MRPC CHRISTIANA LLC, et al., Plaintiffs/Counterclaim Defendants,
CROWN BANK, Defendant/Counterclaim Plaintiff. Draw Req. # Period Ending Rec'd by Crown Insp. Report Date Disburse Date Amount Req'd Insp. Recommended Amt. Amt. Disbursed Difference Days from Draw Req. to Disburse Days from Insp. Report to Disburse Total Disbursed
G. Harris, Esq., Michael W. McDermott, Esq., and David B.
Anthony, Esq., Berger Harris LLP, Wilmington, Delaware.
Attorneys for Plaintiffs/Counterclaim Defendants MRPC
Christiana LLC, Krishnas, LLC, BWI MRPC Hotels, LLC, Paresh
Patel, Ranjan Patel, Chirag Patel and Paresh Patel and Ranjan
Patel Irrevocable Trust.
A. Griffith, Esq., Chad J. Toms, Esq., and Kaan Ekiner, Esq.,
Whiteford, Taylor & Preston, LLC. Attorneys for Crown
DECISION AFTER TRIAL
M. DAVIS, JUDGE.
a commercial civil action. The action arises out of a $12,
988, 000.00 construction loan (the "Loan") by and
between Crown Bank ("Crown"), MRPC Christiana, LLC
("MRPC"). The Loan is secured by various guarantees
and collateral, including the primary collateral which is a
hotel located at 56 South Old Baltimore Pike, Parcel Numbers
09-035.00-019 and 09-035.00-12, Newark Delaware (the
complaint (the "Complaint") initiating this civil
action was filed on January 31, 2015. The named Plaintiffs
were MRPC, Krishnas, LLC ("Krishnas"), Ganesa, LLC
("Ganesa"), BWI MRPC Hotels, LLC ("BWI"),
Paresh Patel ("Mr. P. Patel"), Ranjan Patel
("Ms. R. Patel"), Chirag Patel ("Mr. C.
Patel"), and Ranjan Patel Irrevocable Trust (the
"Trust", and collectively with other Plaintiffs,
the "Plaintiffs"). The Complaint set forth five (5)
causes of action against Crown: (i) Count I - Negligence;
(ii) Count II - Breach of Contract; (iii) Count III -Breach
of Covenant of Good Faith and Fair Dealing; (iv) Count IV -
Tortious Interference with Contract; and (v) Count V - Unjust
February 25, 2015, Crown filed an Answer to the Complaint.
The Answer also asserted twenty-one counterclaims (the
"Counterclaims"), which sets forth 21 counts for
affirmative relief: (i) Count I - Money Damages - Note #1
(Permanent Note); (ii) Count II - Money Damages - Note #2
(Interim Note); (iii) Count III - Money Damages - Chirag
Guaranty #1; (iv) Count IV - Money Damages - Chirag Guaranty
#2; (v) Count V - Money Damages -The Trust Guaranty #1; (vi)
Count VI - Money Damages - The Trust Guaranty #2; (vii) Count
VII - Money Damages - Krishnas Guaranty #1; (viii) Count VIII
- Money Damages - Krishnas Guaranty #2; (ix) Count IX - Money
Damages - Ganesa Guaranty #1; (x) Count X - Money Damages -
Ganesa Guaranty #2; (xi) Count XI - Money Damages - BWI
Guaranty #1; (xii) Count XII - Money Damages - BWI Guaranty
#2; (xiii) Count XIII - Money Damages - Paresh Guaranty #1;
(xiv) Count XIV - Money Damages - Paresh Guaranty #2; (xv)
Count XV - Money Damages - Ranjan Guaranty #1; (xvi) Count
XVI - Money Damages - Ranjan Guaranty #2; (xvii) Count XVII -
Judgment in Possession - Security Agreement #1; (xviii) Count
XVIII - Judgment in Possession - Security Agreement #2; (xix)
Count XIX -In Rem Levy on Hotel Property; (xx) Count XX - In
Rem Levy on Second Hotel Property; and (xxi) Count XXI - In
Rem Levy on the Hockessin Property. Counterclaims I through
XVI, that seek in personam remedies, and
Counterclaims XVII through XXI seek in rem relief. On March
23, 2015, Plaintiffs filed their Answer to the Counterclaims.
