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Vollers Excavating and Construction, Inc v. Citizens Bank of Pennsylvania

March 5, 2012

VOLLERS EXCAVATING AND CONSTRUCTION, INC., PLAINTIFF-APPELLANT,
v.
CITIZENS BANK OF PENNSYLVANIA, DEFENDANT-RESPONDENT.



On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-1707-09.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued November 1, 2011

Before Judges Reisner, Simonelli and Hayden.

Plaintiff Vollers Excavating and Construction, Inc. (Vollers), appeals from the March 4, 2011 Law Division order, which granted summary judgment to defendant Citizens Bank of Pennsylvania (Citizens) and dismissed this matter with prejudice. We affirm.

The following facts are derived from evidence submitted by the parties in support of, and in opposition to, the summary judgment motion, viewed in a light most favorable to plaintiff. See Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).

Opus East LLC (Opus East) was the general contractor for the office complex development project known as the Mercer Corporate Center (the Mercer Project). Opus East was the sole shareholder of Mercer Corporate Center, LLC (MCC). MCC managed the Mercer Project and owned the property in Hamilton on which the office complex would be built (the property).

On October 9, 2007, MCC entered into a construction loan agreement (CLA) with Citizens for $23.3 million to finance the Mercer Project. The CLA contained the following "No Third Parties [Benefited]" clause:

No part of the Loan proceeds will be at any time subject or liable to attachment or levy at the suit of any creditor of [MCC], or at the suit of Contractors, or any subcontractor or materialman, or any of their creditors. No party is intended to be a third party beneficiary of the Loan proceeds or this Agreement.

MCC executed two mortgage notes, one in the amount of $3.8 million and the other in the amount of $19.5 million. To secure payment of the Notes, MCC executed and delivered to Citizens a Purchase Money Mortgage and Security Agreement (the Mortgage) in the total amount of $23.3 million, and an Assignment of Rents, Leases, Agreements of Sale, Licenses and Permits (the Assignment). All contracts and subcontracts for the Mercer Project were assigned to Citizens pursuant to the Assignment; however, none of the loan documents obligated Citizens to pay MCC's or Opus East's debts to third parties, including subcontractors.

On October 30, 2007, Vollers entered into a subcontract with Opus East to perform excavation, grading and other services on the Mercer Project for approximately $3.3 million. The subcontract permitted Opus East "to assign certain rights, including rights under the Subcontract Documents, under a separate agreement with a bank or other commercial lending institution."

In the Fall of 2008, Citizens became aware that cost overruns were jeopardizing the Mercer Project's continuing viability. According to Opus East's then senior project manager, Matthew Schlindwein (Schlindwein), Opus East "wasn't doing well," and Citizens met with him and other Opus East representatives in January 2009 to discuss the cost overruns. In May 2009, Schlindwein warned Vollers that Opus East and MCC might discontinue paying subcontractors, and that Vollers should "use [its] discretion" in deciding whether to continue working on the Mercer Project.

Opus East's parent corporation, Opus Corporation (Opus Corp.), was also facing serious financial difficulties, and met with Citizens in February 2009 to address the situation. At that time, Opus Corp. had approximately six divisions, including Opus East, that were engaged in various real estate development projects, most of which were experiencing financial difficulties. Opus East was involved in three of those development projects, including the Mercer Project.

Citizens hoped to keep Opus Corp. "out of bankruptcy," and intended to complete Opus East's development projects so that these assets could be liquidated in order to repay the Notes. Citizens required that Opus East's three development projects be cross-collateralized, cross-defaulted, and not included in Opus East's pool of assets for other lenders. Contrary to Vollers's claim, Citizens continued providing funds pursuant to the CLA, and advanced over $1 million to Opus East and over $250,000 to MCC. Vollers claimed, however, that this money was not used for the Mercer Project, but rather, to fund Opus East's other development ...


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