## Facts

- Penthouse International, Ltd., through its subsidiary Boardwalk Properties, planned to develop a hotel and casino project in Atlantic City, New Jersey.
- On June 20, 1983, Boardwalk obtained a $97 million loan commitment from Queen City Savings & Loan Association, which contemplated syndication of participation interests to other lenders, including Dominion Federal Savings & Loan Association.
- The commitment imposed multiple pre-closing conditions, including obtaining casino-control licensing, zoning variances and approvals, and adequate public utility services.
- The commitment expressly expired on March 1, 1984, unless extended.
- By March 1, 1984, Penthouse had not satisfied various conditions precedent.
- As the expiration date approached, Dominion raised feasibility concerns and discussed restructuring the financing plan rather than proceeding on the existing terms.
- By mid-March 1984, the project failed and participating lenders withdrew.
- Penthouse sued Dominion (and related participants) for anticipatory breach, alleging Dominion’s refusal to fund caused the project’s collapse rather than Penthouse’s failure to satisfy conditions.
- After a bench trial, the district court held Dominion liable for anticipatory breach and entered judgment for Penthouse and Queen City; Dominion and related parties appealed.

## Issues

1. Whether Dominion committed anticipatory repudiation of its participation obligation under a loan commitment that expired on March 1, 1984, where Penthouse had not satisfied conditions precedent by that date.
2. Whether Dominion’s pre-expiration communications expressing concern and proposing restructuring were a clear, positive, and unequivocal refusal to perform.
3. Whether post-expiration conduct can support anticipatory repudiation liability for obligations that had lapsed by the contract’s terms.

## Decision

- The Second Circuit reversed the judgment finding Dominion liable for anticipatory breach.
- The court held that alleged repudiation occurring after March 1, 1984 could not constitute anticipatory repudiation of obligations that had expired absent an effective extension.
- The court concluded Penthouse’s failure to satisfy conditions precedent by the expiration date meant no duty to fund had matured.
- The court determined Dominion’s statements before March 1 reflected concerns and negotiation positions, not an unequivocal refusal to perform.
- The case was remanded for further proceedings consistent with the reversal.

## Legal Principles

- Anticipatory repudiation requires a clear, positive, and unequivocal manifestation of intent not to perform an existing contractual obligation before performance is due.
- A time-limited commitment that expires by its terms cannot be breached by anticipatory repudiation based on conduct occurring after the expiration date, absent a binding extension.
- Where contractual duties are subject to conditions precedent, no duty to perform arises until the conditions are satisfied or waived.
- Expressions of doubt, concern, or proposals to restructure a transaction generally do not constitute anticipatory repudiation without an unequivocal refusal to perform.

## Conclusion

The Second Circuit rejected anticipatory repudiation liability because the loan commitment expired on March 1, 1984, Penthouse had not met key conditions precedent by that date, and Dominion’s communications did not amount to an unequivocal pre-expiration refusal to perform.


Penthouse Int'l, Ltd. v. Dominion Fed. Sav. & Loan Ass'n, 855 F.2d 963 (2d Cir. 1988)