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DEVELOPER MERUELO SUES OCEAN BANK OVER NO CONSTRUCTION LOAN


BRIAN BANDELL | APRIL 26, 2010

Developer Richard Meruelo has filed a lawsuit against Miami-based Ocean Bank,
seeking $9 million in damages after he and his family members were hit with
foreclosure actions.

Meruelo’s attorney, Michael Budwick of Meland Budwick, P.A., argues that Ocean
Bank should not have given his client a $12.4 million mortgage to buy land in
Golden Beach and then refused a construction loan. The site faces a foreclosure
lawsuit with Meruelo named as a guarantor.

Budwick previously filed suit against Ocean Bank on behalf of the creditor’s
committee in condo convertor Juan Puig’s $100 million bankruptcy filing. After
alleging bank officials maintained strong ties to Puig and kept his companies
afloat with questionable loans, Ocean Bank settled the case for $4.9 million.

Ocean Bank and other lenders are also appealing a $12 million judgment in
homebuilder TOUSA’s bankruptcy case.

Richard Meruelo’s complaint said his family had more than $130 million in loans
on multiple projects with the bank since 1984.

“The allegations in this lawsuit are patently ridiculous,” Ocean Bank said. “To
claim a bank would take millions of dollars in losses in some fanciful vendetta
against a customer does not warrant a response.”

Richard Meruelo is the son of Belinda Meruelo, the head of Miami Beach-based
developer Merco Group. His brother, Homero F. Meruelo, is also a principal. All
three Meruelos have been hit with numerous foreclosure lawsuits over the last
two years.

According to the complaint, Ocean Bank financed much of the Meruelo family’s
real estate projects – to the point that the bank could not legally lend any
more to them.

“As the relationship grew, Ocean Bank exerted increasing influence over the
investment activities of the Meruelo family,” the complaint states. “Over time,
Ocean Bank exercised control over their investment because it could unilaterally
restrict credit or refinance or extend terms of existing loans.”

The complaint is trying to establish that Ocean Bank held so much influence over
the Meruelo family that it became a fiduciary relationship, said Timothy
Kingcade, a bankruptcy attorney with Miami-based Kingcade & Garcia, who isn’t
involved in the case. While it’s rare that a borrower-lender relationship is
characterized that way, a 1986 ruling by theFlorida Supreme Court in Hooper v.
Barnett Bank established that a bank can be liable for giving a borrower bad
business advice in a fiduciary adviser role, he said.

“This will end up, unfortunately for the bank, in front of a jury and they will
determine whether the bank created this problem,” Kingcade said.

In 2006, Richard Meruelo told Ocean Bank about his plan to buy two lots in
Golden Beach, divide them into three lots and build beachfront homes. After
showing the site to senior Ocean Bank executives, Meruelo’s Golden Merc bought
the site for $17 million, including a $12.35 million loan from Ocean Bank the
complaint says. Before the deal, the bank agreed to fund future construction
costs estimated at $12 million, according to the complaint.

“If the bank had told him it wouldn’t make the construction loan, Richard never
would have closed on the loan,” Budwick said.

The complaint said the loan violated Ocean Bank’s internal policies, which
require that construction financing be in place before lending on vacant land.

In May 2008, Ocean Bank signed a modified cease and desist order with regulators
that severely restricted its construction lending and ordered it to get tougher
on problem loans. Like most banks that sign such orders, it was prevented from
extending or renewing credit to borrowers with troubled loans.

THE DETAILS

Litigation involving the Meruelo family and Merco Group

• Ocean Bank won a $49.1 million foreclosure judgment against Merco Group at
Aventura and the Terzetto residential project. The bank settled its personal
guarantee with Homero F. Meruelo.

• Richard Meruelo and his 3720 Collins lost a $3.2 million foreclosure lawsuit
to Collins Beachfront over a damaged, 94-unit apartment complex in Miami Beach.
Ocean Bank also sued it over an $8.8 million mortgage.

• Ocean Bank filed a foreclosure lawsuit against Home R Us Development III and
Richard Meruelo over a $4.5 million mortgage on two Miami Beach homes. The homes
were sold at a distressed price.

• Ocean Bank won a $2.7 million foreclosure judgment against Merco Group at Palm
Beach Lakes over a stalled condo project.

