Thakkar v. Bay Point Capital Partners, LP

• Court: U.S. Bankruptcy Court — Northern District of Georgia
• Writing for the Court: Wendy L. Hagenau U.S. Bankruptcy Court Judge
• Decision Date: 12 January 2018
• Docket Number: ADVERSARY PROCEEDING NO. 17-5248-WLH,BANKRUPTCY CASE NO. 15-58440-WLH
• Citation: Thakkar v. Bay Point Capital Partners, LP, ADVERSARY PROCEEDING NO. 17-5248-WLH, BANKRUPTCY CASE NO. 15-58440-WLH (Bankr. N.D. Ga. Jan 12, 2018)
• Parties: CHITTRANJAN "CHUCK" THAKKAR AND DCT SYSTEMS GROUP LLC, Plaintiffs, v. BAY POINT CAPITAL PARTNERS, LP, BAY POINT ADVISORS LLC, CHARLES ADROS, JOHN DOE 1, AND JOHN DOE 2, Defendants.

CHITTRANJAN "CHUCK" THAKKAR AND DCT SYSTEMS GROUP LLC, Plaintiffs, v. BAY POINT CAPITAL PARTNERS, LP, BAY POINT ADVISORS LLC,CHARLES ADROS, JOHN DOE 1, AND JOHN DOE 2, Defendants.

ADVERSARY PROCEEDING NO. 17-5248-WLH

BANKRUPTCY CASE NO. 15-58440-WLH

UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION

January 12, 2018

IT IS ORDERED as set forth below:

REMOVED FROM SUPERIOR COURT OF FULTON COUNTY, GEORGIA

CASE NO. 2017-CV-294607

ORDER

THIS MATTER is before the Court on the Motion for Judgment on the Pleadings (Doc. No. 4) (the "Motion") filed by Bay Point Capital Partners, LP, Bay Point Advisors LLC, and Charles Andros (collectively the "Movants"). The Court has jurisdiction over this action pursuant to 28 U.S.C. §§ 157 and 1334. For the reasons stated below, the Court will grant the Motion.

I. FACTS

Mr. Thakkar and affiliated entities obtained loans from Wells Fargo. On May 4, 2015, five companies affiliated with Mr. Thakkar filed chapter 11 bankruptcy: Bay Circle Properties LLC; DCT Systems Group LLC ("DCT"); Sugarloaf Centre LLC; Nilhan Developers LLC; and NRCT LLC (collectively the "Debtors"). The cases are being jointly administered under case number 15-58440-WLH, In re Bay Circle Properties, LLC.

Debtors owed over $11 million to Wells Fargo. On November 18, 2015, Mr. Thakkar and Wells Fargo entered into a settlement agreement regarding the unpaid loans (the "Settlement Agreement"). Under the terms of the Settlement Agreement, Debtors were required to repay the outstanding balance on loans and to execute deeds in lieu of foreclosure as to real property at 5100 and 5150 Peachtree Industrial Boulevard, Norcross, Georgia (the "Property"). The deeds in lieu were transferred to Wells Fargo to be held in escrow. The maturity date of the Settlement Agreement was May 1, 2017, though the Settlement Agreement provided for a five business day cure period. A First Amendment to Settlement Agreement was entered on January 8, 2016, and the Court approved the Settlement Agreement on January 13, 2016. A Second Amendment to Settlement Agreement was dated April 7, 2016.

Pursuant to a Loan Purchase and Sale Agreement, dated March 24, 2016, Bay Point Capital Partners LP ("Bay Point CP") acquired the loans from Wells Fargo. Plaintiffs paid Bay Point CP in part, and approximately $2.7 million remained outstanding.

Bay Point CP filed a notice of default on May 2, 2017 stating that, per the terms of the Settlement Agreement, it intended to record the deeds in lieu of foreclosure. The Court held a status conference on the notice on May 5, 2017. That same day, DCT filed a Motion to CompelBay Point CP to Accept Payoff. The Court heard the matter on an expedited basis on May 8, 2017. Following the hearing, the Court entered an order in which it ordered that the DCT did not waive its state law right to tender funds to Bay Point CP even after default; that Bay Point CP's right to record the deeds in lieu would become effective at 5:01 p.m. on May 9, 2017; and that DCT could tender payment in full to Bay Point CP, and Bay Point CP was directed to accept such tender, as long as it was made in full and unconditionally prior to Bay Point CP's recording of the deeds in lieu. Bankr. Doc. No. 694.

The Court also entered an order lifting the automatic stay as to the Property, stating:

Except as provided below, pursuant to Section 362(d)(1) of the Bankruptcy Code, the automatic stay imposed by 11 U.S.C. § 362 is lifted as to Bay Point "for cause" for all purposes with respect to the real property and improvements located at 5100 and 5150 Peachtree Industrial Boulevard, Norcross, Georgia (and also with respect to any personal property located thereon, to the extent necessary to take possession of the real property);

Bay Point is hereby authorized to exercise (in Bay Point's sole discretion) any and all rights and remedies Bay Point has under the Loan Documents, the Settlement Agreement as amended and revised by agreement or order, the Approval Order, and applicable law, including, without limitation, the right to pursue foreclosure rights and remedies (including, but not limited to, conducting sales under power and confirming such sales), with respect to the real property commonly known as 5100 and 5150 Peachtree Industrial Boulevard, Norcross Georgia.

