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HSBC Bank USA v. Resh
Citations: 40 F. Supp. 3d 728; 1992 U.S. Dist. LEXIS 23131; 2014 WL 4186960Docket: Civil Action No. 3:12-cv-00668
Court: District Court, S.D. West Virginia; August 21, 2014; Federal District Court
A motion for summary judgment has been filed by Third Party Defendants Lawyer’s Title Insurance Corporation, Lawyer’s Title, Helen Sullivan, and Realty Concepts, Ltd., which was denied by the court. A renewed motion by Colliers International Valuation, Advisory Services, LLC, and Philip Steffen was granted in part and denied in part. The court granted summary judgment in favor of Colliers and Steffen regarding third-party claims made by Ron Resh and Valarie Reynolds-Resh against them, as well as crossclaims from Lawyer’s Title and Sullivan. However, summary judgment was denied concerning counterclaims made by Colliers and Steffen against the Reshes. The background of the case involves HSBC Bank suing the Reshes for over $2.6 million related to unpaid promissory notes linked to three commercial properties they purchased, which included 'Jiffy Lube' franchises. The Reshes claimed that the properties were fraudulently overvalued during appraisal and that they were misled about the actual ownership of the properties, believing they were purchasing from Peanut Oil, LLC, rather than Adventure 2000, which owned the properties. After purchasing the properties for over $3.5 million and making a down payment of nearly $1 million, the Reshes faced default on their lease with Peanut Oil, which contributed to their inability to repay the notes. The Reshes allege they were victims of a fraudulent scheme that induced their purchase through misrepresentations regarding ownership and property value, resulting in several claims against various parties, including HSBC Bank, Realty Concepts, and Colliers, under multiple legal theories, including fraud and violations of RICO. Colliers and Mr. Steffen filed a Motion to Dismiss the Third Party Complaint, which the Court partially granted, dismissing Counts II, IV, V, and VII against them, while denying Realty Concepts' Motion to Dismiss. Subsequently, Colliers and Mr. Steffen submitted a Motion for Summary Judgment, claiming that a settlement agreement from December 2, 2010, precluded the Reshes' claims against them. The Court denied this Motion without prejudice, allowing the Reshes additional discovery to respond effectively. Before this decision, Lawyer’s Title, Ms. Sullivan, and Realty Concepts filed their own Motion for Summary Judgment, to which the Reshes responded. Colliers and Mr. Steffen later filed a Renewed Motion for Summary Judgment. The Court noted that both Motions were ready for resolution. The legal standard for summary judgment requires the moving party to demonstrate that there are no genuine issues of material fact and that they are entitled to judgment as a matter of law. The Court will view evidence in favor of the nonmoving party and will not assess the truth of the matters but will draw permissible inferences. The nonmoving party must provide concrete evidence to support their claims, and summary judgment is appropriate if they fail to establish an essential element of their case after adequate discovery. The burden of proof lies with the nonmoving party, who must present more than a mere scintilla of evidence. The moving party, whether the plaintiff or defendant, must demonstrate that no reasonable fact-finder could rule in favor of the opposing party to succeed in a motion for summary judgment. If the movant holds the burden of proof, they must establish all essential elements of their claim or defense convincingly. In this case, Lawyer’s Title, Ms. Sullivan, and Realty Concepts filed a Motion for Summary Judgment, asserting that the Reshes' claims are barred by statutes of limitation. The court will first address whether the Reshes require additional time to contest the motion and then consider if their claims have been tolled. Under Federal Rules of Civil Procedure, if a nonmovant shows they cannot present essential facts to justify their opposition due to specific reasons, the court may defer the motion, allow time for discovery, or issue other appropriate orders. The Reshes claim that further discovery is necessary and have submitted an affidavit from their attorney, Mr. Lau, stating that additional depositions of key individuals, including Andrew Brosnac, are needed to fully understand the claims. Mr. Lau alleges that Brosnac withheld critical information and that relevant documents are missing, which could impact the Reshes' awareness of their causes of action. The court's evaluation hinges on whether the requested evidence could create a genuine issue of material fact regarding the summary judgment grounds. However, based on the information presented, the court believes that further discovery is unlikely to provide