Rose Hall, Ltd. v. Chase Manhattan Overseas Banking

• Decision Date: 10 June 1983
• Docket Number: Civ. A. No. 79-182.
• Citation: 566 F. Supp. 1558
• Parties: ROSE HALL, LTD., Plaintiff, v. CHASE MANHATTAN OVERSEAS BANKING CORPORATION and Holiday Inns, Inc., Defendants.
• Court: U.S. District Court — District of Delaware

566 F. Supp. 1558

ROSE HALL, LTD., Plaintiff, v. CHASE MANHATTAN OVERSEAS BANKING CORPORATION and Holiday Inns, Inc., Defendants.

Civ. A. No. 79-182.

United States District Court, D. Delaware.

June 10, 1983.

COPYRIGHT MATERIAL OMITTED

Andrew B. Kirkpatrick, Jr., Paul P. Welsh, Thomas Reed Hunt, Jr., Francis S. Babiarz and Denison H. Hatch, Jr., Morris, Nichols, Arsht & Tunnell, Wilmington, Del., for plaintiff.

Charles S. Crompton, Jr., David B. Brown and Gregory A. Inskip, Potter, Anderson & Corroon, Wilmington, Del., of counsel: Milbank, Tweed, Hadley & McCloy, New York City, for Chase Manhattan Overseas Banking Corp.

Henry N. Herndon, Jr., Morris, James, Hitchens & Williams, Wilmington, Del., of counsel: Ronald L. Reid and Peter Q. Bassett of Alston & Bird, Atlanta, Ga., for defendant Holiday Inns, Inc.

OPINION ON ENTRY OF JUDGMENT

MURRAY M. SCHWARTZ, District Judge.

This opinion addresses the entry of judgment on a special verdict pursuant to Fed. R.Civ.P. 49(a). After deliberating for seven and one-half days, a jury, which sat through 81 trial days and what turned out to be 15,564 transcript pages of proceedings, returned its special verdict on March 17, 1983. Entry of judgment was deferred for thirty days at the request of counsel. At the end of that period, the parties submitted their proposed forms of judgment.¹

The function of a Court in the present procedural posture — entry of judgment on a special verdict — is narrow. Its task is to apply the law to the facts as found by the jury and translate the same into a judgment. See 5A J. Moore, Moore's Federal Practice ¶ 49.02, p. 49-8 (2d ed. 1982). The instant matter is unusual in that two of the three litigants insist that the special verdict entitles each to judgment against the other. In addition to the entry of a judgment on the special verdict, the parties agreed other issues should be determined by the Court as part of the judgment. Falling into the latter category are two issues which only arise if judgment is entered for plaintiff. These issues include: first, the currency of the jury award, if any, and its adjustment to reflect the difference and decline of the value of the Jamaican dollar against the United States dollar;² and second, whether and to what extent prejudgment interest, if any, is to be awarded to plaintiff. Also involved at a peripheral level are treatment of the so-called outparcels and assessment of costs. These matters will be considered seriatim. In order to understand the special verdict sheet, which will be produced in full at a later portion of this opinion,³ a background statement is essential.

BACKGROUND

Plaintiff, Rose Hall Ltd. ("Rose Hall" or "plaintiff"), is a Cayman Islands corporation whose ultimate principal and controlling stockholder is John W. Rollins, Sr. Rose Hall owned approximately 5500 acres of land on the north coast of Jamaica near Montego Bay. In the late 1960's, Rose Hall organized a wholly owned subsidiary company called Rose Hall (H.I.) Ltd. ("Rose Hall (H.I.)") for the purpose of owning a hotel in Jamaica to be known as the Rose Hall Holiday Inn. The hotel property owned by Rose Hall (H.I.) consisted of the hotel building and an 11 acre tract of land cut out from the Rose Hall acreage. The hotel was financed by a US$6,250,000 loan from the Bank of Nova Scotia ("BNS") to Rose Hall (H.I.) and leased to a subsidiary of Holiday Inns for a twenty year term but guaranteed by defendant Holiday Inns, Inc. ("Holiday Inns").

Chase Merchant Bankers Jamaica, Ltd. ("Chase Jamaica") is a wholly owned subsidiary of defendant Chase Manhattan Overseas Banking Corporation ("CMOBC"), which in turn is a wholly owned subsidiary of Chase Manhattan Bank, N.A., a wholly owned subsidiary of the Chase Manhattan Corporation. On June 3, 1974, Rose Hall borrowed US$3,000,000 from Chase Jamaica. As security for the loan, Rose Hall gave Chase Jamaica a first mortgage on approximately 3000 acres of Rose Hall's land, lying largely in the middle of the 5500 acre assemblage, a second mortgage on the Rose Hall Holiday Inn and a pledge of all the shares of Rose Hall (H.I.). The parties to the loan agreed that certain of the 3000 acres described in the mortgage, called the "outparcels," were not intended to be covered by it, and would be released to Rose Hall at any time upon request. This agreement is embodied in a letter from Chase Jamaica to the Rose Hall Directors, dated May 10, 1974. (Plaintiff's Exhibit ("PX") 472).

