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Santander Bank, NA v. Gaver

United States District Court, D. Maryland

March 7, 2019

SANTANDER BANK, NA, Plaintiff,
v.
MARK GAVER, et al., Defendant.

          MEMORANDUM ORDER

          Richard D. Bennett United States District Judge

         Plaintiff Santander Bank, N.A. (“Santander” or “Plaintiff”) brings this action against Defendants Mark Gaver (“Mr. Gaver”), his companies Gaver Properties, LLC, Gaver Consulting, LLC, Fawley Family Partnership, LLC, and Pelican Colony Partnership, LLC (collectively, the “LLC Defendants”), as well as his former spouse, Donna Gaver (“Ms. Gaver”). (Am. Compl., ECF No. 39.) This case follows federal criminal proceedings in which Mr. Gaver was accused of perpetuating a fraudulent scheme to obtain a $50 million line of credit from Santander by submitting false financial statements. On August 1, 2018 Mr. Gaver was convicted of eight counts of bank fraud in violation of 18 U.S.C. § 1344 and two counts of money laundering in violation of 18 U.S.C. § 1957. (Jury Verdict, ECF No. 58; Judgment, ECF No. 106, United States v. Gaver, RDB-17-640.) Now, Santander brings this civil action to recuperate an outstanding loan balance of nearly $50 million from Gaver, his affiliated entities, and Ms. Gaver. (ECF No. 91-1, at ¶ 112.)

         Currently pending before this Court is Plaintiff's Motion for Leave to File Second Amended Complaint (ECF No. 91); Plaintiff's Motion for Default Judgment against Defendants Mark Gaver, Gaver Properties, LLC, Gaver Consulting, LLC, Fawley Family Partnership, LLC, and Pelican Colony Partnership, LLC. (ECF No. 96); and Defendant Mark Gaver's pro se Motion for Contempt of Court against Ms. Gaver. (ECF No. 101). The parties' submissions have been reviewed, and no hearing is necessary. See Local Rule 105.6 (D. Md. 2018). For the reasons stated below, Plaintiff's Motion for Leave to File Second Amended Complaint (ECF No. 91) is GRANTED; Plaintiff's Motion for Default Judgment (ECF No. 96) is DENIED as MOOT and WITHOUT PREJUDICE; the Clerk's Entries of Default (ECF Nos. 69, 73) are SET ASIDE; and Defendant Mark Gaver's Motion for Contempt of Court (ECF No. 101) is DENIED.

         BACKGROUND

         This case arises from Santander's contention that Defendant Mark Gaver submitted fraudulent financial statements to obtain a credit line for his company, Gaver Technologies (“GTI”). In 2009, Mr. Gaver allegedly obtained an $18.5 million line of credit for GTI, secured by GTI's business assets. (Second Am. Compl. at ¶¶ 1, 18, ECF No. 91-1.) Over the next several years, he requested and obtained increases to this credit line. (Id.) These transactions were documented in loan agreements and notes entered into by the parties. (Id. at ¶¶ 28-35.) In March 2016, Santander increased the credit line to $50 million, as documented in an Eighth Amended and Restated Loan Agreement dated March 15, 2016 (the “Loan Agreement”) and a Ninth Amended and Restated Revolving Lice of Credit Note dated as of March 15, 2016 (the “2016 Note”). (ECF No. 91-1, at 35.)

         Mr. Gaver obtained the line of credit and subsequent increases to the line of credit by submitting forged financial statements, designed to appear as though they had been prepared by Grant Thornton LLP, a recognized and respected accounting firm. (Id. at ¶ 2.) The purportedly audited financial statements grossly inflated GTI's financial health, showing strong revenue growth and substantial accounts receivable from contracts with federal agencies. (Id.) For example, GTI's 2008 financial statements showed revenue of $88.6 million and accounts receivable of $28 million. (Id. at ¶ 3.) In reality, GTI only had revenues of $5.8 million and accounts receivable of $530, 000.00. (Id.) Santander relied on the financial statements' representations to fix the size of the line of credit. (Id. at ¶¶ 4.) Because Santander was willing to extend credit up to 80% of the assets securing the loan, GTI's representations about its accounts receivable balance dictated the size of the line of credit Santander was willing to offer. (Id. at ¶ 22.)

         The revolving line of credit funded GTI's operating account and payroll account located at Santander. (Id. at ¶ 37.) The funds from these accounts were also used to make payments against the credit line; at the end of each day, the accounts were “swept” by Santander to pay down the line of credit and achieve a zero balance. (Id. at ¶ 37.) As the sole shareholder and CEO of GTI, Mr. Gaver allegedly exercised complete control over the operations of the company, including control over GTI's operating account and payroll account. (Id. at ¶ 41.) From July 2013 to November 2016, Mr. Gaver allegedly caused GTI to draw on the GTI operating account at Santander by issuing checks to himself totaling $2, 919, 000.00. (Id. at ¶ 43.) At various other times, Mr. Gaver allegedly caused GTI to issue checks to corporate entities which he owned in whole or in part, namely: Gaver Properties, Gaver Consulting, Fawley Family Partnership and Pelican Colony Partnership (the “LLC Defendants”). (Id. at ¶¶ 8-11; 45-51.)

