National Union Fire Ins. v. RH Weber Exploration, 84 Civ. 4960 (EW).
| Decision Date | 08 April 1985 |
| Docket Number | No. 84 Civ. 4960 (EW).,84 Civ. 4960 (EW). |
| Citation | 605 F. Supp. 1299 |
| Parties | NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Plaintiffs, v. R.H. WEBER EXPLORATION, INC., Richard H. Weber, Joseph M. Altemore, III, Stanley R. Lemon, Stephen D. King, Noel E. Brown, L.M. Smith, Raymond R. Kramer and Robert G. Stone, M.D., Defendants. |
| Court | U.S. District Court — Southern District of New York |
D'Amato & Lynch, New York City, for plaintiffs; Robert E. Meshel, Timothy P. Butler, of counsel.
Baldwin, Gilliland & Jones, Dallas, Tex., Olshan, Grundman & Frome, New York City, for defendants; Bruce Baldwin, Dallas, Tex., David Parker, New York City, of counsel.
This diversity action is before the Court on motions by defendants (1) to dismiss or stay the action upon the ground that a prior action is pending in the Northern District of Texas, Dallas Division (the "Texas Court") or, alternatively, (2) to transfer the action to that district.
Plaintiff, National Union Fire Insurance Company of Pittsburgh, Pennsylvania ("National Union"), is a Pennsylvania corporation with its principal place of business in New York City, within this district. The defendant R.H. Weber Exploration, Inc. ("Weber Exploration") is a Texas corporation with its principal place of business in Dallas, Texas and defendant Richard Weber, a Texas resident, is its president and director. Weber Exploration was the general partner in various limited partnerships that acted as co-venturers in a Texas joint venture known as North American Liquid Disposal 1982-I ("North American" or the "Venture"). The seven other defendants in this action were limited partners in the Venture and all are residents of Texas. Each of the seven limited partners executed and delivered his promissory note to North American as part of his capital contribution to the Venture.
J. Henry Schroder Bank & Trust Company ("Schroder" or the "Bank"), not a party to this action, is an authorized banking institution with its principal place of business in New York City, within this district. Schroder extended a one million dollar line of credit to North American, which North American secured by assigning to the Bank the promissory notes it had received from the limited partners as part of their capital contributions to the Venture. Thereafter, National Union issued to North American a Financial Guarantee Bond (the "Bond") that guaranteed payment to Schroder of the installments due on the promissory notes of the limited partners. The Bond provided that National Union would cure a default by a limited partner by making payment directly to Schroder, designated in the Bond as the "Permitted Assignee." The complaint herein further alleges that to induce National Union to issue the Bond each of the limited partner defendants executed an Indemnification and Pledge Agreement with National Union providing that he would repay and reimburse National Union for any and all sums it paid to Schroder under the terms of the Bond and legal and other expenses incurred by reason of his respective default. Weber Exploration and Richard Weber executed a similar Indemnification Agreement covering a default by any of the limited partners. Finally, the Bond provides that, upon payment of any claims thereunder, National Union is subrogated to the rights of the Bank against any defendant who is liable under the terms of a defaulted note.
On December 23, 1983, Schroder notified National Union that each limited partner defendant was in default with respect to a payment then due upon his note. On February 14, 1984, National Union's counsel notified each limited partner that Schroder had notified it of his default and had demanded payment by National Union in accordance with the Bond. Each limited partner was requested to cure his default and advised that unless cured and if "National Union performs in accordance with the terms of its bond, National Union will proceed against you in accordance with the Indemnification and Pledge Agreement signed by you." The defendants did not respond to the demand. Thereupon, on February 24, 1984, National Union paid Schroder $219,589.36 pursuant to the Bond. On May 8, 1984, National Union made demand upon Weber Exploration, Richard Weber, and the limited partners for reimbursement pursuant to their indemnification agreements, but again they did not respond. Instead, the limited partners, on May 24th, commenced an action in the Texas Court against both Schroder and National Union by filing a complaint,1 which, together with a summons, however, was not served2 upon Schroder until September 1984 or upon National Union until October 2, 1984.
Prior to the service of the aforesaid process, National Union, on July 12, 1984, commenced this action against the defendants to recover the amounts it had paid to Schroder as well as counsel fees and related costs, as specified in their indemnification agreements.
In the Texas action, the limited partners alleged in their complaint that disputes had arisen as to the interpretation of the loan agreements entered into by Schroder and the limited partners, more particularly, as to whether or not Schroder, in its sole discretion, had the right to apply the monies received by it from the limited partners as installment payments to whatever portions of the outstanding loans it desired. The relief sought is reformation of the loan agreements as memorialized in various documents in order to conform them to the claimed intent of the parties. After commencement of this action, the limited partners, on September 24, 1984, filed an amended complaint in the Texas action alleging, among other matters in addition to the foregoing, that the loan documents contain misstatements such as the borrower "is a `Texas limited partnership' when in fact it is a Joint Venture"; "the proper name of the Joint Venture is North American Liquid Disposal 82-1, not 82-2"; and "the sum borrowed is variously reflected as $1,100,000 and $1,000,000." In sum, however, the essential claim is that Schroder applied the money received from the limited partners to unsecured portions of the loans instead of to secured portions and in fact they were not in default on their payments to the Bank.
Preliminarily, we consider defendants' contention that National Union was required to file its claim here asserted as a compulsory counterclaim in the Texas action and accordingly this action should be dismissed. They rely upon the fact...
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...starting gun' " (id., quoting Companion Life Ins. Co. v. Matthews, 547 F.Supp. 836, 841). Similarly, in National Union Fire Ins. Co. v. R.H. Weber Exploration (605 F.Supp. 1299 [1985] ), an action was filed in Texas by the limited partners in a Texas joint venture, who had each received a n......
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