Balagiannis et al v. Mavrakis et al
Filing
115
MEMORANDUM Opinion and Order Signed by the Honorable Harry D. Leinenweber on 10/31/2011:Mailed notice(wp, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
NICHOLAS BALAGIANNIS and
RESERVE HOTELS PTY LIMITED, As
Trustee for the NBF TRUST,
Case No. 08 C 943
Plaintiffs,
v.
Hon. Harry D. Leinenweber
THEODORE MAVRAKIS,
Defendant.
MEMORANDUM OPINION AND ORDER
This case is now before the Court on the Defendant’s Motion
for
Summary
Judgment
on
Counts
I
(Breach
of
Contract),
II
(Promissory Estoppel), and III (Common Law Fraud).
The Court
previously
which
ruled
on
Defendant’s
Motion
to
Dismiss
was
directed at the previous Complaint, granting the Motion without
prejudice as to Count II (now Count I), with leave to amend, and
denied the Motion as to Counts III and IV (now Counts II and III).
The basis for dismissing the old Count II was the failure of
Plaintiff to allege consideration for a guarantee.
Plaintiff has
since amended his Complaint to allege breach of contract (rather
than breach of guarantee) as well consideration for the alleged
contract.
I.
BACKGROUND
The factual setting for this dispute is the alleged agreement
on the part of Defendant, Theodore Mavrakis (the “Defendant”), to
sell his shares in Theros Gaming International, Inc. (“Theros”),
the corporate owner of a Greek casino located in Patras, Greece.
The following facts are taken from the parties’ respective
Local Rule 56 statements.
Initially, the Court notes that the
Defendant has been extremely evasive in his response to Plaintiff’s
Rule 56.1 Statement of Additional Facts. He repeatedly responds to
Plaintiff’s statement by making partial admissions followed by the
following boiler plate qualification:
“. . . and denies that the
remainder of the statement is supported by the record citation.”
The Seventh Circuit has repeatedly stated that Local Rule 56.1 is
“not satisfied by evasive denials that do not fairly meet the
substance of the material facts asserted.”
Bordelon v. Chicago
School Reform Board of Trustees, 233 F.3d 524, 528 (7th Cir. 2000).
To give an example here, Plaintiff’s Additional Statement No. 2
says:
“As of January 27, 1999, Ted and Costas Mavrakis, Ted’s
brother, each owned 43,6875% of the shares of Theros. Michael Rose
owned the remaining shares.”
To which Defendant’s response was
“Ted admits only that Ted and Costas Mavrakis at one time each
owned 43 percent of the shares of Theros and denies that the
remainder of the statement is supported by the record citation.”
It defies common sense to assert that a major shareholder of a very
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closely held corporation (three shareholders), would not know as of
January 27, 1999, who owned the other shares of Theros.
Another
example: Statement No. 11: “In order to close the purchase by
Costas of Ted’s shares in Theros, an escrow was created between Ted
and Costas, to which Balagiannis was not a party.”
response:
“Ted
denies
the
statement
because
Plaintiffs attach to the ASOF are illegible.
Defendant’s
the
documents
Ted does admit that
he and Costas were parties to an escrow account.” Why in the world
Defendant would not be able to admit that Balagiannis was or was
not a party to the escrow account to which he was a party is
baffling to say the least.
Bordelon,
District
courts
As the Seventh Circuit stated in
are
not
obligated
to
wade
through
improper denials in search of genuinely disputed facts.
So the
Court, while not striking Defendant’s response, will deem admitted
those facts that clearly are in the knowledge of Defendant and are
denied solely based on what he perceives as not being supported by
the record citation.
II.
At
the
time
of the
FACTS
alleged
agreement
Defendant
and
his
brother, Costas Mavrakis (“Costas”), owned approximately 43.5% of
the corporate owner, Theros International Gaming, Inc.
Defendant
entered into an agreement with a third party, Anakon Investments,
Ltd. (“Anakon”), to sell his shares in Theros for $4 million in
cash, a $5 million promissory note, and a release from Rose, the
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shareholder, who owned the approximate 13% remainder of Theros
shares.
Costas after learning of the proposed sale of Defendant’s
shares to Anakon invoked what he claimed was his right of first
refusal and demanded that Theodore sell him his shares for the same
consideration as given to Anakon. In order to finance the proposed
purchase of Defendant’s shares, Costas entered into an agreement
with Nicholas Balagiannis (the “Plaintiff”) to transfer 34% of
Theodore’s shares to Plaintiff after the purchase was completed for
the price of $6,954,530.
(The transfer was to be made to Plaintiff
individually or to an entity to be named by Plaintiff.)
The
Plaintiff originally intended to name Reserve Hotels Pty, Ltd.
(“Reserve”), as Trustee for the NBF Trust, as the designee for the
ownership of the shares but this did not come to pass.
(The
Plaintiff agrees that Reserve should therefore be dismissed from
this suit.)
