Fleet Natl. Bank, N.A. v Liag Argentina, S.A.
Annotate this CaseDecided on September 21, 2004
Supreme Court, New York County
FLEET NATIONAL BANK, N.A., Plaintiff,
against
LIAG ARGENTINA, S.A., Defendant.
603428/03
Herman Cahn, J.
Plaintiff Fleet Bank, N.A. moves for summary judgment, CPLR 3212, on its claims for repayment of a $1,000,000 promissory note executed by defendant Liag Argentina, S.A. (the "Borrower") in favor of Landesbank Baden-Wrttemburg (the "Lender"). The note was subsequently assigned to Fleet Bank after the Borrower's default.
Borrower cross-moves for summary judgment dismissing the complaint.
The following facts are undisputed, except as noted. On October 23, 2001, the Lender loaned U.S.$1,000,000 to the Borrower. The Borrower promised to repay the principal of $1,000,000 with interest at the LIBOR rate plus 0.6% during the term of the loan, plus an additional 2.0% after the term of loan, on or before October 18, 2002. The loan was memorialized by a promissory note duly executed by the Borrower. The note provides that the principal and interest be payable at the Lender's offices in Stuttgart, Germany in U.S. dollars. The note further provides:
The Borrower submits to the jurisdiction of the courts located in USA, New York, and/or the Ordinary Courts in Commercial Matters of the Federal Capital of the Argentine Republic at the option of the holder. In the case of enforcement in the USA or in the Republic of Argentina the laws of said States shall be applicable, respectively. (Underlining added)
Enrique 6/25/04 Aff., Exh. A.
The Borrower defaulted on the note as of October 18, 2002. By telex dated November 7, 2002, the Lender advised Fleet Bank that a demand for payment had been made to the Borrower, but no portion of the amounts due had been received.
The loan was guaranteed by an irrevocable standby letter of credit, which Fleet Bank issued on or about October 23, 2001 at the request of the Borrower. By its terms, the letter of credit expired on October 31, 2002. The Lender did not present the requisite documents for a draw down of the letter of credit to Fleet Bank until November 7, 2002. Fleet Bank contends that the expiration date was extended to November 8, 2002 pursuant to a handwritten correction on [*2]the application to open the letter of credit. The Borrower denies that it ever agreed to a change in the expiry date and points out that no such change appears in the letter of credit itself.
On November 13, 2002, Fleet Bank honored the Lender's draw request by forwarding $1,034,568.40 from its branch in Scranton, Pennsylvania through Deutsche Bank in New York, as corresponding bank, to the Lender's account in Germany.
After Fleet Bank satisfied the Borrower's obligations to the Lender, the Lender assigned "all of the [Lender's] rights, title, interest and benefits in and to, and all of its obligations and responsibilities under, the Promissory Note and all other instruments in respect thereto," to Fleet Bank. Enrique 6/25/04 Aff., Exh. G: Assignment Agreement dated November 13, 2002. The Lender also endorsed the reverse side of the promissory note to the order of Fleet Bank.
On numerous occasions since November 13, 2002, Fleet Bank informed the Borrower that it had honored the Lender's draw request by making the letter of credit payment and demanded the Borrower reimburse it accordingly. Receipt of a written default notice dated December 17, 2002 was signed for by the Borrower. By letter dated July 18, 2003, the Lender informed the Borrower of the assignment of the promissory note on November 13, 2002.
On June 20, 2003, the Borrower initiated judicial proceedings before the National Commercial Court in Buenos Aires, Argentina regarding the promissory note at issue herein pursuant to the provisions of Section 45 of Argentine Decree Law 5965/63 (the Argentine proceeding). On December 2, 2003, that court issued an order directing "pesification" of the debt and the payment by the Borrower of the amount of 1,486,800.56 Argentine Pesos [FN1], equivalent to approximately U.S. $500,000 as of June 21, 2004, into an account with that court. Pesification means the conversion of a debt owed in U.S. currency into a debt in Argentine pesos at a rate of 1.40 pesos to the U.S. dollar. This effectively reduces the debt by approximately 53%. Pesification was one of the measures taken by Argentina following the currency crisis in that country in late 2001.
The Borrower contends that the amount deposited with the Argentinian court will be delivered to whoever requests payment under the promissory note and evidences that it is the rightful holder of the note.
It is undisputed that neither the Lender nor Fleet Bank were given any prior notice of the Argentine proceeding, and did not make any appearance to challenge the December 2, 2003 order or claim the money on deposit with the Argentinian court.
