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Blue Diamond Group Corp. v. Marmar Realty, LLC

By Adam Leitman Bailey


In Blue Diamond Group Corp. v. MarMar Realty, LLC, et al., a former partner of our client claimed he had performed services towards obtaining required zoning changes that were required before a new commercial building could be constructed on land owned by our client. Our client denied that the money was owed because such services as the former partner alleged he had performed were to be his “investment” in the project. Moreover, the project ultimately failed due to the former partner’s breach of the obligation he had assumed to obtain the required project financing, and, pursuant to the various agreements of the parties, the former partner was not entitled to any monetary compensation for any services he performed in developing the project.

Adam Leitman Bailey, P.C. succeeded in obtaining a final judgment dismissing in its entirety the complaint against our client for the moneys claimed to be owed to the former partner, for his alleged “pre-construction services,” purportedly made pursuant to the agreements the parties had entered into, in connection with the failed project to develop a high rise commercial building on our client’s property.

Adam Leitman Bailey, P.C. also succeeded in defeating the plaintiff’s motion to amend its complaint to allege a cause of action for fraud in connection with the failed transaction.

Initially, the plaintiff alleged causes of action for quantum meruit, unjust enrichment, and to foreclose a mechanic’s lien, seeking to recover more than $400,000.00 from defendant MarMar Realty, LLC (“Realty”), the owner of the premises, and from MarMar Group, LLC (“Group”), an as yet unformed LLC that was intended to represent the interests of various family member owners of Realty in connection with the development project.

Adam Leitman Bailey, P.C. moved to dismiss the action against Group on the ground that the Court could not exercise jurisdiction over a non-existent “fictitious” entity. The Court agreed, holding that “while individuals who enter into a contract on behalf of a non-existent entity may be held liable on the contract, a non-existent entity over which the court clearly cannot obtain jurisdiction cannot independently be a defendant in an action,” and, accordingly, the Court dismissed the action against Group.

Adam Leitman Bailey, P.C. moved to dismiss the action against Realty on the ground, based on documentary evidence, that the plaintiff did not have standing to sue. Adam Leitman Bailey, P.C. argued that the parties’ agreements clearly showed that the plaintiff Blue Diamond Group Corp. (“BDG”) had “unconditionally, absolutely and irrevocably” transferred and assigned to Blue Diamond Ventures, LLC (“Ventures”) “any and all of its right, title and interest in and to the Contract and the Project of any nature whatsoever.” The Court agreed holding (a) that BDG’s arguments ignored the “clear and unambiguous language of the assignment agreement by which plaintiff assigned not only its right and interest under the Contract but also its right and interest in and to the Project, of any nature whatsoever, and (b) as plaintiff had assigned any right it had to payment for its alleged pre-construction services to Ventures, it had “no standing to seek to recover for those services.”

The Court also denied BDG’s cross-motion to amend its complaint to allege fraud against the individual members of Group upon learning that Group was never an organized LLC. The Court held that, “even assuming that misrepresentations were made as to the existence of Group, the only damages claimed as a result of the misrepresentations is the amount plaintiff alleges it is owed by the MarMar defendants for the pre-construction services” for which it lacked standing to sue.

John M. Desiderio of Adam Leitman Bailey, P.C. represented the prevailing party in this litigation.

Adam Leitman Bailey, P.C.

NEW YORK REAL ESTATE ATTORNEYS