28, 2015, Plaintiffs filed a Motion for Administrative
Consolidation (the "Consolidation Motion"), seeking
to consolidate, under Superior Court Civil Rule 42(a), seven
(7) separate matters pending in the Delaware Superior Court.
March 16, 2016, the Court entered the Amended Trial
Scheduling Order (the "Amended Trial Scheduling
Order"), setting forth a trial date of August 1, 2016.
20, 2016, Crown filed a Motion to Strike Jury Demand. On June
20, 2016, the Court granted Crown's Motion to Strike Jury
7, 2016, Crown filed four motions for partial summary
judgment (the "Partial Summary Judgment Motions").
The Partial Summary Judgement Motions sought relief under
Civil Rule 5 on Plaintiffs' Count I, Count IV and Count
V. One of the Partial Summary Judgement Motions moved for
judgement on all of Plaintiffs' breach of contract
claims. On June 27, 2016, Plaintiffs filed their Responses in
Opposition to the Partial Summary Judgment Motions.
29, 2016, Plaintiffs filed a Motion for Leave to File an
Amended Complaint. On July 5, 2016, Crown filed a Response in
Opposition to Plaintiffs' Motion for Leave to File an
Court held a hearing on the Partial Summary Judgment Motions
on July 11, 2016. During the hearing, Plaintiffs withdrew
their opposition to the Partial Summary Judgment Motions as
to Counts I and V. On July 20, 2016, the Court granted
Crown's Partial Motion for Summary Judgment as to Count
IV. The Court also denied Crown's Motion for Partial
Summary Judgment as to all breach of contract claims, holding
that there were genuine questions as to material facts.
Accordingly, the Plaintiffs' only remaining claims were
Count II for Breach of Contract and Count III for Breach of
the Covenant of Good Faith and Fair Dealing.
hearing, the Court also granted in part and denied in part
Plaintiffs' Motion for Leave to File an Amended
Complaint. On July 25, 2016, Plaintiffs filed the First
Amended Complaint. On July 27, 2016, Crown filed its Answer
to the First Amended Complaint.
22, 2016, the pretrial conference was held before the Court.
After the pretrial conference, the Court entered the joint
proposed pretrial stipulation and order (the "Pretrial
trial on Plaintiffs' Counts II and III and Crown's
Counterclaims was held on the following dates: August 1, 2016
through August 5, 2016; September 21, 2016 through September
23, 2016; October 21, 2016; November 7, 2016; and January 6,
2017 (collectively, the "Trial"). The Court then had both
parties submit their closing arguments in written form,
receiving the final post-trial paper on or about June 16,
the Trial, the Court heard from and considered testimony from
the following witnesses:
witnesses testified on direct and were available for
cross-examination. The fact witnesses in this civil action
were Mr. C. Patel, Mr. P. Patel, Mr. Deignan, Mr. Friedrich,
Mr. Burgess, Ms. Lane, Mr. Kneip, Mr. Mirandi, and Mr.
Rodrigues. The expert witnesses were Mr. Lesser, Mr. Feldman,
Mr. Madigan, Mr. Casey and Mr. Santora. Normally, the Court
would list the witnesses in the order they testified and
which party called the witness; however, because the Trial
was a bench trial, the Court took witnesses out of order and
used Rule 611 of the Delaware Rules of Evidence to allow for
examination of the witness for both parties cases-in-chief.
parties submitted an extensive number of exhibits. Most of
these exhibits were admitted without objection. The parties
provided the Court with the exhibits in the form of joint
Court will be applying the following general legal
Governing Substantive Law
Agreement provides that New Jersey law applies to the
substantive issues relating to governance, construction and
Standard of Law for Breach of Contract
Jersey, a party must allege three elements to state a breach
of contract claim: "(1) a valid contract, (2) breach of
that contract, and (3) damages resulting from that
If the terms of a contract are clear, "it is the
function of a court to enforce it as written and not to make
a better contract for either of the
parties." Absent ambiguity, the intention of the
parties is to be ascertained by the language of the
the language is plain and capable of legal construction, the
language alone must determine the agreement's force and
the elements that the party must prove is the other
party's breach of the contract.Failure to perform a contract in
accordance with its terms and conditions constitutes a breach
of contract. It does not matter if the failure to perform was
purposeful or inadvertent.
