Debt-ridden assets abound, wallets are tight, and creditors guard their contracts with default provisions harder than iron and steel. Yet despite the fortress-like protections around these assets, careful formalism can still save buyers (or cost creditors) millions of dollars in asset-related debt during a purchase. This cautionary message, echoing powerfully in bank accounts and court cases today, was one of several lessons the Court of Appeals taught a year ago in MHR Capital Partners LP v. Presstek Inc., 12 N.Y.3d 640, 884 N.Y.S.2d 211 (2009), a case cited for the ancient formalist rules about an express condition precedent that let a multimillion-dollar asset get away.

Since the Court of Appeals decided the case, it has been cited 16 times, often for the simple idea of reading a contract plainly from the four corners of the document. (The author represented the defendant in the case.) In Fellows v. Citimortgage Inc., __ F.Supp.2d __, 2010 WL 1857243 (S.D.N.Y. 2010), the District Court held in a class action that Robert Fellows was not entitled to cancel his personal mortgage insurance because, reading his mortgage on its face, as required by MHR Capital, he was obligated to make payments on the insurance until either he and the lender agreed that he could stop or termination was required by law. In In re Metaldyne Corp., 409 B.R. 671 (Bankr. S.D.N.Y. 2009), the Bankruptcy Court, reading a loan agreement plainly, as required by MHR Capital, held that Metaldyne did not need an objecting lender’s consent to sell its assets.

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