Opinion
Index No.: 651175/2017
04-02-2019
TIDEWATER PLANTATIONS, INC., OXLEY DEVELOPMENT COMPANY, LLC; CARL "CHIP" M. DRURY III, and KATHRYN B. DRURY, Plaintiffs, v. DEUTSCHE BANK AG, GERMAN AMERICAN CAPITAL CORPORATION, DEUTSCHE BANK TRUST COMPANY AMERICAS, DEUTSCHE BANK SECURITIES, INC. SPRING ASSET FUNDING LLC, SPRING ASSET FUNDING LTD, SERIES 2006-1, GLOBAL COMMERCIALREAL ESTATE SPECIAL OPPORTUNITIES, LTD., FIVE MILE CAPITAL PARTNERS LLC, FIVE MILE CAPITAL POLLINGINTERNATIONAL LLC, FIVE MILE SPE BLLC; R.C. PATEL, JAY PATEL, and SONIAL PATEL, Defendants.
NYSCEF DOC. NO. 120 :
The following e-filed documents, listed by NYSCEF document number (Motion 001) 5, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 55, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 89, 90, 91, 92, 114, 115, 116, 117 and 119 were read on this motion to dismiss.
This is an action for fraud and breach of contract arising out of a $37 million loan made in 2007 by defendant German American Capital Corporation (GACC) to plaintiff Oxley Development Company, LLC (Oxley). Defendants R.C. Patel, Jay Patel, and Sonial Patel (the Patel defendants) now cross move to dismiss on the grounds of lack of personal jurisdiction, failure to state a claim, and statute of limitations. The motion is granted.
As noted below, the original motion by the GAAC and the other Deutsche Bank entities (collectively the Deutsche Bank defendants) is moot insofar as the parties have executed a stipulation dismissing the action as against those defendants.
Background/The Complaint
The transactions underlying the complaint have been litigated in New York and Georgia over the course of nearly ten years and will be summarized only briefly here. In April 2007, Oxley executed a loan agreement secured by a $37 million promissory note in favor of GAAC, a subsidiary of defendant Deutsche Bank AG (Deutsche Bank) (Schimek Affirm., [Dkt. 61], Ex. D [Verified Complaint] [Compl.] [Dkt. 65] ¶ 9; Salcedo Affirm. [Dkt. 32], Ex. B [Loan Agreement] [Dkt. 34]). The loan was guaranteed by defendants Tidewater Plantation, Inc. (Tidewater) and Carl M. Drury III Compl. ¶11).
In 2010, GAAC moved in this court (Kornreich, J.) for summary judgment in lieu of complaint (CPLR 3213) upon the note and guarantees (German American Capital Corporation v Oxley Development Company, LLC , et al., New York Co. Index No. 651140/2010) (the 2010 Action). By order dated May 13, 2011 (Salcedo Affirm., Ex. D [Dkt. 36) (the 2011 Order), Justice Kornreich granted the motion. Because Oxley and its guarantors had expressly waived their rights to assert defenses or counterlaims, the court rejected their argument that GAAC's own alleged breaches of the loan agreement precluded entry of judgment (2011 Order, p. 8-9). Pursuant to the 2011 Order, on August 1, 2011, a judgment totaling approximately $49.5 million (the 2011 Judgment) was entered against Oxley and the guarantors (Salcedo Affirm., Ex. D [Dkt. 37]). An order domesticating the judgment in Georgia was entered on September 7, 2011 (Compl. ¶ 76).
The 2011 Order was affirmed by the Appellate Division, First Department in January 2013 (German Am. Capital Corp. v. Oxley Dev. Co., LLC, 102 AD3d 408 [1st Dept 2013]; lv denied 21 NY3d 862 [2013]). Oxley filed for bankruptcy in the Northern District of Georgia in August 2012 (Compl. ¶ 79). In October 2014, GAAC sued Drury and various affiliated companies in the Superior Court of Fulton County, Georgia, alleging that Drury had fraudulently conveyed some of the loan proceeds to avoid paying the judgment (Compl. ¶ 84).
