Tafel v. Lion Antique Investments & Consulting Services
ORDER denying 17 Motion for Summary Judgment, granting 22 Motion for Summary Judgment. Signed by Judge Thomas W. Thrash, Jr on 8/26/11. (dr)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
JAMES B. TAFEL, JR.,
CIVIL ACTION FILE
LION ANTIQUE INVESTMENTS &
This is an action for declaratory judgment. It is before the Court on the
Defendant’s Motion for Summary Judgment [Doc. 17] and the Plaintiff’s Motion for
Summary Judgment [Doc. 22]. For the reasons set forth below, the Court DENIES
the Defendant’s Motion for Summary Judgment [Doc. 17] and GRANTS the
Plaintiff’s Motion for Summary Judgment [Doc. 22].
In December 2007, Tafel Racing Team, Inc. (“Tafel Racing”) and Lion Antique
Investments & Consulting Services, Inc. (“Lion”) entered into an agreement to
purchase two Ferrari race cars (the “Race Car Loan Agreement”). Pursuant to the
Race Car Loan Agreement, Lion agreed to loan the race cars to Tafel Racing for use
in the 2008 American Le Mans Series. Tafel Racing was obligated to purchase or sell
the race cars ninety days after the conclusion the 2008 American Le Mans Series. The
Plaintiff, James Tafel, Jr., is the former CEO of Tafel Racing. On January 22, 2008,
East Coast Jewelry (“East Coast”) agreed to purchase one of the Ferrari race cars for
$700,000 (the “Purchase Agreement”). Vladislav Yampolsky is a partial owner of
East Coast. Although East Coast paid Tafel Racing $700,000 under the Purchase
Agreement, Tafel Racing did not deliver the race car or refund East Coast’s money.
On January 26, 2009, Tafel Racing filed a Voluntary Petition for Chapter 7
Bankruptcy. On Schedule F of this Petition, Tafel Racing listed Yampolsky as one
of Tafel Racing’s creditors holding unsecured nonpriority claims in the amount of
$600,000. (See Tafel Dep., Exs. 39 & 40.) On Schedule H of the Petition, Tafel
Racing identified Tafel as a codebtor for each of Tafel Racing’s creditors. (See id.)
The schedules identified Tafel Racing’s debts as of January 26, 2009, the date the
Chapter 7 Petition was filed. (See id.)
On February 13, 2009, at Yampolsky’s request, Tafel executed a non-negotiable
promissory note in the principal amount of $600,000, plus $22,454.14 in interest,
payable to Yampolsky (the “Note”). (See Compl., Ex. A.) Tafel also executed a Deed
to Secure Debt granting Yampolsky a security interest in Tafel’s residence at 1215
Troon Court, Alpharetta, Georgia, 30005. (Id., Ex. B.) The Note states that it was
“executed and delivered . . . in consideration of advances by Yampolsky to Tafel.”
(Id., Ex. A.) Tafel, however, made no payments on the Note. The Note matured on
November 13, 2009. On May 26, 2010, Yampolsky assigned his rights and interest
in the Note to Lion.
On October 8, 2010, Tafel filed this Complaint against Lion seeking a
declaration that the Note is invalid and unenforceable [Doc. 1]. Lion counterclaimed
for breach of contract, seeking to enforce the Note. Both the Plaintiff and Defendant
have filed Motions for Summary Judgment [Docs. 17 & 22]. The Plaintiff argues that
the Note is unenforceable for lack of consideration. The Defendant contends that
Tafel’s preexisting debt and Yampolsky’s forbearance of claims against Tafel and
Tafel Racing establish consideration for the Note.1
II. Summary Judgment Standard
Summary judgment is appropriate only when the pleadings, depositions, and
affidavits submitted by the parties show that no genuine issue of material fact exists
and that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c).
The court should view the evidence and any inferences that may be drawn in the light
most favorable to the nonmovant. Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59
Originally, the Defendant contended that the Note was valid as satisfaction of
a debt owed by Tafel Racing to East Coast. The Defendant, however, has abandoned
that argument. (See Def.’s Reply in Supp. of Def.’s Mot. for Summ. J., at 2-3.)
(1970). The party seeking summary judgment must first identify grounds that show
the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S.
317, 323-24 (1986). The burden then shifts to the nonmovant, who must go beyond
the pleadings and present affirmative evidence to show that a genuine issue of material
fact does exist. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986).
The Plaintiff argues that the Note is not supported by consideration. “To
constitute consideration, a performance or a return promise must be bargained for by
the parties to a contract.” O.C.G.A. § 13-3-42. “A performance or return promise is
bargained for if it is sought by the promisor in exchange for his promise and is given
by the promisee in exchange for that promise.” Id. “It is axiomatic that a contract
without consideration is invalid.” Thomas Mote Trucking, Inc. v. PCL Constructors,
Inc., 246 Ga. App. 306, 310 (2000). “Furthermore, the consideration must be stated
in the contract or at least be ascertainable from the contract.” Robles v. Humana
Hosp. Cartersville, 785 F. Supp. 989, 1001 (N.D. Ga. 1992).
First, the Defendant claims that the recital of consideration in the Note
establishes valid consideration. In Driggers v. Campbell, 247 Ga. App. 300 (2000),
the plaintiff builder sued for breach of a construction contract. The defendant signed
the contract after the builder had completed all the work. The court held that the
contract was supported only by past consideration and thus unenforceable. The court
reasoned that because the work had been completed before the contract was signed,
the builder’s performance could not have been bargained for.
