Irving Trust Co. v. Braswell, 84 Civ. 6319 (SWK).

• Decision Date: 05 November 1984
• Docket Number: No. 84 Civ. 6319 (SWK).,84 Civ. 6319 (SWK).
• Citation: 596 F. Supp. 1441
• Parties: IRVING TRUST COMPANY, as Trustee for Teachers Insurance and Annuity Association of America, Northwestern National Life Insurance Company, and Northern Life Insurance Company, Teachers Insurance and Annuity Association of America, Northwestern National Life Insurance Company, and Northern Life Insurance Company, Plaintiffs, v. Elliott S. BRASWELL, Defendant.
• Court: U.S. District Court — Southern District of New York

596 F. Supp. 1441

IRVING TRUST COMPANY, as Trustee for Teachers Insurance and Annuity Association of America, Northwestern National Life Insurance Company, and Northern Life Insurance Company, Teachers Insurance and Annuity Association of America, Northwestern National Life Insurance Company, and Northern Life Insurance Company, Plaintiffs, v. Elliott S. BRASWELL, Defendant.

No. 84 Civ. 6319 (SWK).

United States District Court, S.D. New York.

November 5, 1984.

Stroock & Stroock & Lavan, New York City, for plaintiffs; Jay P. Mayesh, Brian M. Cogan, New York City, of counsel.

Heller, Horowitz & Feit, P.C., New York City, for defendant; Richard F. Horowitz, Stuart A. Blander, New York City, of counsel.

MEMORANDUM OPINION AND ORDER

KRAM, District Judge.

This action was commenced on August 31, 1984. The plaintiffs' claim is based on an alleged breach of contract by the defendant, Elliott S. Braswell. Plaintiffs claim that Braswell personally guaranteed certain loans, and that he has failed to satisfy that guarantee. By stipulation of the parties, Braswell's time to answer was extended until November 5, 1984.

Subsequent to the commencement of this action plaintiffs filed a motion to obtain a preliminary injunction. The plaintiffs originally requested the Court to hear this motion on October 11, 1984. At the request and consent of all of the parties the hearing for the preliminary injunction was postponed until October 18. In the interim, Braswell agreed not to dispose of any assets. The Court attempted to go forward with the hearing, as scheduled, on October 18. However, the defendant did not file any responsive papers until only moments before the hearing was to commence.

In order that an informed decision could be reached the Court rescheduled the hearing for October 26, 1984. In the interim, Braswell continued his stipulation not to dispose of any assets. This stipulation remained in effect until October 19. On that day the Court entered a temporary restraining order (hereinafter referred to as "TRO") against Braswell. This order, in effect, prevented Braswell from fraudulently disposing of his assets. The order was to remain in effect until the hearing occurred on October 26.

The hearing for the preliminary injunction went forward on October 26. The plaintiffs introduced several exhibits at this hearing. Braswell did not testify, choosing instead to submit a conclusory two page affidavit. At the conclusion of the hearing the Court ordered that the previously issued TRO be extended and remain in effect through November 5, 1984. Both the initial TRO and the subsequent extension were entered with full notice to Braswell.

The underlying facts regarding plaintiffs' breach of contract claim are not in dispute. On February 15, 1984 the three insurance company plaintiffs loaned $12,000,000 to BSI Corporation (hereinafter referred to as "BSI"). BSI executed promissory notes in return for these funds. Braswell was the sole shareholder in BSI.

In connection with this loan to BSI, Braswell entered into a Guarantee and Pledge Agreement. The agreement was between Braswell and the fourth plaintiff, Irving Trust Company. In this agreement, Irving Trust was to serve as trustee for the three insurance company plaintiffs, and Braswell personally guaranteed payment of the promissory notes should BSI default.

BSI defaulted on the notes and commenced proceedings under Chapter 11 of the Bankruptcy Code on August 13, 1984. Braswell has failed to fulfill his obligations under the guarantee agreement, and has made no payments to cover BSI's default. The outstanding balance of the loan is $10,861,312.00 plus interest.

On July 28, 1984 Braswell transferred a piece of real property he owned to his wife for ten dollars. Braswell had previously valued this property at $500,000. On August 8, 1984 Braswell's wife sold this property for $425,000. On August 16 Braswell made a gift to his wife of another piece of property he owned. Braswell had previously valued this property at $225,000. According to Braswell's Statement of Assets and Liabilities as of March 31, 1984 he had a net worth of $10,664,270. The foregoing facts, none of which are in dispute, must be evaluated in conjunction with the following facts. Braswell was the sole shareholder of BSI, had personally guaranteed loans which BSI had defaulted on, and BSI had filed for bankruptcy on August 13.

Motions Before the Court

As explained earlier, the plaintiffs have moved for a preliminary injunction. Braswell, in addition to opposing the preliminary injunction motion, has filed several motions. These include a motion to dismiss for lack of subject-matter jurisdiction, a motion to dismiss because of improper venue, and a motion to transfer under 28 U.S.C. § 1404. Plaintiffs have now also moved for summary judgment.

On October 31, 1984 the Court refused to sign an Order to Show Cause which essentially requested that Braswell's motions be decided prior to plaintiffs' motion for summary judgment. In the instant opinion the Court currently decides only plaintiffs' motion for a preliminary injunction and Braswell's motion to dismiss for lack of subject-matter jurisdiction. The Court reserves decision on all other pending motions, and will give Braswell adequate time to respond to the summary judgment motion.

Jurisdiction

The basis of the Court's subject-matter jurisdiction is 28 U.S.C. § 1332. Braswell contends that the Court lacks subject-matter jurisdiction over this action because plaintiffs have failed to join an indispensable party. Braswell argues that this action must be dismissed under Rule 19 of the Federal Rules of Civil Procedure because an indispensable party has not been joined and cannot be joined. The party which Braswell claims is indispensable cannot be joined because the presence of this party would destroy diversity among the parties in the instant case. Braswell's factual argument to support this theory is entirely frivolous and without merit.

Braswell contends that the First National Bank of South Carolina (hereinafter referred to as "FNBSC") is an indispensable party under Fed.R.Civ.P. 19. This is untrue. The transaction between FNBSC and BSI was a separate transaction from the instant one. It was a separate loan and was provided for in a separate loan agreement. Plaintiff — Irving Trust is the trustee for both loans, and this is provided for in the same written instrument. However, there are two separate and distinct obligations involved: one to FNBSC and one to the three insurance company plaintiffs in the instant case. Moreover, FNBSC has already commenced a separate law suit against Braswell in South Carolina.

I find that FNBSC is not an "indispensable party" within the meaning of Fed.R. Civ.P. 19(a). Moreover, even if it were, the action would still not be dismissed under Fed.R.Civ.P. 19(b). This is so because any judgment rendered by this Court will in no way prejudice FNBSC, and an adequate judgment can be rendered in the absence of FNBSC as a party to this litigation. Braswell's motion to dismiss this action for non-joinder of an indispensable party is, therefore, DENIED.

The Preliminary Injunction

To obtain a preliminary injunction in the Second Circuit plaintiffs must show the following:

(a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief.

Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d...