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MCNEIL REAL ESTATE FUND XXVI v. MATTHEW'S

June 8, 2000

MCNEIL REAL ESTATE FUND XXVI, L.P., PLAINTIFF,
V.
MATTHEW'S, INC. OF DELAWARE, DEFENDANT.



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

ORDER

AND NOW, this 8th day of June, 2000, after the plaintiff, McNeil Real Estate Fund XXVI, L.P., filed an action in the above-captioned case, and after a motion for summary judgment was submitted by plaintiff, and after a Report and Recommendation was filed by the United States Magistrate Judge granting the parties ten days after being served with a copy to file written objections thereto, and upon consideration of the objections filed by defendant, Matthew's, Inc. of Delaware, and the response to those objections filed by plaintiff, and upon independent review of the motion and the record and upon consideration of the Magistrate Judge's Report and Recommendation, which is adopted as the opinion of this Court.

IT IS ORDERED that plaintiffs motion for summary judgment (Docket No. 7) is granted and judgment is entered in favor of plaintiff.

IT IS FURTHER ORDERED that within fifteen (15) days of the date of this Order the parties submit a stipulation in conformity with the Magistrate Judge's Report and Recommendation as to the total dollar amount owed under the Lease and Guaranty Agreement through June 30, 2000, including any interest due on the $519,799.45 uncontested damages and the present value of the base rent payments due under the Lease Agreement for the period between March of 2002 and February of 2005.

REPORT AND RECOMMENDATION

MITCHELL, United States Magistrate Judge.

I. Recommendation

It is respectfully recommended that plaintiffs motion for summary judgment (Docket No. 7) be granted and that judgment be entered in favor of plaintiff. It is further recommended that the parties be directed to submit a stipulation in conformity with this Report and Recommendation as to the total dollar amount owed under the Lease and Guaranty Agreements through June 30, 2000, including any interest due on the $519,799.45 uncontested damages and the present value of the base rent payments due under the Lease Agreement for the period between March of 2002 and February of 2005.

II. Report

Presently before this Court for disposition is a motion for summary judgment brought by the plaintiff, McNeil Real Estate Fund XXVI, L.P. ("McNeil").

Plaintiff commenced this action on August 30, 1999, bringing a single claim for Breach of Guaranty Surety against defendant Matthew's, Inc. of Delaware ("Matthews").

The record demonstrates that in 1993, McNeil acquired a retail mall in Pittsburgh. Pennsylvania known as the Northway Mall.*fn1 In an effort to "reposition" the Northwav Mall as a "power center," McNeil approached Reading China about leasing space.*fn2 Jay Brinsfield, the manager and controlling shareholder of Reading China, expressed interest in the proposal and subsequently entered into negotiations with Dean Lontos, the Vice President of Commercial Leasing at McNeil.*fn3 Once the commitment was made to lease space at the Northway Mall, Mr. Brinsfield delegated the lease negotiations to Joe Bizzarro, Reading China's Chief Financial Officer.*fn4 During negotiations it became apparent that Reading China's "financial statements were not particularly strong" and McNeil consequently sought additional security. Specifically McNeil requested that Matthews, Reading China's sister company which was also owned by Jay Brinsfield and managed by Messrs. Bizzarro and Brinsfield, act as a guarantor for Reading China.*fn5 A security agreement ("the Guaranty Agreement") was eventually entered into providing that:

If the Lease is terminated or rejected in any such [bankruptcy] proceeding then as between Landlord and Guarantors, Landlord shall have the right to accelerate all of Tenant's obligations under the Lease and Guarantors' obligations under this Guaranty. In such event, all such obligations shall become immediately due and payable by Guarantors to Landlord without any notice or demand whatsoever.*fn6

The Guaranty Agreement, which was signed by Mr. Bizzarro, was expressly incorporated into the agreement subsequently entered into by Mr. Brinsfield and Mr. Lontos on May 5, 1994, under which Reading China was to lease space ...


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