Court Opinion

ID: 2813589
Source: CourtListenerOpinion
Date Created: 2015-07-01 13:07:17.721961+00
Date Added: 2024-06-11T11:30:29.324135
License: Public Domain

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This opinion is uncorrected and subject to revision before
publication in the New York Reports.
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No. 112
JF Capital Advisors, LLC,
                Appellant,
            v.
The Lightstone Group, LLC, et
al.,
                Respondents.

             Jason A. Stern, for appellant.
             Elizabeth S. Saylor, for respondents.

FAHEY, J.:
             The primary issue on this appeal is whether the statute
of frauds, as embodied in General Obligations Law § 5-701 (a)
(10), bars the causes of action set forth in the amended
complaint.    In that pleading, plaintiff claims to have rendered
to defendants financial advisory services for what plaintiff

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                               - 2 -                           No. 112

characterizes as nine groups of investment opportunities,1 and
plaintiff seeks recovery for those services rendered based on
theories of quantum meruit and unjust enrichment.    We conclude
that the statute of frauds does not bar the causes of action with
respect to five of the nine project groups, to wit, with respect
to what the amended complaint characterizes as the “Innkeepers
Project,” the “Fitchburg and Omaha Projects,” the “Towneplace
Suites Metairie Project,” the “Hotel Victor Project,” and the
“Crowne Plaza Somerset Project.”     We therefore modify the
Appellate Division’s order by denying those parts of defendants’
motion seeking to dismiss the amended complaint with respect to
those project groups.
                                I.

     1
          The amended complaint denominates those project groups
as follows:

Project Group   Project Name
1               the Waterpark Portfolio Project
2               the Innkeepers Project
3               the Fitchburg and Omaha Projects
4               the Towneplace Suites Metairie Project
5               the Hotel Victor Project
6               the CBRE 7 Loan Portfolio Project
7               the Allegria Hotel Loan Purchase
8               the Crowne Plaza Somerset Project
9               the Miscellaneous Projects

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                               - 3 -                           No. 112

          Inasmuch as this appeal had its genesis in a motion to
dismiss pursuant to CPLR 3211 (a) (7), we are bound to, inter
alia, “accept the facts as alleged in the [amended] complaint as
true” (Leon v Martinez, 84 NY2d 83, 87 [1994]).    Plaintiff
alleges that it and its principals are hospitality industry
consultants engaged in the business of providing investment and
advisory services.   In November 2010, defendants solicited
plaintiff’s assistance in analyzing an investment opportunity
involving certain hotel/waterpark properties.   The parties
entered into a written agreement whereby plaintiff provided
financial and analytical services to defendants regarding that
project, and defendants paid plaintiff for its work with respect
to that opportunity.
          Defendants did not purchase the hotel/waterpark
properties, and those holdings eventually became the subject of
an online auction.   Based on the seller’s willingness to dispose
of the hotel/waterpark properties separately, defendants again
sought plaintiff’s services with the goal of acquiring only 2 of
the 10 holdings that comprised the hotel/waterpark properties.
Plaintiff provided continuing “advisory services” to defendants
consisting of financial and market analyses with respect to the
hotel/waterpark endeavor, as well as to other projects, and
defendants accepted those services.
          According to plaintiff, however, defendants did not
compensate plaintiff for such work.    Consequently, plaintiff

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                                - 4 -                      No. 112

commenced this action through the filing of a complaint in which
it asserted six causes of action, including claims for quantum
meruit and unjust enrichment.   Defendants moved to dismiss the
complaint, and Supreme Court granted the motion but afforded
plaintiff “leave to serve and file an amended complaint alleging
causes of action for quantum meruit and unjust enrichment.”
          Plaintiff availed itself of that leave, and the amended
complaint lies at the core of this appeal.   There, as noted,
plaintiff asserts causes of action for quantum meruit and unjust
enrichment, through which it seeks compensation for approximately
$480,000 in services it rendered to defendants in connection with
the nine project groups.   Plaintiff generally alleges that its
work with respect to each of the project groups consisted of the
review, analysis, and modeling of the finances and operations of
the assets in which defendants had the opportunity to invest.
However, with respect to the “Waterpark Portfolio Project,” the
“CBRE 7 Loan Portfolio Project,” and the “Allegria Hotel Loan
Purchase,” i.e., what are respectively denominated as project
groups ##1, 6, and 7, plaintiff alleges that it performed work
that was used to assist in defendants’ negotiation of a business
opportunity and that was conducted in anticipation of a possible
purchase bid.
          In lieu of answering, defendants moved to dismiss the
amended complaint pursuant to CPLR 3211 (a) (7), contending that
the claims for compensation for the “advisory services” plaintiff

