Bloor v. Shapiro
| Decision Date | 15 August 1983 |
| Docket Number | No. 80 Civ. 5415 (KTD).,80 Civ. 5415 (KTD). |
| Parties | James BLOOR, as Reorganization Trustee of IFC Collateral Corporation and Invesco Holding Corporation, Debtors in proceedings for reorganization under Chapter X of the Bankruptcy Act, Plaintiff, v. Hyman R. SHAPIRO and Ruth Shapiro, Defendants. |
| Court | U.S. District Court — Southern District of New York |
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Anderson, Russell, Kill & Olick, P.C., New York City, for plaintiff-trustee; Richard W. Collins, Lynne E. Troy, New York City, of counsel.
Shea & Gould, New York City, for defendants; Martin I. Shelton, John G. Nicolich, New York City, of counsel.
The plaintiff, James Bloor, trustee in the bankruptcy of IFC Collateral Corporation and Invesco Holding Corporation, wholly owned subsidiaries of Investors Funding Corporation of New York,1 seeks partial summary judgment against the defendants Hyman and Ruth Shapiro. The three claims here at issue, plaintiff's first, third and fourth causes of action, arise under loan guarantees signed by the defendants. The Shapiros concede partial liability under the first cause of action; but as to the remaining claims, the Shapiro's allege that summary judgment is inappropriate given the existence of disputed issues of fact— whether the guarantees and underlying loans are conditional on the IFC Companies' performance of obligations not set forth in the written agreements. I agree in part with the defendants and will grant summary judgment only on the first cause of action.
The plaintiff also moves for summary judgment on, or, in the alternative, for dismissal of, the defendants' contractual counterclaims on two grounds: that the Shapiros lack standing to assert claims under contracts to which they are not parties and that the claims were in any event not timely interposed. Plaintiff also moves to dismiss the Shapiros' tort counterclaim for failure to state a claim upon which relief may be granted. Finally, the plaintiff moves to strike defendants' statute of limitations defense. These motions are denied in their entirety.
The following facts are taken from the undisputed allegations in the affidavits and exhibits submitted on this motion.
On June 1, 1973, IFC loaned about $180,000 to the Grand Linwood Corporation, a company controlled by the Shapiros. In an agreement of the same date, the Shapiros personally and unconditionally guaranteed payment of the Grand Linwood loan. In June 1974, the parties extended the time for payment of the principal indebtedness until April 1, 1975, with monthly interest payments at a 16 percent annual rate. The Shapiros continued to guarantee all payments under the extended agreement. Grand Linwood subsequently defaulted, failing to pay interest after October 1, 1974 and failing to pay the principal indebtedness by April 1, 1975. All amounts due in April, 1975 are still outstanding.
In early 1970, Norman Dansker, the president of IFC, and Hyman Shapiro "determined that they could assemble properties in Fort Lee , New Jersey, and that they would build a high-rise apartment complex thereon." Total cost of the project, known as "Colony North," was to be about $75,000,000. According to the Shapiro affidavit, "Dansker agreed that the IFC Companies would provide and obtain financing needed by the Shapiro companies to acquire the necessary parcels and to construct the improvements thereon."
Between 1970 and 1972, IFC financed the acquisition of the necessary property through ten different loans to Shaprock Corporation and Parker Palisades Associates, both Shapiro companies. Total indebtedness amounted to about $5 million. The Shapiros personally guaranteed each of the loans.
On October 17, 1972, in a writing called the "Shaprock Application," IFC agreed to provide $13 million in construction financing. In effect, this second mortgage loan was to replace a five-year $13 million second mortgage that the Chase Manhattan Bank had agreed to make in 1972. Chase's agreement to provide the loan was made expressly contingent upon IFC's agreement to provide $13 million in financing when the Chase loan expired. Since a $62 million first mortgage from the C.I. Mortgage Group was contingent upon Chase's agreement to make the $13 million second mortgage, $75 million of construction financing was in effect conditioned on IFC's agreement under the Shaprock Application. Thus, the Shapiros assert, in October, 1972 when the Shaprock Application was made, Dansker assured them that their liability under the guarantees and the liability of the Shapiro companies under the loans were conditioned on the IFC's agreement to make the $13 million second mortgage.
