Law360 (January 5, 2022, 8:07 PM EST) — A dispute between two developers of a Miami Beach hotel took a step toward getting untangled this week when a New York state court ordered one of the parties to pay more than $18.9 million plus interest to cover deficiencies on their original
construction loan.
In an order handed down Tuesday, New York Supreme Court Justice Andrew Borrok found that BBM3 LLC, an entity controlled by Branden B. Muhl, had established that Muhl’s former business partner James Vosotas had executed two guarantees and failed to perform on them when a default occurred due to missed payments on the loan for their Greystone Hotel project.
Muhl had also signed the guarantees on the original $36.8 million loan, but his company later
acquired the loan from the original lender and the court said the terms did not require BBM3 to
pursue claims against him as well.
“It does not matter that the lender has not sued the other guarantors in connection with this lawsuit because the guarantees provide that liability of the guarantors under the guarantees is joint and several,” Justice Borrok said.
BBM3’s counsel Jason H. Friedman of Friedman & Feiger LLP called the ruling a significant development, and Muhl and BBM3 on Wednesday filed notice of the New York court’s decision in a related suit that Vosotas filed against Muhl in state court in Miami.
“Today was an important victory as the order clearly establishes that Mr. Vosotas breached the guarantees and must be held accountable to the lender,” Friedman said. “The lender fully intends to collect the judgment.”
The dispute centers on the Greystone Hotel, a 92-room, adults-only hotel located in South Beach. The hotel received its certificate of occupancy in December 2019 but quickly suspended operations due to the onset of the COVID-19 pandemic and remained shuttered until late September 2021.
In his lawsuit in Miami, Vosotas has claimed Muhl kept the property closed despite a lifting of
pandemic restrictions — depriving it of $14 million to $15 million in revenue — as part of a plot to wrest away his interest.
But the New York Supreme Court granted a motion for summary judgment that BBM3 filed in lieu of a complaint. It entered a judgment against Vosotas for more than $18.9 million plus interest on about $8.6 million at a 5% annual rate from March 10, 2021, until the date of this decision and then at the statutory rate on the total amount thereafter. Vosotas is also liable for costs.
The court found that Vosotas — along with Muhl — signed an interest and carry guaranty and a
completion guaranty in December 2017 when they entered into the $36.8 million construction loan for the Greystone.
The original lender sent a notice of deficiency in November 2018 claiming a deficiency of at least $3.2 million, and in June 2020, BBM3 as the new lender sent notice to Vosotas and Muhl that default events had occurred and demanding repayment of the loan or a payment of nearly $8.6 million, according to the order.
BBM3 also sent Vosotas a notice in June 2020 stating that he owed $1.1 million in interest pursuant to the interest and carry guaranty and more than $8.7 million under the completion guaranty, which pledged payments to make up any gap between the construction loan and project costs, the order said.
In his order, Justice Borrok rejected a dismissal bid by Vosotas based on a claim that the court
lacked personal jurisdiction over him.
“That he resides in Florida and the property is located in Florida simply does not approach the
level of difficulty that would deprive him of his day in court,” the court said. “He agreed [in the
loan agreement] to come to New York to litigate this dispute if necessary and the agreement is
valid.”
Friedman told Law360 on Wednesday that after the initial deficiency, Muhl and BBM3 “solely funded” more than $10 million deficiencies in the first year before purchasing the loan from the original lender with Vosotas’ consent. He said BBM3 then funded additional principal at Vosotas’ request and later found that funds from construction draws had been misapplied.
BBM3 exercised its rights as lender under the operating agreements and took control of all the
Greystone assets, Friedman added.
After Vosotas filed his lawsuit in Miami in July, Miami-Dade County Circuit Judge William Thomas
quickly granted his request to appoint a receiver to take over operations of the Greystone and
reopen the hotel. But the court vacated that order after it was challenged by Muhl, and it adopted Muhl’s request to convert the receiver into a monitor.
Judge Thomas recently discharged the monitor on account of the Greystone having reopened, but he noted in a recent order that the court has yet to determine whether Vosotas still has any financial interest in the hotel and said the hotel is responsible for the monitor’s fees.
A hearing on Muhl’s motion to dismiss the case is currently set for Jan. 19.
“We expect at the end of the day, the Florida court will dismiss Mr. Vosotas’ action in Florida,”
Friedman said.
Muhl and Vosotas both got some good news recently when a federal magistrate judge late last month recommended permanent dismissal of claims against them in a suit brought by a group of Chinese investors who allege they were the victims of a fraud scheme that promised to help them obtain EB-5 immigration visas in exchange for investments that were intended to support the Greystone project. The federal judge said an amended complaint failed to tie the developers to misleading statements.
Counsel for Vosotas did not immediately respond to requests for comment Wednesday.
BBM3 is represented by Mark S. Kaufman of Kaufman & Kahn LLP and Jason H. Friedman of Friedman & Feiger LLP.
Vosotas is represented by Joseph J. Ortego and Marissa A. Muscarella of Nixon Peabody LLP and
William Clayton of Clayton Trial Lawyers PLLC.
The case is BBM3 LLC v. Vosotas, case number 652015/2021, in the Supreme Court of the State of New York. The Miami case is Vosotas et al. v. Muhl et al., case number 2021-16770-CA-01, in the Circuit Court for the Eleventh Judicial Circuit of Florida.
–Editing by Stephen Berg.
