Sigmon v. Goldman Sachs Mortg. Co.
| Decision Date | 26 March 2018 |
| Docket Number | 1:12-cv-3367 (ALC) |
| Parties | WAYNE SIGMON, Trustee in Bankruptcy for Karen LeBauer Hindin, Plaintiff, v. GOLDMAN SACHS MORTGAGE COMPANY, MLQ HOTEL, L.L.C., MLQ HOTEL, L.L.C., MLQ DML SPA, L.L.C. and MLQ DML RESTAURANT, L.L.C., Defendants |
| Court | U.S. District Court — Southern District of New York |
In this action, Plaintiff Wayne Sigmon, as the Trustee for Debtor Karen LeBauer Hindin ("Trustee" and "Debtor," respectively), brings a constructive fraudulent transfer claim challenging a purported transfer of the debtor's property interest in a limited liability company to Defendants, Goldman Sachs Mortgage ("GS Mortgage"), MLQ DML Hotel, LLC, MLQ DML Spa LLC, and MLQ DML Restaurant LLC (collectively, "MLQ Defendants" and together with GS Mortgage, "Defendants"). Defendants now move for summary judgment on the threshold issue of whether a transfer occurred. For the following reasons, the motion is GRANTED.
In June 2006, GS Mortgage made a mortgage loan (the "Loan") to Duval Development Partners I, LLC ("DDP") and Duval Development Partners I Holdings, LLC ("Duval Holdings") (collectively, the "Borrowers") for the purpose of financing the acquisition and construction of certain real property (the "Property"). Karen Hindin, the Debtor, was one of four guarantors ofcertain obligations of the Borrowers under the Loan agreement. Neither a borrower on the Loan nor an owner of the Property, Debtor held a 50% membership interest in Dakota Mountain Lodge LLC ("DML"), which in turn held a 50% interest in Duval Holdings, which held a 100% interest in DDP.
In connection with its 2006 Loan to the Borrowers, GS Mortgage took various forms of collateral, including the Property itself, various associated bank accounts, equity interests in the Borrowers, and entities associated with the Borrowers. In connection with the Loan agreement, Debtor and her husband, Lee Hindin, signed an undated document titled "Certificate for Dakota Mountain Lodge LLC" ("DML Certificate") with the assignee left blank and another undated document titled "Limited Liability Company Membership Interest Power" ("LLC Membership Interest Power") also with the assignee left blank. Berman Decl. Exs. 6-7.
By September 2009, the Borrowers had defaulted on the Loan, rendering the Loan due and payable in full. As a result, GS Mortgage and the Borrowers agreed to enter the Deed in Lieu of Foreclosure Agreement ("DILA").2 The DILA states that the agreement was entered "to avoid delay and expense for Borrowers and Lender, recognizing that Borrowers have no equity in the Mortgaged Property, Borrowers desire to transfer the Mortgaged Property to Transferees, and Lender desires to cause Transferees to accept them from Borrowers." Berman Decl. Ex. 3 (DILA) at p. 4. The DILA and associated documents provided for the transfer of certain collateral, including the Property and various other associated assets, including property management agreements, assignment of condo unit management agreements, and insurance policies to the MLQ Defendants. Exhibit B to the DILA, which lists the "Transfer Documents,"does not reference any document that would transfer membership interest in DML or the right to receive distributions thereunder. The DILA also provided that the Debtor and others would dissolve, liquidate, terminate, and wind up the affairs of the Borrowers. DILA § 4.3.
On April 28, 2010, Debtor filed a petition for Chapter 7 bankruptcy in the United States District Court for the Western District of North Carolina. Third. Am. Compl. ¶ 1. Plaintiff commenced this action on April 27, 2012. After various amendments to the complaint and rounds of motion to dismiss briefing, Plaintiff's only remaining claim is a constructive fraudulent transfer claim under Utah law, specifically that Debtor transferred to Defendants in connection with the DILA (1) her membership interest in DML and (2) her right to receive distributions from DML.
Discovery commenced. Magistrate Judge Gorenstein granted Defendants' application for expedited, limited discovery on the issue of whether Debtor transferred to Defendants her membership interest in DML or right to receive distributions thereunder. See Sigmon v. Goldman Sachs Mortgage Co., 229 F. Supp. 3d 254 (S.D.N.Y. 2017). The basis for Defendants' application is that if there is no transfer of any property to Defendants, then there can be no constructive fraudulent transfer claim as a matter of Utah law. Judge Gorenstein found a "strong likelihood that" the issue of whether a transfer actually occurred "could be dispositive." Id. at 256 (internal quotation marks omitted). At a conference, the Court granted leave to Defendants to file their summary judgment motion. 7/17/2017 Conf. Tr. 25:8-24 (ECF No. 174).
