Asterbadi v. Leitess , 176 F. App'x 426 ( 2006 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 05-1289
NABIL J. ASTERBADI,
Plaintiff - Appellant,
versus
EARL F. LEITESS; LEITESS, LEITESS AND
FREIDBERG, P.C.; THE CIT GROUP/EQUIPMENT
FINANCING, INCORPORATED,
Defendants - Appellees.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. James C. Cacheris, Senior
District Judge. (CA-04-286-1)
Argued: March 16, 2006 Decided: April 20, 2006
Before MOTZ, KING, and GREGORY, Circuit Judges.
Affirmed by unpublished per curiam opinion.
ARGUED: Dale Andrew Cooter, COOTER, MANGOLD, TOMPERT & KARAS,
L.L.P., Washington, D.C., for Appellant. M. Roy Goldberg,
SHEPPARD, MULLIN, RICHTER & HAMPTON, Washington, D.C., for
Appellees. ON BRIEF: Greggory B. Mendenhall, Christopher M.
Loveland, SHEPPARD, MULLIN, RICHTER & HAMPTON, Washington, D.C.,
for Appellees.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:
On March 17, 2004, Nabil Asterbadi initiated this civil action
in the Eastern District of Virginia against The CIT Group/Equipment
Financing, Inc. (“CIT”), Earl Leitess, and the law firm of Leitess,
Leitess, and Freidberg, P.C. (collectively, the “Defendants”).
Among Asterbadi’s claims was one made under Federal Rule of Civil
Procedure 60(b), seeking, inter alia, equitable relief from a
default judgment CIT had obtained against him more than ten years
earlier in that court (the “1993 Judgment”). On July 2, 2004, the
district court dismissed part of Asterbadi’s complaint in the
present civil action as barred by the statute of limitations, but
authorized Asterbadi to pursue his equitable relief claim and
struck his demand for a jury trial. On November 12, 2004, the
Defendants sought summary judgment on the equitable relief claim,
which was granted by the court’s Order of March 1, 2005. See
Asterbadi v. Leitess, No. CA-04-286-1 (E.D. Va. Mar. 1, 2005).
Asterbadi has appealed the summary judgment order and, as explained
below, we affirm.
I.
The background of this dispute is summarized as follows. In
1991, Washington Capital Aviation & Leasing, Inc. (“WCAL”)
purchased a Westwind II Jet aircraft for the sum of $2,262,000.
The purchase of the aircraft was financed by a loan from CIT, and
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CIT obtained, in connection therewith, a security interest in the
plane. At the time of the loan transaction, Asterbadi was WCAL’s
sole stockholder, and he executed the promissory note to CIT as the
guarantor on CIT’s loan to WCAL. Thereafter, on February 12, 1993,
WCAL filed for Chapter 11 bankruptcy in the Eastern District of
Virginia. Leitess, who is being sued in this case, represented CIT
in the bankruptcy proceedings, where CIT was a primary secured
creditor. In that capacity, Leitess dealt with Joseph Manson,
WCAL’s bankruptcy lawyer, who was assisting (but not representing)
Asterbadi in connection with CIT’s efforts to resolve Asterbadi’s
guaranty obligation for the debt owing to CIT by WCAL.
On July 7, 1993, CIT filed a “Verified Complaint for Money
Owed” (the “1993 Complaint”) in the Eastern District of Virginia,
suing Asterbadi on his guaranty obligation. At that time, the
aircraft was already under contract to be sold for the sum of
$1,800,000. The 1993 Complaint was filed on behalf of CIT by
attorneys Christopher Moffitt and Randolph Knepper, and sought
damages from Asterbadi in the sum of $2,286,009.97 (the $2,184,950
balance on the CIT loan, plus interest and late fees to the date
suit was instituted), as well as additional interest and attorneys’
fees. On July 20, 1993, the sales transaction relating to the
aircraft was consummated. The Aircraft Bill of Sale in connection
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therewith, dated July 20, 1993, was signed by Asterbadi.1
According to CIT, it received gross proceeds of $1,825,000 from the
July 20, 1993 sale of the aircraft, and it incurred $125,672.04 in
sales expenses, for a net of $1,699,327.96. The net proceeds to
CIT were thus $586,682.01 less than the sum it sought from
Asterbadi in the 1993 Complaint.
