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UrbanAmerica, L.P. II v. The Carl Williams Group, L.L.C.

Supreme Court of New York, First Department

May 17, 2012

UrbanAmerica, L.P. II, Plaintiff-Respondent-Appellant,
v.
The Carl Williams Group, L.L.C., et al., Defendants/Counterclaim Plaintiffs-Appellants-Respondents, UrbanAmerica, L.P., Counterclaim Defendant.

Robert C. Kilmer, Binghamton, for appellants-respondents.

Pillsbury Winthrop Shaw Pittman LLP, New York (Jack McKay of counsel), for respondent-appellant.

Saxe, J.P., Sweeny, Acosta, Freedman, Román, JJ.

Judgment, Supreme Court, New York County (Ira Gammerman, J.H.O.), entered April 8, 2011, which, insofar as appealed from, awarded plaintiff the total sum of $9, 950, 178.40 as against the Carl Williams Group, L.L.C. (CWG), dismissed plaintiff's third and fourth causes of action, and dismissed the counterclaims, unanimously affirmed, without costs. Appeals from order, same court and Justice, entered December 13, 2010, unanimously dismissed, without costs, as subsumed in the appeals from the judgment.

Plaintiff made a prima facie case against CWG on the amended and restated note "by proof of the note and the debtor's failure to make the payments called for therein" (Cicconi v McGinn, Smith & Co., Inc., 35 A.D.3d 292, 292 [2006]). Plaintiff did not have to prove that the funds that it lent CWG under the original note were actually disbursed to CWG; plaintiff was suing on the amended and restated note, not the original note. Nor did plaintiff have to prove that it had paid 50% of the predevelopment/pursuit costs with anything other than the money it was lending to CWG. We decline to consider defendants' argument, made for the first time in their reply brief, that it would be unconscionable to allow plaintiff to recover 100% of the monies that were lent where 50% of the funds were allegedly used to meet plaintiff's obligations.

The court properly found that plaintiff's damages on its third cause of action (for defendant Carl Williams' breach of a pledge agreement) were too speculative (see generally Cristallina S.A. v Christie, Manson & Woods Intl., 117 A.D.2d 284, 295 [1986] ["damages may not be determined by mere speculation"]). This is not a case where "it is certain that damages have been caused by a breach of the contract, and the only uncertainty is as to their amount" (Randall-Smith v 43rd St. Estates Corp., 17 N.Y.2d 99, 106 [1966] [internal quotation marks omitted]). Mr. Williams' breach of the pledge agreement (his sale of his membership interest in CWG to nonparty Bexley Place Limited Partnership) did not, by itself, injure plaintiff; it was the combination of the sale and Bexley's subsequent bankruptcy that prevented plaintiff from foreclosing on the membership interest.

Plaintiff's contention that it is entitled to recover the amount of its loan to CWG, plus interest, from Mr. Williams as reliance damages for breach of the pledge agreement is unavailing; plaintiff did not lend CWG millions of dollars in preparation for performance of the pledge agreement (see St. Lawrence Factory Stores v Ogdensburg Bridge & Port Auth., 13 N.Y.3d 204, 207-208 [2009]).

Plaintiff's reliance on section 12 of the pledge agreement is also unavailing because there was no sale of the pledged securities by pledgee (i.e., plaintiff) and because "Obligations" are defined as "all indebtedness, liabilities and obligations of Pledgor " (emphasis added). The Pledgor is Mr. Williams, but the loan was made to CWG.

Plaintiff is not entitled to all of its attorneys' fees in the instant litigation pursuant to the attorneys' fees provision of the pledge agreement; the instant action involved many other issues besides Mr. Williams' breach of the pledge agreement, and "a provision for recovery of fees that are incidents of litigation should be construed strictly" (Gottlieb v Such, 293 A.D.2d 267, 268 [2002], lv denied 98 N.Y.2d 606 [2002] [internal quotation marks and citation omitted]; see also Hooper Assoc. v AGS Computers, 74 N.Y.2d 487, 492 [1989]).

As pled, the fourth cause of action (for fraud) was not a fraud-on-creditors claim and did not even hint at the damages that plaintiff now seeks thereunder. Plaintiff did not move at trial to conform its pleadings to the proof. Even if we were to consider the merits of plaintiff's argument, it is far from clear that Debtor and Creditor Law § 276 applies to Mr. Williams' allegedly fraudulent transfer of his membership interest in CWG to Bexley. Mr. Williams is a Maryland resident, CWG is a Maryland company, and Bexley is a Maryland partnership. Plaintiff points to no evidence that the fraudulent transfer occurred in New York. Even if New York law applied, the amount of plaintiff's loan to CWG is not the proper measure of damages for Mr. Williams' fraudulent transfer of his membership interest to Bexley (see Capital Distrib. Servs., Ltd. v Ducor Express Airlines, Inc., 440 F.Supp.2d 195, 204 [ED NY 2006]). Finally, Debtor and Creditor Law § 276-a does not entitle plaintiff to recover all of its attorneys' fees in the instant litigation from Mr. Williams; the instant action involved many other issues besides fraudulent conveyance (see Keen v Keen, 113 A.D.2d 964, 966 [1985], lv dismissed 67 N.Y.2d 646 [1986]; see also Posner v S. Paul Posner 1976 Irrevocable Family Trust, 12 A.D.3d 177, 179 [2004]).

The court properly dismissed defendants' counterclaims. The letter of intent (LOI) specifically states that it is not binding and that "the legal rights and obligations of the parties shall be only those that are set forth in such definitive transaction documents when and if executed and delivered by all parties"; therefore, it did not create a joint venture (see e.g. Schneider v Jarmain, 85 A.D.3d 581, 582 [2011]; Aksman v Xiongwei Ju, 21 A.D.3d 260, 261-262 [2005], lv denied 5 N.Y.3d 715 [2005]). Contrary to defendants' claim, the LOI left important items to be negotiated (see IDT Corp. v Tyco Group, S.A.R.L., 13 N.Y.3d 209, 212-214 [2009]).

Defendants did not prove that the parties' conduct created a joint venture. Even if plaintiff called defendants their "partner, " that is not decisive (see Kyle v Ford, 184 A.D.2d 1036, 1037 [1992]).

Defendants' claim that plaintiff admitted in another lawsuit that it was in a joint venture for the Metroview land is unavailing; plaintiff alleged in the other action that it and CWG were in a joint venture for the CSC Building, not the Metroview land.

Since defendants' counterclaim for breach of a joint venture was properly dismissed, their breach of fiduciary duty counterclaims were also properly dismissed (see Langer v Dadabhoy, 44 ...


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