Branning v. Morgan Guar. Trust Co. of New York, Civ. A. No. 2:85-1783-8.

• Decision Date: 08 June 1990
• Docket Number: Civ. A. No. 2:85-1783-8.
• Citation: 739 F. Supp. 1056
• Parties: Cloide C. BRANNING, Plaintiff, v. MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a Corporation, Walter W. Driver, Jr., and Joseph R. Bankoff, Defendants.
• Court: U.S. District Court — District of South Carolina

739 F. Supp. 1056

Cloide C. BRANNING, Plaintiff, v. MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a Corporation, Walter W. Driver, Jr., and Joseph R. Bankoff, Defendants.

Civ. A. No. 2:85-1783-8.

United States District Court, D. South Carolina, Charleston Division.

June 8, 1990.

Francis T. Draine, Columbia, S.C., for plaintiff.

Henry B. Smythe, Jr., Charleston, S.C., Thomas H. Pope, Newberry, S.C., for defendants.

ORDER

BLATT, District Judge.

This civil case is before the court on the defendants' motions to dismiss the third amended complaint for failure to state a claim upon which relief can be granted. These motions were referenced to a United States Magistrate, who heard this matter in accordance with 28 U.S.C. § 636. In the course of those proceedings the parties submitted materials outside the scope of the pleadings; therefore, the magistrate converted the motions to dismiss into motions for summary judgment. On February 1, 1989, the magistrate entered a report and recommendation in which he recommended that summary judgment be granted for the defendants. The parties were notified of their right to file objections to the magistrate's report and of the consequences for failure to do so in a timely manner; in response, the plaintiff filed timely objections.

The report and recommendation of the United States Magistrate was made in accordance with 28 U.S.C. § 636 and the local rules of this district concerning reference to a magistrate. See United States Magistrates, Local Rule 19, D.S.C.; Social Security Cases, Local Rule 20, D.S.C.; Bowman v. Bordenkircher, 522 F.2d 209 (4th Cir.1975). Under 28 U.S.C. § 636(b),

a judge of the court shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made. A judge of the court may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate. The judge may also receive further evidence or recommit the matter to the magistrate with instructions.

Absent timely objection from a dissatisfied party, a district court is not required to review, under a de novo or any other standard, a magistrate's factual or legal conclusions. Thomas v. Arn, 474 U.S. 140, 150, 106 S.Ct. 466, 472, 88 L.Ed.2d 435 (1985). In the present case, the plaintiff has filed objections to the magistrate's report; therefore, this court will conduct a de novo review of those portions of the magistrate's report to which objections were made.

The plaintiff, Cloide C. Branning (Branning), was a partner in a real estate joint venture named Pleasant Point Plantation. The other members of the partnership were Jack Pendley and David Pendley. The partnership was formed on November 28, 1973, to develop a residential golf community on Lady's Island, Beaufort County, South Carolina. The partnership, to secure the necessary financing, entered into a buy-sell agreement with Morgan Guaranty Trust Company of New York (Morgan) and Atlanta National Real Estate Trust (Anret). Under this agreement, dated June 11, 1974, Morgan loaned the partnership $1.5 million. The agreement further provided that Anret would purchase this loan from Morgan on or before July 1, 1976. This loan was guaranteed by Branning. Subsequent to the first agreement, Branning alleges that Morgan, Anret, and the Pendley brothers secretly agreed that Anret would only be liable to Morgan for $1.3 million on the Pleasant Point venture — (the side agreement). Branning believes this happened between April 8, 1974, and October 3, 1974. This second agreement was allegedly made in conjunction with a restructuring and consolidation of debts owed by third parties to Anret. Walter W. Driver, Jr. (Driver) and Joseph H. Bankoff (Bankoff) were Morgan's attorneys in this transaction. On October 3, 1974, the original buy-sell agreement was amended to reflect Morgan's commitment to provide an additional $1 million in financing, for a total of $2.5 million, and the due date for Anret's purchase was extended to July 31, 1976. On June 21, 1976, the Pendley brothers transferred their interest in Pleasant Point Partnership to Branning.

