Opinion ID: 2054163
Heading Depth: 3
Heading Rank: 1

Heading: The Effect of the Breach Prior to FDC's Default in August 1993

Text: Although Mercy breached the estoppel certificate in May 1992, FDC continued to make regular payments on its restructured loan with Midland through July 1993. Therefore, even though the breach occurred much earlier, Midland did not sustain any damages from the breach until August 1993, when Midland declared FDC to be in default and activated the assignment clause effective for the tenants' October rent payments. This conclusion flows from a consideration of the purpose and intent of the estoppel certificate. See 22 Am.Jur.2d Damages § 44 (1988). Ron Folian, a representative of Midland, testified at trial as to the purpose of the estoppel certificate. Folian testified that one purpose of the provision in the estoppel certificate prohibiting prepayment of rent was to guarantee[] the lender that there will be money in place [for the borrower] to make a monthly ... debt service payment. Thus, the estoppel certificate was intended to ensure that FDC would receive regular monthly payments from its tenants with which to make its loan payments to Midland. Even though Mercy breached the estoppel certificate in May 1992, FDC continued to make payments under the modification agreement until Midland declared a default in August 1993. Thus, despite Mercy's breach, the underlying purpose of the estoppel certificate, to ensure FDC could make its monthly loan payments, although present, was not needed by Midland for legal effect until September 1993, because FDC continued to make monthly payments until August 1993 when Midland declared a default and activated the assignment clause. We conclude that no damages could have arisen from Mercy's breach of the estoppel certificate until Midland declared a default in August 1993 and exercised its rights under the assignment clause. Until that time, FDC made all payments required under the modification agreement and Midland did not suffer damages as a result of Mercy's breach. Therefore, the maximum amount of damages for which Mercy is liable is the amount of rent and other payments Mercy owed under the original lease for the five-month period from September 1993 through January 1994. (Although the last regular monthly payment made by FDC occurred in July 1993, Midland received a loan payment for August in October 1993.) This amount totals $37,773.35. (Monthly rent ($6,739.89), CAM charges ($336.47), insurance ($44.80) and taxes ($433.51) totaled $7,554.67.) Thus, the jury's verdict of $100,000 is excessive and not supported by substantial evidence.