Similarly, in Whitmire v. Watkins, 245 Ga. 713 (1980), the plaintiff sued on a
contract to devise a plot of land. The plaintiff, however, had already completed the
services that he claimed had constituted consideration for the contract. The court held
“that the undisputed evidence demands the finding that the only consideration for the
1944 promise to devise land was past consideration which does not suffice to convert
a promise into a contract.” Id.
Here, the Note states that it was given “in consideration of advances by
Yampolsky to Tafel, net of certain credits.” (Compl., Ex. A.) As in Driggers and
Whitmire, Yampolsky had already advanced the sums that he claims constitute
consideration for the Note.
Thus, as in Driggers, these advances were past
consideration not “bargained for” at the time Tafel executed the Note. See O.C.G.A.
§ 13-3-42(a); Whitmire, 245 Ga. at 713 (“The general rule is that a past consideration
will not support a subsequent promise.”).
The Defendant, however, relies on Berkman v. Commercial Bank, Douglasville,
171 Ga. App. 890 (1984). In Berkman, a bank filed suit on a note. The defendant
claimed that the note was invalid for lack of consideration. The court held that the
note was enforceable, noting that it “recite[d] that it was given in consideration of
loans previously made and for any loans to be made in the future.” Id. at 341
(emphasis added). The court reasoned that “[i]f the contract expressly guarantees past
and future advances, in consideration of future advances to be made, it is sufficient as
to the whole.” Id. (quoting Ellis v. Chem-Tech Finishers, 140 Ga. App. 180, 181
(1976)). Unlike Berkman, the Note was not “made in consideration of future
advances to be made.” Id. Indeed, Lion does not allege that Yampolsky or East Coast
made any promise to extend loans in the future.
Thus, even if a recital of
consideration were sufficient,2 the Note recites only past consideration that cannot
support a contract.
Next, the Defendant contends that in exchange for the Note, Yampolsky agreed
to release his potential fraud and contract claims against Tafel. “Forbearance to
prosecute a legal claim ... [is] sufficient [consideration] to support a contract.”
Berkman, 171 Ga. App. at 891 (quoting Austell v. Rice, 5 Ga. 472 (1848)). In Drake
v. Wallace, 259 Ga. App. 111 (2003), the plaintiff sued on a promissory note. The
note stated that “for value received, the undersigned Maker promises to pay . . .
$50,000.00.” Id. The plaintiff had previously sued the defendant on a separate debt,
The Plaintiff claims that Yampolsky paid Tafel Racing, not Tafel, for the
Ferrari. For purposes of this motion, however, the Court need not decide whether
Tafel is liable under the Purchase Agreement.
but had dismissed the claim after the defendant signed the note. The plaintiff argued
that his release of the prior claim established consideration for the note. The Georgia
Court of Appeals, however, held that the note was unenforceable for lack of
consideration. The court reasoned that “the note [did ] not refer to the dismissal of
[the plaintiff’s prior] action as consideration, and there [was] no written settlement
agreement in the record to memorialize the terms of the parties' agreement.” Id. at
Here, as in Drake, the Note does not state that Yampolsky has forfeited his right
to sue Tafel for fraud or breach of contract.3 Indeed, the Note does not mention any
potential claims held by either East Coast or Yampolsky. See id. (finding no
consideration for note where “the note [did] not refer to the dismissal of [the
plaintiff’s prior] action as consideration.”); Robles, 785 F. Supp. at 1001
(“[C]onsideration must be stated in the contract or at least be ascertainable from the
contract.”). Further, there is no release “agreement in the record to memorialize the
terms of the parties' agreement.” Drake, 259 Ga. App. at 112. In any event, as a party
to the Purchase Agreement, potential contract claims against Tafel or Tafel Racing
Again, the Plaintiff argues that Tafel is liable under the Purchase Agreement.
For the purposes of this motion, however, the Court need not decide this issue.
belong to East Coast. There is no evidence that East Coast assigned any such claims
Nevertheless, the Defendant argues that the Note obligated Tafel to return the
money he had received under the Purchase Agreement. Although the Purchase
Agreement and Note were for similar amounts,5 there is no indication that Yampolsky
agreed to forbear any claims against Tafel. See id. (finding release of prior claim was
not consideration where plaintiff dismissed preexisting claim but promissory note did
not mention prior claim and no settlement agreement existed.) The only consideration
mentioned in the Note are the past “advances by Yampolsky to Tafel.” (Compl., Ex.
A.) Thus, forbearance cannot establish consideration for the Note. For these reasons,
the Note is unenforceable for lack of consideration.
For the reasons set forth above, the Court DENIES the Defendant’s Motion for
Summary Judgment [Doc. 17] and GRANTS the Plaintiff’s Motion for Summary
Judgment [Doc. 22].
Yampolsky is only a partial owner of East Coast.
The Purchase Agreement was for $700,000. The Note was for $600,000.
Assumedly, the Plaintiff argues that Yampolsky also forfeited his right to recover the
SO ORDERED, this 26 day of August, 2011.
/s/Thomas W. Thrash
THOMAS W. THRASH, JR.
United States District Judge