Orlando Residence, Ltd. v. Hilton Head Hotel Investors, Civil No. 9:89-cv-0662-DCN

• Decision Date: 15 March 2013
• Docket Number: Civil No. 9:89-cv-0662-DCN
• Parties: ORLANDO RESIDENCE, LTD., Plaintiff, v. HILTON HEAD HOTEL INVESTORS, KENNETH E. NELSON, WALLACE H. HUSTAD, et al., Defendants.
• Court: U.S. District Court — District of South Carolina

ORLANDO RESIDENCE, LTD., Plaintiff,

v. HILTON HEAD HOTEL INVESTORS, KENNETH E. NELSON,WALLACE H. HUSTAD, et al., Defendants.

Civil No. 9:89-cv-0662-DCN

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA BEAUFORT DIVISION

Dated: March 15, 2013

ORDER

When this case was first filed in South Carolina state court, Def Leppard's Hysteria album topped the Billboard charts, athletes around the world - including the Soviet Union and East Germany - readied themselves for the summer Olympics, a young man named Barack Obama was about to begin his first year of study at Harvard Law School, and the undersigned was an attorney in private practice. Although this case was settled two years into Bill Clinton's presidency, the matter is now before the court on two pending motions. The first is defendant Kenneth E. Nelson's motion to alter, amend, vacate, and dismiss the judgment and for other relief pursuant to Rules 59(e), 12(b)(1), 12(h)(3), and 60(b) of the Federal Rules of Civil Procedure. The second is Nelson's motion to stay the proceedings in this case. For the reasons set forth below, the court denies the first motion, which renders the second motion moot.

I. BACKGROUND

These facts are taken from the stipulated facts included in the parties' settlement agreement. In December 1986, plaintiff Independence Federal Bank (Independence Federal) loaned Hilton Head Hotel Investors (HHHI) a little over $7 million so thatHHHI could construct a hotel on land it had leased on Hilton Head Island. Independence Federal also advanced HHHI $400,000 through execution of a promissory note. HHHI provided security for these loans by delivering to Independence Federal a mortgage lien on its leasehold estate. Nelson and co-defendant Wallace H. Hustad, HHHI's general partners, jointly and severally guaranteed payment on the loans that HHHI received from Independence Federal.

By August 1988, HHHI had defaulted on its loan payments and Independence Federal filed a civil complaint in South Carolina state court. On March 17, 1989, this case was removed to federal court. During the course of litigation Resolution Trust Corporation (RTC) was substituted as plaintiff by virtue of its appointment as the receiver for Independence Federal.

This court granted summary judgment in favor of RTC on June 24, 1991, but vacated that judgment on February 18, 1993 and set the case for trial. On July 13, 1993, the court issued an order stating:

The court having been advised by counsel for the parties that the above action has been settled:

IT IS ORDERED that this action is hereby dismissed without costs and without prejudice to the right, upon good cause shown within ninety (90) days, to reopen the action if settlement is not consummated.

Order July 13, 1993.¹ The case was closed that same day, but the parties later returned to court. Although the docket does not reflect the date on which the parties asked for the case to be reopened, the court reopened the case 93 days after the July 13, 1993 Order. The court's October 14, 1993 order states:

On July 13, 1993, this Court entered an order dismissing this case without costs after being advised by counsel that this matter had been settled. Thecourt was also advised that one of the terms of the settlement was the completion of the previously ordered sale of the real and personal property which is the subject of this action. The Court is now advised that the parties have been unable to complete the documentation of the settlement but that the parties are endeavoring to do so as expeditiously as possible.

IT IS THEREFORE ORDERED that this action is hereby dismissed, upon

good cause shown, and the right to reopen the action if settlement is not consummated is to be held open for an additional period of time not to exceed December 31, 1993. It is the Court's expectation that the settlement will be consummated within this period and the property which is the subject of this action will have been sold by that time at public auction as previously ordered by the Court.

Order, October 14, 1993. The case was again dismissed "with right to reopen if settlement is not consumated [sic] before 12/31/1993." ECF No. 117. Nobody moved to reopen the case before the December 31, 1993 deadline.

The parties, who had long been working towards settlement, eventually settled the case in November 1994. The settlement agreement stipulates that, as of June 1, 1993, HHHI owed RTC principal and interest on promissory notes in the amount of $14,495,949.81. Nelson and Hustad each agreed to pay RTC $80,000 over the course of two years and to help RTC expedite the foreclosure of the hotel property at issue. To ensure their compliance with the terms of the settlement agreement, Nelson and Hustad each signed a confession of judgment in the amount of $4 million. The parties agreed that if either Hustad or Nelson missed a payment, RTC would file the relevant confession of judgment with this court. If Nelson and Hustad made all of their required payments, their confessions of judgment would be returned to their attorneys.

