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SAMUELS v. BEHEER

November 14, 1980

John S. SAMUELS, 3d, Carbomin Group, Inc., Carbomin International Corporation, Leckie Smokeless Coal Company and ICM Corporation, a Missouri Corporation, Plaintiffs,
v.
ELEONORA BEHEER, B. V., Defendant. ELEONORA BEHEER, B. V., Counterclaim Plaintiff, v. John S. SAMUELS, 3d, Carbomin Group, Inc., Carbomin International Corporation, the United States of America, the New York State Tax Commission, People of the State of New York, City of New York, Counterclaim Defendants



The opinion of the court was delivered by: WEINFELD

After a careful study of the undisputed agreements, promissory notes and mortgage instruments executed by one or more of the parties to this litigation, the Court is persuaded that plaintiffs, anticipating a foreclosure suit by defendant based upon plaintiffs' default of payments of almost $ 3,000,000 due under the agreements, "jumped the gun" by commencing an action in the Supreme Court of the State of New York seeking rescission of the agreements and restitution of $ 5,000,000 already paid to defendant pursuant to such agreements on the ground of fraud, and that its purpose was to delay the "judgment day."

The defendant, Eleonora Beheer, B.V., a Netherlands corporation ("Beheer"), removed the state action to this Court based upon diversity of citizenship. *fn1" Beheer then served an amended answer which, among other matters, asserted a counterclaim to foreclose a mortgage held by it on real property owned by plaintiff, John S. Samuels, 3d ("Samuels"). Plaintiffs served a reply to the counterclaim, alleging defenses of fraud, which tracked the allegations of their complaint, duress, failure of consideration, release, waiver of defaults and an agreement by defendant to refrain from foreclosure of the mortgage.

Beheer now moves pursuant to Rules 12 and 56 of the Federal Rules of Civil Procedure for an order granting summary judgment in its favor dismissing the complaint and striking plaintiffs' various defenses in reply to defendant's counterclaims. In support of its motion, Beheer filed a statement pursuant to General Rule 9(g) of the Local Rules of this Court. Plaintiffs filed a counterstatement which does not dispute the execution of the various documents, notes, security agreements, guarantees and mortgages that are the subject of the defendant's counterclaim; however, they assert, as does the complaint, that they were executed as a result of fraud practiced by Leonard Cohen ("Cohen"), now deceased, and that with respect thereto there exist genuine disputed issues of material facts. The parties having filed affidavits in support of their respective positions, this motion is deemed one for summary judgment pursuant to Rule 56. Despite the extensive and voluminous record, the issues presented to this Court are comparatively simple.

 The Parties

 Plaintiff Samuels is the sole owner of the stock of plaintiff Carbomin Group, Inc. ("Group"), which is the parent corporation of plaintiff Carbomin International Corporation ("Carbomin"). Group is owner of 51% of the stock of plaintiff, Leckie Smokeless Coal Company ("Leckie"). Another plaintiff is ICM Corporation ("ICM"), of which Samuels owns 971/2% of its shares. (The plaintiffs are at times hereafter referred to as "Samuels" or "Samuels group.") Samuels was engaged in the early 1970s in coal trading and in the acquisition of coal mines. The defendant herein, Beheer, prior to Cohen's death, acquired from him by assignment all of his right, title and interest under the various agreements with the plaintiffs.

 The Agreements

 A chronological history of the agreements and documents which give rise to Beheer's claims against plaintiffs follows. On December 1, 1976, Group and Cohen entered into an agreement, which was amended on May 20, 1977 (the "Settlement Agreement"), whereby Samuels and Group purchased from Cohen certain shares of Leckie and Carbomin. Significantly, the preamble of the Settlement Agreement referred to the agreement of December 1, 1976, and stated that Cohen was and remained

 
... ready, willing and able to consummate the sale of the (Leckie) Shares under the Agreement (of December 1, 1976) but Buyer (Group) has failed to perform its obligations thereunder; and
 
... Carbomin and John S. Samuels, 3d have jointly and severally guaranteed the obligations of Buyer under the Agreement ... but have similarly failed to perform any and all of their obligations under the Guaranty; and
 
... in order to induce Seller (Cohen) to refrain from enforcing his legal rights and remedies against Buyer, Carbomin and Samuels arising out of said defaults, and to induce him (Cohen) to forbear in the pursuit of his legal rights and remedies in the two currently pending legal actions which he has instituted against Samuels and others ... (the parties enter into the Settlement Agreement).

 Pursuant to the agreement Cohen transferred the securities to Group, the purchaser; Cohen was paid $ 1.5 million in cash and received promissory notes aggregating $ 5.75 million, the balance of the purchase price. Plaintiffs, Samuels and Carbomin, jointly and severally guaranteed full and timely performance by Group of all obligations under the agreement. In addition, Samuels, as collateral security for his obligations under the guaranty, executed a mortgage in the principal sum of $ 500,000 (increased to $ 1,500,000 in December 1979, as referred to hereafter) on real property owned by him at 123 East 79th Street, New York City.

 On July 31, 1977, Cohen sold to Beheer the negotiable promissory notes payable by Group. Beheer surrendered these notes to Group in exchange for new notes of identical tenor payable directly to Beheer. Thereafter, Group paid to Beheer $ 1,000,000 due October 31, 1977, and $ 2,000,000 due April 30, 1979. Interest was paid on the remaining notes until July 31, 1979, when Group defaulted. Beheer thereupon gave notice of acceleration, and declared the unpaid balance on the outstanding notes due and payable. Following the default, on December 7, 1979, Group, Samuels and Carbomin entered into a direct agreement with Beheer ("Modification Agreement"). Again, significantly, in the light of the claims of fraud now made by plaintiffs, the preamble reads in part:

 
WHEREAS, Group and other parties to the Guarantees and Security Agreements are presently in default in a number of respects under the Notes, the Security Agreements and the Settlement Agreement; and
 
WHEREAS, Group, Carbomin and Samuels have requested that Eleonora (Beheer) forbear from exercising its remedies under the Notes, the Guarantees and the Security Agreements and release certain of the Collateral, and in consideration ...

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