facts essential for the Reshes to counter the Motion for Summary Judgment effectively. The Third Party Defendants assert that the statute of limitations for the Reshes' claims begins with the Reshes' knowledge, not Mr. Brosnac's. The Reshes have failed to show how Mr. Brosnac's potential testimony regarding his alleged concealment would aid in resolving the issues, given the existing evidence of the Reshes' knowledge. The claims made by Mr. Lau regarding ongoing document reviews and additional depositions lack credibility, especially since the Reshes did not move to supplement their summary judgment briefing after these depositions took place in April. The request to delay the ruling until the dispositive motion deadline is rejected, as the extension was solely for Mr. Brosnac's deposition, which the Court believes will not impact the current motion. Regarding the tolling of the statute of limitations under West Virginia Code, 55-2-21, the Reshes contend that the pendency of their civil action tolls all relevant statutes of limitation. The statute allows for tolling when a civil action is commenced, affecting any counterclaims, cross-claims, or third-party complaints that are asserted. Citing Hensel Phelps Construction Company v. Davis and the West Virginia Supreme Court's decision in J.A. Street Associates, Inc. v. Thundering Herd Development, LLC, the Court affirms that claims can be maintained even if their statute of limitations expired prior to the action's commencement, so long as the underlying action is pending. The critical issue is whether the Reshes' claims against Lawyer’s Title, Ms. Sullivan, and Realty Concepts qualify as counterclaims or third-party complaints. As they are the only defendants, the Reshes do not assert cross-claims; their claims are categorized as part of a third-party complaint under Federal Rule of Civil Procedure 14(a)(1), which permits a defending party to bring in a nonparty who may be liable. The Reply asserts that the Reshes' third-party complaint fails under federal law, constituting an independent cause of action rather than a proper third-party claim. Citing *Erickson v. Erickson*, it emphasizes that a third-party claim must be derivative of the plaintiff's claim, as derivative liability is fundamental to Rule 14. A third-party claim is valid only if the third party's liability is secondary; mere relatedness is insufficient. In *Erickson*, a son sued for an accounting against his deceased father's estate and subsequently filed a third-party complaint against the wife's lawyers, which was dismissed for not meeting Rule 14(a) requirements, as the lawyers had no obligation concerning the defendant’s actions. In contrast, the Reshes' claims are viewed as derivative of HSBC Bank's original claims, potentially similar to claims in *Hensel Phelps*, which involved allegations of indemnification and negligent actions. The Reshes' claims against Lawyer’s Title, Ms. Sullivan, and Realty Concepts could be categorized as counterclaims, as they are asserted alongside HSBC Bank's claims. The court must evaluate whether these claims arise from the same transaction or occurrence as HSBC Bank's claims, considering factors such as the identity of facts and law, mutuality of proof, and the logical relationship between claims. There is a strong logical relationship identified, as HSBC Bank accuses the Reshes of failing to meet note obligations, while the Reshes contend their entry into the notes was influenced by fraudulent conduct by HSBC Bank and others. This connection mitigates any issues regarding fact identity and proof mutuality. For permissive counterclaims, parties may be joined if they are involved in the same transaction or occurrence and share common legal or factual questions. Each request for relief is presented jointly and severally, focusing on the Third Party Defendants' involvement in a fraudulent scheme against the Reshes. The counterclaims stem from the original claims, making them subject to tolling under West Virginia Code § 55-2-21, regardless of their interpretation. Lawyer’s Title, Ms. Sullivan, and Realty Concepts argue the Reshes' third-party claims are independent, referencing a 2010 foreclosure suit by California Credit Union against the Reshes in Pennsylvania, which led to the Reshes filing their own claims against several parties, including California Credit Union. The Court finds that the claims in the current case are not independent and therefore eligible for tolling, negating the need to consider alternative tolling arguments. Consequently, the Motion for Summary Judgment from Lawyer’s Title, Ms. Sullivan, and Realty Concepts is denied. Colliers and Mr. Steffen have filed a Renewed Motion for Summary Judgment regarding the remaining claims against them, specifically Count I (fraudulent misrepresentation), as Counts II, IV, V, and VII were previously dismissed. They also seek summary judgment