Chemical Bank v. Haseotes, 742

• Decision Date: 05 January 1994
• Docket Number: No. 742,D,742
• Citation: 13 F.3d 569
• Parties: 22 UCC Rep.Serv.2d 583 CHEMICAL BANK, Plaintiff-Appellant, v. Demetrios B. HASEOTES, Belmont VLCC I, Inc., Belmont VLCC II, Inc. and Belmont VLCC III, Inc., Defendants-Appellees, J. Aron & Co., Vitol Holdings B.V. and Cumberland Farms, Inc., Intervenor-Defendants-Appellees. ocket 93-7794.
• Court: U.S. Court of Appeals — Second Circuit

Page 569

13 F.3d 569

22 UCC Rep.Serv.2d 583

CHEMICAL BANK, Plaintiff-Appellant, v. Demetrios B. HASEOTES, Belmont VLCC I, Inc., Belmont VLCC II, Inc. and Belmont VLCC III, Inc., Defendants-Appellees J. Aron & Co., Vitol Holdings B.V. and Cumberland Farms Inc., Intervenor-Defendants-Appellees.

No. 742, Docket 93-7794.

United States Court of Appeals Second Circuit.

Argued Sept. 27, 1993.

Decided Jan. 5, 1994.

Mark J. Hyland, New York City (Peter C. Mester, Seward & Kissel, of counsel), for plaintiff-appellant Chemical Bank.

Stuart A. Summit, New York City (Michael J. Silverberg, Wayne Josel, Joseph Scholz, Phillips, Nizer, Benjamin, Krim & Ballon, of counsel), for intervenor-defendant-appellee Vitol Holdings, B.V.

Melvin A. Brosterman, New York City (David Neier, Matthew Mayers, Stroock & Stroock & Lavan, of counsel), for defendant-intervenor-appellee J. Aron & Co.

Martin P. Ochs, Goldberg & Pines, New York City (Stephen F. Gordon, Stanley W. Wheatley, Gordon & Wise, Boston, MA, of counsel), filed a brief on behalf of defendants-appellees Demetrios B. Haseotes, Belmont Before: CARDAMONE, McLAUGHLIN and LAY, ^* Circuit Judges.

VLCC I, Inc., Belmont VLCC II, Inc., and Belmont VLCC III, Inc.

PER CURIAM:

Chemical Bank (Chemical or appellant) appeals from a portion of an order of the United States District Court for the Southern District of New York (McKenna, J.), entered August 6, 1993, that denied Chemical's motions for a mandatory injunction. The order Chemical sought would have enjoined appellee Demetrios Haseotes to bring his shares of Newfoundland Energy Limited (NEL) into New York so that they could be attached, and also would have enjoined Haseotes from the sale of his NEL shares to Vitol Holdings, B.V. (Vitol), an intervenor-appellee.

BACKGROUND

A. Chemical Bank's Loan

In September 1990 Chemical Bank's predecessor in interest, Manufacturers Hanover Trust Company, loaned $50 million to the Belmont Corporations, three entities that together owned three "Very Large Crude Carriers." The loan was secured by mortgages on each of the ships, and by a personal guarantee of up to $20 million given by Haseotes, the sole owner of the Belmont Corporations. After the loan was made, the Belmont Corporations defaulted. Chemical alleges it gave notice of the default to the Belmont Corporations and demanded payment in full in June of 1992. In November 1992 Chemical caused the ships to be arrested, two in Greece and one in South Africa. The one arrested in South Africa was sold at auction for $4.5 million and the others were sold at auction in Greece for a combined price of about $13 million.

On April 29, 1993 Chemical sued Haseotes and the Belmont Corporations to recover the deficiency on the $50 million loan, which Chemical declares exceeds $32 million. It filed an amended complaint on June 18, 1993 that added claims against Haseotes for fraudulent conveyances in violation of the New York Debtor and Creditor Law, N.Y.Debt. & Cred. Law Secs. 273, 276 (McKinney 1980).