This sum was to be paid as follows:
by the deposit of
$4 million in an escrow to be used to close on Costas’ acquisition
from Defendant and the remaining amount would be used to make the
majority
of
the
first
three
payments
promissory note due to Defendant.
due
on
the
$5
million
The Plaintiff also agreed to
lend $500,000 to Costas to pay his attorneys’ fees in connection
with a dispute over Costas’ right to purchase the shares from
Defendant then pending in a Chicago court. Plaintiff also advanced
Costas an additional $300,000 with the understanding that he would
deposit that sum into the escrow account.
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The establishment of the escrow account was a term of Costas’
agreement with Defendant to which he and Defendant would be the
only
parties.
The
terms
of
the
Escrow
Agreement
were
that
Defendant would deposit his shares in Theros and Costas would
deposit the $4 million cash, the $5 million promissory note and the
release form the remaining shareholder. When the required deposits
were made, the Escrow Agent would release the shares to Costas and
the cash, note, and release to Defendant.
In August 2003 Plaintiff was asked to deposit the $4 million
into the Escrow.
However, because he was not a party to the escrow
Plaintiff was reluctant to do so.
Plaintiff through his counsel,
Konstantinos Grekos (“Grekos”), requested that Costas agree that
the funds not be released from the Escrow without Plaintiff’s
agreement unless the terms of the Escrow were satisfied. By letter
dated August 27, 2003, Costas and his attorney, Robert Nieman
(“Nieman”), agreed to this.
Thereafter, on September 1, 2003,
Plaintiff caused $3,700,000 to be deposited in the Escrow.
This
sum plus the $300,000 already advanced to Costas was to satisfy the
$4 million cash requirement due Defendant.
In October, Costas and
Defendant apparently concluded that the terms of the Escrow could
not be satisfied, and Costas’ attorney directed the Escrow Agent to
disburse the Escrow Funds to a Greek bank in Defendant’s name to
serve as a deposit while Costas continued with his efforts to
purchase the shares from Defendant.
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At that time Defendant knew
the funds came from Plaintiff and their intended use was to
purchase Defendant’s shares.
On October 21, 2003, Plaintiff’s lawyer spoke to Defendant by
telephone wherein Defendant agreed that the
money in escrow would
not be at risk and Defendant would purchase Plaintiff’s rights
under his agreement with Costas for $4 million at any time that
Plaintiff requested.
Based on this assurance, the lawyer executed
a written direction to release the funds to a bank account in
Greece in Defendant’s name.
The lawyer then drafted the terms of
this agreement in a handwritten letter which he faxed to Defendant
on October 21, 2003.
Defendant signed the letter and faxed it back
to the attorney on October 22, 2003.
On October 24, 2003, the sum
of $3,703,606.80 held in the escrow was released and sent to
Defendant’s Greek bank account.
In late 2003 or early 2004, the parties and their attorneys
met in Athens during which Defendant represented to Plaintiff and
his attorney that if he did not want to continue the transaction,
that
Defendant
would
purchase
Plaintiff’s
rights
under
his
agreement with Costas within 20 to 30 days after notice from
Plaintiff.
On February 2, 2007, Plaintiff’s lawyer sent a letter
to Defendant requesting that Defendant purchase Plaintiff’s rights
pursuant to the terms of their Agreement.
While Defendant did not
respond to this letter, he did send a letter to Costas, with a copy
to Plaintiff, on March 31, 2007, stating that he had the funds on
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deposit and would return them if the parties wished to cancel the
transaction.
This was false because almost all of the funds save
$17,000 had been distributed to Costas by January 27, 2004.
Defendant claims that he made these transfers to Costas as gifts.
However, he did not file any gift tax returns. None of Plaintiff’s
money has been returned to him and he has received no shares in
Theros.
III.
ARGUMENT
A.
Count I
Count I of the Second Amended Complaint alleges that Defendant
breached the October Agreement by refusing to purchase Plaintiff’s
rights under
the
Stock Purchase
Agreement
with
Costas.
The
Agreement allegedly breached consisted of a telephone conversation
between Plaintiff’s attorney and Defendant on October 21, 2003,
which was reduced to writing, faxed to, and signed by Defendant,
and, returned by fax to Plaintiff.
Defendant acknowledges that he
signed the fax. Defendant contends that there was no consideration
given by Plaintiff in exchange for the agreement, that the attorney
was
not
authorized
by
Plaintiff,
and
that
the
agreement
is
there
in
fact
consideration
for
interest.
The
imprecise.
It
is
Defendant’s
clear
that
promise
to
was
purchase
Plaintiff’s
Plaintiff had been requested to deposit the $4 million into the
escrow.
He was reluctant to do so because he was not a party to
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the escrow.
Based on Defendant’s agreement not to withdraw the
money without Plaintiff’s consent, the money was deposited into the
escrow.
An
oral
agreement
was
subsequently
reached
whereby
Defendant agreed to repurchase Plaintiff’s interest at the price of
$4 million if the transaction did not go through.
