| Emigrant Bank v UBS Real Estate Sec., Inc. |
| 2008 NY Slip Op 02214 [49 AD3d 382] |
| March 13, 2008 |
| Appellate Division, First Department |
| Emigrant Bank et al., Appellants, v UBS Real EstateSecurities, Inc., Respondent. |
—[*1] Williams & Connolly LLP, Washington, D.C. (Dane H. Butswinkas, of the District ofColumbia bar, admitted pro hac vice), for respondent.
Judgment, Supreme Court, New York County (Karla Moskowitz, J.), entered March 27,2007, dismissing the complaint, unanimously modified, on the law, to the extent of reinstatingthe first, third and fifth causes of action in the complaint, and otherwise affirmed, without costs.
Defendant bid on plaintiffs' mortgage loan portfolio in an on-line auction, and the bid wasaccepted. The bid form provided that the sale is "subject to a mutually acceptable Purchase andSale agreement, which will be subject to negotiation, but substantially in the form of theagreement posted to the [bidding Web] site." The bid form provided space for the bidder to addconditions, and defendant added several, including: "a mutually acceptable mortgage loan saleand servicing agreement will be negotiated in good faith. The agreement will contain standardreps and warranties." For more than two months thereafter, the parties continued to negotiate theterms of the final purchase and sale agreement. After initially indicating its readiness to executethe agreement, defendant broke off negotiations, claiming the portfolio included some loans withdefault interest rate riders. Plaintiffs then commenced this action, alleging defendant's reason forterminating negotiations was pretextual since the presence of the riders had been disclosed in thebid information.
The documents did not conclusively contradict the pleading, and it was thus premature todismiss the contract claim (see Foster vKovner, 44 AD3d 23, 28 [2007]; Richbell Info. Servs. v Jupiter Partners, 309AD2d 288, 289-290 [2003]). "Subject to" in the bid form did not unmistakably condition assenton the execution of a definitive agreement at some later juncture. Any later agreement to beexecuted was limited to terms substantially the same as those in the agreement posted on thebidding Web site and was to contain the standard industry representations and warranties as setforth in the conditions added by defendant on the bid form. "Subject to" language in a subsequentUBS commitment memorandum was similarly limited to such representations and warranties andto other matters described therein as "miscellaneous." While defendant argued that transactionsof this type are usually memorialized in a more extensive writing than the bid form (seeElizabeth St. v 217 Elizabeth St. Corp., 276 AD2d 295 [2000]), plaintiffs specifically allegedthat in this industry bids are considered binding.
The authorities relied upon by the motion court for the proposition that the bid was [*2]conditioned on the execution of a more definitive bindingagreement are distinguishable since they involve unequivocal reservations of assent. In Prospect St. Ventures I, LLC v EclipsysSolutions Corp. (23 AD3d 213 [2005]), the letter agreement was expressly conditionedon the execution of a definitive agreement, and the intent of the parties not to be bound wasfurther manifest from references to a "proposed" commitment and a "proposed" transaction, andfrom an express statement that the letter (in the record in that case) was "not a commitment." InAksman v Xiongwei Ju (21 AD3d260, 260 [2005], lv denied 5 NY3d 715 [2005]), the opening line of the letter ofintent stated that it was "a basis for conducting business" and repeatedly emphasized that itwould be replaced by a "contract," thereby reflecting the intent to enter into a binding agreementat a later date.
The agreement was reasonably certain as to its material terms (see Cobble Hill NursingHome v Henry & Warren Corp., 74 NY2d 475, 482 [1989], cert denied 498 US 816[1990]). The bid price was sufficiently definite as a percentage of the value of the fixed ratemortgages in the pool. There is an issue of fact as to whether subsequent price adjustments wereboth immaterial and the subject of renegotiations of already agreed-upon terms. That theportfolio's mortgages could be paid off or defaulted from day to day, leaving its composition influx after submission of the bid, did not render the bid indefinite.
Dismissal of the cause of action for breach of the duty to negotiate (see generallyArcadian Phosphates, Inc. v Arcadian Corp., 884 F2d 69, 72 [2d Cir 1989]) was flawed forthe same reason as dismissal of the contract claim. Whether defendant breached such dutypresented a question of fact (see Goodstein Constr. Corp. v City of New York, 67 NY2d990 [1986]). The promissory estoppel cause of action was similarly viable, since—contraryto the motion court's conclusion that there was no binding agreement—there was a clearand unambiguous promise that could give rise to reasonable detrimental reliance (see e.g.Esquire Radio & Elecs., Inc. v Montgomery Ward & Co., Inc., 804 F2d 787, 793 [2d Cir1986]).
The cause of action for negligent misrepresentation was properly dismissed as an attempt torecast the contract claim in tort, while lacking the requisite underlying relationship of trust andconfidence (see Kimmell v Schaefer, 89 NY2d 257, 263-264 [1996]; Saunders v AOL Time Warner, Inc., 18AD3d 216 [2005]). The lack of such relationship was properly determined as a matter of law(cf. Knight Sec. v Fiduciary TrustCo., 5 AD3d 172, 174 [2004]), since it must have existed prior to the transaction givingrise to the alleged wrong, and not as a result of it (Elghanian v Harvey, 249 AD2d 206[1998]).
The request for specific performance was properly dismissed for failure to set forthnonconclusory allegations as to why an award of damages would be inadequate.[*3]
We have considered plaintiffs' other contentions and findthem unavailing. Concur—Saxe, J.P., Gonzalez, Buckley and Acosta, JJ. [See2007 NY Slip Op 30291(U).]