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RIVEREDGE ASSOC. v. METROPOLITAN LIFE INS.

January 15, 1991

RIVEREDGE ASSOCIATES, PLAINTIFF,
v.
METROPOLITAN LIFE INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Wolin, District Judge.

OPINION

Plaintiff Riveredge Associates ("Riveredge") and defendant Metropolitan Life Insurance Company ("Metropolitan") have cross-moved for summary judgment. The Court will grant Metropolitan's motion and deny Riveredge's motion.

I. BACKGROUND

This case involves the financing and suggested refinancing of Riveredge Plaza Associate ("Plaza"), a New Jersey general partnership formed on or about February 23, 1984 by Riveredge and Metropolitan for the purpose of acquiring and developing real estate located at 25 Vreeland Road in Florham Park, Morris County, New Jersey ("the Property"). Two commercial office buildings are located on the Property owned by Plaza.

Plaintiff Riveredge is a New Jersey general partnership comprised of several individual general partners. Defendant Metropolitan, a New York corporation, is a large, nationally known insurance company with substantial real estate investment holdings. Metropolitan has offices throughout the United States, including New Jersey. Its headquarters are located at One Madison Avenue, New York, New York.

Riveredge and Metropolitan entered into a Partnership Agreement dated February 23, 1984. Section 4.01 of the Partnership Agreement provides that Riveredge is a general partner of Plaza and the owner of a 30 percent interest in the partnership, and Metropolitan is a general partner of Plaza and the owner of a 70 percent interest in the partnership. Section 1.02(b) of the Partnership Agreement defines the scope of the general partnership as "the acquisition and development of the Property and the leasing, sale, financing, operation and management of the Property and Improvements . . . for investment and production of income and profit. . . ."

Section 2.01(a) of the Partnership Agreement provides that the partners will collectively control the business and affairs of the partnership. Section 2.01(b) requires the approval of both partners as to "Major Decision," and defines "Major Decisions" to include, inter alia: "Financing of the Venture [i.e., the partnership], including but not limited to interim and long-term financing or refinancing of the Improvements and financing the operations of the Venture. . . ."

In addition to its status as 70 percent general partner, Metropolitan is the holder of a mortgage on the partnership Property in the original principal amount of $11,500,000. This mortgage carries interest at the rate of 15.125 percent. Metropolitan agreed to make the mortgage loan pursuant to a written Commitment dated October 28, 1982, and the loan is evidenced by a Note and Mortgage, both of which are dated February 23, 1984. At the closing of the loan from Metropolitan to Riveredge on February 23, 1984, Riveredge executed and delivered the $11,500,000 Note and Mortgage. Following the closing of the loan, Plaza was formed as a partnership between Riveredge and Metropolitan, and the Property owned by Riveredge was conveyed to Plaza, subject to the Mortgage and the Note it secured. Plaza is now the Mortgagor and makes the monthly mortgage payments.

The Note provides prepayment of the Mortgage loan without penalty after 14 years: "Maker shall have the privilege of paying the entire principal balance evidenced by this Note but not a part thereof on the first day of any month commencing with the first day of the first month of the fifteenth (15th) Loan Year. . . ." Rider, ¶ 2(a). The Note contains the following provision regarding prepayment, with a 5 percent prepayment fee, upon the occurrence of an Event of Default:

The Note also contains the following acceleration clause:

  And it is hereby expressly agreed that upon the failure of the
  Maker to pay any sum herein specified, when due, or upon a
  breach of any other of the terms, covenants, conditions,
  provisions, stipulations, promises and agreements of this Note,
  the Mortgage, or any other instrument given as collateral
  security for the obligation evidenced by this Note, the entire
  principal debt, or so much thereof as may remain unpaid at the
  time, and all interest thereon, shall, at the option of the
  Holder, become due and payable immediately, and payment of said
  principal debt, or the unpaid principal balance thereof, and
  all interest thereon, together with all other sums due under
  the terms hereof, the Mortgage, or any other instrument given
  as collateral security for the obligation evidenced by this
  Note may be enforced and recovered at once, time being of the
  essence.

Section 12 of the Mortgage defines "Events of Default" to include, inter alia, failure to make payments when due, failure to perform any other obligation, or occurrence of any default under the Note. Section 48 of the Mortgage states in full:

  Metropolitan Life Insurance Company, in its capacity as
  Mortgagee, shall not be deemed to have additional duties or
  obligations, nor shall its rights be diminished or otherwise
  adversely affected by reason of Metropolitan Life ...

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