Governor & Co. v. Wasserman
| Decision Date | 05 March 2013 |
| Docket Number | C.A. No. 10–328–M. |
| Citation | 928 F.Supp.2d 400 |
| Parties | The GOVERNOR AND COMPANY, OF the BANK OF SCOTLAND, Plaintiff, v. Bernard WASSERMAN, David Wasserman, and Richard Wasserman, Defendants. |
| Court | U.S. District Court — District of Rhode Island |
OPINION TEXT STARTS HERE
Gayle P. Ehrlich, Jeffrey E. Francis, Pierce Atwood LLP, Boston, MA, Michael J. Daly, Pierce Atwood LLP, Peter J. Furness, Boyajian, Harrington, Richardson & Furness, Providence, RI, for Plaintiff.
Anthony M. Traini, Adam M. Ramos, Hinckley, Allen & Snyder LLP, Providence, RI, for Defendants.
This case involves a contract, personally guaranteed by the three businessmen, for a bank loan to allow for the purchase of a former St. Andrews University dormitory in Scotland to be developed into fractional ownership units. It is undisputed that the Defendants, Bernard Wasserman, Richard Wasserman, and David Wasserman, breached the contract and that the personal guarantees are valid.
The Governor and Company of the Bank of Scotland (“the Bank”) filed suit against the Wassermans for breach of contract and breach of guaranty. (ECF No. 1.) Before the Court is the Bank's Motion for Summary Judgment on its two claims and on the Wassermans' counterclaims. (ECF No. 35.) The Wassermans opposed this motion. (ECF No. 39.) Despite the Wassermans' gallant attempts to throw many and varied curves at this extremely straightforward breach of contract case, the Court is unmoved and GRANTS the Bank's summary judgment motion.
The Wassermans, through three newly created business entities, Hamilton Hall Venture LLC (“Hamilton Hall”), WREC Hamilton Hall, LLC, and St. Andrews Ventures, LLC, set out to purchase land and a former dormitory (“the Property”) in St. Andrews, Scotland to create twenty-six fractional ownership units located behind the eighteenth green of the world-famous golf course in St. Andrews. (ECF No. 36 at ¶¶ 9–11; ECF No. 40 at ¶ 84.)
The Wassermans were, by their own admission, experienced businessmen and real estate developers. (ECF No. 45 at ¶¶ 76–78.) The Bank and Hamilton Hall financed the purchase through a Facility Agreement (“the Agreement”) dated August 11, 2006. ( Id. at ¶ 83.) The total potential loan was for £84,335,000 and was to be released in four tranches. The first tranche was for £27,500,000 to purchase the dormitory from St. Andrews University and for initial plans, permitting, and demolition. (ECF No. 36 at ¶ 25.)
After the Property was appraised, the Bank identified a loan to collateral deficiency of £9,500,000. ( Id. at ¶ 17.) In August 2006, the Wassermans signed a personal guaranty (“the Guarantee”) for up to £9,500,000 1 as a condition to the Bank providing a loan to Hamilton Hall to fund the purchase of the dormitory. (ECF No. 45 at ¶ 88.) The Wassermans did not personally review the terms or sign the guaranty, but Alison Newton, their attorney in Scotland, signed on their behalf. ( Id. at ¶ 91.)
The Wassermans experienced early success in garnering interest and prospective buyers for the fractional ownership units.2 ( Id. at ¶ 86.) However, because Hamilton Hall failed to meet the term of the Agreement that required it to have a minimum of £10,000,000 in deposits on fractionalized ownership interests by October 31, 2006 and £14,000,000 by December 31, 2006, the Bank refused to release more than the first payment of £27,500,000. (ECF No. 45 at ¶¶ 100, 102; ECF No. 36 at ¶¶ 24–27.) Hamilton Hall did not satisfy the deposit requirement, constituting a default under Sections 20.1.1, 20.1.2, and 20.2.2 of the Agreement. (ECF No. 36 at ¶ 27.)
On March 23, 2007, the Bank notified Hamilton Hall that it reserved its rights due to Hamilton Hall's failure to meet the agreed-to deposit requirements. ( Id. at ¶ 28.) David Wasserman testified that he understood this notice to mean that the Bank could foreclose at any time. ( Id. at ¶ 29.) Hamilton Hall approached the Bank with three strategies in order to salvage the project and/or limit their personal liability for the debt. (ECF No. 45 at ¶ 107–109.) It approached the Bank about refinancing, finding a new partner to bring more cash to complete the project, or finding a new buyer. ( Id.) Although the Bank refused to refinance, the record suggests that it agreed to give Hamilton Hall additional time, until April 2008,3 to work on the other potential deals. ( Id.) Section § 31 of the Agreement provided that the documents involved in the deal, including the Guarantee, could only be amended or waived by a writing signed by the Wassermans and the Bank. (ECF No. 36 at ¶ 34.)