Summary judgment must be granted "if the movant shows that there is no genuinedispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317 (1986). There is no issue of material fact where the facts are irrelevant to the disposition of the matter. Chartis Seguros Mexico, S.A. de C.V. v. HLI Rail & Rigging, LLC, 967 F. Supp. 2d 756, 761 (S.D.N.Y. 2013); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (). An issue is genuine "if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson, 477 U.S. at 248.
At summary judgment, the moving party has the burden "to demonstrate that no genuine issue respecting any material fact exists." Gallo v. Prudential Residential Servs., Ltd. P'ship, 22 F.3d 1219, 1223 (2d Cir. 1994). "[I]n cases where the nonmovant will bear the ultimate burden of proof at trial on an issue, the moving party's burden under Rule 56 will be satisfied if he can point to an absence of evidence to support an essential element of the nonmoving party's claim." Brady v. Town of Colchester, 863 F.2d 205, 210-11 (2d Cir. 1988) (citations omitted). "Where the moving party demonstrates the absence of a genuine issue of material fact, the opposing party must come forward with specific evidence demonstrating the existence of a genuine dispute of material fact." Brown v. Eli Lilly & Co., 654 F.3d 347, 358 (2d Cir. 2011) (citations omitted). "More specifically, it must do more than simply show that there is some metaphysical doubt as to the material facts and may not rely on conclusory allegations or unsubstantiated speculation." Id. (internal citations and quotation marks omitted).
The issue here is whether Debtor transferred her membership interest in, or distributionrights under, DML to Defendants as part of the DILA. Defendants argue that a transfer did not occur; on the contrary, Plaintiff counters that it did. The Court finds that the language of DILA establishes that Debtor did not transfer her interest in DML or any right to receive distributions thereunder to Defendants.
In resolving a motion for summary judgment involving contract interpretation, "a court should accord [the contract] language its plain meaning giving due consideration to the surrounding circumstances and apparent purpose which the parties sought to accomplish." Palmieri v. Allstate Ins. Co., 445 F.3d 179, 187 (2d Cir. 2006) (quoting Thompson v. Gjivoje, 896 F.2d 716, 721 (2d Cir. 1990)). Summary judgment is appropriate in a contract interpretation dispute when either "the language of the contract provision is wholly unambiguous" or "the language is ambiguous and there is relevant extrinsic evidence, but the extrinsic evidence creates no genuine issue of material fact and permits interpretation of the agreement as a matter of law." Compagnie Financiere de CIC et de L'Union Europeenne v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 232 F.3d 153, 157-158 (2d Cir. 2000) (citations omitted). Additionally, summary judgment is appropriate "regarding the interpretation of ambiguous language if the non-moving party fails to point to any relevant extrinsic evidence supporting that party's interpretation of the language." Id. (citing Mellon Bank v. United Bank Corp., 31 F.3d 113, 116 (2d Cir. 1994))
Section 2 of the DILA, entitled "The Transfer," is the first substantive section (after the Definitions section) of the DILA and describes the transfer. Section 2 provides for the transfer of all "Desired Collateral and certain other agreements (collectively, the "Transferred Assets") toone or more of the transferees pursuant to the Transfer Documents."3 DILA § 2.1. The Transfer Documents, also referred to as "Checklist of Deliverables" and listed in Exhibit B to the agreement, are 17 different categories of documents. Various provisions besides Section 2.1 of the DILA state that the transfer will be effected by the Transfer Documents. "Transfer" is defined as "the conveyance and transfer of all the Desired Collateral . . . to Transferees under the Transfer Documents." (emphasis added). DILA § 1. Section 2.2 of the DILA reads "Borrowers . . . shall implement, formalize and complete such Transfer by signing, acknowledging, and delivering to the Transferees all documents listed in Exhibit B. . . ."
Critically, the list of Transfer Documents does not reference or include Debtor's DML interest or the right to receive distributions thereunder. DILA Ex. B. The principle expressio unius est exclusio alterius i.e., "to express or include one thing implies the exclusion of the other, or of the alternative" applies here. See VKK Corp. v. Nat'l Football League, 244 F.3d 114, 130 (2d Cir. 2001) (). Where, as is the case here, the parties specifically enumerate a list of items from a general class to which a provision is applicable, they mean to cover the...
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