Defendant Talisman Brookdale, LLC (Talisman) moves, pursuant to CPLR 3212, for summary judgment dismissing the first and second causes of action, and, upon defendant's satisfaction of plaintiff's claim for reimbursement under the third cause of action, dismissal of the complaint in the entirety. Plaintiffs The Ackman-Ziff Real Estate Group, LLC (AZREG), and Ackman-Ziff Chazen Realty Advisors, LLC (AZCRA)(collectively, Ackman) cross-move for summary judgment on all three causes of action.

This action involves a letter agreement between Ackman and Talisman to obtain financing in order for Talisman to buy a property out of receivership. Ackman contends that it is entitled to commissions, while Talisman denies that Ackman is entitled to commissions, but acknowledges that Ackman is entitled to reimbursement for certain expenses that it incurred while it was Talisman's agent seeking financing.

Talisman acquired the Brookdale Mall, a shopping mall in Brooklyn Center, Minnesota, in November 1997. The Bank of America foreclosed on the mortgage in 2004. In late 2004 or 2005, the opportunity to buy the property out of receivership, using a combination of equity and a mortgage loan, arose. James Schlesinger (Schlesinger), president of Talisman, was referred to Edward Chazen (Chazen), of AZCRA, in order to try to obtain the necessary financing. After some negotiation, Chazen on behalf of AZCRA and Schlesinger on behalf of Talisman signed a letter agreement dated March 1, 2005, setting forth a brokerage agreement (Letter Agreement). The Letter Agreement provided that AZCRA would have an exclusive right, subject to the Carve-out Investors listed on exhibit A to the Letter Agreement, to arrange an equity joint venture investment for the Brookdale Mall. The Letter Agreement further provided:

2.When you have delivered a commitment or term sheet on terms which are accepted by us, and the first mortgage and joint venture equity transactions close, respectively, pursuant to those terms, you will have earned and be paid a commission of:

a..75% of the maximum principal amount of the commitment for the first mortgage loan;

b.3% of the maximum principal amount of the commitment for the equity.

3.We agree to pay the commission to you in full on the day the loan and/or equity joint venture closes. If we and a lender or equity investor sign an application or commitment or agreement and subsequently (a) we agree to accept a commitment from another lender or equity investor, you shall be deemed to have earned the full commission set forth above ... .

This exclusive right agreement shall expire 90 days following mutual execution of this agreement. This agreement shall be automatically extended for a period [*2]sufficient to close the loan or equity joint venture investment if you have delivered to us an acceptable term sheet formal application or a commitment from a lender or equity investor, on terms and conditions which are acceptable to us.

GMAC is one of the entities that was on the Carve-out list. On April 14, 2005, GMAC tendered a loan commitment (GMAC Loan Commitment) setting forth the terms and conditions pursuant to which it would provide a loan in the amount of $68,175,000. Of that amount, $54,175,000 was a first mortgage, $7 million was a mezzanine loan, and $7 million a junior mezzanine loan. This was not an equity joint venture agreement, but a loan commitment. AZCRA was not involved in any way in obtaining that loan commitment, and those negotiations began before Talisman and AZCRA entered into the Letter Agreement.

AZCRA procured a letter of intent from Rockwood Capital Corporation (Rockwood) which provided that from the date of the letter, May 6, 2005, until three weeks later, May 27, 2005, Talisman would not enter into negotiations with anyone other than Rockwood for a joint venture for the purpose of purchasing Brookdale Mall (Letter of Intent). Schlesinger signed the Letter of Intent on behalf of Talisman. The Letter of Intent was not intended to be a final document, but was intended, by its terms, to be non-binding except for the exclusivity and confidentiality provisions, and to be followed by a binding agreement. The Letter of Intent specifically referred to the loan money which was to be provided by GMAC as a source of funding for the purchase. However, there seems to be a discrepancy between the amount that Rockwood was aware of, and the amount provided for in the GMAC Loan Commitment.

No joint venture agreement with Rockwood was ever finalized, nor were the conditions or timelines imposed upon Rockwood in the Letter of Intent met. The parties all knew that time was a critical factor, because otherwise Talisman would not be able to buy the property out of foreclosure. The negotiations between Rockwood and Talisman reached an impasse over certain control rights that were deal-breakers to both parties, and that were not part of the terms of the Letter of Intent. The parties also disagreed about which decisions would qualify as "major decisions" that would call for approval rights. Rockwood's draft joint venture agreement also provided that Rockwood had the absolute right to remove Talisman as the property manager, which Talisman had never agreed to, nor had Rockwood ever advised Schlesinger that it would insist upon such a provision.

