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Ray Capital Inc. v. Castellano

United States District Court, S.D. Georgia, Savannah Division

March 20, 2017

RAY CAPITAL INC.; OPPENHEIM CAPITAL LTD.; CHEYENNE HOLDINGS LTD.; and LABROY SHIPTRADE LIMITED, Plaintiffs,
v.
M/V NEWLEAD CASTELLANO, IMO NO. 9686338, her engines, tackle, equipment, furniture, appurtenances, etc., in rem, and NEWLEAD CASTELLANO LTD., Defendants.

          ORDER

          HONORABLE J. RANDALL HALL UNITED STATES DISTRICT JUDGE

         Presently before the Court is Plaintiffs' motion for summary judgment. (Doc. 43.) The Clerk of Court gave Defendants timely notice of the summary judgment motion and the summary judgment rules, its right to file affidavits or other materials in opposition, and the consequences of default. (Doc. 45.) Therefore, the notice requirements of Griffith v. Wainwright, 772 F.2d 822, 825 (11th Cir. 1985) (per curiam), have been satisfied. Defendants have wholly failed to respond to Plaintiffs' motion for summary judgment; with the time for filing materials in opposition having expired, the motion is ripe for consideration.[1] Plaintiffs' motion, therefore, is deemed unopposed. LR 7.5, SDGa. ("Failure to respond within the applicable time period shall indicate that there is no opposition to a motion."). Further, all material facts set forth in Plaintiffs' statement of material facts (WPSMF") (doc. 44) are deemed admitted for the purpose of this motion because Defendants have failed to controvert them by filing their own statement of facts or any other materials in opposition. LR 56.1, SDGa. ("All material facts set forth in the statement required to be served by the moving party will be deemed to be admitted unless controverted by a statement served by the opposing party."); see also Fed.R.Civ.P. 56(c)(1) & (e)(2). Upon due consideration and for the reasons that follow, the Court hereby GRANTS Plaintiffs' motion for summary judgment.

         I. BACKGROUND

         The present dispute arises out of Defendants' default and/or other breaches of several financing transactions and related instruments executed in favor of Plaintiffs. Plaintiffs each hold a promissory note executed by non-party Newlead Holdings, Ltd. ("NH") in favor of the respective Plaintiffs. (PSMF ¶ 1; Tsouvelekakis 05/25/2016 Decl., Doc. 28-2, ¶ 11.) More particularly, Plaintiff Ray Capital Inc. ("Ray") holds a note dated December 27, 2013 in the principal amount of $6, 000, 000.00 USD executed by NH in favor of Ray, as subsequently amended (the "Ray Note"). (PSMF ¶ 1; Tsouvelekakis 05/25/2016 Decl. ¶ 11; Doc. 18-1.) Plaintiff Oppenheim Capital Ltd. ("Oppenheim") holds a note dated August 4, 2014 in the principal amount of $2, 499, 955.98 USD executed by NH in favor of Oppenheim, as subsequently amended (the "Oppenheim Note"). (PSMF ¶ 1; Tsouvelekakis 05/25/2016 Decl. ¶ 11; Doc. 18-2.) Plaintiff Cheyenne Holdings Ltd. ("Cheyenne") holds a note dated September 21, 2014 in the principal amount of $1, 250, 000.00 USD executed by NH in favor of Cheyenne, as subsequently amended (the "Cheyenne Note"). (PSMF ¶ 1; Tsouvelekakis 05/25/2016 Decl. ¶ 11; Doc. 18-3.) Plaintiff Labroy Shiptrade Limited ("Labroy") holds a note dated May 26, 2015 in the principal amount of $1, 215, 000.00 USD executed by NH in favor of Labroy (the "Labroy Note", and collectively with the Ray Note, the Oppenheim Note, and the Cheyenne Note, the "Notes"). (PSMF ¶ 1; Tsouvelekakis 05/25/2016 Decl. ¶ 11; Doc. 18-4.) Each of the Notes is secured by a guarantee and indemnity agreement executed by NH's wholly-owned subsidiary, Defendant Newlead Castellano Ltd. ("NC"), in favor of the respective Plaintiff creditor (each, a "Guaranty"). (PSMF ¶ 6; Doc. 18-5.) Each Note and Guaranty is secured by a mortgage over Defendant M/V Newlead Castellano, IMO No. 9686338 (the "Vessel") executed by NC in favor of the respective Plaintiff creditor (each, a "Mortgage").[2](PSMF ¶ 7; Doc. 18-6; see also Doc. 18-7.)