B. The Vitol Agreement

Haseotes owns all of the stock of Newfoundland Energy Limited (NEL), a Bermuda Corporation. NEL in turn owns all of the stock of Newfoundland Processing, Ltd. (NPL), a Canadian corporation, that owns an oil refinery in Canada. On October 5, 1992 Haseotes entered into an agreement with Vitol to sell all of his stock in NEL to Vitol for $125 million plus an earn out worth up to $25 million. The agreement is expressly conditioned on Haseotes' settling all claims against NPL.

At the time of the Vitol agreement, the claims asserted against NPL were in excess of $200 million. Of this amount, $76.1 million comprised uncontested debts. Another $92 million was claimed by Cumberland Farms, a company in which Haseotes owns 25 percent, the remainder being owned by his relatives. Cumberland Farms is now a Chapter 11 debtor-in-possession. Included in Cumberland Farms' claim against NPL is a sum allegedly due on $52 million in advances made to Cumberland Crude Processing, Inc. (Cumberland Crude), a company in which Haseotes is a 100 percent beneficial owner. Cumberland Farms asserted this claim against NPL because NPL had guaranteed Cumberland Crude's debt on which that company had defaulted. Finally, intervenor J. Aron & Co. (Aron) claimed that it was owed $44 million by NPL for its alleged wrongful conversion of oil refined for Aron at the NPL refinery. Although prior to the Vitol agreement Aron had commenced a wrongful conversion action against Cumberland Crude, Cumberland Farms, NPL, and Haseotes as guarantor of Cumberland Crude's liability for up to $33 million, it asserted the entire amount allegedly due against NPL, because NPL agreed in writing not to dispose of the In an attempt to meet the conditions of the Vitol agreement, Haseotes entered negotiations with Cumberland Farms and Aron, and reached agreements with both as to settlements of their respective claims against NPL. Cumberland Farms agreed that if the Vitol agreement went through, it would settle all of its claims against NPL for $23 million plus any earn out, up to another $25 million. During his negotiations with Cumberland Farms, Haseotes entered an agreement with the other shareholders in which each shareholder agreed not to receive directly or indirectly any money or other consideration or proceeds with respect to the sale of the NEL stock, or from any claim he or she might have against Cumberland Crude, NPL or NEL. There is some evidence that NPL owed Haseotes between $10-20 million. Thus, by entering this agreement, Haseotes relinquished any right he might have had to recover this purported debt. Haseotes' negotiations with Aron resulted in an agreement to settle Aron's claims against NPL for $30 million and a release of any alleged liability from Haseotes. Aron also agreed to give releases to NPL, Cumberland Crude, Cumberland Farms and Haseotes.

refinery's assets prior to satisfying Aron's claim.

C. Proceedings Appealed From

By order to show cause submitted on notice on June 21, 1993, Chemical moved for an order to attach Haseotes' assets in New York, a mandatory injunction ordering Haseotes to bring his NEL shares into New York, and a preliminary injunction enjoining the sale of the NEL shares to Vitol or attaching a portion of the sale proceeds. The order to show cause, which included a temporary restraining order preventing the closing of the sale, was signed on June 23 by United States District Judge Conboy, who later recused himself. On July 26, 1993 this case was reassigned to Judge McKenna.

Following expedited discovery, Judge McKenna held a hearing on August 4, 1993 on Chemical's motions, and also heard Vitol's, Aron's and Cumberland Farms' motions to intervene. The district court granted the motions to intervene. It also granted an attachment of any of Haseotes' assets found in New York City. The court refused to order Haseotes to bring the NEL shares to New York so that they could be attached, to enjoin the Vitol sale, or to attach a portion of the proceeds.

Chemical appeals insisting that because the district court found Chemical was entitled to an attachment, it erred in refusing to order Haseotes to bring his only substantial asset--the NEL shares--into New York, or to either enjoin the sale or attach the proceeds. We affirm.

DISCUSSION

On appeal Chemical claims that because it was granted an order of attachment, the district court either should have ordered Haseotes to bring his shares of NEL into New York so that they could be attached, or entered a preliminary...