Tamares Holdings I, LLC v Falor
Annotate this CaseDecided on April 9, 2009
Supreme Court, New York County
Tamares Holdings I, LLC, T-C Partners V, LLC, and Michael R. Treanor, Plaintiffs,
against
Robert D. Falor, Guy Mitchell, The Falor Companies, Inc., Chicago H & S Hotel Property, LLC, and Royal Palm Hotel Property, LLC, Defendants.
601935/2006
APPEARANCES:
For Plaintiffs:
Law Offices of William J. Turkish, PLLC
33 South Service Road
Jericho, New York 11753
By: William J. Turkish, Esq.
For Defendants:
Troutman Sanders LLP
405 Lexington Avenue
New York, New York 10174
By: Stephen G. Rinehart
Bernard J. Fried, J.
Defendants move for summary judgment dismissing the complaint in its entirety. The motion is granted.
This action involves two distinct claims arising from separate deals among the parties, each of which depends upon the enforceability of its own alleged oral agreement. The first claim is for the return of an $850,000 earnest money deposit allegedly paid in connection with the attempted purchase by plaintiffs of the Palm Beach Hilton Hotel in 2005. Plaintiffs allege that defendant Guy Mitchell (Mitchell) orally agreed to guarantee repayment of the $850,000. [*2]
The second is a claim for a 1% consulting fee by plaintiff Michael R. Treanor (Treanor) on $213 million in financing that allegedly resulted from the introduction of Mitchell and defendant Robert D. Falor (Falor) to Credit Suisse in connection with the purchase of two hotels, unrelated to the Palm Beach Hilton transaction. Plaintiffs allege that Mitchell orally agreed to guaranty payment of the 1% fee.
The first cause of action (denoted "Count") in the complaint seeks to enforce the alleged oral agreement to return the $850,000 deposit as a contract. The second cause of action seeks enforcement of that alleged oral agreement on the ground of promissory estoppel.
The third cause of action alleges that, in the Fall of 2004, both Falor and Mitchell, on behalf of themselves and as agents of defendants The Falor Companies (TFC), Chicago H & S, and Royal Palm Hotel Property, LLC (RPHP), promised Treanor a consulting fee of 1% of any financing obtained in return for introducing them to potential lenders. It alleges that, as a result of Treanor's services, defendants were able to obtain debt financing in the amount of $213 million for at least two hotel acquisitions, Hotel 71 and the Royal Palm Hotel Crowne Plaza. The third cause of action charges defendants with breach of contract for failing to pay the alleged $2.13 million consulting fee.
The fourth cause of action asserts a right to payment of the consulting fee on the ground of promissory estoppel.
The fifth cause of action sounds in unjust enrichment, and is limited in plaintiffs' brief to the claim for the finder's fee.
Plaintiffs state in their brief that Falor has neither answered the complaint nor appeared, and that plaintiffs have decided not to pursue their claims against Falor.
Plaintiff Tamares Holdings LLC (Tamares), a Delaware limited liability company, is an accredited investor engaged in the business of financing the purchase of interests in hotel properties for conversion into cooperative ownership. Tamares is the managing member of plaintiff T-C Partners V LLC (TCP V), also a Delaware limited liability company. TCP V was formed as a vehicle to purchase the Palm Beach Hilton Hotel in Florida. Plaintiff Michael Treanor (Treanor) alleges that he is an attorney duly licensed in New York State, and was for some time an officer of TCP V, and the sole member of Concorde II, LLC, which is not a party but is a member of TCP V along with Tamares. Treanor did not represent any of the parties as an attorney, but was acting in a business capacity, on behalf of Tamares, and as a principal.
Falor is a real estate professional experienced in the business of operating hotels and converting hotels into condominium ownership. Falor is a principal of TFC, and other Falor entities involved in the transactions.
Mitchell is a real estate investor. Mitchell owns an equity stake in defendant Chicago H & S Hotel Property, LLC (Chicago H & S), which allegedly recently entered receivership. According to the complaint, Mitchell is an affiliate and agent of TFC, Chicago H & S, and RPHP, which, according to Mitchell, declared bankruptcy recently, and is subject to the automatic stay. No order from the Bankruptcy Court evidencing an automatic stay has been submitted with the motion papers.
