Credit Francais Intern., S.A. v. Sociedad Financiera De Comercio, C.A.

• Decision Date: 14 May 1985
• Citation: 128 Misc.2d 564,490 N.Y.S.2d 670
• Parties: CREDIT FRANCAIS INTERNATIONAL, S.A., Plaintiff, v. SOCIEDAD FINANCIERA DE COMERCIO, C.A. (formerly named Sociedad Financiera Credival, C.A.), Defendant.
• Court: New York Supreme Court

Page 670

490 N.Y.S.2d 670

128 Misc.2d 564

CREDIT FRANCAIS INTERNATIONAL, S.A., Plaintiff, v. SOCIEDAD FINANCIERA DE COMERCIO, C.A. (formerly named Sociedad Financiera Credival, C.A.), Defendant.

Supreme Court, Special Term New York County, Part 1.

May 14, 1985.

Butler, Fitzgerald & Potter by Stuart Potter, New York City, for plaintiff.

Kramer, Levin, Nessen, Kamin & Frankel, New York City, for defendant; Abbe L. Dienstag, New York City, of counsel.

GREENFIELD, Justice:

Plaintiff Credit Francais International, S.A. is a French banking corporation headquartered in Paris which was part of an international consortium of nine banks which loaned $25,000,000 to defendant Sociedad Financiera De Comercio, C.A., a Venezuelan financial institution, pursuant to a written Deposit Agreement entered into on November 24, 1980. Plaintiff bank deposited $3,000,000 of the total pursuant to the Agreement terms. The Agreement provided for repayment of principal and interest in six semi-annual installments. The Marine Midland Bank, which is headquartered in New York City, was designated as the Agent for the participating banks. It was to receive the payments Plaintiff contends that the failure of defendant to make the payments required constitutes a clear breach of the Deposit Agreement, and sues for the principal balance owing. Plaintiff has attached sums allegedly owing to the defendant, and this attachment was confirmed by decision and order of Mr. Justice Alvin Klein dated July 5, 1984. Plaintiff now moves for partial summary judgment on the first cause of action in its amended complaint for breach of the Agreement. The defendant has cross-moved to dismiss on the grounds of forum non conveniens, and alternatively, for summary judgment on the ground that the Venezuelan decrees prohibiting repayment should be respected and accorded comity, and that plaintiff is not a proper party to bring suit individually under the terms of the Deposit Agreement.

made by the defendant, to be applied pro rata to the accounts of the participating banks. Defendant made the requisite payments in February and August of 1982, reducing the principal amount owed to the plaintiff to $2,000,000. However, in February and March, 1983, the Government of Venezuela, in attempting to cope with its problem of foreign debt, adopted certain currency control regulations restricting the use of dollars and calling on all Venezuelan financial institutions to restructure their debt payments, and to suspend all payments of principal until 1986. Thus, while defendant continued to pay interest on the loan, it has made no payments on account of principal in 1983 and 1984.

FORUM NON CONVENIENS

Before dealing with any of the other procedural or substantive issues which are raised on this motion, the court of necessity must determine the threshold issue of whether New York is the appropriate forum for resolution of the dispute, or whether it should be handled elsewhere, since neither plaintiff nor defendant is a New York resident and the critical question of law allegedly involves the interpretation and application of Venezuelan currency decrees. Defendant points out that the suit is brought by a French bank headquartered in Paris against a Venezuelan financial institution with offices in Caracas. Neither plaintiff nor defendant maintains any offices in New York. Defendant professes concern about a possible New York judgment ordering repayment of a Venezuelan debt which is prohibited by the decrees of the Venezuelan Government. "Act of State" is asserted as an affirmative defense. Cf. French v. Banco Nacional de Cuba, 23 N.Y.2d 46, 295 N.Y.S.2d 433, 242 N.E.2d 704; Weston Banking v. Turkiye Garanti Bankasi, 57 N.Y.2d 315, 456 N.Y.S.2d 684, 442 N.E.2d 1195; Mirabella v. Banco Industrial De La Republica Argentina, 101 Misc.2d 767, 768, 421 N.Y.S.2d 960. Allied Bank International v. Banco Credito Agricola de Cartago, 757 F.2d 516 (2nd Cir.1985).

