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Grande Village LLC v. Cibc Inc.

United States District Court, D. New Jersey

March 6, 2015

GRANDE VILLAGE LLC, et al., Plaintiffs,
CIBC INC., et al., Defendants.




NOEL L. HILLMAN, District Judge.

This is a breach of contract case involving various loan and mortgage documents secured for a retail space in New Jersey. Defendants filed a motion to dismiss. For the reasons explained below, defendants' motion to dismiss will be granted in part and denied in part.


Plaintiffs, Grande Village LLC ("Grande Village"), Grande Properties, LLC ("Grande Properties"), Willingboro Town Center Urban Renewal North, LLC ("Willingboro Urban Renewal") Willingboro Town Center North Manager, LLC ("Willingboro Manager"), William T. Juliano and Thomas E. Juliano, brought breach of contract claims against defendants CIBC Inc. and Canadian Imperial Bank of Commerce, New York Agency ("CIBC").

On September 14, 2007, CIBC extended a $6.2 million loan to Willingboro Urban Renewal and Willingboro Manager. On March 15, 2008, CIBC extended a $32.2 million loan to Grande Properties. On November 10, 2008, CIBC made an $8.4 million construction loan to Grande Village (the Grande Village Loan), with an initial advance of $6, 365, 000, to finance the development of a shopping center, the Grande Village Center, evidenced by a promissory note and mortgage ("Grande Village Mortgage"). The Grande Village Mortgage enabled Grande Village to obtain "subsequent advances" up to the sum of $2, 034, 500, in order to pay for "approved costs, " including capital improvements and renovations to the property and leasing costs. The Loans are secured by mortgages, as well as performance and payment guaranties executed by plaintiffs William T. Juliano and Thomas E. Juliano.

On July 20, 2011, plaintiffs and CIBC entered into an agreement pursuant to which the loans were cross-defaulted and cross-collateralized (the "cross-collateralization agreement"). Pursuant to the cross-collateralization agreement, the crosscollateralized principal balance on the loans was $46.8 million. Also, on July 20, 2011, CIBC and plaintiffs entered into three separate loan modification agreements pursuant to which the maturity date for each of the loans was extended to May 10, 2013. Plaintiffs were permitted to extend the maturity date of the loans in one-year increments provided that they satisfied a variety of conditions set forth in the agreements between the parties. The maturity date was then extended from May 10, 2013 to May 10, 2014.

By May 7, 2013, Grande Village had procured two commercial leases for tenants at the Grande Village Center (the "Leases"), both of which required the construction of significant tenant improvements to fit out the property within a set timeframe, at the risk of penalties. On May 7, 2013, Grande Village delivered a budget to CIBC which provided a financial plan for the construction of the tenant improvements required under the Leases, predicated upon Grande Village receiving approximately $1, 980, 000 in a subsequent advance.

On May 13, 2013, plaintiffs state that CIBC responded by "tentatively" approving the budget and improvements, but conditioned disbursement of the Grande Village Loan proceeds on the sale of the Grande Village Center. At the time, none of the loans between CIBC and Grande Village, Grande Properties, and Willingboro Urban Renewal were in default.

Subsequent advances under the Grande Village Loan are governed by paragraph 2 of Exhibit B to the Grande Village Mortgage ("subsequent advance provision"), which states, in part, the following:

Approved Costs. Lender has allocated a portion of the Subsequent Advance equal to the sum of $2, 034, 500.00 to be used for payment of Capital Improvements... Borrower may request an advance (as that term is hereinafter defined) to pay for the costs of capital improvements and renovations to the Property ("Capital Improvements") pursuant to plans and specifications delivered to and approved by the Lender in accordance with this Exhibit B (the "Plans and Specs") and in accordance with a budget for each Capital Improvement undertaken by the Borrower, which shall be subject to Lender's prior approval (the "Budget"). The budget shall include line items (collectively, "Budget Line Items") for the cost of all labor, materials, and equipment to be used in constructing and completing the Capital Improvements (the costs of Capital Improvements and Leasing costs (to the extent such costs are permitted in this Exhibit B) are collectively referred to as "Approved Costs").

On August 26, 2013, CIBC approved both Leases, including the attached plans and specifications for the capital improvements. However, CIBC did not approve the disbursement of the subsequent advance until Grande Village paid off the Grande Village Loan in full or sold Grande Village Center to a third party purchaser.

On January 21, 2014, CIBC finally approved Grande Village's Budget and removed the condition requiring Grande Village to sell the Grande Village Center. However, Grande Village was not able to complete the tenant improvements by the March deadline required under the Leases. Plaintiffs state that the lessees no longer intend to lease space with Grande Village Center.

On March 3, 2014, CIBC issued three letters declaring Grande Village, Grande Properties and Willingboro Urban Renewal in default based upon their alleged failure to deliver certain documents to the bank (e.g., certain ECF statements, operating statements, rent roll, and a certified financial statement for William Juliano for year ending 2012). Plaintiffs maintain that CIBC's declarations of "technical" default were in error because, as of March 3, 2014, plaintiffs had provided the information requested by CIBC and were not in default, and had not missed any payments.

On April 9, 2014, the borrowers each delivered notices to CIBC in accordance with the Grande Village, Grande Properties, and Willingboro Urban Renewal Loan Documents and the Loan Modification Agreement, extending the maturity date of each loan from May 10, 2014 to May 10, 2015. On April 17, 2014, CIBC responded declaring that the borrowers were in default as a result of failing to cure their technical defaults, and further declaring each of the borrowers in default as a result of the failure by William and Thomas ...

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