Imperium Blue Acquisition Partners, LLC v Marathon Asset Mgt., L.P. 2024 NY Slip Op 33042(U) August 28, 2024 Supreme Court, New York County Docket Number: Index No. 650497/2024 Judge: Margaret A. Chan Cases posted with a "30000" identifier, i.e., 2013 NY Slip

Op 30001(U), are republished from various New York State and local government sources, including the New

York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication.INDEX NO. 650497/2024 NYSCEF DOC. NO. 23 RECEIVED NYSCEF: 08/28/2024

1 of 8 PRESENT: 

### SUPREME COURT OF THE STATE OF NEW YORK NEWYORK COUNTY
HON. MARGARET A. CHAN PART Justice 49M 

### -------------------X INDEX NO. 650497/2024

IMPERIUM BLUE ACQUISITION PARTNERS, LLC, IMPERIUM BLUE TAHOE, LLC, IMPERIUM BLUE TAHOE HOLDINGS, LLC Plaintiffs,


### -vMARATHON ASSET MANAGEMENT, LP., MARATHON REAL ESTATE ACQUISITION II, LLC, Defendants. 

### -------------------X MOTION DATE 03/22/2024
MOTION SEQ. NO. 001

DECISION + ORDER ON MOTION

The following e-filed documents, listed by NYSCEF document number (Motion 001) 7, 8, 9, 10, 11, 12, 13, 19,20,21 were read on this motion to/for DISMISS


### Plaintiffs Imperium Blue Acquisition Partners, LLC, Imperium Blue Tahoe, LLC, and Imperium Blue Tahoe Holdings, LLC. (together, Imperium) are a Florida· basedinvestment firm with a focus inresortproperties. Whenplaintiffs entered into a purchase agreement with a non-party seller onJuly 28, 2021, to buy a resort propertyin South Lake Tahoe, CA, plaintiffs selected defendants MarathonAsset Management, LP andMarathonReal EstateAcquisition II, LLC (Marathon) for a $24,750,000 loanto finance thispurchase. The purchase agreement had a strict closing date ofDecember 6, 

### 2021. Plaintiffs claim that defendants represented to them thatbecause plaintiffs hadpriorloan transactions withthem, defendants will exercise best efforts to timely close. Defendants failed to do so, requiringplaintiffs to quickly seek another lender and at a higher rate and additional costs. Plaintiffs therefore brings this action to recover the $75,000 deposit they hadpaid to defendants for the loan as well as damages in more than $3 million thatwere allegedly causedby defendants. Plaintiffs' complaint alleges causes ofaction1 

### for fraud; breach ofgood faith obligations; promissory estoppel; andbreach ofcontract. Defendants now move to dismiss the complaint. For the reasons statedbelow, defendants' motion is grantedinpart and denied inpart.

1Plaintiffs withdrew two causes ofaction: tortious interference with a prospective economic advantage, and unjust enrichment (NYSCEF # 19, Plfts' MOL at 5).

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### BACKGROUND
InMay 2021, plaintiffs submitted an offer to purchase resort properties from non·party sellers for$ 33 million (id. 

## ,r 15). The sellers ultimatelyopted for another buyer. But that deal fell through, so the sellers returned to plaintiffs and sweetened the deal on the condition that plaintiffs close the transactionby the end of2021. Plaintiffs entered into a term sheet with the sellers on July 28, 2021 (id 

## ,r 16). To finance the transaction, plaintiffs explored a number oflenders but ultimately chose defendants because the parties had executed similar transactions inthe past and, critically, defendants promised to streamline the closingby re-using paperworkfrom the parties' prior deals to forgo ALTA survey requirements, as it had done onprior deals (id 

## ,r 18). On November 2, 2021, after the parties inthis action reached a preliminary financing agreement, plaintiffs entered into a purchase agreement with the sellers contractingto close the transaction on orbefore December 6, 2021 (id 

## ,r 25). That same day, the parties signed a term sheet wherein defendants agreed to exercise best efforts to close the transaction on orbefore December 6, 2021 (id 

## ,r 29; Plfts' MOL at 3). Plaintiffs then gave defendants the required $75,000 good faith deposit as specified under the terms ofthe term sheet (id 

