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MERIDIAN HOMES CORP. v. NICHOLAS W. PRASSAS & CO.

December 30, 1980

MERIDIAN HOMES CORPORATION, PLAINTIFF,
v.
NICHOLAS W. PRASSAS & COMPANY, DEFENDANT.



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

MEMORANDUM OPINION AND ORDER

Plaintiff Meridian Homes Corporation ("Meridian") has moved for partial summary judgment on the issue of its right to terminate the joint venture relating to the Hampton Park Terrace Shopping Center property (the "Venture") in Romeoville, Illinois. In opposition to that motion and in support of its own cross-motion for summary judgment, defendant Nicholas W. Prassas & Company ("Prassas") asserts that:

    (1) Meridian never became a member of the
  Venture and therefore has no right to dissolve it
  or seek a decree of dissolution.
    (2) In any event, the Venture was not
  terminable at will.

For the reasons stated in this memorandum opinion and order, Meridian's motion for partial summary judgment is granted in part and denied in part and Prassas' cross-motion for summary judgment is denied.

Facts

Financial arrangements regarding the Venture were straight-forward as such ventures go. After improvement of the property the net cash flow was divided equally between the venturers, with Alexander "to the extent permissible under the Internal Revenue Code, [to] have the benefit of the entire depreciation deduction available to the joint venture" (Agreement ¶ 5). Upon sale of the real estate, the net proceeds of sale after payment of mortgage and other indebtedness would first be paid to Alexander to the extent of the agreed value of the land and all funds advanced by Alexander, with any surplus then to be divided equally between the venturers.

Agreement ¶ 4 provided:

  It is agreed that First Party may develop Project
  No. 1 in separate stages consistent with economic
  operation and the terms and conditions of this
  agreement shall apply separately to each stage
  until the property in Project No. 1 shall have
  been fully developed.

Agreement ¶ 7 gave Alexander an option to acquire Prassas' joint venture interest within "ninety days after completion and opening for business of a minimum of 500 front feet of store units constituting the entire planned portion of Project No. 1. . . ." It went on to provide:

  In the event this option is not exercised, the
  joint venture shall continue and the parties
  agree that thereafter they shall offer the
  property for sale and [Prassas] shall be the sole
  designated agent to offer the property for sale.

Agreement ¶ 8 required that "[i]n the event that the property is sold as vacant, both parties must be in agreement. . . ." Except for the provisions just quoted and summarized, the Agreement was silent on the subjects of its term or its termination.

Initial development of the property involved a small shopping center (about 31,000 square feet of store area, with a Jewel store of 15,000 square feet as the major tenant) occupying about five of the nine acres, begun and completed promptly after entry into the Agreement. No other development took place until after 1970, when Prassas negotiated a new Jewel lease calling for remodeling of the existing store and a 25,000 square foot addition. Because that deal would have required an estimated additional $300,000 capital contribution by Alexander over and above the added mortgage financing obtainable by Prassas, the affidavit submitted by Nicholas W. Prassas ("Nicholas") with the current Prassas motion states:

  Alexander initially objected to this second phase
  of the development of Project 1 and proposed that
  Prassas Company buy Alexander's interest in the
  joint venture.

Prassas rejected that offer, Alexander ultimately proceeded (with a somewhat smaller capital contribution) and the addition was built in 1972. No other development has taken place or is now planned, and now Meridian (which claims to be the present successor to the Alexander joint venture interest) wants out.

Initial development of the property in 1961 comprised approximately 281 front feet of store units. Another 175 front feet were involved in the 1972 addition. Thus the development to date aggregates 456 front feet, and the point (500 front feet) that Agreement ¶ 7 called "the entire planned portion of Project No. 1" and that would trigger the option under that Paragraph has never been reached.

From the time of its incorporation in 1972 (just prior to its transaction with Alexander) Allister was a wholly-owned subsidiary of Meridian.*fn1 In connection with a 1977 transaction in which certain Allister employees were acquiring a stock interest in that corporation (to give them an equity participation in another real estate project), Meridian required Allister to transfer to Meridian all of its ...


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