Four Seasons Hotels Ltd. v. Vinnik

Citation127 A.D.2d 310,515 N.Y.S.2d 1
PartiesFOUR SEASONS HOTELS LIMITED and Two East 61st Street Corporation, Plaintiffs-Respondents, v. Daniel M. VINNIK and Dale A. Jenkins, Defendants-Appellants.
Decision Date28 April 1987
CourtNew York Supreme Court Appellate Division

Robert P. Stein, of counsel (Scheffler Karlinsky & Stein, New York City, attorneys), for plaintiffs-respondents.

Dale A. Schreiber, of counsel (Schwartz Klink & Schreiber, P.C., New York City, attorneys), for defendant-appellant Dale A. Jenkins.

Paul M. Lewittes, of counsel (Vinnik & Auerbach, White Plains, attorneys), for defendant-appellant Daniel M. Vinnik.

Before KUPFERMAN, J.P., and CARRO, KASSAL, ELLERIN and WALLACH, JJ.

WALLACH, Justice.

On a motion pursuant to CPLR 3211(a)(7), the question immediately before the court is whether the complaint on its face is sufficient to state a cause of action. The court does, however, have the discretion under CPLR 3211(c) to go behind the face of the complaint by treating the motion as though it were one for summary judgment. This raises the possibility of summary judgment being granted to either side prior to joinder of issue--but not before the court first gives notice of its intention to so treat the motion. Such notice must come directly from the court, and should advise as to the issues the court deems dispositive of the action.

In dispute is whether the parties entered into a contract. Plaintiff Four Seasons Hotels Ltd. ("Four Seasons") is a foreign corporation in the business of hotel management. Joined as a co-plaintiff and appearing through the same attorney, but silent on the motion, is Four Seasons' wholly owned subsidiary and assignee, Two East 61st Street Corporation, a New York corporation. It appears from the complaint, as amplified by the affidavits and documents plaintiffs submitted on the motion, that luxury hotels are frequently under lease to professional hotel managers. In January 1980, Four Seasons, desiro of becoming the manager of the Pierre Hotel in New York City, entered into lease negotiations with its owner, a cooperative housing corporation known as 795 Fifth Avenue Corporation ("795"). At this time, the Pierre was being managed by Trust House Forte (Pierre) Management Inc. ("THF"), whose lease with 795 was expiring.

795 controls not only the common areas of the Pierre, but also 251 of the approximately 330 rooms. The balance of the rooms are controlled by various of 795's shareholders with appurtenant proprietary leases. Two such shareholders, defendants Vinnik and Jenkins, at relevant times owned 53 rooms constituting some of the most desirable suites in the Pierre. Historically, these rooms were leased to whoever was the manager of the Pierre, and it was important to Four Seasons that most of them be included in any deal. Accordingly, Four Seasons, through its then chairman and president, Mr. Sharp, made contact with Vinnik and Jenkins, and entered into negotiations with them for a lease of their rooms at the same time it was negotiating with 795 for a lease of its rooms. At all times, Vinnik and Jenkins have acted as though they owned the rooms jointly and were otherwise united in interest.

From the outset, Vinnik made clear to Sharp that he and Jenkins wanted to lease their rooms to whoever was the Pierre's manager, and that as between THF remaining the manager and Four Seasons taking over, they had no preference. The negotiations took various twists and turns, with Vinnik supplying financial data showing that a fair return on his and Jenkins' investment in 47 of their rooms would be $490,000 a year, and advising Sharp all the while that he and Jenkins were not satisfied with their then current lease with THF providing for a rental of only $170,000 a year. When Vinnik informed Sharp that he had reached an "agreement in principle" with THF to increase the rent to $450,000 a year, with additional annual increases of 60% of any annual increase in the Consumer Price Index, Four Seasons immediately offered to do the same. Vinnik then invited Four Seasons to submit a written proposal.

