National Union Fire Ins. Co. v. Deloach, No. 86 Civ. 2271 (LLS)

CourtU.S. District Court — Southern District of New York
Citation708 F. Supp. 1371
Decision Date25 February 1989
PartiesNATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Plaintiff, v. A.M. and Patsy DELOACH and 43 related cases (Barrick Jacksonville Limited Partnership, Case Nos. 86 Civ. 2272, 2284, 2285, 7206, 7207, 7208, 7209, 7210, 7211, 7212, 7213, 7214, 7215, 7216, 7217, 7218, 7219, 7220, 7221, 7222, 7223, 7224, 7229, 7244, 7245, 7246, 7247, 7248, 7249, 7250, 7251, 7252, 7253, 7254, 7255, 7256, 7257, 7332, 7504, 7506, 7507, 7529, 8546), Defendants.
Docket Number86 Civ. 7504,86 Civ. 7506,86 Civ. 7244-86 Civ. 7257,86 Civ. 7229,86 Civ. 7206-86 Civ. 7224,86 Civ. 2272,86 Civ. 7529 and 86 Civ. 8546.,86 Civ. 2285,86 Civ. 2284,No. 86 Civ. 2271 (LLS),86 Civ. 7507,86 Civ. 7332

708 F. Supp. 1371

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Plaintiff,
v.
A.M. and Patsy DELOACH and 43 related cases (Barrick Jacksonville Limited Partnership, Case Nos. 86 Civ.
2272, 2284, 2285, 7206, 7207, 7208, 7209, 7210, 7211, 7212, 7213, 7214, 7215, 7216, 7217, 7218, 7219, 7220, 7221, 7222, 7223, 7224, 7229, 7244, 7245, 7246, 7247, 7248, 7249, 7250, 7251, 7252, 7253, 7254, 7255, 7256, 7257, 7332, 7504, 7506, 7507, 7529, 8546), Defendants.

Nos. 86 Civ. 2271 (LLS), 86 Civ. 2272, 86 Civ. 2284, 86 Civ. 2285, 86 Civ. 7206-86 Civ. 7224, 86 Civ. 7229, 86 Civ. 7244-86 Civ. 7257, 86 Civ. 7332, 86 Civ. 7504, 86 Civ. 7506, 86 Civ. 7507, 86 Civ. 7529 and 86 Civ. 8546.

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

February 25, 1989.


708 F. Supp. 1372
COPYRIGHT MATERIAL OMITTED
708 F. Supp. 1373
D'Amato & Lynch, New York City (Richard F. Russell, Lloyd J. Herman, Gerald J. Carroll, Jr., of counsel), for plaintiff
708 F. Supp. 1374

Robert A. Goldschlag, Freehold, N.J., for defendants Dolores and Erich Tappert.

Drinker Biddle & Reath, New York City (J. Portis Hicks, Jane R. Coleman, Gregg J. Borri, of counsel), for all other defendants.

OPINION AND ORDER

STANTON, District Judge.

These 44 cases1, consolidated for purposes of discovery and the within motions, concern investments defendants made in a tax shelter limited partnership. National Union Fire Insurance Company of Pittsburgh ("National Union"), an issuer of financial guarantee bonds, sues to enforce its indemnity agreements with limited partners in the limited partnership, and to enforce its rights as subrogee on the limited partners' promissory notes which it honored on their behalf. National Union issued bonds which guaranteed, to the partnership and to the banks that financed the partnership, that the limited partners would make all of the capital contributions represented by their notes. The defendant limited partners stopped making their required contributions, and National Union paid on their behalf. Now it sues defendants for reimbursement, under the indemnity agreements, and as subrogee on the promissory notes on which defendants defaulted.

Two motions are decided in this opinion. One is National Union's motion under Fed. R.Civ.P. 56 for summary judgment dismissing2 the counterclaims of eight defendants (the "counterclaiming defendants")3 alleging violations of the federal securities laws, fraud, negligence, and breaches of plaintiff's alleged duties of good faith and fair dealing, and fiduciary duty. The other is a motion by twenty-nine defendants4 under Fed.R.Civ.P. 14, for leave to file a third-party complaint. Because, as defendants' surety, National Union only owed defendants a duty to cure their defaults rather than a duty to disclose to them any information it might have had about the limited partnership, National Union's motion for dismissal of the counterclaims is granted, and defendants' motion for leave to bring in third parties is denied.

