Superintendent of Insurance of the State of New York v. Chase Manhattan Bank
| Decision Date | 02 August 2007 |
| Docket Number | 501433. |
| Citation | 840 N.Y.S.2d 479,2007 NY Slip Op 06307,43 A.D.3d 514 |
| Parties | SUPERINTENDENT OF INSURANCE OF THE STATE OF NEW YORK, as Liquidator of UNITED COMMUNITY INSURANCE COMPANY, Respondent, v. CHASE MANHATTAN BANK, Formerly Known as CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), et al., Appellants. |
| Court | New York Supreme Court — Appellate Division |
Appeal from an order of the Supreme Court (Williams, J.), entered September 27, 2006 in Schenectady County, which, inter alia, denied defendants' cross motions for summary judgment dismissing the complaint.
Crew III, J.P.
At all times relevant hereto, the Lawrence Group, Inc. was a New York corporation and holding company owned by Albert Lawrence and Barbara Lawrence. The Lawrence Group, in turn, was comprised, in relevant part, of Lawrence Agency Group and Lawrence Insurance Group, the latter of which included subsidiaries in the form of United Community Insurance Company (hereinafter UCIC) and what ultimately became known as United Republic Insurance Company.
Between 1988 and 1992 defendants, various financial entities, entered into credit and lending agreements with the Lawrence Group and its various affiliates, which were secured by substantial consideration. Although the Lawrence Group made all scheduled payments to defendants, it periodically was found to be in breach of certain covenants put in place to monitor its financial performance. Over time, financial difficulties ensued, and the Lawrence Group amassed a debt to defendants in excess of $27 million, the recovery of which defendants deemed doubtful.
In response to this situation, the Lawrence Group entered into negotiations with defendants in December 2003 with regard to reducing, restructuring and/or repaying the debt owed. Through a series of telephone conversations and letters, a plan emerged whereby the Lawrence Group would borrow $13 million from UCIC and $14 million from United Republic Insurance, with said funds placed in the "Alpha Trust." The Alpha Trust would then loan $27 million to the Lawrence Group, with that group executing several notes in favor of the trust. Such notes, in turn, were secured by stock pledges and other guarantees. The $13 million loaned by UCIC was not disclosed for prior approval by plaintiff, the Superintendent of Insurance. Due to his role in restructuring this transaction and repayment plan, Albert Lawrence was federally indicted for, among other things, the crimes of mail fraud and wire fraud in October 1999.
Plaintiff thereafter commenced this action seeking the return of the $13 million portion of the payment made by the Lawrence Group to defendants upon the ground that defendants knew or should have known that UCIC was or would be rendered insolvent by the Alpha Trust transaction. Plaintiff thereafter moved to compel defendants to disclose all communications with counsel pertaining to such transaction. Defendants opposed that relief and cross-moved for summary judgment dismissing the complaint. Supreme Court granted plaintiff's motion to compel and denied defendants' ...
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