Waterways Ltd. v. Barclays Bank PLC

• Decision Date: 04 June 1991
• Citation: 174 A.D.2d 324,571 N.Y.S.2d 208
• Parties: WATERWAYS LIMITED, Plaintiff-Appellant, and Knightsbridge Hotels, Ltd., Plaintiff, v. BARCLAYS BANK PLC, Defendant-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 208

571 N.Y.S.2d 208

174 A.D.2d 324

WATERWAYS LIMITED, Plaintiff-Appellant, and Knightsbridge Hotels, Ltd., Plaintiff, v. BARCLAYS BANK PLC, Defendant-Respondent.

Supreme Court, Appellate Division,

First Department.

June 4, 1991.

Before SULLIVAN, J.P., and CARRO, ELLERIN, ROSS and ASCH, JJ.

MEMORANDUM DECISION.

Order, Supreme Court, New York County (Karla Moskowitz, J.), entered November 26, 1990, which granted the motion of defendant to dismiss the complaint, pursuant to CPLR rule 327, on the ground of forum non conveniens, is unamiously reversed, on the law, on the facts, and in the exercise of discretion, the motion is denied, and the complaint is reinstated, with costs.

Waterways Limited (Waterways) and Knightsbridge Hotels, Ltd. (Knightsbridge) are Bermuda corporations, and Knightsbridge currently owns more than 80% of the shares of Waterways.

In February 1988, Waterways borrowed Nine Million Dollars (loan) from Barclays Bank PLC (Barclays), a British banking corporation, authorized to do business in New York, to refinance a Five Million Dollar first mortgage and to fund the improvement of the Grotto Bay Beach Hotel and Tennis Club (Hotel), located in Hamilton Township, Bermuda. The Hotel is a 200 unit, 21 acre, beachside resort. Pursuant to a management agreement between Knightsbridge and Waterways, from March 1974 until February 14, 1989, Knightsbridge managed the Hotel.

The subject loan was evidenced by, inter alia, a Building Loan Agreement (Loan Agreement) and a promissory note (note), executed by Waterways and Barclays, in Barclays' New York office, and both instruments provide that New York law governs. Further, the loan was to be serviced out of Barclays' New York office, and the note was payable there.

Barclays conditioned its making the loan, upon Waterways and Barclays executing a Participation Agreement with Barclays' Bermuda affiliate, Bermuda Commercial Bank Limited (Commercial), and, pursuant to the terms of that Agreement, Commercial purchased a 20% interest in the loan.

Also, in connection with the loan, in Bermuda, Waterways and Barclays executed a mortgage and a debenture, both governed by Bermuda law. The terms of the debenture, inter alia, required Waterways to use Commercial for all local banking business of the Hotel in Bermuda, and authorized the appointment of a receiver, in the event of a default by Waterways.

After the closing of the loan, over the course of the next six months, Waterways received more financing from Barclays and Commercial, consisting of a $500,000.00 line of credit from Commercial, and an additional One Million Dollar loan from Barclays, making the total loan amount Ten Million Dollars.

In October 1988, Waterways defaulted on a $100,000.00 principal payment, and thereafter, on December 6, 1988, in Boston, Massachusetts, it is undisputed that Mr. Robert Dowling, Vice President, Barclays, met with representatives of Waterways to discuss the default.

Although denied by Barclays, Waterways and Knightsbridge allege that Barclays agreed to waive the amortization schedule, set forth in the Financing Documents, consisting of, inter alia, the Loan Agreement, note, mortgage and debenture, in exchange for advancing the maturity date of the loan to June 1989, Waterways immediately placing the Hotel up for sale, and Waterways prepaying $500,000.00 in interest. Further, Waterways and Knightsbridge contend that Barclays' waiver was memorialized in a writing, dated December 7, 1988, by Mr. Dowling. Waterways claims that it accepted Barclays' waiver, since it prepaid the $500,000.00 in interest, and put the Hotel up for sale.

The subject $500,000.00 was borrowed by Waterways "from Knightsbridge, which had immediately prior thereto borrowed that sum from the Bank of Bermuda ..." (see, Record on Appeal (RA), at 39). Further, repayment of the Knightsbridge loan to the Bank of Bermuda was guaranteed by Mr. Ralph O. Marshall, a member of the Bermuda Cabinet, and "[i]n ... consideration for his personal guaranty, Marshall requested and was granted an option from Waterways to purchase the Hotel for $20,000,000 ..." (see, RA, at 39).

Thereafter, On December 22, 1988, Barclays accelerated payment of the loan, and demanded immediate repayment in full, since it claimed that it "discovered additional breaches of the Financing Documents by Waterways, including ... failure to pay operating bills, ... maintenance of undisclosed operating accounts, ... failure to pay interest, and ... failure to provide meaningful financial statements ..." (see, RA, at 230).

When Waterways failed to sell the Hotel in January and early February 1989, on February 14, 1989, Barclays appointed a Bermuda resident, as receiver and manager of the Hotel. Subsequently, this receiver closed the Hotel, and sold same to a group of Bermuda investors, headed by Mr. Marshall, for Fifteen and One-Half Million Dollars cash and a One Million Dollar conditional promissory note. Further, the purchasing group suspended the Knightsbridge Hotel management contract, and did not renew same. Thereafter, it is undisputed that, on March 2, 1989, the Waterways' shareholders approved the sale. According to Waterways and Knightsbridge, Barclays and Commercial used the sale proceeds to recoup "the outstanding loan balance, plus all accrued interest and expenses. Since the cost of the receivership plus outstanding trade payables of the Hotel was approximately $3,000,000 almost all of the equity in the Hotel was lost ..." (see, RA, at 46).

By summons and complaint, in November 1989, Waterways and Knightsbridge (plaintiffs) commenced an action against Barclays (defendant) to recover damages, in the Supreme Court, New York County. The complaint, containing two causes of action for breach of contract, alleges in substance, that Barclays breached the December 1988 waiver agreement, discussed supra, by wrongfully accelerating the loan payment, and appointing a receiver, and that Barclays wrongfully caused the suspension of Knightsbridge's Hotel management contract, in order to avoid termination payments. Before answering, defendant moved, pursuant to CPLR Rule 327, to dismiss, upon the ground of forum non conveniens, and the Motion Court granted the motion. Plaintiff Waterways appeals.

We held, in Corines v. Dobson, 135 A.D.2d 390, 391, 521 N.Y.S.2d 686 (1st Dept.1987), "[t]he rule of forum non conveniens, now codified in CPLR 327, allows a court to stay or dismiss an action when in the interests of substantial justice it should be heard in another forum. The rule rests upon justice, fairness and convenience, and while various objective factors are to be...