Court Opinion

ID: 2714323
Source: CourtListenerOpinion
Date Created: 2014-08-06 15:42:55.482609+00
Date Added: 2024-06-11T13:19:55.000503
License: Public Domain

ORDER AFFIRMING IN PART, REVERSING IN PART, AND
                                                   REMANDING

                                       These are appeals from a district court summary judgment
                           and a post-judgment order awarding costs in a contract action. Eighth
                           Judicial District Court, Clark County; Allan R. Earl, Judge.
                                       Appellant Jeffrey Soffer is the principal of the Turnberry
                           group of companies, including appellant Turnberry Development, LLC,
                           that was part of a joint venture that developed the Town Square Las
                           Vegas Mall. To fund the construction of Town Square, Soffer obtained a
                           $470,000,000 construction loan from a group of lending institutions (the
                           Senior Lending Group), which included respondent The Bank of Nova
                           Scotia (BNS). As the maturity date approached, the parties sought to
                           negotiate a possible new loan. They entered into a pre-negotiation
                           agreement (PNA), which required any final binding agreement to be
                           written. The parties then exchanged a term sheet through a series of e-
                           mails as they attempted to negotiate the new loan. The term sheet
                           contained a disclaimer stating that it was not a written agreement for
                           purposes of the PNA. The original loan went into default in March 2009,
                           but the Senior Lending Group did not foreclose and the parties continued
                           to negotiate. In December 2009, the parties exchanged a version of the
                           term sheet that had a column entitled "FINAL, Agreed to by All Parties."
                           Following the December exchange, the parties continued to work on
                           completing the term sheet requirements and to negotiate the details of the
                           agreement not yet resolved. However, negotiations eventually broke down
                           and no agreement was finalized A foreclosure sale was scheduled for
                           February 2011.

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                                   Soffer and Turnberry Development initially filed a complaint
                      against BNS wherein they sought, amongst other relief, to enjoin the
                      foreclosure sale, but they ultimately abandoned that cause of action and
                      the foreclosure sale was completed in March 2011. Thereafter, Soffer
                      amended the complaint twice, eventually alleging the eight causes of
                      action at issue in this appeal. Soffer's first five causes of action
                      surrounded his allegations that BNS, as agent for the Senior Lending
                      Group, breached a binding contract when it failed to conclude the new
                      loan. In the three remaining causes of action, it is alleged that Turnberry
                      Development, as property manager for Town Square, was entitled to
                      unpaid management fees. BNS moved for summary judgment arguing
                      that the agreement was unenforceable as a matter of law, and the relevant
                      documents showed that it did not owe management fees to Turnberry
                      Development. The district court granted the motion and dismissed the
                      complaint in its entirety. BNS and respondent TSLV, Inc. then filed a
                      memorandum of costs. Soffer and Turnberry Development moved to retax
                      and settle costs, which the district court granted in part and denied in
                      part and awarded BNS and TSLV $294,287.94 in costs. These appeals
                      followed. The parties are familiar with the facts and we do not recount
                      them further except as pertinent to our disposition.
                      The district court did not err in dismissing Soffer's first five causes of
                      action because there was no enforceable agreement as a matter of law
                                  "This court reviews a district court's grant of summary
                      judgment de novo."    Wood v. Safeway, Inc.,   121 Nev. 724, 729, 121 P.3d
1026, 1029 (2005). Summary judgment is appropriate when "there is no
                      genuine issue as to any material fact and. . . the moving party is entitled
                      to a judgment as a matter of law." NRCP 56(c).

