When The Dude Ranch Deal Goes South, Blame the Attorney
SS Marks LLC v Morrison Cohen LLP 2014 NY Slip Op 31030(U) April 16, 2014 Sup Ct, New York County Docket Number: 650049/2009 Judge: O. Peter Sherwood is an example of how a likely sounding legal malpractice case can be lost on a series of e-mails. Here, plaintiff's plausible claims are completely undone by e-mails which unseat him.
"Beginning in February 2005, Marks began working with non-party Peter Morris to obtain financing for real estate transactions. In December 2005, Morris informed Marks about a potential investment in real property located in Stanfordville, NY known as the Roseland Ranch (the Property"). Originally, the parities contemplated a consulting agreement where Marks would be paid fees for his services. The proposed transaction involved acquisition of the Property and its
subsequent operation as a dude-ranch style hotel, with the possibility of developing single family
homes on a portion of the land. Brett Marks \was also to invest in the transaction. Eventually it was
proposed that the Marks invest, through SAM. SSM agreed to invest $1,050,000 toward purchase of the Property. In exchange, SSM was to receive an 89% ownership interest in the Property as tenant in common with Roseland Ranch Holdings, LLC ("RR Holdings"). Once acquired, the Property would be managed by Roseland Ranch Management, LLC (the "Manager'').
The parties entered into a Lease and Management Agreement (the ''Lease") in connect.ion with the transaction. The Lease had a two year initial term, with automatic renewals, unless one party chose to terminate. Under the terms of the Lease, SSM \was entitled to receive monthly payments of$ I 0,500 from the manager. Upon termination of the Lease, SSM was entitled to a return of its investment in the form of a ''termination payment" in the sum of $ I ,050,000.
On March 2, 2006, the Lenders demanded that a subordination clause be included in the
Lease. The effect of the subordination clause \was that SSM would not receive the termination
payment until after the Lenders were repaid. According to Marks, this clause was inserted without
his knowledge or consent after he had already executed the agreement. Marks also claims that
Soleymani did not explain the effect of the subordination clause on the personal guarantees.
It is undisputed that Soleymani forwarded the Lenders' demand to Marks within half an hour
of receipt (Rule 19-a Stmt 45 and Furman Aff, Ex V.). Two hours later, a draft of the Lease containing the subordination provision \was emailed to Marks (id, Ex Y). Marks denies having read
the emails (Response to Rule 19-a Stmt ,45, 46). However an email exchanged on March 2, 2006 at 12:38 PM shows that Marks was aware of the subordination provision, understood it .and sought to negotiate changes (Furman Aff, Ex U ["We still need to discuss the lender's requested revisions .. , Sandy wants to discuss , .. "]).
Admissible proof in the record, shows that Marks \was advised of the subordination clause and of the unsigned guaranties prior to the closing. Marks's excuse for not having read his emails
even if credited, is insufficient to create a triable fact as to legal malpractice. Dismissal of a
malpractice claim is appropriate \when, as here, it is "inconceivable that plaintiff's principal was
unaware of' that of which defendant allegedly failed to advise him (see Delphi Easter Partners Ltd.
Partnership v Prickett, Jones, Elliott, Kristo! & Schnee, 224 AD2d 349 [1st Dept 1996]). The documents SSM points to in support of its contention that the personal guarantees were critical to the transaction do not support the assertion. ln an email Marks sent to Soleymani on January 19, 2006, he insists that the consulting agreement must ensure that the other investors ''cannot in any way get out of paying that money to me" and that "'in the event they don't pay that the interest in the hotel is then pledged (100% to me)" (Marks Aff, Ex 1 ). The document does not reference guaranties. Instead it refers to a consulting fee Marks wanted, prior to the agreement to invest in the Property. In any case, the other investors did in fact receive an interest junior to SSM.
The "interest in the hotel" \Vas indeed pledged to Marks. A guaranty goes far beyond an "interest in
the hotel." l\farks also sent an email on January 20, 2006 where he stated that the consulting
agreement is "the important agreement I have to make sure they pay me no matter what happens"
(Marks Aff, Ex 2). Again the email refers to a consulting agreement. It makes no mention of a
Accordingly, it is hereby ORDERED that defendants' motion for summary judgment dismissing the complaint is GRANTED in its entirety