The opinion of the court was delivered by: SHADUR
MILTON I. SHADUR, UNITED STATES DISTRICT JUDGE
BA Mortgage and International Realty Corporation ("BAMIRCO") has sued American National Bank and Trust Company of Chicago ("Bank"), Southwick Properties, Inc. and Ronald R. Coco, Sr. ("Coco") and William McLinden ("McLinden") (collectively "Coco-McLinden"), seeking:
1. to foreclose its mortgage on the Southwick Office Centre in Schaumburg, Illinois (Count I);
2. to enforce the Coco-McLinden written guaranty (the "Guaranty") of a portion of the mortgage note ("Note") (Count II); and
3. to foreclose its security interest in personal property executed by Coco-McLinden (Count III).
Defendants' answer asserts, by way of affirmative defenses to all three of BAMIRCO's claims, that BAMIRCO:
1. breached its duty of good faith and fair dealing;
2. was a joint venturer and breached its fiduciary duty owed to defendants in that capacity;
3. is not entitled to foreclose the mortgage because it is a joint venturer;
4. is estopped from foreclosing; and
5. has waived its right to foreclose or declare a default.
Coco-McLinden also state alternative added defenses to the Count II claim on their Guaranty:
1. BAMIRCO's Complaint is premature and does not present a justiciable controversy.
2. They are entitled to a reformation of the Guaranty.
Finally, Coco-McLinden have filed a four-count Counterclaim along the same lines as the affirmative defenses:
1. Count I advances a claim for breach of joint venture and breach of fiduciary relationship.
2. Count II states a claim for breach of the obligation of good faith and fair dealing.
3. Count III claims waiver and estoppel.
4. Count IV seeks a declaratory judgment reforming the Guaranty on the basis of mutual mistake.
BAMIRCO has now filed a motion under Fed. R. Civ. P. ("Rule") 12(b)(6) to dismiss all four counts of Coco-McLinden's Counterclaim and a Rule 12(f) motion to strike:
1. the affirmative defenses claiming breach of a joint venture and fiduciary relationship;
3. Counterclaim paras. 4, 6, 7, 18 and 53 through 56 as assertedly redundant, immaterial and impertinent.
For the reasons stated in this memorandum opinion and order:
1. Both aspects of Counterclaim Count I -- that asserting breach of a joint venture and that claiming a breach of fiduciary duty -- are dismissed.
2. Counterclaim Count II, claiming breach of the implied duty of good faith, remains viable.
3. Counterclaim Count III, based on waiver and estoppel, is dismissed on Coco-McLinden's own motion.
4. BAMIRCO's motion to dismiss the Counterclaim Count IV alternative claims for a declaratory judgment or for reformation is granted.
5. Defendants' affirmative defenses based on the claimed breach of a joint venture and breach of fiduciary duty are stricken.
6. BAMIRCO's motion to dismiss all affirmative defenses to its Complaint Count II claim is granted in principal part (but not entirely).
7. Its motion to dismiss Counterclaim paras. 4, 6-7 and 18 is granted, while its motion to dismiss Counterclaim paras. 53-56 is denied.
In February 1985 Coco-McLinden were general partners holding an option on land in Schaumburg, Illinois. They were in the business of constructing and developing commercial real estate and planned to improve the property with an office building (the "Project") (paras. 1, 3).
Coco-McLinden approached BAMIRCO to see if it was interested in financing the Project. They had obtained a loan from BAMIRCO in the past and were familiar with its personnel (para. 2). In this instance they met with BAMIRCO President Larry Knobel ("Knobel") (para. 4).
Knobel told Coco-McLinden that BAMIRCO had developed a new financing program under which its construction loan, after it had become funded as a permanent loan, would "convert into an ownership situation" between BAMIRCO and Coco-McLinden (id.). At that time BAMIRCO was to become a "50/50 participant" with Coco-McLinden (id.).
BAMIRCO explained that both during and beyond the life of the construction loan it would retain substantial control over the Project, including the rights (para. 23):
1. to approve the sale price of the Project in the event of sale;
2. to approve all leases;
3. to approve all changes in plans or specifications;
4. to approve the management leasing agreement and the management leasing agent;
5. to approve all major subcontractors and the architect; and
6. to approve the expenditure of all funds.
Coco-McLinden assert it was the intent of the parties "as evidenced by the loan documents" that the project would be built, leased and then either sold or refinanced within five years (the term of the loan). It was intended to build the office center and lease it as expeditiously as possible to permit prompt sale or refinancing, not to hold the building on a long term basis (para. 8).
On February 25 the package of documents called for by the loan commitments was executed:
1. Bank -- as trustee under the land trust created by Coco-McLinden for that purpose -- executed the $ 14.3 million Note.
2. Bank, Coco-McLinden and BAMIRCO executed a Construction Loan Agreement.
3. As security for the Note and Construction Loan Agreement, Bank executed a Mortgage and Security Agreement (the "Mortgage") and Coco-McLinden executed the Guaranty, a personal guaranty of the Note and Mortgage (paras. 12-14).
In addition to those principal documents, the parties signed and delivered other security documents that need not be detailed because not relevant to the discussion in this opinion.
Under the Construction Loan Agreement BAMIRCO agreed to fund all interest and all operating and leasing expenses, including tenant improvements and leasing commissions, for the life of the loan (para. 19). Amounts estimated as necessary to meet those expenses were allocated to various reserve accounts (para. 20). Those reserves provided a mechanism for funding the operation and leasing of the Project (para. 21).
During the first 15 to 18 months of the loan it became apparent that to attract tenants in the Schaumburg market, it would be necessary to grant rent concessions exceeding those estimated by the parties. That meant a two-year delay in rent on each new lease, with a correspondingly accelerated depletion of the reserve amounts built into the loan (para. 24). Because of those market conditions, BAMIRCO approved leases submitted by Coco-McLinden even though they did not fit within the intended parameters and put the loan "out of balance" by depleting the reserves (para. 25).
In May 1986 Coco-McLinden began negotiating a lease with Merrill Lynch for a large portion of the remaining office space. Though significant lease concessions would clearly be required, BAMIRCO told Coco-McLinden "we have to make deals." For months ...