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                              Soffer argues that the district court erred in determining that
                  the parties did not enter into a binding and enforceable agreement. He
                  asserts that the term sheet was an agreement that represented a meeting
                  of the minds on all material terms, and any specific terms not included
                  were set forth in the original loan, which the parties intended to
                  incorporate. Furthermore, Soffer contends that the disclaimer language
                  was accidently included in the term sheet and must be ignored because it
                  conflicts directly with the offer that was accepted by the parties through
                  the exchange of e-mails to form a binding contract. As an initial matter,
                  we note that both parties agree that New York law applies to the
                  substantive legal issues in this matter.
                              "It is well settled that a contract is to be construed in
                  accordance with the parties' intent, which is generally discerned from the
                  four corners of the document itself."        MHR Capital Partners, LP v.
                  Presstek, Inc., 912 N.E.2d 43, 47 (N.Y. 2009). A "fundamental tenet of
                  contract law [is] that enforceable legal rights do not arise from contract
                  negotiations until both parties consent to be bound or, in any event,
                  manifest that consent to each other."      Chrysler Capital Corp. v. Se. Hotel
                  Props. Ltd. P'ship, 697 F. Supp. 794, 799 (S.D.N.Y. 1988) (applying New
                  York law). "[W]hen a party gives forthright, reasonable signals that it
                  means to be bound only by a written agreement,' that intent is honored."
                  Kowalchuk v. Stroup,     873 N.Y.S.2d 43, 47 (App. Div. 2009) (quoting
                  Jordan Panel Sys., Corp. v. Turner Constr. Co., 841 N.Y.S.2d 561, 565
                  (App. Div. 2007)).
                              We conclude that in this case the disclaimer on the term sheet
                  and the language in the PNA clearly evinced the parties' intent not to be
                  bound. First, the PNA unambiguously stated that the parties were free to

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                withdraw from negotiations without penalty "until a written agreement is
                executed." Second, not only did each page of the term sheet, which was
                circulated amongst the parties as it was being negotiated, state that it was
                "FOR DISCUSSION PURPOSES ONLY," but the disclaimer on the first
                page explicitly stated that it was "not a 'written agreement' within the
                meaning" of the PNA. The plain and unambiguous language of the
                disclaimer cannot be ignored simply because the document's fourth
                column was titled "FINAL, Agreed to by All Parties." See RM 14 FK Corp.
                v. Bank One Trust Co., N.A., 831 N.Y.S.2d 120, 123 (App. Div. 2007)
                (stating that a contract must also be interpreted so as not to "render any
                clause meaningless.").
                            Soffer also argues that the disclaimer language on the term
                sheet was irrelevant because the offer was contained within the e-mail,
                and the term sheet was merely attached to convey the agreed-upon terms.
                However, this argument fails because the language in the body of the e-
                mail itself does not indicate the intent to create a binding agreement.
                Rather, it simply asks that the attached terms be approved so the parties
                could continue to work toward a formal binding agreement. Furthermore,
                even if the e-mail's language was construed as an offer to enter into a
                binding commitment, the e-mail itself contained no essential material
                terms, but instead sought approval of the attachment, and could thus not
                stand alone as an offer. See Kowalchuk, 873 N.Y.S.2d at 46 (stating that,
                to be enforceable, an offer must include all essential terms) As such, we
                conclude that the term sheet was a necessary part of the parties' offer,
                thus making the disclaimer language relevant to that offer.
                            We further reject Soffer's alternative argument that even if
                the agreement was not enforceable, BNS was still required to negotiate in

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                good faith. Soffer bases his argument upon a distinction drawn by federal
                courts in New York between two different types of preliminary
                agreements. A Type I agreement is an agreement that is "preliminary
                only in form" as the "parties [may] desire a more elaborate formalization of
                the agreement," but the agreement is complete and enforceable.         Teachers
                Ins. & Annuity Ass'n of Am. v. Tribune Co.,        670 F. Supp. 491, 498
                (S.D.N.Y. 1987). A Type II preliminary agreement occurs when there is a
                "mutual commitment to a contract on agreed major terms," but the parties
                recognize "the existence of open terms that remain to be negotiated."       Id.
                The contract itself is not binding, but the parties "accept a mutual
                commitment to negotiate together in good faith in an effort to reach final
                agreement within the scope that has been settled in the preliminary
                agreement." Id.
                            To determine whether an agreement is a Type II preliminary
                agreement, courts consider the following factors: whether the parties
                expressed an intent to be bound; the context of the negotiations; the
                existence of open terms; whether there was partial performance; and the
                necessity of putting the agreement in final form. Teachers, 670 F. Supp. at
                499-503. In applying the factors from Teachers, federal courts have stated
                that "[t]he first factor, the language of the agreement, is 'the most
                important.' .. . Indeed, if the language of the agreement is clear that the
                parties did not intend to be bound, the Court need look no further."    Cohen
                v. Lehman Bros. Bank, FSB, 273 F. Supp. 2d 524, 528 (S.D.N.Y. 2003)
                (quoting Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69, 72 (2d