breach may be material or minor. If a breach "goes to
the essence of the contract, " then the breach is
New Jersey Supreme Court adopted Section 241 of the
Restatement (Second) of Contracts to determine if a breach is
The Court must consider:
(a) the extent to which the injured party will be deprived of
the benefit which he reasonably expected;
(b) the extent to which the injured party can be adequately
compensated for the part of that benefit of which he will be
(c) the extent to which the party failing to perform or to
offer to perform will suffer forfeiture;
(d) the likelihood that the party failing to perform or to
offer to perform will cure his failure, taking account of all
the circumstances including any reasonably assurances; and
(e) the extent to which the behavior of the party failing to
perform or to offer to perform comports with standards of
good faith and fair dealing.
conduct is a breach of contract or a material breach of
contract is ordinarily a question for the trier of
party materially breaches the contract, the other party may
treat the contract as void or proceed on the
If the non-breaching party continues to perform on the
contract, then the contract remains valid. The non-breaching
party's indication that it intends "to perform will
operate as a conclusive choice, not in deed depriving him of
a right of action for the breach which has already taken
place, but depriving him of any excuse for ceasing
performance on his own part."
Modification of a Contract
can show modifications to contracts through explicit
agreements to modify or actions and conduct of the parties,
but "the intention to modify [must be] mutual and
clear.""Ambiguous course of dealing from
which one party might reasonably infer that the original
contract was still in force, and the other that it had been
changed, will not support modification." Further, modification
of a contract requires new or additional
Implied Covenant of Good Faith and Fair
addition to the express terms of a contract, the law provides
that every contract contains an implied covenant of good
faith and fair dealing. This means that, even though not
specifically stated in the contract, it is implied or
understood that each party to the contract must act in good
faith and deal fairly with the other party in performing or
enforcing the terms of the contract.
in good faith and deal fairly, a party must act in a way that
is honest and faithful to the agreed purposes of the contract
and consistent with the reasonable expectations of the
parties. A party must not act in bad faith, dishonestly, or
with improper motive to destroy or injure the right of the
other party to receive the benefits or reasonable
expectations of the contract.
can be no breach of the implied covenant of good faith and
fair dealing unless the parties have a
Additionally, the implied covenant of good faith and fair
dealing may not override an expressly granted right under the
order for there to be a breach of the implied covenant of
good faith and fair dealing in this case, a party must
demonstrate that the other contracting party, with no
legitimate purpose: 1) acted with bad motives or intentions
or engaged in deception or evasion in the performance of
contract; and 2) by such conduct, denied the party of the
bargain initially intended by the parties. In considering what
constitutes bad faith, a number of factors can be considered,
including the expectations of the parties and the purposes
for which the contract was made. The fact finder should also
consider the level of sophistication between the parties,
whether the parties had equal or unequal bargaining power,
and whether the party's act involved the exercise of
fact finder must keep in mind, however, that bad faith is not
established by simply showing that a party's motive for
the actions did not consider the best interests of the other
party. New Jersey contract law does not require parties to
behave thoughtfully, charitably or unselfishly toward each
order for a party to prevail on a breach of implied covenant
of good faith and fair dealing, the fact finder must
specifically find that bad faith motivated a party's
actions. A party who acts in good faith on an honest, but
mistaken, belief that the actions were justified has not
breached the covenant of good faith and fair
Legal Standard for Guarantees
resolving questions as to the interpretation of contracts of
guarantee, New Jersey courts look to the rules governing
construction of contracts generally. The terms of a guarantee agreement
must be read in light of commercial reality and in accordance
with the reasonable expectations of persons in the business
community involved in transactions of the type
General Damages - Breach of
plaintiff who is awarded a verdict for breach of contract is
entitled to compensatory damages for such losses as may
fairly be considered to have arisen naturally from the
defendant's breach of contract. Alternatively, a party
may be entitled to such damages as may reasonably be supposed
to have been contemplated by both parties, at the time they
made the contract, as the probable result of the breach of
damages for breach of contract are designed under the law to
place the injured party in as good a monetary position as
he/she would have enjoyed if the contract had been performed
as promised. What that position is depends upon what the
parties reasonably expected at the time they made the
contract. A party is not liable for a loss that the parties
did not have reason to foresee as a probable result of any
breach. While the loss must be a reasonably certain
consequence of the breach, the exact amount of the loss need
not be certain.
