Clark Tower, LLC (“Clark”) brought this suit against Wells Fargo Bank, N.A., as Trustee for the Registered Holders of J.P. Morgan Chase Commercial Mortgage Securities Trust 2007 (“the Mortgagee”) wherein Mortgagee held a mortgage to property owned by Clark. Clark was the owner of an office building but defaulted on its mortgage in 2015. Clark and its loan servicers negotiated to restructure the loan, thereby avoiding a foreclosure. The maturity date of the two notes negotiated during restructuring was September 1, 2017, a date Clark attempted to extend twice. Clark then attempted to refinance the loan however the Mortgagee did not give its consent for an extension despite the parties agreeing on an appraisal value for the property. In February 2019, the Mortgagee foreclosed on the property and purchased it at auction for $43 million. It was sold in August 2021 for $37.1 million.

Clark maintained that the Mortgagee breached the terms of its loan and argued that its motive in doing so was to force a foreclosure of the mortgage and steal the building. The Mortgagee argued that the breach of contract claim should be dismissed as Clark did not prove that it was unreasonable for the Mortgagee to withhold consent to refinance the loan. The Court agreed, finding that the Mortgagee’s arguments regarding their consent right were not in conflict with the contract. The Mortgagee was not required to give consent simply on the grounds that the appraisal value had been agreed upon, and the Court found that the Mortgagee did not give consent to the refinance at the time that the appraisal value was established. However, the Court also decided that it could not issue summary judgment on the motion regarding withheld consent to refinance in the first place as the Mortgagee was unable to prove whether refusal to consent was met the standard of reasonableness under New York law. Furthermore, the Court rejected the Mortgagee’s argument that Clark’s breach of contract claim must be dismissed for lack of damages.

Nevertheless, Judge Melissa Crane dismissed Clark’s breach of contract cause of action as by not paying its debts according to the initial agreement it had breached the terms of the loan first. As for Clark’s wrongful foreclosure claim, the Court found that arguments that the foreclosure would not have occurred if the Mortgagee consented to refinance were speculative and that there was no evidence in the record to support a conspiracy to steal the building. The Court ordered that the complaints against the Mortgagee be dismissed. The decision was filed on April 14, 2023.