Court Opinion

ID: 2714322
Source: CourtListenerOpinion
Date Created: 2014-08-06 15:42:49.650019+00
Date Added: 2024-06-11T13:19:54.885911
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
                claim 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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                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

                                                                            ,   J.
                                                 Douglas

                                                                                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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