General Ins. Co. v. Fort Lauderdale Partnership

• Decision Date: 21 May 1990
• Docket Number: No. 89-26Z.,89-26Z.
• Citation: 740 F. Supp. 1483
• Court: U.S. District Court — Western District of Washington
• Parties: GENERAL INSURANCE COMPANY OF AMERICA, a Washington corporation, Plaintiff, v. FORT LAUDERDALE PARTNERSHIP, a general partnership; et al.

740 F. Supp. 1483

GENERAL INSURANCE COMPANY OF AMERICA, a Washington corporation, Plaintiff, v. FORT LAUDERDALE PARTNERSHIP, a general partnership; et al.

No. 89-26Z.

United States District Court, W.D. Washington, N.D.

May 21, 1990.

COPYRIGHT MATERIAL OMITTED

B. David Thomas, Windus, Thomas, Calmes & Wiley, Bellevue, Wash., for plaintiff.

Robert Farnum Bakemeier, Bogle & Gates, Seattle, Wash., Alan B. Rubenstein, Rackman, Sawyer & Brewster, Boston, Mass., for defendant Domenick Nicolaci.

Ramer B. Holtan, Jr., Perkins, Coie, Seattle, Wash., Donald H. Shaw, Shaw & Markistin, New York City, for defendant Harry Walker.

ORDER GRANTING SUMMARY JUDGMENT AND DENYING MOTION TO DISMISS

ZILLY, District Judge.

THIS MATTER comes before the Court upon plaintiff's motion for summary judgment and defendant's motion to dismiss for lack of personal jurisdiction. This Court took both motions under advisement following oral argument on May 4, 1990. The Court now being fully advised hereby GRANTS plaintiff's motion for summary judgment (docket no. 33) and DENIES defendant's motion to dismiss (docket no. 45).

Plaintiff General Insurance Company of America ("General") issued a $1,893,500 bond in favor of Banque Indosuez. The bank extended financing to Cypress Corners South ("Cypress Corners"), a New York limited partnership with commercial real estate holdings in Florida. Defendants Domenick Nicolaci and Harry Walker were limited partners in Cypress Corners. They purchased their interests with little cash down by executing relatively large promissory notes in favor of the partnership.

The financing from Banque Indosuez was secured by the partnership's assignment to the bank of the limited partners' promissory notes, including those executed by Nicolaci and Walker. The bond issued by General guaranteed the limited partners' obligations under the notes. General moves for summary judgment in the amount of $122,787.35 against defendant Nicolaci and $130,367.76 against defendant Walker. The figures represent sums paid by General to Banque Indosuez following the defendants' defaults on their promissory notes, and General's attorney fees and costs in prosecuting this claim.

As consideration for issuing the bond, General required both Nicolaci and Walker execute an "Indemnification and Pledge Agreement." See Oswald Decl., Exhs. D & E. Those agreements obligate each partner to indemnify General for any amounts paid on the bond by reason of the partner's default on the underlying note. See id. at ¶ 3, p. 2. Each partner is further obligated to pay interest thereon at the highest legal rate, as well as any costs or expenses, including reasonable attorney fees, incurred by General.

Defendants Nicolaci and Walker do not deny that they signed the promissory notes and indemnity agreements, that they failed to make payments on the notes, and that General made the payments they missed. Other than in one minor aspect, see infra section B.6. (attorney fees), neither defendant directly challenges the sufficiency of General's summary judgment motion. Rather, they individually interpose numerous defenses to liability. To defeat summary judgment, therefore, each defendant must at least raise a genuine issue of fact as to each material element of their defenses.

A. Domenick Nicolaci

Defendant Nicolaci moves to dismiss this action for lack of personal jurisdiction. He also resists the instant summary judgment motion on grounds that the indemnity agreement is unenforceable because it was part of a package of contracts which were procured by fraud, and that his signature on the indemnity agreement was fraudulently obtained by a third person who was acting as an agent of General.

1. Personal Jurisdiction¹

Nicolaci is a resident of Massachusetts. General Insurance is a Washington corporation. Cypress Corners is a New York limited partnership which owned and operated an office building in Fort Lauderdale, Florida. Nicolaci denies having minimum contacts with the state of Washington. General does not dispute Nicolaci's denial, but argues instead that Nicolaci consented to this Court's jurisdiction under terms of the Indemnification and Pledge Agreement. See Oswald Decl., Exh. D, at ¶ 9, p. 4.² Nicolaci denies being bound by the forum selection clause on grounds that he never assented thereto or that his assent was fraudulently obtained.

In The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), the U.S. Supreme Court ruled forum selection clauses "are prima facie valid and should be enforced unless enforcement is shown by the resisting party to be `unreasonable' under the circumstances." Id. at 10, 92 S.Ct. at 1913, 32 L.Ed.2d at 520. The Court imposed a high standard of proof for the party resisting the jurisdictional claim: The forum selection clause should control "absent a strong showing" that enforcement would be unreasonable or unjust, or that the clause was invalid for such reasons as fraud or overreaching. Id. at 15, 92 S.Ct. at 1916, 32 L.Ed.2d at 523 (emphasis supplied).

