Nature of the Case
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Facts
D entered into a partnership agreement with a wealthy investor and money manager Martin Sosnoff to build a large residential project in Manhattan. The parties signed two letter agreements. These provided for the $105,000,000 development of a residential highrise on West 48th Street in Manhattan, to be known as the Ritz Plaza. Their agreement provided that P would contribute 80% of the necessary equity and collateral in exchange for 80% of the tax benefits and 50% of the profits. From November 1985 to October 1987, P complied with their partnership agreement, contributing his share of the capital and the necessary loan collateral. D contracted to acquire the real property from the owners of Momma Leone's Restaurant, as well as certain development rights from the owners of the contiguous O'Neill Theatre. Both P and D obtained a letter of credit from Citibank, made a $1,875,000 payment toward Momma Leone's acquisition in the agreed 80/20 ratio, took steps to satisfy zoning requirements, and pursued various real estate tax benefit programs, including an application to the United States Department of Housing and Urban Development (HUD) for a permanent mortgage of $90,000,000, signing the requisite application forms as equal principals. The closing of the real estate and development rights was scheduled for November 19, 1987, and Marine Midland Bank officially approved a bridge loan,. P announced, before then, that he would make no further capital contributions, and that he would not participate in the $20,000,000 bridge loan which he and D had obtained from Marine Midland Bank to finance the closing. P's attorney wrote to D's attorney, notifying him that 'Martin Sosnoff does not intend to participate in a 20 million proposed commitment from Marine Midland', and expressing 'Martin Sosnoff's desire to terminate any relationship' with D, requesting that D repay 'the amounts advanced or otherwise made available by P or on his behalf'. P refused to honor his commitments. P's refusal to abide by the joint venture agreement threatened a complete collapse of the Ritz project and this turn of events brought him to the brink of financial ruin because without P's participation, the Marine Midland bridge loan was lost and no other bank was willing to lend the $20,000,000 required to purchase the Momma Leone's property and to commence construction on the project. P refused to honor his commitments. The failure to close would also have constituted a default under Momma Leone's contract, resulting in the forfeiture of the $1,875,000 cash deposit, causing the owners of Momma Leone's to draw down the letter of credit from Citibank, then amounting to approximately $4,675,000, on which D was personally liable. Despite D's attempt to find someone to replace P the best that d could do was to obtain a $8.5 million short-term loan from BRT Realty Trust at a high interest rate of 5% above prime, which, by its terms, only provided $ 4,000,000 toward the scheduled closing, leaving D several million dollars short. P then offered to lend the partnership an additional $1.7 million and to convert into cash the $4,675,000 letter of credit from Citibank. This would enable the Momma Leone acquisition to go forward. P demanded that the nearly $7.5 million in equity he had previously contributed to the partnership be converted to short-term debt; that D release P from his obligation to contribute 80% of the partnership's equity; that D personally guarantee the combined $9.1 million obligation; and that his wife, Julia Carter (D), guarantee $1.7 million of that. According to Ds, they had no other choice other than to sign the papers. Ds unsuccessfully protested that Ps proposal amounted to nothing more than the unilateral repudiation of a partnership agreement, and hence were forced to capitulate. D signed a note on behalf of Sosnoff-Carter Associates, promising to pay P $ 9,145,648.55, plus 9% interest in periodic installments over a three-year period. Ds signed personal guarantees in a release discharging P from partnership-related claims, and P signed a letter announcing his resignation from the partnership, thereby transforming himself from a major equity investor dependent upon uncertain profits into a lender with a smaller, secured, and guaranteed loan. P refused to consent to make certain minor modifications required by HUD before approving the mortgage unless Julia Carter (D) agreed to increase her guarantee to cover the full amount of P's 'loan'. faced with certain financial disaster if P carried out his threat to block the HUD loan and thereby destroy the Ritz Plaza project, Julia Carter (D) signed the July 1988 guarantee as demanded by P. D was forced to mortgage everything he owned, including his family's residence, in order to keep the Ritz Plaza project alive. D also made a number of principal and interest payments to Sosnoff so as to avoid triggering cross-default provisions in the loan agreements entered into by him until May of 1989 when he stopped making any payments on the P note. Toni Sosnoff (P) seeks to recover the principal sum of $7,945,649.55 with interest and costs on a promissory note executed by D in the face amount of $ 9,145,648.55 and a written guarantee of payment executed by his wife, Julia Vance Carter (D), both dated as of July 1, 1988. They were executed in favor of P's husband, Martin T. Sosnoff, and thereafter assigned to her. Ds do not deny that the July 1988 note is in default, and assert that they were forced to sign the initial November 1987 note and guarantee the then-modified note and guarantee of July 1988 under economic duress. The Supreme Court denied P's motion for summary judgment, finding triable issues of fact with respect to Ds' affirmative defense of economic duress, possible ratification, abatement of duress, and as to whether Ds had acted reasonably, under the circumstances, in disaffirming the note and guarantee, and also upon the court's sua sponte determination, that the note and guarantee which P had sued upon were not 'instrument[s] for the payment of money only' within the meaning of CPLR 3213.
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