INDUSTRI & SKIPSBANKEN A/S v. Levy
| Decision Date | 19 June 1995 |
| Docket Number | No. 95 Civ. 0137 (RWS).,95 Civ. 0137 (RWS). |
| Citation | 183 BR 58 |
| Parties | INDUSTRI & SKIPSBANKEN A/S, Plaintiff, v. Andrew A. LEVY and Ragnvald Gabrielsen, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Healy & Baillie (Glen T. Oxton, Susan Emma Olick, of counsel), New York City, for plaintiff Industri & Skipsbanken A/S.
Andrew A. Levy, New York City, defendant pro se.
Haight, Gardner, Poor & Havens (Richard A. Menchini, Robert A. O'Hare, of Counsel), New York City, for defendant Ragnvald Gabrielsen.
Plaintiff Industri & Skipsbanken A/S ("I & S" or "the Bank") has moved under Rule 56 Fed.R.Civ.P., for summary judgment to enforce the guaranty of the Defendants Andrew A. Levy ("Levy") and Ragnvald Gabrielsen ("Gabrielsen") (collectively, the "Defendants"). Levy has cross moved under Rule 12(b)(7) and Rule 19, Fed.R.Civ.P. to dismiss the complaint for failure to join necessary parties or, in the alternative, under 28 U.S.C. § 1404 to transfer this action to the United States District Court for the Southern District of Texas, Houston Division, or to stay this action pending certain proceedings in the Bankruptcy Court for the Southern District of Texas, Houston Division. Gabrielsen has similarly moved for the transfer of this action to the United District Court for the Southern District of Texas, Houston Division, or for a stay. For the reasons set forth below, the motion of I & S for summary judgment is granted. The motion of Levy to dismiss the complaint is denied, and the motions of Levy and Gabrielsen to transfer the action to the United States District Court for the Southern District of Texas, Houston Division, are granted.
This action was commenced by I & S by the filing of a complaint on January 9, 1995 seeking to enforce the personal guaranty of Levy and Gabrielsen. I & S moved for summary judgment on its complaint on February 7; Levy cross-moved to dismiss the complaint for failure to join an indispensable party or to transfer the action to the United States District Court for the Southern District of Texas or for a stay pending the resolution of its application in the Bankruptcy Court to lift the stay which barred I & S from foreclosing on its security. Gabrielsen also cross-moved for transfer and a stay. On February 27 Levy filed an answer and crossclaim which might be construed as alleging a fraudulent misrepresentation by I & S and Gabrielsen in connection with the sale of the oil rig which was the asset underlying the transactions between the parties.
The motions were heard on March 22 and considered fully submitted at that time.
The facts set forth are in the 3(g) statements of the parties or in affidavits which have not been contravened. I & S is a Norwegian bank and Levy and Gabrielsen are individuals, the former residing in New York and the latter with an office and residence in Houston, Texas, where he lives for a substantial part of each year.
Big Foot Two Ltd. ("Big Foot"), a Liberian corporation, was formed by Levy and Gabrielsen as principals to purchase Big Foot Two, a jack-up oil drilling rig registered under the laws of the Republic of Vanuatu, since renamed NR Big Foot (the "Oil Rig"). I & S had previously foreclosed on the Oil Rig which had been owned by a defunct Norwegian tax shelter partnership.
On December 28, 1992, I & S and Big Foot Two Ltd. entered into a Loan Agreement (the "Loan Agreement") under which I & S agreed to loan to Big Foot as the Borrower the sum of $1,620,000 to enable Big Foot to purchase the Rig. The terms of the sale of the Oil Rig were 10% down in cash plus 90% of the purchase price paid to I & S in the form of the Loan. Big Foot acquired the Rig and granted a first preferred ship mortgage on it in favor of I & S which was recorded with the Vanuatu Deputy Commissioner of Maritime Affairs on December 29, 1992, in Book PM 13, at Page 88.
Prior to the sale to the Defendants, I & S informed Merchant Partner A/S, the broker in the transaction, that it estimated that it would require between $400,000 and $500,000 to get the Rig ready to drill. Paragraph 3 of the contract of purchase and sale required that Big Foot establish a cash reserve of $500,000 to refurbish the Oil Rig. According to information learned by Levy after the purchase, the Oil Rig had been involved in a severe accident prior to the sale and as a result $2.9 million was required for refurbishing.