According to Treanor, the transactions that gave rise to this dispute came about through the collaboration of four principals, acting through various entities. Falor had hotel management experience and contacts in the industry. He brought the deals to the table. Mitchell, as an independent investor, was to provide capital for the earnest money. Chaim Zabludowicz, [*3](Zabludowicz), through the Tamares entities, was to provide capital and arrange for long-term financing. Treanor also was to arrange for long-term financing through his contacts among lenders. Christopher White, Esq. (White), who is not a party, participated in some of the meetings as counsel for Tamares, and also contributed real estate expertise and contacts among lenders. According to Treanor, the lender contacts were White's, except for Credit Suisse, which was Treanor's. Treanor asserted in his deposition that certain conversations he had with White are privileged. John Buehner, Esq. (Buehner), counsel for Mitchell, was a party to many of the e-mails in evidence, but did not attend any of the meetings.
By limited liability company agreement dated January 21, 2005, TCP V and Palm Beach Lake Worth Hotel Investors, LLC, a Falor entity, created Palm Beach Lake Worth Hotel Property, LLC (the Palm Beach LLC Agreement) (ex. B-32 to mov. aff.), as a vehicle for the acquisition of the Palm Beach Hilton. The $850,000 contributed by Tamares was paid to that newly formed entity. Pursuant to section 10.6 of that agreement, Tamares had a put option by which it could require the "Falor Member"(Palm Beach Lake Worth Hotel Investors, LLC) effectively to repay the $850,000 within a seven-day period. The parties do not dispute that such period has elapsed without Tamares having exercised the put option.
Falor Development Corp. LLC, which is not a party, entered a purchase and sale agreement, dated January 3, 2005, for the Palm Beach Hilton hotel with its owner, Davidson Hotel Partnership, L.P. (Davidson) (ex B-30 to mov. aff.). The $1 million down payment, comprised of $850,000 contributed by Tamares and $150,000 contributed by Mitchell, was then delivered to Davidson. It is undisputed that the closing never occurred, despite the fact that Mitchell allegedly put additional earnest money into the deal. It is also undisputed that, when the transaction failed to close as scheduled on June 30, 2005, Davidson declared the $1 million earnest money forfeit (ex. 9 aff. in opp.).
Falor Development Corp. assigned its interest in the purchase agreement to PBH Lake Worth Resort, LLC, for $10, in a May 27, 2005, signed by Mitchell on behalf of the assignee. Plaintiffs allege that Mitchell then attempted to "flip the contract."An entity in which Mitchell is an investor ultimately purchased the Palm Beach Hilton.
The issue on both of these claims is whether the respective alleged oral agreements underlying both of these claims can satisfy New York's statute of frauds (GOL § 5-701), or, alternatively, can be enforced pursuant to principles of promissory estoppel.
I hold that neither alleged oral agreement is supported by a sufficient writing signed by the party to be charged that would satisfy the statute of frauds (GOL § 5-701) as against Mitchell.
There is a written "Deposit Guaranty Agreement," dated January 21, 2005, by Falor in favor of Tamares in the parties' submissions (ex. B-22 to mov. aff.). It is signed by Falor and not Mitchell, although there is a signature line for Mitchell, and the opening recital states that Mitchell is a guarantor. That guaranty agreement, by its terms only guarantees the performance of the put option, which was never exercised.
Plaintiffs argue that Falor and Mitchell waived the strict enforcement of the put option by
their conduct, despite the fact that neither Falor, individually, nor Mitchell were
parties to the agreement containing the put option. Plaintiffs have not presented
sufficient evidence to demonstrate the existence of a triable issue of fact on the issue of waiver
of the time limit on the put option. Even if the time limit were waived, the put option, by its
terms, only required repayment [*4]by TFC.
Mitchell also argues that the oral agreement is barred because the agreement containing the put agreement contains a merger clause. The Palm Beach LLC agreement is irrelevant because Mitchell was not a party to the agreement. The simple fact is that there is no written agreement that would satisfy the statute of frauds by which Mitchell guaranteed repayment of the $850,000 in earnest money.
An oral guaranty would be enforceable "(1) if it were supported by new consideration; (2) if it were beneficial to the promisor; and (3) if the promisor had agreed to be directly liable for the debt" (Talansky v Schulman, 2 AD3d 355 [1st Dept 2003]). Here, there is no allegation of new consideration flowing to Mitchell to guaranty either the payment of the $850,000, or the consulting fee.
Accordingly, defendants' motion for summary judgment is granted dismissing the complaint in its entirety. The first cause of action is barred by the statute of frauds. The second and fourth causes of action, which seek to invoke the doctrine of promissory estoppel, are dismissed as a matter of law as duplicative of the breach of contract action in the absence of a duty independent of the agreement (see Celle v Barclays Bank P.L.C., 48 AD3d 301, 303 [1st Dept 2008]). The third cause of action is dismissed for the reasons stated below. The fifth cause of action based on unjust enrichment is barred by the statute of frauds (Snyder v Bronfman, 57 AD3d 393 [1st Dept 2008]).
