Learn About the Law
Get help with your legal needs
SPG Capital Partners LLC, Plaintiff, v. Cascade 553 LLC, ABRAHAM BRACH, ANDOR DEUTSCH, MAX LEBOWITZ, Defendant.
The following e-filed documents, listed by NYSCEF document number (Motion 003) 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95, 96, 97, 98, 99, 100, 101, 102, 103, 104, 105, 106, 107, 108, 109, 110, 111, 112, 113, 114, 115, 116, 117, 118, 119, 120, 163, 165, 168, 169, 172, 178, 179, 180, 181, 182, 183, 184, 185, 186, 187, 188, 189, 190, 191, 192, 193, 194, 195, 196, 197, 198, 199, 200, 201, 202, 203, 204, 205, 206, 207, 208, 209, 210, 212, 214 were read on this motion for JUDGMENT - SUMMARY.
The following e-filed documents, listed by NYSCEF document number (Motion 004) 121, 122, 123, 124, 125, 126, 127, 128, 129, 130, 131, 132, 133, 134, 135, 136, 137, 138, 139, 140, 141, 142, 143, 144, 145, 146, 147, 148, 149, 150, 151, 152, 153, 154, 155, 156, 157, 158, 159, 160, 161, 162, 164, 166, 167, 170, 173, 174, 175, 176, 177, 211, 213, 215 were read on this motion for JUDGMENT - SUMMARY.
In motion sequence number 003, Cascade 553 LLC (Cascade), Abraham Brach (Brach), Andor Deutsch (Deutsch), and Max Lebowitz (Lebowitz) (collectively, defendants) seek summary judgment dismissing plaintiff's claim for breach of contract and granting Cascade summary judgment on each of its counterclaims, for at least $3,218,307.97 for breach of contract, plus $200,000 for quantum meruit, unjust enrichment, and conversion (NYSCEF doc. nos. 64, 65). In motion sequence number 004, plaintiff seeks summary judgment against defendants in the amount of $2,220,000, plus prejudgment and post-judgment interest, attorneys' fees, and other costs and expenses (NYSCEF doc. no. 121). The court consolidates these motions for disposition.
According to the verified complaint (NYSCEF doc. no. 114), plaintiff is a real estate investment and finance corporation, and Cascade is a real estate development company. Brach, Deutsch, and Lebowitz are principals of Cascade (the principals). The parties signed a term sheet agreement (the term sheet) on March 9, 2017 (NYSCEF doc. no. 66). Pursuant to the term sheet, plaintiff agreed to provide a first mortgage loan to Cascade $108,100,000 for the development of property located at 835 Myrtle Avenue in Brooklyn. The loan amount later was increased to $110,000,000. The complaint asserts that all three principals guaranteed full payment, performance, and completion of Cascade's obligations under the agreement. When the parties executed the term sheet, Cascade paid plaintiff $200,000 as a good faith deposit.
The term sheet noted that plaintiff was "devoting time and resources" to its due diligence investigation, and that before
"the earlier . . . of either (i) the termination of this Term Sheet by Lender or (ii) the Closing Date, neither Borrower or Guarantor will cause or permit any affiliates to obtain or attempt to obtain first mortgage financing for the Property with any party other than the Lender. The Borrower acknowledges that by commencing the due diligence investigation contemplated by this Term Sheet, Lender is devoting time and resources that it otherwise could be devoting to other projects. This paragraph shall survive the termination of this Term Sheet. In the event Borrower (or its affiliate) obtain first mortgage financing for the Property from another Lender, or . . . otherwise elects not to proceed with the Loan, then Lender shall be entitled to retain the unapplied balance of the Good Faith Deposit and Borrower and Guarantor shall pay immediately, upon demand - to Lender a breakup fee equal to 2% of the maximum principal balance of the proposed Loan Amount, as liquidated damages for the time and effort expended by Lender, it being expressly acknowledged and agreed that Lender's actual damages in such instance will be impossible to calculate"
(id., *4; see NYSCEF doc. no. 114, 11). Two percent of the agreed-upon loan is $2.2 million (the breakup fee).
