Forbes & Wallace, Inc. v. Chase Manhattan Bank

79 F.R.D. 563, 1978 U.S. Dist. LEXIS 16936
CourtDistrict Court, S.D. New York
DecidedJune 28, 1978
DocketNo. 77 Civ. 1522
StatusPublished
Cited by5 cases

This text of 79 F.R.D. 563 (Forbes & Wallace, Inc. v. Chase Manhattan Bank) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Forbes & Wallace, Inc. v. Chase Manhattan Bank, 79 F.R.D. 563, 1978 U.S. Dist. LEXIS 16936 (S.D.N.Y. 1978).

Opinion

GRIESA, District Judge.

This is a diversity action which was transferred to this Court from the United States District Court for the District of Massachusetts. In their complaint, plaintiffs First Hartford Corp. (“Hartford”) and its wholly owned subsidiary, Forbes & Wallace, Inc. (“Forbes”), seek a declaratory judgment concerning the terms of a note of Forbes payable to defendant Chase Manhattan Bank (N.A.) (“Chase”), and of two guarantees executed by Hartford in connection with the note. Chase has counterclaimed on the note and guarantees.

Plaintiffs now move pursuant to Fed.R. Civ.P. 15(a) to file an amended complaint, modifying the jurisdictional allegations to reflect the transfer to this Court, and asserting four additional causes of action.

The following summary of the complaint and the proposed additional counts assumes, for purposes of exposition, the truth of plaintiffs’ factual assertions.

The original complaint, which will become Count I of the proposed complaint, concerns a $2,800,000 loan by Chase to Forbes for the construction of a building in Springfield, Massachusetts, to be owned by JMB Income Properties Ltd. -1973 (“JMB”), and leased by Forbes. In connection with this loan (“the Massachusetts loan”), Forbes executed a note on August 21, 1974. The note, payable April 1, 2000, was secured by a guarantee on the part of Hartford (“the payment guarantee”) and by a mortgage on the subject property. On the same date, Hartford delivered to Chase a letter which guaranteed payment of the entire note by April 1, 1975 (“the prepayment guarantee”). Plaintiffs allege that the prepayment guarantee was conditional upon Forbes’s obtaining permanent third-party refinancing of the note before April 1, 1975. In April 1975, the parties reached some agreement in compromise of the prepayment guarantee. This agreement, the terms of which are not described in the complaint, was embodied in a letter from Hartford to Chase dated April 14, 1975. Although Chase did not execute this agreement, it complied with it until October 7, 1976, when it demanded full payment of the principal of the note and accrued interest. In this count, plaintiffs seek a declaratory judgment that the maturity of the Massachusetts loan, notwithstanding the prepayment guarantee, is April 1, 2000.

Count II of the proposed complaint seeks at least $5 million in damages, apparently in contract or tort. Plaintiffs state that Hartford, Forbes, and First Hartford Realty Corp. (“Realty”), another wholly owned subsidiary of Hartford, have intimate financial interrelationships, and were in fact regarded by Chase as a single entity with a single, combined line of credit. Realty obtained a loan from Chase to build a project in South Carolina (“the South Carolina loan”). In December 1976, Chase wrongfully declared both the Massachusetts and South Carolina loans in default, and commenced foreclosure proceedings against the properties involved. Chase subsequently advised other prospective lenders of the claimed defaults, as a result of which plaintiffs were damaged by the loss of other potential loans. Plaintiffs were also damaged through being forced to divert resources from intended uses to meet obligations which were to have been met by scheduled advances on the South Carolina line of credit.

Count III states that in the Massachusetts loan agreement Chase undertook to [565]*565provide Forbes’s subtenants with non-disturbance agreements, insuring that their subleases would not be affected by any default on the note or the mortgage. Chase refused to provide these agreements, and as a result Forbes has been unable to sublease space in the property. Plaintiffs seek at least $100,000 in damages, again apparently in contract or tort.

Count IV claims that as a result of the wrongful acts by Chase alleged in Counts II and III, the security and subrogation rights of Hartford as guarantor of payment on the Massachusetts loan were impaired. Plaintiffs seek a declaratory judgment that Hartford is therefore released from the payment guarantee.

Count V seeks rescission of the prepayment guarantee. Plaintiffs claim that Chase’s false representation that it would treat the guarantee as conditioned on permanent third-party refinancing constituted fraud in the inducement.

Defendant does not oppose the modification of the jurisdictional allegations in the complaint, or the addition of Count V.

Defendant does oppose the addition of Counts II, III, and IV. As these claims allegedly arose after November 24, 1976, the date of the filing of this action, the Court will construe plaintiffs’ motion with respect to these three counts as a motion to file a supplemental complaint pursuant to Fed.R.Civ.P. 15(d). See The Dells, Inc. v. Mundt, 400 F.Supp. 1293, 1295 (S.D.N.Y. 1975). Rule 15(d) does not contain the express injunction of Rule 15(a) that “leave [to amend] shall be freely given when justice so requires.” However, there is authority in this Court that the same standards are to be applied to motions under both subdivisions of Rule 15, see, e. g., United States v. International Business Machines Corp., 66 F.R.D. 223, 227-28 n. 1 (S.D.N.Y. 1975), and the Court so holds.

Defendant’s opposition is based on two grounds: that the claims in Counts II, III, and IV have already been put in contest in other pending lawsuits, and that the addition of these claims to the present action would unduly delay and complicate a case which is nearly ready for trial and in which the issues are relatively straightforward. These grounds will be considered in turn below.

Other Pending Actions

The specific question of whether a party should be permitted to amend a pleading to assert a claim already in issue in a lawsuit in another court appears to have arisen in only two reported federal decisions. In both of these decisions, leave to amend was denied on the ground that to permit the litigation of the same issue in two actions would impose undue prejudice on the other party. See Hanover Insurance Co. v. Emmaus Municipal Authority, 38 F.R.D. 470, 472-73 (E.D.Pa.1965) (denying motion to amend complaint to add a claim which had already been decided in part in another federal action and the remainder of which had already been raised in a pending state action); United States v. American Optical Co., 7 F.R.D. 158, 159 (S.D.N.Y.1945) (denying motion to amend answer to add cross-claim against co-defendant identical to a claim already being litigated between these parties in another federal court).1

It is important to note that in both Hanover Insurance and American Optical, there was a complete equivalence between the claim in the already-pending action and the claim sought to be raised by amendment. That is, in both actions three important identities were present: (1) the same parties were involved, (2) the same substantive claim was raised, and (3) the same relief was sought. The granting or denial of amendments to pleadings is, of course, a matter of judicial discretion within the [566]*566broad standards of Rule 15.

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79 F.R.D. 563, 1978 U.S. Dist. LEXIS 16936, Counsel Stack Legal Research, https://law.counselstack.com/opinion/forbes-wallace-inc-v-chase-manhattan-bank-nysd-1978.