The opinion of the court was delivered by: CARTER
Plaintiff, Interstate Properties ("Interstate"), is a New Jersey general partnership, with three partners: Stephen Roth, Russell B. Wight, Jr. and David Mandelbaum. Its principal place of business is Clifton, New Jersey, and each of its partners is a citizen of New Jersey. The partnership was formed in 1968, and since then has been principally involved in the development and operation of regional mall shopping cneters in Manassas, Virginia; Reading, Pennsylvania; Battle Creek, Michigan; Huntington, West Virginia; Binghamton and Utica, New York, and five or six other locations.
Defendant, Pyramid Company of Utica ("Pyramid"), is a New York general partnership consisting of Robert J. Congel, Woodchuck Hill Associates (also a New York general partnership), Leonard Leveen, James McDonald, Joseph Scuderi and Gerald Dick. Its principal place of business is DeWitt, New York. It is one of various partnerships spun off from the Pyramid Company, which was established in 1969 or 1970 by Congel and two other partners to develop shopping centers. The company is considered the umbrella organization and handles the clerical work for the partnerships. These are formed by the company to handle specific shopping center projects. They are usually composed of several partners from the company and generally remain in operation until a project is completed. In this manner, the Pyramid Company has developed a number of regional mall shopping centers in upstate New York.
Pyramid was formed in 1977 to develop the shopping center mall involved in this case. That year Pyramid made plans to construct a two-storied regional shopping center in New Hartford, New York. It secured a commitment from defendant, Teachers Insurance and Annuity Association ("Teachers"), a New York corporation with its principal place of business in New York City, for a permanent mortgage loan of $26 million on the proposed mall.
Interstate owned and managed the Riverside Mall, a shopping center in Utica, New York and held options on some valuable property adjacent to the area. Sears Corp. and J.C. Penny Co. were interested in a regional shopping center being built in the Hartford vicinity. Both organizations expressed displeasure that Pyramid and Interstate were not working together so that the project they desired could be built and pressured the two parties into joining forces to build the mall. Discussions between Pyramid and Interstate began in the spring of 1978, culminating in December, 1978 in a Joint Venture Agreement ("JVA") pursuant to which Interstate and Pyramid agreed to pool their resources to construct, develop and operate the Sangertown Regional Mall ("Sangertown"), the subject of this litigation.
Under the JVA, Pyramid was afforded the active role of constructing, developing, financing, managing and securing tenant occupancy of the mall until such time as Interstate contributed Riverside Mall to the enterprise. At that point, at its option, Interstate could elect to take over management of the enlarged operation. JVA 3A.1, 7.1(a) (b) (c), 7.2.
Pyramid was responsible for securing construction financing for the mall, and the funds secured for permanent financing were to be retained by Pyramid for payment of incurred obligations in the following order of priority: (1) construction mortgage financing, (2) payment of all unpaid development costs, (3) $2 million to Interstate, and (4) balance to Pyramid. JVA 3.1.
Section 5 of the JVA provides for a stablized cash flow to Pyramid when full occupancy of the new mall is reached. All expenses, costs of development and construction of the new mall, JVA 2.2.2, and all decisions in regard thereto, as long as not inconsistent with any of the terms of the agreement, were solely Pyramid's responsibility. JVA 2.2.1, 2.2.2. Pyramid agreed to keep Interstate informed on a regular basis as to the status of the development of the new mall "including without limitation . . . the granting or failure to grant any approval required for construction of the New Mall, the status and terms of leasing and costs of development." JVA 2.2.3(a).
Pyramid was given authority to make all decisions concerning financing or refinancing of the new mall, JVA 8.1.1, but this authority was qualified by JVA 8.1.2(a). The latter provision states that "[a]ll mortgages placed against [the] New Mall shall be limited to the first mortgages held by an institutional lender in an amount not to exceed 75% of such lender's appraisal of the New Mall; except for the initial construction mortgage, the terms and provisions of each such mortgages must provide for full amortization of the principal amount thereof at constant equal (monthly, quarterly, semi-annual or annual) payments over the term of the loan so obtained."
JVA 8.1.2(b) provides that the initial construction mortgage shall not exceed the principal amount of the initial permanent mortgage that is fundable.
JVA 8.1.2(d) provides that Pyramid agrees to use its best efforts to require all mortgages of the new mall to give to Interstate notice of all defaults with a reasonable opportunity to cure the default.
JVA 8.1.2(e) provides that Interstate, on curing a default, becomes sole joint venturer, but Pyramid could reinstate its interest within six months by paying to Interstate the funds advanced plus interest at 1% above the prime rate of Citibank.
JVA 8.5.1 provides that proceeds for initial financing of any expansion are to cover all costs and expenses of the expansions, with the remainder, if any, being ...