The opinion of the court was delivered by: SWEET
These consolidated actions are once again on the eve of trial. Quintel Corporation, N.V. ("Quintel"), a Netherlands Antilles corporation, commenced the action against Citibank, N.A. ("Citibank") on August 27, 1980, in connection with Quintel's investment in Flag Associates, L.P. ("Flag"), a real estate limited partnership, alleging that Citibank violated section 10(b) of the Securities and Exchange Act of 1934 (the "1934 Act"), 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. 240.10b-5, breached fiduciary duties owed to Quintel, committed fraud and acts of negligence, and converted monies and property belonging to Quintel. Citibank, in turn, filed a third-party complaint against H. R. Gajria ("Gajria"), the sole beneficial owner of Quintel, and against Robert Ginsburg, Nelson C. Rising and John M. Rudey, the general partners of Flag (collectively "general partners"). Quintel and the general partners enered into a settlement agreement in June 1983, pursuant to which Quintel received $6,100,000.
Quintel and Gajria commenced an action against Arnold S. Alperstein, Gajria's attorney, and the law firm of Goldstick, Weinberger, Feldman, Alperstein & Taishoff, P.C. (collectively "Alperstein") on July 28, 1982, alleging negligence. The two actions were consolidated, and Citibank, in turn, asserted a claim against Alperstein
At the final pretrial conference on September 5, 1984, the parties raised certain substantive and evidentiary issues which were briefed and argued on September 21, 1984. These issues include: (i) whether an indemnity agreement precludes assertion of a claim of negligence against Citibank; (ii) whether evidence relating to Gajria's sophistication and financial resources in admissible; (iii) whether Quintel may recover damages in excess of fees paid to Citibank and Alperstein; (iv) and whether post-closing evidence of the actual performance of the investment property is admissible.
The underlying facts are fully described in the court's prior opinions and the parties' pretrial order filed on September 7, 1984. The actions arise from the parties' involvement in a real estate transaction that took place in 1979.On August 8, 1979, Gajria entered into an acquisition agreement ("Acquisition Agreement") with Citibank for the purpose of acquiring certain developed real property in Florida. The property was to be acquired by Flag, a limited partnership, of which Quintel was the limited partner. The acquisition was closed on August 14, 1979. Alperstein and his law firm performed legal services for Gajria and Quintel in connection with the acquisition.
The plaintiffs contend that, in advising Gajria to make the investment, Citibank, among other things:
(i) failed to disclose to Gajria that his capital contribution to Flag would be utilized not only to acquire the developed land but also for the acquisition by the Flag general partners of certain valuable undeveloped land of approximately 80 acres located adjacent to the developed land; and
(ii) presented to Gajria projections of income to be earned from the project which were derived without adequate due diligence and which omitted material facts and assumptions which would have been necessary to prevent Gajria from being misled.
In addition, they contend that Alperstein failed to inquire or learn of the undisclosed compensation the general partners would receive -- i.e., the undeveloped land.
Citibank's Liability for Negligence
Gajria and Citibank entered into the Acquisition Agreement on August 8, 1979 On the same date, Gajria assigned all of the rights and obligations contained in the Acquisition Agreement to Quintel which, in turn, accepted assignment of Gajria's rights and duties. In the absence of consent by Citibank to a delegation of Gajria's duties, Gajria remained liable for the obligations under the Acquisition Agreement. See Contemporary Mission, Inc. v. Famous Music Corp., 557 F.2d 918, 924 (2d Cir. 1977) (applying New York law); Davidson v. Madison Corp., 257 N.Y. 120, 177 N.E. 393 (1931).
Clause 1(d) of the Acquisition Agreement provides that Citibank will coordinate the closing and will acquire property for the client, at the client's sole risk and expense. ...