In re Total Containment, Inc., Bankruptcy No. 04-13144bf (Bankr. E.D. Pa. 1/29/2008)
| Decision Date | 29 January 2008 |
| Docket Number | Adversary No. 06-0647.,Bankruptcy No. 04-13144bf. |
| Parties | In re TOTAL CONTAINMENT, INC. Chapter 11, Debtor CANAM GROUP, INC. Plaintiff v. TCI ENVIRONMENT NV/SA Defendant |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Presently before me are cross-motions for summary judgment filed by the plaintiff and the defendant. In its amended complaint, Canam Group, Inc., in its capacity as purported assignee of claims from Canam Steel Corporation, alleges that TCI Environment NV/SA ("TCIE")1 was a co-maker of promissory notes to Bank of America ("BOA") that Canam Steel guaranteed. After TCIE and its co-borrowers defaulted, Canam Steel allegedly repaid the loan obligation of TCIE in the amount of $4,678,124.89. Canam Group now seeks to recover from defendant TCIE the entire guarantee payment made to BOA. It asserts in its amended complaint two alternative counts: Count I for contribution or reimbursement, and Count II for unjust enrichment. The plaintiff contends that both claims should be determined by relying upon the laws of the State of Maryland, consistent with the choice of law provisions found in the loan agreements, promissory notes and guarantee contract.
Defendant TCIE contests both claims for numerous reasons. It disputes that Canam Steel repaid BOA the amount it now demands in its amended complaint. It also challenges the plaintiff's purported assignment from Canam Steel. TCIE further maintains that the unjust enrichment claim is barred by the statute of limitations. It also argues that the contribution and reimbursement claim was waived when BOA and the trustee for the chapter 11 debtor, Total Containment, Inc. (TCI), entered into a settlement, which settlement contained, inter alia, a release of TCIE from BOA's claim.
Moreover, the defendant, which is a Belgian corporation, denies that it legally obligated itself to borrow funds from BOA, based upon Belgian law. Instead, it asserts that BOA loaned funds only to the chapter 11 debtor, TCI, which owned 99% of the stock of TCIE. TCIE maintains that it received no benefit from that loan to its parent corporation and that the persons who signed the documents did so without the knowledge or consent of TCIE's Board of Directors and acted against the interests of TCIE.
Finally, TCIE contends in the alternative that if it has any obligation to pay Canam Group, it would be only in the capacity of "co-surety," thus limiting any amount due to contribution among various parties to the loan agreements and notes. TCIE Amended Memorandum, at 28-29.
In support of their respective summary judgment motions (and in opposition to the other party's motion), Canam Group and TCIE have submitted numerous documents, affidavits and memoranda. They debate the meaning of Belgian corporate law and its relevance to this adversary proceeding, as well as the legal effect of the claim release given by BOA to TCIE upon the Canam Steel loan guarantee. They also contest the admissibility of certain documents relied upon by TCIE for summary judgment purposes.
For the following reasons, I conclude that material facts are in dispute, thereby precluding summary judgment for either party.
Based upon my review of the affidavits, deposition transcripts and exhibits, the following facts appear undisputed.
On December 14, 1999, TCI and BOA entered into a loan agreement for $5 million. Amended Complaint, Ex. A. This loan agreement involved a revolving line of credit. Id., ¶ 2. TCI, the borrower, was identified as a Pennsylvania corporation located in Oaks, Pennsylvania. Id. All notices to BOA were to be sent to an address in Frederick, Maryland. Id. This agreement had a choice of law provision selecting Maryland law. Id. Mr. Keith Ruck signed this agreement on behalf of TCI and identified himself as corporate vice-president for finance as well as chief financial officer. Id.
The loan agreement referred to a promissory note of the same date. This promissory note, in the amount of $5 million, matured on June 30, 2001. Canam Motion for Summary Judgment, Ex. 2. The payee was BOA located in Frederick, Maryland. The borrowers were identified as TCI, Rene Morin, Inc. ("RMI"), American Containment, Inc. ("ACI") and TCIE. Id. All the borrowers were made jointly and severally liable. This promissory note identified Maryland law as governing, and that the co-borrowers consented to personal jurisdiction in the state and federal courts of Maryland. Id. Mr. Ruck signed the note on behalf of all four borrowers. He signed as corporate secretary on behalf of TCIE, RMI and ACI.
TCIE also executed a security agreement in favor of BOA, with Keith Ruck again signing on behalf of TCIE as corporate secretary. The other borrowers, TCI, RMI and ACI, executed similar security agreements on the same date also signed by Mr. Ruck. Amended Memorandum of Law of [TCIE], App. I, Ex. VII(b); see Amended Memorandum of Law of [TCIE], App. I, Exs. VII(a), (c), and (d). These security agreements also contained choice of law provisions favoring Maryland law.
