Stichting Juridisch Eigendom De Veste Beleggingsfondsen v. Capstone Credit, LLC

Background

Stichting brought claims for breach of contract and foreclosure against Capstone Credit, LLC (CC) and Capstone Capital Group, LLC (CCG), and a fraudulent-misrepresentation claim against their managing member, Joseph F. Ingrassia. The defendants asserted counterclaims against Stichting, its asset manager De Veste B.V., and De Veste’s CEO and fund manager, Jack van Oosterbosch, for breach of the implied duty of good faith and fair dealing, tortious interference, and fraudulent misrepresentation.

In 2017, CC and CCG issued notes to Stichting, each for up to $45 million in principal, and entered loan and security agreements with Stichting. The notes provided for 12.5% interest, additional default interest, and maturity on September 30, 2022. They also allowed Stichting to demand prepayment of up to 10% of the unpaid principal. The loan and security agreements gave Stichting a continuing security interest in the borrowers’ collateral, including accounts and other business assets. An intercreditor agreement made Stichting’s and the Capstone Cayman Current Liquidity Fund’s liens equal in priority.

In March and April 2020, Stichting demanded prepayments of $1.3 million and $1.4 million, respectively, on each note. CC and CCG did not make those payments. Stichting later accelerated the debt and asserted that the defendants had also failed to make required interest payments. The parties discussed a possible modification under which Capstone would pay certain interest and apply additional payments to principal. Capstone paid $1 million and sent written modification agreements, but Stichting did not sign them and later rejected the alleged modification.

Stichting’s Summary-Judgment Claims

The court granted Stichting summary judgment on Count One, its breach-of-contract claim. Summary judgment is appropriate when the evidence shows no genuine dispute over a fact that could affect the result and the moving party is entitled to judgment under the law.

The court found that the notes and loan agreements were valid and unambiguous, that they gave Stichting the right to demand the prepayments, and that CC and CCG did not make the required payments. The defendants’ arguments about the priority of collateral liens did not create an issue concerning whether they owed the required payments. Nor did the parties’ use of the word “redemption” in correspondence create ambiguity because that word did not appear in the notes or loan agreements.

The court also rejected the defendants’ argument that the parties had orally modified the agreements. The notes and loan agreements contained clauses requiring any modification to be in a signed writing. Under New York law, the defendants could avoid that requirement only if their conduct amounted to legally sufficient partial performance or if Stichting’s conduct caused substantial reliance that made it unfair to enforce the writing requirement. The court held that neither exception applied. The $1 million payment was already required under the original agreements, and preparing modification documents and exchanging communications were merely steps toward a possible future written agreement. The court therefore concluded that any oral modification was unenforceable.

The court also granted Stichting summary judgment on Count Three, its foreclosure claim. Under the governing secured-transactions law, a secured party may enforce its claim or security interest through a judicial proceeding after default. Stichting produced the notes and loan agreements and showed that the defendants had failed to pay. The court found no ambiguity in the agreements’ treatment of collateral: Stichting’s lien was senior to all liens except the fund’s lien, and Stichting and the fund would share the collateral proportionally. The defendants also failed to establish a triable issue concerning their proposed equitable defenses of unclean hands and equitable estoppel.

Counterclaims

The court granted the counterclaim defendants’ motion to dismiss all counterclaims for failure to state a claim. A motion to dismiss tests whether the pleaded facts, assumed true for this purpose, plausibly establish a legal claim.

For the implied-covenant counterclaim, the court held that the duty of good faith could not impose obligations inconsistent with the notes’ express terms. Because the agreements expressly allowed Stichting to exercise its prepayment rights, the defendants could not use the implied duty to eliminate those rights. The court also rejected the theory based on Stichting’s refusal to sign a modification because no enforceable modification existed.

The tortious-interference counterclaim was deficient under either possible theory. As a claim involving existing contracts, it did not allege that the defendants’ customers actually breached their contracts. As a claim involving prospective business relationships, it did not allege that Stichting acted through criminal, independently tortious, or solely malicious conduct. The court observed that the agreements referenced in the counterclaims authorized Stichting to seek payment from the defendants’ receivables, making economic self-interest part of the alleged conduct.

The fraudulent-misrepresentation counterclaim was also dismissed. The alleged statements concerned a future intention to waive defaults and enter a modification, rather than a false statement about an existing fact. The counterclaims did not allege facts showing that van Oosterbosch lacked the present intention to sign a modification when he allegedly made those statements. The court separately found no record evidence that could support the counterclaim as a defense to Stichting’s contract claim.

Disposition

Judge Lorna G. Schofield granted Stichting’s motion for summary judgment on Count One, breach of contract, and Count Three, foreclosure. She granted the counterclaim defendants’ motion to dismiss the counterclaims. The court stated that the defendants could seek to replead the dismissed counterclaims by submitting a proposed amended pleading and explaining how it would cure the identified deficiencies. Stichting’s separate Count Two fraudulent-misrepresentation claim was not part of the motions decided in this opinion. The court directed Stichting to file a letter proposing next steps for that claim.