Market Street Associates Limited Partnership v. Frey Case Brief Summary | Law Case Explained

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Market Street Associates Limited Partnership v. Frey | 941 F.2d 588 (1991)
In 1968, J.C. Penney entered into a sale and leaseback arrangement with General Electric Pension Trust. Under Paragraph 34 of the contract lease, if Penney requested funding for improvements to a property and the trust refused to supply it, Penney could repurchase the property at a favorable price. This arrangement was still in place 20 years later, when it generated the dispute at the heart of Market Street Associates versus Frey.
In 1987, Penney assigned the lease to a Milwaukee shopping center to Market Street Associates. After failing to get financing for improvements from other sources, Market Street tried to buy the property back from the trust. The trust offered to sell for three million dollars, which Market Street thought too much. Market Street requested that the trust fund the improvements. It didn’t mention paragraph 34. The trust refused because it was only financing loans over seven million dollars. Market Street then invoked its right under paragraph 34 to purchase the property at a price of one million dollars. The trust refused to sell.
Market Street sued for specific performance. The district court awarded summary judgment to the pension trust on the grounds that, by failing to mention paragraph 34, Market Street had prevented negotiations over financing, which violated the duty of good faith. Market Street appealed to the United States Court of Appeals for the Seventh Circuit.
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