The proposal came in the form of a letter from Sharp to Vinnik, dated March 10, 1980. Sharp first indicated therein that Vinnik had in recent telephone conversations requested from Four Seasons a "proposal" for the leasing of the suites owned by Vinnik and Jenkins; that Vinnik had represented to Four Seasons that he and Jenkins owned 15 suites comprising 47 rooms for which THF was then paying a rental of $170,000 a year but offering to pay $450,000 a year with annual increases of 60% of the increase in the Consumer Price Index for urban wage earners and clerical workers; and that Four Seasons was then submitting a revised proposal to 795 in its ongoing negotiations with it to become the manager of the Pierre. The letter then stated that if Vinnik's representations concerning the offer he had received from THF were verified by "satisfactory evidence", and that if Four Seasons' revised proposal was accepted by 795 substantially as submitted, then

We would agree to enter into a lease of the Suites with you at a rental structured so that in one form or another, as compared with the rental structure you have today, you will effectively receive $450,000 annually to be increased according to the C.P.I. We also will assume the payment of all other operating and maintenance costs.... The remaining terms and conditions of our lease with you for the Suites would be finalized after completion of our negotiations with 795 Fifth Avenue Corporation so that to the greatest extent possible the leases would be consistent with each other.

* * *

* * *

If you are in agreement with the proposals set out above, kindly sign the enclosed copy of this letter in the space indicated and return same to us.

Vinnik signed the letter on behalf of himself and Jenkins in the space indicated, a signature line above which were typed the words "Accepted and Agreed"; at about the same time, he entered into a similar agreement with THF. However, when Four Seasons was awarded the Pierre contract, Vinnik and Jenkins refused to lease their rooms to it, and, subsequently, in November 1980, they sold the rooms to a non-party subject to any judicial determination holding them liable to Four Seasons under the March 10 letter.

The issue in dispute is whether the letter of March 10, 1980 is a contract. Defendants Vinnik and Jenkins contend that it was merely a "preliminary proposal" for further negotiations, or a "skeletal outline" of a suggested agreement, "neither binding nor enforceable", and that as much is apparent upon the face of the writing itself, it being so incomplete and indefinite, and barren of the terms usually found in a garden variety lease not to mention one worth many millions of dollars. In particular, defendants point to the omission of "such crucial provisions" as the specific space demised, term, security, commencement date, cancellation, assignability, and method of payment. Against this, plaintiffs assert that the "cornerstone" of Four Seasons' agreement with defendants was the amount of annual rent, and that the parties did not contemplate close bargaining over any other aspect of their relationship. While acknowledging that a formal lease was contemplated, plaintiffs argue that, except for the annual rent and operating costs, the terms thereof were to "parallel the structure" of Four Seasons' hoped for lease with 795, and that once the 795/Four Seasons Lease came into being the entire transaction could have been readily "finalized" within the meaning of the letter given good faith and reasonableness on defendants' part. To show that this was in fact what the parties intended, plaintiffs point to various acts and utterances by defendants after March 10, 1980 evincing, they say, an understanding of the March 10 letter as binding. In particular, plaintiffs point to defendants' membership on 795's Board of Directors, and the accusation made by some of the other directors that defendants could not be objective in the selection of a new manager. According to Four Seasons, and the minutes of 795's Board meetings, introduced by the affidavit of 795's then president and chairman, Mr. Bienenstock, Vinnik and Jenkins denied any conflict of interest by representing to 795's Board that they had made similar agreements to lease their rooms with THF and Four Seasons alike, and that it consequently did not matter to them which of the two was awarded the Pierre contract. As another manifestation of defendants' understanding of the March 10 letter as a binding contract, plaintiffs emphasize that the sale of defendants' apartments to an outsider was made subject to Four Seasons' rights under the letter.

The action seeks specific performance on the theory that the March 10 letter is a contract to enter into a lease. Defendants moved pursuant to CPLR 3211(a)(7) to dismiss the complaint on the ground that the letter is not such a contract. The only evidentiary material they submitted in support of this motion was a copy of the March 10 letter itself which, for some reason, was not annexed to the complaint. Their argument, as recapitulated in their brief on appeal, was that the letter was so lacking in detail as to demonstrate, on its face, notwithstanding plaintiffs' conclusory allegations to the contrary, that the parties did not intend to be bound by it. In response, plaintiffs cross-moved for an order "pursuant to CPLR 3211(c), granting partial summary judgment declaring the validity of a certain agreement dated March 10, 1980". Submitting affidavits from Sharp, Bienenstock, and their attorney, plaintiffs purported to show that, given the parties' situation, the objectives they were striving to attain, and their other acts and utterances, there could be no issue as to their intent to be bound by the March 10 letter. Although defendants had originally eschewed reliance on evidentiary material other than the letter...

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