In September 2017, Oxley and the guarantors moved to vacate the 2011 Judgment. They alleged that GAAC had fraudulently misrepresented the ownership of the loan, having transferred it to a different Deutsche Bank subsidiary, Deutsche Bank Trust Company Americas (DBTCA), prior to the commencement of the 2010 Action. Justice Kornreich denied the motion from the bench on February 7, 2018 [the 2018 Order) (Miltenberg Affirm. [Dkt. 70], Ex. 5 [Dkt. 75]). Characterizing the motion as "gamesmanship", the court noted that the judgment debtors should have raised the issue in the domestication action in Georgia, and that their application was untimely insofar as they alleged that they had first learned of the transfer upon receiving a title report in 2014 (2018 Order, 11:5-15; 11:24-12:5).
This action was commenced by the filing of a summons with notice in March 2017, although the complaint was not filed until December 2017. The allegations are directed primarily at the conduct of GAAC and other Deutsche Bank entities between 2007 and 2017, asserting that the loan was extended as a part of a fraudulent scheme to seize plaintiffs' assets. It includes the allegation that the loan was fraudulently transferred to DBTCA, and accuses the Deutsche Bank defendants of furthering the scheme by instituting various legal action and filings based upon the allegedly invalid judgment (Compl. ¶¶ 42-92).
As against the Patel defendants, the allegations center around their efforts in late 2017 to acquire plaintiffs' Georgia properties and the judgment from GAAC. The fifth cause of action for unjust enrichment demands that the Patels disgorge any profits or assets they may have received if they consummated an agreement with GAAC (Id., ¶¶ 193-96). The sixth cause of action for fraud, conspiracy, abetting and unjust enrichment seeks similar relief (Id., ¶¶ 212-15).
The Patels noticed their cross motion on March 28, 2018. Claiming that they had overlooked the efiled notice, plaintiffs contacted the court seeking leave to file late opposition papers (Salcedo May 4, 2018 letter [Dkt. 91], Ex. A [email chain] [Dkt. 92]). After the moving defendants objected, on April 24, 2018, the court notified the parties that it would decide what to do with the cross motion at the oral argument scheduled for June 1, 2018 (Id.). Plaintiffs nevertheless filed opposition papers, without leave of court, on May 2, 2018. By letter dated May 4, 2018, the Deutsche Bank defendants asked that the papers be disregarded as untimely, and for raising matters beyond the scope of their motion (Salcedo May 4, 2018 letter [Dkt. 91]).
After the motions were submitted, the Patel defendants advised the court of additional developments in the parties' dispute. To a letter dated October 18, 2018, they annexed a verified complaint filed by Tidewater, Oxley, Drury and other parties in the Superior Court of Camden County Georgia which disclosed that GAAC and Deutsche Bank were selling the Georgia property to a third party, the Freeman Capital Group, LLC (Freeman) (Schimek October 18, letter [Dkt. 115], Ex. 1 [Dkt. 116], ¶ 15). Also annexed was an affidavit from one of Freeman's managing members avering that on September 7, 2018, a subsidiary of Freeman closed on a transaction to purchase the property and be able to pursue GAAC's judgment (Schimek October 18, letter, Ex. 2 [Dkt. 117], ¶ 15).
Finally, the court takes judicial notice of certain recent filings in the dockets of this and the other New York action. First, by stipulation dated January 10, 2019, the parties agreed to the dismissal, with prejudice, of the Deutsche Bank defendants from this action (Dkt. 119). Second, a satisfaction of judgment was filed in the 2010 Action on February 13, 2019, confirming that GAAC was the owner of the judgment and the full amount of $49,474,138.39 had been fully satisfied (2010 Action, Dkt. 99).