                Cir. 1989)). Here, because the plain language within the four corners of
                the term sheet contained an explicit disclaimer that the negotiations were
                non-binding, and the PNA allowed for negotiation between the parties

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                    without any possibility of incurring liability, our inquiry ends. Thus, we
                    conclude that the district court did not err in dismissing Soffer's and
                    Turnberry Development's first five causes of action.
                    The district court erred in dismissing as a matter of law the remaining
                    three causes of action related to Turnberry Development's management fees
                                Soffer and Turnberry Development argue that the district
                    court erred in dismissing the remaining three causes of action for
                    Turnberry Development's unpaid management fees. They claim that
                    evidence was presented to show that the Senior Lending Group explicitly
                    requested that Turnberry Development continue to manage the property
                    during the time the parties were negotiating the possible new loan, and
                    while the loan was in default, thus, creating an oral contract. The Senior
                    Lending Group then breached that contract when it failed to pay for those
                    services. BNS counters that the relevant documents show that one of the
                    other Turnberry companies, Turnberry/Centra Sub, LLC, not BNS, was
                    responsible for paying the management fees. Furthermore, BNS contends
                    that Turnberry Development's claim of an oral agreement is barred by the
                    original loan agreement and the PNA.
                               The district court concluded that Turnberry Development's
                    claimS of an oral agreement for the payment of Turnberry Development's
                   management fees was "barred by the PNA and the Loan Agreement as a
                   matter of law." The court further concluded that the property
                   management agreement provided that Turnberry/Centra was obligated to
                   pay Turnberry Development's management fees, not BNS. However, our
                   review of the record indicates that both the PNA and the original loan
                   were entered into between Turnberry/Centra and the agent on behalf of
                   the Senior Lending Group. Turnberry Development is an affiliate of
                   Turnberry/Centra and, under New York law, "affiliated corporations are,
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74E4WEntila I Z412114,04(Fi                                                ffitalLaSESI
                as a rule, treated separately and independently so that one will not be
                held liable for the contractual obligations of the other absent a
                demonstration that there was an exercise of complete dominion and
                control." Sheridan Broad. Corp. v. Small, 798 N.Y.S.2d 45, 46 (App. Div.
                2005).
                             In this case, BNS has not made the requisite demonstration of
                complete domination and control by Turnberry/Centra over Turnberry
                Development. As such, while the PNA and original loan governed the
                relationship between BNS and Turnberry/Centra, it has no bearing on
                Turnberry Development and its dealings with BNS. Furthermore, the fact
                that the property management agreement was between Turnberry/Centra
                and Turnberry Development would not necessarily preclude a separate
                contract between BNS and Turnberry Development. Therefore, we
                conclude that the district court erred in determining that, as a matter of
                law, these documents mandated dismissal of Soffer's and Turnberry
                Development's three remaining causes of action for Turnberry
                Development's management fees.
                            Accordingly, we affirm that portion of the district court's
                judgment dismissing Soffer's and Turnberry Development's first five
                causes of action, and we reverse that portion of the district court's
                judgment dismissing the remaining three causes of action for Turnberry
                Development's management fees, and we remand this matter to the
                district court for proceedings consistent with this order.
                            Based on our decision to partially reverse the district court's
                summary judgment, we conclude that the district court's order awarding
                costs to BNS and TSLV is premature. Accordingly, we reverse the district
                court's award of costs. Cf. Kahn v. Morse & Mowbray, 121 Nev. 464, 479-

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                    80, 117 P.3d 227, 238 (2005) (reversing an entire fee award made under
                    NRS 18.010(2)(b) when summary judgment was reversed in part and
                    affirmed in part on appeal).
                                It is so ORDERED.

                                                                                   J.
                                                    Hardesty

                                                    Douglas
                                                              IL&       <
                                                                    hes-c      ,   J.

                                                                                   J.

                    cc:   Hon. Allan R. Earl, District Judge
                          Ara H. Shirinian, Settlement Judge
                          Meister Seelig & Fein LLP
                          Carbajal & McNutt, LLP
                          Lemons, Grundy & Eisenberg
                          Katten Muchin Rosenman LLP/New York
                          Katten Muchin Rosenman LLP/Los Angeles
                          Ballard Spahr, LLP
                          Eighth District Court Clerk

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