V.E.C. Corp. v. Hilliard
2012 U.S. Dist. LEXIS 131596
S.D.N.Y.2012Background
- V.E.C. Corp. of Delaware (VEC) leased four aircraft to the Hilliards; New Light Church guaranteed the Hilliards’ payments.
- A Fee Agreement (185,000) related to the leases was signed the same day and stated it was assignable with the lease to Putnam.
- VEC secured loans from Putnam to finance the aircraft; loans were secured by the respective aircraft, but no cross-collateralization across loans.
- Putnam required a cash collateral account; VEC maintained funds in a passbook savings account with Putnam.
- January 24, 2002: Putnam directed lessees to pay Putnam directly, invoking the Assignment and allegedly withholding prior notice to VEC.
- Putnam later sold the aircraft to the lessees; VEC alleged fraudulent conveyances and misappropriation related to those sales and to the passbook funds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether contract claims are time-barred | VEC contends breaches occurred after 2002 and some claims tolled by discovery. | Putnam argues six-year NY limitations from breach; accrual was 1/24/2002. | Contract claims time-barred; accrual on 1/24/2002. |
| Whether the breach of contract claim against Putnam and related good-faith claim survive against all Putnam Defendants | Breaches continued after 2002 and included misappropriation and overages. | Breaches accrued in 2002 and are time-barred; related covenant claim duplicative. | Dismissed for all Putnam Defendants; time-barred. |
| Whether VEC states a actionable fraud claim against Putnam | Putnam misrepresented ownership to third parties and concealed fraud from VEC. | No misrepresentation to VEC; fraud by proxy is not cognizable; no duty to disclose to VEC. | Dismissed; no viable fraud by concealment against Putnam. |
| Whether VEC states a breach of contract claim against the Hilliard Defendants | Fee Agreement is separate and assignable to Putnam, not subject to the Assignment. | Fee Agreement is assignable with the Lease under the Assignment; effective upon exercise. | Dismissed; Fee Agreement read with Lease via Assignment; no independent breach by Hilliards. |
Key Cases Cited
- ABB Indus. Sys., Inc. v. Prime Tech., Inc., 120 F.3d 351 (2d Cir. 1997) (contract limitations accrue at breach; no discovery toll)
- Ely-Cruikshank Co., Inc. v. Bank of Montreal, 81 N.Y.2d 399 (N.Y. 1993) (accrual of contract breach at breach; discovery rule not allowed)
- Murphy v. Cadillac Rubber & Plastics, Inc., 946 F. Supp. 1108 (W.D.N.Y. 1996) (exclusion of unsigned documents in motion to dismiss)
- In re Methyl Tertiary Butyl Ether Prods. Liab. Litig., 457 F. Supp. 2d 455 (S.D.N.Y. 2006) (fraud pleading standards; sufficiency on 12(b)(6))
- Woods v. Maytag Co., 807 F. Supp. 2d 112 (E.D.N.Y. 2011) (fraudulent concealment elements and duties)
- Wall v. CSX Transp., Inc., 471 F.3d 410 (2d Cir. 2006) (fraudulent concealment elements and duties)
- Barzingus v. Wilheim, 306 F.3d 17 (10th Cir. 2010) (motion to compel arbitration standard rules (for comparison))
- Barnt v. Barnt, 550 U.S. 544 (Supreme Court 2007) (Twombly pleading standard)
- Iqbal v. Ashcroft, 556 U.S. 662 (Supreme Court 2009) (pleading standard; plausibility requirement)