Burden of Proof by a Preponderance of the
civil case, the burden of proof is by a preponderance of the
evidence. Proof by a preponderance of the evidence means
proof that something is more likely than not. It means that
certain evidence, when compared to the evidence opposed to
it, has the more convincing force and makes the Court believe
that something is more likely true than not. Preponderance of
the evidence does not depend on the number of witnesses. If
the evidence on any particular point is evenly balanced, the
party having the burden of proof has not proved that point by
a preponderance of the evidence, and the Court must find
against the party on that point.
deciding whether any fact has been proved by a preponderance
of the evidence, the Court may consider the testimony of all
witnesses regardless of who called them, and all exhibits
received into evidence regardless of who produced them.
particular case: (i) MRPC must prove all the elements of
Count II for Breach of Contract and Count III for Breach of
the Covenant of Good Faith and Fair Dealing by a
preponderance of the evidence; and (ii) Crown must prove all
the elements of the Counterclaims by a preponderance of the
speaking, there are two types of evidence from which a jury
may properly find the facts. One is direct evidence-such as
the testimony of an eyewitness. The other is indirect or
circumstantial evidence-circumstances pointing to certain
general rule, the law makes no distinction between direct and
circumstantial evidence, but simply requires that the Court
find the facts from all the evidence in the case: both direct
Evidence Equally Balanced
evidence tends equally to suggest two inconsistent views,
neither has been established. That is, where the evidence
shows that one or two things may have caused the event
(e.g., a material breach): one for which MRPC was
responsible and one for which Crown was not. The Court cannot
find for MRPC if it is just as likely that the event was
caused by one thing as by the other.
other words, if the Court finds that the evidence suggests,
on the one hand, that Crown committed a breach, but on the
other hand, that Crown did not commit a breach, then the
Court must not speculate about the suggested causes of
MRPC's injury; in that circumstance the Court must find
Court notes that there are several parties in this case with
claims and counterclaims. Some may be liable while others are
not. The Court will engage in a fair consideration of all of
the parties' arguments and defenses. If the Court finds
against one party, that shouldn't affect the Court's
consideration of other parties.
Credibility of Witnesses-Weighing
the Court is the sole judge of each witness's
credibility. That includes the parties. The Court considers
each witness' means of knowledge; strength of memory;
opportunity to observe; how reasonable or unreasonable the
testimony is; whether it is consistent or inconsistent;
whether it has been contradicted; the witnesses' biases,
prejudices, or interests; the witnesses' manner or
demeanor on the witness stand; and all circumstances that,
according to the evidence, could affect the credibility of
Court finds the testimony to be contradictory, the Court may
try to reconcile it, if reasonably possible, so as to make
one harmonious story of it all. But if the Court cannot do
this, then it is the Court's duty and privilege to
believe the testimony that, in the Court's judgment, is
most believable and disregard any testimony that, in the
Court's judgment, is not believable.
Prior Sworn Statements
Court finds that a witness made an earlier sworn statement
that conflicts with witness's trial testimony, the Court
may consider that contradiction in deciding how much of the
trial testimony, if any, to believe. The Court may consider
whether the witness purposely made a false statement or
whether it was an innocent mistake; whether the inconsistency
concerns an important fact or a small detail; whether the
witness had an explanation for the inconsistency; and whether
that explanation made sense to the Court.
Court's duty is to decide, based on all the evidence and
the Court's own good judgment, whether the earlier
statement was inconsistent; and if so, how much weight to
give to the inconsistent statement in deciding whether to
believe the earlier statement or the witness's trial
Prior Inconsistent Statement by
witness may be discredited by evidence contradicting what
that witness said, or by evidence that at some other time the
witness has said or done something, or has failed to say or
do something, that is inconsistent with the witness's
Court, as the fact finder, will determine whether a witness
has been discredited, and if so, to give the testimony of
that witness whatever weight that the Court think it
parties presented expert witnesses during the course of the
Trial. Expert testimony is testimony from a person who has a
special skill or knowledge in some science, profession, or
business. This skill or knowledge is not common to the
average person but has been acquired by the expert through
special study or experience.
weighing expert testimony, the Court may consider the
expert's qualifications, the reasons for the expert's
opinions, and the reliability of the information supporting
the expert's opinions, as well as the factors previously
mentioned for weighing the testimony of any other witness.
