TRANSAMERICA LIFE INSURANCE COMPANY v. DAIBES GAS HOLDINGS ATLANTA, L.L.C. et al
OPINION. Signed by Judge Stanley R. Chesler on 10/17/2018. (dam, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
TRANSAMERICA LIFE INSURANCE
DAIBES GAS HOLDINGS ATLANTA,
L.L.C., REB OIL OF ALABAMA, LLC,
FRED A. DAIBES, 1096-1100 RIVER
ROAD ASSOCIATES, L.L.C.,
COMMUNITIES, LLC, and PORTSIDE
GORGE ASSOCIATES, L.L.C.,
Civil Action No. 18-10869 (SRC)
CHESLER, District Judge
This matter comes before the Court on the motion filed by Defendants, Daibes Gas
Holdings Atlanta, LLC (“DGHA”), Reb Oil of Alabama, LLC (“Reb Oil”), Fred A. Daibes
(“Daibes”), 1096-1100 River Road Associates, LLC, (“River Road”), Lyndhurst Residential
Communities, LLC, (“LRC”), and Portside Gorge Associates, LLC, (“PGA”), (collectively,
“Defendants”), seeking an Order dismissing the Count Five of Plaintiff’s Complaint, pursuant to
Federal Rules of Civil Procedure 12(b)(1) or 12(b)(6). Plaintiff Transamerica Life Insurance
Company, LLC (“Transamerica” or “Plaintiff”), opposes this motion. The Court has reviewed
the parties’ submissions and proceeds to rule without oral argument. See Fed. R. Civ. P. 78(b).
For the reasons that follow, the motion to dismiss Count Five of Plaintiff’s Complaint will be
A. THE PARTIES AND THE UNDERLYING CONTRACTS
This breach of contract action arises out of two commercial notes and associated
guarantees executed by Defendants and delivered to Transamerica. The following summary is
based on the facts alleged in the Complaint, and the Court assumes the truth of the factual
allegations solely for purposes of this motion. See Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).
In December 2007, DGHA and Reb Oil each executed a separate Secured Promissory
Note (the “DGHA Note”) and (the “Reb Oil Note”) in favor of Transamerica, in a combined
amount of $31 million. Compl. ¶¶ 12-13, Ex. A (DGHA Note); Ex. C (Reb Oil Note). Under the
terms of the DGHA Note and the Reb Oil Note, payment is due at the first of each month. Id. ¶
19. At or around the same time in December 2007, Daibes executed a Guarantee in favor of
Transamerica in relation to the DGHA Note (the “DGHA Guarantee”), and a Guarantee in favor
of Transamerica in relation to the Reb Oil Note (the “Reb Oil Guarantee”). Id. ¶ 14, Ex. F (the
“DGHA Guarantee”); Ex. G (Reb Oil Guarantee).
Additionally, in or around sometime in 2006, LRC executed a Secured Promissory Note
(the “LRC Note”) in favor of Transamerica, in the amount of $26 million. Ex. H (Assumption) at
1. Subsequently, sometime in or around November 2011, the loan under the LRC Note was
consolidated with another loan and assumed under a “First Assumption Agreement,” into a
single loan in the amount of approximately $69,639,115.73, which the parties refer to as the
“Alexander Loan.” Id. at 2. The Alexander Loan was secured by real property located in Bergen
County, New Jersey. Id. The Alexander Loan is separate from the loans issued pursuant to the
DGHA Note and the Reb Oil Note, respectively.
In September 2012, River Road and LRC assumed the DGHA Note as joint and several
co-obligors with DGHA pursuant to an Assumption of Note and Other Loan Documents (the
“Assumption”). Id. ¶ 15, Ex. H (Assumption). In the Assumption, Daibes and PGA agreed that
the guarantee they previously executed in favor of Transamerica in connection with the
Alexander Loan would be amended to include the DGHA Note and any obligations arising
thereunder. 1 Id., Ex. H (Assumption) § 6. The Assumption also provided for the cross-default
and cross-collateralization of the Alexander Loan and the loan evidenced by the DGHA Note,
meaning that under the terms of the Assumption, a default under either note or their related loan
documents would constitute a default under both, and the collateral for each would secure both
loans. Id. §§ 7-8.
