Meltzer v. Crescent Leaseholds, Ltd.

• Decision Date: 11 June 1970
• Docket Number: No. 68 Civ. 1516.,68 Civ. 1516.
• Citation: 315 F. Supp. 142
• Parties: M. Curt MELTZER, Plaintiff, v. CRESCENT LEASEHOLDS, LTD., John G. Bennett, A. Gordon Bennett, the Royal Trust Company, Wachovia Bank and Trust Company, the Bank of Montreal and Albert Gareh, Defendants.
• Court: U.S. District Court — Southern District of New York

315 F. Supp. 142

M. Curt MELTZER, Plaintiff, v. CRESCENT LEASEHOLDS, LTD., John G. Bennett, A. Gordon Bennett, the Royal Trust Company, Wachovia Bank and Trust Company, the Bank of Montreal and Albert Gareh, Defendants.

No. 68 Civ. 1516.

United States District Court, S. D. New York.

June 11, 1970.

Daniel H. Greenberg, New York City, for plaintiff.

Curtis, Mallet-Prevost, Colt & Mosle, New York City, for defendants Crescent Leaseholds, Ltd., John G. Bennett and A. Gordon Bennett; Peter K. Leisure, New York City, of counsel.

Isidore Sapir, New York City, for defendant Gareh.

MANSFIELD, District Judge.

In this diversity suit for recovery of $280,000 allegedly due as a brokerage commission or finder's fee, the remaining defendants, Crescent Leaseholds, Ltd. ("Crescent"), John G. Bennett and A. Gordon Bennett, move pursuant to Rule 56, F.R.Civ.P., for summary judgment dismissing plaintiff's claim against them (First Claim of Complaint). The claim alleges that on August 10, 1967, plaintiff entered into a written agreement with Crescent whereby it employed plaintiff to obtain a $7 million loan for a period of 27 months at 8% to be used for interim financing of the construction of a shopping center in Saskatoon, Saskatchewan, for which plaintiff was to receive a fee or commission of 4% of the amount of the loan commitment. It is further alleged that plaintiff obtained a commitment for $7 million from a ready, willing and able lender and that defendant Crescent and the Bennetts, officers and directors of Crescent, failed and refused to perform the agreement and to accept the loan obtained by plaintiff.

Summary judgment has already been granted by other members of this court against plaintiff as to all other claims asserted in the complaint. For the reasons stated below, summary judgment is also granted as to this sole remaining claim.

Defendant Crescent, a Canadian corporation, is the owner of leases covering a tract of land in Saskatoon, upon which it is in the process of constructing a shopping center and office building complex. In 1965 and 1966 it obtained permanent financing for the completed project. Pending completion, however, it needed interim bank loans to finance construction of the complex. Partial interim financing was to be obtained through Canadian sources. One of the lenders, The Royal Trust Company, a Canadian corporation, was willing to form a consortium to secure interim financing and to act as trustee for the consortium to supervise the distribution to Crescent of the interim loans that would be extended.

However, by 1967 Crescent was having difficulty obtaining the balance of its interim financing requirements because of the tight money market. For instance, negotiations with one prospective lender, Wachovia Bank and Trust Company, were suspended on June 27, 1967, because of the onerous terms demanded by it, which included not only the usual construction and building loan agreement secured by a mortgage on the premises but also signed leases from prospective tenants.

In early August 1967, plaintiff, a New York attorney, indicated that he might be able to obtain the $7 million interim financing for Crescent. When defendants exhibited an interest he turned for help to one Albert Gareh (named as a defendant in this action), the president of Pan American Credit Corporation, a New York company engaged in arranging international money transactions. Gareh believed that, in view of the tight money market in the United States, he would be in a position through sources in Europe to obtain American money located in Europe (called "Eurodollars") for deposit with a bank in the United States at interest rates lower than those charged by American banks, and that upon such deposit the American bank, armed with the dollar balance, would lend it to Crescent at a higher rate than that paid to the European depositor upon its certificate of deposit, thereby realizing the difference in the interest rates as profit. It is not clear from the papers whether the American bank would issue the loan commitment to Crescent, thereby extending its own credit to the borrower or simply act as an administrator of the loan.¹ For our purposes, however, it is unnecessary to resolve that question, since the record is clear that regardless which form the loan took, it was to be secured by a mortgage on the leasehold and premises to be constructed with the proceeds.