Although the Letter of Intent provided for a finalized joint venture agreement by May 27, 2005, the parties were still negotiating until at least June 28, 2005. By that date, Rockwood knew that Schlesinger was not willing to close the deal on the basis of the draft joint venture agreement, and Rockwood was not willing to close based upon Schlesinger's comments on the draft. There is some evidence that negotiations continued until July 7, 2005, but according to all parties, there was an awareness by all shortly after July 7 that the deal would not close.

Schlesinger did not find an equity joint venture partner. However, Talisman closed on the property with $6 million in equity from partners in existing deals, a mezzanine and junior mezzanine loan from GMAC of $8 and $6 million respectively, and a GMAC senior first mortgage loan of $32,950,000. The GMAC loans were made pursuant to an agreement entered into on July 22, 2005. The amounts are not the same as those contained in the GMAC Loan Commitment, and total a significantly smaller amount. [*3]

In the first cause of action, Ackman seeks a fee of three percent of the $12,500,000 equity investment which Rockwood agreed to provide in the Letter of Intent, which amounts to a fee of $375,000 plus interest from June 20, 2005. In the second cause of action, Ackman seeks .75% of the maximum principal amount of the commitment for the first mortgage loan ($54,175,000) provided by GMAC, which amounts to a commission of $406,312.00. In its third cause of action, Ackman seeks reimbursement for its expenses, as provided for under the Letter Agreement, which they allege totals $7,513.00, plus interest from June 1, 2005.

Ackman contends that the Letter of Intent constitutes a commitment, which triggered its right to obtain a commission on the equity financing. Even though the proposal never closed, Ackman maintains that, under paragraph three of the Letter Agreement, it is entitled to a commission because Talisman closed with another lender.

Talisman disputes whether the Letter of Intent was a commitment, and contends that the draft proposal, which was a commitment, did not contain acceptable terms, as was necessary in order to earn a commission under the Letter Agreement. Talisman also relies on the fact that the Letter Agreement expired before any closing took place, and that, therefore, Ackman no longer had an exclusive right to arrange the financing, and cannot seek a commission on financing that it had no part in arranging. Ackman relies on the extension provision of the Letter Agreement in asserting its right to a commission.

The parties disagree as to exactly when the Letter Agreement was executed, but it appears that it was executed by March 15, 2005. Accordingly, the Letter Agreement expired by June 15, 2005. The extension provision of the Letter Agreement states that the agreement is automatically extended "for a period sufficient to close the loan or equity joint venture investment if you have delivered to us an acceptable term sheet formal application or a commitment from a lender or equity investor, on terms and conditions which are acceptable to us." Here, even if the Rockwood Letter of Intent were construed as constituting a term sheet, formal application, or commitment, and assuming that it was not negated by the draft proposal which contained differing, unacceptable terms, the extension would continue only so long as the proposals were still viable. Once it was clear that the parties would not reach an agreement, the extension no longer continued, because its purpose, to allow for the loan to close, no longer existed. No other construction would both allow for the purpose of the extension, and prevent Talisman from being bound indefinitely by an exclusive provision which was not intended by either party to continue.

Ackman maintains that Talisman should nonetheless be bound, because Ackman did what was necessary to earn the commission by producing Rockwood as an investor. Having done that, according to Ackman, it was entitled to a commission for the first mortgage commitment (see infra) as well as for the joint venture loan. However, despite Ackman's claims that Talisman chose to abandon the deal with Rockwood, there is uncontroverted evidence that the terms of the draft proposal differed from those in the Letter of Intent, and that Rockwood had not informed Talisman of its position prior to submitting the draft proposal. A party is not required to accept such differing terms, and a broker does not earn its commission if the terms proposed are different from those agreed to by the borrower. See Donald Zucker Co. v Lieberman, 183 AD2d 553, 554 (1st Dept 1992). Further, the complaint does not allege that Talisman failed to negotiate with Rockwood in good faith, so the fact that Talisman reached an agreement with another lender shortly after Ackman's exclusive brokerage right expired does not alter the outcome. See Freda Green & Assoc., [*4]Inc. v Heydt, 167 AD2d 328, 329 (1st Dept 1990).

Under these circumstances, it is apparent that the extension must have expired by July 7, 2005, or within a day or two of that date. The loan with GMAC did not close until July 22, 2005. Ackman did not have any role in obtaining the GMAC loan. Therefore, Ackman does not have any basis for seeking a commission on that loan.

