Office of Comptroller Gen. v. INTERN. PROMOTIONS AND VENTURES, LTD.

• Decision Date: 04 September 1985
• Docket Number: No. 83 Civ. 7707 (BN)(RJW).,83 Civ. 7707 (BN)(RJW).
• Citation: 618 F. Supp. 202
• Parties: OFFICE OF the COMPTROLLER GENERAL OF the REPUBLIC OF BOLIVIA on Behalf of the GENERAL COMMAND OF the BOLIVIAN AIR FORCE, and Central Bank of Bolivia, Plaintiffs, v. INTERNATIONAL PROMOTIONS AND VENTURES, LTD., and Larry Tractman, Defendants.
• Court: U.S. District Court — Southern District of New York

618 F. Supp. 202

OFFICE OF the COMPTROLLER GENERAL OF the REPUBLIC OF BOLIVIA on Behalf of the GENERAL COMMAND OF the BOLIVIAN AIR FORCE, and Central Bank of Bolivia, Plaintiffs, v. INTERNATIONAL PROMOTIONS AND VENTURES, LTD., and Larry Tractman, Defendants.

No. 83 Civ. 7707 (BN)(RJW).

United States District Court, S.D. New York.

September 4, 1985.

Walter L. Stratton and Mitchell A. Karlan, Gibson, Dunn & Crutcher, New York City, for plaintiffs.

Thomas Torto, Brooklyn, N.Y., for defendants.

Opinion and Order On Plaintiffs' Motion for Summary Judgment

BERNARD NEWMAN, Senior Judge of the United States Court of International Trade, sitting by designation:

This diversity action has its genesis in two contracts executed in 1981 and 1982 by the plaintiff Bolivian Air Force¹ and defendants, International Promotions and Ventures, Ltd. ("IPVL") and Larry Tractman, president of IPVL, concerning the purchase of certain military aircraft, related equipment and services. Plaintiffs sue to recover possession of certain promissory notes delivered to defendants with a face value of $33.01 million, or alternatively for damages equal to the face amount of the notes plus accrued interest. Defendants counterclaim seeking damages for breach of contract and fraudulent misrepresentations, which allegedly frustrated defendants' efforts in performing the contracts.

Presently before the court is plaintiffs' motion for summary judgment. In support of their motion, plaintiffs rely upon the stipulated facts in the Joint Pretrial Order of May 23, 1985 and numerous documentary exhibits attached thereto and submitted with plaintiffs' Notice of Motion. In opposition, defendants contend that there are material issues of fact which must be decided by a trial.

For the reasons that follow, the court holds that there are no genuine or material issues for trial and that plaintiffs are entitled to summary judgment.

The Facts

On September 30, 1981 the Bolivian Air Force and IPVL entered into a contract ("1981 contract") pursuant to which IPVL agreed to supply the Bolivian Air Force with fifty-two F-104 Starfighter airplanes, related equipment, spare parts, turbines, maintenance and training (exhibits A and B, Joint Pretrial Order). The 1981 contract provided that the Bolivian Air Force was to pay for the Starfighters and related goods and services by issuing to defendants, upon execution of the contract, promissory notes guaranteed by the Central Bank of Bolivia in the principal amount of approximately $69.9 million.

Under the 1981 contract, defendants were to purchase the Starfighters from the Belgium Government. When the 1981 contract was entered into, the parties were aware that Belgium could not sell the aircraft in question unless a transfer license was issued by the United States Government, acting through the State Department.² Additionally, the parties recognized that United States Government policy opposed the sale of military equipment to Bolivia. Anticipating the contingency that the required transfer license might not be granted by the United States Government, the parties expressly agreed to condition the 1981 contract upon defendants' obtaining such license. Hence, so far as pertinent, paragraph Ninth of the 1981 contract provides:

NINTH: DURATION OF THE CONTRACT.—The present contract will become effective once the following requirements have been complied with:

* * * * * *

Four.—The transfer license of the goods, object of the present contract, has been obtained by "THE SELLER" defendants in the United States of America, within the maximum deadline of thirty (30) days, computed from the time the present document was subscribed i.e., September 30, 1981.

On or about September 30, 1981, date of execution of the 1981 contract, twenty-one promissory notes in the amount required by the contract (the September notes) were issued and subsequently delivered to agents of IPVL and to the Republic of Belgium. In conformance with the 1981 contract, the September notes were accompanied by letters of guarantee from the Central Bank. Although the 1981 contract required that plaintiffs deliver the promissory notes to defendants upon execution of the agreement, the contract also expressly stipulated that defendants were to return the notes if the United States did not issue the transfer license. In that regard, paragraph Thirtieth of the 1981 contract provides:

ANNULMENT OF THE PROMISSORY NOTES AND LETTER OF GUARANTEE.—In case that the present Contract would not become in force by failure in obtaining the license of sale or the export permit, the promissory notes and letters of guarantee issued as a consequence of the execution and compliance of the Contract, will become ipso-facto null of full right and therefore without any legal value. "THE SELLER" defendants should return them to "LA FAB" the Bolivian Air Force within a period of 3 days. Emphasis added.