on crossclaims from Lawyer’s Title and Ms. Sullivan, as well as on their own counterclaims against the Reshes, citing a settlement agreement from December 2, 2010, in Ohio that they argue bars the current claims and entitles them to attorneys' fees. The Reshes claim this motion is premature, pending Mr. Brosnac's deposition, which they believe will provide critical information. However, the Court finds the Reshes have not convincingly demonstrated that this deposition would create a genuine issue of material fact regarding the Agreement's implications. Additionally, although expert Jay Goldman’s deposition took place, there is no evidence that it contributed relevant information regarding the Agreement, as the Reshes did not file any supplementary materials post-deposition. Discovery is ongoing, but only Mr. Brosnac's deposition remains outstanding, and the Reshes have not filed for leave to present additional supplemental information from other discovery. Unlike the cited case of Miller v. Dell Financial Services, sufficient time has elapsed for discovery, allowing the court to proceed with the Renewed Motion without waiting for the dispositive motion deadline. The court examines whether a Settlement Agreement and Mutual Release signed by the Reshes on December 2, 2010, bars their claims against Colliers and Mr. Steffen. Colliers and Mr. Steffen bear the burden of proof in this matter. The Agreement involved the Reshes as Trustees and included FirstService PGP Valuation, Inc. and Russell W. McCoy. It acknowledges the existence of prior litigation in Ohio, with the parties aiming to settle all disputes under the Agreement's terms. The Reshes have released PGP and associated parties from all claims up to the present date. However, the Agreement explicitly states it does not release any claims against other parties involved in the lawsuit. The Agreement binds the parties and their respective affiliates and applies Ohio law for its interpretation. The Reshes assert a genuine issue of material fact regarding who drafted the Agreement, which is important because ambiguities are interpreted against the drafter. If ambiguity exists, extrinsic evidence may be used to clarify the intent of the parties. Ambiguity in contractual language is defined as a situation where the meaning cannot be determined from the agreement itself or where it allows for multiple reasonable interpretations. The Reshes claim that their Agreement is ambiguous regarding its application to claims related solely to the Ohio litigation. To support their argument, they reference affidavits submitted after their depositions, in which Ms. Reynolds-Resh and Mr. Resh express their belief that the Agreement was limited to the Ohio Action and the Medina Transaction, and that they did not intend to waive rights concerning West Virginia real estate transactions. However, the court notes that these post-deposition affidavits cannot be used to establish ambiguity or a genuine issue of material fact, as they contradict prior deposition testimony. The law stipulates that a genuine issue of fact cannot arise from conflicting statements of a party's testimony. The Reshes also cite Colliers and Mr. Steffen's acknowledgment of potential ambiguities, but this acknowledgment was made in a context that does not support a finding of ambiguity. They reference the case Walsh v. Marsh Building Products, Inc. to illustrate ambiguity in contract terms; however, the court distinguishes this case from the current Agreement, noting that the release provisions in the current Agreement lack the specific limitations present in the Walsh contract. Colliers and Mr. Steffen reference the case of Seals v. General Motors Corp., where the Sixth Circuit upheld a ruling that a signed release, part of a voluntary buyout agreement, barred an employee's intentional tort lawsuit against his employer. The court emphasized that the release was broad, covering all claims related to employment, including those known or unknown at the time of signing. The employee failed to show any ambiguity or fraud regarding the agreement. Similarly, in Davis v. Cincinnati Metropolitan Housing Authority, the court found a settlement agreement unambiguous in releasing claims arising before the agreement date, despite defendants’ claims to the contrary. The court concluded that the language clearly released all claims prior to the settlement. Drawing from these cases, the current Agreement is determined to unambiguously release all claims that arose before its signing, not limited to claims related to the Ohio litigation. The Court will next assess whether the Agreement effectively releases Colliers and Mr. Steffen as intended third-party beneficiaries. The Court evaluates whether the Agreement absolves Colliers of liability, subsequently addressing Mr. Steffen. The Third Party Complaint asserts that Colliers is a successor in interest to PGP