• Eastern Financial Florida Credit Union, now part of Space Coast Credit Union,
won a $37 million foreclosure judgment against Homero Meruelo, Belinda Meruelo
and their Merco Group of the Palm Beaches over a stalled condo project.

• Caja de Ahorros De Galicia filed a $38.7 million foreclosure lawsuit against
Merco Group at MGI Hotels and Homero Meruelo over the shuttered Grand Bay Hotel
in Coconut Grove.

• U.S. Century Bank filed a $7.5 million foreclosure action against Merco Group
at MGI Residences and Homero Meruelo over an office building in Coconut Grove.

• U.S. Century Bank filed a $13.3 million foreclosure lawsuit against Meruelo
Pomona and Belinda Meruelo over a home in Golden Beach.

• Regions Bank filed a foreclosure lawsuit against Homero Meruelo and his Indian
Creek Holdings and 67th Street Holdings over a $14 million mortgage for a condo
project in Miami Beach.

• DI-FL No. 1 filed a $2.2 million foreclosure against Belinda Meruelo, Homero
Meruelo and their Merco Group Properties over units in the Akoya Condominium in
Miami Beach.

• Richard Meruelo was hit with 10 foreclosure lawsuits over units in the
Seashore Club condo in Miami Beach and eight foreclosure lawsuits for units in
the Miami Beach Club condo-hotel.

• Chapter 11 bankruptcy reorganization of Los Angeles-based Meruelo Maddux
Properties (OTCBB: MMPIQ), with Richard Meruelo as chairman and CEO.


CONDO BULK SALE IN PALM BEACH GOES FOR $18M

October 18, 2017


COURT OKS TOM PETTERS VICTIM’S $1B LAWSUIT AGAINST GE CAPITAL

August 27, 2013


BRUCE BERKOWITZ AND BILLIONAIRE W.R. BERKLEY BUY COCONUT GROVE SITE

November 9, 2017


ARCHIVE

February 2022 January 2022 October 2021 September 2021 July 2021 June 2021 May
2021 April 2021 March 2021