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                               - 5 -                         No. 112

allegedly performed are subject to the statute of frauds (see
General Obligations Law § 5-701 [a] [10]).   Supreme Court granted
the motion in part by dismissing the amended complaint to the
extent it seeks recovery for work performed with respect to the
“Waterpark Portfolio Project,” the “CBRE 7 Loan Portfolio
Project,” the “Allegria Hotel Loan Purchase,” and the
“Miscellaneous Projects,” i.e., what are denominated as project
groups ##1, 6, 7, and 9.   The court denied the remaining parts of
the motion.
          On appeal, the Appellate Division modified by granting
the motion in its entirety and dismissing the amended complaint
based upon its conclusion that “investment analyses and financial
advice regarding the possible acquisition of investment
opportunities clearly fall within General Obligations Law § 5-701
(a) (10)” (115 AD3d 591, 592-593 [1st Dept 2014] [internal
quotation marks omitted]).   The Appellate Division subsequently
granted plaintiff leave to appeal and certified the question
whether the order of Supreme Court, as modified, was properly
made.
                                II.
          Having marshaled the relevant facts, our review turns
to the pertinent principles of law.    In addition to accepting the
facts as alleged as true (see Leon, 84 NY2d at 87), we “must give
the pleading a liberal construction[] . . . and afford . . .
plaintiff the benefit of every possible favorable inference”

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                                 - 6 -                       No. 112

(Landon v Kroll Lab. Specialists, Inc., 22 NY3d 1, 5 [2013],
rearg denied 22 NY3d 1084 [2014] [internal quotation marks
omitted]).    In other words, “[w]here the allegations are
ambiguous, we resolve the ambiguities in plaintiff's favor”
(Snyder v Bronfman, 13 NY3d 504, 506 [2009]) and, dissimilar to a
motion for summary judgment, where we review the record to
determine whether a cause of action or a defense has been
established as a matter of law, here we “ ‘limit our inquiry to
the legal sufficiency of plaintiff’s claim[s]’ ” (Davis v
Boeheim, 24 NY3d 262, 268 [2014], quoting Silsdorf v Levine, 59
NY2d 8, 12 [1983]; see Leon, 84 NY2d at 87-88).
             The statute of frauds is codified in General
Obligations Law § 5-701.    As a general matter, it “is designed to
protect the parties and preserve the integrity of contractual
agreements” (William J. Jenack Estate Appraisers & Auctioneers,
Inc. v Rabizadeh, 22 NY3d 470, 476 [2013]).     More precisely, the
statute
             “is meant ‘to guard against the peril of
             perjury; to prevent the enforcement of
             unfounded fraudulent claims’ (Morris Cohon &
             Co. v Russell, 23 NY2d 569, 574 [1969]). The
             statute ‘decrease[s] uncertainties,
             litigation, and opportunities for fraud and
             perjury,’and primarily ‘discourage[s] false
             claims’ (73 Am Jur 2d, Statute of Frauds §
             403). ‘In short, the purpose of the Statute
             of Frauds is simply to prevent a party from
             being held responsible, by oral, and perhaps
             false, testimony, for a contract that the
             party claims never to have made’ (id.)”
             (William J. Jenack Estate Appraisers &
             Auctioneers, Inc., 22 NY3d at 476).

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          Here we are specifically concerned with General
Obligations Law § 5-701 (a) (10), which “appl[ies] to a contract
implied in fact or in law to pay reasonable compensation” and
which provides that
          “[e]very agreement, promise or undertaking is
          void, unless it or some note or memorandum
          thereof be in writing, and subscribed by the
          party to be charged therewith, or by his
          lawful agent, if such agreement, promise or
          undertaking . . . [i]s a contract to pay
          compensation for services rendered in . . .
          negotiating the purchase . . . of any real
          estate or interest therein, or of a business
          opportunity, business, its good will,
          inventory, fixtures or an interest therein .
          . . .” (emphases added).
The same subdivision further states that “ ‘[n]egotiating’
includes procuring an introduction to a party to the transaction
or assisting in the negotiation or consummation of the
transaction” (id.).
                              III.
          Applying these principles, we conclude that the statute
of frauds does not bar the causes of action to the extent they
pertain to what the amended complaint characterizes as the
“Innkeepers Project,” the “Fitchburg and Omaha Projects,” the
“Towneplace Suites Metairie Project,” the “Hotel Victor Project,”
and the “Crowne Plaza Somerset Project,” i.e., what are
denominated as project groups ##2-5 and 8.   The fundamental
question on this appeal is whether the services for which
plaintiff seeks compensation were tasks performed so as to inform
defendants whether to negotiate for the properties at issue, or

