Rose Hall, Ltd. v. CHASE MANHATTAN OVERSEAS BANK.
| Decision Date | 27 June 1980 |
| Docket Number | Civ. A. No. 79-182. |
| Citation | 494 F. Supp. 1139 |
| Parties | ROSE HALL, LTD., Plaintiff, Rose Hall (H.I.), Ltd., Plaintiff (Involuntary) on Second Count, v. CHASE MANHATTAN OVERSEAS BANKING CORPORATION and Holiday Inns, Inc., Defendants. |
| Court | U.S. District Court — District of Delaware |
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James M. Tunnell, Jr., Andrew B. Kirkpatrick, Jr., and Thomas Reed Hunt, Jr., of Morris, Nichols, Arsht & Tunnell, Wilmington, Del., for plaintiff.
Charles S. Crompton, Jr., of Potter, Anderson & Corroon, Wilmington, Del., for defendant Chase Manhattan Overseas Banking Corporation; Milbank, Tweed, Hadley & McCloy, New York City, of counsel.
Henry N. Herndon, Jr., of Morris, James, Hitchens & Williams, Wilmington, Del., for defendant Holiday Inns, Inc.; Ronald L. Reid and Peter Q. Bassett, of Alston, Miller & Gaines, Atlanta, Ga., of counsel.
This action was brought by Rose Hall, Ltd. (Rose Hall) and an involuntary plaintiff, Rose Hall (H.I.) Ltd. (Rose Hall (H.I.)) to recover substantial damages for alleged torts committed by the defendants Holiday Inns, Inc. (Holiday Inns) and Chase Manhattan Overseas Banking Corporation (Chase Overseas). Rose Hall is a Cayman Islands corporation, Rose Hall (H.I.) is a Jamaican corporation. Chase Overseas is an "Edge Act corporation" chartered under federal law. 12 U.S.C. § 601. Holiday Inns is incorporated under the laws of Tennessee. Jurisdiction is based upon 28 U.S.C. §§ 1331 and 1332 and 12 U.S.C. § 632. The case is before the Court upon a motion of Holiday Inns to dismiss and a motion of Chase Overseas for summary judgment.
The complaint contains two counts. The first count alleges a claim by Rose Hall against both Holiday Inns and Chase Overseas. The second count alleges a claim by Rose Hall (H.I.) as an involuntary plaintiff solely against Holiday Inns.
Summarized, the salient facts alleged in the first count are:
In 1968, Rose Hall was the beneficial and record owner of all of the issued and outstanding stock of Rose Hall (H.I.).
Some time later Rose Hall (H.I.) began the construction in Jamaica of the Rose Hall Holiday Inn ("Hotel Asset").1 The hotel was permanently financed by the Bank of Nova Scotia by a loan to Rose Hall (H.I.) of $6,250,000. The loan was secured by a first mortgage on Rose Hall's real estate, a pledge of the proceeds of the lease of the property by Rose Hall (H.I.) to Holiday Inns,2 and a bill of sale covering all the furniture, furnishings and equipment at the hotel. The government of Jamaica guaranteed the repayment of the loan to the Bank of Nova Scotia.
Prior to December 1977, Rose Hall was also the owner of approximately 5,500 acres of real estate in Jamaica which was proximate to the hotel.
On May 28, 1974, in an unrelated transaction, Rose Hall borrowed U.S. $3,000,000 from Chase Merchant Bankers Jamaica, Ltd. (Chase Jamaica), a wholly owned subsidiary of Chase Overseas. As security Rose Hall gave Chase Jamaica a mortgage on approximately 3,000 acres of real estate proximate to the hotel, a junior security interest in the hotel, and pledged with Chase Jamaica all of the stock of Rose Hall (H.I.). Certain of the 3,000 acres described in the mortgage were not intended to be covered by it and Chase Jamaica agreed that this was so. The complaint (¶ 11) alleges that "Chase"3 was subject to an implied contractual, equitable and fiduciary duty to Rose Hall to act with reasonable care and in good faith in exercising its powers as mortgagee and pledgee of the real estate and stock of Rose Hall (H.I.).
In mid-1975, Rose Hall began negotiating with the Jamaican government to dispose of the Hotel Asset. The complaint alleges (¶ 13):
The form of the transaction being of no material significance, Rose Hall, Ltd. was agreeable to a sale of the stock of Rose Hall (H.I.), Ltd. or a sale of the Hotel by either Rose Hall (H.I.), Ltd. or by Rose Hall, Ltd., and at various times, the transaction was indeed contemplated in different forms.
One reason Rose Hall had for wishing to dispose of the Hotel Asset was to repay the Chase loan.