         NH subsequently defaulted on the Ray Note by failing to tender payments due thereunder by the maturity date of December 27, 2015. (PSMF ¶¶ 9-10; Livanos Decl., Doc. 15-1, ¶ 23.) NH's default on the Ray Note entitled Ray to call on NC's Guaranty. (Doc. 18-5, 59-80, ¶ 3.) Accordingly, Ray sent notices of default to NH and NC on December 29, 2015 and January 8, 2016, respectively. (Tsouvelekakis 05/25/2016 Decl. ¶ 32; Livanos Decl. ¶ 25; compare Am. Compl. ¶¶ 53, 56, with Answer, Doc. 31, ¶¶ 53, 56.) NH and/or NC failed to cure their respective defaults within the requisite cure period. (PSMF ¶ 11; Tsouvelekakis 05/25/2016 Decl. ¶ 32.) NC also defaulted on the terms of the Mortgages by, inter alia: (a) allowing significant debt to accumulate against the Vessel; (b) failing to pay the Vessel's crew in a timely manner; (c) failing to maintain insurance cover on the Vessel; (d) failing to provide audited financial statements to Plaintiffs where required; and (e) failing to maintain the Vessel in a complete state of repair. (PSMF ¶ 13; Swimmer 05/25/2016 Decl., Doc. 28-1, ¶¶ 8-9, 18-27; Tsouvelekakis 05/25/2016 Decl. ¶¶ 37-38; Tsouvelekakis 07/08/2016 Decl., Doc. 43-2, ¶¶ 6-7, 10-12 & Ex. 1; see also Doc. 18-6, at 2-30, 64-93, 122-53, 157-85.) NC also failed to cure these additional defaults. (PSMF ¶¶ 15-24.)

         Based upon NH and NC's failure to cure their respective defaults and/or breaches, Plaintiffs initiated the instant action on April 19, 2016. (Doc. 1.) Upon the filing of Plaintiffs' verified complaint, the Court entered orders directing the issuance of a warrant for the maritime arrest -and process for the maritime attachment and garnishment - of the Vessel. (Docs. 1, 8, and 10.) On May 3, 2016, NC filed a motion to vacate the arrest and attachment of the Vessel. (Doc. 15.) On July 14, 2016, the Court entered an order vacating the arrest of the Vessel, but denying the vacatur of the attachment of the Vessel. (Doc. 47.) On July 15, 2016, Plaintiffs filed an Emergency Motion for Reconsideration seeking to reinstate the arrest of the Vessel. (Doc. 49.) On August 4, 2016, the Court reinstated the arrest of the Vessel. (Doc. 64.) The Vessel was subsequently sold to non-party Strategic Shipping, Inc. ("Strategic") via interlocutory admiralty sale for $7, 400, 000.00 USD (plus the current market price of any fuel or gas oil remaining on board the Vessel at the time of its delivery to Strategic), with that sale being confirmed by this Court on August 16, 2016 and the Vessel's sales proceeds (i.e., the substitute res) (the "Proceeds") being deposited in the registry of this Court.[3] (Docs. 73, 75; see also Docs. 48, 65, 66, 68, 70, 79.)