Expert testimony should receive whatever weight and credit
the Court thinks appropriate, given all the other evidence in
Court heard from a number of witnesses-both fact and expert.
Before detailing the findings of fact and conclusions of law,
the Court is going to address the credibility and
effectiveness of the witnesses.
Credibility of Witnesses
the Court is the sole judge of each witness's
credibility, including the parties. The Court finds
that-based on their testimony at the Trial, their manner or
demeanor on the witness stand, and all circumstances that,
according to the evidence, could affect the credibility of
the testimony-Mr. P. Patel, Mr. Deignan, Mr. Kneip and Mr.
Mirandi were very credible witnesses. The Court noted that
Mr. P. Patel, Mr. Deignan, Mr. Kneip and Mr. Mirandi were
responsive to the questions asked even when the question was
difficult and may have solicited information that did not
support the position espoused by the party they supported.
The Court also finds that Mr. Kneip, Mr. Deignan and Mr.
Mirandi provided testimony that was helpful to the Court on
the issues to be decided in this civil action.
Court did not find the testimony of Mr. C. Patel to be overly
credible or helpful. Mr. C. Patel was not always responsive
to the questions asked by the lawyers or the Court. In fact,
the Court cautioned Mr. C. Patel during the Trial that he
needed to respond the questions that were asked. Moreover,
some of the testimony of Mr. C. Patel seemed contrary to the
evidence adduced at the Trial and the plain language of
controlling documents. Mr. C. Patel's testimony
surrounding the use of the $1, 500, 000 cash collateral held
in an account at Crown on or about December 8, 2014 is just
one example of why the Court finds Mr. Patel not to be a
credible witness. JX649; TT:8/2, 51:13-84:10; TT:8/3
Court finds that some of the testimony of Mr. Rodrigues was
credible and/or helpful. Mr. Rodrigues was not as responsive
as he could be and that made it difficult to follow some of
his responses. To the Court, Mr. Rodrigues seemed to be
"trying to hard" to present the position of Crown
as opposed to responding to the question. Because of this,
the Court discounted some of Mr. Rodrigues' testimony.
Patel and Mr. Rodrigues were the representatives at trial of
MRPC and Crown respectively. As such, Mr. C. Patel and Mr.
Rodrigues have a strong interest in the outcome of this civil
action, i.e., bias. This showed through unreasonable
testimony, inconsistency of testimony, convenient memory
failure and their demeanor on the stand.
Court finds the remaining witnesses-Mr. Lesser, Mr.
Friedrich, Mr. Burgess, Ms. Lane, Mr. Feldman, Mr. Santora,
Mr. Casey and Mr. Madigan-to be credible witnesses.
Findings of Fact
a Delaware limited liability company, maintaining its
principal place of business at 56 S. Old Baltimore Pike,
Newark, Delaware. JX726 at 3, Ans. No. 3. MPRC is the owner
of the primary collateral in this litigation-the Hotel.
made a decision to expand and re-flag the Hotel as a Sheraton
Four Points Hotel "towards the end of 2010, beginning of
2011." TT:8/1, 27:9-28:1. Sheraton Four Points is part
of the Starwood Hotel conglomerate. TT:8/1, 25:16-18.
is a New Jersey chartered bank. Crown's principal place
of business is located at 27 Prince Street, Elizabeth Union
County, New Jersey, 07276. JX84.
Patel and Ms. R. Patel are husband and wife residing at of
181 Thompson Drive, Hockessin, Delaware. JX726 at 3-4, Ans.
Nos. 9, 10. Mr. C. Patel is an individual residing at the
same address. Mr. C. Patel is the manager of MRPC. TT:8/1,
23:23-24:7; 26:14-23. The residence of Mr. P. Patel and Ms.
R. Patel (the "Patel Residence") is secondary
collateral for the Loan. TT:8/1, 76:11-77:5.
Trust is a Delaware trust formed with an address location of
181 Thompson Drive, Hockessin, Delaware. Mr. P. Patel and Ms.
R. Patel are the grantors and beneficiaries of the Trust.
JX726 at 3, Ans. No. 5. The Trust is a member of MRPC.
