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KOEHLER v. BANK OF BERMUDA LIMITED

July 6, 2004.

LEE N. KOEHLER, Petitioner,
v.
THE BANK OF BERMUDA LIMITED, Respondent.



The opinion of the court was delivered by: CHARLES HAIGHT, District Judge

MEMORANDUM OPINION AND ORDER

Two motions are presently pending before the Court. In one, Respondent The Bank of Bermuda Limited ("BBL"), a Bermudian company, moves under Rule 56, Fed.R. Civ. P., for partial summary judgment in respect of a Petition filed in this Court by Lee N. Koehler, a Pennsylvania resident, against BBL as a garnishee. By that Petition Koehler is attempting to collect on an unsatisfied judgment in excess of U.S. $2 million he obtained in the District of Maryland against A. David Dodwell, a Bermudian resident. In the other, Koehler moves for an order construing his prior motion under Rule 25(c), to substitute BBL for or join it with Dodwell as Respondents in the garnishment proceeding, as an amendment to the Petition to add a claim against BBL for fraudulent conveyance, or in the alternative, granting Koehler leave to file an serve such an amended pleading. This Opinion resolves both motions, and makes a further Order for the governance of the case.

I. BACKGROUND

  Familiarity with all the Court's prior opinions in this protracted litigation is assumed. In an opinion reported at 2004 WL 444101 (S.D.N.Y. March 10, 2004) (the "March 10 Opinion"), I held that three foreign judgments obtained by BBL, referred to as the Bermuda Deficiency Judgment, the Nevis Enforcement Judgment, and the Bermuda Declaratory Judgment, were each entitled to full recognition by this Court.

  In contemplation of deciding the two pending motions, the March 10 Opinion directed the parties to make two additional submissions. First, the parties were directed to address the effect of the recognition by this Court of the three foreign judgments upon any issues or claims pending before this Court. Second, the parties were directed to address BBL's contention that this Court could not make any order in respect of Dodwell's shares in The Reefs resort because the share certificates were not and never had been situated within the Court's territorial boundaries. In regard to that latter contention, the March 10 Opinion directed BBL to file and serve an affidavit executed by an individual with personal knowledge, attesting to the present location and ownership of all existing share certificates in The Reefs, as well as all transfers or other disposition of those shares between the time Koehler commenced this proceeding and the present date. BBL complied with that last direction by submitting a declaration sworn to on April 15, 2004 by William Ackerman, a Vice President in BBL's Commercial Loan Department ("Ackerman Dec.").

  Ackerman attests that as of July 1993, BBL had possession of stock certificates representing Class A and Class D shares in The Reefs, owned by Dodwell and held by BBL as collateral for Dodwell's obligations to BBL, arising out of loans BBL had made to Dodwell. Ackerman Dec. at ¶ 3. During the period that those share certificates were in BBL's possession, they were always located at BBL's main office in Hamilton, Bermuda, and were never located in BBL's branch in New York. Id.

  In October 1993, BBL and Dodwell entered into a recapitalization of The Reefs which was intended to satisfy Dodwell's obligations to BBL. Specifically, Class X and Class Y shares in The Reefs were issued based upon certain of Dodwell's Class D shares, sold, and the proceeds applied against Dodwell's outstanding obligations. The Class X and Class Y shares were always located in Bermuda, and never in New York. Ackerman Dec. at ¶ 4.

  This recapitalization of The Reefs stock was fully executed on October 29, 1993. See the March 10 Opinion, 2004 WL 444101, at *4. Having registered his District of Maryland judgment against Dodwell in this Court, Koehler filed his initial Petition in this Court on October 27, 1993. The case came before the late District Judge Robert J. Ward, sitting in Part I, who on October 29, 1993 signed an ex parte Order which directed that
The Bank of Bermuda Limited, Respondent Garnishee, deliver to Lee N. Koehler, Judgment Creditor, any stock certificates owned by A. David Dodwell, Judgment Debtor, whose value equals $2,096,343.00 and which is an amount sufficient to satisfy said judgment or to pay over to Lee N. Koehler, Judgment Creditor, any debt owed to A. David Dodwell, Judgment Debtor, by the Bank of Bermuda Limited, Respondent, up to the sum of $2,096,343.00.
  We know from the Ackerman Declaration that on October 29, 1993, the date of Judge Ward's order, BBL was in fact in possession of "stock certificates owned by A. David Dodwell." We know that because Ackerman Dec. ¶ 5 says:
 
In or about July 1994, Dodwell's Class A and Class D shares were returned to Dodwell because the obligations for which BBL had held these shares as collateral had been repaid. At Dodwell's instructions, the shares were transferred to Andadod Limited ("Andadod"). Upon information and belief, Anadadod is a Bermuda company that is 100% owned by Harrington Limited in its capacity as trustee of a Bermuda trust for the benefit of Dodwell and his children, and the address for Andadod is Cedar House, 41 Cedar Avenue, Hamilton, Bermuda.
It would appear that the only inference one can draw from this assertion is that the recapitalization creation of Class X and Class Y shares in The Reefs through the vehicle of Dodwell's Class D shares did not consume all of Dodwell's Class A and Class D shares; some of those shares remained in BBL's possession until July 24, when on Dodwell's instruction, and in disregard of Judge Ward's October 29, 1993 order that such shares be delivered to Koehler, BBL transferred Class A and Class D shares in The Reefs to a Dodwell family trust.

  BBL did not comply with Judge Ward's order because it took the position that this Court did not have personal jurisdiction over BBL. That issue consumed years of litigation, involving sanctionable dilatory conduct by BBL and its former counsel, the dismal details of which it is not necessary to recount here. For present purposes suffice it to say that BBL has recently, through successor counsel, abandoned that position entirely, and acknowledged that this Court has personal jurisdiction over BBL in respect of Koehler's Petition. See the March 10 Opinion, 2004 WL 444101, at *6.

  Ackerman concludes by attesting that Dodwell's shares in The Reefs "were the only asset that BBL ever had in its possession. BBL does not currently have in its possession any assets belonging to Dodwell." Ackerman Dec. at ¶ 6. Koehler does not accept the accuracy of those assertions, which in some respects volunteer information that the Court did not request. Koehler's brief in response to the March 10 Opinion at 2-3 refers to documents produced by BBL to Koehler in discovery that raise at least the possibility that at one time BBL had possession of Dodwell's share certificates in Windward Properties Limited, again as security for Dodwell's indebtedness to BBL. It may be necessary in future to inquire further into the Windward shares, since Judge Ward's October 29, 1993 order directed BBL to deliver to Koehler "any stock certificates owned by A. David Dodwell" up to the value of the Maryland judgment; the order was not limited to shares in The Reefs. But the Court can decide the pending motions without pursuing the question of the Windward shares.

  II. DISCUSSION

  A. The Effect of the Bermuda Declaratory Judgment

  The Bermuda Declaratory Judgment, entitled to full recognition and effect in this Court, is dispositive of BBL's motion for partial summary judgment and Koehler's motion for leave to assert a claim for fraudulent conveyance against BBL. That ...


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