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AMERICAN EXPRESS INTL. BANKING CORP. v. HABIB SABE

August 29, 1980

AMERICAN EXPRESS INTERNATIONAL BANKING CORPORATION, Plaintiff,
v.
Habib SABET, Iradj Sabet, Hormoz Sabet and Firooz Corporation, Defendants



The opinion of the court was delivered by: CONNER

OPINION AND ORDER

This removed case is before the Court on the motions of plaintiff American Express International Banking Corporation ("AEIBC") to confirm the attachment order issued in state court and for summary judgment in lieu of complaint pursuant to N.Y.C.P.L.R. § 3213, and on defendants' cross-motion to vacate the attachment.

Background

 This is an action to recover $ 3,232,930.14 allegedly due and owing under three promissory notes executed by defendant Habib Sabet and co-signed by defendants Hormoz and Iradj Sabet, Habib's sons, on September 26, 1977, December 9, 1977 and January 28, 1978. Plaintiff also sues on two unconditional, undated guarantees of any obligations of Habib Sabet to AEIBC executed by Habib and Iradj Sabet, and on a corporate guarantee of Habib Sabet's obligations to AEIBC executed by defendant Firooz Corporation ("Firooz") on September 12, 1977. (Firooz, an Iranian corporation, was controlled by the Sabets until its expropriation by the Islamic Provisionary Revolutionary Government of Iran in 1979.)

 On July 9, 1979, plaintiff obtained an order of attachment in New York County Supreme Court pursuant to N.Y.C.P.L.R. § 6211 of the property of Habib Sabet, Iradj Sabet and Firooz Corporation, and levy was made by the Sheriffs of New York and Westchester Counties.

 Defendant Habib Sabet was personally served in New York with a summons and notice of motion, as provided for in C.P.L.R. § 3213, on July 30, 1979. As discussed below, the parties have submitted conflicting affidavits with respect to personal service on defendant Hormoz Sabet. Iradj Sabet and Firooz Corporation were served on September 7, 1979 by personal delivery of the summons and notice of motion to David H. Jackman, President of the United States Corporation Company, the agent designated for service of process by Iradj and Firooz in their respective guarantees.

 In August 1979, the action was removed to federal court pursuant to 28 U.S.C. § 1441. Federal jurisdiction is based on diversity of citizenship.

 Documents

 The first note in question is for the principal sum of $ 500,000, due August 31, 1979, with interest payable quarterly at 11/4% above the New York prime rate. The note provides, in relevant part, that:

 
"If at any time: (a) the Borrower defaults in the payment of any sum due to (AEIBC) or in the payment of any other indebtedness or in the performance of any agreement with (AEIBC) or of any agreement relating to indebtedness; or ... (i) the holder of this Note deems itself insecure, then, in any such event, this Note shall become immediately due and payable without presentation or demand, which are hereby expressly waived .... This Note shall bear interest after maturity at the higher of the rate specified above or 6% per annum. The Borrower shall pay all expenses (including reasonable attorneys' fees) incurred by the holder in connection with the enforcement of any of the provisions of this Note.... If there is more than one signatory to this Note, they shall be jointly and severally liable hereon and the term "Borrower' shall refer to any or all of the undersigned."

 The second note in question is for the principal sum of $ 1,500,000, due and payable in six equal consecutive installments on the last day of the sixth, twelfth, eighteenth, twenty-fourth, thirtieth and thirty-fourth calendar months after December 9, 1977. Interest is payable quarterly at a rate of 11/4% above the prime rate. The note further specifies that it is issued subject to the terms of a Loan Agreement signed by Habib, Iradj and Hormoz Sabet on the same date, which, in turn, provides in relevant part that:

 
"1. ... The term "Loans' as used herein shall include any and all indebtedness, obligations and liabilities of any kind of the Borrower ... in which (AEIBC) shall have any interest, now or hereafter existing ...."
 
"2. ... In the event that (a) any sum payable upon any Loan shall not be paid when due, or (b) the Borrower shall fail to perform any agreement with (AEIBC), ... or ... (d) the financial responsibility of Borrower shall, in the sole opinion of (AEIBC), become impaired or unsatisfactory, ... then and in any such event, all Loans shall be due and payable forthwith without presentation or demand for payment, which are expressly waived, and thereafter all Loans shall bear interest at the legal rate (if higher than the rate then applicable thereto) ...."
 
"3. ... Upon non-payment of interest or principal on any Loan when due ... (b) the Bank may without demand or payment ... enforce, collect and realize upon any security ....
 
"4. The Borrower will pay all expenses (including legal fees ...) of or incidental to the enforcement of any of the provisions hereof ....
 
"10. ... If more than one person signs this agreement, they shall be jointly and severally liable hereunder ...."

 The Loan Agreement and second note refer also to a Pledge Agreement. Paragraph 14 of the Loan Agreement states that:

 
"This Agreement and the Loans due ... hereunder or under promissory notes evidencing such Loans are secured by a pledge of and security interest in certain Pledged Shares as defined in ... a Pledge Agreement, dated of even date herewith ... between the Borrower and the Bank ... as a condition precedent and prior to disbursement of any amounts of any Loan made by the Bank to the Borrower hereunder."

 Two Pledge Agreements were signed on December 9, but these agreements were between two Iranian corporations controlled at that time by the Sabets, Firooz and Iramoz Corporation, respectively, and AEIBC rather than between the Sabets and AEIBC, as suggested by Paragraph 14 of the Loan Agreement. The Pledge Agreements are substantially identical: each recites that Iramoz, or Firooz, is the owner of certain shares of the Industrial and Mining Development Bank of Iran ("IMD Bank"); that:

 
"Mr. Habib Sabet ("Borrower') has entered into a Loan Agreement dated as of December 9, 1977 (said Loan Agreement as the same may be amended, modified or supplemented from time to time being the "Loan Agreement'; terms defined in the Loan Agreement being used here as therein defined) with the Bank, and has executed one or more Promissory Note(s) the (the "Note') in favor of the Bank pursuant thereto, and it is a condition to the making of the Loan by the Bank that this Agreement be executed and delivered;"

 and that:

 
"the Pledgor has agreed to pledge and grant a security interest (the "Security Interest') in the pledged collateral as collateral security for all the indebtedness of the ...

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