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SONGBIRD JET LTD., INC. v. AMAX INC.

March 27, 1985

SONGBIRD JET LTD., INC. and JET LEASING CORPORATION, Plaintiffs,
v.
AMAX INC., Defendants, v. ALAN P. ROSEFIELDE, WILLIAM F. HANDY, and SONGBIRD, LTD., Counterclaim Defendants



The opinion of the court was delivered by: WEINFELD

EDWARD WEINFELD, D.J.

Plaintiffs, Songbird Jet Ltd., Inc. ("Songbird Jet") and Jet Leasing Corporation (collectively "Songbird" or plaintiffs), brought this diversity action against Amax, Inc. to recover damages upon claims for: (1) breach of contract by Amax for the sale to Songbird of a Falcon Jet plane Model 50, Serial No. 108 (the "108"); (2) fraudulent representations by Amax based upon its lack of intention to perform the agreement; (3) breach of a brokerage agreement for the sale of the 108; and (4) unjust enrichment of Amax at Songbird's expense based upon the claimed agreement for the sale of the 108.

 On defendant's motion, this Court granted summary judgment dismissing all plaintiffs' claims except that which alleged breach of contract for the sale of the 108, holding that with respect thereto there were issues of fact to be resolved upon a trial. *fn1" A trial has now been held upon those issues and also upon Amax's counterclaims against plaintiffs. The essential issues to be decided thereunder are: (1) whether, as Songbird alleges and Amax denies, an agreement was entered into whereby Amax agreed to sell and Songbird agreed to purchase the 108 for the net sum of $8,850,000; and (2) whether, as Amax alleges under its counterclaim and plaintiffs deny, plaintiffs breached an agreement to purchase from Amax the 108 for $9.4 million and a Falcon 50, Serial No. 8 (the "8"), for $7.5 million, and to lease to Amax a Falcon 50, Serial No. 87 (the "87"), for two years at a rental of $130,000 per month.

 the terms of the alleged agreement for the sale of the 108 were negotiated on behalf of the plaintiffs by Alan P. Rosefielde, the sole shareholder and Chief Executive Officer of Songbird Jet, and on behalf of Amax by David Ayres, its Manager-Financings. In conducing these negotiations, Rosefielde acted in a close working relationship with Jet Leasing Corporation the co-plaintiff, and William F. Handy, its principal officer and controlling shareholder. *fn2"

 Apart from the basic dispute as to the alleged contracts, also at issue is the defense that plaintiffs' claim is barred by the statute of frauds, which in large measure centers about the purpose for which a $250,000 check was remitted by plaintiffs to Amax. Another issue is the authority of Ayres, assuming that he and Rosefielde had agreed upon the terms for the sale of the 108, to act on behalf of and commit Amax thereto. With these issues sharply contested, about the only item the parties agree upon is that their resolution depends upon an assessment of the credibility of participants in the negotiations, principally of Rosefielde and Ayres.

 Based upon a post-trial word by word study of the trial transcript and relevant exhibits, and upon the Court's trial notes which include its contemporaneous appraisal of the demeanor and credibility of the witnesses, the Court concludes that plaintiffs have failed to sustaint heir burden of proof and that Amax, as counterclaim plaintiff, also has failed to sustain its claim. Their respective claims are dismissed upon the merits and judgment may be entered accordingly.

 The origin of this litigation was Amax's decision, following financial reverses, to reduce its fleet of aircraft which it either owned or leased for use by its corporate executives. In pursuit of that program, Amax and Songbird officials, who had had previous relationships involving the sale or leasing of corporate jets, met on June 15, 1982 ("June 1982 meeting"). At that meeting, Ayres was one of a number of Amax officials who conferred with Rosefielde and Handy. At the time, Amax owned two Falcon Model 50 corporate jets, Serial Nos. 8 and 69 (the "8" and "69"); it was the lessee from Songbird of a Falcon Model 20F, Serial No. 388 (the "388"); and it was the owner of the 108 which was then under construction by the Falcon Jet Corporation ("Falcon") and was as yet undelivered.

 SONGBIRD'S CLAIM AGAINST AMAX FOR BREACH OF CONTRACT FOR THE SALE OF THE 108

 Familiarity is assumed with the Court's opinion on the defendant's summary judgment motion which sets forth the parties' versions of what transpired at that meeting and of events subsequent thereto which led to the L.R. French, Jr. ("French") proposal, first advanced in September 1982, upon which Songbird asserts its claim that Amax agreed to sell it the 108 for $8.85 million. *fn3" French owned a Lear 35A aircraft which he sought to trade in upon the purchase of the 108. It was this situation which led to a proposal by Songbird for a restructuring of the contemplated sale of the 108. In consequence, Songbird proposed that it would purchase the plane from Amax for $9 million and that Songbird, by a separate and independent agreement with French, would sell the 108 to him and accept the Lear as a trade in with the expectation of selling it on the open market and applying the proceeds toward the purchase price to be paid to Amax. Also contemplated was a sale by Amax to a third party of the tax benefits of the 108 (still under construction) by the end of the year. The proceeds of this tax benefit transfer ("TBT"), estimated to be about $2.8 million, were to be applied toward Amax's original asking price of $9 million, later reduced to $8.85 million by an allowance for the cost of shifting the lavatory on the plane, a condition also required by French.