## ,r 29). On November 3, 2021, defendants made their first diligence requests from the plaintiffs, and, on November 4, defendants began requestingthe ALTA surveys that it had allegedly promised not to require ofplaintiffs (id). From thatpoint on, accordingto plaintiffs, defendants continued "piling on surprise requests" that deviated considerablyfrom both defendants' representations to plaintiffs and the way that they had handledprior deals (id 

## ,r,r 31-32). Because plaintiffs found such requests to be unreasonable and a departure from defendants' recent promises, plaintiffs sought to terminate the transaction (id 

## ,r 34). Defendants insisted that theywould "do everythingin their powerto make [the deal] work for [plaintiffs'] team" (id 

## ,r 36). Plaintiffs agreed to continue the transaction as long as defendants honored theirword (id 

## ,r 38). After the parties agreed to continue the transaction, plaintiffs obtained the ALTA surveys allegedly at significant effort and expense (id 

## ,r 48). Defendants then told plaintiffs that the December 6 closingdate would be impossible and proposed a January 22, 2022 closing date (id 

## ,r 53). Plaintiffs reminded defendants that a 2022 closing wouldbe impossible because oftheir purchase agreement with the sellers to close by December 6, 2021 (id). Although defendants told plaintiffs that it would be impossible to close, they inexplicably toldplaintiffs that the draft loan documents "shouldbe out tomorrow" (id 

## ,r 54).

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3 of 8 On November 23, 2021, rather than sendingthe loan agreement draft to plaintiffs, defendants simply told them that it would be impossible to close by the end ofthe year (id 

## ,r 56). Plaintiffs, in response, requested to terminate the transaction for the second time (id 

## ,r 57). Defendants insistedthatplaintiffs contact the sellers to buy more time on the deal so that they could close (id 

## ,r 58). Plaintiffs contactedthe sellers, who agreed to a one·week extensionto December 13, but defendants indicated that they still could not commit to that date (id 

## ,r 59). Plaintiffs then demanded a refund oftheir $75,000 good faith deposit from defendants, who counter-offered returning $65,850 on the conditionthatplaintiffs release defendants from any and all future claims (id 

## ,r 56). Plaintiffs refused (id). After the expiration ofthe exclusivityperiodbetween the parties, plaintiffs sought alternative financing, eventually obtaining a costly bridge loan (id 

## ,r,r 67- 69). Plaintiffs then negotiated with the sellers to pushthe close date out to December 30, 2021, which the sellers agreed to on the condition thatplaintiffs make costly concessions (id). OnMarch 30, 2022, plaintiffs obtained financing from another non-party lender to pay offthe costly bridge loan (id 

## ,r 70). According to plaintiffs, defendants' delays were intentional and inbad faith (id 

## ,r 74). Plaintiffs claim that defendants were only delayingthe transaction because defendants had reached their maximum collateralized loan obligation limit for 2021 and therefore needed to push the closing out to 2022 (id). Plaintiffs posit that defendants had known all alongthat they would be unable to close the transactionby 2021 but made false promises to plaintiffsjustto secure the transaction in the hopes ofpersuadingplaintiffs to push the closing date out to 2022 when defendants' loan limit would renew (id) Plaintiffs bringthis action against defendants alleging (1) fraud, (2) breach of good faith obligation, (3) promissory estoppel, and (4) breach ofcontract (Complaint 

## ,r,r 23-28). Inits opposition, plaintiffs withdrew the causes ofaction for tortious interference with a prospective economic advantage and unjust enrichment (Plfts' MOL at 5). Each cause ofaction will be addressed in turnbelow. Legal 

### Standard On a CPLR 3211(a)(7) motion to dismiss, the court must afford the pleadings a liberal construction, accept the allegations ofthe complaint as true and provide the plaintiffs with "the benefit ofeverypossible favorable inference" 

### (Leon v Martinez, 84 NY2d 83, 87 [1994]). A motion to dismiss pursuant to CPLR 3211(a)(l) maybe appropriately granted "only ifthe documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter oflaw" 

### (Morgenthow

### &Latham vBankof 

### N. Y. Co., 

### Inc., 305 AD2d 74, 78 [1st Dept 2003] [internal citations and quotations omitted]). Under these circumstances, "legal conclusions and factual allegations [in the complaint] are flatly contradictedby

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4 of 8 documentary evidence [such that] they are not presumed to be true or accorded every favorable inference" [international citations and quotation omitted] (id at 78). 