On July 8, 1993, I & S and Big Foot entered into an amendment (the "Amendment") to the Loan Agreement under which I & S agreed to defer an installment that was due under the original Loan Agreement and to advance an additional loan of $518,000 to Big Foot (the "Second Loan"). One of the conditions of the Amendment was the issuance by Levy and Gabrielsen and another of their companies, NR Marine, Inc., of a Guaranty and Subordination Agreement under which they would unconditionally jointly and severally guaranty the prompt payment of up to $500,000 principal amount of the Second Loan (the "Guaranty"). The Guaranty was signed by Levy & Gabrielsen as guarantors on July 9, 1993.
The Mortgage on the Rig was amended to reflect the terms of the Amendment (including a redefinition of "Loan" to include the Second Loan) by an Amendment No. 1 thereof, dated July 9, 1993, recorded with the Vanuatu Deputy Commissioner of Maritime Affairs in New York, New York, on July 9, 1993 in Box PM 14, at Page 40.
Among the events of default specified in Section 15 of the Mortgage is the following:
Failure to pay any installments of principal or interest on the Loan, and such failure shall continue for a period of five (5) days after written notice from the Lender.
According to the terms of the Loan Agreement, Big Foot was to repay the loan by quarterly installments of $60,000 with the balance to be paid by a final installment payment with the full amount of the loan under the Amended Loan Agreement to be repaid on July 12, 1994.
By telefax dated March 16, 1994, I & S advised Big Foot that interest was owing for the period December 29, 1993 to March 29, 1994 in the amount of $25,149.38 and that an installment payment was due of $60,000. I & S, by telefax dated April 5, 1994, similarly advised of the interest owing for the additional amount of the Loan Agreement made by Amendment No. 1. No payments were made.
In April 1994, an officer of I & S in charge of the loan attended a meeting with Levy. Levy represented to the I & S officer that Big Foot would settle the overdue amounts and that the Oil Rig was earning money.
In May I & S proposed a loan restructuring which would require, among other things, that all amounts due and owing under the Loan Agreement would be paid by June 29, 1994. Levy represented that the interest due and owing under the Loan Agreement would be paid by May 13.
Levy, by letter of May 31, 1994, stated that "requirements of overdue vendors, operating costs and repairs has absorbed all available cash" and that Big Foot was embarking on refinancing of the Oil Rig which would take six to eight weeks "at which point we intend to completely repay the Bank."
By letter dated June 9, 1994, I & S advised Levy that its board of directors had "decided not to foreclose now but to await the six to eight weeks that you need to accomplish the refinancing" provided that all due interest was paid and asking for various other information. Levy responded that Big Foot was "unable to pay the interest due immediately but we should be able to pay it in a few weeks" and that he would provide the information and documents requested.
By letter dated June 24, 1994, Levy stated that refinancing negotiations would take at least another two or three months and proposed terms for payment of the overdue amounts of $560,000 by way of, among other things, a second mortgage. By letter dated June 29, 1994, Big Foot was advised of the interest installment amounts due and owing and documents and information were again requested.
By letter dated July 6, 1994, I & S advised Levy of the terms upon which I & S would agree to a second mortgage on the Oil Rig. Levy, by letter dated July 8, 1994, provided the terms under which I & S had agreed to a second mortgage to Messrs. Healy & Bailie, counsel for I & S, to permit counsel to prepare the second mortgage.
By letter dated July 14, 1994, I & S advised Big Foot of the amounts due and owing under the Loan Agreement and by letter dated July 25, 1994 I & S requested Levy to advise the amount that Big Foot would be paid by Gabriel Invest, Inc. Levy stated that Gabriel Invest Ltd. had proposed a $1 million loan to N.R. Marine, Inc. of which $500,000 would be used to pay the Loan Agreement, which Loan Agreement was, however, delayed while N.R. Marine, Inc. negotiated the sale of "all of its rigs." Accordingly, Levy asked I & S "to be patient for several days."
By letter dated August 10, 1994, I & S advised Levy that Big Foot was in material default of the Loan agreement and that I & S would "take the necessary steps to commence a foreclosure procedure" against the Oil Rig. I & S was "willing to await a full settlement of the loans, interest and costs until September 30, 1994 by which date a voluntary sale of N.R. Big Foot must have taken place" but without any requirement that I & S forebear foreclosing should, among other things, another creditor seize the Oil Rig.
Levy telefaxed a signed copy of the I & S letter dated August 10, 1994, stating in his handwriting:
Accepted: Big Foot Two Ltd. by A. Levy under power of attorney.
On August 24, 1994, Big Foot, N.R. Marine, Inc. and four affiliated corporations filed separate petitions for reorganization under Chapter 11 in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (94-45723, -40, -44, -47, -48, -49 -HI-11) (the "Bankruptcy Proceeding").
I & S moved on November 3, 1994 in the Bankruptcy Proceeding to lift the automatic stay to permit...
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