In November 2012, Defendants executed a Cross-Collateralization and Cross-Default
Agreement (the “CCCD Agreement”), which, among other things, cross-collateralized the
Alexander Loan, the loans evidenced by the DGHA and Reb Oil Notes, and other loans with real
property located in Georgia, Alabama, Florida, and New Jersey. Compl. ¶ 18, Ex. I (CCCD
Agreement). Section 3.2 of the CCCD Agreement provides, in relevant part, that a default under
any notes or other loan documents shall be deemed a default under all of the loan documents.
Compl., Ex. I (CCCD Agreement) § 3.2. Section 3.2 further provides that any such default under
any loan document shall entitle “Lender to, at its option, declare all of the Cross-Collateralized
Obligations to be immediately due and payable in full and to exercise any and all remedies
available under any one or more of the Loan Documents or provided by applicable law.” Id.
However, according to the Complaint, in June 2014, Transamerica signed a Release of Guarantee Obligations that
released PGA from the obligations PGA had assumed under the Assumption. Compl. ¶ 16.
B. DEFENDANTS’ ALLEGED BREACH OF CONTRACT
The Complaint avers that the DGHA and Reb Oil Notes are in default, as DGHA and Reb
Oil each failed to make their respective scheduled monthly payments for March, April, May, and
June 2018, and failed to pay their respective property taxes for 2011— which Transamerica then
paid on their behalves to protect its liens. Compl. ¶¶ 20-37. On May 10, 2018, Transamerica
made demand on both DGHA and Reb Oil, which both failed to respond with timely payment.
Id. ¶¶ 25, 32. As a result, Transamerica then accelerated the indebtedness owed under both the
DGHA Note and the Reb Oil Note. Id. ¶¶ 26, 33. On June 15, 2018, Transamerica sent demands
on both the DGHA Guarantee and the Reb Oil Guarantee to Daibes as Guarantor for all amounts
due under the DGHA and Reb Oil Notes. Id. ¶¶ 35-37. The Complaint avers that to date, Daibes
has similarly failed to remit payment due and owing. Id.
Thereafter, on June 21, 2018, Transamerica filed a five-count Complaint, alleging four
counts of breach of contract, against: DGHA (Count I), Daibes, as Guarantor of the DGHA and
Reb Oil Notes (Counts II and IV), and Reb Oil (Count III), respectively, and one count seeking a
declaratory judgment with respect to its rights under the CCCD (Count V). The Court has subject
matter jurisdiction on grounds of diversity pursuant to 28 U.S.C. § 1332(a).
Defendants move for dismissal of Count Five of Transamerica’s Complaint. They argue
that Count Five, which seeks a declaratory judgment, fails to present a justiciable “case or
controversy,” as required by Article III of the Constitution, and therefore must be dismissed
pursuant to Rule 12(b)(1). Defendants also argue that Count Five of the Complaint fails to state a
claim upon which relief may be granted, pursuant to Rule 12(b)(6). For the following reasons,
the Court finds that it lacks subject matter jurisdiction over Transamerica’s claim for a
A. RULE 12(B)(1) STANDARD
Federal Rule of Civil Procedure 12(b)(1) permits the dismissal of a complaint for lack of
subject matter jurisdiction at any point during the case. Mortensen v. First Fed. Sav. & Loan
Ass’n, 549 F.2d 884, 891 (3d Cir. 1977). Under Rule 12(b)(1), subject matter jurisdiction may
be challenged on either the face of the pleadings or on the facts underlying the existence of
jurisdiction. Id. A facial challenge asserts that a claim, on its face, is “insufficient to invoke the
subject-matter jurisdiction of the court because, for example, it does not present a question of
federal law,” whereas a factual challenge maintains “that there is no subject matter jurisdiction
because the facts of the case . . . do not support the asserted jurisdiction.” Constitution Party of
Pa. v. Aichele, 757 F.3d 347, 358 (3d Cir. 2014). “In evaluating a Rule 12(b)(1) motion, a court
must first determine whether the movant presents a facial or factual attack,” as the court's review
of the motion will differ depending on the kind of challenge. In re Schering Plough Corp.