Based on this
promise
the
Plaintiff
agreed
to
the
withdrawal
of
money
he
deposited into the escrow.
It would defy reason to suppose that
Plaintiff
the
would
authorize
release
of
the
funds
without
assurance that he would get either the shares or his money back.
In short it is clear that the evidence is sufficient to support a
finding that there was consideration for the promise to repurchase
the shares by Defendant in the form of Plaintiff’s agreement to
allow withdrawal of the funds.
Consideration is “some form of
bargained for exchange between the parties.”
Midwest Builder
Distributing, Inc. v. Lord and Essex, Inc., 383 Ill.App 3d 645, 658
(1st. Dist. 2007).
The next point raised by Defendant in his Motion is his
contention that Plaintiff’s attorney who obtained the agreement
from Defendant did not have authority to enter into the alleged
agreement.
Defendant bases his claim on the allegation of a
lawsuit filed by Plaintiff in Greece against his attorney.
The
argument is that Defendant could not enforce the agreement against
Plaintiff and therefore mutuality was lacking.
However, this
argument fails because the Defendant has already obtained all of
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the benefits to which the agreement entitled him.
He agreed that
in return for allowing the withdrawal of the funds he would agree
to repurchase Plaintiff’s interest should Plaintiff request.
He
withdrew the funds but did not live up to his side of the bargain.
He did not repurchase Plaintiff’s rights after a request to do so.
Defendant argues that he could not enforce his rights under the
alleged agreement.
But what rights are left to enforce?
withdrew the money which was all he was entitled to.
He
Plaintiff
ratified the agreement by allowing the escrow withdrawal and by
requesting Defendant to purchase his rights against Costas.
Defendant’s final argument against Count I is that the terms
are imprecise.
The court can agree that the alleged agreement is
poorly drafted.
unenforceable.
However this is not to say that it would be
It is clear that the parties understood the terms
of the agreement.
In return for the release of the funds Defendant
assured Plaintiff that his funds would not be at risk if the money
was withdrawn from the escrow because he would agree to purchase
Plaintiff’s rights for $4 million in the event Plaintiff was
unsuccessful in obtaining the Theros stock. Accordingly the Motion
for Summary Judgment on Count I is denied.
B.
Count II
Defendant moves for summary judgment on Count II (promissory
estoppel) contending that the Illinois Statute of Frauds (740ILCS
80/1 bars this count and that in any event the so-called promise is
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ambiguous.
Plaintiff
points out
Section 80/1
is
limited
to
guarantees of “debt, defaults, or miscarriage of another person.”
However, Count I is no longer based on a guarantee but rather
breach of contract.
owed by Costas.
anyone.
Here the promise was not to guarantee money
At that time Costas had not been paid any money by
He was attempting to obtain shares in Theros stock from
Defendant, which he apparently was unable to do.
The promise was
on the part of Defendant to, in effect, repay the money he obtained
from Plaintiff for which he gave no consideration.
Statute of Frauds does not apply.
Thus, the
In any event, there is a
memorandum in writing signed by Defendant upon which Count I is
based.
Defendant repeats his argument that the promise made by
Defendant was ambiguous. For the reasons set forth above the court
finds that the alleged promise is sufficiently clear so as to deny
Summary Judgment on Count II.
C.
Count III
The final count is Count III, common law fraud.
First,
Defendant argues that there is no evidence that Plaintiff relied on
any
misrepresentation
of
Defendant.
Defendant
contends
that
Plaintiff has acknowledged that Defendant might move the funds from
the
Greek
transferred.
bank
account
to
which
they
had
initially
been
He also acknowledged that Defendant could use the
money for investment or other purposes.
The statement he relied
upon was Defendant’s assurance that he would repay the money if
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Plaintiff asked or if he was unable to obtain the Theros stock.
Thus, it would appear that Plaintiff is relying on a statement of
future intentions or promises of conduct to be carried out in the
future.
Under Illinois law a promise to perform an act, though
accompanied at the time with an intention not to perform it, is not
such a false representation as will constitute fraud sufficient to
predicate thereon a cause of action.
(1948).
Roda v. Berko, 401 Ill. 335
Plaintiff cites Defendant’s letter to Costas (on which he
was copied) which was sent in 2007, which promises Costas that he
will refund the money if Costas wants to void the proposed sale.
(Defendant’s Sum. Jud. Ex. K).
Costas, not Plaintiff.
However the “promise” is made to
Accordingly, the court grants Defendant’s
Motion for Summary judgment on Count III.
III.
CONCLUSION
For the reasons stated herein, the Court rules as follows:
1.
Reserve is dismissed as a party Plaintiff with prejudice;
2.
Defendant’s Motion for Summary Judgment is Denied as to
Count I (contract) and Count II (promissory estoppel), but is
Granted as to Count III (Fraud).
IT IS SO ORDERED.
Harry D. Leinenweber, Judge
United States District Court
DATE: 10/31/2011
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