United States District Court, D. New Jersey, Camden Vicinage
September 12, 2005.
In the matter of EAST WEST TRADE PARTNERS, INC., Debtor.
The opinion of the court was delivered by: ROBERT KUGLER, Magistrate Judge
This matter comes before the Court on appeal by Sobel WP,
L.L.C., from Orders by the United States Bankruptcy Court for the
District of New Jersey denying Appellant's motion for return of
its deposit and motion for reconsideration. For the reasons set
forth below, the Bankruptcy Court's decision is affirmed.
In December 2000, Appellant Sobel WP, L.L.C., ("Sobel") and
East West Trade Partners, Inc., ("East-West") negotiated an
Agreement of Sale ("the Agreement") providing for Sobel to
purchase a tract of undeveloped property in Philadelphia,
Pennsylvania from East-West for $3,800,000.00. Prior to the
Agreement at issue, East-West and entities associated with Sobel
had twice entered into agreements of sale, the first in October 1996 and the second in October 1997. In both instances, the deal
was never completed because the buyer was unable to find a
In January 2001, East-West and Sobel signed the Agreement
presently before the Court; East-West signed the Agreement on
January 5, 2001 and Sobel signed on January 23, making January 23
the Agreement's Effective Date. The Agreement provided for a due
diligence period, which was to expire thirty days after the later
of the Effective Date or the date East-West delivered copies of
required due diligence documents. The closing date was set for
180 days after the expiration of the due diligence period. Under
this calculation, the earliest possible closing date fell on
August 21, 2001.*fn1 The Agreement also granted Sobel the
right to extend the closing date for three additional successive
periods of 180 days, provided that Sobel paid a deposit for the
second and third extension.
Per the Agreement, Sobel tendered a $50,000.00 deposit to be
put in escrow. In the event of a breach by either party, the
escrow company was to convey the deposit to the nonbreaching
party. This deposit is the subject of the present appeal.
The Agreement also required East-West to provide copies of due
diligence documents within ten business days following the Effective Date.*fn2 It is uncontested that East-West
provided no such documents after the Effective Date. However,
East-West did send Sobel a letter on February 16, 2001 notifying
Sobel that all relevant documents had been provided prior to the
Effective Date and that no new documents existed. Whether Sobel
actually received this notification appears to be in dispute.
However, it is clear that Sobel did not contact East-West about
documents until a letter written by Sobel's counsel to East-West
on August 10, 2001, notifying East-West that no title documents
had yet been received and requesting copies.
On August 16, 2001, East-West's counsel wrote to the escrow
company, stating that "the Buyer has not performed" and
requesting the $50,000.00 deposit.*fn3 Although, the
Agreement required East-West to provide notice and a five day cure period
to Sobel in the event of a default, East-West contacted the
escrow company directly and did not adhere to the Agreement's
Sobel's counsel responded by letter on August 21, 2001,
informing East-West that Sobel did not believe it was in default
and that it considered the agreement in full force and effect. On
October 17, 2001, Sobel filed suit against East-West in the
United States District Court for the Eastern District of
Pennsylvania, seeking specific performance of the Agreement. On
June 27, 2003, East-West filed a Chapter 11 petition in the
Bankruptcy Court, staying the District Court case.
Sobel filed an initial motion for return of its deposit in
Bankruptcy Court on August 6, 2004. The Honorable Gloria M. Burns
ruled that the deposit should be paid to East-West because
Sobel's failure to consummate settlement prior to the closing
date constituted a default of the Agreement. The Court found that
East-West's failure to provide a five day cure period was not a
material breach since Sobel was clearly unprepared to close by
the closing date and because, while Sobel had the ability to
extend the closing period as of August 16, it failed to do so.
The Court rejected Sobel's argument that because East-West had never produced documents, the 180-day closing period had not
yet begun to run. Instead, the Court found that Sobel's failure
to request any documents prior to August 10 was a waiver of
East-West's requirement to produce. Judge Burns also rejected
Sobel's argument that East-West's August 16 letter constituted an
anticipatory repudiation of the Agreement, which would have
relieved Sobel of any further duties to perform.
On December 10, 2004, Judge Burns denied Sobel's motion for
reconsideration of this order, holding that the motion for
reconsideration presented no new facts or law that the Court did
not have before it or which could have been brought before it in
the original motion.
II. Jurisdiction and Standard of Review
This Court has appellate jurisdiction over a final order of the
Bankruptcy Court pursuant to 28 U.S.C. § 158(a)(1). Under Rule
8013 of the Federal Rules of Bankruptcy Procedure, a district
court cannot set aside the factual determinations of a bankruptcy
court unless they are "clearly erroneous." Fed.R.Bankr.P.