Despite Cascade's contractual obligation, the complaint asserts, "Defendants attempted to and did in fact obtain first mortgage financing for the property from a party other than Plaintiff" (NYSCEF doc. no. 114, 14). Thus, in its first and only cause of action, for breach of contract, plaintiff seeks the $2.2 million breakup fee. In addition, plaintiff seeks reimbursement for its costs and expenses, which includes attorneys' fees. Plaintiff asserts that together, these damages total at least $2.72 million.
In their amended verified answer (NYSCEF doc. no. 115), defendants do not challenge the existence of the term sheet. However, they deny that they are liable for contractual breach. As explained below, defendants contend that the term sheet was a nonbinding agreement. Also, they state that they have no liability because "plaintiff's losses, if any, were caused by plaintiff's own decisions, conduct, assumption of risk and/or negligence" (id. [Sixth Affirmative Defense]).
In addition, Cascade counterclaims for damages (id. [Counterclaim], 1). Cascade notes that it is constructing a seven-building residential condominium complex on the property (the project). Cascade's principals funded over $50 million, which enabled Cascade to commence the project, but it needed outside funding to continue with the construction. In addition, it sought to pay off its original first mortgage, which was for $50 million and was with Romspen Mortgage Limited Partnership (Romspen) (see NYSCEF doc. no. 65 [Brach Aff],13-14). To these ends, Cascade signed the term sheet. However, Cascade stresses, the document states that it is "for discussion purposes only and is subject to the Lender's satisfactory completion of its due diligence, internal credit approvals and satisfactory legal review" (NYSCEF doc. no. 66; see NYSCEF doc. no. 17 [Counterclaim], 10). Further, the agreement states that interest would be calculated on the full loan amount at closing (see NYSCEF doc. no. 115, 14). Cascade states that, throughout, it remained "ready, willing and able" to finalize the agreement (id., 33).
Cascade contends that "[a]lmost immediately after executing the Term Sheet, it became clear to Cascade that there would be problems in completing the loan transaction with [plaintiff]" (id., 18). More specifically, Cascade asserts that it told plaintiff that it had to close on the first mortgage financing by April 20, 2017, at 1:00 p.m., or else it would not be able to pay off the existing first mortgage in a timely fashion. Despite this, plaintiff did not respond to Cascade's repeated requests for a draft of the loan document until around one week in advance, when it provided Cascade with a document that was missing critical information. Further, although Cascade repeatedly asked plaintiff to supplement the document, plaintiff had not responded by April 19, 2017, the day before the scheduled closing. According to Cascade, on the closing date it learned that one of the loan's principal funders, Goldman Sachs, could not fund its share of the loan until the following day. Plaintiff did not attend the scheduled closing. As a result, Cascade states that it could not close on the loan on the scheduled date or pay off the original first mortgage.
Cascade additionally claims that plaintiff attempted to change the deal as described in the term sheet. Specifically, Cascade did not learn until midnight on the scheduled closing date that plaintiff "was insisting on the entire loan proceeds being reserved and charging interest on the complete loan (including unfunded portions) even though the loan was being fully funded at the closing" (id., 27 [emphasis in original]). Cascade objected to the proposed new terms. Defendants annex an email that purportedly shows plaintiff previously approved Cascade's interpretation (NYSCEF doc. no. 68).
Further, Cascade states that it was damaged by plaintiff's conduct. It contends that due to plaintiff's failure, it did not make a timely payment to Romspen on the original first mortgage. Shortly thereafter, Romspen sold the mortgage loan to another party, and as a result Cascade could not close the loan with plaintiff. In turn, Cascade alleges that the construction project was delayed, resulting in damages of at least $2.5 million. This also resulted in additional interest charges on the first mortgage. Although Cascade obtained "certain financing" on April 21, 2017, (NYSCEF doc. no. 115, 35), it never obtained first mortgage financing and, as a result, is bound by the original first mortgage.