Intron/Temodar Consumer Class Action, 678 F.3d 235, 243 (3d Cir. 2012) (citing Mortensen,
549 F.2d at 891); see also Aichele, 757 F.3d at 357 (holding same).
A facial challenge asserts that the complaint does not allege sufficient grounds to
establish subject matter jurisdiction or that there is a legal bar to the court hearing the case, such
as sovereign immunity. Bennett v. City of Atl. City, 288 F. Supp. 2d at 679-80. When reviewing
a facial challenge under Rule 12(b)(1), the Court must accept all factual allegations in the
complaint as true, and the Court may only consider the complaint and documents referenced in
or attached to the complaint. Gould Elecs., Inc. v. United States, 220 F.3d 169, 176 (3d Cir.
2000). The application made by Defendants presents a facial challenge to the Complaint, and
will be analyzed on that basis.
B. DECLARATORY JUDGMENT CLAIM
The Declaratory Judgment Act provides that, “[i]n a case of actual controversy within its
jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, may
declare the rights and other legal relations of any interested party seeking such declaration,
whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a). The phrase “case of
actual controversy” “refers to the type of ‘Cases’ and ‘Controversies’ that are justiciable under
Article III.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (citation omitted).
The party bringing a declaratory judgment action must prove that an actual controversy exists, by
a preponderance of the evidence. See, e.g., Shell Oil Co. v. Amoco Corp., 970 F.2d 885, 887
(Fed. Cir. 1992). An actual controversy exists where “the facts alleged, under all the
circumstances, show that there is a substantial controversy, between parties having adverse legal
interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.”
MedImmune, 549 U.S. at 127 (quoting Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270,
273 (1941)). The Supreme Court has only “required that the dispute be ‘definite and concrete,
touching the legal relations of parties having adverse legal interests'; and that it be ‘real and
substantial’ and ‘admi[t] of specific relief through a decree of a conclusive character, as
distinguished from an opinion advising what the law would be upon a hypothetical state of
facts.’” Id. (quoting Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240-41 (1937)). An “adverse
legal interest” requires a dispute as to a legal right, “for example, an underlying legal cause of
action that the declaratory defendant could have brought or threatened to bring.” Arris Grp., Inc.
v. British Telecomms. PLC, 639 F.3d 1368, 1374 (Fed. Cir. 2011). This inquiry is necessarily
fact specific, and the Court must consider all of the relevant circumstances. See MedImmune,
549 U.S. at 127.
According to the Complaint, Transamerica seeks a declaratory judgment from this Court
“indicating that Transamerica has not waived its rights to pursue any legal remedies against any
of the foregoing parties under New Jersey’s ‘Entire Controversy Doctrine’ (as reflected in
New Jersey Court Rule 4:30A and case law), Federal Rule of Civil Procedure 19, or case
law by electing not to presently assert all the rights and remedies afforded to it, including
claims against RRA, LRC, and PGA, under the CCCD Agreement, the Assumption, and any
other agreement at this time.” Compl. ¶ 82 (emphasis added). The Complaint further avers that
While Transamerica possesses the legal right under the CCCD Agreement and
Assumption to call a default on other currently performing loans covered
thereunder, Transamerica presently desires to elect, subject to the granting by
the Court of the above described declaratory judgment, not to exercise that
right granted pursuant to Section 4.1 of the CCCD Agreement and under the
Assumption, but to proceed solely with respect to the enforcing of the DGHA
Note and the Reb Oil Note (and associated guarantees). Transamerica
presently asserts that calling a default on other loans covered under the CCCD
Agreement and affected by the Assumption (i.e., the Alexander Loan), would be
premature in light of the fact that the payments on the other notes are current and
the accelerations of the DGHA Note and Reb Oil Note may result in the curing of
the defaults at issue herein.
