Summit Powder Mountain’s suit against lenders survives dismissal effort
A federal judge has refused to dismiss a suit filed by Summit Powder Mountain against lender groups it accuses of defrauding the Utah resort in a $120 million development loan deal.
Summit Village Development Lender 1 LLC had asked U.S. District Judge Bruce Jenkins in Salt Lake City to throw out the resort’s suit, which was filed in August after the lenders served the resort with a $51 million loan default notice.
But in a brief ruling posted Monday, Jenkins denied the dismissal request. The resort, under the corporate name Summit Mountain Holding Group, accuses the lenders of fraud and breach of contract and good faith.
The resort did agree to drop two causes of action against a second lender, Grand Canyon Development Holdings 3 LLC, but Jenkins ruled the remaining complaint against it will stand for now.
The lenders now must file formal answers to the suit by Dec. 6, Jenkins said.
The loan litigation surrounds the planned development of Summit Village, an estimated $207.2 million centerpiece of the Summit group’s vision for transforming the resort near Eden into a haven for thought leaders, influencers, business titans, artists and entertainers.
The resort’s general manager, Mark Schroetel, said in August that the loan dispute would not stop the development. He said the resort was lining up replacement lenders. Other portions of the resort’s development have continued, including housing developments around the village core.
The village is a 4-acre area that may include commercial, restaurant and retail spaces, some high-density housing such as condos or townhouses, plus hotel and event space.
In 2016, Summit Mountain Holding Group, acting as a guarantor for the project development entity SMHG Village Development, entered into loan agreements with Summit Village Development Lender 1 LLC and Grand Canyon Development Holdings 3 LLC. Court records show those two latter entities are controlled by Hong Kong-based Celona Asset Management.
On July 6, Celona sent a default notice saying Summit has defaulted on the $120 million loan and must may $51.3 million plus $360,600 in interest. The loan had a five-year term and Celona said in the notice that Summit was required to have finished construction by now.
But in its suit, Summit accused the lenders of breach of contract by not delivering loan proceeds on schedule, and not sending any more than $42 million by 2019. Summit said it had already fulfilled providing more than its share of equity requirement by then, $35.9 million.
Summit further accused the lenders of using the remaining $78 million raised for the loan on other projects — even after Summit fulfilled the lenders’ requests to secure an appearance at a project fundraising event by basketball star Kobe Bryant.
Because the lenders allegedly pulled the rug from beneath the project, Summit has been deprived of at least $50 million the project would have generated by now, so it cannot pay back the $42 million received, the suit said.
The lender entities say they are made up of 81 Chinese nationals who, by contributing to U.S.-based projects under the federal EB-5 program, may acquire permanent green cards. An individual must invest $500,000 in a U.S. project that creates jobs.
Investors are “in pursuit of the American dream” and the attendant visa and they expect only nominal profits, the lawsuit response said.
The 81 investors “are seeking to leave the People’s Republic of China for a better life in America,” and their investment helped create new jobs, the document said. Summit Powder Mountain, on the other hand, it said, “is a high-end property developer constructing a luxury ski resort for several hundreds of millions of dollars and seeking to populate it with some of the world’s celebrities, millionaires, and billionaires.”
The lenders say the requirements of the loan package are unambiguous and that Summit’s suit “is a desperate effort to avoid its absolute, unconditional, and irrevocable obligations.”