On July 31, 1976, notwithstanding the terms of the alleged side agreement, Morgan demanded that Anret comply with the terms of the amended buy-sell agreement. Anret was unable to purchase the notes pursuant to the amended buy-sell agreement; Morgan then demanded payment of the $2.5 million loan from Pleasant Point. Pleasant Point was unable to fulfill its obligation, and Morgan then commenced two law suits. On August 1, 1976, Morgan sued Anret in state court in Georgia on the amended buy-sell agreement — (the Georgia suit). In July, 1980, that suit was settled for $1.3 million, and the record was then sealed in that case. On September 24, 1976, Morgan foreclosed on the real estate in state court in South Carolina — (the foreclosure suit) — and on September 8, 1979, Morgan received a $4.2 million judgment in that action. The property was then purchased at foreclosure sale on November 5, 1979, by Morprop, a Morgan subsidiary, for $1.45 million. In the meantime, Morgan pursued a deficiency against Branning, and received a $2.8 million judgment in September, 1980; in July, 1981, Morprop sold the property for $2.2 million.

Branning, on October 1, 1976, sued the United States in the Court of Claims — (the avigation suit). This suit alleged that the United States had unlawfully taken an aviation easement over Pleasant Point through military overflights. Branning's creditors, including Morgan, were joined as third-parties in this suit. Branning, in May, 1985, was awarded $2 million, plus interest from the date of the taking, for a total judgment of $4,514,796.08. There were two later settlements involved in that case. Morgan and Branning negotiated a $500,000.00 credit for Branning on his indebtedness to Morgan in exchange for a full release for Morgan from Branning for any and all claims relating to the Georgia suit — (the Anret stipulation). The proceeds of the avigation suit were then distributed to Branning's creditors, with the consent of all parties to the avigation suit, and the approval of the Claims Court — (the distribution stipulation). Morgan received $4,436,703.28.

Subsequently, in June, 1985, Branning instituted this suit. The original complaint sought a further credit from Morgan than that obtained in the Anret stipulation, and asked this court to order the unsealing of the record in the Georgia suit between Morgan and Anret. After limited discovery, Branning filed an amended complaint on April 17, 1986, naming Driver and Bankoff as additional defendants and alleging fraud, constructive fraud, breach of contract accompanied by fraudulent acts, tortious interference with contract, and a RICO claim against the defendants. This complaint also sought to repudiate the compromise embodied in the Anret stipulation, on the ground that Branning's attorneys lacked the authority to enter into the Anret stipulation. This court ordered Morgan to allow Branning access to the Georgia records in July, 1986.¹ In August, 1986, the parties returned to the Claims Court. The Claims Court held several hearings in which Branning argued that his Washington attorneys mislead him with regard to, and/or did not have the authority to enter into, the stipulations, and that Morgan's counsel mislead Branning and his counsel. The Honorable Mastin White, United States Claims Court Judge, upheld the authority of Branning's attorneys to enter into the distribution stipulation and ordered the proceeds of the avigation suit distributed accordingly.

This court, in February, 1988, conducted a hearing on the defendants' motions to dismiss the amended complaint. As a result of this proceeding, the RICO claim was dismissed, and a second amended complaint was filed. On June 27, 1988, a third amended complaint was filed to correct technical deficiencies in the plaintiff's fraud allegations. It is this complaint that is presently before the court.

There is one other proceeding of note. Branning, on February 3, 1988, filed a motion with the South Carolina Supreme Court for a new trial in the Beaufort County foreclosure action. The grounds for this motion were identical to the theories advanced in the present case. On May 17, 1988, the motion was summarily denied under Supreme Court Rule 23.

In the third amended complaint, Branning is suing the defendants for their actions with regard to the Anret stipulation and the alleged side agreement. The remaining claims are for breach of contract with fraudulent acts, tortious interference with contract, constructive fraud, and fraud. The plaintiff alleges, in brief, that the defendants deprived Branning of credit on the Morprop sale and the Anret settlement by suppressing information concerning the Anret side agreement and settlement, that the side agreement with Anret was a material breach of the buy-sell agreement, and that the defendants, including Driver and Bankoff as alleged agents of Morgan, breached the buy-sell agreement by these deceitful acts; that defendants Driver and Bankoff, as agents and attorneys for Morgan, tortiously interfered with the buy-sell agreement by advising and encouraging Morgan and Anret to enter into the side agreement, and for failing to give Branning credit for the Anret settlement; that the defendants violated the public confidences arising from their equitable relationship with the plaintiff; and that the defendants, during the Claims Court proceedings, made misleading representations to the plaintiff concerning the side agreement, which induced the plaintiff to sign the Anret stipulation.

The defendants filed motions to dismiss based on a variety of grounds. These motions were referenced to Magistrate Carr, who converted the defendants' motions to dismiss into motions for summary judgment, because each party had submitted exhaustive materials outside the pleadings....