Hamilton Hall attempted to salvage the deal by bringing in three potential buyer groups for the Property to satisfy the loan—Donald Trump, Dermot Desmond, and Steven Carmichael and Neal McAllister. ( Id. at ¶ 51.) To the extent that any of these three potential buyers had a serious interest in the project and negotiations developed with the Bank, the negotiations never resulted in a binding term sheet. ( Id. at ¶ 53.) David Wasserman requested on December 15, 2008 that the Bank agree to forbear from exercising its rights and the Bank declined to do so. ( Id. at ¶ 35.) On February 2, 2009, the Bank notified Hamilton Hall that it intended to foreclose, giving it two months to either cure its default or seek judicial intervention before the Bank listed the Property for sale. ( Id. at ¶ 63.) By April 2009, two years after the default, Hamilton Hall had failed to present an alternative acceptable to the Bank to pay off the loan. ( Id. at ¶ 54.)
Faced with the information from the Bank that it intended to foreclose and sell the Property, the Wassermans allege that they were surprised to learn of these intentions because they assert that the Bank's agent Angela Smillie assured them that the Bank would not sell the Property, but by listing it for sale, were merely testing its pricing on the market. (ECF No. 45 at ¶ 136.) The Wassermans further assert that Ms. Smillie agreed that the Bank would not pursue the Guarantee against them in exchange for David Wasserman's agreement that he would not go public with the Bank's alleged unreasonable prevention of the three potential substitute transactions. ( Id. at ¶¶ 137–138.) On June 8, 2009, however, the Bank told Hamilton Hall that it would sell the Property. (ECF No. 36 at ¶ 64.) Hamilton Hall participated in the open auction held on August 13, 2009, submitting an unsuccessful £6,000,000 bid. ( Id. at ¶ 67.) The winning bid went to Kohler Co., the Old Course Limited, for £11,000,000, leaving £15,658,772.19 remaining due on the loan, plus default interest, fees and charges, including costs of collection. (ECF No. 36 at ¶¶ 71–72; ECF No. 45 at ¶¶ 139–140.)
The Bank then filed this suit against the three guarantors in order to recover this arrearage and costs. The Bank makes very straightforward claims in Counts I and II of its complaint. (ECF No. 1.) It alleges that the Wassermans breached the contract and the Guarantee because the contract and Guarantee were valid, the Wassermans failed to perform, the Bank did perform, and the Wassermans' breach damaged the Bank. The Bank also argues that it is entitled to summary judgment on the Wassermans' counterclaims for breach of the implied covenant of good faith and fair dealing, tortious interference with advantageous business relations, and misrepresentation. It argues that the Wassermans lack standing to assert these counterclaims and substantively, that these claims lack any merit.
Generally, a “court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56. The Court must view the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in his [or her] favor. Wilson v. Moulison N. Corp., 639 F.3d 1, 6 (1st Cir.2011). However, the non-moving party “must point to ‘competent evidence’ and ‘specific facts' to stave off summary judgment.” Tropigas de P.R., Inc. v. Certain Underwriters at Lloyd's of London, 637 F.3d 53, 56 (1st Cir.2011) (quoting McCarthy v. Nw. Airlines, Inc., 56 F.3d 313, 315 (1st Cir.1995)).
In order to defeat a properly supported motion for summary judgment, therefore, the nonmoving party must establish a trial-worthy issue by presenting “enough competent evidence to enable a finding favorable to the nonmoving party.” Goldman v. First Nat'l Bank of Boston, 985 F.2d 1113, 1116 (1st Cir.1993) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). A summary judgment motion cannot be defeated by “conclusory allegations, improbable inferences, acrimonious invective, or rank speculation.” Ahern v. Shinseki, 629 F.3d 49, 54 (1st Cir.2010). When reviewing the evidence in the record in the light most favorable to the nonmovant, the Court must “safely ignor[e] ‘conclusory allegations, improbable inferences, and unsupported speculation.’ ” Colon–Fontanez v. San Juan, 660 F.3d 17, 27 (1st Cir.2011) (quoting Carroll v. Xerox Corp., 294 F.3d 231, 237 (1st Cir.2002)). The Court must constrain itself to determining matters of law. SeeFed.R.Civ.P. 56.
Before tackling the parties' legal arguments, the Court must first determine whether to apply Scottish law or Rhode Island law to the claims and counterclaims in this case.
The Bank argues that Scottish law applies because the Agreement contains a choice of law provision specifying Scottish law and because the entirety of the transaction involved in this suit occurred in Scotland. Moreover, the alternative application of Rhode Island law, for which the Wassermans advocate, is essentially the same as Scottish law so the Bank asserts that the Court should favor the law specified by the parties to the contract.4 The Wassermans argue, relying on Northeast Data Sys., Inc. v....
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