As its first counterclaim, Cascade seeks a declaratory judgment stating that the term sheet is not a valid, binding, and enforceable contract and that, even if enforceable, plaintiff did not satisfy the necessary conditions for the imposition of the breakup fee. Cascade's second counterclaim alleges, in the alternative, that if the court concludes the term sheet was a binding contract, plaintiff (1) improperly tried to get Cascade to fund an interest amount over that required in the term sheet and (2) improperly did not fund and close on the loan in accordance with the term sheet's provisions. Third, Cascade contends that plaintiff breached the covenant of good faith and fair dealing. Cascade's fourth, fifth, and sixth counterclaims seek repayment of the $200,000 deposit under theories of quantum meruit, unjust enrichment, and conversion, respectively. Plaintiff's reply to the counterclaim essentially denies Cascade's allegations and sets forth several affirmative defenses, including that Cascade was not ready, willing, and able to close; that Cascade, rather than plaintiff, breached the agreement; and that defendant acted in bad faith and is liable for misrepresentation, fraud, duress, and unclean hands (NYSCEF doc. no. 20).
Defendants initially argue that the term sheet is an agreement to agree and therefore is not binding. They quote the following language in the term sheet: "This Term Sheet is for discussion purposes only and is subject to Lender's satisfactory completion of its due diligence, internal credit approvals and satisfactory legal review" (NYSCEF doc. no. 66, *1). Further, the term sheet ends by reiterating that the term sheet is subject to the above and that it is not "an offer, agreement, or commitment to lend or borrow" (NYSCEF doc. no. 66, *5). It adds that "[t]he actual terms and conditions upon which the Lender might extend credit to the Borrower may change and [also] will be subject to . . . such other terms and conditions as determined by Lender in its sole discretion" (id.). According to defendant Brach, defendants "understood from this language that SPG was not agreeing to be bound to Cascade in any way in connection with the Non-Binding Term Sheet [ ] and was instead merely setting forth indicative terms of a potential loan that SPG might be willing to make to Cascade, subject to the negotiation of definitive loan agreement" (NYSCEF doc. no. 65, 32). Thus, defendants contend, they are not bound by the term sheet.
In support of their argument, defendants cite Luxor Capital Group, L.P. v Seaport Group LLC (2016 NY Slip Op 30728 [U], *5 [Sup Ct, NY County 2016], affd 148 AD3d 590 [1st Dept 2017] [Luxor]), which states that, under a breach of contract claim, there must be the existence of a contract, performance by the plaintiff, nonperformance by the defendant, and resulting damages. Defendants also note that plaintiff must show that a binding contract existed (citing, Allied Sheet Metal Works v Kerby Saunders, Inc., 206 AD2d 166, 169 [1st Dept 1994]). Here, defendants state, plaintiff merely agreed to consider the loan, retaining complete discretion over its decision. Because plaintiff retained sole discretion, defendants argue that the term sheet is not enforceable as a contract (citing Hunter v Deutsche Bank AG, NY Branch, 56 AD3d 274, 274 [1st Dept 2008]).
Similarly, defendants argue that the terms are too indefinite to comprise a binding agreement. More specifically, they reiterate that the term sheet expressly states it was not "an offer, agreement or commitment to lend or borrow." Instead, it states that "[t]he actual terms and conditions upon which the Lender might extend credit to the Borrower may change" and, again, that it is subject to plaintiff's satisfactory completion of all components of its review "as determined by Lender in its sole discretion" (NYSCEF doc. no. 126, *5). According to defendants, this renders the term sheet an unenforceable agreement to agree (citing, Joseph Martin, Jr., Delicatessen v Schumacher, 52 NY2d 105, 109 ).
