Timberlane Lumber Co. v. Bank of America, C 73-0792 SW

• Decision Date: 24 October 1983
• Docket Number: No. C 73-0792 SW,C 74-0277 SW and C 74-0278 SW.,C 74-0275 SW,C 73-0792 SW
• Citation: 574 F. Supp. 1453
• Court: U.S. District Court — Northern District of California
• Parties: TIMBERLANE LUMBER COMPANY, et al., Plaintiffs, v. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, et al., Defendants.

574 F. Supp. 1453

TIMBERLANE LUMBER COMPANY, et al., Plaintiffs, v.BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, et al., Defendants.

Nos. C 73-0792 SW, C 74-0275 SW, C 74-0277 SW and C 74-0278 SW.

United States District Court, N.D. California.

October 24, 1983.

COPYRIGHT MATERIAL OMITTED

John H. Boone, Arthur L. Martin, Boone, Knudsen & Martin, San Francisco, Cal., William Hillyer, Norman R. Allenby, Hillyer & Irwin, San Diego, Cal., for plaintiffsTimberlane Lumber Co., Gordon Sloan Smith, Jorge Lima and Miguel Ardon.

Pillsbury, Madison & Sutro, William I. Edlund, Walter J. Robinson, III, Charles R. Ragan, John F. Nolan, Terry Calvani, San Francisco, Cal., for defendants.

ORDER AND MEMORANDUM OF LAW GRANTING DEFENDANTSMOTION TO DISMISS FOR LACK OF JURISDICTION AND FOR FORUM NON CONVENIENS, AND DENYING DEFENDANTSMOTIONS FOR JUDGMENT ON PLEADING OR SUMMARY JUDGEMENT

SPENCER WILLIAMS, District Judge.

ORDER AND MEMORANDUM OF LAW

Upon review of all the submitted testimonial, documentary, and other evidence¹ offered in support of the massive briefing on defendants' motion for summary disposition of plaintiffs' antitrust complaint², IT IS HEREBY ORDERED THAT defendants' motion to dismiss for lack of this Court's subject matter jurisdiction is GRANTED.Defendants' motions for judgment, in the alternative, are DENIED.We explain these holdings below.

FACTS:

The first operative facts of this lengthy case occurred in the early 1970's when a small group of United States businessmen attempted a highly leveraged buy-out of a failing Honduran lumber firm.These investors³ who had previously joined in other timber-related ventures were enticed by E.H. Robbins to consider Honduras lumber as a new opportunity.In 1971, Sloan Smith, as an agent provocateur for Robbins and his associates, discovered the Lima family mill and timber holdings in an outlying area of Tegucigalpa, the capital city of Honduras.Lima et Hijos, S.A.⁴ had been experiencing a liquidity and management crisis; although originally a small family-managed and prosperous mill, a series of misfortunes had dealt the enterprise severe setbacks.After the death of its founder and family patriarch, the family's tenuous control of the business was threatened by financial obligations the firm had assumed with the Bank of America, Banco de Honduras and one Casanova, a creditor and competing mill.

Enter Timberlane and Sloan Smith.

In 1971, Robbins and the other principals of Timberlane Lumber Company formed two Honduran subsidiaries as investment vehicles in the lumber industry.⁵The first of these entities was Danli Industrial, S.I. ("Danli")⁶, incorporated in Honduras principally by the Timberlane general partners to acquire lumber contracts in Honduras.A second corporation, Maya Lumber Company, S. de R.L., ("Maya")⁷ was held in a Panamanian shell corporation owned by Smith, and was to obtain the Lima assets, and employ a couple of Lima "hijos" to help continue the milling operations.A third corporation, Pinex, S.A.("Pinex") was to export lumber from Honduras to designated markets.

Throughout 1968-1971, the Honduran branch of the Bank of America ("Branch"), continued to increase its exposure on loans to the Limas, in apparent disregard for the home office or regional branch credit officers' admonitions to the Branch that the Lima family business did not appear to merit the credit.The Branch continued to make the loans, without imposing the restrictive requirements urged by these regional loan officers or the home office in San Francisco.⁸Despite Lima's failure to maintain the precautions considered by the supervisory personnel as essential in safeguarding the Bank's investment in the firm, the Honduran branch was inexplicably overzealous in extending the troubled firm credit.⁹

The Bank, through the Branch, had also maintained normal business relationships with other lumber producers in the country; these dealings included the Bank's extension of sizable loans to finance these entities' activities.At the time of Timberlane's investment in Lima, Lima was indebted to the Bank for borrowings approximating U.S. $250,000, secured by a hipoteca de empressa, a security device provided under Honduran law, entitling the Bank to an all-inclusive right of foreclosure against any of Lima's property.