 At a meeting on October 8, 1982, Rosefielde submitted to Ayres the substance of a proposal, but without definitive terms, whereby Amax would sell the 108 directly to Songbird, which Ayres said he would "run . . . up the flagpole with the senior management." *fn4" After consulting with R. Bern Crowl, Executive Vice President and Chief Financial Officer of Amax, Ayres indicated interest in the Rosefielde proposal and requested that he submit a copy of Songbird's purported but yet unsigned agreement with French, and that Songbird send Amax a check for $250,000. At a meeting on October 28th, Rosefielde submitted a copy of a draft agreement with French to Ayres, who turned it over to Amax's legal department to determine among other matters whether French was committed to plaintiffs for the purchase of the plane. On October 29th, John Kennedy, the Controller of Jet Leasing, upon instructions of Handy in response to Rosefielde's request, forwarded a check payable to Amax for $250,000, accompanied by a letter the full text of which is set forth and discussed hereafter. The check was deposited by Amax and the proceeds entered on its books as an account payable to Jet Leasing Corporation. *fn5" The plaintiffs contend that the events of October 28-29 constituted an oral agreement for the sale of the 108 and that subsequent events were intended to memoralize the terms agreed upon orally on those dates.

 Thereafter, Rosefielde and Ayres continued their negotiations with respect to the proposed transaction. Their discussions covered a broad range of items including, but not limited to: (1) whether the 108 would be delivered to Amax by Falcon, the manufacturer, by the end of December 1982, a sine qua non, if the benefits of the TBT were to be realized; (2) the assumption of a leasehold interest by French with respect to the TBT; and (3) an indemnity agreement that Amax sought from French with respect to the TBT proposal. Another outstanding issue was transfer of warranties from Falcon of the yet undelivered 108 to run in favor of French as a prospective transferee of the plane. At no time during their negotiations was there any direct contact between French and Ayres or any representative of Amax. Rosefielde carried on separately all negotiations with French, as he did separately with Ayres.

 During November and December 1982, drafts of proposed agreements were prepared by Amax's legal department following discussions between Rosefielde and Ayres and sent to Rosefielde on November 16th, December 3rd, and December 7th; the last was not received by him until December 11, 1982. The first two drafts were unacceptable to Rosefielde because, as he testified, they did not reflect the terms of the Songbird Jet-French agreement. He conceded that the last draft embodied the terms of the claimed oral agreement reached by him and Ayres on October 28-29. However, this draft was never executed by Rosefielde.

 Ayres disputes that Rosefielde accepted the terms of the third draft, and instead claims that he advanced an additional proposal that $250,000 deposited by French under an escrow agreement with Songbird be taken by assignment by Amax who then was to return the $250,000 previously received by it from Songbird. Ayres requested an executed copy of the Songbird-French contract and escrow agreement, and Rosefielde, for the first time, submitted them. The proposal for substitution of the escrow money was sent by Ayres to the Amax legal department but no action was taken on it.

 At this juncture of the negotiations, about mid-December 1982, while it appeared that a warranty transfer from Falcon to French was feasible, there was uncertainty that the 108 would be in service by the end of December 1982 so that Amax could transfer the tax benefits; Amax officials were just starting negotiations for the sale of the 108's tax benefits to a third party; and no steps had been taken to negotiate with French an indemnity agreement with respect to his acceptance of a leasehold interest between him and the yet undetermined participant in the TBT plan. The third draft, which Rosefielde claims was ready for execution, reflects these uncertainties. Not only were the price terms left blank, so too were references to the name of the potential third party to whom Amax was to sell the 108's tax benefits as well as the precise date in December 1982 that the TBT agreement with the unknown third party was to be executed. *fn6"

 Toward the latter part of December 1982 when Ayres submitted the terms of the proposed sale of the 108 to senior management and the Chairman of the Amax Board of Directors, they refused assent thereto or to submit the proposal for Board approval, and plaintiffs were notified of that fact on or about December 20th. On January 3, 1983 Ayres wrote Rosefielde that he was returning the $250,000 *fn7" ...


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