Opinion
15727 Index No. 655334/18 Case No. 2021–04375
04-14-2022
Harry JEREMIAS, et al., Plaintiffs–Respondents–Appellants, v. TOMS CAPITAL LLC et al., Defendants–Appellants–Respondents, Nicholas Boyle, Defendant–Respondent.
Dontzin Nagy & Fleissig LLP, New York (Tibor L. Nagy, Jr., of counsel), for appellants-respondents. Tuttle Yick LLP, New York (David G. Skillman of counsel), for respondents-appellants.
Dontzin Nagy & Fleissig LLP, New York (Tibor L. Nagy, Jr., of counsel), for appellants-respondents.
Tuttle Yick LLP, New York (David G. Skillman of counsel), for respondents-appellants.
Acosta, P.J., Kern, Gonza´lez, Shulman, JJ.
Order, Supreme Court, New York County (Barry R. Ostrager, J.), entered October 18, 2021, which, to the extent appealed from, denied defendants Toms Capital LLC and Noam Gottesman's (the Toms defendants) motion for summary judgment dismissing the breach of contract, unjust enrichment, and quantum meruit claims and granted the motion as to the breach of fiduciary duty and breach of implied covenant of good faith and fair dealing claims, granted defendant Nicholas Boyle's motion for summary judgment dismissing the faithless servant claim, and granted plaintiff's/counterclaim defendants’ motion for summary judgment dismissing the fraud counterclaim, unanimously modified, on the law, to deny the Toms defendants’ motion as to the breach of fiduciary duty and breach of implied covenant of good faith and fair dealing claims, and otherwise affirmed, without costs.
Plaintiff (Jeremias) alleges that he reached an oral agreement with the Toms defendants to jointly develop a property in Manhattan adjacent to defendant Gottesman's residence. Contrary to the Toms defendants’ contention, the "underdevelopment fee" that they allegedly agreed to if Gottesman chose not to develop the property fully to the extent permitted was not a liquidated damages provision, since the alleged agreement gave him the option essentially to pay the joint development company for square footage that he chose not to develop (see Truck Rent–A–Ctr. v. Puritan Farms 2nd, Inc., 41 N.Y.2d 420, 424–425, 393 N.Y.S.2d 365, 361 N.E.2d 1015 [1977] ; Feiertag v. Feiertag, 2 A.D.3d 574, 768 N.Y.S.2d 367 [2d Dept. 2003] ). In any event, defendants failed to demonstrate that the price per square foot upon which the underdevelopment fee was allegedly based was disproportionate to the value of the forgone square footage (see Puritan Farms, 41 N.Y.2d at 424–425, 393 N.Y.S.2d 365, 361 N.E.2d 1015 ; JMD Holding Corp. v. Congress Fin. Corp., 4 N.Y.3d 373, 380, 795 N.Y.S.2d 502, 828 N.E.2d 604 [2005] ).
Further, issues of fact exist as to whether there was a meeting of the minds on the underdevelopment fee. Similarly, issues of fact exist as to whether the one-page document that the Toms defendants provided to plaintiff, which did not contain a merger clause or a no-oral-modifications clause, embodied all the material terms of the agreement (see Saxon Capital Corp. v. Wilvin Assoc., 195 A.D.2d 429, 430, 600 N.Y.S.2d 708 [1st Dept. 1993] ). Plaintiff submitted evidence, including contemporaneous emails and evidence of the Toms defendants’ own conduct, from which a trier of fact could conclude that they had agreed, inter alia, to an underdevelopment fee and that counterclaim defendant Harch Group LLC would be the project developer. Because there is a dispute as to the scope of the agreement, plaintiff may maintain his quasi-contract claims as an alternative to the breach of contract claim ( Henry Loheac, P.C. v. Children's Corner Learning Ctr., 51 A.D.3d 476, 857 N.Y.S.2d 143 [1st Dept. 2008] ).
The faithless servant claim against Boyle was correctly dismissed. Taking preparatory steps, while still in the employer's employ, to enter into a competing business is not a breach of an employee's duty of loyalty as long as the employee does not use the employer's time or resources to do so ( Feiger v. Iral Jewelry, 41 N.Y.2d 928, 394 N.Y.S.2d 626, 363 N.E.2d 350 [1977] ).
The fraud counterclaim was correctly dismissed because knowledge of whether the tenant of the property intended to exercise its right of first offer to purchase the property was not within the exclusive knowledge of plaintiff, and therefore the Toms defendants were not justified in relying on plaintiff's alleged representation ( DDJ Mgt., LLC v. Rhone Group L.L.C., 15 N.Y.3d 147, 154, 905 N.Y.S.2d 118, 931 N.E.2d 87 [2010] ; 320 Realty Mgt. Co. v. 320 W. 76 Corp., 221 A.D.2d 174, 633 N.Y.S.2d 295 [1st Dept. 1995] ). In any event, they did not sustain any loss. Regardless of any misrepresentation plaintiff might have made as to whether the tenant intended to exercise its option, once the tenant decided to do so, buying out the option was part of the cost of obtaining the property, and the Toms defendants chose to pay it to complete the deal on which they made a profit of more than $7 million.
The breach of implied covenant of good faith and fair dealing claim should be reinstated because the contours of the agreement are in dispute, and facts exist upon which a trier of fact could find that the Toms defendants defeated plaintiff's right to receive the fruits of the contract (see Demetre v. HMS Holdings Corp., 127 A.D.3d 493, 493–494, 7 N.Y.S.3d 110 [1st Dept. 2015] ). The breach of fiduciary duty claim should also be reinstated. Defendants argue that plaintiff cannot establish the existence of any partnership or joint venture (the premise for the fiduciary duty claim), contending that he would not share in any losses because he was not an equity investor in the project. However, there are issues of fact as to whether this was a situation in which there was no reasonable expectation of loss, thus falling under the exception to the general requirement that partners and joint venturers must agree to share in losses as well as profits (see Lebedev v. Blavatnik, 193 A.D.3d 175, 185–186, 142 N.Y.S.3d 511 [1st Dept. 2021] ; Don v. Singer, 92 A.D.3d 576, 939 N.Y.S.2d 363 [1st Dept. 2012], affg 2011 N.Y. Slip Op 31993[U], 2011 WL 2972297 [Sup. Ct., N.Y. County 2011] ). Further, contrary to defendants’ contention, even to the extent the agreement gave them sole control over all decisions of the development company with respect to the property's development, it did not give them license to self-deal.