On May 21, 1997, Hustad's confession of judgment was filed with the court, along with a fully executed copy of the settlement agreement.

Fourteen years passed.

On September 19, 2011, Orlando Residence, Ltd. (ORL) moved to substitute itself as plaintiff in place of RTC. On the same day, ORL filed Nelson's confession of judgment, which states:

Defendant, Kenneth E. Nelson, does hereby confess judgment against himself in favor of the Plaintiff in the sum of FOUR MILLION AND NO/100 ($4,000,000.00) DOLLARS and authorizes the entry of a judgment against himself subject to the terms set forth in the Settlement Agreement by and between the RESOLUTION TRUST CORPORATION, as Receiver for INDEPENDENCE FEDERAL BANK and HILTON HEAD HOTEL INVESTORS, a Wisconsin Limited Partnership, Kenneth E. Nelson and Wallace H. Hustad dated as of _________, 1994 (the "settlement agreement").

This confession of judgment is for an indebtedness now just and due as a result of the parties' compromise settlement agreement described in their Settlement Agreement.

Nelson Confession of J. Nelson's confession of judgment is dated July 11, 1994.

Defendants did not respond to ORL's motion to substitute itself as plaintiff, and the court granted the motion. On October 17, 2011, Nelson moved to strike the confession of judgment from the docket. On October 31, 2011, ORL moved to enforce the confession of judgment. Both parties filed responses and replies, and Nelson subsequently filed a motion to strike portions of ORL's filings. A hearing was held before this court on December 14, 2011.

On August 15, 2012, the court entered a judgment stating that "plaintiff Orlando Residence, Limited recover of the defendant Kenneth E. Nelson the amount of Four Million and no/100 ($4,000,000.00) Dollars" (the Judgment). On the same day, the court mooted Nelson's motion to strike the confession of judgment, ORL's motion to enforce the judgment, and Nelson's motion to strike portions of ORL's response.

On August 23, 2012, Nelson filed the instant motion to alter, amend, vacate, and dismiss the Judgment and for other relief pursuant to Rules 59(e), 12(b)(1), 12(h)(3), and60(b). On August 28, 2012, Nelson moved to stay the enforcement of the Judgment in this case until after his motion to alter is decided. The parties have fully briefed these motions and they are ripe for the court's review.

II. STANDARDS

A. Rule 59(e) Motion to Alter or Amend Judgment

Federal Rule of Civil Procedure 59(e) governs motions to alter or amend a judgment. Though the rule does not provide a standard under which a district court may grant such motions, the Fourth Circuit has recognized "three grounds for amending an earlier judgment: (1) to accommodate an intervening change in controlling law; (2) to account for new evidence not available at trial; or (3) to correct a clear error of law or prevent manifest injustice." Pac. Ins. Co. v. Am. Nat'l Fire Ins. Co., 148 F.3d 396, 403 (4th Cir. 1998) (citing EEOC v. Lockheed Martin Corp., 116 F.3d 110, 112 (4th Cir. 1997); Hutchinson v. Staton, 994 F.2d 1076, 1081 (4th Cir. 1993)). Rule 59(e) provides an "extraordinary remedy that should be used sparingly." Pac. Ins. Co., 148 F.3d at 403 (internal citation omitted); Wright v. Conley, Docket No. 10-cv-2444, 2013 WL 314749, at *1 (D.S.C. Jan. 28, 2013).

B. Rule 12(b)(1) and 12(h)(3) Motion to Dismiss for Lack of Subject Matter Jurisdiction

Under Federal Rules of Civil Procedure 12(b)(1) and (h)(3), a court must dismiss a civil action if it determines that it lacks subject-matter jurisdiction. The question of subject matter jurisdiction may be raised at any time during the course of the lawsuit. Arbaugh v. Y&H Corp., 56 U.S. 500, 514 (2006). "Motions brought pursuant to Rule 12(h)(3) are subject to the same standards as motions to dismiss for want of subject matter jurisdiction brought pursuant to Rule 12(b)(1)." Perrodin v. United States, 350 F.Supp. 2d 706, 708 n.1 (D.S.C. 2004) (citing Berkshire Fashions, Inc. v. M.V. Hakusan II, 954 F.2d 874, 880 n.3 (3d Cir. 1992) and Brotman v. United States, 111 F. Supp. 2d 418, 420 n.1 (S.D.N.Y. 2000)).

When considering a motion to dismiss for lack of subject matter jurisdiction, "the district court is to regard the pleadings' allegations as mere evidence on the issue, and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment." Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991) (citing Trentacosta v. Frontier Pac. Aircraft Indus., 813 F.2d 1553, 1558 (9th Cir. 1987)). "The court may dismiss a case for lack of subject matter jurisdiction on any of the following bases: (1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Boyd v. Angelica Textile...