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SAI Restaurants, Inc. v. Needham Bank

Superior Court of Massachusetts, Norfolk, Business Litigation Session

January 28, 2019

SAI RESTAURANTS, INC. et al.[1]
v.
NEEDHAM BANK et al.[2]

          MEMORANDUM OF DECISION AND ORDER ON NEEDHAM BANK’S MOTION TO DISMISS COUNTS 3, 5 AND 6 OF PLAINTIFFS’ SECOND AMENDED COMPLAINT

          Diane C. Freniere, Justice of the Superior Court

          In their second amended complaint, plaintiffs Sai Restaurants, Inc. and Sorabh Kapoor as Trustee of the Great Realty Trust ("the plaintiffs") bring claims against defendant Needham Bank alleging breach of contract (Count III), fraud or intentional misrepresentation (Count V) and unfair and deceptive trade practices under G.L.c. 93A (Count VI). Plaintiffs allege injury as a result of Needham Bank’s actions relating to four business loans made by the bank in November 2009. Needham Bank seeks dismissal of Counts III, V and VI of the second amended complaint arguing, in part, that: (i) Count III is barred under the doctrines of res judicata and judicial estoppel; (ii) Count V is time-barred under the three-year statute of limitations and not pled with the required specificity; and (iii) Count VI is time-barred and wholly derivative of the common-law claims. For the reasons that follow, the defendant’s motion to dismiss is ALLOWED in part and DENIED in part .

          BACKGROUND/FACTS

          The relevant facts, set forth in the plaintiffs’ second amended complaint, are as follows:

          For more than nineteen years, the Kapoor family has operated restaurants in Massachusetts, including the Bombay Club and Masala Art. In 2009, Vinod Kapoor, the proprietor of the Bombay Club, decided to move the restaurant from Harvard Square, Cambridge to the South End of Boston. In order to relocate the Bombay Club, the Kapoor family needed $ 1.7 million in financing to purchase an existing restaurant. In that regard, in July 2009, Vinod and Sorabh Kapoor submitted a business plan to Needham Bank and met with the bank’s president and a loan officer. Needham Bank proposed financing the new restaurant venture through four separate loans. Those loans would be secured by the real estate located at 1407-1417 Washington Street, Boston ("the Washington Street Property"), the proposed South End address of the new Bombay Club, and by the real estate located at 990-992 Great Plain Avenue, Needham ("the Great Plain Avenue Property"), the location of the Kapoor family’s other restaurant, Masala Art. The Great Realty Trust owned the Great Plain Avenue Property and Sai Restaurants, Inc. ("Sai") operated Masala Art at that location.

          On November 24, 2009, Endsouth Realty, LLC and Great Realty Trust executed four notes with Needham Bank: (1) loan number 590279165 in the amount of $ 880, 000, to purchase the real estate at the Washington Street Property; (2) loan number 590278050 in the amount of $ 1, 900, 000, to refinance the Great Plain Avenue Property; (3) loan number 590279355 in the amount of $ 472, 000, to purchase the restaurant/licenses at the Washington Street Property; and (4) loan number 590277953, a $ 250, 000 revolving line of credit to finance the operations of the new Bombay Club. Sai executed guarantees for each of the four notes. Pursuant to the terms of each guarantee, Sai’s financial obligation was not to exceed the principal amount of each respective note.

          Sometime in 2010, the Kapoors’ new South End restaurant began to fail. On February 7, 2011, Needham Bank commenced foreclosure proceedings on the Great Plain Avenue Property. Sai declared bankruptcy on March 14, 2011 and Vinod Kapoor filed for personal bankruptcy on April 7, 2011. Also in 2011, Needham Bank foreclosed on the Washington Street Property, executing a foreclosure deed and granting the Washington Street Property to SBS Investments, LLC ("SBS") on December 27, 2011 for $ 900, 000.

          As part of Sai’s bankruptcy proceeding, on December 13, 2012, Needham Bank filed a proof of claim in the amount of $ 3, 721, 624.70, based on Sai’s guarantees for the four underlying promissory notes. This claim exceeded the maximum financial obligation called for under the four guarantees and did not account for the proceeds Needham Bank received from the foreclosure sale of the Washington Street Property to SBS.

          On February 20, 2013, Sai filed a Second Amended Chapter 11 Plan, which was confirmed by order of the bankruptcy court on June 27, 2013. Under the terms of the Second Amended Chapter 11 Plan, Needham Bank was allowed a secured claim in the amount of $ 3, 721, 624.70, the amount initially requested in its claim.[3] The Plan provided for scheduled monthly payments to be applied towards Needham Bank’s secured claim and prohibited the accrual or payment of post-petition interest on the claim. The Plan also provided that Sai would make a balloon payment on or before the sixtieth month of the plan sufficient to pay off Needham Bank’s secured claim as may be modified by the agreement of Sai and Needham Bank.

          In July 2013, Sai made an additional modification to the Second Amended Chapter 11 Plan, inserting a clarification regarding how Needham Bank would apply the monthly payments.[4] In addition, Sai also filed a non-material modification to the Plan which allowed Needham Bank to transfer its claim.

          The plaintiffs allege that on September 17, 2013, Needham Bank employee John Shea approached Vinod Kapoor at his restaurant and threatened the immediate closing of Masala Art if Kapoor did not execute a certificate confirming the facts set forth in the non-material modification of the bankruptcy plan. Shea also represented to Kapoor that Needham Bank would work with Masala Art after the five-year bankruptcy plan was completed. Further, Needhan Bank provided a false amortization schedule detailing what the note balances would be after the repayment plan.

          Three days later, on September 20, 2013, Needham Bank executed an Assignment of Claim Transfer Agreement to Great Plain Acquisitions, LLC ("GPA"). Needham Bank (and GPA and Harbor Light Advisors, LLC) failed to account for the monthly payments that were made by Great Realty Trust on the four notes prior to Sai’s bankruptcy, or for the monthly payments that were made by the guarantor Sai during the pendency of its bankruptcy.

          On June 11, 2018, the plaintiffs filed the instant complaint ...


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