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February 14, 1994

OAK BROOK HOTEL COMPANY, an Illinois limited partnership, and DONALD W. WEST, Individually, Plaintiffs and Counterclaim Defendants,

The opinion of the court was delivered by: MARVIN E. ASPEN

 MARVIN E. ASPEN, District Judge:

 This action arises out of an aborted loan agreement between plaintiffs Oak Brook Hotel Company ("OBHC") and Donald W. West ("West") and defendant Teachers Insurance and Annuity Association of American ("Teachers"). Currently before us are defendant's motions for summary judgment on liability and damages. For the following reasons, we deny the motion for summary judgment on liability and grant in part and deny in part the motion for summary judgment on damages.

 I. Factual Background

 Plaintiff West is the general partner of OBHC, which was the sole beneficiary of a Trust that owned the Hyatt Regency Oak Brook Hotel. Sometime in 1986, OBHC began negotiating with Teachers to obtain a $ 42 million loan. The loan, secured by the hotel and property, was largely going to be used to repay a $ 30 million construction loan by Heller that was due on December 31, 1986. *fn1"

 A. The Commitment Letter

 On June 5, 1986, the parties signed a Commitment Letter outlining the terms and conditions of the loan. *fn2" In addition to requiring OBHC to finalize a management contract with Hyatt Hotels Corporation "in form satisfactory to [Teachers]," *fn3" Teachers stated that "all obligations on [its] part herein [were] expressly subject to . . . [its] approval of a current appraisal of the Subject Property prepared by an appraiser designated by us." Plaintiff's Exh. E at P 10(a). The loan was to become effective upon acceptance of the agreement as delineated in the Letter and upon payment by OBHC of $ 840,000 and delivery of a $ 420,000 letter of credit payable to Teachers.

In the event of [Teachers'] disapproval of the appraisal, or the engineering report for items that cannot be reasonably corrected by [OBHC], required herein, or of [Teachers'] incapacity to comply with any applicable law or governmental regulation, then in such event [Teachers'] sole liability shall be to return to [OBHC] the said Letter of Credit and to refund the sum of $ 840,000 paid hereunder and thereupon this agreement shall become null and void.

 Plaintiff's Exh. E at P 12.

 B. The Appraisal and Management Contract

 Once the Commitment Letter had been signed, Teachers hired Landauer Associates, Inc. ("Landauer") to value the hotel property. After investigating the property, Landauer submitted three letters to Teachers recounting their findings. The first, dated September 15, 1986, cited a market value of $ 46 million and expressly assumed that the incentive fee arrangement between OBHC and its Hyatt management would be fully subordinated. *fn4" In its second letter, dated September 17, 1986, Landauer instead assumed full fee accounting between OBHC and Hyatt -- i.e. no subordination -- and appraised the property at $ 43.5 million. Finally, in what appears to be its final missive, Landauer sent Teachers a September 19, 1986 letter placing the value of the property at $ 46 million "expressly subject to [Teachers'] proposed financing and further assuming per your instructions, full subordination of the incentive fee portion of the management contract between the owner [OBHC] and Hyatt Hotel Corporation." Plaintiff's Exh. Q.

 Prior to September 19, 1986, OBHC and Hyatt had had no conversations regarding any subordination of these incentives. The parties agree, however, that Teachers had sent OBHC a draft "Recognition, Estoppel, Attornment and Non-Disturbance Agreement" on August 19, 1986 which included a provision subordinating Hyatt's incentive fees to Teachers' mortgage payments. Plaintiff's Exh. M at P 5(c). Upon noticing the subordination language, West phoned John Miner, Teachers' counsel, to register his displeasure with the provision and his understanding that the parties had not previously agreed to such a term. It is not clear whether the parties reached an agreement regarding subordination at that time, nor can we discern what steps they took to resolve the apparent controversy.

 Nevertheless, on September 29, 1986, Teachers sent West a letter stating that "the appraisal of the above property by Landauer and Associates, Inc., dated September 19, 1986 has been approved." Plaintiff's Exh. F. Although the appraisal cited the subordination assumption, the letter itself made no reference to subordination.

 The next day (the day the loan was to close), the Teachers' officer in charge of the OBHC loan, Mary Beth Sandiford ("Sandiford") telephoned West and informed him that the approved appraisal had expressly assumed subordination of Hyatt's incentive fee, and that without subordination, the appraisal would not support the loan. *fn5" Deciding to extend the loan deadline in the hopes of finalizing the transaction, the parties engaged in a struggle to characterize the nature of OBHC's "non-compliance." OBHC sought to treat its inability to force Hyatt to renegotiate its management contract to include subordination as an appraisal problem, thereby guaranteeing that if the loan foundered, OBHC would get its money back. On the other hand, Teachers chose to view the lack of a subordination agreement as a management contract problem a perspective that would allow it to retain the $ 840,000 under the contract.

 C. Heller's Foreclosure

 Ultimately the loan failed and Teachers kept the $ 840,000, although it did not draw upon the letter of credit. *fn6" On December 31, 1986, OBHC's construction loan with Heller came due. Receiving no payment, Heller foreclosed on its loan. *fn7"

 After some initial pre-trial discovery and motions, Heller, OBHC, West, and various creditors of OBHC and West reached a settlement (the "Workout") and dismissed the foreclosure action with prejudice. Under the Workout, Heller extended the maturity date of the $ 30 million construction loan and increased the amount of its loan to $ 40 million. This restructured loan was used, in part, to defray the foreclosure costs and was memorialized in two new promissory ...

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