Soffer v. the Bank of Nova Scotia ( 2014 )

 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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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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