A wellness resort project's financing unraveled over one contract clause
A New York appeals court ruled that lenders can reject third-party financing partners when their contracts say so, handing Canara Bank a $37 million foreclosure win.
The decision, issued January 22, 2026, by the Appellate Division's Third Judicial Department, offers a clear reminder to mortgage professionals: when loan documents spell out a lender's discretion, courts will hold borrowers to the letter of the deal.
At the heart of the dispute was a building loan agreement between Canara Bank, New York Branch, and Veria Lifestyle, Inc., a company that had acquired a 1,302-acre parcel in the Town of Thompson, Sullivan County, with plans to develop a wellness resort and golf course. The agreement, signed in June 2016, called for Canara to provide $25 million, while Veria would secure the remaining $20 million from other lenders. The total project financing was capped at $45 million. Union Bank of India (UK) Limited later joined through a novation agreement in September 2016, agreeing to lend an additional $12.5 million.
Things went south when Veria missed an interest payment due April 1, 2019, and failed to fund a required debt service reserve account by March 31, 2019. The lenders filed suit in January 2022, demanding over $37 million in principal, interest, and charges.
Veria did not go quietly. The company challenged the bank's standing to sue and fired back with counterclaims, arguing that Canara had breached the agreement by lending only $25 million instead of the full $45 million. Veria also claimed that Canara acted in bad faith by refusing to approve a third-party lender the borrower had proposed.
The court was unconvinced. Justice Ceresia, writing for a unanimous panel, pointed to the plain language of the building loan agreement. Canara's obligation was always limited to $25 million, with Veria responsible for lining up the rest. More importantly, the agreement required any new lender to be "satisfactory to" Canara, giving the bank full authority to approve or reject outside financing partners.
The proposed lender Veria had in mind would have pushed the company's total debt past the $45 million ceiling, the court noted, making the bank's refusal entirely justified.
On standing, the court confirmed that a domestic branch of a foreign bank is not a separate legal entity from its parent and can pursue claims the parent could bring. Canara's license from the Department of Financial Services established its right to operate and do business in New York.
For lenders, the takeaway is straightforward. Contract language matters. When agreements grant discretionary authority over financing arrangements, courts will enforce those provisions as written, leaving little room for borrowers to claim otherwise.
The ruling affirms the lower court's summary judgment and serves as a practical lesson in how airtight documentation can shield lenders from protracted litigation when deals fall apart.