Rose Hall quickly went into default on its loan from Chase Jamaica. By mid-1975 Rose Hall (H.I.) had entered into negotiations for the sale of the hotel to the Urban Development Corporation ("U.D.C."), a corporation owned by the Jamaican government. John Rollins negotiated principally with Moses Matalon, who between 1975 and 1977 was the Chairman of the U.D.C. By May or June 1976, those negotiations had crystallized into a tentative arrangement with the Jamaican government. The hotel and the 11 acres on which it was situated would be sold to U.D.C. for US$13,000,000, payable in US$10,000,000 cash and US$3,000,000 in long-term Jamaican government guaranteed debentures. The US$10,000,000 cash was to be loaned by BNS to the Jamaican government. From the sale proceeds, BNS was to receive US$6,250,000 to pay off the existing mortgage and US$2,625,000 toward other obligations owed to BNS by Rollins entities. Chase Jamaica was to receive US$1,125,000 cash toward repayment of its loan, and the US$3,000,000 in debentures were to be available for repayment of the remainder. In exchange, BNS and Chase Jamaica were to release their previously existing security interests in the hotel with the Jamaican government providing security sufficient to satisfy BNS.

As the sale negotiations continued, Rose Hall fell further behind in payments due under the Chase Jamaica loan. In early 1976, Chase Jamaica, as pledgee of the shares, registered the stock of Rose Hall (H.I.) in its name and became involved in the sale negotiations.

Holiday Inns learned of the sale negotiations in approximately April 1976, and, desiring to modify the terms of the lease with Rose Hall (H.I.) which it considered oppressive, held discussions with John Rollins and Jamaican government representatives. Plaintiff contended that these discussions embodied: first, threats to breach its lease unless it was granted concessions; second, false and malicious statements that Rose Hall (H.I.) had misrepresented its earnings to the government; and third, assertion of a false claim that Rose Hall (H.I.) owed Holiday Inns approximately US$4 million previously spent by the lessee for maintenance and repair of the hotel. Without specifying which allegation formed the basis for its finding, the jury implicitly concluded that Holiday Inns wrongfully interfered with the Rollins negotiated proposed US$13,000,000 sale to U.D.C. and thereby caused Rose Hall US$4,500,000 in damages.⁴

During the spring and summer of 1976, political and economic conditions in Jamaica deteriorated. Under Prime Minister Michael Manley, leader of the People's National Party ("P.N.P."), the government moved to the left in foreign and domestic policy and created widespread apprehension, flight of capital, and political violence on the island. This culminated in the declaration of a national State of Emergency on June 19, 1976. As a result, tourism and resort development declined dramatically.

In early August, 1976, Chase Jamaica informed Holiday Inns that it was the owner of the Rose Hall (H.I.) shares, and arranged a meeting for August 20, 1976 in Miami, Florida. This meeting formed the basis of conspiracy claims by plaintiff against the defendant Holiday Inns. Rose Hall alleged that Chase Jamaica and Holiday Inns conspired to frustrate the consummation of the US$13,000,000 arrangement and replace it with a sale at a drastically reduced price, thereby accomplishing objectives beneficial to themselves without regard to Rose Hall's interests. The jury, however, found that there was no such conspiracy.⁵

In late August, 1976, the U.D.C. formally notified Rose Hall (H.I.) that it was no longer interested in pursuing the US$13,000,000 negotiations. On September 14, 1976, Chase Jamaica made a proposal far more attractive to the U.D.C. Instead of US$13 million for the hotel only, Chase Jamaica offered to sell to the U.D.C. all of the Rose Hall collateral for approximately US$9.5 million, consisting of US$8.5 million for the shares of stock of Rose Hall (H.I.) and US$1 million for the 3000 acres of mortgaged land. The U.D.C. accepted the offer in late September or early October, 1976, with closing taking place on November 18, 1977. In this action, plaintiff alleged and the jury found that this sale was unreasonably "cheap"⁶ and in violation of Chase Jamaica's mortgagee duties, determining that, as a result, plaintiff was damaged in the amount of US$1,500,000 for the cheap sale of the land and US$0 for the shares of Rose Hall (H.I.).⁷

The title conveyed by Chase Jamaica to the U.D.C. included the outparcels. After the sale, the U.D.C. and Chase Jamaica agreed that the U.D.C. would honor Chase Jamaica's obligation to release the outparcels. Although efforts are being made by Rose Hall and the U.D.C. to accomplish this reconveyance, problems relating to boundary determination have impeded progress. In this proceeding, plaintiff has requested that the Court issue a declaratory judgment that if the U.D.C. fails to reconvey the outparcels by October 1, 1983, CMOBC is liable to Rose Hall for resulting damages.

On September 21, 1976, Rose Hall representatives requested Chase Jamaica to permit Rose Hall (H.I.) to bring a lawsuit in Georgia against Holiday Inns for interference with the US$13,000,000 arrangement. Rose Hall representatives also requested that Chase Jamaica withdraw its offer of sale to the U.D.C. In December, 1976, a lawyer for the Jamaican government requested that Chase Jamaica sell the...