         Donna Gaver allegedly benefitted from her former husband's scheme and used divorce proceedings to obtain additional funds owed to Santander. From 2009 to 2016, payments from GTI represented the vast majority of the Gaver family's income. (ECF No. 64.) In 2010 and 2011, Ms. Gaver was listed as an employee of GTI and allegedly received payments totaling $362, 500 directly from the company. (Id.) In July 2015, Ms. Gaver filed a petition for divorce in the Circuit Court for Lee County, Florida, resulting in a “bitter and contentious” divorce proceeding. (Id. at ¶ 52.) Despite learning of the fraud by no later than December 2016, Gaver allegedly used the divorce proceedings to obtain control over the payments from GTI and property purchased using payments from GTI. (Id. at ¶ 68.) Beginning in December 2015, Ms. Gaver allegedly arranged to receive payments from GTI, Gaver Properties, and Fawley Family Partnership, LLC totaling more than $1 million. (Id. at ¶¶ 72-76.) In some cases, the payments were allegedly made to an escrow fund used in Ms. Gaver's divorce proceedings (Id. at ¶¶ 72-75.) On other occasions, funds were allegedly transferred directly to a bank account in her name (Id. at ¶ 76.)

         Santander claims that about $50 million remains outstanding on the loan. (Id. at ¶ 112.) On February 8, 2017, the bank commenced this lawsuit against Mark Gaver and his affiliated entities, [1] alleging that he is personally liable for the outstanding loan balance. (ECF No. 1.) On July 5, 2017, Mr. Gaver, acting pro se, timely filed a Motion to Dismiss (ECF No. 36.) On week later, Plaintiff served Mr. Gaver with an Amended Complaint. (ECF Nos. 39, 61.) Once again, acting pro se, Mr. Gaver timely filed a Motion to Dismiss the Amended Complaint, which Judge J. Frederick Motz of this Court subsequently denied on September 28, 2017.[2] (ECF Nos. 54, 59.) Following these Motions, neither Mr. Gaver nor the LLC Defendants filed an Answer or otherwise responded to the Complaint.

         On October 10, 2017, Plaintiff filed four separate Motions for Clerk's Entry of Default against each LLC Defendant for failing to respond to the First Amended Complaint. (ECF Nos. 64, 65, 66, 67.) On November 14, 2017, Plaintiff filed a Motion for Clerk's Entry of Default against Mr. Gaver on this same basis. (ECF No. 71.) On November 16, 2017, default was entered against Mr. Gaver for failing to respond to the First Amended Complaint. (ECF No. 73.) In separate Motions, both Mr. Gaver and Gaver Properties, LLC moved to set aside the entries of default against them. (ECF Nos. 68, 81.) This Court denied both motions in separate Memorandum Orders (ECF Nos. 75, 90.)

         On April 16, 2018 Santander filed a Motion for Leave to File Second Amended Complaint, which would add actual and constructive fraudulent conveyance claims against Ms. Gaver pursuant to the Maryland Uniform Fraudulent Conveyance Act (“MUFCA”), Md. Code Ann., Comm. Law § 15-201, et seq., and the Florida Fraudulent Transfer Act (“FFTA”), Fla. Stat. § 726.01, et seq. (ECF Nos. 91, 91-2.) Only Ms. Gaver opposes this Motion. (ECF No. 93.) On June 15, 2018 Santander moved for a Default Judgment against Mr. Gaver and the LLC Defendants based on their failure to plead or otherwise defend in response to the First Amended Complaint. (ECF No. 96, at 4.) Defendant Gaver Properties, LLC opposes the Motion for Default Judgment. (ECF No. 97.) On August 1, 2018 a jury convicted Mr. Gaver of eight counts of bank fraud and two counts of engaging in monetary transactions in property derived from specified unlawful activity. See United States v. Mark Gaver, RDB-17-0640. From his prison cell, Mr. Gaver, has filed a handwritten Motion for Contempt of Court against Donna Gaver and her Florida divorce attorney, Herman Tarnow. (ECF No. 101.) Ms. Gaver opposes the Motion. (ECF No. 102.)

         STANDARD OF REVIEW

         A plaintiff may amend his or her complaint once as a matter of course before a responsive pleading is served, or within twenty-one days of service of a responsive pleading or motion under Federal Rule of Civil Procedure 12(b), (e), or (f), whichever is earlier. Fed.R.Civ.P. 15(a). While Rule 15(a) requires that leave “shall be freely given when justice so requires, ” id., a district court may deny leave to amend “when the amendment would be prejudicial to the opposing party, the moving party has acted in bad faith, or the amendment would be futile.” Equal Rights Center v. Niles Bolton Assocs., 602 F.3d 597, 603 (4th Cir. 2010). “Whether an amendment is prejudicial will often be determined by the nature of the amendment and its timing.” Laber v. Harvey, 438 F.3d 404, 427 (4th Cir. 2006). An amendment is futile “when the proposed amendment is clearly insufficient or frivolous on its face.” Johnson v. Oroweat Foods Co., 785 F.2d 503, 510 (4th Cir. 1986). As this Court has repeatedly explained, an amendment is insufficient or frivolous if it would not survive a motion to dismiss. See, e.g., Whitaker v. Ciena Corp., RDB-18-0044, 2018 WL 3608777, at *3 (D. Md. July 27, 2018) (citing Tawaab v. Virginia Linen Service, Inc., 729 F.Supp.2d 757, 770 (D. Md. 2010).

         Rule 12(b)(6) of the Federal Rules of Civil Procedure authorizes the dismissal of a complaint if it fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). The purpose of Rule 12(b)(6) is “to test the sufficiency of a complaint and not to resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.” Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006). While a complaint need not include “detailed factual allegations, ” it must set forth “enough factual matter (taken as true) to suggest” a cognizable cause of action, “even if . . . [the] actual proof of those facts is improbable and . . . recovery is very remote and unlikely.” Be ...


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