Banco Portugues do Atlantico v. ASLAND, SA

• Decision Date: 18 September 1990
• Docket Number: No. 89 Civ. 4970 (RJW).,89 Civ. 4970 (RJW).
• Citation: 745 F. Supp. 962
• Parties: BANCO PORTUGUES do ATLANTICO, Plaintiff, v. ASLAND, S.A., Logostable, N.V., Obanos Minerals, N.V., Joaquin de Navasques, Joaquin Bertran, Miguel Del Campo, Alberto Vinolas and Joaquin Targhetta, Defendants.
• Court: U.S. District Court — Southern District of New York

745 F. Supp. 962

BANCO PORTUGUES do ATLANTICO, Plaintiff, v. ASLAND, S.A., Logostable, N.V., Obanos Minerals, N.V., Joaquin de Navasques, Joaquin Bertran, Miguel Del Campo, Alberto Vinolas and Joaquin Targhetta, Defendants.

No. 89 Civ. 4970 (RJW).

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

September 18, 1990.

Cleary, Gottlieb, Steen & Hamilton, New York City (Thomas J. Moloney, Frank L. Eppes, Linda A. Hiniker, of counsel), for plaintiff.

Baker & McKenzie, New York City (Lawrence W. Newman, Charles Cummings, of counsel), for defendant Asland, S.A.

OPINION

ROBERT J. WARD, District Judge.

Plaintiff Banco Portugues do Atlantico ("the Bank") has moved, pursuant to Rule 56, Fed.R.Civ.P., for summary judgment against defendant Asland, S.A. ("Asland") with respect to the first cause of action in plaintiff's amended complaint, and for entry of a final judgment as to that claim pursuant to Rule 54(b), Fed.R.Civ.P. For the reasons that follow, the motion for summary judgment is granted, and the motion for entry of a final judgment is denied.

BACKGROUND

In this lawsuit, the Bank seeks to recover money it advanced to various companies to fund the mining operations of the Sugarloaf Mine in Arkansas. The action was originally filed in state court, and was removed to this Court pursuant to 28 U.S.C. §§ 1331 and 1341 after amendment of the original complaint to add three claims under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. ("RICO"). The instant motion concerns only one aspect of a series of somewhat complex transactions by which the loans at issue in the instant case were effected and guaranteed by various parties.

Except where otherwise noted, the following facts are not disputed. On February 12, 1986, the Bank entered into a Security and Loan Agreement (the "Loan Agreement") with Koal Industries International, Inc. ("KII"), European Energy Corporation ("EEC"), Sugarloaf Mining Corporation ("SMC"), Daylight Holdings, Inc. ("DHI"), Asland,¹ and certain other companies not involved in the instant motion.² Pursuant to the Loan Agreement, the Bank agreed to make certain loans to KII and DHI (the "Term Loans"). In addition, the Loan Agreement provided for the execution of certain other agreements prior to or contemporaneous with the making of the Term Loans. Among these other agreements were a Revolving Credit Agreement between the Bank and EEC (the "Revolving Credit Agreement"), a Revolving Credit Guarantee executed by certain companies, including Asland (the "Guarantee"), a Purchase Agreement between Asland and EEC (the "Purchase Agreement"), and a Distribution Agreement among the Bank and KII, EEC, SMC and DHI (the "Distribution Agreement") providing for the distribution by the Bank of amounts assigned to it under the Loan Agreement.

The Bank and EEC entered into the Revolving Credit Agreement on March 14, 1986, under which the Bank granted EEC a revolving line of credit in the amount of $1,900,000.³ As set out in the Revolving Credit Agreement, this line of credit was made available to EEC for the purpose of paying the costs of mining, inspection, transportation and delivery of the coal marketed by it prior to payment for the coal by its ultimate purchaser, Asland.⁴ Section 1.2 of the Revolving Credit Agreement, entitled "Availability," provides:

Each loan shall be in a principal amount of not less than $25,000, and shall be made by the Bank to the Borrower EEC, provided that the Borrower delivers a notice in the form of the Notice of Drawing attached as Schedule A hereto ..., fixing a date ... and otherwise containing the representations required by such schedule. Each Loan shall be made in respect of a specific shipment of coal or other minerals duly delivered to a barge carrier for shipment....

Exh. A to Affidavit of Sergio Capela, filed February 14, 1990 ("Capela Aff."). The Notices of Drawing required the following items to be provided with respect to the particular shipment of coal: (1) the applicable purchase contract; (2) the date of loading; (3) the barge number; (4) tonnage in metric tons; and (5) the price per ton.

