In this action, plaintiff Jason D. Carter has sued defendants Broadway 48th-49th Street Associates, a New York Limited Partnership (the "partnership"), KG Crowne Corp. ("Crowne"), KG Land New York Corporation ("KG Land") and Broadway 48th-49th Street LLC ("Broadway LLC") for alleged breach of contract for the years 1997, 1998 and 1999 (first cause of action); breach of contract for the years 2003 and 2004 (second cause of action); unjust enrichment (third cause of action); breach of fiduciary duty (fourth cause of action); conversion (fifth cause of action) and fraud (sixth cause of action).

Plaintiff also seeks a judgment declaring his rights to receive distributions of the partnership's Cash Flow, based on his percentage interest in the partnership for at least the years 1997, 1998, 1999, 2003 and 2004 (seventh cause of action); an accounting (eighth cause of action) and imposition of a constructive trust (ninth cause of action). [*2]

Defendants now move for an order pursuant to CPLR § 3212 granting summary judgment dismissing plaintiff's Amended Complaint.

Plaintiff opposes the motion and cross-moves for an order:

(1)pursuant to CPLR § 3025(c) permitting him to amend the Amended Complaint to include damages arising out of disclosures contained in the 2005 Financial Statement produced during discovery, and

(2)pursuant to CPLR § 3212(e) granting plaintiff partial summary judgment with respect to the first, second, third, fifth and seventh causes of action contained in both the Amended Complaint and the proposed Second Amended Complaint.

Background

Pursuant to the "Agreement of Limited Partnership of Broadway 48th-49th Street Associates" dated August 12, 1985 (the "partnership agreement"), the partnership was formed to develop and hold for investment a mixed-use real property consisting of hotel, office, retail and parking garage space bounded by Eighth Avenue on the west, Broadway on the east, 49th Street on the north and 48th Street on the south (i.e., the Crowne Plaza Hotel).

There is no dispute that plaintiff was involved in assembling' the Hotel site and owned certain air rights on an adjacent property called the "Basic Ritz Air Rights". Plaintiff was not required to invest any money under the partnership agreement, but the agreement contemplated that plaintiff, the sole Class A Limited Partner, might transfer his rights to develop the "Basic Ritz Air Rights" to the partnership for a payment of $1.5 million. There is no dispute that plaintiff did not transfer those rights to the partnership, but rather used them for another development project.

Plaintiff was apparently repaid the costs he incurred in assembling the parcel and essentially acting as a broker, and received an equity interest in the partnership's Cash Flow ^[FN1] but never participated in any of the partnership's activities for the next twenty years.

Plaintiff now claims, inter alia, that defendants breached the partnership agreement by failing to pay him a percentage share of the partnership's Cash Flow for the years 1997, 1998 and 1999, and 2003 and 2004, as plaintiff contends was required under sections [*3]3.3.1 and 3.3.2 of the agreement.

Defendants claim that the partnership operated continually at a deficit from its inception and incurred substantial capital shortages which were covered by loans from partners, other than plaintiff, including defendant Crowne, the Managing Partner of the partnership and apparently the only remaining General Partner. The partnership allegedly only repaid a very small fraction of certain loans made by an affiliate of one of the Partners but never came remotely close to repaying any of the partners' loans.

The Crowne Plaza Hotel was sold by defendants to the Intercontinental Hotels Group, Inc. in or about November 2006 for over $360 million.

Discussion

Section 3.3.1 of the agreement provides, in relevant part, as follows:

If the Basic Ritz Air Rights shall have been contributed to and accepted by the Partnership [emphasis supplied], then no later than the earliest of (1) the date funds are first advanced under the Construction Loan, (2) one year from the Contribution Date, or (3) June 30, 1987, the Class A Limited Partner shall be unconditionally entitled to receive and the Partnership shall make a first minimum distribution to the Class A Limited Partner, for application first to any accrued rate of return as in Section 3.3.1(b) provided on such Partner's outstanding capital contribution and then towards reduction of such Partner's capital account, in an amount equal to the lesser of (x) the then outstanding Air Rights Credit Amount or (y) $1,500,000. Subject to the foregoing [emphasis supplied], all additional Cash Flow determined by the General Partners to be available for distribution to the Partners shall be distributed by the Partnership toward payment of the Funded Contract Deposits, together with the rate of return or interest on such Contract Deposits (as the case may be) provided for in Sections 3.3.1(b) and 2.5(a), respectively, for application first to such rate of return or interest and then to such Contract Deposits. If the Basic Ritz Air Rights shall have been contributed to and accepted by the Partnership [emphasis supplied], then no later than (x) June 30, 1989 or (y) the date the amounts in the preceding sentence are paid, whichever date comes first, the Class A Limited Partner shall be unconditionally entitled to receive and the Partnership shall make a second minimum distribution [*4]to the Class A Limited Partner in an amount equal to the aggregate of (x) any accrued, unpaid rate of return as in Section 3.3.1(b) provided on such Partner's outstanding Air Rights Credit Amount and (y) the balance of the then outstanding Air Rights Credit Amount. Thereafter, subject to Section 3.3.2. all Cash Flow shall be distributed in the following order of priority [emphasis supplied]:

(a)First, to Partners and affiliates of Partners to whom the Partnership shall be indebted for borrowed monies [emphasis supplied] (other than in respect of costs of acquisition of the Development Site), in such amounts (for principal, interest, and any other charges) as shall be due to them from time to time, such distribution to be applied first to accrued interest and the balance, if any, toward repayment of principal, in each case pari passu, provided such monies were borrowed on terms reasonably competitive with those which would have prevailed in a borrowing from an unaffiliated third party and were borrowed to cover cost overruns, operating deficits, cash flow shortages, or otherwise to provide funds determined by the General Partners to be reasonably necessary for the operations of the Partnership;

(c)Finally, the balance (if any) to the Partners, pro rata according to their Percentage Interests.