Asterbadi admits that he was served with the 1993 Complaint,
and that he nonetheless failed to respond to it. On August 30,
1993, Moffitt, at Leitess’s direction, filed a motion for default
judgment against Asterbadi on the 1993 Complaint, and failed to
inform the district court that the aircraft had been sold. The
court entered the 1993 Judgment on October 4, 1993, awarding CIT
$2,286,009.97 in damages, plus interest and attorneys’ fees in the
sum of $347,742.50. If the plane’s sale had been taken into
account, CIT would have been awarded $586,682.01 in damages —
$1,699,327.96 less than those awarded in the 1993 Judgment.
CIT did not thereafter seek to execute on the 1993 Judgment
and, on January 4, 1994, it entered into a forbearance agreement
with Asterbadi. By the forbearance agreement, CIT reduced the 1993
Judgment to $586,682.01, and it also reduced the interest and
1
Asterbadi asserts that he signed the Bill of Sale “[s]ometime
after a bankruptcy court hearing in May 1993,” and that he left the
date of sale on the Bill of Sale blank. He maintains that he did
so because he “understood that CIT needed to have a Bill of Sale to
accommodate a future sale of the aircraft, or in the event that CIT
retained the aircraft.”
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attorneys’ fees award to $88,002.50. The forbearance agreement
provided that, if Asterbadi paid $250,000 in principal to CIT by
July 8, 1996, and did not otherwise default, he would “be released
from any further payment or other obligation on account of the
[1993] Judgment.” That same day, Leitess sent a letter to Manson,
copied to Moffitt, and directed that Moffitt credit the 1993
Judgment to account for the aircraft’s sale and reflect the
forbearance agreement. On April 11, 1994, Moffitt filed a Notice
of Partial Satisfaction with the Clerk in the Eastern District of
Virginia, pursuant to Leitess’s instructions.
When Asterbadi failed to make the payments agreed upon in the
forbearance agreement, CIT made multiple attempts to collect on the
1993 Judgment, filing enforcement actions against him between 1995
and 2003 in New Jersey, Maryland, and the District of Columbia.
Although certain of those filings failed to initially reflect that
the 1993 Judgment had been reduced, Asterbadi does not dispute
that, in all instances, the appropriate courts were informed by CIT
of the aircraft sale, the forbearance agreement, and the Notice of
Partial Satisfaction.
On March 17, 2004, Asterbadi filed this civil action in the
Eastern District of Virginia, asserting, inter alia, his claim for
equitable relief from the 1993 Judgment. As noted, on November 12,
2004, the Defendants moved for summary judgment on the equitable
relief claim, and their motion was granted by Order of March 1,
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2005. This appeal followed, and we possess jurisdiction pursuant
to 28 U.S.C. § 1291.
II.
We review de novo an award of summary judgment, viewing the
facts and inferences drawn therefrom in the light most favorable to
the non-moving party. Baqir v. Principi, 434 F.3d 733, 741 (4th
Cir. 2006). Summary judgment is not appropriate unless “‘the
pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, show that there is no
genuine issue of material fact and that the moving party is
entitled to judgment as a matter of law.’” Id. (quoting Fed. R.
Civ. P. 56(c)) (alteration and internal quotation marks omitted).
Whether to accord equitable relief from a final judgment, however,
is an issue committed to the sound discretion of the district
court. See Browder v. Dir., Dep’t of Corrections of Ill., 434 U.S.
257, 263 n.7 (1978).
III.
Asterbadi contended in the district court that CIT, in
securing the 1993 Judgment against him, perpetrated a fraud. He
maintained that the fraud emanated from CIT’s failure to disclose
that the aircraft had been sold, thereby denying Asterbadi an
opportunity to determine whether the sale was a commercially
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reasonable transaction under Virginia’s Uniform Commercial Code
(the “UCC”), and prejudicing his right under the UCC “to recover
[from CIT] any loss caused by a failure to comply with” the UCC’s
provisions. See Va. Code. Ann. § 8.9-507(1) (1993) (repealed
2001). In other words, Asterbadi asserted that CIT devalued the
plane by selling it improperly, and then, in securing the 1993
Judgment, fraudulently failed to disclose the sale to the court,
not to avoid crediting the 1993 Judgment for the sale, but so that
the credit would be for the deflated sales price.