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                               - 8 -                         No. 112

whether those services were performed as part of or in
furtherance of negotiation for the subject properties.     As noted,
General Obligations Law § 5-701 (a) (10) interdicts oral
agreements to pay compensation for services rendered with respect
to the negotiation of the purchase of real estate or of a
business opportunity or business.   Supreme Court recognized this
in dismissing the causes of action pertaining to project groups
##1, 6, and 7.   The allegations pertaining to project group #1
include what Supreme Court correctly saw as a claim for
compensation for work plaintiff performed in furtherance of
defendants’ negotiation of a business opportunity, while the
allegations pertaining to project groups ##6 and 7 seek
compensation for services rendered in anticipation of a possible
bid by defendants, including preparation of documents for
bidding.
           Said another way, Supreme Court properly dismissed the
parts of the amended complaint bound by the common thread of
allegations pertaining to defendants’ negotiation of a business
opportunity and declined to dismiss the parts of the amended
complaint pertaining to project groups ##2-5 and 8, which are not
braided by such claims.   Indeed, the allegations with respect to
project groups ##2-5 and 8 could be construed as seeking recovery
for work performed so as to inform defendants whether to partake
in certain business opportunities, that is, whether to negotiate.
To the extent the causes of action are based on such allegations,

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                               - 9 -                        No. 112

they are not barred by the statute of frauds.2
          Our decision in Snyder (13 NY3d 504), which is among
the authorities on which defendants rely in seeking affirmance of
the Appellate Division order, does not compel a different result.
In that case the parties allegedly engaged in what the plaintiff
characterized as a joint venture wherein the plaintiff
essentially was to have functioned as the defendant’s
“consigliere” (id. at 506) in exchange for a share in the
proceeds of any business transaction the defendant was able to
consummate.   In concluding that such “intermediary” work was
covered by the statute of frauds, we invoked Freedman v Chemical
Constr. Corp. (43 NY2d 260 [1977]), which provides that
          “where [an] intermediary’s activity is so
          evidently that of providing ‘know-how’ or
          ‘know-who’, in bringing about between
          principals an enterprise of some complexity
          or an acquisition of a significant interest
          in an enterprise, the statute [of frauds] is
          entitled to be read both in accordance with
          its plain meaning, its evident purpose, and
          to accomplish the prevention of the mischief
          for which it was designed” (id. at 267; see
          Snyder, 13 NY3d at 509-510).
The work contemplated by the project groups that we have

     2
          To this point absent from our analysis is reference to
project group #9. The omission is intentional inasmuch as
plaintiff abandoned its appeal with respect to that project group
by failing to raise any contention with respect to that group
(see generally Webb-Weber v Community Action for Human Servs.,
Inc., 23 NY3d 448, 451 n 2 [2014]; New York Mut. Underwriters v
Baumgartner, 19 AD3d 1137, 1140-1141 [4th Dept 2005]). We
neither examine that project group nor grant relief with respect
to that group herein.

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                                - 10 -                       No. 112

concluded survive the motion to dismiss arguably is not of an
“intermediary” nature, so Snyder does not require that we affirm.
Indeed, with respect to those project groups, plaintiff does not
seek recovery for its “know-how” or “know-who,” i.e., the “use
[of] ‘connections’, . . . ‘ability’, and . . . ‘knowledge’ to
arrange for [defendants] to meet ‘appropriate persons’ ” in their
business pursuits (Freedman, 43 NY2d at 267).
             Plaintiff also contends that the Appellate Division
order violates Morris Cohon & Co. v Russell (23 NY2d 569 [1969]),
in that a memorandum writing may satisfy the statute of frauds
(id. at 575-576).    This contention is not properly before us
inasmuch as the issue was raised for the first time on reply at
the Appellate Division (see Bingham v New York City Tr. Auth., 99
NY2d 355, 359 [2003] [“this Court best serves the litigants and
the law by limiting its review to issues that have first been
presented to and carefully considered by the trial and
intermediate appellate courts”]; see also Elezaj v Carlin Constr.
Co., 89 NY2d 992, 994 [1997] [“(t)his Court has no power to
review . . . unpreserved error”] [internal quotation marks
omitted]).    Finally, plaintiff’s remaining contention is
unpreserved.
             Accordingly, the order of the Appellate Division should
be modified, without costs, by denying defendants’ motion to
dismiss the amended complaint in part in accordance with this
opinion, and, as so modified, affirmed and the certified question

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not answered as unnecessary.
*   *   *   *   *   *   *   *     *      *   *   *   *   *   *    *   *
Order modified, without costs, by denying defendants' motion to
dismiss the amended complaint in part in accordance with the
opinion herein, and, as so modified, affirmed and certified
question not answered as unnecessary. Opinion by Judge Fahey.
Chief Judge Lippman and Judges Read, Pigott, Rivera, Abdus-Salaam
and Stein concur.

Decided July 1, 2015

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