### DISCUSSION Plaintiffs and defendants have a fundamental disagreement about what is in dispute. Defendants argue that "[t]his case begins and ends with a Term Sheet" (Dfts' MOL at 7), butplaintiffs contend that "[tlhis is not a case that rises and falls with a Term Sheet" (Plfts' MOL at 5). Defendantspaint this case as one in which they were not contractually bound to fulfill the terms ofa term sheet, whereas plaintiffs are paintingit as one in which defendants fraudulently induced them into an exclusive relationship with defendants, thereby barringthem from actively pursuing other lending opportunities. And inthe end, defendants allegedly cost plaintiffs $ 3 million in damages. 

### Fraud Defendants argue thatplaintiffs' fraud claim shouldbe dismissed because the parties had signed the term sheet which clearly states that itis not a binding agreement. Defendants cite the following provisionfrom the term sheet: "Under no circumstances should the terms and conditions contained herein constitute orbe deemedto constitute a legallybindingcommitmentonthe part of [Marathon] or any ofits affiliates, nor shallthey be construed as an offer or undertaking by [Marathon] to issue, arrange or negotiate a commitment for the Proposed Financing or any other financing, or any commitment, offer, undertaking or agreement ofany kind." (id). Defendants argue that plaintiffs cannot reasonably rely on an agreement that is non-binding (NYSCEF # 8- Dfts' MOL at 1). Plaintiffs, on the other hand, argue that defendants are mis-readingthe Complaintbecause plaintiffs are not premisingtheir causes ofaction on defendants' failure to complete the financingpursuant to the term sheet (Plfts' MOL at 7). Instead, plaintiffs argue, defendants' repeated misrepresentations and omissions that they would "expedite the underwritingprocess, would re·use former documentation and omit certain conditions to do so, and would use best efforts to meet deadlines it did not have any intention ofmeeting" form the basis oftheir Complaint (id). In other words, plaintiffs are not bringingthis lawsuitbecause of defendants' failure to fulfill the financing pursuant to the term sheetbut instead because defendants had inducedplaintiffs to enter into an exclusive business relationship with defendants by using a series ofmisrepresentations and omissions. Plaintiffs point to the following omission: the true reason that defendants were "pilingon surprise requests" and requesting diligence items that defendants

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5 of 8 promisedit would not need is that defendants had maximized their collateralized loan obligation for 2021, and therefore needed to push the closing date out to 2022 (id 

## ,r 74). Defendants' repeated misrepresentations and omissions allegedly resulted in a $3-millioninjury to the plaintiffs since plaintiffs had to re-negotiate extensions with the seller, acquire a costlybridge loan, and then enter into a new financing agreement with a new lender, who eventually closed the transaction (id 

## ,r,r 70-72). Under CPLR 3016(b), "the circumstances constitutingthe wrong shallbe stated in detail." [1st Dept 2020]). "To state a cause ofaction for fraud, a plaintiff must allege 'a material misrepresentation ofa fact, knowledge ofits falsity, an intent to induce reliance,justifiable reliance by the plaintiffand damages' [citations omitted]" 

### (Cohen BrothersRealtyCorp. vMapes, 181 AD3d 401, 404 [1st Dept 2020]). Additionally, "material omissions offact" can also constitute an element of fraudjust as material misrepresentations can 

### (Mandarin TradingLtd v Wildenstein, 16 NY3d 173, 178 [2011]). Here, plaintiffs sufficiently allege a claim for fraud: defendants' omissions and misrepresentations inducedplaintiffs to initially secure and then help expedite a loan, when defendants' had motives to push the closingpast December 2021, which causedplaintiffs injury 

### (see Held vKaufman, 91 NY2d 425, 431 [1998] ["[t]o state a cause ofaction for fraud, a plaintiffmust show an intentional misrepresentation ofa material fact resulting in some injury"]). While plaintiffs pleadreasonable reliance on defendants' misrepresentations in a general manner, it is sufficient to withstand a motion to dismiss at this pre-discovery stage 