Developer Meruelo sues Ocean Bank over no construction loan. April 26, 2010.
Developer Richard Meruelo has filed a lawsuit against Miami-based Ocean Bank,
seeking $9 million in damages after he and his family members were hit with
foreclosure actions. Meruelo’s attorney, Michael Budwick of Meland Budwick,
P.A., argues that Ocean Bank should not have given his client a $12.4 million
mortgage to buy land in Golden Beach and then refused a construction loan. The
site faces a foreclosure lawsuit with Meruelo named as a guarantor. Budwick
previously filed suit against Ocean Bank on behalf of the creditor’s committee
in condo convertor Juan Puig’s $100 million bankruptcy filing. After alleging
bank officials maintained strong ties to Puig and kept his companies afloat with
questionable loans, Ocean Bank settled the case for $4.9 million. Ocean Bank and
other lenders are also appealing a $12 million judgment in homebuilder TOUSA’s
bankruptcy case. Richard Meruelo’s complaint said his family had more than $130
million in loans on multiple projects with the bank since 1984. “The allegations
in this lawsuit are patently ridiculous,” Ocean Bank said. “To claim a bank
would take millions of dollars in losses in some fanciful vendetta against a
customer does not warrant a response.” Richard Meruelo is the son of Belinda
Meruelo, the head of Miami Beach-based developer Merco Group. His brother,
Homero F. Meruelo, is also a principal. All three Meruelos have been hit with
numerous foreclosure lawsuits over the last two years. According to the
complaint, Ocean Bank financed much of the Meruelo family’s real estate projects
– to the point that the bank could not legally lend any more to them. “As the
relationship grew, Ocean Bank exerted increasing influence over the investment
activities of the Meruelo family,” the complaint states. “Over time, Ocean Bank
exercised control over their investment because it could unilaterally restrict
credit or refinance or extend terms of existing loans.” The complaint is trying
to establish that Ocean Bank held so much influence over the Meruelo family that
it became a fiduciary relationship, said Timothy Kingcade, a bankruptcy attorney
with Miami-based Kingcade & Garcia, who isn’t involved in the case. While it’s
rare that a borrower-lender relationship is characterized that way, a 1986
ruling by theFlorida Supreme Court in Hooper v. Barnett Bank established that a
bank can be liable for giving a borrower bad business advice in a fiduciary
adviser role, he said. “This will end up, unfortunately for the bank, in front
of a jury and they will determine whether the bank created this problem,”
Kingcade said. In 2006, Richard Meruelo told Ocean Bank about his plan to buy
two lots in Golden Beach, divide them into three lots and build beachfront
homes. After showing the site to senior Ocean Bank executives, Meruelo’s Golden
Merc bought the site for $17 million, including a $12.35 million loan from Ocean
Bank the complaint says. Before the deal, the bank agreed to fund future
construction costs estimated at $12 million, according to the complaint. “If the
bank had told him it wouldn’t make the construction loan, Richard never would
have closed on the loan,” Budwick said. The complaint said the loan violated
Ocean Bank’s internal policies, which require that construction financing be in
place before lending on vacant land. In May 2008, Ocean Bank signed a modified
cease and desist order with regulators that severely restricted its construction
lending and ordered it to get tougher on problem loans. Like most banks that
sign such orders, it was prevented from extending or renewing credit to
borrowers with troubled loans. THE DETAILS Litigation involving the Meruelo
family and Merco Group • Ocean Bank won a $49.1 million foreclosure judgment
against Merco Group at Aventura and the Terzetto residential project. The bank
settled its personal guarantee with Homero F. Meruelo. • Richard Meruelo and his
3720 Collins lost a $3.2 million foreclosure lawsuit to Collins Beachfront over
a damaged, 94-unit apartment complex in Miami Beach. Ocean Bank also sued it
over an $8.8 million mortgage. • Ocean Bank filed a foreclosure lawsuit against
Home R Us Development III and Richard Meruelo over a $4.5 million mortgage on
two Miami Beach homes. The homes were sold at a distressed price. • Ocean Bank
won a $2.7 million foreclosure judgment against Merco Group at Palm Beach Lakes
over a stalled condo project. • Eastern Financial Florida Credit Union, now part
of Space Coast Credit Union, won a $37 million foreclosure judgment against
Homero Meruelo, Belinda Meruelo and their Merco Group of the Palm Beaches over a
stalled condo project. • Caja de Ahorros De Galicia filed a $38.7 million
foreclosure lawsuit against Merco Group at MGI Hotels and Homero Meruelo over
the shuttered Grand Bay Hotel in Coconut Grove. • U.S. Century Bank filed a $7.5
million foreclosure action against Merco Group at MGI Residences and Homero
Meruelo over an office building in Coconut Grove. • U.S. Century Bank filed a
$13.3 million foreclosure lawsuit against Meruelo Pomona and Belinda Meruelo
over a home in Golden Beach. • Regions Bank filed a foreclosure lawsuit against
Homero Meruelo and his Indian Creek Holdings and 67th Street Holdings over a $14
million mortgage for a condo project in Miami Beach. • DI-FL No. 1 filed a $2.2
million foreclosure against Belinda Meruelo, Homero Meruelo and their Merco
Group Properties over units in the Akoya Condominium in Miami Beach. • Richard
Meruelo was hit with 10 foreclosure lawsuits over units in the Seashore Club
condo in Miami Beach and eight foreclosure lawsuits for units in the Miami Beach
Club condo-hotel. • Chapter 11 bankruptcy reorganization of Los Angeles-based
Meruelo Maddux Properties (OTCBB: MMPIQ), with Richard Meruelo as chairman and
CEO. . Brian Bandell, Other NewsCondo bulk sale in Palm Beach goes for $18M,
October 18, 2017, Court OKs Tom Petters victim’s $1B lawsuit against GE Capital,
August 27, 2013, Bruce Berkowitz and billionaire W.R. Berkley buy Coconut Grove
site, November 9, 2017, Archive. February 2022 January 2022 October 2021
September 2021 July 2021 June 2021 May 2021 April 2021 March 2021 . MRB. Contact
us, Our attorneys, careers. About. Firm overview, Our Values, Community
involvement, Representative matters. Pracrtice. Real Estate, Commercial
Litigation, Receiverships and Assignments, Bankruptcy and Restructuring. In the
News, Announcements, Film Videos. 2018 Meland, Russin, Budwick. ALL RIGHTS
RESERVED.


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