded one half of the sum paid into the court Offer: First offer – $80,000 (the offer was presented before litigation commenced); last offer – $50,000 (the offer was made in response to the demand for half of the amount that was paid into court, just prior to trial )
Verdict or settlement: Verdict
Amount: $29,219 for defendant
Attorney for defendant: Raighne C. Delaney, Arlington
Attorney for plaintiffs: John R. Owen, Richmond