Bankr. Doc. No. 692.

Bay Point CP recorded the deeds in lieu as to the Property and advertised the Property for foreclosure sale in July 2017. The foreclosure notice incorrectly stated the date of the July sale, and Bay Point CP cancelled the sale. Bay Point CP re-advertised the foreclosure sale for September 5, 2017. On September 3, 2017, counsel for DCT sent a letter via electronic mail to counsel for Bay Point CP stating, "I am writing to you to make a tender of the remaining amounts owed" to Bay Point CP by DCT. The letter further provided that DCT intended to tender $2.8 million, which was in escrow. Counsel wrote:

DCT has arranged for and tenders the sum of $2,800,000 in complete and final payment of the debt owed by it to Bay Point and the release of all other collateral. . . . I can confirm to you that the sum of $2,800,000 is in escrow to be tendered on behalf of DCT and such sum cane (sic) be remitted to Bay Point upon receipt of written acknowledgement that it will accept this tender.

Verified Compl. Ex. A at 1 (Doc. No. 1 at 49). On September 5, 2017, Mr. Thakkar appeared at the foreclosure sale and read the terms of the September 3 offer letter. Mr. Thakkar did not produce any funds. Bay Point CP conducted the foreclosure sale and credit bid $2.85 million.

Mr. Thakkar filed a complaint in the Superior Court of Fulton County, Georgia on August 25, 2017. Plaintiffs filed a Verified First Amended Complaint on September 13, 2017 (the "Verified Complaint"), asserting the following claims: breach of duty of good faith, wrongful foreclosure, conversion, attorney's fees, prejudgment interest, and punitive damages.¹

Movants filed a notice of removal on September 27, 2017, initiating this adversary proceeding. On October 13, 2017, Movants filed an answer. That same day, Movants filed the Motion. Plaintiffs responded, and Movants filed a reply brief in support of the Motion.

II. JUDGMENT ON THE PLEADINGS STANDARD

Bankruptcy Rule 7012(b) makes Federal Rule 12(c) applicable in adversary proceedings. Civil Rule 12(c), regarding judgment on the pleadings, provides: "After the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c). If no counterclaim or cross-claim is included in the answer, the pleadings will consist of the complaint and the answer and will then be closed. After closing of the pleadings, any party may make a motion for judgment on the pleadings. Fed. R. Civ. P. 12(c).

Judgment on the pleadings is appropriate when no material facts are in dispute and, considering the substance of the pleadings and judicially noticed facts, the moving party isentitled to judgment as a matter of law. Horsley v. Rivera, 292 F.3d 695, 700 (11th Cir. 2002); Cannon v. City of West Palm Beach, 250 F.3d 1299, 1301 (11th Cir. 2001). "[T]he central issue is whether, in the light most favorable to the plaintiff, the complaint states a valid claim for relief." Hughes v. Tobacco Inst., Inc., 278 F.3d 417, 420 (5th Cir. 2001) (citations omitted). Although the court must accept the factual allegations in the pleadings as true, a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007).

In considering a motion for judgment on the pleadings, the court generally cannot consider matters outside the pleadings without converting the motion to a motion for summary judgment. See Fed. R. Civ. P. 12(d). However, under the Federal Rules of Civil Procedure, exhibits are part of the pleading "for all purposes." Fed. R. Civ. P. 10(c); see Griffin Indus. v. Irvin, 496 F.3d 1189, 1205 (11th Cir. 2007). Therefore, a court deciding a Rule 12(c) motion can consider all exhibits attached to the pleadings and materials referred to without converting it into a Rule 56 summary judgment motion. 5C Fed. Practice and Procedure Civil § 1371 (3rd ed.). In considering a Rule 12(c) motion, a court may also take judicial notice of matters of public record without converting the motion into one for summary judgment. U.S. v. Wood, 925 F.2d 1580, 1582 (7th Cir. 1991).

III. ANALYSIS

a. Count I: Breach of Duty of Good Faith

Plaintiffs allege that Defendants violated the duty of good faith inherent in all contracts by choosing to foreclose instead of pursuing other remedies. Movants contend that they are entitled to judgment on the pleadings because Georgia does not recognize an independent cause of action for violation of a good faith duty in the performance of a contract. Movants also contend that they did not violate the duty of good faith because they not only followed theSettlement Agreement and related loan documents, but they also sought for and received Court approval to foreclose. The Court finds that judgment on the pleadings for Movants is appropriate because, under Georgia law, there is no independent cause of action for a breach of the duty of good faith.

The implied covenant of good faith and fair dealing in performing a contract has a basis in both statutory and common law. Stuart Enters. Int'l, Inc. v. Peykan, Inc., 555 S.E.2d 881 (Ga. App. 2001). The Uniform Commercial Code establishes a duty of good faith in performance for contracts governed thereunder, and there is a general statutory requirement to perform substantially within the spirit and letter of a contract. O.C.G.A. § 11-1-203; § 13-4-20; Flynn v. Gold Kist, Inc., 353 S.E.2d 537 (Ga. App. 1987). There is also a common law duty to diligently and in good faith seek to comply with all portions of the terms of a contract. See Brack v. Brownlee, 273 S.E.2d 390 (Ga. 1980); Smithloff v. Benson, 17328 S.E.2d...