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Aruba Hotel Enterprises, N.V v. Michael Belfonti

November 21, 2011

ARUBA HOTEL ENTERPRISES, N.V., PLAINTIFFS,
v.
MICHAEL BELFONTI, BELFONTI HOLDINGS LLC, AND BELFONTI CAPITAL PARTNERS, LLC, DEFENDANTS.



The opinion of the court was delivered by: Honorable Paul A. Crotty, United States District Judge:

USDC SDNY DOCUMENT

ELECTRONICALLY FILED DOC #:

OPINION & ORDER

Plaintiff Aruba Hotel Enterprises N.V. ("AHE") seeks a declaratory judgment, pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201(a), that funds advanced to AHE by defendants Michael Belfonti, Belfonti Holdings LLC, and Belfonti Capital Partners, LLC ("BCP") (collectively "Defendants"), are capital investments, and not loans repayable to Defendants. AHE also seeks a permanent injunction (the "anti-suit injunction") prohibiting Defendants from attempting to enforce these transactions as loans in other jurisdictions, specifically Aruba.

On July 25, 2008, AHE moved for summary judgment on its claims. On September 5, 2008, Defendants opposed AHE's motion for summary judgment and cross-moved for summary judgment denying AHE's request for a permanent injunction. On January 26, 2009, in a related action filed by AHE against Belfonti and MCR Property Management, Inc. ("MCR") in the United States District Court for the District of Connecticut, the parties made similar motions and the district court granted both parties' motions for summary judgment. See Aruba Hotel Enter's N.V. v. Belfonti, 611 F. Supp. 2d 203 (D. Conn. 2009) (the "Connecticut Action"). That court held that funds advanced by a Belfonti entity to AHE were not loans subject to repayment because the Connecticut Statute of Frauds was not satisfied. Belfonti never appealed and the district court's decision is final.

Following the Connecticut decision, and a change of counsel, the parties filed supplemental briefs on their motions for summary judgment to address the impact of the decision, as well as to bring additional new facts to this Court's attention. In its supplemental brief, AHE now asks this Court to find that Defendants are collaterally estopped from relitigating the same declaratory judgment issues decided in the Connecticut Action. In addition, AHE argues that Defendants' conduct since the decision in the Connecticut Action further warrants an anti-suit injunction. Defendants argue that collateral estoppel does not apply and request that the Court deny the anti-suit injunction.

For the following reasons, Plaintiff's motion for summary judgment is GRANTED and Defendants' cross-motion for summary judgment is GRANTED in part.

BACKGROUND*fn1

In May 2006, Michael Belfonti became the beneficial owner and control person of AHE, an Aruban entity in which he had a seventy-five percent interest. AHE's principal asset was a resort hotel now known as the Westin Aruba Resort (the "Hotel") on the island of Aruba. To finance the purchase of the Hotel in May 2006, Belfonti arranged for two loans.

A. The Mortgage and Mezzanine Loans

The first loan (the "Mortgage Loan") was made to AHE by WIBC Aruba N.V. ("WIBC"), an affiliate of Wachovia Bank, National Association ("Wachovia") in the amount of $230,000,000.00. The terms of the Mortgage Loan were memorialized in a loan agreement between AHE and WIBC, dated May 3, 2006 and signed by Belfonti on behalf of AHE.

The Second loan (the "Mezzanine Loan") was made by Petra Mortgage Capital Corp. LLC ("Petra Mortgage")*fn2 in the amount of $19,450,000.00 to BCP Florin, LLC ("BCP Florin"), a Belfonti-controlled entity. The terms of the Mezzanine Loan were memorialized in a loan and security agreement executed on or about June 9, 2006 and signed by Belfonti on behalf of BCP Florin. The Mezzanine Loan was secured by a first priority security interest in one hundred percent of the issued and outstanding equity of Twilight Holdings, LLC ("Twilight"). Twilight is a Delaware LLC that was an indirect subsidiary of BCP Florin and was, at the time, majority beneficially owned by Belfonti.

B. Additional Fund Transfers to AHE

Between May 2006 and March 2007, AHE received additional funds from several Belfonti-controlled entities*fn3 in order to cover closing and operational costs, as well as to satisfy the Mortgage Loan payments. Defendants contend that these payments were loans, and Plaintiffs allege that these ...


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