One month later, on November 17, 1972, the ten Shaprock and Parker mortgages were consolidated under a single agreement.2 In an agreement of the same date, the Shapiros undertook personally "to unconditionally guarantee payment of any and all sums payable" under the consolidated Shaprock Mortgage.3 The Shapiros assert that their liability as well as that of the Shapiro companies under the November 17 agreements was conditional, as evidenced by Dansker's assurances that repayment of the loan was subject to the condition that IFC make the $13 million second mortgage. On November 29, 1973, the period for repayment of the $2.7 million remaining due under the consolidated Shaprock mortgage was extended until January 15, 1975, at which point the entire principal balance together with accrued interest would be due. The Shapiros agreed that their obligations under the November, 1972 guarantee would remain unimpaired by the modification and extension of the loan.
In October 1974, the IFC companies became insolvent and filed petitions in bankruptcy. According to the Shapiros, it then became clear that IFC would not be able to provide the $13 million second mortgage; thus, the filing of petitions in bankruptcy constituted an anticipatory breach of the Shaprock Application. The Shapiro companies stopped making payments under the Shaprock mortgage. Chase and the C.I. Mortgage group stopped making advances under their loan agreements, and construction of Colony North came to a halt.
The Shapiros immediately attempted to obtain additional financing. In early 1975, Chase and the C.I. Mortgage Group expressed a willingness to provide additional financing, on the condition that the trustee in bankruptcy subordinate IFC's interest in the Shaprock Mortgage, in order to give the new financing superior security. The trustee refused to do so,4 and the proposed agreement fell through. The C.I. Mortgage Group subsequently foreclosed on its $62 million mortgage. A sale of the property produced no remaining proceeds and thus eliminated the interests of IFC, the Shapiros and the Shapiro companies.
The parties allege three causes of action arising out of this fiasco. First, the plaintiff attempts to hold the Shapiros to their guarantee for the unpaid balance of the Shaprock loan, about $2.3 million, plus acrued interest. Second, the Shapiros claim, as a set-off, that IFC is liable for the ruinous consequences of the breach of its agreement to provide the $13 million second mortgage under the Shaprock Application. Third, the defendants claim, also as a set-off, that the trustee committed a prima facie tort under New York law when he refused to subordinate the consolidated mortgage without excuse or justification and with an intent to cause the Shapiros harm.
In 1972, Dansker and Shapiro agreed to start another project. They "determined" that a parcel of property located on West 57th Street in New York City was suitable for the construction of a 48 story luxury apartment building, to be called "the Parc Vendome." They estimated that the total cost would run to about $56 million. IFC then acquired several fee and leasehold interests in the necessary property. In a contract of sale dated September 15, 1972, IFC agreed to sell these interests to Bolton, another Shapiro company. Bolton was to pay in part in cash and to take out a mortgage loan with IFC (the Bolton loan) for the balance.
In an agreement dated February 13, 1973 (the Bolton Application), IFC agreed to make a $10 million second mortgage loan to finance construction of the project. In the same agreement, Bolton authorized IFC to obtain a $46 million construction loan. Bolton also agreed to purchase the Pare Vendome property which had been acquired by IFC. At this time, Dansker assured the Shapiros that "repayment of the Bolton loan not yet made was conditioned upon the IFC Companies' obligation to make the $10,000,000 Second Mortgage Loan and to keep their other financing commitments for Parc Vendome." One month later, on March 20, 1973, the parties closed the Bolton contract of sale. Bolton borrowed $3.1 million from IFC as part of the purchase price, and secured the loan with a mortgage on the property. In May 1973, Vendome, another Shapiro company, entered into a construction loan agreement with Chase. Chase agreed to provide $46 million in construction financing on the condition that IFC fulfill its financing commitments.
In November 1, 1973, the parties entered into the Bolton Modification, which altered, amont other things, the repayment schedule of the Bolton loan. In an agreement dated the same day, the Shapiros gave their personal guarantee for payments under the loan.
IFC filed bankruptcy petitions in October 1974, and it became clear that the company would be unable to meet its financial commitments. Chase refused to make further advances under the $46 million loan, and construction came to a halt. The Shapiro companies made no further payments under the Bolton modification. Chase foreclosed on the property, and the proceeds of the sale were applied to its mortgage. IFC and the Shapiros thus lost their interests in the Parc Vendome.
Again, the...
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