### (Cohen BrothersRealty Corp., 181 AD3d at 404 ["Actual knowledge

. . . need onlybe pleaded generally, [given], particularly at the pre-discovery stage, that a plaintiff lacks access to the very discovery materials which would illuminate a defendant's state ofmind" [internal citations omitted]). Moreover, as alleged, defendants' motive for pushing out the closing date was that defendants had maximized their loan obligationfor the year. Defendants' underlying motives are within defendants' knowledge, and plaintiffs are ill-equippedto show those facts at this pre-discovery stage 

### (Jared Contracting Corp. vNew York City TransitAuthority, 22 NY2d 187, 194 [1968] ["[i]t is almost impossible to state in detail the circumstances constituting a fraud where those circumstances are peculiarly within the knowledge ofthe party against whom the defense is being asserted."]). Defendants present an argument in the alternative thatplaintiffs' fraud claim is premised on a breach ofcontract claim and that "[cllaims arising out of breaches ofcontracts are not cognizable as fraud" (Dfts' MOL at 9). Again, plaintiffs are not premisingtheir claims on the term sheetbut on the material omissions and misrepresentations that defendants are alleged to have made not onlyinthe lead· up to the signing ofthe term sheetbut also eachtime thatplaintiffs attempted to terminate the transaction. Moreover, ifthe term sheet is a non-binding contract, as

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6 of 8 defendants assert, then it is not possible for the fraud claim to arise out ofany contractual duty since there would be no contractual duty. The branch of defendants' motion to dismiss plaintiffs' fraud claim is denied. 

### Breach of GoodFaith Obligation & 

### Contract In New York, "causes ofaction based upon breach ofthe covenant ofgood faith and fair dealing cannotbe sustained absent a contractual obligationbetween the parties" 

### (ParkmercedInvs., LLCv We Work Cos. LLC, 217 AD3d 531, 532 [1st Dept 2023], citing

### DurationMun. FundL.P. vJ.P. Morgan Sec. Inc., 77 AD3d 474, 474-475 [1st Dept 2010]). "Absent the existence ofa contract, a claim alleging breach ofthe implied covenant ofgood faith and fair dealingis legally unavailing [citations omitted]" 

### (Keefe vNew YorkLawSchool, 71 AD3d 569 [1st 2010]; 

### seealso KingPenguin OpportunityFundIII, LLCv Spectrum GroupManagementLLC, 187 AD3d 688, 690 [1st Dept 2020]). Here, defendants argue that because the term sheet explicitly states that "[u]nder no circumstances should the terms and conditions contained herein constitute or be deemed to constitute a legallybinding commitment

..." (NYSCEF # 11, Exh B to Dfts' MOL), the term sheet itselfis not an unenforceable contract and, therefore, cannot be breached. Likewise, because there is no contract, there is no implied covenant ofgoodfaith, which does not existin the absence ofa contract (Dfts' MOL at 12-13). Defendants note that "no claims based on conditions explicitly addressed inthe Term Sheet can succeed" (Dfts' MOL at 20). Plaintiffs, on the other hand, argue that even ifthe term sheet itselfis unenforceable, there existed an oral agreement between the parties that arose once plaintiffs attempted to terminate the agreement and defendants orally induced them to forgo the termination with redoubled promises to use best effort to close the transaction (Pltfs' MOL at 13-16). Thus, plaintiffs argue that, even ifthe term sheet in not binding as far as completingthe financing, defendants were nonetheless bound underwritingthe financing in good faith (Pltfs' MOL at 14). Plaintiffs also claim that defendants formed an oral contractby reassuring plaintiffs that they would be able to fulfill the terms ofthe contract. However, because there is clear and unambiguous language in the term sheet outliningthat the term sheet is non-binding and unenforceable, plaintiffs' argument that there is at minimum an implied good faith obligation inthe term sheet is circuitous and unavailing. Further, plaintiff's argument that defendants' re· assurance to fulfill a contract that is already non-binding does not create a separate bindingoral contract. The branch ofdefendants' motion to dismiss the breach ofcontract and good faith obligation claims are granted.

