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Did “L.A. Law” Inspire NYC Multifamily Operators Isaac Hager & Chaim Lax?
Back in 1986, “L.A. Law” aired: its gimmick was entertaining but convoluted legal dilemmas in and out of the courtroom. The writers poured new wine into one old bottle: the attorney-client privilege. In that particular episode, an attorney successfully defended his client on murder charges. After he got his client acquitted, his client confessed to him that he indeed was a murderer. What to do? Attorney-client privilege bars counsel from divulging this to the universe. So, counsel confided the confession to another attorney – a terminally ill attorney. This attorney then told the world that his friend’s client was a killer.
By this point, you are probably thinking: What does this have to do with real estate?
In December 2007, Kent Wythe 9th Street paid $42.6 million for a development site at 421-431 Kent Avenue, and 464-474 Wythe Avenue in the Williamsburg section of Brooklyn, with plans to build several apartment buildings there.
Alpha Capital, a firm controlled by Kalikow’s Manchester Real Estate and Construction, entered an agreement in October 2007, to lend a $17 million second mortgage to Kent Wythe. Kent Wythe was a firm led by Issac Hager and Chaim Lax. At the time, Lax was suffering from terminal cancer, according to a lawsuit filed November 20, 2009 in New York State Supreme Court.
According to the complaint, Kalikow told Hager and his attorney, Irving Alter, that a personal guarantee by Lax was required for him to approve the loan. But, Lax did not attend any of the negotiations, and Kalikow said he was unaware of Lax’s health condition and depended on Alter and Hager to assure him that Lax would be able to fulfill the terms of the loan, particularly the guarantee.
“Hager knew that Lax’s personal guarantee, and, thus anything that would render Lax unable to fulfill his role as guarantor, including Lax’s health, was material to Alpha’s decision to loan any monies to Kent,” Herrick Feinstein attorney William Fried, who represented Kalikow, said in the court filing. “Hager failed to mention any reason why Lax would be unable to fulfill his duties.”
According to the complaint, Lax’s personal guarantee was critical, because his business interests depended upon a “family financial empire” that only Lax could maintain. Lax was the president of Dynamic Diamond and a leading philanthropist in New York and Israel.
Because of Lax’s death, the complaint says, the only way to enforce the personal guarantee against Lax, would be to file suit against his estate.
By August 2008, the developer went into default on the $17 million and Alpha accelerated the loan. Lax passed away Nov. 3, 2008. Following the default, the loan was later transferred to Beta Capital, another firm controlled by Kalikow.
Hat Tip: The Real Deal
Use a dying attorney to bypass the attorney-client privilege. Use a dying partner to avoid a personal guarantee.
Welcome to the wacky world of New York City commercial real estate.
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Check out what others are saying about this post...[...] 5. Your dying partner personally guarantees the mortgage: A new low even in the shark tank of New York City real estate? Kent Wythe 9th Street paid $42.6 million for a development site at 421-431 Kent Avenue, and 464-474 Wythe Avenue in the Williamsburg section of Brooklyn, with plans to build several apartment buildings there. Alpha Capital, a firm controlled by Kalikow’s Manchester Real Estate and Construction, entered an agreement in October 2007, to lend a $17 million second mortgage to Kent Wythe. Kent Wythe was a firm led by Issac Hager and Chaim Lax. At the time, Lax was suffering from terminal cancer, according to a lawsuit filed November 20, 2009 in New York State Supreme Court. Hager allegedly knew that Lax was terminally ill, and conspired to have his dying partner take the h…. [...]