Compl. ¶ 83 (emphasis added). Section 4.1 of the CCCD Agreement, entitled “Election of
Remedies,” provides as follows:
In the event of a Default, Lender need not resort first to its remedies under the
Loan Documents executed by the Borrower that executed the Note or Loan
Documents from which the Default arises. Lender may exercise its remedies for
Default under any of the Loan Documents executed by any one or more of the
Borrower Parties, at its sole and absolute discretion. All collateral securing the
Cross-Collateralized Obligations may be applied to any of the CrossCollateralized Obligations in such order as the Lender, in its sole discretion, shall
Id. § 4.1.
In contrast to its Complaint, Transamerica’s opposition brief says something entirely
different. In its opposition, Transamerica contends the issue presented in the declaratory
judgment count is strictly whether Section 4.1 of the CCCD Agreement permits Transamerica to
declare only the non-performing loans identified in the Complaint to be immediately due and
payable, and to proceed on these loans and associated guarantees—without fear of losing its
remedies in the future—which it contends is an issue of contractual interpretation ripe for
adjudication, and not an attempt to adjudicate a future legal defense. Pl. Opp’n at 7.
Transamerica avers that despite its contractual right to declare all loans covered under the CCCD
Agreement and Assumption to be immediately due and payable, it chose to institute this action
only against the non-paying debtors on the notes that were delinquent and the associated
guarantees. 2 Thus, Transamerica claims that it is pursuing this declaratory judgment claim as
“Defendants have, unfortunately, used Plaintiff’s good faith actions as a sword, claiming, in
essence, that Plaintiff should have to declare all performing loans subject to the cross-default
provisions of the CCCD Agreement and Assumption to be due and payable now, or potentially
be barred from recovery in the future, even if one of the non-joined performing loans becomes
delinquent under its payment terms or other material default, or there is an unsatisfied judgment
in this action.” Id. at 6-7. Transamerica further contends that its attempt “to limit the scope of the
dispute by proceeding only under non-performing loans should be praised, not punished.” Id. at
7. Finally, Transamerica argues, in the alternative, that should the Court dismiss Count Five of
the Complaint, it should be granted leave to amend the Complaint to include the currentlyperforming Alexander Loan by virtue of its cross-default under the CCCD Agreement and
It further states it has “no desire to declare the notes that are performing with respect to monthly payments [i.e. the
Alexander Loan] to be due and payable in full based solely on a cross-default.” Pl. Opp’n at 6.
Assumption, and all necessary parties, so that it does not lose the right to proceed against this
loan. Id. at 8-9.
To the extent that Transamerica seeks declaratory relief, the Court notes that the burden
here rests on Transamerica, the party requesting declaratory judgment, “to establish that
jurisdiction over its declaratory judgment action existed at, and has continued since, the time the
[claim] was filed.” Sierra Applies Scis., Inc. v. Advanced Energy Indus., 363 F.3d 1361, 1373
(Fed. Cir. 2004) (citing Int’l Med. Prosthetics Research Assocs., Inc. v. Gore Enters. Holdings,
Inc., 787 F.2d 572, 575 (Fed. Cir. 1986)). Importantly, “district courts possess discretion in
determining whether and when to entertain an action under the Declaratory Judgment Act, even
when the suit otherwise satisfies subject matter jurisdiction prerequisites.” Wilton v. Seven Falls
Co., 515 U.S. 277, 289 (1995). In essence, the Court must determine whether issuing a
declaratory judgment will move forward a concrete, fully developed dispute.