Discussion
The motion is granted for lack of jurisdiction. As a preliminary matter, the court must disregard plaintiffs' opposition papers as untimely. "[W]hile a court has the discretion to grant an extension of time to file opposition papers, it must be upon a showing of good cause (see CPLR 2004). The delinquent party must offer a valid excuse for the delay" (Tec-Crete Transit Mix Corp. v Great Am. Ins. Co. of New York, 167 AD3d 806, 807 [2d Dept 2018], quoting Adotey v British Airways, PLC, 145 AD3d 748, 750 [1st Dept 2016]). The excuse offered here, that counsel overlooked the filing of defendants' papers, is a "perfunctory claim of law office failure" that does not justify relief (Quinones v Joan & Sanford I. Weill Med. Coll. & Graduate Sch. of Med. Scis. of Cornell Univ., 114 AD3d 472, 474 [1st Dept 2014]). Additionally, the papers were filed without leave of court and raised matters beyond the scope of the Patels' motion. The Patels properly elected to ignore them, and would be prejudiced if the court considered plaintiffs' late papers in the absence of the reply to which they would be have been entitled to file had plaintiffs proffered timely submissions.
On the record as it stands, there is no basis to maintain this action in New York. "On a motion to dismiss pursuant to CPLR 3211(a)(8), the plaintiff has the burden of presenting sufficient evidence, through affidavits and relevant documents, to demonstrate jurisdiction" (Coast to Coast Energy, Inc. v Gasarch, 149 AD3d 485, 486 [1st Dept 2017], citing Fischbarg v Doucet, 9 NY3d 375, 381 n. 5 [2007]). Here, the complaint affirmatively alleges that each of the Patel defendants is a resident of Georgia (Compl. 26-28), and does not specify the statutory or other basis for jurisdiction in New York. Furthermore, the real property at issue is in Georgia, and the Patels have submitted affidavits avering that all of their discussions with plaintiffs occurred in Georgia (Schimek Affirm., Exs A-C) [Dkt. 62-64]). When asked to discuss the Patels' motion at oral argument, their counsel discussed the underlying merits of the claims against them without addressing the jurisdictional question (June 1, 2018 Transcript [Dkt. 114], 36:34-39:34).
The existence of the New York judgment is not material to the jurisdictional analysis. None of the Patel defendants were parties to the loan agreement, the note, the guarantees or the 2010 Action. Moreover, the recent satisfaction of judgment recites that GAAC owned the judgment. And although the complaint quotes from a 2017 e-mail in which Jay Patel refers to "the loan I helped you obtain with Deutsche Bank" (Compl. ¶ 99), the pleading also affirmatively denies that the Patels "ever had anything whatsoever with the procurement of the loan" (Id., ¶ 99, fn.31). Moreover, the judgment was domesticated in Georgia eight years ago, and as noted, has been satisfied in full.
In light of this determination, it is unnecessary to address the parties' remaining arguments (see CDR Creances S.A.S. v First Hotels & Resorts Investments, Inc., 140 AD3d 558, 563 [1st Dept 2016].) In an excess of caution, however, the court notes that it concurs with defendants that plaintiffs' claims would be time-barred by virtue of its discovery of the alleged transfer of the loan in 2014. Likewise, the court agrees that the claims are largely a collateral attack on the 2011 Judgment which would more properly resolved by a CPLR 5015 motion to vacate (Yalkowsky v Century Apartments Assocs., 215 AD2d 214, 215 [1st Dept [1995]) -- the precise relief sought and denied by Justice Kornreich the day before the Deutsche Bank defendants noticed their now-academic motion. Lastly, it is unclear what would remain of this action given the dismissal of the Deutsche Bank defendants and plaintiffs' pursuit of Freemont parties for the same essentially the relief sought herein against the Patels.
Accordingly, it is hereby
ORDERED that the motion to dismiss of defendants R.C. Patel, Jay Patel and Sonial Patel is granted, and the claims against them are hereby dismissed, with costs and disbursements to those defendants as taxed by the Clerk of the Court upon submission of an appropriate bill of costs, and it is further
ORDERED that the Clerk is directed to enter judgment accordingly.
This constitutes the decision and order of the court.
Dated: 4/2/19
/s/_________
HON. ANDREA MASLEY, J.S.C.