In opposition, plaintiff argues that the agreement is binding. It quotes Bed Bath & Beyond Inc. v IBEX Constr., LLC, in which the First Department affirmed that a letter of intent was a binding agreement although the letter used language such as "subject to" and called for the execution of a formal construction agreement (52 AD3d 413, 414 [1st Dept 2008]). It also cites Flying Point, LLC v KillyBegs Rlty. Corp., which found that a lease was enforceable even though some matters were subject to future negotiations (2013 NY Slip Op 30389 [U] [Sup Ct, NY County 2013]). Here, plaintiff asserts that the parties agreed on every point that required negotiation, including the issue of whether to be bound, and merely agreed to memorialize their agreement in a more formal document. Plaintiff argues, therefore, that the term sheet was preliminary only in form. Plaintiff contends that all material terms were in the term sheet — specifically, the amount of the loan, an explanation as to the use of the funds, the interest rate, the loan's term, the origination fee, and the exclusivity provision. Thus, it states, there is no ambiguity in the term sheet. The cases that defendants cite to the contrary are not similarly comprehensive. Plaintiff states that the failure to define the closing date does not render the term sheet indefinite. Plaintiff also argues that equitable considerations militate in favor of enforceability of a loan of this size, because otherwise lenders would perform lengthy and extensive due diligence without the security a contract provides.
In reply, defendants argue that, although a phrase such as "subject to" does not render an agreement indefinite, there is sufficient language here to show the parties did not intend for the term sheet to bind them. Specifically, defendants note that the document is titled a "proposed" term sheet, and that there is a paragraph underscoring that the term sheet is "for discussion purposes," that it does not comprise an offer or commit the parties to lend and to borrow, that plaintiff retained the right to change the terms and conditions of the loan or to refuse to loan Cascade the money after plaintiff completed its due diligence, and that the loan was subject to negotiation and the parties' acceptance of the loan documents. Contrary to plaintiff's contention, defendants argue that the material terms were not agreed to, as the term sheet itself stated that they were subject to change. As for the equitable concern that plaintiff expressed, defendants quote Simon v Kyrejko, which states that where the parties express "an intent not to be bound until [they] achieve[ ] a fully executed document, no amount of negotiation or oral agreement to specific terms will result in the formation of a binding contract" (2017 NY Slip Op 31155 [U], *15 [Sup Ct, NY Country 2017][internal quotation marks and citation omitted]).
Based on the prevailing standard, the court concludes that the term sheet does not bind the parties. "To determine whether the parties to a preliminary agreement calling for the execution of a formal instrument intended to be bound in the absence of such an executed final instrument, a court must consider the following factors: 1) whether there has been an express reservation of the right not to be bound in the absence of a final writing; 2) whether there has been partial performance of the alleged contract; 3) whether all of the terms of the alleged contract have been agreed upon; and 4) whether the agreement at issue is the type of contract that is usually committed to a final writing" (Meadow Ridge Capital LLC v Levi, 29 Misc 3d 1224 [A], *12, 2010 NY Slip Op 51969 [U] [Sup Ct, Nassau County 2010]).
As defendants note, the document repeatedly emphasizes its nonbinding nature (see NYSCEF doc. no. 66, **1, 5). Where, as here, a term sheet is expressly conditioned on the completion of the lender's due diligence, further satisfactory negotiation by the parties, and the acceptance of the loan documents, the document is not binding (see King Penguin Opportunity Fund III, LLC v Spectrum Group Mgt. LLC, 187 AD3d 688, 689 [1st Dept 2020]; Luxor Capital Group, L.P. v Seaport Group LLC, 148 AD3d 590, 590 [1st Dept 2017]). As the Second Department held in dismissing a contract claim in a case with language like that at issue here, "the letters of intent, by their own terms, were nonbinding, and that the formation of an enforceable agreement . . . was expressly conditioned, inter alia, on the finalization of a definitive agreement" (DCR Mtge. VI Sub I, LLC v Peoples United Fin. Inc., 148 AD3d 986, 988 [2d Dept 2017]).
Plaintiff's arguments to the contrary are not persuasive. Its reliance on Bed Bath and Beyond is misplaced, because there the court found that "[t]he plain language of the [letter of intent] manifests the parties' intent to be bound by its terms" (52 AD3d at 414). Indeed, in those cases where courts have found letters of intent or term sheets to be binding, courts have relied not only on the specificity of the details in the documents but a similar manifestation of intent (e.g., Twenty 6 Realty Partners Inc. v GSS N3 LLC, 192 AD3d 463, 464 [1st Dept 2021] [granting summary judgment]; Moshan v PMB, LLC, 141 AD3d 496, 496 [1st Dept 2016] [summary judgment properly denied on enforceability of commission agreement where the plaintiff "alleged sufficient facts to permit a reasonable inference that the parties manifested an intent to be bound"]).
