Forde v. Krantz

• Docket Number: 21-cv-80603-RKA/Reinhart
• Decision Date: 27 October 2023
• Parties: STEVEN FORDE, et al., Plaintiffs, v. ARTHUR KRANTZ, et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

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STEVEN FORDE, et al., Plaintiffs, v. ARTHUR KRANTZ, et al., Defendants.

No. 21-cv-80603-RKA/Reinhart

United States District Court, S.D. Florida

October 27, 2023

ORDER GRANTING SUMMARY JUDGMENT

ROY K ALTMAN UNITED STATES DISTRICT JUDGE

This case involves a luxury yacht sale gone wrong, and it initially came to us when the buyer, Steven Forde, sued the seller, Arthur Krantz, for a declaratory judgment.^[1]See generally Complaint [ECF No 1]. Before us now is Krantz's Motion for Summary Judgment (“MSJ”) [ECF No. 95] on his Amended Counterclaim [ECF No. 59], in which he asserts-under “the Admiralty jurisdiction of the Court”-“in personam claim[s] for breach of preferred ship's mortgage and marine promissory note” against Forde (Count I) and MWE Yachts, LLC (Count II). See Amended Counterclaim at 2, 4, 6.

To make a long story short, Forde's final mortgage payment to Krantz-a $220,000 lump sum-ended up in the bank account of a third-party fraudster who was pretending to be one of Krantz's lawyers. After their attempts at rectifying the situation failed, Forde and Krantz blamed each other-which is to say that Forde behaved as though the yacht belonged to him, while Krantz embarked on an aggressive repossession campaign. Because the facts-even when viewed in the light most favorable to Forde-reveal that Forde wired his final lump-sum payment not to Krantz (or to Krantz's lawyers) but to a third-party fraudster, we agree with Krantz that Forde materially breached both the preferred ship's mortgage (the “Mortgage”) and the promissory note (the “Promissory Note”). We also agree that Forde cannot use the third party's fraud as a defense to Krantz's counterclaims because Forde was in the best position to prevent it. After careful review, then, we GRANT Krantz's MSJ as to both Counts I and II.^[2]

The Facts^[3]

A. Forde and Krantz execute a Preferred Ship's Mortgage and a Marine Promissory Note for the sale of the yacht.

On January 3, 2019, the parties executed (1) the Mortgage and (2) the Promissory Note, in accordance with the provisions of 46 U.S.C. §§ 31322, 31325. Forde and MWE Yachts were the mortgagors, and Krantz and Krantz Motor Yachts were the mortgagees. See Mortgage [ECF No. 59 3] at 2. Under the terms of the Mortgage and the Promissory Note, Krantz conveyed the yacht (called “Arthur's Way”) to Forde in exchange for $900,000. See Promissory Note [ECF No. 59-3] at 9; Krantz's Statement of Material Facts in Support of his MSJ (“SMF”) [ECF No. 94] ¶ 1 (“On January 3, 2019, [Forde] executed a Preferred Ship's Mortgage contract and Marine Promissory Note as mortgagor in favor of [Krantz], mortgagee[ ], for the amount of $900,000[ ] in accordance with 46 U.S.C. § 31322 and § 31325 for the purchase of the Vessel, Arthur's Way[.]”); November 8, 2021, Deposition of Forde (“Forde Dep.”) [ECF No. 94-1] at 16:16-18 (Q: “Are you familiar with this document?” Forde: “Yeah, it's like the mortgage we did on the boat.”). The Mortgage imposed on Forde the following duties (among others):

• “SECURED OBLIGATION: This Agreement secures: (a) all of Borrower's obligations under this agreement; (b) all of Borrower's obligations under that certain Promissory Note in the amount of $900,000.00 and any mortgage or debt instrument or charter party agreement which Borrower executed and which is intended to be secured by this Agreement . . .; (c) payment of all costs, charges, expenses, and fees related to the Agreement and/or the Instrument . . .; and (d) the performance of all representations, warranties, and promises as stated in this Agreement or the Instrument.” Mortgage ¶ 1.

• “FEDERAL DOCUMENTATION/STATE REGISTRATION: Borrower agrees that this vessel will be documented as with the United States with its current hailing port in Florida, in Borrower's name and that this Security Agreement and First Preferred Ship's Mortgage on the vessel will be recorded in Lender's favor.” Id. ¶ 3.

• “RISK OF LOSS, INSURANCE: . . . (b) Until this Agreement and the Instrument are fully paid and performed, Borrower agrees to maintain in full force and effect [several enumerated] insurance coverages.” Id. ¶ 6.

In the case of a default, the Mortgage allowed Krantz, among other things, to:

(1) require that Borrower immediately pay the full unpaid balance of Borrower Debt; . . . (3) demand that borrower assemble and deliver the Vessel to Lenders at such location as Lenders may reasonably require . . .; (4) lawfully enter any premises where the Vessel may be located and repossess the Vessel . . . with or without legal process or judicial decree and with or without previous notice or demand for performance; . . (6) bring suit at law, in equity, or in admiralty to foreclose Lenders' security interest and/or to recover judgment for any and all amounts due . . .; (8) refer this Agreement to an attorney for collection or enforcement[.]