It is also worth noting that the terms of the Letter Agreement, taken as a whole, would not support Ackman's position. See Waverly Corp. v City of New York, 48 AD3d 261, 264 (1st Dept 2008) ("in considering the intention of the parties, a court should read a contract as a whole and consider its various clauses contextually"). Paragraph two provides that Ackman would earn its commission only when the first mortgage and joint venture equity transactions closed. Therefore, if the transactions did not close, Ackman would have no grounds for seeking a commission. Ackman relies on paragraph three in asserting its right. Paragraph three provides protection for Ackman in the event that Talisman chose to accept a commitment from another lender or investor, allowing Ackman to still collect its commission. However, when the document is read as a whole, it is apparent that this provision was intended by both parties to apply only if the original lender was still a viable investor in the project. Otherwise, the parties would have provided for Ackman to have earned its commission before the closing under all circumstances. The fact that the commission was to be earned only when the loan closed ensured that Talisman would not be obligated for a commission if the parties were unable to reach a final agreement for the loan. Here, no final agreement was reached with Rockwood, and the deal was dead before Talisman reached an agreement with GMAC and the other investors. Therefore, the Rockwood deal never reached the point that would have triggered any entitlement to a commission, and it was not due to another lender being substituted for it. Thus, even if the Letter Agreement had still been in effect, Ackman would not have been able to successfully claim a commission under the circumstances.

In the second cause of action Ackman seeks a commission on the first mortgage commitment, as set forth in the GMAC Loan Commitment. While Ackman acknowledges that it was not involved in obtaining that commitment, it relies on the provision in the Letter Agreement that states that Ackman would have the "exclusive right to arrange a first mortgage loan if you also obtain equity joint venture proposals on terms acceptable to us." Since Ackman obtained the Letter of Intent from Rockwood, it claims that it is entitled to a commission on the first mortgage.

As with the prior cause of action, Ackman cannot collect a commission because the Letter Agreement provides that no commission would be earned until the loan closed. The loan did not close until after the Letter Agreement expired. Therefore, Ackman no longer had an exclusive right to arrange a first mortgage. Since it was admittedly not involved in obtaining the loan commitment from GMAC, it has no entitlement to a commission. It is also noteworthy that there is no evidence that there were any negotiations concerning the GMAC loan during the exclusivity period. Consequently, it cannot be said that Ackman delivered to Talisman an acceptable term sheet from GMAC, which could extend the Letter Agreement. In view of this conclusion, it is unnecessary to address the question of whether the Letter of Intent constituted an "equity joint venture proposal[] on terms acceptable to [Talisman]," which would be a prerequisite to Ackman obtaining a commission on the GMAC first mortgage even if the loan had closed during the exclusivity period provided under the Letter Agreement.

In its third cause of action, Ackman seeks $7,513.00 as reimbursement for expenses that [*5]Ackman incurred, and which were subject to reimbursement under the Letter Agreement. Ackman includes a list of expenditures (Ex. 14 to Notice of Cross Motion), which total that amount. The list includes charges for Fed Ex deliveries, printing, airfare, train fare, hotel, and car rentals. The exhibit does not document the charges; it merely lists them.

The Letter Agreement provides for reimbursement of "any reasonable out-of-pocket costs for coach class air travel and standard hotel accommodations incurred ... ." It does not provide for delivery service, printing, train fare or car rentals. Ackman contends that it is entitled to reimbursement for these additional items pursuant to the second section regarding reimbursement. That section is an indemnification and hold harmless provision, which does not apply to out-of-pocket expenses for serving as a broker for obtaining financing. Thus, those additional items, which constitute $2,471 of the amount sought, must be deducted from the total.

Further, before Ackman is entitled to reimbursement for the reimbursable expenses, it must provide some evidence that those expenditures were made. A list generated from unknown sources is inadequate. Ackman has failed to produce adequate evidence of its entitlement to the amount of reimbursement it seeks, and that issue is referred to a Special Referee.

Accordingly, it is hereby

ORDERED that defendant's motion for partial summary judgment is granted to the extent that the first and second causes of action of the complaint are severed and dismissed; and it is further

ORDERED that plaintiffs' cross motion is denied; and it is further

ORDERED that the issue of the amount of reimbursable expenses (reasonable out-of-pocket costs for coach class air travel and standard hotel accommodations) that plaintiff incurred pursuant to the parties' agreement is referred to a Special Referee to hear and report with recommendations, except that, in the event of and upon the filing of a stipulation of the parties, as permitted by CPLR 4317, the Special Referee, or another person designated by the parties to serve as referee, shall determine the aforesaid issue; and it is further

ORDERED that counsel for the party seeking the reference or, absent such party, counsel for the plaintiff shall, within 30 days from the date of this order, serve a copy of this order with notice of entry, together with a completed Information Sheet,^[FN1] upon the Special Referee Clerk in the Motion Support Office in Rm. 119 at 60 Centre Street, who is directed to place this matter on the calendar of the Special Referee's Part (Part 50 R) for the earliest convenient date.

Date:_May 20, 2008

ENTER:

______________________________

J.S.C.