BACKGROUND

The Project

In late 1983 each defendant received a Confidential Private Placement Memorandum ("CPPM") concerning the Barrick Jacksonville Limited Partnership ("BJLP"). (CPPM, Exhibit 1 to affidavit of Gregg J. Borri, sworn to June 1, 1987) BJLP was organized, and the CPPM was prepared, by Leslie R. Barth and three affiliated entities: Landmark Acquisitions, Inc. (a Connecticut corporation of which Barth was the president and director), The Barrick Group, Inc. (a Connecticut corporation of which Barth was the president, director, and treasurer), and Barth, Richheimer, Marvin-Smith, Friedman and Scholnick, P.C. (a law firm of which Barth was a partner) (the "law firm") (collectively "the Group").5 The

708 F. Supp. 1375
CPPM identified Landmark Acquisitions, Inc. as the general partner of BJLP, and The Barrick Group, Inc. as "the Seller." (CPPM, p. 2) Although the CPPM's list of participants included the general partner, the seller, the banking liaison, tax counsel, and the property manager, National Union does not appear among the participants. Id.

BJLP's purpose was to sell limited partnership interests in order to raise money to "acquire, own and operate an office building and attached parking garage located in Jacksonville, Florida, currently undergoing rehabilitation (the `Project')." Id. at i, 28-30. The CPPM stated that "It is anticipated that the Project will be 100 percent completed by March 31, 1984," id. at 12, but it did not specify a date by which the building would be acquired. The anticipated returns to the limited partners included income tax deductions as well as payments from leasing space in the building.

Each investor was encouraged to "consult his own counsel and accountant as to legal, tax and other related matters concerning his investment" before deciding whether to participate in BJLP. Id. at iii.

Financing for the Project

Financing for the Project was to come from two sources: sales of limited partnership interests totalling $3,996,000, and a mortgage to be obtained. Id. at 2, 20. Investors could pay for their limited partnership interests in cash, whether borrowed or their own. Id. at 9. Or, as did all the defendants, investors could make initial cash down payments, and sign promissory notes (the "Notes") for the balance of the purchase price of the limited partnership interests. Id. at 8-9.

In accordance with the CPPM's provision in the Summary, id. at 3,6 that

the General Partner may pledge, assign, or negotiate the Notes to a financial institution in connection with financing for the acquisition of the Project,

the Group assigned forty Notes to the J. Henry Schroder Bank & Trust Company in May 1984 and another twelve Notes to the Bank of New York (collectively "the banks") in August 1984 as collateral for loans the banks made to BJLP. To induce the banks to make the loans and accept assignment of the Notes, the Group needed, and asked, National Union to supply bonds which guaranteed payment by the limited partners of their Notes. National Union, in its turn, required the limited partners to execute indemnity agreements whereby they agreed to reimburse National Union for any payments it made on the Notes on their behalf. In addition, the limited partners pledged their interests in BJLP as security for their obligations to National Union under the indemnity agreements.

In accordance with instructions, defendants sent their installment payments on the Notes to the Group, which was to forward7 these payments to the banks.

The Defaults

As early as September 21, 1984 the Group wrote to some defendants, informing them that "interest on the outstanding balance of your capital contribution is now due" and instructing each to send a check payable to BJLP to the banks. (Exhibit A, affidavit of Robert W. O'Donnell, sworn to Mar. 2, 1988) Shortly thereafter the banks notified National Union that many of the BJLP limited partners had defaulted on their first payments. National Union wrote the limited partners and requested they cure their defaults.8 Those limited partners eventually made the payments.

708 F. Supp. 1376

National Union, however, continued to receive default notices from the banks during the fall of 1984. It cured the defaults by paying the banks, and was reimbursed by the Group in November 1984.

Rescissions and "Redirections" of the Limited Partners Obligations

By letter dated December 13, 1984 Mr. Barth advised defendants that much was amiss with BJLP:

As a result of repeated delays caused by numerous breaches by the Sellers of the existing contract between Barrick and ACM Investors, Inc. (the Sellers of the Jacksonville Project), it has become clear to Barrick that to proceed with the construction of the Project would be both economically unfeasible, and because of the excessive time delays, would be in no way in conformity with the revised schedules projected in our previous correspondence to the Limited Partners. Therefore, we have elected to cancel the Project, have commenced suit against the Sellers on behalf of the Partnership for breach of contract, and offer the Limited Partners two alternative investments in place of recission sic. (Letter dated December 13, 1984 from Leslie Barth to Dr. and Mrs. O'Donnell, Exhibit F to affidavit of Robert W. O'Donnell, sworn to Mar. 2, 1988).

The letter further stated that the alternative investments "present an element of certainty that was not in the Jacksonville Project." Mr. Barth also assured the limited partners that they were "entitled to a full recission sic." Id.

Most defendants elected rescission, signed rescission agreements which by their terms extinguished their obligations on their Notes, and stopped making payments. The Group returned their original cash down payments, as well as the principal and interest payments they had made. It also promised to return their Notes to them, but never did so.

