In re Okura & Co.(America), Inc.
| Decision Date | 15 June 2000 |
| Docket Number | No. 98-B-46032 JHG.,98-B-46032 JHG. |
| Citation | 249 BR 596 |
| Parties | In re OKURA & CO. (AMERICA), INC., Debtor. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
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Kronish, Lieb, Weiner & Hellman LLP, New York City, by James A. Beldner, Ronald Sussman, for the debtor.
Dewey Ballentine, LLP, New York City, by Stuart Hirshfield, Sandor E. Schick, for the Liquidating Trustee.
White & Case, LLP, New York City, by Philip H. Schaeffer, Andrew P. DeNatale, David G. Hille, for The Bank of Tokyo-Mistusbishi, Ltd.
The Liquidating Trustee (the "Trustee"), appointed pursuant to the First Amended Joint Plan of Liquidation of Okura & Co. (America), Inc. moves,1 pursuant to § 502(b) of the United States Bankruptcy Code (the "Code") and Federal Rule of Bankruptcy Procedure 3007, to reduce claim number 150 filed by The Bank of Tokyo-Mitsubishi, Ltd. ("BTM").2 The Trustee contends that the portion of BTM's claim which is based upon BTM's participation in a loan from Fuji Bank, Limited ("Fuji") to Okura & Co. (America), Inc. (the "Debtor") should be disallowed because it is based upon a claim which cannot be asserted against the estate.
For the reasons set forth below, the Liquidating Trustee's motion is GRANTED.
The facts are not in dispute. On January 24, 1990, Fuji entered into a letter of credit agreement (the "LCA") with the Debtor in order to allow the Debtor to create a $50 million commercial paper program. The LCA provides that Fuji would issue certain irrevocable letters of credit for the account of the Debtor in order to support commercial paper which the Debtor would issue. The LCA also sets limits as to minimum dollar amounts of individual letters as well as a maximum amount that Fuji would honor. Only Fuji and the Debtor were signatories to the LCA.
On the same day, Fuji and BTM entered into a participation agreement (the "Participation Agreement") under which Fuji agreed to sell, and BTM to buy, an "undivided interest and participation to the extent of 22.5% (your `Percentage Share') in and to the Letters of Credit and the obligations of the Debtor in respect of the Letters of Credit and under the Letter of Credit Agreement. . . ." Participation Agreement at 1.
The Participation Agreement further provides that Fuji reserves
the right, in its sole discretion, in each instance, without prior notice to BTM, to agree to the amendment modification or waiver of any or all of the terms of the Letter of Credit Agreement, the Depository Agreement, the Letters of Credit or any agreement or document related thereto, to consent to any action or failure to act by the Debtor or any other party, and to exercise or refrain from exercising any powers or rights which we may have under or in respect of the Letter of Credit Agreement, the Depository Agreement, the Letters of Credit or any agreement or document related thereto or any collateral therefore, including, without limitation, the right to enforce the obligations of the Debtor or any other party, except that we shall not, without your prior written consent approve any amendment to, modification of or waiver of the Letter of Credit Agreement, the Depository Agreement, the Letters of Credit or any agreement or document related thereto which would (i) alter the time or times for payment of the principal of or interest on any reimbursement or repayment obligation under the Letter of Credit Agreement, the principal amount thereof, or the rates of interest thereon; nor (ii) reduce the Letter of Credit Fee payable under Section 2.07 of the Letter of Credit agreement. . . . Notwithstanding anything otherwise contained herein, we may at any time in our sole discretion increase the Bank Letter of Credit Commitment; provided that you shall not be under any obligation to increase your liability to purchase participations hereunder due to such increase in the Bank Letter of Credit Commitment.
Participation Agreement at ¶ 10 ().
Other significant provisions of the Participation Agreement include paragraph 11 (); paragraph 14 (); and paragraphs 2, 4(a), 4(b), 4(c), 12, 13 and 14 (). The Debtor was not a party to the Participation Agreement.
On Aug. 21, 1998, the Debtor filed a voluntary petition for relief under Chapter 11 of the Code. On the petition date, it owed $15 million to Fuji under the LCA. The Debtor listed this indebtedness on its schedules of assets and liabilities filed with the Court. Fuji filed a proof of claim regarding the letters of credit underwriting the Debtor's commercial paper program in the amount of $15 million. This amount includes BTM's 22.5 percent participation interest in the Debtor's indebtedness to Fuji. Finally, BTM's proof of claim includes an entry for $3,375,000 characterized as "Participation to L/C regarding C/P." Thus, Fuji and BTM each filed a proof of claim for BTM's participation in the LCA.
