Linden Partners v. Wilshire Linden Associates

Facts And Procedural Background

On June 7, 1989, plaintiffs agreed to buy and defendants agreed to sell a medical office building in Beverly Hills, known as the Wilshire-Linden Building. An agreement was signed on that date. The initial purchase price was $22.2 million. Escrow was opened on June 13, 1989, and after several negotiated extensions, closed on October 27, 1989.

The defendants had owned the building since the early 1980’s. Each of the tenants had a written lease with, and paid rent directly to defendants—with one important exception; there was a subtenant on the premises—and apparently only one—named Bank Leumi (hereafter Leumi).

Leumi leased space on the ground floor from its sublessor, Wells Fargo Bank (hereinafter Wells Fargo) and paid its rent directly to Wells Fargo, which, in turn, paid its rent to defendants. Wells Fargo had been a tenant for many years. Defendants had no direct dealings with Leumi and had no reason to be concerned, on a day-to-day basis, with the amount of rent being paid by Leumi to Wells Fargo.

Plaintiffs, on the other hand, had reason to be concerned with all rents being paid on the premises, because the economic viability of the…