The seven counterclaiming defendants opted for the alternative investments and signed a "Redirection of Investment Agreement." These defendants continued to send checks payable to BJLP to the Group in satisfaction of their obligations on the new investment. National Union was not a party to, and did not receive copies of, the redirection agreements. Nor did it receive a copy of Mr. Barth's December 13, 1984 letter.

The Settlement

At a meeting held on April 3, 1985 Mr. Steve Sion of the Barrick Group informed those at National Union assigned to BJLP that there were problems with the Project, that the Group had commenced litigation, and that some limited partners wished to redirect their investments into another Group partnership while others wished to rescind their obligations.

Raymond McDaniel, one of National Union's employees, took the following handwritten notes at the meeting:

Project is not 50% leased-up.
This allows rescission to L.P.'s & 80% wants that.
Q: Escrow of funds until 50% lease-up? What happened to this?
-Investors have rt. of rescission — this works
...

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64 practice notes
  • Menes v. Cuny University of New York, No. 97 CIV. 4334 RWS.
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • April 12, 2000
    ...but rather must set forth "`concrete particulars'" showing that a trial is needed. National Union Fire Ins. Co. v. Deloach, 708 F.Supp. 1371, 1379 (S.D.N.Y.1989) (quoting R.G. Group, Inc. v. Horn & Hardart Co., 751 F.2d 69, 77 (2d Cir.1984)). Mere speculation or conjecture as ......
  • Tufariello v. Long Island R.R. Co., No. 03 CV 3520(CLP).
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • March 18, 2005
    ...The party must set forth "concrete particulars" showing that a trial is necessary. Nat'l Union Fire Ins. Co. v. Deloach, 708 F.Supp. 1371, 1379 (S.D.N.Y.1989). Indeed, "the mere existence of some alleged factual dispute between the parties" alone will not defeat a proper......
  • Pearson v. Board of Educ., No. 02 Civ. 3629(DC).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • August 10, 2007
    ...or denials, but must set forth "concrete particulars" showing that a trial is needed. Nat'l Union Fire Ins. Co. v. Deloach, 708 F.Supp. 1371, 1379 (S.D.N.Y. 1989) (quoting R.G. Group, Inc. v. Horn & Hardart Co., 751 F.2d 69, 77 (2d Cir.1984) (internal quotations omitted)). Acc......
  • Minott v. Port Authority of N.Y. and N.J., No. 97 CIV. 7127(RWS).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • October 17, 2000
    ...Page 519 must set forth "`concrete particulars'" showing that a trial is needed. National Union Fire Ins. Co. v. Deloach, 708 F.Supp. 1371, 1379 (S.D.N.Y.1989) (quoting R.G. Group, Inc. v. Horn & Hardart Co., 751 F.2d 69, 77 (2d Cir.1984)). Mere speculation or conjecture as to......
  • Request a trial to view additional results
64 cases
  • Menes v. Cuny University of New York, No. 97 CIV. 4334 RWS.
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • April 12, 2000
    ...but rather must set forth "`concrete particulars'" showing that a trial is needed. National Union Fire Ins. Co. v. Deloach, 708 F.Supp. 1371, 1379 (S.D.N.Y.1989) (quoting R.G. Group, Inc. v. Horn & Hardart Co., 751 F.2d 69, 77 (2d Cir.1984)). Mere speculation or conjecture as ......
  • Tufariello v. Long Island R.R. Co., No. 03 CV 3520(CLP).
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • March 18, 2005
    ...The party must set forth "concrete particulars" showing that a trial is necessary. Nat'l Union Fire Ins. Co. v. Deloach, 708 F.Supp. 1371, 1379 (S.D.N.Y.1989). Indeed, "the mere existence of some alleged factual dispute between the parties" alone will not defeat a proper......
  • Pearson v. Board of Educ., No. 02 Civ. 3629(DC).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • August 10, 2007
    ...or denials, but must set forth "concrete particulars" showing that a trial is needed. Nat'l Union Fire Ins. Co. v. Deloach, 708 F.Supp. 1371, 1379 (S.D.N.Y. 1989) (quoting R.G. Group, Inc. v. Horn & Hardart Co., 751 F.2d 69, 77 (2d Cir.1984) (internal quotations omitted)). Acc......
  • Minott v. Port Authority of N.Y. and N.J., No. 97 CIV. 7127(RWS).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • October 17, 2000
    ...Page 519 must set forth "`concrete particulars'" showing that a trial is needed. National Union Fire Ins. Co. v. Deloach, 708 F.Supp. 1371, 1379 (S.D.N.Y.1989) (quoting R.G. Group, Inc. v. Horn & Hardart Co., 751 F.2d 69, 77 (2d Cir.1984)). Mere speculation or conjecture as to......
  • Request a trial to view additional results

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