Next, the court turns to plaintiff's primary argument in opposition. It states that, regardless of whether the term sheet is binding, the exclusivity provision is independently enforceable. It cites Avant Capital Partners LLC v W108 Dev. LLC (16 Civ. 3359 [LLS], SDNY, Dec. 9, 2016, Stanton, J.) and White Winston Select Asset Funds LLC v Intercloud Syst., Inc. (619 Fed. Appx. 157 [3d Cir. 2015]), in which the courts, applying New York law, denied motions to dismiss claims based on the exclusivity provisions of term sheet agreements. It quotes FCS Advisors, Inc. v Fair Fin. Co., Inc. (No. 07 Civ. 6456 [DC], SDNY, May 19, 2009, Chin, J. [FCS], *8, affd 378 Fed Appx 65 [2d Cir 2010] [addressing summary judgment only]), which states that an exclusivity provision existed because the plaintiff had bargained for an "exclusivity period during which it would have an opportunity to make a deal" and that, when the lender "negotiated with [an alternate lender] regarding a line of credit during this period, it deprived [the plaintiff] of the benefit of the bargain." Plaintiff argues that, for the same reason, the exclusivity agreement here should be enforced. Further, plaintiff states that, as in 119 Spring LLC v 119 Spring St. Co., LLC (2014 NY Slip Op 31134 [U], *4 [Sup Ct NY County 2014]), the exclusivity agreement "set the foundation for the parties' ongoing negotiations and left no open terms."
Further, plaintiff argues that there was mutuality of obligation. According to plaintiff, although plaintiff retained the sole discretion to cancel the loan, plaintiff's obligation to perform due diligence is sufficient to create such mutuality (citing, inter alia, MRC RE Holdings, LLC v Schreiber (2015 NY Slip Op 30235 [U], **6-8 [Sup Ct, NY County 2015]). MRC stated that, if a plaintiff/lender does not perform due diligence or otherwise abuses its discretion, the defendant/borrower could sue for breach of contract (id. at *9).1
In reply, defendants argue that a strong presumption exists "against finding binding obligation in agreements which include open terms, call for future approvals and expressly anticipate future preparation and execution of contract documents" (Teachers Ins. and Annuity Ass'n of America v Tribune Co., 670 F Supp 491, 499 [SDNY 1987]). As a result, such provisions are only independently enforceable if this is the express intent of the parties (see id.). Among many other cases, defendants point to the documents the courts considered in Avant Capital (16 Civ. 3359 [LLS], SDNY, Dec. 9, 2016) and Mortgage Equicap, LLC v Glacier Global Partners, LLC (2017 NY Slip Op. 32324 [U], *2 [Sup Ct, NY County 2017]).
Defendants additionally counter that plaintiff was not obliged to perform due diligence. Defendants again cite to page 5 of the term sheet and its provision that plaintiff had sole discretion to set the terms and conditions pursuant to which it would extend credit. Therefore, they argue that plaintiff's due diligence was not mandatory — or that, even if it was mandatory, plaintiff had the right to discontinue its investigation at any point. They contend that, at the same time, Cascade was bound to comply with the exclusivity provision. Accordingly, they contend that the term sheet's exclusivity provision lacks mutuality of obligation (citing, inter alia, Dorman v Cohen, 66 AD2d 411, 415 [1st Dept 1979]).
The court has carefully considered this issue. Where, as here, a "Term Sheet . . . expressly provides that the summary of terms should not be construed to constitute a commitment to lend and that no binding agreement shall exist until final loan documents have been executed and delivered by all parties" (511 9th St LLC v Credit Suisse USA, Inc., 69 AD3d 497, 497 [1st Dept 2010] [internal quotation marks omitted]), courts often refuse to enforce the agreement (see, e.g., King Penguin, 187 AD3d 668). Where the parties agree that an exclusivity provision shall survive the term sheet and is binding regardless of the binding nature of the term sheet, on the other hand, courts have enforced the provision (e.g., White Winston, 619 Fed Appx 157).