Moreover, on December 14, 1999, Canam Steel signed a "guaranty and indemnification agreement" in favor of BOA. Canam Ex. 4. This agreement stated that BOA "intends to provide a certain line of credit" not to exceed $5 million to TCI and "three (3) of its subsidiaries [including TCIE] . . . for the purpose of financing certain working capital of the Borrowers." Id. Canam Steel is identified as a "preferred stockholder" of TCI that is "desirous that the Borrowers obtain the Loan from the Bank." Id. This guarantee also provided that it was to be construed and interpreted using Maryland law. Id.2
TCIE's directors signed a "Consent in Lieu of Special Meeting of the Board of Directors of TCIE" on December 13, 1999. Amended Complaint, ¶ 6 Ex. B; Answer, ¶ 6. This document stated: "RESOLVED, that the Secretary of the Corporation may negotiate the terms of and enter into such agreements and take such actions as necessary in connection with a credit facility with Bank of America." Id. This document was signed by Francois Meersemann, John R. Wright, Jr., Jeffrey Boehmer, Pierre Desjardins, and Mr. Ruck. Id.
On March 31, 2000, the loan agreement between TCI and BOA, dated December 14, 1999, was modified. TCIE, Appx. I, Ex. I(b). The document was signed by Mr. Ruck on behalf of TCI. Id. A second loan modification agreement between TCI and BOA was signed on April 14, 2000, with Mr. DesJardins acting on behalf of TCI. TCIE, Appx. I, Ex. I(c). These modifications incorporated almost all of the terms of the original loan agreement, including the choice of law provision, but the second modification referenced an increased line of credit of $7 million.3
On April 14, 2000, a promissory note was executed in the amount of $7 million, naming TCI, TCIE, RMI and ACI as borrowers and BOA as lender. Amended Memorandum of Law of [TCIE], App. I, Ex. II(b). "Renewal" is checked at the top of the document and it recites the same maturity date, June 30, 2001, as the December 14, 1999 Promissory Note. Id.4 Again, Mr. Ruck signed on behalf of all four borrowers, and identified himself as secretary for TCIE. Maryland law was made applicable to this new note. Id.
Also on April 14, 2000, Canam Steel Corporation and BOA entered into a new Guaranty and Indemnification Agreement in connection with the $7 million loan. Amended Complaint, ¶ 9 Ex. D; Answer, ¶ 9. Mr. Bernard Gouin signed the Agreement on behalf of Canam Steel. Id. Maryland law was made applicable to this new guarantee. Id.
A "Third Modification of Loan Agreement" was signed on March 29, 2001. Amended Memorandum of Law of [TCIE], App. I, Ex. I(d). This Agreement stated that it modified the December 14, 1999 loan agreement (as modified by agreements dated March 21, 2000 and April 14, 2000, already discussed), to add TCIE, RMI and ACI as borrowers. Id., at ¶ 2. It also amended the 1999 loan agreement to increase the loan amount to $7 million, and it decreased TCI's tangible net worth requirement to $2 million. Id. This Note was again signed on behalf of TCIE by Mr. Wright as vice president (who also signed on behalf of ACI). Id.
On March 29, 2001, TCI, TCIE, RMI and ACI entered into another "renewal" Promissory Note for $7 million payable to BOA, with a maturity date of April 1, 2002 and retaining the express applicability of Maryland law. Amended Memorandum of Law of [TCIE], App. I, Ex. II(c). Mr. Wright signed the note on behalf of TCIE as vice president. Id.
On May 11, 2001, TCI, TCIE, RMI, ACI and BOA entered into an additional "renewal" Promissory Note. Amended Complaint, ¶ 11 Ex. F; Answer, ¶ 11. This note increased the line of credit to $8 million and extended the maturity date to October 1, 2002. Id. The note was signed on behalf of TCIE by Mr. Wright as vice president. Id. The last page of the note contains a signed statement by Canam Steel "ratify[ing] and confirm[ing] its continuing guarantee of the Borrower's payment and performance obligations under the Note and the other Loan Documents, pursuant to the terms and provisions of that Guarantee and Indemnification Agreement dated March 29, 2001, by the undersigned in favor of the Bank." Id. The parties did not provide a copy of the March 29th guarantee agreement in connection with these summary judgment motions.
On June 20, 2001, TCIE executed a document styled "Certification of Corporate Resolution." See Amended Complaint, ¶ 7, Ex. C; Answer, ¶ 7. This document purported to authorize Mr. Wright and Thomas P. Kennedy, or either one of them, to borrow on behalf of TCIE, including "all such acts, transactions or agreements undertaken by any officer of Company prior to the date of these Resolutions. . ." id., thus intending to grant retroactive authorization. The document was signed by Mr. Wright as director and Mr. Kennedy as vice president, and was witnessed by the secretary of the company [illegible signature]. Id.5...
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