The factual allegations here are relatively straightforward. Defendant Nicolaci claims he was unaware of the forum selection clause at the time he executed the Indemnification and Pledge Agreement. See Nicolaci Aff., at ¶ 12, p. 5. Indeed, as part of a broader allegation of fraud, Nicolaci alleges that his financial adviser, Richard Abedon, fraudulently induced him to invest in Cypress Corners by misrepresenting the risk involved and the amount of income the investment was expected to generate. See id. at ¶ 10, pp. 4-5. He further alleges that Abedon induced him to sign the necessary investment documents, including the indemnity agreement, without disclosing their contents and after assuring him that he had thoroughly examined each and had already approved of them. See id. at ¶ 11, p. 5.

The jurisdiction in this action is founded upon diversity of citizenship. This Court is therefore required to apply Washington law on the threshold question of whether the forum selection clause is valid and enforceable. See, e.g., Colonial Leasing Co. v. Pugh Bros. Garage, 735 F.2d 380, 382 (9th Cir.1984) (applying Oregon contract law). The Washington rule concerning a party's failure to read a contract term is summarized in National Bank v. Equity Investors, 81 Wash.2d 886, 506 P.2d 20 (1973):

A party to a contract which he has voluntarily signed will not be heard to declare that he did not read it, or was ignorant of its contents. One cannot, in the absence of fraud, deceit or coercion be heard to repudiate his own signature voluntarily and knowingly fixed to an instrument whose contents he was in law bound to understand.

National Bank, 81 Wash.2d at 912-13, 506 P.2d 20 (citations omitted). The Washington Supreme Court in Skagit State Bank v. Rasmussen, 109 Wash.2d 377, 745 P.2d 37 (1987), elaborated on National Bank, holding the relevant inquiry includes whether: (1) the party had an opportunity to examine the documents; (2) the documents were plain and unambiguous; (3) the party was sufficiently sophisticated and experienced to understand the documents he signed; and (4) the party was the victim of fraud, deceit or coercion. Skagit State Bank, 109 Wash.2d at 382-84, 745 P.2d 37.

The first three factors are clearly satisfied under the facts presented. First, Nicolaci does not allege he was denied an opportunity to examine the indemnity agreement. Rather, he alleges he declined to do so in reliance upon his "trust and confidence in Abedon." Nicolaci Aff., at ¶ 12, p. 5. Second, the five-page indemnification agreement is plain and unambiguous, see Oswald Decl., Exh. D, and Nicolaci does not contend otherwise. Third, Nicolaci was not an unsophisticated businessman. Indeed, at the time he entered into the Cypress Corners investment he was the chairman and part-owner of Cliftex Corp., a company with projected annual sales of $120,000,000. See Paterson Decl., Exh. A (Dun & Bradsheet Report).

The only remaining question, therefore, is whether the alleged fraud by Abedon vitiates Nicolaci's assent in signing the indemnity agreement with General. As an initial matter, there is no allegation here that Abedon misrepresented the terms of the indemnity agreement or the fact that it included a forum selection clause. Cf. Farmland Industries, Inc. v. Frazier-Parrott Commodities, Inc., 806 F.2d 848, 851 (8th Cir.1986). More importantly, because Nicolaci's fraud defenses fail for the reasons described in sections A.2.-.3, infra, Nicolaci is bound by the parties' contractual selection of this forum.

Even if this Court were to conclude that Nicolaci's fraud allegations raise triable issues of fact, Nicolaci would still be subject to this Court's jurisdiction absent a "strong showing" that the parties' choice should be set aside. The Bremen, 407 U.S. at 15, 92 S.Ct. at 1916, 32 L.Ed.2d at 523. The facts presented negate such a showing. In particular, the signature page of the indemnity agreement, which Nicolaci acknowledges signing, includes the final words of the Washington forum selection clause. See Oswald Decl., Exh. D, p. 5 ("... and Investor hereby submits to the jurisdiction of any such court."). This language should have at least put Nicolaci on notice that the document might obligate him to defend himself in a foreign forum. Under these circumstances, and in view of the defendant's undisputed business sophistication, this Court concludes that Nicolaci has failed to make a sufficient showing to avoid enforcement of the forum selection clause. Accordingly, Nicolaci's motion to dismiss for lack of personal jurisdiction is denied.

2. Fraudulently Procured "Package" of Contracts

Defendant Nicolaci next contends that the indemnification agreement was part of a "package" of contracts which were procured by fraud. On December 11, 1984, Nicolaci executed three key documents: (1) a $199,400 promissory note in favor of Cypress Corners, representing his purchase...