Id. ¶ 16.

One of the parties-it's unclear which-recorded the Mortgage with the U.S. Coast Guard on February 21, 2020. See Abstract of Title [ECF No. 94-2] at 4.

B. Forde doesn't document the yacht with the Coast Guard. Krantz told him not to- at least at first.

Although the Mortgage required Forde to document the yacht with the Coast Guard, see Mortgage ¶ 3, he admits that he didn't do so, see Forde Dep. at 64:4-8 (Q: “[D]id you ever consult with anybody about forming [MWE Yachts] in the United States or in the State of Florida so that you could document the vessel?” Forde: “No, ma'am.”). As justification for this omission, Forde said that Krantz told him not to document the yacht. Id. at 25:8-10 (Q: “[I]t's your position that Arthur [Krantz] told you not to document the vessel?” Forde: “Yes.”); Id. at 21:8-21 (Q: “So in this agreement that was signed by both you and Arthur [Krantz], do you agree that you agreed to document the vessel with the United States?” Forde: “Yes, when Arthur [Krantz] gave me the go-ahead, yes.” Q: “So you're saying that his signature wasn't the go ahead[?]” Forde: “No, because he asked me not to document it.”); Id. at 64:13-16 (Forde: “Arthur Krantz asked me not to document the boat because it would . . . register the transfer of ownership and he didn't want the brokers knowing that he had sold the boat.”).

On March 13, 2020, however-over a year after the Agreement was signed-one of Krantz's lawyers (Matthew Valcourt) contacted Forde and requested the information he needed for the yacht's documentation. See March 13, 2020, Email from Valcourt to Forde [ECF No. 48-6] at 1; Forde Dep. at 30:7-10 (Q: “Here Matt [Valcourt], who you say is Arthur [Krantz's] attorney, is asking you for information to document the vessel, correct?” Forde: “Yes, 15 months after.”). Forde didn't provide Valcourt with the requested information. Id. at 30:11-12 (Q: “Did you provide that information?” Forde: “No.”).

C. Forde pays the $220,000 final lump sum-but not to Krantz or Krantz's lawyers.

Under the terms of the Promissory Note, Forde was obligated to satisfy the $900,000 mortgage by making monthly payments of $35,000 to Krantz. See Promissory Note at 9. Initially, Forde made these payments-though not always on time. See March 13, 2020, Email from Valcourt to Forde [ECF No. 48-6] at 2 (“[T]he loan is now two months in arrears.”); Forde Dep. at 31:18-32:1 (reading-and not denying the contents of-the March 13, 2020, Email from Valcourt to Forde). Forde made several partial payments-thus reducing (by June 2020) the amount he owed to $292,240.56. See SMF at 4. Krantz and Forde then agreed on a final lump-sum payment of $220,000-the details of which Forde worked out with Krantz's lawyer, Peter Terracciano. See June 10, 2020, Email from Terracciano to Forde (the “Genuine Email”) [ECF No. 1-11] at 6 (“Please wire $220,000 as agreed upon with Arthur [Krantz].”);^[4] Forde Dep. at 38:8-10, 39:3-6, 39:11 (reading-and not denying the contents of-the Genuine Email).

Just ten minutes later, however, Forde received a second email, ostensibly from Terracciano, with updated wiring instructions-this time to an account at Capital One Bank. See June 10, 2020, Email from Fraudster to Forde (“Fraudster's Email”) [ECF No. 1-11] at 9;^[5] Forde Dep. at 41:21-42:5, 43:16-17 (discussing the Fraudster's Email). The fraudster signed off as “Peter,” and the email address he listed in the signature block at the bottom of the email was Peter Terracciano's real email address (pterracciano@jtesqs.com). See generally Fraudster's Email. But the actual email account from which the message was sent was peter@jtessgs.com. Ibid. Forde didn't notice this discrepancy. See Forde Dep. at 42:16-17 (Q: “Did you notice that [the fraudster's email address was different from Terracciano's]?” Forde: “No.”).

Forde thus wired his $220,000 to the Capital One account the fraudster had told him to use. See Forde Dep. at 46:11-15 (Q: “Who created this subsidiary account?” Forde: “I mean, the law firm that Arthur [Krantz] had me send the $220,000 to him. I don't know. But it was on the law firm's-it was on the law firm's letterhead, Joseph, Terracciano, and Lynam.”); Id. at 47:4-6 (Q: “Did you ever get a response from the FBI as to where your money went?” Forde: “No.”). Naturally, none of this money made it to Krantz. So, a few days later, Terracciano sent Forde the following email: “Steve, as advised, our firm did not receive the $220,000 wire pursuant to the wire instructions [provided in the Genuine Email]. The bank you wired funds to [sic] Capital One is not our bank and was not the bank listed on our wiring instructions Sterling National Bank.” June 17, 2020, Email from Terracciano to Forde [ECF No. 1-11] at 15; Forde Dep. at 47:21-48:7 (reading that email and not denying its contents). When asked at his deposition where the money went, Forde said: “To my...