In re Private Capital Partners, Inc.
| Decision Date | 27 April 1992 |
| Docket Number | Bankruptcy No. 91 B 21573,No. 92 ADV. 5003.,92 ADV. 5003. |
| Citation | 139 BR 120 |
| Parties | In re PRIVATE CAPITAL PARTNERS, INC., Debtor. PRIVATE CAPITAL PARTNERS, INC., Plaintiff, v. RVI GUARANTY CO., INC. and US West Financial Services, Inc., Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
COPYRIGHT MATERIAL OMITTED
Shaw, Licitra, Parente, Esernio & Schwartz, P.C., Garden City, N.Y., for plaintiff.
Miller & Wrubel, P.C., New York City, for defendants.
DECISION ON MOTIONS FOR SUMMARY JUDGMENT
The Chapter 11 debtor, Private Capital Partners, has brought this adversary proceeding against RVI Guaranty Co., Ltd. ("RVI") and US WEST Financial Services ("USWFS") to recover fees incurred by the defendants for investment banking services the debtor performed in connection with USWFS's acquisition of RVI. The defendants, RVI and USWFS, have moved for summary judgment pursuant to Federal Rule of Civil Procedure 56 as incorporated by Bankruptcy Rule 7056 on each of the debtor's three claims for such investment banking fees.
The debtor alleges that under certain contracts, RVI owes the debtor a $300,000.00 fee which became due when RVI met its first year gross revenue projection and $500,000.00 for additional investment banking services the debtor rendered to RVI after the transaction was completed. The debtor also seeks payment of the $500,000.00 investment banking fee from USWFS on the ground that either USWFS was a direct obligor to the debtor on the $500,000.00 portion of the fee or guaranteed payment of that fee by RVI.
The defendants have moved for summary judgment as to each of the debtor's three claims. First, RVI argues that the $300,000.00 fee is a finder's fee and is rendered unenforceable because there is no writing signed by RVI as required under New York General Obligations Law § 5-701. Second, RVI claims that it does not owe the $500,000.00 additional investment banking services fee because such services were never performed. As to the debtor's third claim, which is against USWFS, USWFS argues that it is not liable on the alleged guaranty of $500,000.00 because the services were not performed, and in any event, the debtor did not reduce the guaranty to writing as required by New York General Obligations Law § 5-701(a)(2).
On October 10, 1991, the debtor filed with this court a petition for reorganizational relief under Chapter 11 of the Bankruptcy Code and was continued in management and possession of its property and business in accordance with 11 U.S.C. §§ 1107 and 1108. The debtor is engaged in the business of investment banking.
On or about September 6, 1989, the debtor and RVI entered into a letter agreement (the "Letter Agreement") confirming the debtor's appointment as the exclusive financial advisor and placement agent to RVI. RVI is a property and casualty insurer, specializing in residual value insurance of high quality assets. Pursuant to the Letter Agreement, the debtor was engaged to prepare a private placement offering (the "Offering") to raise between $20,000,000.00 and $50,000,000.00 in the form of equity, convertible preferred stock or other financial instruments.
Pursuant to the Letter Agreement, the debtor was to receive a fee equal to 3½% of the amount raised by the debtor on behalf of RVI and was to be paid in a manner to be outlined in the Offering. On October 20, 1989, the debtor prepared the Offering. However, the Offering did not specify the manner or amount which the debtor was to be paid. The debtor concedes this point. Debtor's Rule 13(h) Statement, at 1.
The debtor contends that in January of 1990, prior to the closing of the RVI/USWFS transaction, Howard Chickering ("Chickering"), the President of RVI, advised Gerald H. Houghton ("Houghton"), an Executive Vice-President of the debtor, that RVI refused to proceed if the debtor's entire $1,750,000.00 fee was to be paid at the closing of the RVI/USWFS transaction. Affidavit of Gerald H. Houghton, at 4. The debtor claims that Houghton entered into an oral agreement with Chickering such that the debtor's investment banking fee of $1,750,000.00 was payable as follows: (a) the sum of $950,000.00 payable upon closing of the Offering on January 19, 1990; (b) the sum of $300,000.00 on the date that RVI met its first year gross revenue projection of $5,088,055.00, as reflected in the Offering; and (c) the sum of not less than $500,000 for additional investment banking services to be rendered by the debtor to RVI during 1990.