The claim in the third cause of action for the consulting fee presents the issue whether sufficient evidence exists to withstand summary judgment on Treanor's claim of an oral agreement by Mitchell to pay the consulting fee directly to Treanor, an attorney in good standing in the State of New York. The statute of frauds would be satisfied by the alleged oral agreement, if proved, because New York General Obligations Law § 5-701, entitled, "[a]greements required to be in writing," provides, as pertinent:
(a) [e]very agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking:
. . .
(10) Is a contract to pay compensation for services rendered in negotiating a loan ... "Negotiating" includes procuring an introduction to a party to the transaction or assisting in the negotiation or consummation of the transaction. This provision shall ... not apply to a contract to pay compensation to ... an attorney at law ... [emphasis supplied] .
The law is clear that an attorney may rely on subdivision (10) to collect a finder's fee
pursuant to an oral agreement, even if the attorney is not representing any party to
the
transaction and is acting as a principal (Rever v Kayser-Roth Corp., 26
NY2d 652 [1970];
Hutner v Greene, 734 F2d 896, 900 (2d Cir1984)(attorney who had not
practiced for almost fifty years entitled to benefit of exemption); see generally Taussig v The Clipper
Group, L.P., 16 AD3d 224, 225 [1st Dept 2005].
Plaintiffs allege that Mitchell orally agreed to guaranty payment of the consulting fee. It is [*5]undisputed that no written agreement signed by Mitchell exists that supports the consulting fee guaranty claim against Mitchell. It is also undisputed that Treanor cannot identify any date on which Treanor discussed the alleged consulting fee with Mitchell (Rule 19-A Statement ¶ 50).
According to Treanor's deposition testimony, there had been discussions to create a company among Mitchell, Falor, Treanor and Tamares, in order to share profits in the hotel conversion investments, but that no final decision was reached to form a company. Treanor testified:
[w]e had discussed different ways of compensation ... including equity ownership ... creation
of a new company ... . Ultimately it was agreed that in lieu of coming up with anything better,
we had proposed that if we secured debt financing, senior debt financing through any of our
contacts — actually I had proposed that we be paid a fee of two per cent, which Mitchell
negotiated down to one per cent.
(Ex. B to mov. aff. p. 52).
Treanor testified that this agreement took place at a meeting in New York roughly in October or November 2004.
An e-mail from Treanor to Buehner, dated December 30, 2004, states:
can you draft an agreement between Tamares Real Estate Investments and Falor whereby
Tamares or its designee will be paid 1% of the gross loan proceeds for any debt provided to
Falor or its affiliates by CSFB ... and any other institution that is introduced to Falor by Tamares.
(Ex. B-17 to mov. Aff.)
No such agreement was ever drafted by Buehner, who testified that he was unaware that
such an agreement had been negotiated (ex. C mov. aff. P. 47).
Defendants have submitted an unsigned copy of a letter agreement dated December
30, 2004, on TFC letterhead, confirming that TFC had requested Tamares Real
Estate Holdings, Inc., to assist in "identifying appropriate sources to finance the acquisition and
development of hotels." The letter names several financial institutions that were introduced to
Falor, but does not name Credit Suisse. It also states that Falor agrees to pay Tamares 1% of the
gross amount of proceeds by any of the selected financial institutions for funding obtained prior
to December 31, 2007 (ex. 6 aff. in opp.).
Treanor also testified at his deposition, as pertinent:
Q: Is this the fee agreement that you believed you ultimately were entitled to receive proceeds from?
A: Not ultimately, no. This was the initial fee discussions, where the fee was to be payable to
Tamares. Subsequent to that the discussions — the fee was to be paid to me, and there
were economic adjustments to compensate Tamares for that, for that new arrangement.
( Id. at 80).
Treanor also testified that the decision to have the fee paid to Treanor rather than Tamares [*6]occurred after January 24, 2005 (id. at 81), but he does not recall whether the change was communicated to Mitchell (id. at 85):
Q. It [an e-mail dated March 26, 2005 from Treanor to Falor] says CSFB will have the title company pay Tamares, it doesn't say pay you, correct?
A. Well, because they're not aware of how we re-jiggle things internally. It's not —
we didn't make Guy [Mitchell] and Robert [Falor] privy to every little thing that we did
internally in order to, you know, allocate the economics. And, you know, and maximize the, you
know, enforceability of our agreement and send that kind of transparency.