Section 4.1, entitled "Conditions of Borrowing," further provided that the Bank's obligation to make advances under the contract would be subject to certain conditions precedent, including that EEC provide, "as to each advance, an appropriately completed and executed Notice of Drawing," and that the "form and substance of ... each Notice of Drawing ... shall be satisfactory to the Bank and its counsel." Id.

The Guarantee, also dated as of March 14, 1986 and signed by Asland as well as certain other defendants not involved in the instant motion, provides that, in order to induce the Bank to furnish a line of credit to EEC under the Revolving Credit Agreement,

each Guarantor hereby unconditionally and irrevocably guarantees to the Bank ... the prompt and complete payment when due (whether at the stated maturity, by acceleration or otherwise) an amount equal to such Guarantor's Guarantee Percentage of all indebtedness, obligations and liability of EEC under the Line of Credit....

Exh. C to Capela Aff. The Guarantee Percentage

of Asland is forty percent.⁵

Between April and August, 1986, the Bank made a total of 37 advances to EEC under the Revolving Credit Agreement, pursuant to Notices of Drawing which were complete in all respects. Beginning at the end of August, 1986, however, and for approximately four months thereafter, advances were made by the Bank to EEC pursuant to Notices of Drawing which, in place of the "Barge number" and "Date of Loading" information, stated that this information was "to be announced." The parties disagree about the extent to which such information was subsequently furnished to the Bank, and about the degree of diligence with which the Bank attempted to fill in the blanks left by EEC. In addition, Asland points to a series of "remarkable coincidences" with respect to the amounts of coal purportedly loaded onto barges as reported in these later Notices of Drawing which, according to Asland, either did or should have alerted the Bank that the information contained therein was false.⁶ It is apparently undisputed that some amount of coal for which the Bank made advances to EEC pursuant to the Notices of Drawing was not in fact delivered to Asland, although the exact degree of the discrepancy is disputed.

In or about July 1986, the Bank informed all parties involved that substantial Term Loan installments would become due on September 15 of that year and that it was important to the Bank that these installments be paid. According to Asland, at a meeting held in July the Bank informed both Asland and Earl Powers of EEC that "if two cargoes of coal could be shipped to Spain and paid for before the September 15 deadline, sufficient revenue would be produced to pay all debts due to the Bank." Affidavit of Miguel Del Campo, filed April 13, 1990, ¶ 8 ("Del Campo Aff."). However, it soon became apparent that only one shipment of coal could be shipped to Spain prior to the installment date. Thus, Asland asserts that it agreed, in order "to help solve the problem," to make a partial payment for the second shipment of coal in advance of its shipment date, provided that sufficient coal had been mined to cover the advance payment. Asland states that it made this advance payment "on the understanding that those funds would be used to reduce or pay the amounts due under the Term Loans," and that it also "understood" that the payment for the first shipment of coal, along with the advance payment for the second shipment, would suffice to pay the total debt then due the Bank, including the balance due under the Revolving Credit Agreement. Id. at ¶¶ 8-10.

On September 12, 1986, Asland paid ninety percent of the invoice amount (as per the usual practice of the parties) for the first shipment of coal, amounting to $1,145,039.85. Several days later, Asland was informed by an official of the Bank that an advance payment of $675,000 would be needed with respect to the second shipment in order to pay the balance of the term loan installments. Id. at ¶ 9. On October 8, 1986, Asland paid the remaining ten percent due on the first shipment, or $127,226.65, as well as the $675,000 advance payment on the second shipment as previously agreed. According to Miguel Del Campo, the Director General of Asland, defendant "understood that by these payments the total debt due to the Bank — including the balances due under the Revolving Credit Agreement — had been paid." Id. at ¶ 10.

A close reading of the Del Campo Affidavit reveals that this alleged "understanding" was based upon Asland's pre-existing "understanding" of the purpose and operation of the Revolving Credit Agreement. Del Campo states that the Bank "did not allocate the money it received from Asland in September and October of 1986 in the manner in which it had agreed." Del Campo Aff. at ¶ 12. Although he points to no specific or separate agreement occurring at the time the advance payment for the second shipment was made, Del Campo asserts that the Bank and EEC "were careful not to alert Asland to the Bank's deviation from the allocation formula presented to Asland in February and March 1986, or from the Distribution Agreement...." Id. at ¶ 13. February and March 1986 was the time at which the Revolving Credit Agreement and the other relevant agreements were signed by the parties. Thus, it appears that Asland's position is that the Bank failed to act in accordance with its obligations under the Revolving Credit Agreement in allocating the September-October payments.

In any event, the payments made in September and October 1986 were not in fact sufficient to repay both the Term Loan installments and the Revolving Credit advances which remained unpaid. After satisfying the Term Loan payments due, the Bank repaid several Revolving Credit advances pursuant to the directions of EEC, however...