8013; In re Cellnet Data Systems, Inc., 327 F.3d 242, 244 (3d
Cir. 2003). A factual finding is clearly erroneous only where
"the reviewing court on the entire evidence is left with the
definite and firm conviction that a mistake has been committed."
Id. (quoting United States v. United States Gypsum Co.,
333 U.S. 364, 395 (1948)). The Court reviews the Bankruptcy Court's legal conclusions de
novo and applies a dual standard to mixed questions of law and
fact. Id.; see also In re Brown, 951 F.2d 564, 567 (3d Cir.
1991) ("Mixed questions of law and fact must be divided into
their respective components and the appropriate test applied.").
An exercise of discretion by the bankruptcy court is conclusive
unless it constitutes an abuse of discretion. See In re
Vertientes, Ltd., 845 F.2d 57, 59 (3d Cir. 1988).
A. Anticipatory Repudiation
The Bankruptcy Court held that Sobel defaulted under the
Agreement by neither closing nor exercising its right to an
extension. Sobel's default would entitle East-West to the
$50,000.00 deposit. Sobel disputes the finding of default, and
argues that East-West's August 16 letter to the escrow company
repudiated the Agreement, relieving Sobel of any obligation to
Although Judge Burns found that the letter was not an
anticipatory repudiation, repudiation of a contract is a question
of law that this Court must review de novo. See St. Paul Fire
& Marine Ins. Co. v. City of Green River, Wyo.,
93 F. Supp. 2d 1170, 1175 (D. Wyo. 2000) ("Whether a party's actions constitute
an anticipatory repudiation, like other issues of contract
interpretation, is a question of law for the Court to decide"); see also Nuco Plastics, Inc. v. Universal Plastics, Inc.,
601 N.E.2d 152, 155 (Ohio Ct. App. 1991).
Under Pennsylvania law,*fn4 anticipatory repudiation
occurs when one party communicates a definite and unconditional
refusal to perform to the other party. McClelland v. New
Amsterdam Cas. Co., 185 A. 198, 200 (1936); Restatement (Second)
of Contracts § 250 (1981). Only "an absolute and unequivocal
refusal to perform or a distinct and positive statement of an
inability to do so" qualifies as an anticipatory repudiation.
Edwards v. Wyatt, 335 F.3d 261, 272-73 (3d Cir. 2003) (quoting
2401 Pennsylvania Ave. Corp. v. Federation of Jewish Agencies,
489 A.2d 733, 737 (1985)).
As the Third Circuit recently explained in overturning a
district court finding of anticipatory repudiation, Pennsylvania
has a particularly narrow interpretation of the anticipatory
repudiation standard and is reticent to find repudiation unless
the repudiating party makes his refusal to perform absolutely
clear. Id. at 272 n. 8 ("The Pennsylvania Supreme Court has
emphasized that Pennsylvania contract law imposes stricter
requirements than does the Restatement for an anticipatory
repudiation defense."); see also 2401 Pennsylvania Ave. Corp.
v. Federation of Jewish Agencies, 489 A.2d 733, 737 (1985) ("we
reject any argument suggesting a dilution of our long recognized standard of an `absolute and unequivocal refusal to
Under this standard, it is clear that East-West's August 16
letter does not constitute a repudiation sufficient to relieve
Sobel of its obligations under the Agreement. No reading of the
letter suggests an absolute and unequivocal refusal to perform.
Rather, the letter demonstrates East-West's belief that Sobel had
defaulted under the Agreement and that East-West was therefore
entitled to the deposit.*fn5 The fact that East-West was in
error, since the closing date had not passed and therefore Sobel
could not have defaulted at that time, does not render its
request for the deposit a repudiation. There is no suggestion
that East-West would have refused to perform, had East-West been
made aware of its error and had Sobel wished to close or extend
the closing date.
Consequently, this Court finds that East-West did not repudiate
the Agreement, and Sobel remained bound to perform. Because Sobel
failed to either close or extend the closing period, Sobel is in default under the agreement and East-West is
entitled to the $50,000.00 deposit.
B. Notice and Opportunity to Cure
Sobel also argues that it could not have defaulted because
East-West failed to provide Sobel with either notice of default
or the requisite five-day opportunity to cure. Sobel's argument
is without merit.
As the Bankruptcy Court observed, such notice and opportunity
to cure would have been useless in light of Sobel's obvious
inability to close within such a short amount of time.
Consequently, East-West's failure to adhere to the notice and
cure provision is not so material as to negate the reality of
Sobel's breach, particularly since East-West's August 16th letter
acted as notice that East-West considered Sobel in default.
Sobel's failure to take action to close or request an extension
in the period that transpired since the August 16 letter renders
the lack of a five-day cure period immaterial.
Accordingly, this Court will affirm the Bankruptcy Court's
Orders denying Sobel's motion for return of its deposit and
motion for reconsideration.
The accompanying Order shall issue today.
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