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MRPC Christiana LLC v. Crown Bank

Superior Court of Delaware

December 26, 2017

MRPC CHRISTIANA LLC, et al., Plaintiffs/Counterclaim Defendants,
v.
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

          John 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.

          Daniel A. Griffith, Esq., Chad J. Toms, Esq., and Kaan Ekiner, Esq., Whiteford, Taylor & Preston, LLC. Attorneys for Crown Bank.

          DECISION AFTER TRIAL

          ERIC M. DAVIS, JUDGE.

         I. INTRODUCTION

         This is 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 "Hotel").

         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 Enrichment.

         On 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.

         On July 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.

         On 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. [D.I. 62].

         On May 20, 2016, Crown filed a Motion to Strike Jury Demand. On June 20, 2016, the Court granted Crown's Motion to Strike Jury Demand.

         On June 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.

         On June 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 Amended Complaint.

         The 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.

         At the 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.

         On July 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 Stipulation").

         II. THE TRIAL

         A bench 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").[1] The Court then had both parties submit their closing arguments in written form, receiving the final post-trial paper on or about June 16, 2017.[2]

         a. Witnesses

         During the Trial, the Court heard from and considered testimony from the following witnesses:

Chirag P.
Paresh Patel
Daniel Lesser
Thomas Deignan
Kevin Friedrich
John Burgess
Peggy Lane
Lawrence Kneip
Anthony Mirandi
Jacinto Rodrigues
Warren Feldman
William Santora
Brian Casey
Keith Madigan

         All the 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.

         b. Exhibits

         The 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 exhibits ("JX").

         III. APPLICABLE LAW

         The Court will be applying the following general legal principles:

         a. Governing Substantive Law

         The Agreement provides that New Jersey law applies to the substantive issues relating to governance, construction and interpretation.[3]

         b. Standard of Law for Breach of Contract

         In New 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 breach."[4] 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."[5] Absent ambiguity, the intention of the parties is to be ascertained by the language of the contract.[6] If the language is plain and capable of legal construction, the language alone must determine the agreement's force and effect.[7]

         One of the elements that the party must prove is the other party's breach of the contract.[8]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.

         c. Material Breach

         A breach may be material or minor. If a breach "goes to the essence of the contract, " then the breach is material.[9] The New Jersey Supreme Court adopted Section 241 of the Restatement (Second) of Contracts to determine if a breach is material.[10] 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 deprived;
(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.[11]

         Whether conduct is a breach of contract or a material breach of contract is ordinarily a question for the trier of fact.[12]

         If a party materially breaches the contract, the other party may treat the contract as void or proceed on the contract.[13] If the non-breaching party continues to perform on the contract, then the contract remains valid.[14] 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."[15]

         d. Modification of a Contract

         Parties 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."[16]"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."[17] Further, modification of a contract requires new or additional consideration.[18]

         e. Implied Covenant of Good Faith and Fair Dealing[19]

         In 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.[20]

         To act 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.

         There can be no breach of the implied covenant of good faith and fair dealing unless the parties have a contract.[21] Additionally, the implied covenant of good faith and fair dealing may not override an expressly granted right under the contract.[22]

         In 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.[23] 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 discretion.

         The 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 other.[24]

         In 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 dealing.[25]

         f. Legal Standard for Guarantees

         When resolving questions as to the interpretation of contracts of guarantee, New Jersey courts look to the rules governing construction of contracts generally.[26] 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 involved.[27]

         g. General Damages - Breach of Contract[28]

         A 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 such contract.

         Compensatory 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.

         h. Burden of Proof by a Preponderance of the Evidence[29]

         In a 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.

         In 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.

         In this 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 evidence.[30]

         i. Evidence-Direct or Circumstantial[31]

         Generally 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 facts.

         As a 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 and circumstantial.

         j. Evidence Equally Balanced[32]

         If the 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.

         In 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 for Crown.[33]

         k. Multiple Parties[34]

         The 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.[35]

         l. Credibility of Witnesses-Weighing Conflicting Testimony[36]

         Here, 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 the testimony.

         If the 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.

         m. Prior Sworn Statements[37]

         If the 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.

         The 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 testimony.

         n. Prior Inconsistent Statement by Witness[38]

         A 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 present testimony.

         The 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 deserves.

         o. Expert Testimony[39]

         The 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.

         In 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 the case.

         IV. DISCUSSION

         The 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.

         a. Credibility of Witnesses

         Here, 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.

         The 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:8/3 147:10-149:15.

         The 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.

         Mr. C. 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.

         The 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.

         b. Findings of Fact

         1. The Parties

         MRPC is 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.

         MRPC 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.

         Crown 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.

         Mr. P. 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.

         The 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.

         Krishnas 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.

         BWI is 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.

         Ganesa 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.

         2. The Hotel and Decision to Renovate and Reflag

         In 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; 23:13-22.

         In 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; 8/1118:3-14.

         MRPC 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.

         In 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 County. JX073.

         MRPC 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; JX785.

         3. The Loan Commitment, as Modified

         MRPC 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.

         The Loan Commitment, among other things, provides:

• the term of the Loan was to be 12 months from closing (p. 2);
• 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. 4);
• Crown Bank would not make the Loan with the SBA 504 Lender issuing a commitment to refinance the Bridge Loan (p. 6).

         Exhibit 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.

         Exhibit 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 provides that:

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 Commitment.

         The 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.

         The 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.

         The 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.

         The 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 ...

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