TT:8/1, 74:2-12. Mr. C. Patel is the sole trustee of the
Trust. TT:8/1, 30:5-8.
is a Delaware limited liability company with a business
address of 1024 Churchmans Road in Newark, Delaware. Krishnas
owns and operates the Country Inn and Suites located at 1024
Old Churchmans Road, Newark DE, 19713 ("The Country Inn
Hotel"). JX726 at 3, Ans. No. 6; TT:8/2, 160:19-161:2.
The Country Inn Hotel is also collateral for the Loan.
TT:8/1, 76:11-77:5. Mr. C. Patel is Krishnas' manager.
JX94 at 4.
a Maryland limited liability company with a Delaware address
location of 181 Thompson Drive, Hockessin, Delaware. JX726 at
3, Ans. No. 7. Mr. P. Patel is BWI's managing member.
JX100 at 4. On December 19, 2012, BWI owned an undeveloped
parcel of land located at 1200 Old Elkridge Landing Road,
Linthicum, Maryland (the "Maryland Parcel").
TT:8/2, 175:9-17. Crown already foreclosed on the Maryland
Parcel. TT:8/2, 154:9-155:5.
is a Delaware limited liability company with an address
location of 181 Thompson Drive, Hockessin, Delaware. JX726 at
3, Ans. No. 8. Ganesa owns an undeveloped parcel of land
located at 630 South Pennsville Auburn Road, Carneys Point,
Salem County, New Jersey (the "New Jersey Parcel").
TT:8/2, 163:21-164:4. Mr. C. Patel is Ganesa's manager.
JX109 at 4.
The Hotel and Decision to Renovate and
1991, Mr. P. Patel purchased the unimproved real property
located at 56 S. Old Baltimore Pike, Newark, Delaware (the
"Property"). TT: 8/1, 22:19-22. In 1996-97, Mr. P.
Patel developed the Property into a 65-unit Comfort Suites
hotel, defined here as the Hotel. Id. at 100:13-14.
In the years that followed, Mr. P. Patel's son, Mr. C.
Patel, worked at the Hotel in virtually every facet of its
business operations. Id. at 114:18-19; 145: 14-16;
2011, MRPC closed the Hotel so that it could be renovated and
reflagged. JX779 at 3; TT: 8/1, 65:7-9. At about the same
time, Mr. C. Patel, on behalf of MRPC, engaged DelVal
Financial Business Corp. ("DelVal") for the purpose
of originating, underwriting, processing, and servicing the
SBA component of the financing needed for rebranding and
renovating the Property. TT: 8/1, 46:14-21; 8/1104:6-8;
weighed two renovation and rebranding scenarios. One option
was to renovate the existing 65-room hotel and rebrand it as
La Quinta Inn and Suites ("La Quinta"), which would
require $400, 000 of financing. TT: 8/1, 31:9-32:3; 8/1
46:17-21. MRPC had lined-up funds to refinance existing debt
for the La Quinta option through Evolve Bank and Trust. 8/1
44:5-15; 102:7-10; JX779 at 134. The second option was to
renovate, expand, and rebrand the Hotel as a Four Points by
Sheraton, which entailed adding three floors to the Property.
2012, MRPC commissioned a report from HVS, a hotel consulting
firm, to evaluate both renovation options. TT: 10/21, 97:12;
JX6; JX779. MRPC ultimately decided to move forward with the
Four Points option (the "Project"). TT: 8/1,
33:1-20. MRPC negotiated the PIP, procured new furniture,
fixtures and equipment ("FF&E") and obtained
the necessary building permit for the Project from New Castle
sought out a lending source for the additional financing
needed to complete the Project. In or around early March of
2012, a financing agent, CLC Lending, introduced MRPC to
Crown. TT: 8/1, 47:16-23. The parties entered into a Letter
of Intent on or about March 5, 2012, which required that MRPC
pay Crown a fee of approximately $20, 000. TT: 8/1 49:2-4;
The Loan Commitment, as Modified
and Crown entered into a loan commitment letter dated May 31,
2012 (the "Loan Commitment"), outlining the terms
and conditions of Crown's commitment to lend nearly $13
million to MRPC through a construction loan and a bridge
loan. JX23. Senior Vice President and SB A Director, Mr.
