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MFW Associates, LLC v. Plausteiner

United States District Court, S.D. New York

March 16, 2017


          OPINION & ORDER

          PAUL A. ENGELMAYER, District Judge

         This decision resolves a motion by plaintiff MFW Associates, LLC ("MFW") to dismiss a counterclaim for fraudulent inducement brought by defendants Steven and Susan Plausteiner (the "Plausteiners").

         MFW claims the Plausteiners owe unpaid money under a loan agreement that they entered into in connection with the development of a now-closed Vermont ski resort, the Ascutney Mountain Resort (the "Resort"). The Court previously denied the Plausteiners' motion to dismiss. Relevant here, the Plausteiners there argued that the operative loan agreement, "the Amended Forbearance Agreement" ("AFA"), released them from all personal liability on the outstanding debt. The Court, however, held that while the AFA on its face released the Plausteiners in one capacity (as loan "Guarantors"), it did not clearly release them from liability in their other capacities relevant to the transaction (as "Pledgors, " and, with other Pledgors, as the "Debtor"). The Court left open the possibility of discovery to probe any contractual ambiguity on this point.

         The Plausteiners then brought the counterclaim at issue. It alleges that, while negotiating the AFA, Dan Purjes-MFW's manager, and the Plausteiners' co-investor in the Resort-orally agreed that the Plausteiners would be released from all personal liability for the unpaid debt. It alleges that the Plausteiners entered into the AFA, under which they made payments towards the debt and renegotiated security interests on the mortgage on the Resort, in reliance on Purjes's oral statement. But, the Plausteiners allege, Purjes concealed his intention, in the event the debt remained unpaid, to argue that the AFA did not release the Plausteiners from personal liability on the unpaid debt in capacities other than as Guarantors and to pursue further recovery from them. Based on Purjes's misleading presentation, the Plausteiners claim, they were fraudulently induced to pay $1 million towards the debt and to enter into the AFA.

         MFW now moves to dismiss. It argues that the Plausteiners do not allege that Purjes made any misrepresentations of present material facts in negotiating the agreement. Instead, MFW notes, the basis for the Plausteiners' counterclaim is that Purjes concealed his intention to assert that the AFA permits him to pursue claims against the Plausteiners. Such a claim, MFW argues, effectively sounds in-and merges into a claim for-breach of contract, such that any claim the Plausteiners might have had would sound in contract, not fraudulent inducement. Separately, MFW argues that the Plausteiners' claim is untimely, brought outside of the six-year statute of limitations period governing fraud claims under New York law.

         The Court grants MFW's motion to dismiss for two reasons. First, the Plausteiners' counterclaim does not allege, as required, misrepresentations of present fact, as opposed to a future intention not to perform. Second, the counterclaim is untimely.

         I. Background

         The Court reviews first the factual background to this dispute, including the series of events that gave rise to the AFA, the key document here. The Court then reviews the litigation to date on MFW's claims, including the Court's decision denying the motion to dismiss those claims, and its assessment there of the text of the AFA. The Court then reviews the Plausteiners' ensuing counterclaim and the factual allegations underlying it.

         A. Factual Background[1]

         1. The $4.5 Million Loan and Snowdance's Default

         MFW is a limited liability company managed by Purjes. Complaint ¶¶ 1, 13. MFW is a creditor of Snowdance, LLC (“Snowdance”), a limited liability company that owned the Resort. Id. ¶¶ 6-7, 14. The Plausteiners were majority owners and sole officers of Snowdance at all relevant times, id. ¶ 7; they were also the sole owners of other entities involved in the Resort's development and management, id. ¶ 8. These included Snowdance Realty Company (“Realty”), Snowdance Ski Company (“Ski”), and Snowdance Hotel Company (“Hotel”). Id. ¶ 8.

         On May 19, 2005, Snowdance obtained a $4.5 million loan from the Palisades Regional Investment Fund (“PRIF”) (the “PRIF Loan”) pursuant to a promissory note dated May 19, 2015 (the “Note”). Id. ¶ 9[2]; Counterclaim ¶ 48. The PRIF Loan was secured by the buildings, improvements, and fixtures upon the Resort. Complaint ¶ 9. The Plausteiners personally guaranteed the PRIF Loan. Id.; Counterclaim ¶ 49.

         Around December 2007, Snowdance defaulted on the PRIF Loan and PRIF initiated foreclosure proceedings in Vermont state court. Complaint ¶ 10; Counterclaim ¶ 54. PRIF and Snowdance then entered into an agreement under which PRIF would refrain from enforcing its rights and remedies under the PRIF Loan subject to certain conditions (“Forbearance Agreement”). Complaint ¶ 11; Counterclaim ¶¶ 55-58. The Forbearance Agreement gave the members of Snowdance about one year to satisfy the PRIF loan; the Plausteiners were required to pledge their Snowdance membership interests in favor of PRIF and agree to be personal guarantors of the PRIF Loan. Counterclaim ¶¶ 57-58.

         Around February 2008, however, Snowdance defaulted on the Forbearance Agreement and PRIF resumed the foreclosure proceedings in Vermont state court. Complaint ¶¶ 12, 20.

         2. The Assignment to MFW and the AFA

         Around October 2008, MFW purchased, and was assigned, the PRIF Loan. Id. ¶ 14; Counterclaim ¶¶ 73-77. MFW then entered into the AFA, titled “Amendment No. 1 to the Forbearance Agreement dated June 30, 2008.” Complaint ¶¶ 15-16; Counterclaim ¶ 78.[3] The agreement extended the period of forbearance on the PRIF Loan until October 1, 2009. Complaint ¶ 16.

         The AFA states that it was entered into “by and between” the following parties:

MFW ASSOCIATES, LLC . . . (the “Lender”), who is the successor and assignee of PRIF ASCUTNEY, LLC (“PRIF”), and SNOWDANCE LLC . . . (the “Borrower”), STEVEN PLAUSTEINER . . ., SUSAN PLAUSTEINER . . . (each sometimes referred to herein as a “Guarantor” individually, jointly and severally as the “Guarantors”), SNOWDANCE SKI COMPANY, . . . SNOWDANCE HOTEL COMPANY, . . . SNOWDANCE REALTY COMPANY, . . . STEVEN PLAUSTEINER and SUSAN PLAUSTEINER, (collectively, the “Pledgors”, and together with the Borrower and the Guarantors, are referred to herein as the “Debtor”).

AFA at 1. The AFA provides that it “shall be deemed incorporated into and made part of the Transaction Documents.” Id. § 10; Counterclaim ¶ 81. The AFA defines the Transaction Documents to encompass the PRIF Loan and the associated promissory note, the agreement for the sale of the PRIF Loan to MFW and the associated assignment, and “all instruments, documents, mortgages, forbearance agreements and other agreements executed in ...

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