The facts in the Allied Bank case bear striking similarities to those here involved, although the principles of law involved are somewhat different. Allied Bank had been designated as the agent for a syndicate of 39 banks which loaned money to three Costa Rican institutions subject to control of its Central Bank. The Costa Rican government, through its Central Bank, issued regulations suspending all external debt payments in United States dollars. The debtors then defaulted on their obligations to pay in dollars. Unlike the situation here however, the Agent accelerated the debt, and on behalf of the entire syndicate sued in the federal district court for the Southern District for the full amount of principal and interest outstanding. The district court held that since non-payment was the result of foreign governmental decrees, the Agent was barred from suing here by the Act of State doctrine. Underhill v. Hernandez, 168 U.S. 250, 252, 18 S.Ct. 83, 84, 42 L.Ed. 456. The Circuit Court reversed, on the ground that the governmental acts of Costa Rica did not affect property solely within the dominion and within the borders of that country, but impinged on an obligation to pay a debt in United States dollars to the syndicate's agent in New York. The Costa Rican banks had by their agreement conceded jurisdiction in New York It is clear that the residence of the parties is no longer the controlling consideration in determining whether or not New York courts are an appropriate forum under CPLR Sec. 327. Silver v. Great American Ins. Co., 29 N.Y.2d 356, 328 N.Y.S.2d 398, 278 N.E.2d 619; Bata v. Bata, 304 N.Y. 51, 105 N.E.2d 623. Ordinarily, New York will continue as the forum chosen by the plaintiff unless it can be demonstrated that there is a better and more appropriate forum elsewhere. Varkonyi v. S.A. Empresa De Viacao Airea Rio Grandense, 22 N.Y.2d 333, 292 N.Y.S.2d 670, 239 N.E.2d 542; Bader & Bader v. Ford, 66 A.D.2d 642, 645, 414 N.Y.S.2d 132. In such cases, New York may continue to entertain the action unless important policy considerations dictate otherwise, even if there is a minimal nexus between the parties and facts of the action and New York. See Aboujdid v. Gulf Aviation, 108 Misc.2d 175, 437 N.Y.S.2d 219, aff'd. 86 A.D.2d 564, 448 N.Y.S.2d 427.

and the court declared: "The United States has an interest in maintaining New York's status as one of the foremost commercial centers in the world."

In this case, the lending banks which made up the consortium, other than plaintiff, a French bank, are located in England, Panama, Texas, Minnesota, the Netherlands Antilles and three in the Bahamas. The Marine Midland Bank of New York was designated as Agent, and Marine Midland Ltd. of London is designated by the Agreement as the Manager. It is alleged, however, that the underlying agreement was negotiated in New York, that the text of the Deposit Agreement was drafted in New York, that payments under the Agreement were to be made to Marine Midland in New York and that meetings between the parties to the Agreement were held in New York.

Given the multi-national character of the Agreement, the parties obviously anticipated that situations could arise where disputes might be litigated in any one of a number of jurisdictions, with widely varying results. Therefore, the parties provided that the Agreement was to be governed and interpreted in accordance with the laws of the State of New York, the place of payment, and they further provided what is known as a "forum-selection clause" pursuant to which defendant

"... irrevocably consents that any legal action or proceeding against it or any of its property arising under or relating to this Agreement ... may be brought in any court of the State of New York or any federal court of the United States of America located in the City and State of New York, or in the appropriate courts in Caracas, Venezuela as the Agent, the Manager or any Depositor may elect ..."

Defendant appointed an agent headquartered in New York City to receive service of process in its behalf, and agreed to submit to and accept the jurisdiction of the New York courts.

Defendant further explicitly and irrevocably waived "any objection which it may now or hereafter have to the laying of the venue of any suit, action or proceeding arising out of or relating to this Agreement ..." and further explicitly waived "any claim that the State of New York is not a convenient forum for any such suit, action or proceeding." It further waived any right that it had to insist on any action in connection with the Agreement being brought before a Venezuelan court. Lastly, it waived any right to assert a defense of sovereign immunity with respect to its obligations.

When all the parties to an agreement have designated a particular jurisdiction as the forum for the resolution of their disputes, such a forum-selection clause "is prima facie valid and should be enforced ... unless unreasonable under the circumstances." M-S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 1913, 32 L.Ed.2d 513 (1972). In that case, a contract between a Texas corporation and a German corporation to tow a drilling rig from Louisiana to Italy contained a forum-selection clause providing for the litigation of any dispute in the courts of England.

When a dispute arose, the Texas corporation attempted to bring suit in the United States. The Supreme Court noted that while forum-selection clauses historically had not been favored by American courts because they ousted such courts of their jurisdiction, the correct doctrine to be followed would be to hold that parties could agree in advance to submit to the jurisdiction of a given court and that parties could appropriately chose a neutral forum. Having done so, "absent some compelling and countervailing reason, it [forum-selection] should be honored by the parties and enforced by the courts." id. p. 12, 92 S.Ct. p. 1914. "The elimination of all such uncertainties by agreeing in advance on a...