Kneip, signed the Loan Commitment for Crown, and Mr. C. Patel
signed the document for MRPC. JX23. MRPC paid Crown $95,
082.00 to obtain the Loan Commitment. JX23.
Loan Commitment, among other things, provides:
• the term of the Loan was to be 12 months from closing
• a list of "Collateral Security" (p. 3-4);
• an entity entitled Tetra Tec was to provide a
performance Bond, complete a plan and cost review to
determine acceptability prior to closing and conduct site
inspections and review all draw requests. Crown was to review
and approve the plan and cost review prior to closing. (p.
• Crown Bank would not make the Loan with the SBA 504
Lender issuing a commitment to refinance the Bridge Loan (p.
A to the Loan Commitment provides for the use of the Loan
proceeds (the "Sources and Uses"). The Sources and
Uses were reviewed and approved by Crown, MRPC and DelVal
before the Loan closed. JX23; JX82. Mr. Kneip presented the
Sources and Uses to Crown's Board Loan Committee
("BLC"), which approved them without modification.
JX22 at 4. The Sources and Uses were also provided to HVS,
who used them in determining the feasibility and expected
profit of the Project. JX779 at 39.
E to the Loan Commitment is entitled "Construction
Addendum." JX23 at Exhibit E. The Construction Addendum
provides a lengthy list of "Required documentation for
construction disbursement." JX23 at 1-2. Exhibit E also
Disbursements will occur within five business days of the
receipt of a satisfactory CONSTRUCTION MANAGER. Retainage of
10% for each advance will be withheld. This retainage will be
released when the construction management company signs off
on the project, the borrower accepts the project, final lien
waivers have been received and the permanent certificate of
occupancy has been issued and confirmed.
JX23 at 2. While Tetra Tec is mentioned in the Loan
Commitment, Tetra Tec is not defined as or designated as the
"Construction Manager" anywhere in the Loan
Court finds that the evidence at Trial indicates that, with
respect to the Loan, the "CONSTRUCTION MANAGER"
means a process beginning with Mr. Mirandi's inspection
report as submitted to and reviewed by Crown, see,
e.g., JX212 and JX221, and JX228 and JX237, and ending
in a Construction Loan Advance Authorization Sheet. See,
e.g., JX301 (prepared by Vanessa Fernandes, verified by
Ms. Ross, signed by Mr. Kniep and officer approved by John
Young). The Court does not find that Mr. Rodrigues
explanation was very credible on this point. Instead, the
Court finds the wording of Exhibit "E" and
testimony from Ms. Lane and Mr. Kneip demonstrates that more
than Mr. Mirandi's site inspection would be necessary for
disbursement. JX23 at 18-19. For example, the CONSTRUCTION
MANAGER includes "review of retainage status, "
"verify disbursement math, "
"review…lien waivers." JX23 at 18-19.
Court, as fact finder, used the word "indicates"
because the Court does not believe either party fully
demonstrated or proved by a preponderance of the evidence
what was meant by CONSTRUCTION MANAGER. Crown drafted the
term and the ambiguity rests with Crown. In any event, the
evidence adduced at the Trial provides that Crown did not
always make a disbursement within five (5) business days
after: (i) Mr. Mirandi submitted an inspection report; or
(ii) Construction Loan Advance Authorization Sheet had been
executed by all necessary parties.
parities modified the Loan Commitment after May 31, 2012. On
August 9, 2012, the parties modified the Loan Commitment to
extend the expiration date to November 30, 2012. JX47. In
addition, the parties modified the Loan Commitment on
December 9, 2012 to extend the expiration date to December
31, 2012 (the "December LC Modification"). JX72.
December LC Modification required that Mr. P. Patel and Ms.
R. Patel put up their personal residence as collateral for
the Loan. TT: 1/6, 148:12-19; JX47; JXE 72. The December LC
Modification also removed Tetra Tec. JX47. The December LC
Modification, in part, provides:
Tetra Tec was originally approved to complete a plan and cost
review, review draw requests and perform site inspections,
and to provide a performance bond. The Bank will engage its
own construction consultant and Tetra Tec will not be used.
The Borrower also obtained a performance bond separately,
which must be approved by the Bank prior to closing. The hard
cost budget will be adjusted and $50, 000 will be funded from
the hard cost ...