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Camden Empowerment Zone Corporation v. Cooperative Business Assistance Corporation

A-1867-07T1 (N.J. Super. App. Div. 2009) (Unpublished)

CONTRACTS — Provisions that specifically become applicable upon the termination of an agreement do not necessarily become applicable at the natural expiration of the term of the agreement unless the agreement clearly makes that so.

A non-profit corporation that administered government grants to for-profit businesses and non-profit entities in federal empowerment zones granted $2 million to a non-profit lender. The lender utilized the funds to create a revolving fund for loans to local, small businesses. After the grant agreement expired, the grant maker sought the return of any available funds from the grant as well as assignments of all notes, mortgages, and security agreements that were acquired with the monies. Eventually, it sued the lender. The lower court disagreed with the grant maker’s argument that the expiration of the agreement constituted a termination of the agreement. It held that the lender was not obligated to turn over those funds or any assets acquired through the grant proceeds.

On appeal, the Appellate Division pointed out that the lender complied with the terms of the agreement between the parties and that the grant agreement was not a loan or management agreement. It agreed with the lower court that the agreement differentiated between a termination, where any available funds were to revert to the grant maker, and an expiration of the agreement under which there was no explicit provision for a reversion of funds. Based on its review of the record, the Court affirmed the lower court’s holding that the agreement did not require the lender to turn over its remaining funds and assets stemming from the grant to the corporation.

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