Hilfiger fails with $26.2M lawsuit
A Manhattan state court judge rejected a $26.2 million lawsuit brought by clothing designer Tommy Hilfiger's company against two entities involved with the $53 million purchase of his Midtown building in 2005, according to a ruling published today.
Hilfiger claimed in the June 2007 breach of contract lawsuit against the entities that he was due $5.4 million that was never paid.
Hilfiger sold 25 West 39th Street in December 2005 for $53 million to a company called 25 West 39th Street Realty. Included in the sale contract was a clause that gives Hilfiger a cut of any sale recorded with a deed before December of 2006.
25 West 39th Street Realty was wholly owned by 25 West 39th Street Holdings, which had an address at the Chetrit Group, a low-profile but substantial real estate family.
Chetrit's 25 West 39th Street Holdings sold a full interest in the building for $80 million in September 2006 to the current owner of the building, Thor Equities, a real estate property and management company. The sale was of the controlling interest and not the property, so no deed was filed, the judge wrote.
By the terms of the 2005 contract that allocate 20 percent of the difference between the $53 million sales price and any sale within a year, Hilfiger claimed he was due $5.4 million.
But Manhattan State Supreme Court Justice Richard B. Lowe, ruled August 21 that the September, 2006, transfer was not technically a sale since no deed was transferred, as specified in the contract, and rejected the suit. The decision was announced today.
Hilfiger's attorney and a spokesman for Thor Equities had no comment. Calls to the Chetrit Group were not immediately returned.
Comments
Anonymous
tommy needs a better lawyer
Comment #1 Posted By: Anonymous 08/28/08
Joann Prinzivalli
Years ago, New York City learned about this kind of thing relative to Real Property Transfer Tax (RPT) avoidance. Back then, the City was anticipating RPT from a deed recording for the Pan Am building. The parties found a legal loophole, and transferred the ownership of the entity rather than the title to the property. Result? The City could not collect a tax on that transaction - RPT rules were amended to prevent later "Pan Am" type transfers from avoiding RPT.
It may be the other party readily agreed to the 5.4 million knowing the loophole was there (or engineering it). Such a loophole works best where the entity is an SPE (Special purpose Entity), with the sole purpose of owning the realty.
The purchaser of the entity may have obtained title insurance with a "non-imputation" endorsement - which may have been triggered by the Hilfinger lawsuit, depending on circumstances. It might be interesting to see who handled the defense of the lawsuit (assuming that the entity in title was one of the parties defendant).
Comment #2 Posted By: Joann Prinzivalli 09/02/08
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