By May 1976, Rose Hall had an arrangement with the Jamaican government to sell the "Hotel Asset" for U.S. $13,000,000 assuming that the "Hotel Asset" would be transferred free of the Bank of Nova Scotia mortgage and the Chase security interests. The arrangement was approved by the Urban Development Corporation (UDC), a corporation wholly owned by the Jamaican government, and the Jamaican cabinet. In connection with the transaction Chase, Rose Hall and the Bank of Nova Scotia agreed that Chase would be paid U.S. $1,125,000 from the proceeds of the sale in exchange for which Chase would release its security interests in the Hotel Asset.
Beginning in April 1976, Holiday Inns sought major concessions in its lease of the hotel. Because it feared that it was less likely that they could be obtained if Rose Hall consummated its arrangement with the Jamaican government, Holiday Inns intentionally interfered with those arrangements to the damage of Rose Hall by a number of wrongful and malicious actions which the complaint details.
In the meantime, by early 1976, Chase had decided to close down its Jamaican operations and to liquidate as quickly as possible all of its loans in Jamaica, including its loan to Rose Hall. The complaint alleged that ultimately Chase proceeded to do this without any of the regard required by good faith for the implied contractual, equitable and fiduciary duties it owed as mortgagee and pledgee to Rose Hall.
Holiday Inns was aware of the loan from Chase to Rose Hall, and the security which Chase held for the loan, and Chase's desire to close down its Jamaican operations. In February 1976, Chase caused the shares of Rose Hall, Inc., which it held as pledgee, to be transferred to and registered in its name and by May 1976, assumed the management of the company, a fact which was known to Holiday Inns.
Because of the desires of Holiday Inns and Chase to accomplish the objectives beneficial to themselves, and believing that the consummation of Rose Hall's arrangement with the Jamaican government would provide an obstacle to their achieving those objectives, Holiday Inns and Chase conspired and agreed to frustrate the consummation of Rose Hall's arrangement with the Jamaican government. Thereafter, pursuant to the conspiracy, Chase and Rose Hall engaged in a course of conduct detailed in the complaint to prevent the consummation of Rose Hall's arrangement. As a result of their efforts, in August 1976, the Jamaican government terminated the arrangement which Rose Hall had with it.
In September 1976, Chase offered to sell the Hotel Asset to the Jamaican government for U.S. $2,255,000, a greatly reduced and wholly inadequate price, subject to the Bank of Nova Scotia first mortgage of $6,250,000, but free of the Chase security interests. In addition, Chase offered to sell to the Jamaican government for U.S. $1,000,000, the 3,000 acre parcel on which it held a first mortgage despite the fact that the land had a fair market potential of at least $40,000,000.
The complaint alleges that the price at which Chase offered to sell these assets was calculated in disregard of the interests of and its duty to Rose Hall and was only sufficient to allow Chase to recoup its loan with interest. The offer, the complaint alleges, also furthered objectives of Holiday Inns to obtain major concessions in its lease. In connection with Chase's offer, Chase's parent company, Chase Manhattan Bank, N.A., offered to lend U.S. $5,000,000 to the Jamaican government in order to finance the purchase.
In December 1977, Chase transferred to UDC the stock of Rose Hall (H.I.) and the 3,000 acres of land in accordance with the terms of the offer of September 1976. The transfer of title to the land included acreage which the parties never intended the mortgage to cover. Holiday Inns succeeded ultimately in obtaining major modifications of its rights and obligations with respect to the Hotel Asset.
The complaint alleges that the wrongful acts of Holiday Inns and Chase damaged Rose Hall directly as stated and indirectly in other specified ways.
The first count in the complaint directed against Holiday Inns has two facets: first, a claim by Rose Hall solely against Holiday Inns for interfering with the arrangement which Rose Hall had with the Jamaican government; and second, a claim by Rose Hall against both Holiday Inns and Chase Overseas based upon a conspiracy between them to accomplish their several respective objectives by frustrating the arrangement which Rose Hall had with the Jamaican government.
Holiday Inns argues that in both aspects the first count is barred by res judicata or collateral estoppel based on a judgment rendered in a suit in Georgia by Rose Hall against Holiday Inns.4
The law of Georgia controls the effect which this Court must give to the Georgia judgment. 28 U.S.C. § 1738 (1976). Pertinent to the res judicata defense are two sections of the Georgia law, Ga. Code Ann. §§ 110-501, 503.
A judgment of a court of competent jurisdiction shall be conclusive between the same parties and their privies as to all matters put in issue, or which under the rules of law might have been put in issue in the cause wherein the judgment was rendered, until such judgment shall be reversed or set aside.
Section 503 reads:
A former recovery on grounds purely technical and where the merits were not and could not have been in question, shall not be a bar to a subsequent action brought so as to avoid the objection fatal to the first. For the former judgment to be a bar, the merits of the case shall have been adjudicated.
The Georgia action was begun by Rose Hall against Holiday Inns5 on September 30, 1976. The substance of the Georgia action was in general the same as in the...
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