Skandinaviska Enskilda Banken v. Rathaus

• Decision Date: 22 November 1985
• Docket Number: No. 85 Civ. 3208 (RWS).,85 Civ. 3208 (RWS).
• Citation: 624 F. Supp. 207
• Parties: SKANDINAVISKA ENSKILDA BANKEN, Plaintiff, v. Bernt RATHAUS, also known as Bernt C. Rathaus, Defendant.
• Court: U.S. District Court — Southern District of New York

624 F. Supp. 207

SKANDINAVISKA ENSKILDA BANKEN, Plaintiff, v. Bernt RATHAUS, also known as Bernt C. Rathaus, Defendant.

No. 85 Civ. 3208 (RWS).

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

November 22, 1985.

Seward & Kissel, New York City, for plaintiff; M. William Munno, James F.X. Hiler, of counsel.

Lehrich & Lehrich, New York City, for defendant; Hyman D. Lehrich, Eric Moss, of counsel.

OPINION

SWEET, District Judge.

The defendant in this action for collection of a debt, Bernt C. Rathaus ("Rathaus"), has moved pursuant to Rule 55(c) of the Federal Rules of Civil Procedure for an order vacating a default for failure to serve a timely answer and has moved pursuant to Rule 42(a) for an order consolidating this action with the action entitled Sundsvallsbanken v. Fondmetal, Inc. and Robern International, Inc., 624 F.Supp. 811 (S.D.N.Y.1985). Plaintiff, Skandinaviska Enskilda Banken ("SEB") cross-moved for summary judgment under Rule 56(a) of the Federal Rules of Civil Procedure. For the reasons set forth below, which constitute the findings of fact and conclusions of law, SEB's motion for summary judgment is granted.

Summary Judgment Standards

A motion for summary judgment requires the district courts to resolve all doubts and draw all reasonable inferences in favor of the party opposing the motion, United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962) (per curiam); United States v. One Tintoretto Painting Entitled "The Holy Family with Saint Catherine and Honored Donor", 691 F.2d 603, 606 (2d Cir. 1982), to allow the development of a full factual record through trial of the issues presented, a policy which is limited by the grant of summary judgment. See Jaroslawicz v. Seedman, 528 F.2d 727, 731 (2d Cir.1975). On the other hand, a litigant's failure to allege substantial facts in dispute or his mere reliance on an unsubstantiated denial of the accuracy of the opponents' affidavits is insufficient to controvert a motion for summary judgment. Project Release v. Prevost, 722 F.2d 960, 968 (2d Cir.1983); see WIXT Television, Inc. v. Meredith Corp., 506 F.Supp. 1003 (N.D.N. Y.1980). In such circumstances the use of summary judgment is desirable to avoid imposing and incurring "fruitless expenses of litigation." Merit Motors, Inc. v. Chrysler Corporation, 569 F.2d 666, 673 (D.C. Cir.1977).

Undisputed Facts

SEB, a bank organized and existing under the laws of the Kingdom of Sweden and with its principal place of business in Stockholm, Sweden, brought this action to enforce Rathaus' obligation to unconditionally guarantee repayment of a loan that SEB made to a Swedish corporation called Fondmetall A.B. ("Fondmetall"). On February 7, 1983 Rathaus, a citizen and resident of New York State, executed a written agreement entitled "Continuing Guaranty" which unconditionally promised to pay SEB all indebtedness up to the principal amount of six hundred thousand Swedish Crowns ("SEK") plus interest due upon a loan agreement between SEB and Fondmetall entitled "Contract Cheque Account with Overdraft Facility." Under the contract, SEB granted Fondmetall a loan facility in the form of a cheque account overdraft privilege of up to SEK 1,200,000.00, with interest fixed at 4.5% over the discount rate set by the Central Bank of Sweden. Fondmetall also promised to pay penalty interest of 2% if it failed to repay the overdraft loans when due.

In addition to the Overdraft Facility, Fondmetall maintained a Foreign Currency Account with SEB, and drew loans totalling $270,000 before defaulting on these loans on July 31, 1984. This default prompted SEB's termination of Fondmetall's right to borrow under the contract,¹ and on August 23, 1984 SEB demanded that Fondmetall repay the overdrawn SEK 1,200,000.00 which SEB had loaned under the contract, plus accrued interest. Fondmetall defaulted on this demand for repayment, triggering Rathaus' obligation under his unconditional guaranty of the account. SEB notified Rathaus of this default by letter of August 24, 1984, and demanded payment of SEK 600,000.00 pursuant to the guaranty. To date Rathaus has failed to honor any portion of his obligation under the guaranty, despite SEB's repeated attempts to secure such compliance.