Transamerica has not met its burden to show that this is the case here. Transamerica
phrases its requested declaratory relief as seeking the Court to construe of Section 4.1 of the
CCCD Contract. (“Plaintiff seeks adjudication as to its affirmative rights and obligations related
to the parties involved in this case and the agreements that are specifically at issue herein. Stated
another way, Plaintiff seeks a ruling as to the meaning and validity of a contract provision, not a
preemptive ruling as to Defendants’ potential affirmative defense in a subsequent proceeding.”)
Pl. Opp’n at 12. However, Defendants correctly note that any declaratory relief the Court grants
on this issue would in fact constitute an advisory opinion for a dispute not currently before this
Court. By the very terms of the Complaint, Transamerica instead seeks a judicial declaration
advising it as to the future consequences of its inaction. Specifically, Transamerica seeks a ruling
on the question of whether by declining to pursue an action on the Alexander Loan, it will be
subject to an affirmative defense that Defendants might assert in the future, based upon New
Jersey’s Entire Controversy Doctrine and/or Federal Rule of Civil Procedure 19. Thus,
Transamerica asks the Court to determine the impact of its action or inaction in this lawsuit with
regard to a potential future lawsuit, and a potential affirmative defense, to determine if
Transamerica will have waived its right to pursue a claim concerning the Alexander Loan in a
future suit, should default occur. Transamerica essentially asks the Court to rule on the viability
of a hypothetical claim which may never be brought, and an affirmative defense that may never
be asserted. This ruling would constitute an advisory opinion. Based on the Complaint itself,
Transamerica asks the Court to rule in advance, before having a truly concrete issue or
immediacy of a dispute, as to whether bringing this action for default on the Reb Oil and DGHA
Notes would foreclose a claim in the future should a default subsequently occur under the
Alexander Loan. Federal courts may not render advisory opinions. Herb v. Pitcairn, 324 U.S.
117, 126 (1945) (“We are not permitted to render an advisory opinion.”); see also Friends of the
Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 213 (2000) (citation omitted).
Count Five of this Complaint and the facts alleged in support of this declaratory judgment
claim fail to present a concrete dispute for the Court to decide. The Court’s interpretation of
Section 4.1 of the CCCD Agreement and its declaration of Transamerica’s rights would fail to
address Transamerica’s stated concern of whether the operation of the Entire Controversy
Doctrine would bar Transamerica from subsequently litigating a claim based on the Alexander
Loan if it does not pursue it in the instant matter. Moreover, at this time, there is nothing in the
record to indicate, and Transamerica has not pleaded, that Defendants have preemptively
invoked the Entire Controversy Doctrine as a defense or intend to pursue such defense.
Accordingly, based on these facts, Transamerica has not shown that an actual controversy exists
with respect to its Declaratory Judgment action, and the Court therefore lacks the authority to
grant the declaratory form of relief Transamerica has requested under Count Five in this action.
Accordingly, Count Five of the Complaint must be dismissed for lack of subject matter
C. AMENDMENT OF THE COMPLAINT
Plaintiff, in its opposition, requests that in the event the Court finds that Count Five
should be dismissed, it be permitted to amend the Complaint. Defendant contends
Transamerica’s request is premature and unripe for decision, as no motion for leave to amend has
been filed, and Transamerica has not submitted the proposed amended Complaint as required by
Federal Rule of Civil Procedure 15 and Local Rule 7.1(f).
The Court agrees with Defendants that Transamerica’s request is technically premature,
since review of the docket indicates a motion to amend has not been filed, and a proposed
amended Complaint has not been submitted. However, the Court does note that pursuant to
Federal Rule of Civil Procedure 15, motions for leave to amend should be freely granted. It
would appear that, in light of the Court’s decision, any application to amend the Complaint to
include loans which, by virtue of the cross-collateralization provisions, are now in default,
should be readily consented to by Defendants.
For the foregoing reasons, the Court will grant Defendants’ motion to dismiss Count Five
of the Complaint. An appropriate Order will be filed.
s/ Stanley R. Chesler
STANLEY R. CHESLER
United States District Judge
Dated: October 17, 2018
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?