The genesis of this dispute is somewhat unusual. During the course of this case, but prior to confirmation, the Debtor sued BTM regarding matters unrelated to this motion. The suit was settled and one of the terms of the settlement relates directly to this matter. The parties agreed that if BTM is allowed to file a separate claim for its participation interest in the LCA, then 40 percent of that claim will be paid in full while the remaining 60 percent will receive the same treatment as all other unsecured creditors.
On the other hand, if BTM is not allowed to file its own claim, it will be paid 22.5 percent of any recovery that Fuji receives on account of its LCA claim. That claim is a general unsecured claim. At the time that this motion was argued, the attorney for the Trustee estimated that general unsecured creditors would receive a distribution of about 30 percent of the allowed amount of their claims. The significance of this motion, to the parties, is the difference between the treatment that BTM is entitled to receive under the settlement stipulation, if its claim is allowed, and the treatment that the same claim would receive as a general unsecured claim, about $950,000.3 However, the treatment of loan participation agreements by Bankruptcy Courts is of general importance in the commercial world.
With its opposition papers, BTM submitted several additional documents which it argues I should consider (collectively, the "Extrinsic Materials"). These are: 1) an affidavit of Akira Takeuchi, Vice President of BTM; 2) an alleged credit application, covering September 1, 1997 to August 31, 1998, from Okura & Co. Ltd. ("Okura-Japan"), the parent company of the Debtor, to BTM's head office in Tokyo listing all of the Debtor's obligations to BTM which includes an entry for $11.25 million (the maximum amount of BTM's potential exposure on the $50 million LCA); 3) a guarantee running from Okura-Japan to BTM in which Okura-Japan purportedly agrees to guarantee all of the Debtor's obligations to BTM outlined in the credit application (including the $11.25 million potential exposure); and 4) a letter from Okura-Japan to BTM's head office in Japan "acknowledging" that its American subsidiary has a series of credit facilities outstanding, including the $11.25 million potential exposure under the Participation Agreement, and requesting that BTM renew these facilities for another year.
The Trustee opposes my consideration of the Extrinsic Materials on the grounds that my consideration of it is precluded by the parol evidence rule because the contract at issue is unambiguous and that the Extrinsic Materials are not relevant to the question before me.4
The Trustee argues that the claim asserted by BTM for $3,375,000, based on Okura's obligations under the LCA, should be disallowed and that BTM should only receive a pro-rata share of any distribution to Fuji as lead lender. The Trustee maintains that the LCA, the Participation Agreement, and the case law regarding participation agreements do not support BTM's assertion that it may assert a claim directly against the Debtor because BTM is not a creditor of the Debtor.
In opposition, BTM makes five arguments. First, BTM argues that it is entitled to file a claim because of the broad definition given to the words "creditor" and "claim" under the Bankruptcy Code. See 11 U.S.C. §§ 101(5) and 101(10) (2000). Next, it contends that there is binding Supreme Court and Court of Appeals of the Second Circuit precedent on point which I am constrained to follow. See Small Business Admin. v. McClellan, 364 U.S. 446, 81 S.Ct. 191, 5 L.Ed.2d 200 (1960); In re The Westover, Inc., 82 F.2d 177 (2d Cir.1936). Third, BTM claims that it is a tenant-in-common in the LCA with Fuji, and, therefore, has a right to assert a claim directly against the Debtor. Fourth, BTM maintains that the way it and Fuji were required to treat the LCA and the Participation Agreement in their books, pursuant to prevailing federal banking laws, supports the conclusion that the Participation Agreement affected a partial assignment and complete divestiture of the participated portion of the LCA to BTM from Fuji. Finally, BTM asserts that I should consider the Extrinsic Materials which, it contends, demonstrates the...
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N.Y.C. Energy Efficiency Corp. v. Suria, INDEX NO. 655339/2017
...the DCL, and itsinterpretation of what recourse a participant has is of limited value here. Defendants next cite to In re Okura & Co., Inc., 249 BR 596, 608-9 (SDNY 2000), claiming that "courts are generally in agreement that a transfer of an undivided interest and participation in the cont......