Fleet Bank commenced this action in November 2003 asserting causes of action against the Borrower for: (1) breach of contract default on the note-subrogation; (2) breach of contract default on the note-assignment; (3) breach of contract letter of credit; (4) guaranty; and (5) unjust enrichment. The Borrower has asserted affirmative defenses based on lack of personal jurisdiction, failure to state a cause of action, and forum non conveniens. The Borrower also claims that Argentinian law applies to this dispute and that the Argentine proceeding resolved all issues concerning the promissory note. [*3]
Fleet Bank is entitled to summary judgment on its second cause of action, based on its rights as the current holder of the promissory note. A prima facie case is made out by the Borrower's execution of the promissory note, its default in payment on October 18, 2002, and the subsequent assignment of the instrument to Fleet Bank. Alard, L.L.C. v Weiss, 1 AD3d 131 (1st Dept 2003). While there is a material issue of fact regarding the expiration date of the letter of credit and whether the Lender's draw request was timely made, the letter of credit and the promissory note are separate and independent contracts. First Commercial Bank v Gotham Originals, Inc., 64 NY2d 287, 294 (1985); see also 3 J. White & R. Summers, Uniform Commercial Code § 26-2, at 112-13 [4th ed.]). Thus, even assuming there was a wrongful honor of the letter of credit, that is not a defense to the underlying loan transaction between the Borrower and the Lender.
The Borrower argues that this action should be dismissed in favor of the pending Argentine proceeding, citing to cases that have dismissed actions brought in New York based on the doctrine of forum non conveniens. However, since the promissory note includes a choice of New York law and the Borrower's submission to the jurisdiction of New York courts, all at the option of the holder of the note, and relates to an obligation of more than one million dollars, New York is a convenient forum as a matter of law. CPLR 327(b); GOL § 5-1402; National Union Fire Ins. Co. of Pittsburgh, Pa. v Worley, 257 AD2d 228, 230-31 (1st Dept 1999).
Further, the present status of the Argentine proceeding is unclear. In support of its cross-motion for dismissal, the Borrower describes the Argentine proceeding as "pending," yet an order directing the pesification of the debt has apparently already issued ex parte. This order was issued ex parte despite the Borrower's knowledge of Fleet Bank's payment of the letter of credit as early as November 13, 2002, and its knowledge of the assignment of the promissory note as of July 18, 2003. Fleet Bank was given no notice of the commencement of the Argentine proceeding and no opportunity to contest the Borrower's application for pesification. For this reason, the Argentine order does not merit recognition by this Court as a matter of comity. While New York courts will generally recognize a foreign judgment or decree under the doctrine of comity, it "must be shown to have been based on principles of jurisdiction and due process analogous to our own, comporting with our own sense of fairness." Siegel, NY Civ Prac § 473 at 766 (3d ed.); see also Greschler v Greschler, 51 NY2d 368, 376-77 (1980); Porsini v Petricca, 90 AD2d 949 (4th Dept 1982).
Both the venue of the action and the choice of controlling law, were set in the note itself as New York or Argentina at the option of the holder of the note. The holder, Fleet Bank, chose the New York Supreme Courts and the New York law, as it had a right to do; the Argentine decree is of no relevance. The defendant's attempt to change the terms of the note, to commence an action or proceeding in Argentina, can not deprive the plaintiff of its right to make the choice of which law will control and which court will hear the action. By apparently obtaining relief ex parte, defendant did not improve its position.
The Borrower's lack of personal jurisdiction defense lacks merit since it agreed to submit to the jurisdiction of this Court in the promissory note itself. Likewise, the Borrower's claim that the laws of Argentina apply, ignores the plain language of the promissory note which provides that New York law applies to any action for enforcement brought in New York. See GOL § 5-1401(1). [*4]
For the foregoing reasons, it is
ORDERED that plaintiff's motion for summary judgment is granted with respect to its second cause of action, and the Clerk is directed to enter judgment in favor of the plaintiff Fleet National Bank, N.A. and against defendant Liag Argentina, S.A. in the amount of U.S. $1,000,000 plus interest at the contractual rate of LIBOR plus 0.6% per annum from October 18, 2001 to October 18, 2002, and thereafter at the contractual rate of LIBOR plus 2.6% per annum until the date of entry of judgment, as calculated by the Clerk, together with costs and disbursements to be taxed by the Clerk upon submission of an appropriate bill of costs; and it is further
ORDERED that the defendants' cross motion for summary judgment is denied.
Dated: September 21, 2004ENTER:
_________/s/_______
J.S.C.
Footnotes
Footnote 1:The document purporting to be the order of the Argentinian court providing for this payment does not make reference to this amount, and merely concludes as follows: "Therefore, the promissory note is deemed, in principle, to have been created in Buenos Aires and its amount plus interest to have been paid in court in the terms of Section 45 of the aforesaid Decree-Law."
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