Here, the exclusivity provision states that it "shall survive the termination of this Term Sheet" (NYSCEF doc. no. 66, *4). Moreover, this section states that, should the deal not go forward, plaintiff is entitled to the breakup fee along with the portion of the good faith deposit attributable to its actual expenses. However, there is no statement that renders the provision enforceable notwithstanding the nonbinding nature of the term sheet.
Further, mutuality of consideration is a prerequisite for enforcement (see Lebedev v Blavatnik, 193 AD3d 175, 182-183 [1st Dept 2021]). "A valuable consideration, in the sense of the law, may consist either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility given, suffered or undertaken by the other" (id. at 183 [internal quotation marks and citation omitted]).
In the case at hand, plaintiff did not assume an obligation that fits the above definition. As defendants state, virtually all the obligations in the term sheet fell upon defendants. The term sheet, on the other hand, gave plaintiff the sole discretion to extend the option (NYSCEF doc. no. 66, *3), and stated that plaintiff would select the insurance policy that Cascade would acquire (id.). Further, under the term sheet, plaintiff had the sole power to allow or reject Cascade's request to obtain subordinate financing (id.), allow Cascade to transfer any interest in the property in question (id., *4), approve all critical decisions and set the thresholds necessary before it offered a loan for phase II of the project (id.), terminate the term sheet (id.), and determine the terms upon which it would extend credit (id., *5). The court notes that the exclusivity provision bound Cascade to refrain from seeking other financing without regard to whether plaintiff moved forward with its due diligence in a timely fashion or adhered to the other provisions in the term sheet, such as those relating to the interest reserve.
Plaintiff argues that the due diligence requirement, which arose upon the payment of the $200,000 good faith deposit (see id., *5), is sufficient to create mutuality of obligation. The court rejects this position. The courts have found mutuality only where the obligation is much greater than that at hand. In 644 E. 14th Realty LLC v Mount Sinai Health Sys., Inc. (205 AD3d 405 [1st Dept 2022]), for example, the First Department upheld a $2 million breakup fee which applied to whichever party failed to execute the lease in question. There, the letter of intent in question was the second one concerning this particular property. The original letter, which did not contain a breakup fee, did not result in a lease, and both sides had spent significant time and money during the negotiation process for both leases (see id.; see also 644 E. 14th Realty LLC v Mount Sinai Health Sys., Inc., Index No. 651941/2020, NYSCEF Doc. Nos. 8, 9 [copies of the letters of intent]). Here, on the other hand, only one side was purportedly bound.
Similarly, the court rejects plaintiff's contention that the due diligence requirement "impose[d] an obligation on the parties to negotiate in good faith" (King Penguin, 187 AD3d at 690). Here, too, the parties explicitly stated that they did not intend to be bound (see id.). The trial court order in MRC, upon which plaintiff relies, was decided prior to the First Department's decision in King Penguin.
As defendants argue, the caselaw makes it clear that a clear expression of intent, along with mutuality of obligation, must exist before a clause such as the one at hand is independently enforceable. The cases upon which plaintiff relies bear out this principle. The court in Avant Capital stressed that in the term sheet defendants expressly acknowledged that they owed the lender a breakup fee due to its default on a prior agreement, that the lender was waiving its right to this fee, and that, as consideration, the defendants agreed to assume responsibility for the payment of a breakup fee if the borrower did not proceed with the loan (16 Civ. 3359 [LLS], SDNY, Dec. 9, 2016, at *2). The court found that this rendered the agreement enforceable because, in New York, "forbearance to assert a colorable legal claim constitutes sufficient consideration to support a contract so long as the promise of forbearance is absolute and for a definite time" (id. [internal quotation marks and citation omitted]). Further, in that case, the lender established that it had incurred substantial expenses in reliance on the second agreement (id.).