Valuation, Inc. The Reshes claim a genuine issue of material fact exists regarding this relationship, pointing to Colliers’ response to an admission request, where it contested the term "successor in interest" while acknowledging it has assumed liabilities from PGP Valuation, Inc. The Reshes also highlight the complex series of name changes, mergers, and acquisitions among the entities, suggesting ambiguity about Colliers' status as a successor under the Ohio Settlement's Paragraph 3. Despite this, the Reshes fail to provide evidence that counters Colliers’ assertion of being an assignee of PGP Valuation, Inc., relying instead on the convoluted nature of the corporate transitions to argue against summary judgment. The document outlines that PGP Valuation, Inc. merged with FirstService Corporation in November 2006, subsequently changing its name multiple times, culminating in January 2011 when it became Colliers International Valuation Advisory Services, Inc. In November 2011, PGP Holdings (US) formed Colliers International Valuation Advisory Services, LLC, which became the sole member of Colliers. By December 27, 2011, Colliers International Valuation Advisory Services, Inc. assigned all rights and obligations to Colliers International Valuation Advisory Services, LLC. This establishes that Colliers International Valuation Advisory Services, LLC is an assignee of the original Agreement and, therefore, is released from liability concerning the Reshes’ claims. The Court concludes that there is no genuine dispute regarding this matter and thus does not need to address the issue of Colliers' status as a successor. Mr. Steffen is released from liability for the Reshes' claims based on the terms of the Agreement. The Third Party Complaint identifies him as an employee of Colliers and a former employee of PGP Valuation, Inc., with the Reshes alleging inconsistencies in Mr. Steffen's employment status. However, the Court finds no genuine issue of material fact regarding Mr. Steffen's release from liability, as he was a shareholder of PGP Valuation, Inc. when the appraisals were completed and the Agreement was signed, which explicitly releases claims against shareholders. The Reshes do not contest this shareholder status. Additionally, Mr. Steffen, in his deposition, confirmed he was also an employee and possibly a director and agent of PGP Valuation, Inc. The admissions from Colliers regarding Mr. Steffen's employment do not contradict his status. Furthermore, the Agreement releases all claims arising before its signing, irrespective of their known status at that time, and there is no allegation of mutual mistake regarding the Agreement's validity. Consequently, the Agreement encompasses the claims in this case, and Colliers and Mr. Steffen are entitled to summary judgment on the Reshes' claims. The document also addresses the request for summary judgment on crossclaims filed by Lawyer’s Title and Ms. Sullivan against Colliers and Mr. Steffen, indicating that further proceedings will address these claims. Crossclaims for contribution and indemnification have been filed by Title against Colliers and Mr. Steffen, as well as by Ms. Sullivan. Lawyer’s Title and Ms. Sullivan did not respond to the Renewed Motion for Summary Judgment. Under West Virginia law, a party that settles in good faith before a judicial determination is relieved of contribution liability, as established in Bd. of Educ. of McDowell Cnty. v. Zando, Martin, Milstead, Inc. There is no evidence to suggest the settlement agreement was not made in good faith, thus preventing Lawyer’s Title and Ms. Sullivan from seeking indemnification from Colliers and Mr. Steffen. The respondents argue that Schoolhouse cannot succeed on its implied indemnity cross-claim since such claims are only available to fault-free parties. If Schoolhouse is found faultless, there would be no obligation for the settling defendants to indemnify. The court agrees with this assessment, granting summary judgment to Colliers and Mr. Steffen regarding the crossclaims from Lawyer’s Title and Ms. Sullivan. Regarding the counterclaims made by Colliers and Mr. Steffen against the Reshes for breach of contract and breach of the duty of good faith and fair dealing, the court finds genuine issues of material fact remain, thus denying summary judgment on these claims. The court concludes that the Motion for Summary Judgment by Lawyer’s Title, Ms. Sullivan, and Realty Concepts is denied, while the Renewed Motion by Colliers and Mr. Steffen is granted in part and denied in part. The Court directs the Clerk to distribute this Opinion and Order to counsel and unrepresented parties. The Reshes are sued both individually and as trustees of their respective trusts, and the Agreement's terms encompass both capacities. Realty Concepts has also filed crossclaims against Colliers and Mr. Steffen but did not seek summary judgment on those claims.