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BBS NORWALK ONE, INC. v. RACCOLTA

June 23, 1999

BBS NORWALK ONE, INC., PLAINTIFF,
v.
RACCOLTA, INC. AND STEVEN NICHOLAS BUNZL, DEFENDANTS.



The opinion of the court was delivered by: Cedarbaum, District Judge.

OPINION & ORDER

BBS Norwalk One, Inc. ("BBS") sues Steven Nicholas Bunzl ("Nick") and Raccolta, Inc., a company wholly owned by Nick, for aiding and abetting a breach of fiduciary duty by BBS's officer, Hugo Bunzl. BBS's sole asset is an office building in Norwalk, Connecticut. BBS contends that Hugo Bunzl misappropriated the opportunity to purchase the building's mortgage at a substantial discount. It alleges that Nick (who is Hugo's cousin) knowingly participated in Hugo's breach of fiduciary duty by lending Hugo money to make the down payment and by then purchasing the mortgage himself when Hugo failed to repay the loan.

The defendants previously moved for summary judgment on the grounds (1) that an arbitration award — which denied all claims by the other shareholders of BBS against Hugo Bunzl — collaterally estopped BBS from arguing that Hugo Bunzl breached his fiduciary duty, and (2) that defendants did not know of Hugo Bunzl's alleged breach of fiduciary duty. I granted the motion on the ground of collateral estoppel, but specifically did not reach the alternate ground. The Second Circuit reversed, holding that the defendants did not show that the arbitrator's decision necessarily involved a determination on the merits. BBS Norwalk One, Inc. v. Raccolta, Inc., 117 F.3d 674 (2d Cir. 1997). Following the Second Circuit's decision, defendants renewed their motion for summary judgment on the ground that there is no genuine issue of material fact as to their lack of knowledge of Hugo Bunzl's alleged breach of fiduciary duty. In addition, plaintiff now requests leave to amend its complaint to assert a claim of unjust enrichment. For the reasons that follow, defendants' motion is granted and plaintiff's application is denied.

UNDISPUTED FACTS

The following facts are undisputed except where otherwise noted.

BBS is a Delaware corporation which was formed in 1991 for the purpose of acquiring and operating an office building in Norwalk, Connecticut (the "Property"). (Joint Pretrial Order ¶ 1.) BBS purchased the Property subject to two mortgages of more than $10 million from Chase Manhattan Bank. (Id. ¶ 22.)

Ten percent of the shares of BBS were owned by John Steele. Ninety percent of the shares were owned by B & B Property, Inc. A single stock certificate, representing all of the shares of B & B, was issued in the name of Hugo Bunzl and his uncle, Virginio Battanta, as "TEN COM" (presumably meaning tenants in common).*fn1 (Id. ¶¶ 10, 12, 13.) Battanta, Hugo and Steele were directors and corporate officers of BBS. (Id. ¶¶ 18, 19.)

Battanta resides in Milan, Italy and visits the United States for only a few days each year. Battanta sent Hugo to the United States to monitor the investment in the Property and to report to Battanta. (Id. ¶¶ 14, 16, 17.) The Board of Directors of BBS did not meet between September 27, 1991 and May 31, 1994. (Id. ¶ 25.)

In April 1993, at the invitation of Hugo Bunzl, Nick visited the Property with Hugo and Jerome Lowell of Hall Investments, Ltd., which was the managing agent for the Property. Hugo and Lowell asked Nick if he wished to purchase an equity position in the Property. (Id. ¶¶ 29, 30.) In May 1993, at Nick's request, Lowell provided Nick certain financial information regarding the Property. (Id. ¶¶ 32, 33.)

Hugo sent a letter dated May 5, 1993 to Chase on BBS stationery and signed "Hugo Bunzl, Director." (Id. ¶ 31; Stiefel Aff.Ex. 22.) Hugo wrote: "Confirming our conversation we are prepared to purchase our current first mortgage together with the balance of our construction line . . . for the amount of Seven Million Dollars." Hugo Bunzl sent another letter dated November 19, 1993 to Chase, again on BBS stationery and signed "Hugo Bunzl, Director": "Confirming our meeting of this day, this will confirm our offer to purchase our current mortgage and construction loan for the sum $6,500,000." (Joint Pretrial Order ¶ 36; Stiefel Aff.Ex. 21.)

