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MANUFACTURERS HANOVER OVERSEAS CAPITAL CORP. v. SO

May 21, 1984

MANUFACTURERS HANOVER OVERSEAS CAPITAL CORPORATION Plaintiff, against SOUTHWIRE COMPANY, Defendant.


The opinion of the court was delivered by: CARTER

CARTER, District Judge

Manufacturers Hanover Overseas Capital Corporation ("MHOCC") has moved for partial summary judgment pursuant to F.R.Civ.P. 56; for an order pursuant to F.R.Civ.P. 54(b) directing that judgment be entered in its favor on the claim at issue; and for an order pursuant to F.R.Civ.P. 15(a) granting leave to serve an amended complaint. The underlying action was brought by MHOCC against Southwire Company ("Southwire") to recover money on a written guaranty executed by Southwire in MHOCC's favor. *fn1" The guaranty was issued in connection with a $25,000,000 loan made in 1979 by MHOCC to Suramericana de Aleaciones Laminada, C.A. ("Sural"), a Venezuelan company of which Southwire owns 49 percent.

 The motion for partial summary judgment is granted since the court cannot agree with Southwire that its obligations under the guaranty have been suspended by any agreement between Sural and MHOCC. MHOCC's request for entry of a judgment pursuant to F.R.Civ.P. 54(b) is, however, denied.MHOCC has not set forth facts to convince the court that there is "no just reason for delay." The motion for leave to serve an amended complaint, unopposed by Southwire, is granted.

 Background

 1. The loan agreement *fn2"

 Pursuant to an agreement dated October 31, 1979, ("the loan arrangement"), MHOCC loaned Sural $25,000,000 U.S. dollars for the purchase of machinery and equipment, the purchase of land and the construction of a plant in Venezuela for the production of aluminum rod, cable and other products. Sural executed in favor of MHOCC a promissory note in the principal sum and in connection with the signing of the loan arrangement, Southwire guaranteed 49 percent of that note. Both the loan arrangement and the note contained provisions that all payments made thereunder would be in U.S. dollars at the offices of Manufacturers Hanover Trust Co. in New York, New York. Interest payments were to begin on December 31, 1979, and the principal was to mature in 25 consecutive quarterly installments, payable on the 4th through the 28th payment dates. (Exhibit A, Flax Affidavit).

 Although Sural's loan payments had not in any case been proceeding smoothly, *fn3" in February, 1983, the Venezuelan government froze temporarily all exchanges of bolivares for U.S. dollars. Thereafter, the government announced a procedure by which companies could apply for approval for payment of pre-existing debts in U.S. dollars at the official exchange rate of 4.3 bolivares to the dollar, a rate apparently a great deal more favorable than the one available elsewhere during that period. *fn4" In March, 1983, representatives of Sural and MHOCC met to discuss whether Sural should apply to participate in this program.

 The content of the agreement reached by Sural and MHOCC is the subject of contention in this suit. In consequence of some understanding reached, however, Sural began depositing bolivares into bank accounts in Venezuela for the benefit of MHOCC in quantities sufficient at the 4.3 rate to bring Sural current on the note by the end of 1983. MHOCC contends that these deposits were made as "collateral security for the payment of interest and principal." (Exhibit F, Flax Affidavit). It denies that these deposits can in any way be considered partial payment of the U.S. dollar debt to MHOCC. Southwire maintains, on the other hand, the partial payment position; at the least, it argues, the deposits functioned to defer the time at which Sural's, and hence Southwire's obligation to make payments on the note in U.S. dollars came due.

 The guaranty executed by Southwire in MHOCC's favor binds Southwire to

 unconditionally and irrevocably guarantee[s] to MHOCC . . . the prompt and complete payment when due (whether at the stated maturity, by acceleration or otherwise) of (i) 40% of the unpaid principal amount of the Note; (ii) 49% of the amount of accrued and unpaid interest on the Note; and (iii) 49% of any and all other unpaid indebtedness, obligations and liabilities of [Sural] to MHOCC now existing or hereafter incurred under or arising out of or in connection with the Loan Agreement, the Note or any Security document, whether for principal interest, fees, expenses or otherwise. . . .

 (Exhibit C, Flax Affidavit, P4). *fn5" Southwire emphasizes that the guaranty is actionable only when Sural has left unpaid a payment due. Because, pointing to the MHOCC/Sural agreement, Southwire maintains that the requisite default has not occurred, it argues that it cannot be held liable yet under the guaranty. *fn6" The merits of this claim aside, Southwire contends that the question of fact concerning the meaning of the agreement precludes the award of summary judgment.

 2. The MHOCC suit

 MHOCC's complaint in this action states three claims. The first seeks 100 percent of the past due principal and interest amounts under an instrument known as the "offtake contract", under which Southwire allegedly promised to pay, as each quarterly installment came due, any and all amounts which Sural itself could not pay to MHOCC. The second, on which MHOCC has brought this motion for summary judgment, seeks to impose liability on Southwire for 49 percent of all past due principal and interest amounts under Southwire's guaranty. The third claim seeks to hold Southwire liable for 100 percent of past due principal and interest amounts under the same Southwire guranty on the theory that subsequent events and the operations of another agreement rendered Southwire automatically responsible for payment of 100 percent of the Sural loan obligations. MHOCC argues, in bringing its motion pursuant to F.R.Civ.P. 54(b), requesting judgment on the second claim, that the claim is separate and discrete from the other two and that there is no just reason to delay the entry of judgment on this claim. Southwire disputes both of these contentions.

 In its second claim, MHOCC seeks $3,370,700.61 in U.S. dolars, as well as late interest up to the date of the present complaint. *fn7" The amount sought represents 49 percent of U.S. $6,878,980.83, which MHOCC claims is the sum of past due principal and interest. The last payment of principal and interest to MHOCC in U.S. dollars was the installment due in June, 1982. In December, 1982, MHOCC received a partial payment of interest from Southwire. However, Sural has submitted that through its deposits in bolivares, the last of which it made in December, ...


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