(Id. at 115).
Treanor testified that he had agreed with Tamares that the consulting fee in this case would be allocated to him to compensate for a loss he had taken in a separate deal (id. at 83-84).
Treanor also testified:
Q: What did you discuss with Chris White with regard to the
issue of the fee being payable to you?
A: Generally, the enforceability of fee arrangements unless they were evidenced in writing, except in certain circumstances.
Q: What did you say to him?
A: I don't recall saying much to him. He did most of the talking, but the way of structuring
the arrangement was to re-jiggle the economics of the deal we have made — have it paid
solely to me, because I'm an attorney in New York.
( id. at 105).
In an e-mail dated March 24, 2005, to Michael Lehrman and Michael May (representatives of lenders), Treanor stated, "[i]n order to protect the enforceability of the claim, counsel has recommended that the fee be payable to me (a licensed attorney in New York) and then remitted to Tamares" (ex. B-24 to mov. aff.).
The threshold issue, as framed by the evidence, is not whether Treanor, as a New York attorney in good standing, could enforce an oral agreement to be paid a finder's fee pursuant to G.O.L 5-701 (10). Rather, it is whether an oral agreement to pay a finder's fee to a party that is not an attorney, here Tamares, may be rendered enforceable by assigning it to an attorney. Plainly, such a stratagem is not within the intendment of subdivision (10).
It makes no difference whether the assignment was to give effect to economic adjustments worked out with Tamares, or merely to avail themselves of the protection of subdivision (10). Any other rule would be an invitation to wholesale assignments of otherwise unenforceable oral agreements to attorneys.
Thus, any oral agreement by Mitchell to guaranty payment of the consulting fee to Treanor, would have had to have been made subsequent to the assignment of the agreement to pay the fee to Tamares, which Treanor testified was after January 24, 2005. Prior to that date, any oral agreement by Mitchell related to payment of the fee to Tamares, an agreement that I hold cannot be rendered enforceable by assignment. [*7]
In support of defendants' motion for summary judgment, Mitchell submits the statement of agreed facts pursuant to Rule 19-A of the Commercial Division, Treanor's responses and objections to interrogatories, the contribution agreement, the Palm Beach LLC, the purchase and sale agreement for the Palm Beach Hilton, selected excerpts of the deposition testimony of Treanor, Mitchell, and John Buehner, Esq. (Buehner), Mitchell's counsel, as well as selected e-mails.
I hold that the moving defendants have demonstrated their entitlement to judgment as a matter of law by submitting sufficient evidence in admissible form that Mitchell did not enter into any oral agreement to pay a finder's fee to Treanor. The burden thus shifts to plaintiffs to demonstrate the existence of a triable issue of fact (see Winegrad v New York University Medical Center, 64 NY2d 851 [1985]; Zuckerman v City of New York, 49 NY2d 557 [1980]).
Plaintiffs have failed to submit sufficient evidence in admissible form to demonstrate the existence of a triable issue of fact. The e-mail evidence plainly shows that as of March 26, 2005, Treanor was still seeking payment of the consulting fee to Tamares (ex. 2-27 aff. in opp.). Plaintiffs' reliance on a May 18, 2005 e-mail (ex. 4 aff. in opp.), from Buehner to Stuart Hoffman in connection with the extension of the Palm Beach Hilton purchase and sale agreement does not constitute evidence of an oral agreement by Mitchell to guaranty payment of a consulting fee to Treanor. It states:
[d]eposit $1,850,000 (instead of $1,800,000). Guy [Mitchell] also mentioned that he and
Don [not further identified in the parties' submissions] amount would be paid upfront (instead of
at closing) to enable Guy [Mitchell] to "buy out" the TFC's interest in the contract/project;
including the repayment of the $850,000 loan that TFC took out from a third party to fund the
[sic] a portion of the deposit.
(Id.).
Plaintiffs have failed to come forward with sufficient evidence in admissible form of
an oral agreement by Mitchell to personally guaranty the payment to Treanor of the
1% fee
owed by TFC to Tamares, to demonstrate the existence of a triable issue of fact..
Accordingly, it is
ORDERED, that defendants' motion for summary judgment dismissing the complaint in its entirety is granted; and it is
ORDERED, that the complaint is dismissed, with costs and disbursements as taxed by the Clerk of the Court; and it is further
ORDERED that the Clerk shall enter judgment accordingly.
Dated:April 9, 2009
_______________________________
J. S. C.
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