When Gareh indicated an interest, he and plaintiff negotiated a series of written agreements with the Bennetts whereby plaintiff and Gareh would undertake to obtain the $7 million interim construction loan commitment for Crescent. By letter agreement dated August 10, 1967, signed by plaintiff and Crescent, plaintiff was authorized to apply to lending institutions for a $7 million, 27-month "construction loan on the subject property (described as "Midtown Plaza, Saskatoon, Saskatchewan, Canada") with interest not to exceed 8% per annum "if our personal and corporate credit will stand against certificates of deposit of any major Canadian bank or The Royal Trust Company," Crescent agreed to make available "whatever documents are necessary to satisfy the requirements of the lending institutions to whom you make application on our behalf." For his services in obtaining the loan commitment plaintiff was to be paid 4% of the amount of the commitment upon its delivery to Crescent. The agreement was to remain in force for 45 days, i. e., until September 25, 1967.

Plaintiff simultaneously entered into a separate letter agreement with Gareh, also dated August 10, 1967, in which he exclusively authorized Gareh "to secure the construction loan requested by Crescent Leaseholds, Ltd. of Canada for the project known as Midtown Plaza in Saskatoon," for which Gareh was to be paid 2% of the gross amount of the loan commitment. On the same date Crescent also entered into a letter agreement directly with Gareh to the effect that upon delivery of the loan commitment Crescent would pay 2% of the commitment to Gareh. Crescent also agreed to pay Gareh's out-of-pocket expenses up to $3,000.

On August 22, 1967, Crescent and Gareh entered into a more formal written agreement which provided that Gareh would obtain for Crescent a $7 million loan "from a recognized banking institution acceptable to Crescent" so that construction of the Midtown Plaza on Crescent's leasehold might be financed. The contract also provided that Crescent, before it would accept the commitment, had to have made an arrangement with The Royal Trust Company of Canada and others for their extension through a trust arrangement of an additional temporary construction loan of $8.5 million. The parties also agreed that any dispute arising under the August 22 agreement "shall be construed under the laws of the State of New York where it was executed."

By letter agreements dated August 23, 1967, and September 27, 1967, the underlying letter agreements of August 10, 1967, were extended, including the "assignment" of plaintiff's August 10, 1967 agreement to Gareh, until January 28, 1968.

With this background of the formal agreements between the parties, we turn to the activities undertaken pursuant to them. Following the August 10, 1967 agreement Ufitec, S.A., a Swiss bank which had acted as a correspondent with Gareh's New York company, Pan American Credit Corporation, advised Gareh that it would be willing to deposit $7 million by way of a letter of credit with the Bank of Montreal or Fidelity Philadelphia Trust Company to enable Gareh, in turn, to negotiate the interim construction loan being syndicated by The Royal Trust Company. Interest rates of from 6¼% to 7%, depending on the period of the loan, were quoted.

Armed with the apparent willingness of the Swiss bank to make Eurodollars available, plaintiff and Gareh made attempts to complete the second essential step of the proposed loan, which was to find an American bank that would, upon deposit of the $7 million, be willing to make a loan commitment to Crescent at 8% or act as the administrator of the loan, obtain and verify the necessary security to be furnished which included a mortgage and other assignments. Toward this purpose plaintiff and Gareh approached various banks in the United States and made visits to The Royal Trust Company in Toronto and the Bank of Montreal in Montreal. The necessity for obtaining adequate security from the borrower, including a mortgage on the leasehold and premises to be constructed, is illustrated by a "List of Documents Required Prior to Conclusion of Loan," which was submitted by plaintiff and Gareh to The Royal Trust Company, the proposed manager of the consortium in October 1967. The first item on that list was "The mortgage." Also listed were "Title insurance policy," "The ground lease," "The Eaton lease," and "Assignment of Crescent Leaseholds shares to Royal."

Although Gareh's Swiss correspondent was apparently willing to deposit $7 million with an American bank which would then lend that money to Crescent upon receipt of security by The Royal Trust Company, plaintiff and Gareh were unsuccessful in inducing any American or Canadian bank to enter into the venture, either by way of a loan commitment or supervision of the loan and security. Thus they failed, during the period when their agreement with Crescent was in force, to meet all of the essential requirements for obtaining a loan commitment that would entitle them to their respective commissions.

On January 22, 1968, six days before the agreements were to terminate, Gareh "reassigned" to Meltzer all of the rights and interest which Meltzer and Crescent had assigned and delegated to him in the August 10, August 22, and extension agreements. The reason for this is disputed. Meltzer contends that his contract with Crescent provided for an exclusive brokerage arrangement and that Crescent had anticipatorily breached this part of the contract when it apparently...