Rule 60(b), which generally vests a district court with
authority to grant relief from final judgments, provides that
“[t]his rule does not limit the power of a court to entertain an
independent action to relieve a party from a judgment, . . . or to
set aside a judgment for fraud upon the court.”2 Asterbadi asserts
that he is entitled to equitable relief from the 1993 Judgment
under both a fraud on the court theory, and through an independent
action in equity.
The doctrine of fraud on the court is a principle to be
narrowly construed and applied, and it embraces “only that species
of fraud which does or attempts to, defile the court itself, or is
2
Although Rule 60(b)(3) allows a party to obtain relief from
a judgment on the basis of “fraud . . . , misrepresentation, or
other misconduct of an adverse party,” a motion under Rule 60(b)(3)
must be made “not more than one year after the judgment.” Because
Asterbadi filed this civil action in March 2004 — more than ten
years after the 1993 Judgment was entered — he cannot rely on Rule
60(b)(3) to obtain relief from the 1993 Judgment.
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a fraud perpetrated by officers of the court so that the judicial
machinery can not perform in the usual manner its impartial task of
adjudging cases that are presented for adjudication,” such as a
lawyer’s subornation of perjury. See Great Coastal Express, Inc.
v. Int’l Bhd. of Teamsters, 675 F.2d 1349, 1356 (4th Cir. 1982)
(emphasis added and internal quotation marks omitted). A party
asserting fraud on the court must establish that the conduct
complained of was part of “a deliberate scheme to directly subvert
the judicial process.” Id.In awarding summary judgment against Asterbadi, the district
court did not specifically address whether the 1993 Judgment was
obtained through a fraud on the court.3 Viewing the facts of this
case in the light most favorable to Asterbadi, however, it would
not have been within the court’s discretion to grant relief under
a fraud on the court theory. The Defendants’ failure to advise the
court, prior to securing entry of the 1993 Judgment, that the
aircraft had been sold, when considered in light of the Defendants’
subsequent actions (entering into the forbearance agreement and
filing the Notice of Partial Satisfaction), simply does not
constitute the egregious conduct essential to a fraud on the court.
Moreover, the Defendants’ actions cannot be seen as hindering the
3
The Defendants maintain on appeal that the district court
failed to specifically address the fraud on the court theory
because Asterbadi never asserted it there. As Asterbadi’s claim of
fraud on the court is meritless, we need not address whether he
properly presented that theory to the district court.
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court’s ability to perform its impartial adjudicatory function.
See Great Coastal, 675 F.2d at 1356-57.
In the end, the Defendants took the steps necessary to
appropriately reduce the 1993 Judgment. No court could reasonably
conclude that the Defendants, in obtaining and then reducing the
1993 Judgment, carried out “a deliberate scheme to directly subvert
the judicial process.” Although the court should have been
notified that the aircraft had been sold, the actions apparent from
this record plainly did not perpetrate a fraud on the court in
connection with the 1993 Judgment.
Finally, in order to sustain an independent action in equity,
Asterbadi must establish the five factors set forth in Great
Coastal: (1) that the 1993 Judgment ought not, “in equity and good
conscience,” be enforced; (2) that he had “a good defense to the
alleged cause of action” underlying the 1993 Judgment; (3) that
“fraud, accident, or mistake” prevented him from obtaining the
benefit of his defense; (4) “the absence of fault or negligence” on
his part; and (5) “the absence of any adequate remedy at law.” See
675 F.2d at 1358 (internal quotation marks omitted). By his own
admission, Asterbadi failed to respond to the 1993 Complaint, even
though he was properly served with it. Accordingly, even if he
could meet the balance of the test, Asterbadi is entirely unable to
satisfy the fourth Great Coastal factor, in that he cannot show
“the absence of fault or negligence” on his part, see id., and he
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thus cannot maintain an independent action in equity. In these
circumstances, the district court did not abuse its discretion when
it denied Asterbadi’s claim for equitable relief from the 1993
Judgment.
IV.
Pursuant to the foregoing, we affirm the award of summary
judgment made to the Defendants on Asterbadi’s claim for equitable
relief from the 1993 Judgment.
AFFIRMED
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