In January 1985, SEB received over $134,000 (equivalent to approximately SEK 2,222,000) wired to Fondmetall from an Italian customer, Terninoss Terni. SEB seized the funds and credited them equally to the defaulted Overdraft Facility account and Foreign Currency account loans.

Discussion

Rathaus admits to all of the facts outlined above and opposes SEB's motion for summary judgment, however, with a request for additional time to pursue discovery under Rule 56(f) of the Federal Rules of Civil Procedure. Rule 56(f) provides:

When Affidavits Are Unavailable. Should it appear from the affidavits of a party opposing the motion that he cannot for reasons stated present by affidavit facts essential to justifying his opposition, the court may refuse the application for judgment or may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or may make such other order as is just.

It is the duty of this court under Rule 56(f) to ensure that the parties have been given a reasonable opportunity to make their record complete before ruling on a motion for summary judgment. Berne Street Enterprises, Inc. v. American Export Isbrandtsen Co., 289 F.Supp. 195 (S.D.N.Y.1968). However, Rule 56(f) is not a shield which will prevent the entry of summary judgment without a showing that the material sought is germane to the defense. Quaker Chair Corp. v. Litton Business Systems, Inc., 71 F.R.D. 527 (S.D.N.Y.1976). "A `bare assertion' that the evidence supporting a plaintiff's allegation is in the hands of the defendant is insufficient to justify a denial of a motion for summary judgment under Rule 56(f)." Contemporary Mission, Inc. v. U.S. Postal Service, 648 F.2d 97, 107 (2d Cir.1981).

Pursuant to the requirements of Rule 56(f), Rathaus has attempted to demonstrate that he has three defenses to SEB's claim which require additional discovery of relevant material in the hands of SEB. Underlying these defenses is the claim of Rathaus that he has been defrauded by his former partner Anders J. Lofberg ("Lofberg") and that Lofberg's acts, together with those of the banks involved, have damaged him and relieved him of his liabilities.

Rathaus' first defense is that SEB breached three² duties which it owed with regard to the Fondmetall accounts at SEB, and that he requires additional discovery under Rule 56(f) to substantiate this defense. Specifically Rathaus charges that the funds wired to Fondmetall's account at SEB were not properly accounted for, and should have been applied to reduce the debt in the Overdraft Facility account which he guaranteed. Rathaus contends that SEB has failed to produce account instructions for the two Fondmetall accounts and has failed to show that the seized Italian funds were not destined for the Overdraft account.

However, SEB has provided documentation relating to the Terninoss Terni transaction. In the Reply Declaration of Bengt A.S. Smith, bank attorney (¶¶ 4-6), SEB establishes that the funds were wired for deposit into Fondmetall's Foreign Exchange account, and not to the Overdraft cheque account guaranteed by Rathaus.³ A copy of the wire advice from Citibank, the origin of the Terninoss Terni funds, marked with the Fondmetall Foreign Exchange account number is attached as an exhibit to the affidavit. Smith also rebuts Rathaus' assertion that Terninoss Terni gave any deposit instructions to SEB regarding the wired funds (¶ 5) and Rathaus has alleged no facts. as opposed to speculation, on which he bases his defense.

Rathaus' second defense alleges that another Swedish Bank, Sundsvallsbanken ("SVB"), agreed to indemnify him as to his guarantee of the Fondmetall account at SEB, and that SEB agreed to this substitution of SVB on the guaranty. To support this assertion, Rathaus stated that "SEB was kept constantly advised" of the negotiations between SVB, Rathaus and his partner Lofberg (Rathaus Affidavit ¶ 4) and that "SEB was directly concerned with, was advised of, and concurred in the terms of the aforementioned agreements" (Rathaus Affidavit ¶ 5). Rathaus asserts, pursuant to Rule 56(f), that SEB possesses some documentary evidence or can attest to its approval of this indemnity by SVB. However, Rathaus has not produced a single affidavit or other piece of documentary evidence to support the existence of such an agreement by SEB.

The documentary evidence which has been submitted, belies the contention that SVB undertook to fulfill his obligations to SEB under his unconditional guaranty. Exhibit A of the Rathaus affidavit, the "Limited Release and Indemnification Agreement" of ...