On January 19, 1990, Houghton advised the law firm drafting the closing documents that provisions (b) and (c) above of the oral agreement should be incorporated into the closing documents for the RVI/USWFS transaction. The debtor contends that this information was incorporated in a Schedule of Liabilities to the RVI/USWFS Acquisition Agreement (the "Acquisition Agreement") under which USWFS acquired all of the stock of RVI. On February 1, 1990, the closing took place and RVI paid the debtor $950,000.00. Houghton Affidavit, at 5.
The debtor takes the position that the Schedule of Liabilities should be read together with the debtor's letter of January 19, 1990 such that RVI is obligated to pay the debtor the $300,000.00 portion of the fee. The debtor also claims that on or about January 19, 1990, USWFS guaranteed payment of the $500,000.00 portion of the fee to the debtor, although no written guaranty was ever entered into between RVI and USWFS.
The debtor also argues that RVI and USWFS acknowledged their obligation to pay the $500,000.00 portion of the fee in a letter agreement dated February 1, 1990 (the "Additional Services Agreement"). Both RVI and USWFS signed this Additional Services Agreement, which reads as follows:
This letter sets forth our understanding that, in consideration for your agreement to forego $500,000.00 in fees for investment banking services rendered in connection with the investment by US WEST Financial Services, Inc. in our common stock and preferred stock, we and US WEST Financial Services, Inc. agree to make all reasonable efforts in good faith to provide you with fee income of $500,000.00 or more by discussing first with you where appropriate possible retention for investment banking services required by us or US WEST Financial Services, Inc. and by recommending and referring you to third parties who may require investment banking services of a type provided by you.
Sincerely RVI Guaranty, Ltd. By: s/Howard Chickering, Pres ACKNOWLEDGED US WEST FINANCIAL SERVICES INC. By: s/Robert Pinkerton, VP
Additional Services Agreement, attached as Exhibit 4 to Houghton Affidavit.
The defendants' disagree with the debtor's version of the fee arrangement. The defendants claim that USWFS refused to purchase RVI's stock pursuant to the fee structure set forth in the Letter Agreement, not that USWFS and RVI simply wanted to defer the payment of the fees. Therefore, to close the deal, the defendants claim the Letter Agreement was vacated. In the alternative, the defendants argue that "the Letter Agreement only provides for a percentage fee and does not refer to the $300,000.00 fee or $500,000.00 fee alleged in the Complaint." Defendants' Memorandum of Law, at 7 n. 2. As to the $300,000.00 portion of the fee, RVI argues that because the Letter Agreement was vacated and because RVI did not sign the Offering, the debtor must rely on the alleged oral agreement between Chickering and Houghton, which is unenforceable under New York General Obligations Law § 5-701(a). Even if the oral agreement were valid or the Letter Agreement had not been vacated, RVI contends that there never was an agreement that RVI would have to pay the $300,000.00 portion of the fee if RVI did not meet its 1990 projections in 1990, regardless of whether RVI achieved such revenue projections in 1991. Reply Affidavit of Chickering, at 2. RVI argues that the debtor's claim for an additional $500,000.00 investment banking fee has no merit because the services were never performed.
USWFS contends that the debtor's claim for $500,000.00 against it based on a theory that USWFS guaranteed RVI's payment of that amount is meritless as a matter of law because the debtor offers no writing setting forth this guaranty. Therefore, under section 5-701(a)(2) of the New York General Obligations Law, the guaranty is unenforceable. With regard to the debtor's argument that both are obligated to the debtor as a result of the Additional Services Agreement, USWFS argues, as does RVI, that they are not primarily liable to the debtor because the services were never performed.
The debtor claims that on or about May 1, 1991, RVI reached its first year gross revenue projection of $5,088,055.00, triggering payment of the $300,000.00 portion of the fee from RVI. The debtor further states that it performed services for RVI and USWFS after February 2, 1990 and therefore is entitled to the $500,000.00 additional fee.1 The debtor has requested payment of both the $300,000.00 and $500,000.00 portions of the fee from RVI and the $500,000.00 portion from USWFS. Both RVI and USWFS have refused to pay the debtor these portions of the fees the debtor alleges are now due and owing.
The Letter Agreement contains a provision requiring the application of New York law to resolve disputes concerning that agreement.
RVI and USWFS have moved for summary judgment under Federal Rule of Civil Procedure 56, which is made applicable to this adversary by Bankruptcy Rule 7056. In ruling on a motion for summary judgment, the court must review the pleadings, depositions, answers to interrogatories, admissions and affidavits, if any, to determine if there is no genuine issue as to any material fact so that the moving party is entitled to a judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2509, 91 L.Ed.2d 202 (1986). The moving party...
To continue reading
Request your trial