Another case plaintiff cites, White Winston, stated that the breakup fee was applicable only "if White Winston was prepared to close the Financing within 45 days of the 'Termination Date' but [the defendant] failed to close because it had obtained other financing" (619 Fed Appx at 159). In the case at hand, plaintiff was not obliged to show its ability to close the deal for the exclusivity provision to bind Cascade. FCS, which involved an agreement for the sale and purchase of receivables, is also distinguishable because the plaintiff there was required to notify the defendant of its intent to exercise its option for the exclusivity agreement to apply, and because the agreement further noted that if it appeared that the plaintiff could not go through with the purchase, the breakup fee would be reduced from $1,500,000 to $200,000 — the equivalent of the good faith deposit in the case at hand (No. 07 Civ. 6456 [DC], SDNY, May 19, 2009, at *2). 119 Spring involved a motion to dismiss, and the court there merely found that the allegation of a breach of the exclusivity agreement was sufficient to survive dismissal (see 119 Spring, 2014 NY Slip Op 31134 [U], **5-6). Specifically, the court noted that the term sheet expressly referred to the provision as a binding one (id. at *5).
The court notes that, although defendants move for summary judgment on their causes of action (counterclaims) in general, they only provide substantive arguments relating to their counterclaim for the return of the $200,000 good faith deposit. Thus, although they ask for significant financial relief, they do not appear to pursue the second and third counterclaims. The court denies the portion of the motion that seeks judgment on defendants' second and third causes of action counterclaims for breach of contract and breach of the implied covenant of good faith and fair dealing.
Cascade seeks summary judgment on its fourth, fifth, and sixth counterclaims, for the refund of its $200,000 good faith deposit. It cites the pertinent provision of the term sheet, which states that "if lender or Borrower chooses not to proceed with the Loan, Lender's expenses, including due diligence costs and legal fees, will be reimbursed, any remaining funds from Good Faith Deposit will be returned to the Borrower" (NYSCEF doc. no. 66, *3). Here, Cascade notes, the loan did not go forward. Therefore, in these three counterclaims respectively, Cascade states that the principles of quantum meruit (citing Soumayah v Minnelli, 41 AD3d 390, 391 [1st Dept 2007]), unjust enrichment (citing Schroeder v Pinterest Inc., 133 AD3d 12, 26 [1st Dept 2015]), and conversion (citing State of New York v Seventh Regiment Fund, 98 NY2d 249, 259 ), entitle it to the return of the $200,000. The court concludes that Cascade is entitled to the return of this amount, less any money plaintiff may have spent during its due diligence.
As plaintiff's motion, motion sequence number 004, seeks summary judgment on essentially the same arguments the court has addressed above, the court need not discuss the motion in detail. It notes that, among other things, plaintiff argues that defendants breached the exclusivity provision by seeking financing from other lenders. However, as the exclusivity provision is not binding, this argument lacks merit. The court fully considered the parties' other arguments but finds that such other arguments do not warrant discussion herein.
Accordingly, it is hereby
ORDERED that defendants' motion for summary judgment seeking declaratory relief and judgment on defendants' first, fourth, fifth, and sixth counterclaims (motion sequence number 003) is granted; and it is further
ORDERED that plaintiff is directed to return Cascade's $200,000 good faith deposit, minus all expenses related to its due diligence and other research related to the loan; and it is further
ORDERED that the remainder of defendants' motion for summary judgment (motion sequence number 003), which seeks additional monetary relief, is denied; and it is further
ORDERED that plaintiff's complaint is dismissed in its entirety; and it is further
ORDERED that plaintiff's motion for summary judgment (motion sequence number 004) is denied.
This constitutes the decision and order of the court.
ROBERT R. REED, J.S.C.
Robert R. Reed, J.
Response sent, thank you
Docket No: Index No. 652457/2017
Decided: January 06, 2023
Court: Supreme Court, New York County, New York.
Search our directory by legal issue
Enter information in one or both fields (Required)
FindLaw for Legal Professionals
Search our directory by legal issue
Enter information in one or both fields (Required)