MONARCH NORMANDY v. NORMANDY SQUARE

• Decision Date: 16 March 1993
• Docket Number: 88-1513-MLB.,Civ. A. No. 88-1388-MLB
• Citation: 817 F. Supp. 908
• Parties: MONARCH NORMANDY SQUARE PARTNERS, Plaintiff, v. NORMANDY SQUARE ASSOCIATES LIMITED PARTNERSHIP, et al., Defendants. NORMANDY SQUARE ASSOCIATES LIMITED PARTNERSHIP, et al., Plaintiffs and Counterclaim Defendants, v. MONARCH NORMANDY SQUARE PARTNERS, et al., Defendants and Counterclaim Plaintiffs.
• Court: U.S. District Court — District of Kansas

817 F. Supp. 908

MONARCH NORMANDY SQUARE PARTNERS, Plaintiff, v. NORMANDY SQUARE ASSOCIATES LIMITED PARTNERSHIP, et al., Defendants.

NORMANDY SQUARE ASSOCIATES LIMITED PARTNERSHIP, et al., Plaintiffs and Counterclaim Defendants, v. MONARCH NORMANDY SQUARE PARTNERS, et al., Defendants and Counterclaim Plaintiffs.

Civ. A. Nos. 88-1388-MLB, 88-1513-MLB.

United States District Court, D. Kansas.

March 16, 1993.

COPYRIGHT MATERIAL OMITTED

James A. Walker, Triplett, Woolf & Garretson, Wichita, KS, T. Barry Kingham, Curtis, Mallet-Prevost, Colt & Mosle, New York City, Warren Dennis, Proskauer, Rose, Hoetz & Mendelsohn, Washington, DC, Marc Marmaro, Jeffery, Mangels & Butler, Los Angeles, CA, for plaintiffs.

Terry L. Malone, Martin, Pringle, Oliver, Wallace & Swartz, Wichita, KS, for defendants Monarch Normandy Square Partners, Al Fenstermacher, Richard Hoagland, Richard Rayl, BMRD, Monarch Properties Inc., Monarch Real Estate Co., Inc. and Monarch Securities, Inc.

J. Michael Kennalley, Hershberger, Patterson, Jones & Roth, Wichita, KS, for defendant Helsley, Mulcahy & Fesler.

Philip L. Bowman, Adams, Jones, Robinson & Malone, Wichita, KS, for defendant William C. Grieger.

Terry L. Malone, Martin, Pringle, Oliver, Wallace & Swartz, Wichita, KS, Steven C. Kiser, Law Offices of Steven C. Kiser, Newport Beach, CA, for defendant Steven C. Kiser.

MEMORANDUM AND ORDER

BELOT, District Judge.

This case comes before the court on defendants' Monarch Normandy Square Partners (MNSP), Al Fenstermacher, Richard Hoagland, Richard Rayl, BRMD, Monarch Properties, Inc., Monarch Real Estate Co., Inc., Monarch Securities, Inc., Steven C. Kiser, and William C. Grieger's motion for summary judgment, pursuant to Fed.R.Civ.P. 56. (Doc. 331)¹ The plaintiffs (Civil Action 88-1513) have brought claims against these defendants alleging fraud, negligent misrepresentation, civil conspiracy, and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq. MNSP also seeks summary judgment on its claims in Civil Action 88-1338.

These consolidated actions arise from the sale of the Normandy Square Apartments (NSA), a 276 unit apartment complex in Wichita, Kansas, in October, 1985. Monarch Normandy Square Partnership (MNSP), a California limited partnership whose general partners are Richard Hoagland, Al Fenstermacher, Richard Rayl, and BRMD, purchased NSA in 1983. In the summer of 1985, it offered to sell NSA for a list price of $6.75 million. On July 19, 1985, Richard Gleicher made an offer to purchase NSA for $6.75 million. Gleicher made a $15,000 earnest money deposit by tendering a check on the account of his management company, Premier Management, Inc. Gleicher requested and received a copy of the For Sale Package for the apartment complex and an Offer to Sell NSA from Steven Kiser² shortly thereafter. After making a few minor changes, Gleicher returned the Offer to Sell on August 9, 1985. Additional negotiations thereafter ensued.

On August 28, 1985, Gleicher and his assistant conducted an on-site inspection of NSA. He also visited several other apartment complexes in the vicinity of NSA. During his visit, William Grieger, an employee of MNSP, provided Gleicher a copy of financial statements covering NSA's operations for 1984 and for the first seven months of 1985. After returning to Boston, Gleicher wrote Kiser on September 4, 1985, and requested additional information concerning NSA, including the collected rents, vacancy rate, delinquent rents, and move-in bonuses. Kiser provided the information Gleicher requested on September 19, 1985.

On September 19, 1985, Gleicher executed a Real Estate Purchase Contract to purchase NSA. On September 24, 1985, MNSP executed the Real Estate Purchase Contract and sent two copies to Gleicher's attorney.