In late 1981, agents of IPVL attempted to discount certain of the September notes and obtain cash from the Bank of Luxembourg, which refused to accept any of the September notes presented by IPVL. It appears that defendants encountered difficulties with the letters of guarantee accompanying the September notes, which letters according to defendants, had been deliberately signed by the representative of the Central Bank in a manner designed to render the notes nonnegotiable. Thereafter, on December 7, 1981 the September notes were replaced by plaintiffs with reissued negotiable promissory notes, numbered 1 through 40, whose face amount totaled $80,953,567 (December notes), also guaranteed by the Central Bank (exhibit H, Joint Pretrial Order). December notes 1 through 10 were issued to the Belgium Air Force and delivered to the Belgium Government at its embassy in Washington, D.C. December notes 11 through 40 were issued to and accepted by IPVL. There is no dispute concerning the validity of the December notes. The September notes were returned to the Bolivian Air Force and destroyed.

Respecting the transfer license upon which the 1981 contract was conditioned, it appears from an affidavit executed on March 18, 1985 (annexed to plaintiffs' notice of motion) by the Honorable Samuel F. Hart, then United States Ambassador to Ecuador,³ that in late 1981 or early 1982 Ambassador Hart officially advised the then President of Bolivia, General Torrelio, "that under no circumstances would the United States Government issue a transfer license for authorizing the sale of the Star-fighters by Belgium to Bolivia". It further appears from Ambassador Hart's affidavit that in 1982 the Bolivian Ambassador to the United States, Julio Sanjines, raised the matter of a transfer license with Hart on several occasions, that Hart informed the Bolivian Ambassador there was no substance to reports that Mr. Tractman "had sufficient influence within the State Department to arrange for the transfer license to be issued," and further "there would be no change in United States policy on this question". Moreover, Ambassador Hart states in his affidavit that on April 8, 1982, "to quash any further speculation on the part of Ambassador Sanjines", Hart confirmed by letter the official decision of the Department of State to "oppose the sale of Belgian F-104 aircraft to the Government of Bolivia, should a formal request for such a sale be received" (exhibit C, Joint Pretrial Order). Lastly, to emphasize the adamant position of the United States Government respecting denial of a transfer license, Ambassador Hart's affidavit insists that "under no circumstances would the United States Government have issued the transfer license necessary to complete the sale in question. Any representation to the contrary by Mr. Tractman would simply be without basis".

The short of the matter is that the transfer license, upon which the 1981 contract was expressly conditioned, was not issued by the United States Government within thirty days, as required by paragraph Ninth of the contract, and in point of fact the transfer license has never been issued.

Anticipating that a reversal of United States policy could be achieved, the Bolivian Air Force and defendants entered into an agreement on or about April 27, 1982 ("1982 contract") supplementing the 1981 contract and modifying some of the original provisions (exhibits D and E, Joint Pretrial Order). However, like the 1981 contract, the 1982 agreement specifically retained the condition that the contract would not become effective unless and until the transfer license was issued, and also stipulated that the promissory notes delivered to defendants must be returned should the transfer license not be issued.

As of June 28, 1983, the position of the United States Government relative to granting a transfer license had not changed. Thus, following inquiries by the Bolivian Comptroller General, the State Department reaffirmed its decision that it would not authorize transfer of the Belgian aircraft to Bolivia; and on that very date, June 28, 1983, the Honorable Edwin G. Corr, United States Ambassador to Bolivia, wrote to the Comptroller General of Bolivia:

During conversations in 1981 between the United States Government and the Belgian Government, the Government of the United States indicated that it would not give its authorization for the transfer to the Bolivian Air Force of 52 F-104 airplanes, owned by the Belgian Air Force, in accordance with our arms Export Control Law. On several occasions previous to March 23, 1982, the Department of State conveyed verbally this decision also to Mr. Bernard L. Tractman, Manager of International Promotions and Ventures Limited.

To date, there is no reason to modify this judgment and my Government does not deem it feasible to grant the authorization requested of us. Exhibit G, Joint Pretrial Order.

After receipt of Ambassador Corr's June 1983 letter, plaintiffs requested that defendants return the promissory notes in their possession. Similar...