         On July 8, 2016, Plaintiffs filed their present motion for summary judgment. (Doc. 43.) On July 21, 2016, so as to allow Defendants to conduct factual discovery, Defendants were granted until October 14, 2016 to respond to Plaintiffs' motion for summary judgment. (Doc. 55, at 2.) On September 16, 2016, Defendants' counsel filed their motion to withdraw as counsel of record after having provided Defendants with notice of their intent to withdraw on August 30, 2016. (Doc. 83.) On October 5, 2016, the Court granted counsel for Defendants' motion to withdraw; in its Order, the Court specifically noted that upon their counsels' withdrawal, Defendants would be left unrepresented and therefore unable to proceed.[4] (Doc. 95.) To allow Defendants sufficient time to secure new counsel and respond to Plaintiffs' motion for summary judgment, the Court granted Defendants until November 4, 2016 to respond to Plaintiffs' motion for summary judgment.[5] (Id. at 2.) To date, Defendants have failed to: (a) have new counsel enter a notice of appearance in this case; or (b) respond to or otherwise defend against Plaintiffs' motion for summary judgment.

         II. SUMMARY JUDGMENT STANDARD

         Summary judgment is appropriate only if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The Court shall grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to summary judgment as a matter of law." Hickson Corp. v. N. Crossarm Co., 357 F.3d 1256, 1259, 1260 (11th Cir. 2004); Fed.R.Civ.P. 56(c). The "purpose of summary judgment is to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (internal citation omitted).

         "[The] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the [record before the court] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If - and only if - the movant carries its initial burden, the non-movant may avoid summary judgment by demonstrating that there is indeed a genuine issue as to the material facts of its case. Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). Facts are "material" if they could affect the outcome of the suit under the governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute of those material facts "is 'genuine' . . . [only] if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Id.

         When ruling on the motion, the Court must view all the evidence in the record in the light most favorable to the non-moving party and resolve all factual disputes in the non-moving party's favor. Matsushita, 475 U.S. at 587. The Court must also avoid weighing conflicting evidence. Anderson, 477 U.S. at 255; McKenzie v. Davenport-Harris Funeral Home, 834 F.2d 930, 934 (11th Cir. 1987). Nevertheless, the non-moving party's response to the motion for summary judgment must consist of more than conclusory allegations, and a mere "scintilla" of evidence will not suffice. Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir. 1990); Pepper v. Coates, 887 F.2d 1493, 1498 (11th Cir. 1989) . Where the non-moving party does not respond to a motion for summary judgment, the Court "may . . . grant summary judgment if the motion and supporting materials - including the facts considered undisputed - show that the movant is entitled to it." Fed.R.Civ.P. 56(e)(3); see also United States v. One Piece of Real Prop. Located at 5800 SW 74th Ave., Miami, Fla., 363 F.3d 1099, 1101-02 (11th Cir. 2004) ("[S]ummary judgment, even when unopposed, can only be entered when appropriate. . . . Thus, the district court cannot base the entry of summary judgment on the mere fact that the motion was unopposed, but, rather, must consider the merits of the motion." (internal quotations and citations omitted)).

         III. DISCUSSION

         A. The Ray Note & Related Guaranty & Mortgage

         The Ray Note is governed by New York law. (Doc. 18-1, at 8.) Under New York law, w [t]o establish prima facie entitlement to judgment as a matter of law on the issue of liability with respect to a promissory note, a plaintiff must show the existence of a promissory note executed by the defendant and the failure of the defendant to pay in accordance with the note's terms." Griffon V, LLC v. 11 E. 36th, LLC, 934 N.Y.S.2d 472, 474 (N.Y.App.Div. 2011) (citations omitted). Similarly, w[t]o establish prima facie entitlement to judgment as a matter of law on the issue of liability with respect to a guaranty, a plaintiff must submit proof of the underlying note, a guaranty, and the failure of the defendant to make payment in accordance with the terms of those instruments."[6]Id. (citations omitted). "Once the plaintiff submits evidence establishing its prima facie case, the burden then shifts to the defendants to submit evidence establishing the existence of a triable issue of fact with respect to a bona fide defense." Id. (citations omitted). Here, Ray has established its prima facie entitlement to judgment as a matter of law on the Ray Note and related Guaranty by submitting proof of: (a) NH's execution of the Ray Note and default in payment thereunder; and (b) NC's execution of the related Guaranty securing the Ray Note and default in ...


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