In early December 1993, Chase offered BBS the opportunity to purchase the Chase mortgages for $6.5 million. (Joint Pretrial Order ¶ 37.) On December 2, 1993, Chase's counsel (Russel Hamilton of Dewey Ballantine) sent Lyda Hakimi of Hall Investments a draft letter agreement addressed to BBS. It provided that Chase would sell the mortgages to "you or your designee" for a total purchase price of $6.6 million, to be paid at a closing to take place by March 15, 1994. BBS or its designee was required to tender a down payment of $660,000 by December 15, 1993. (Id. ¶ 38; Stiefel Aff.Ex. 23.) The Chase mortgages had an outstanding principal balance in excess of $9 million at that time. (Joint Pretrial Order ¶ 39.)

The draft letter agreement was telecopied to Duane Berlin on December 3, 1993. Berlin was a partner at a Norwalk, Connecticut law firm that rendered legal services to BBS beginning in early 1993 until the first half of 1995. (Id. ¶¶ 38, 28.)

In late 1993, Hugo and Lowell were negotiating with WestPac Capital Services, Inc. "for financing for BBS in the amount of $11.3 million for the purposes of purchasing the Chase mortgage[s] at a discount, purchasing the BBS interests of Battanta and Steele, and paying for tenant improvements. WestPac sent a proposal to Lowell dated November 29, 1993, and Hugo signed it on behalf of BBS." (Joint Pretrial Order ¶ 41; see also Stiefel Aff. Ex. 24.) The contemplated Westpac financing, however, apparently could not be finalized by December 15, 1993, the deadline for the Chase down payment. (Nick Bunzl Dep. at 302-03.)

On December 7, 1993, Hugo asked Nick for a loan of $660,000 for the down payment required by Chase. (Joint Pretrial Order ¶ 42.) On December 8, 1993, Nick telecopied Hugo a memorandum in which Nick stated: "On behalf of an investment company, ROMAGNA ETS c/o Lehman Bros. N.Y. over which I have full investment power of attorney, I am prepared to make available in cash an emergency loan of $660,000 payable to Chase Manhattan Bank against their mortgage on [the Property]." (Stiefel Aff.Ex. 25.) Nick stated that as a condition of the loan, he required "a legal document from your lawyer." The terms of the loan required that Romagna be paid $1 million by February 7, 1994. In the event that repayment was not made by February 7, Romagna was to have the right "to take over . . . the agreed deal with Chase to pay off the entire mortgage at the agreed amount of $6,600,000 in total." Nick further wrote that "[i]n addition, in the event of non payment, Romagna requires a guaranteed IOU from a Hugo controlled entity that is in a position to repay $1,000,000 plus interest from February 7, 1994 within a period of 12 months." Finally, Nick stated, "The simplest solution of course for all concerned is that you repay the $1,000,000 as agreed on February 7 and soon thereafter you pay everyone off as agreed and walk away with 100% of a substantially 100% rented premium property financed at an attractive fixed rate for 8 years."

On the same day (December 8, 1993), Lowell returned to Nick a copy of the memorandum signed by Hugo as "agreed and accepted." Lowell also wrote to Nick that he had asked "counsel" to prepare the necessary documents. (Stiefel Aff.Ex. 56.)

Attorney Duane Berlin prepared a set of documents, including a promissory note to be signed by Hugo in the amount of $1 million and in favor of Romagna, a guaranty of the note by BBS, and a letter agreement between BBS and Romagna which provided that in the event Hugo failed to pay the note on February 7, 1994, BBS would assign to Romagna its right to buy the mortgage. (Joint Pretrial Order ¶ 44; Stiefel Aff.Ex. 28-30.) Nick telecopied these drafts to his attorneys, Kaye, Scholer, Fierman, Hays & Handler. (Joint Pretrial Order ¶ 44.)

The documents ultimately signed include a promissory note showing an obligation running from Galaxy Realty, Inc. to Romagna for $1 million and signed by Thomas Vellotti, President of Galaxy. (Id. ¶ 52.) Galaxy is a corporation whose sole shareholder and sole director is Hugo. (Id. ¶ 47.) The other documents were a guaranty of the note from Hugo, a guaranty from BBS (signed by Hugo in an unspecified capacity) and a December 13, 1993 letter agreement ...


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