The opinion of the court was delivered by: SWEET
Defendant Manufacturers Hanover Trust Company ("MHT") has moved for an order dismissing plaintiff Amelia Riis' ("Riis") amended complaint pursuant to Rule 12(b)(6) and Rule 56, Fed.R.Civ.P., for failure to state a claim upon which relief can be granted, pursuant to Rule 9(b), Fed.R.Civ.P. for failure to assert fraud with particularity, and for sanctions pursuant to Rule 11.
As MHT's challenge to Riis' complaint is supported by material outside the pleadings, and both parties have submitted voluminous supplementary affidavits and exhibits, this motion will be treated as one for summary judgment. MHT's motion for summary judgment is granted because Riis' claims are barred by the applicable statute of limitations.
This action concerns a financing in which MHT and a Norwegian bank, Den norske Creditbank ("DnC") obtained a mortgage on a vessel owned by a group of Norwegian shipping companies as collateral for an outstanding loan which MHT and DnC had extended to the companies. The chronology of this transaction is central to the statute of limitations bar to the claim.
In 1973, MHT and co-lender DnC made a $32 million dollar loan to a group of Norwegian shipping companies known as the Olsen- Ugelstad companies (collectively "O-U"), one of which is a company called A/S Falkefjell which held title to the bulk ship M/S Sognefjell. Riis, the daughter of the founder of O-U and holder of a significant percentage of O-U stock, entered into an agreement on April 5, 1974 (the "Easter Agreement") with A/S Falkefjell and its principals under which Falkefjell agreed to transfer the M/S Sognefjell to Riis in exchange for all of her shares in O-U. A/S Falkefjell never delivered the ship because it failed to obtain the required export license needed to deliver the ship as provided in the Easter Agreement, and this delay thwarted Riis' pre-arranged sale of the ship to the government of India for $12 millon dollars.
In July of 1974, Riis commenced arbitration proceedings against O-U for damages and delivery of the ship, and on March 18, 1975, the parties concluded their presentation of evidence to the arbitration panel. While the parties awaited the decision of the arbitration board, O-U issued an $8 million dollar mortgage on the M/S Sognefjell jointly in trust to Ole Lund ("Lund"), an O-U officer, and Christian Haneborg (a Norwegian lawyer and independent advisor for MHT and DnC) "for the benefit of all creditors" in an attempt to preserve the asset for the creditors of O-U. On April 26, 1975, Haneborg issued a receipt for the mortgage which acknowledged the pendency of the arbitration proceeding and provided that the mortgage would be "redelivered" to O-U if Riis did not prevail in the arbitration. Also on April 26, 1975, Haneborg sent a letter to MHT and DnC which referred to the mortgage on the ship and confirmed that the mortgage had been obtained to prevent the possible depletion of assets in the O-U companies by a revitalization of the Easter Agreement or the transfer of ship title to Riis. The negotiations and decisions concerning this mortgage were memorialized by Erling Naper ("Naper") a DnC bank officer (the "Naper Memorandum").
On May 2, 1975, the arbitration board announced its decision to dissolve the Easter Agreement. The ship, therefore, remained an asset of the O-U companies and on June 13, 1975, Lund and Haneborg transferred the mortgage to DnC, and the ship was subsequently sold. Subsequently the Court of Appeals vacated the arbitration board's decision to dissolve the Easter Agreement because O-U had concealed its insolvency from the arbitration panel. The Norwegian Supreme Court reversed this determination in 1983, forcing Riis to relitigate her rights under the Easter Agreement from the beginning.
In June, 1981, Riis commenced an action against DnC in connection with DnC's involvement in obtaining the ship mortgage. As part of this action against DnC in the Oslo Municipal Court, Riis obtained deposition testimony from DnC and officers and documentation of the mortgage transaction, which she presented to the Court in her December 6, 1982 pleadings. They included, inter alia, the depositions of Haneborg, Naper and Johan Melander ("Melander"), the managing director of DnC, taken by Riis' counsel Engelschion, and a letter which Melander had written to DnC on April 10, 1980 outlining the purpose in obtaining the mortgage. Riis also submitted the mortgage receipt and Haneborg's April 26, 1975 letter to DnC and MHT. DnC submitted a defense brief on January 4, 1983.
In September, 1983, Einar Riis, husband of Amelia Riis, conferred with MHT officers in Oslo and New York. According to Einar Riis, the MHT officers denied any involvement with obtaining the mortgage and placed all responsibility on DnC. Finally, in December, 1983, DnC produced the Naper Memorandum or Naper's contemporaneous notes of the negotiations surrounding the 1975 mortgage of the ship.
Riis' amended complaint sets forth two claims arising from this complex chronology of events. First, Riis claims that MHT's acts in obtaining the ship mortgage in 1975 were fraudulent because it knew that: (1) O-U was insolvent during that time, (2) the arbitration panel would not have rescinded the Easter Agreement had it known of the insolvency; and (3) that the "secret" obtaining of this mortgage during the pendency of the arbitration would strip Riis of her equitable title to the vessel. Riis claims that MHT made a "deliberate and false representation that the shipowner was solvent at the time of the conveyance," (Riis' Memorandum in Opposition, p.12) upon which she and the arbitration panel relied in rescinding the agreement.
Riis' second claim is one of "fraudulent concealment."
She contends that MHT's alleged act of concealing the mortgage on the vessel by registering it in the name of Lund and Haneborg and MHT's subsequent denial of knowledge of the facts underlying the mortgage constitute a fraudulent scheme to conceal its "appropriation" of the ship. The complaint alleges that MHT concealed its involvement and knowledge of the mortgage from Einar Riis and thwarted Riis' investigation of the loss of the ship. According to Riis, she was unaware of the extent of MHT's knowledge and participation in the mortgage until she obtained the Naper Memorandum in December, 1983, and only then could she allege that MHT knew that she was mistakenly relying on O-U's solvency in the arbitration.
MHT contends that Riis has not satisfied the pleading requirements for fraud and fraudulent concealment under New York law, as her claim is both substantively defective and is barred by the statute of limitations. According to MHT, the face of Riis' amended complaint illustrates that she has long had the knowledge necessary to assert this claim; knowledge of the alleged fraudulent mortgage, knowledge of MHT's involvement in securing that mortgage and knowledge of MHT's purpose and intent (the "fraudulent intent") in obtaining the mortgage. Indeed, MHT claims that Riis' own pleadings submitted in the Norwegian action against DnC in 1982, and the depositions which Riis' own attorney took of DnC officers and MHT's agent Haneborg, demonstrate that she has been sleeping on her rights while the statute of limitations has run on her claims.
MHT contends that Riis inserted a fraudulent concealment claim in the amended complaint to meet MHT's statute of limitations defenses. According to MHT, this defense is insufficient to toll the statute of limitations because Riis knew all the facts which she now alleges were concealed from her, and it fails to state an affirmative cause of action as a matter of New York law.
MHT has asserted the statute of limitations as a threshold bar to the maintenance of this action. According to MHT, the statute of limitations has run on both the fraud and fraudulent concealment claims because Riis' amended complaint and her pleadings in the Norway action demonstrate that she knew all that was required to timely assert a fraud claim and the objectively assessed state of her knowledge of MHT's involvement and intent ...