Lima's deteriorating financial condition intensified their creditors' serious qualms about their exposure to loss on the loans in the event of default.Other creditors of Lima felt as did the regional and home office of the Bank: the time to pull the plug on outstanding loans had arrived.¹⁰A flurry of legal proceedings in Honduras on the outstanding loans to Lima ensued; in an action by Banco de Honduras to foreclose on its loan to Lima, the Bank intervened, pressing its priority against the assets as established by its hipoteca.¹¹Also Casanova, a competing firm, intervened in that action on behalf of its claim secured by a pledge of lumber from Lima's yard.¹²The Bank prevailed upon Lima's other creditors to accede to its claim's priority; however, these creditors' interests, while subordinated, remained undiluted.¹³

In a second suit filed in a Honduran labor court, the workers' union sought to protect the claims of employees to the wages and concessions promised them by Lima during a conciliatory period from June to July, 1971.By failing to satisfy the workers' claims to accrued wages, after the union had voluntarily deferred collection, upon Lima's assurances that it could work itself out of the then-present cash squeeze, Lima became immediately liable for 150% of back wages and severance benefits in July, 1971.

Notwithstanding its intervention in the suit initiated by the Banco de Honduras, the Bank filed a separate foreclosure action on the hipoteca in August, 1971.The Honduran court which heard that suit decreed another embargo, directing that the Lima assets be sold at judicial auction to satisfy the Bank's claim.The judicial sale never occurred, since Lima had surreptitiously disposed of their interest in these assets to the Union and to Timberlane, leaving the Bank's claim to approximately U.S. $180,000 unsatisfied in late 1971.¹⁴

In late 1971, Timberlane's principals learned from Smith that Lima's equipment and capital assets might be obtained from the union.Upon advice of counsel that the Syndicate might convey good title to those assets, they agreed to purchase them, and on January 20, 1972, completed the purchase and recorded the transaction in the Public Register for Commerce.Under Smith's management and supervision, Maya resumed Lima's lumber milling and shipping operations.

Smith and Robbins, on Timberlane's behalf, made multiple entreatments to the Bank, both through the Branch's loan officers, as well as through senior management in San Francisco, to relieve the pressure of its hipoteca upon nascent efforts at reviving Lima's operations under their control.Bonheur responded that the Bank had written off the note, and was not interested in rescheduling or refinancing the debt.Although the Bank's officials in San Francisco met with Robbins and counsel to entertain Timberlane's proposals, no formal or written agreement to restructure the Lima obligation, or commitment to reach an agreement was obtained by Timberlane from the Bank or Branch.Throughout this time, Timberlane, via its various corporate incarnations, attempted to mill and market lumber, using these highly leveraged assets.Their business plan seemed quite simple: with only a minimal cash infusion, the partners in Timberlane had sought to obtain the cooperation of Lima's creditors to permit them the chance to turn the enterprise around, and reserve for themselves any "upside" profitability, with little, if any, capital investment at risk.Stripped clean of much conflicting evidence of intent, good faith or conspiracy, this amounts to a very simple attempt by Timberlane's partners to force Lima's creditors, if they refused to consent, to an involuntary leveraged buy-out of the goodwill and ongoing productive assets of the company.

Meanwhile, the Bank's attorney, Dr. Gutierrez, advised the Bank that Maya's title to the assets was, in his opinion, defective because of the manner in which the sale by the Syndicate had been conducted.However, by April of 1972, the Bank's management, already dismayed by Branch's disregard for its past directives to refrain from increasing the Lima borrowings, reacted to what appeared to be Timberlane and Lima efforts to secrete assets, and opted to liquidate the outstanding Lima indebtedness.

Being a U.S. multinational, the Bank apparently thought it prudent to avoid having itself, or its Branch, appear to side against the Syndicate's assertion of ownership of the assets on the workers' behalf.Therefore, instead of attacking title directly, the Bank chose to transfer its security interest to Casanova, a lower priority creditor.Casanova, in turn, consolidated the Bank's claim with its own, and transferred both claims to Caminals for collection.In final form, the agreement between these Lima creditors provided that anything realized by Caminals, as substituted plaintiff, would be split proportionately among them.

Caminals, as an undisclosed agent for collection of the substantial debts, obtained another embargo against sale or disposal of the Lima assets by Timberlane or the Limas.He then offered Smith a settlement of the entire matter, upon Timberlane's satisfaction of the outstanding debts secured by the embargo.Instead, Smith, through Maya, instituted suit in Honduras contesting the claims.When the Honduran court appointed Smith and a second Maya employee as "depositories"(a type of operating trustee over the Lima assets), custody and rightful claim were both further clouded.

At the same time, Caminals filed a "Desposimiento de una Maquinaria Hipoteca" against Maya, seeking satisfaction of Lima's outstanding debts of...