As the negotiations for the sale of NSA were proceeding, Gleicher was busy arranging to syndicate NSA to a group of investors. Gleicher planned to set up a limited partnership and offer investors an opportunity to invest therein. To that end, Gleicher hired a major accounting firm³ and law firm⁴ to assist in the preparation, drafting, and review of financial projections associated with the offering documents of the limited partnership. The venture was designed as a tax shelter for the investors.

Gleicher's representatives inspected NSA on September 25-26, 1985. On October 18, 1985, a partner of the New Manhattan Corporation⁵ wrote a letter to Dennis Schreves of American Real Estate Analysts (A.R.E.A.) asking that A.R.E.A. perform a property analysis and appraisal. A.R.E.A. performed the appraisal and informed Gleicher prior to October 30, 1985, that NSA had a value of $6.8 million, an amount in excess of what Gleicher planned to pay for it.

In mid-October, 1985, Monarch Properties, Inc. staged a promotion that plaintiffs refer to as the October Tenant Bonus Promotion, wherein Monarch Properties, Inc. offered eighteen tenants move-in bonuses of up to $400. The total amount of these bonuses was $6,290. The rent rolls provided by the defendants on October 20, 1985, identified these eighteen persons and indicated the tenants had prepaid their November rent. In fact, Monarch Properties, Inc. paid these move-in bonuses. This fact was not disclosed to the plaintiffs.

On October 30-31, 1985, a closing for the sale of NSA was held in Wichita, Kansas. MNSP sold NSA to Richard Gleicher, who transferred it to Normandy Square Associates Limited Partnership (NSALP). NSALP is a Massachusetts limited partnership whose general partner is Anchor Properties. Anchor Properties is a New York general partnership whose general partners are Richard Gleicher and J. Stanley Pottinger. As part of the consideration for the sale, NSALP assumed a mortgage on NSA and executed a promissory note in the amount of $320,000 in favor of MNSP.

Following the closing, Kiser informed Gleicher that Monarch Properties, Inc. was not interested in managing NSA on the terms requested by Gleicher and Pottinger. In its place, Gleicher hired Linda Bruno to manage NSA. Bruno had previously worked for Monarch Properties, Inc., and received a $10,000 bonus shortly before the sale was consummated. Over the next several months, Bruno and Gleicher were in regular contact concerning various operational matters at NSA. Bruno contends that she reported that tenants of NSA who had received rent coupons from Monarch continued to use the rent coupons to pay part of their rent. Gleicher denies receiving the information for the months of December, 1985, and January, 1986, but he admits receiving it for the months of February and March, 1986. In addition, Gleicher admits that he received and responded to a January 29, 1986, letter from Bruno in which she suggested that "move-in bonuses of at least $150 should be (sic) continued to be offered." (Doc. 333, ¶¶s 45-50) (emphasis added)

The occupancy level of NSA declined in the months following the sale. On May 14, 1986, Gleicher terminated Bruno's employment.

NSALP defaulted on the promissory note in December, 1987. NSALP, Anchor, Pottinger and Gleicher filed suit in federal court in California on April 20, 1988, claiming their failure to perform their contract was caused by incomplete and inaccurate information they received when they decided to purchase the apartment complex. They alleged claims of fraud, negligent misrepresentation, civil conspiracy, and RICO violations against the defendants. The predicate acts alleged to form the basis of the RICO violations were mail fraud⁶ and wire fraud.⁷ In addition to the sale of NSA, the plaintiffs alleged that MNSP, Fenstermacher, Hoagland, Rayl, BRMD, HMF, Grieger and Kiser committed mail fraud and wire fraud when they failed to disclose to the purchasers of the Oak Park Apartments, an apartment complex in Lenexa, Kansas, of the use of rent concessions granted to tenants and falsely represented the accuracy of a list of rents being collected in the apartment complex. (¶¶ 33-35 of Pretrial Order) MNSP in turn filed suit in Kansas to enforce the terms of the promissory note. The actions have been consolidated.

Standards for Summary Judgment

Rule 56(c) of the Federal Rules of Civil Procedure directs the entry of summary judgment in favor of the party who "shows that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." A principal purpose "of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses...." Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). The court's inquiry is to determine "whether there is the need for a trial— whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). "Entry of summary judgment is mandated, after an adequate time for discovery and upon motion, against a party who `fails to make a showing to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.'" Aldrich Enters., Inc. v. United States, 938 F.2d 1134, 1138 (10th Cir.1991) (quoting Celotex, 477 U.S. at 322, 106 S.Ct. at 2552). Summary judgment is inappropriate, however, if there is sufficient evidence on which a trier of fact could reasonably find for the nonmoving party. Prenalta Corp. v. Colorado Interstate Gas Co., 944 F.2d 677, 684 (10th Cir. 1991).

The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact by informing the court of the basis for its motion. Celotex, 477 U.S. at 323, 106 S.Ct. at 2552. This burden, however, does not require the moving party to "support its motion with affidavits or other similar materials negating the...