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### PromissoryEstoppel To establish a claim for promissory estoppel, a plaintiffmust show (i) a sufficiently clear and unambiguous promise; (ii) reasonable reliance on the promise; and (iii) injury causedby the reliance [citations omitted]" 

### (Caselloti vFree, 138 AD3d 198, 204 [1st Dept 2016]). While plaintiffmust show in detail each ofthese elements, at this pre-discovery stage, however, "no such showingis required to survive a motion to dismiss pursuant to CPLR 

### § 3211(a)(7)" (

### Villacorta v SaksInc., 2011 NY Slip Op 51160(U) at 12 [Sup Ct, NY County 2011]). Defendants', in arguing dismissal for plaintiffs' promissory estoppel cause of action, rely on 

### StarVestPartnersII, L.P. vEm portal, Inc.: "Where a term sheet or other preliminary agreement explicitly requires the execution of a further written agreement before any party is contractually bound, itis unreasonable as a matter oflaw for a partyto rely upon the other party's promises to proceed with the transaction in the absence ofthatfurther written agreement." (101 AD3d 610, 613 [1st Dept 2012]; Dfts' MOL at 17). Defendants insist that the term sheet expressly conditions any completion ofthe financing on "due diligence review, the result ofwhich must be satisfactoryto [defendants] in [their] sole discretion' and makes plain that [defendants are] under no bindinglegal obligation to complete the Proposed Financing" (Dfts' MOL at 17). Plaintiffs reiterate that defendants are misreadingtheir complaint and misrepresenting theirposition (Plfts' MOL at 16-17). Plaintiffs againpoint out that theirposition is not based on the term sheet; rather, they would not have selected defendants as their lenderbut for defendants' representations that they would expedite the transaction through the re-use ofprior diligence materials and the waiver ofALTA land surveys. Plaintiffs also point out that when they attempted to terminate the deal not once but twice, defendants made continuing assurances that they would exercise best efforts to close and "meet the December 6, 2021 deadline" (Complaint

## ,r,r 46-47). But more thanjustthe mere blanket assurance, plaintiffs allege that defendants assured plaintiffs that they wouldtake certain steps to expedite the transaction and exercise best efforts, especially upon each ofthe two times plaintiffs tried to terminate the loan deal. However, defendants allegedly took none ofthe promised steps and, moreover, could not exercise best efforts since it was allegedly impedingthe closing onpurpose to buythemselves time to close in 2022. Here, plaintiffhas adequately shown that there is a clear and unambiguous promise that defendants would expedite the loan transaction for a closing in December 2021. 

### It is undisputed that the parties had conducted prior deals together and defendants had foregone the ALTA surveys and other diligence materials for

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8 of 8 plaintiffs inthe past. Suchpriorconductwould have further inducedplaintiffsto rely on defendants' promise that theywould do the same for the similartransaction intendedto close on December 6, 2021. As for the alleged$ 3 million injury, plaintiffs make clearthat once the transaction with defendants broke down, they needed to obtaincostly bridge financing and extensions from the sellers, ultimatelyclosingthe financing transaction onDecember 30, 2021 (id 

## ,r 69). Plaintiffs then had to pursue another lender in 2022 to pay offthe bridge financingbyMarch 30, 2022 and incurred more costs (id 

## ,r,r 70-71). Consideringthat the closingwith the new lenders occurredin 2021, plaintiffs have adequately alleged a causalityhere between defendants' actions and the injury sufferedbyplaintiffs. At thispre-discovery and pre-answer stage in the proceedings, plaintiffs' cause ofaction for promissory estoppel survives defendants' motionto dismiss. 

### CONCLUSION Accordingly, it is hereby ORDERED that defendants' motion to dismiss is granted only to the extent thatcount two (good faith obligation), count three (tortious interference with prospective economic advantage), count five (unjust enrichment [quantum meruitD, and count six (breach ofcontract) are granted; and itis further ORDERED thatthe branches ofdefendants' motion to dismiss is denied as to count one (fraud) and count four (promissory estoppel); and it is further ORDERED that defendants have 30 days from the date ofthis Decision and Orderto file their Answer to plaintiffs' complaint; and itis further ORDERED that counsel for plaintiffshall serve a copy ofthis decision, along with notice ofentry, onthe defendants within 10 days ofthis filing.

08/28/2024 DATE CHECK ONE: MARGARET A. CHAN, J.S.C.

APPLICATION: CHECK IF APPROPRIATE: CASE DISPOSED GRANTED**□** DENIED SETTLE ORDER INCLUDES TRANSFER/REASSIGN NON-FINAL DISPOSITION GRANTED IN PART SUBMIT ORDER FIDUCIARY APPOINTMENT

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