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Park Place at Malta, LLC v. Berkshire Bank

Supreme Court of New York, Third Department

March 16, 2017

BERKSHIRE BANK et al., Respondents.

          Calendar Date: January 17, 2017

          Lanin Law, PC, New York City (Scott L. Lanin of counsel), for appellant.

          Nolan & Heller, LLP, Albany (Madeline H. Kibrick Kaufman of counsel), for respondents.

          Before: Peters, P.J., McCarthy, Egan Jr., Rose and Mulvey, JJ.


          Peters, P.J.

         Appeal from an order of the Supreme Court (Hartman, J.), entered January 25, 2016 in Albany County, which granted defendants' motion for summary judgment dismissing the complaint.

         From 2009 through 2013, plaintiff owned certain real property in the Town of Malta, Saratoga County. Such property was under development and was improved by, or was to be improved by, single-family homes and multifamily units, as well as a clubhouse. The property was encumbered by a mortgage that secured a promissory note whereby plaintiff promised to repay to defendant Berkshire Bank $3, 860, 000. The note required plaintiff to make an initial principal payment of $500, 000 in September 2010 and then to make annual principal payments of at least $1, 310, 000 each September until the loan was paid off.

         Plaintiff made only a partial principal payment of $280, 000 in September 2010, prompting Berkshire to declare the loan in default. Plaintiff again defaulted on the loan in May 2011 by failing to keep an interest reserve account sufficiently funded. In September 2011, as a result of, among other things, these defaults, Berkshire transferred plaintiff's loan file to defendant Thomas Matejek of its commercial loan workout department. The note matured by its terms on September 7, 2012, at which time the entire principal, accrued interest and other sums owing thereunder became immediately due and payable in full. In late September 2012, plaintiff advised Matejek that it had entered into an agreement with Albany Partners III, LLC (hereinafter AP) to sell a portion of the property's multifamily lots and the clubhouse for $4, 760, 000, which would have satisfied plaintiff's debt obligation to Berkshire. The purchase agreement was contingent on, among other things, AP's ability to raise the necessary capital within 120 days.

         In light of such purchase agreement, plaintiff requested that Berkshire forbear from exercising its rights and remedies under the loan documents for a limited period of time to allow plaintiff to close on its transaction with AP. Berkshire agreed, but required plaintiff to enter into a forbearance agreement. This agreement, executed in December 2012, provided that the duration of the forbearance would be until the AP deal closed, February 28, 2013 or upon default, whichever occurred first. The agreement further stated that, if by February 28, 2013 the AP sale had not yet closed and no event of default occurred, Berkshire would continue to forbear during an extended forbearance period commencing on February 28, 2013 and ending immediately on the earliest of the closing of the sale, March 29, 2013 or default. The agreement specified, as relevant here, that "[a]ny termination of the AP [p]urchase [a]greement" would constitute a default. It also reserved Berkshire's rights under the loan documents and indicated that any waiver of its rights must be in writing and that no omission, delay or partial exercise of a right or remedy could be construed as a waiver of such rights.

         On February 22, 2013, AP canceled the purchase agreement. Plaintiff's principal, Frank Tate, notified Matejek of the cancellation and informed Matejek that, due to a change in local law, more units could be built on the property, making it more valuable. Thereafter, plaintiff tendered to Berkshire a partial payment of approximately $10, 000, which Berkshire deposited on March 1, 2013. Five days later, Berkshire sent plaintiff a forbearance expiration notice, which indicated that the termination of the purchase agreement with AP constituted an event of default, that the initial forbearance period had expired by its terms on February 28, 2013 and that, accordingly, no extended forbearance period was in force or effect. On March 7, 2013, Tate sent Matejek a letter stating that he had discussed with "Leccese [sic] Group" a deal to sell a portion of the property for $7.5 million and that other parties were also "very interested" in purchasing the property. On March 12, 2013, LeCesse Development Corporation issued to plaintiff a letter of interest (hereinafter LOI) to purchase a portion of the property for $7.5 million.

         Shortly thereafter, Tate contacted Matejek to schedule a meeting between Berkshire and LeCesse regarding the potential transaction between plaintiff and LeCesse. Tate wanted to meet in March, but Matejek stated that he was not available and the meeting was allegedly scheduled for April 4, 2013. On March 29, 2013, Berkshire sold plaintiff's loan to Juno Malta LLC. Berkshire informed plaintiff of the loan sale by letter dated April 2, 2013. Plaintiff subsequently sold a larger portion of the property than it had been contemplating to LeCesse for $6.5 million.

         In April 2015, plaintiff commenced this action seeking $2.5 million that it claimed to have lost as a result of defendants' alleged misconduct. The complaint asserted causes of action for breach of fiduciary duty, aiding and abetting such breach, fraud and misrepresentation, negligence, breach of the implied covenant of good faith and fair dealing, tortious interference with a business relationship and promissory estoppel. Defendants answered and moved for summary judgment dismissing the complaint. Supreme Court granted the motion, and plaintiff appeals.

         Defendants met their initial burden on the motion by tendering proof showing that plaintiff defaulted on the loan, that the forbearance period terminated when AP canceled its conditional agreement to purchase the property and that plaintiff did not suffer any cognizable injury that was proximately caused by defendants when plaintiff decided to sell a larger portion of the property to LeCesse at a reduced price (cf. Hotel 71 Mezz Lender LLC v Mitchell, 63 A.D.3d 447, 448 [2009]; Trustco Bank N.Y. v Drake, 195 A.D.2d 665, 667 [1993]). The burden, therefore, shifted to plaintiff to demonstrate the existence of a triable issue of fact (see generally Alvarez v Prospect Hosp., 68 N.Y.2d 320, 324 [1986]; Zuckerman v City of New York, 49 N.Y.2d 557, 562 [1980]). This plaintiff failed to do.

         To prevail on its causes of action, plaintiff was required to establish that it suffered an actual, nonspeculative injury that would not have occurred but for defendants' conduct and that defendants proximately caused such injury (see Route 217, LLC v Greer, 119 A.D.3d 1018, 1020 [2014]; Marchell v Littman, 107 A.D.3d 1082, 1083 [2013], lv denied22 N.Y.3d 856');">22 N.Y.3d 856 [2013]; Country Club Partners, LLC v Goldman, 79 A.D.3d 1389, 1391 [2010]; OSJ, Inc. v Work, 273 A.D.2d 721, 723 [2000]). Plaintiff's complaint alleged that defendants improperly shared confidential information with Mark Rosen, the manager of Juno Malta, regarding the LeCesse deal prior to Berkshire's sale of the loan to Juno Malta and intentionally delayed meeting with LeCesse and plaintiff in order to complete the sale of the loan before plaintiff's deal with LeCesse could close. Yet, plaintiff's proffers failed to rebut Matejek's and Rosen's affidavits attesting that neither Matejek nor anyone else from Berkshire ever disclosed such information to Rosen. Plaintiff's mere speculation that Matejek "must have" told Rosen about ...

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