Pursuant to section 3.3.2.,

Except as otherwise in this Agreement provided, Cash Flow shall be distributed by the Partnership at such time or times as the General Partners may determine, but not less frequently than annually; provided, however, that if in respect of any fiscal year of the Partnership and all prior fiscal years thereof Net Profits shall have been allocated to a Limited Partner in excess of the Cash Flow distributed to such Partner in respect of such year and prior years, an amount of Cash Flow equal to such excess, if available, and subject to the priorities set forth in the preamble provisions of Section 3.3.1., shall be distributed to such Limited Partner within 90 days after the close of such year.

Defendants contend that distributions were properly made pursuant to section 3.3.1(a) of the agreement (referred to by defendants as the "waterfall" provision), i.e., Cash Flow was to be [*5]used to repay the partner or partner affiliate loans before any payment on account of plaintiff's Class A limited partnership interest.

Plaintiff, however, contends that section 3.3.1, including the priority of distribution set forth in subsection (a), does not apply unless he had previously contributed the Basic Ritz Air Rights. Plaintiff claims that since the Partnership decided not to acquire these air rights, Section 3.3.2 is triggered and he was entitled to receive a priority distribution of surplus Cash Flow, which distribution would not be subordinate to the prior repayment of partnership loans.

Defendants move for summary judgment dismissing the Amended Complaint on the grounds that: (i) plaintiff's interpretation of the partnership agreement is not supported by the plain terms of the agreement, which can be determined without resorting to parol evidence; (ii) plaintiff's interpretation of the agreement violates basic rules of contract construction and renders large sections of the agreement meaningless; (iii) plaintiff's fraud claim is simply a restatement of his claims for breach of contract and (iv) plaintiff has failed to state a claim for an accounting.^[FN2]

Specifically, defendants argue that plaintiff's interpretation of the agreement (i.e., that the "waterfall" provision does not apply since plaintiff did not contribute the air rights) violates the terms and mechanism of the agreement because the removal of section 3.3.1 would leave the agreement without a provision for the mechanics and priority of distribution of Cash Flow, or a provision for repaying Partner Loans.^[FN3]

Defendants further argue that if section 3.3.1 is removed from the agreement, references to that section throughout the agreement (i.e., in sections 2.5, 3.5.1[a][i] and 7.2.4[e]) cease to make sense. [*6]

In addition, defendants contend that plaintiff's position that he is entitled to payments out of Cash Flow, if any, prior to the reimbursement of Partner Loans, even though plaintiff contributed no capital, was previously reimbursed for his costs in assembling the site, and ended up using the Basic Ritz Air Rights on another project, defies common sense.^[FN4]

Plaintiff, on the other hand, argues that defendants should not be permitted to evade their clear contractual obligations to him and that this Court should interpret and enforce the plain meaning of the unambiguous terms "If" and "Thereafter" in Section 3.3.1 and reject defendants' interpretation. According to plaintiff,

[t]he bargain which I negotiated was intended to protect my years of investment and effort in assembling the Crowne Plaza Hotel site. Not having contributed the available air rights — and, accordingly, not having received a substantial up-front distribution of $1.5 million — the 1985 Agreement was carefully drafted to make it clear that unless those air rights were contributed, I was entitled to be paid my pro rata share of annual Cash Flow.

Plaintiff alternatively argues that in the event that this Court finds that the 1985 agreement is not clear and unambiguous, defendants' motion for summary judgment should be denied and this matter be set down for a trial which shall include parol evidence, including prior drafts of the agreement, as well as testimony from the individuals involved in the negotiations, to assist this Court in determining the true meaning and intent of the provisions.

[*7]Based on the papers submitted and the oral argument held on the record on November 14, 2007, this Court finds that the subject provisions are susceptible to more than one meaning.

It is well settled that

[t]he parol evidence rule forbids proof of an oral agreement that might add to or vary the terms of a written contract that was intended to embody the entire agreement between the parties (citation omitted). It will not, however, preclude evidence to clarify an ambiguity caused by the absence of particulars from the writing, provided that the parol evidence to be introduced does not contradict the written agreement (citation omitted).

It is this Court's opinion that parol evidence is required in the instant case to determine the intention of the parties and the true meaning of the agreement.

Accordingly, defendants' motion for summary judgment and that portion of plaintiff's cross-motion seeking partial summary judgment must be denied.

However, that portion of plaintiff's cross-motion seeking permission to amend the Amended Complaint to include claims for damages allegedly disclosed by the 2005 Financial Statement is granted.

Plaintiff shall serve his Second Amended Complaint (without the claims for fraud and an accounting) within 20 days of service of a copy of this Order with Notice of Entry.

Defendants shall then have 20 days to serve an Answer to the Second Amended Complaint.

A status conference shall be held in IA Part 12, 60 Centre Street, Room 341 on June 11, 2008 at 9:30 a.m. in order to coordinate all outstanding discovery.

This constitutes the decision and order of this Court. [*8]

Dated: April 7, 2008________________________BARBARA R. KAPNICK

J.S.C.