The opinion of the court was delivered by: ROBERT W. SWEET
Defendants Bankers Trust Company ("BTCo") and Bankers Trust New York ("BTNY") (collectively, "Bankers Trust") have moved pursuant to Rule 56, Fed. R. Civ. P., for an order granting summary judgment in their favor and against the plaintiffs Frutico, S.A. de C.V. ("Frutico"), Itex, Inc. ("Itex"), and Grupo Reynosa, S.A. ("Grupo"), dismissing the latter's complaint in its entirety.
For the reasons set forth below, Bankers Trust's motion is granted.
Frutico and Grupo are corporations organized and existing under the laws of Mexico. Itex is a corporation organized and existing under the laws of the State of Texas with its principal place of business in Hidalgo County, Texas. At all times materially relevant to this action, Frutico was the majority shareholder in Itex, and Grupo was a major shareholder in Frutico.
BTCo and BTNY are corporations organized and existing under the laws of the State of New York and doing business in the State of Texas. BTCo is a subsidiary of BTNY.
This diversity action was commenced in Texas state court in December 1990. It then was removed to the United States District Court for the Southern District of Texas and subsequently was transferred to this Court on October 10, 1991. This Court granted the Plaintiffs leave to amend the original complaint, and an amended complaint (the "Amended Complaint") was filed on February 10, 1992.
By Stipulation and Order, entered by this Court on January 18, 1993, the pretrial discovery period ended on February 15, 1993. Bankers Trust now moves for summary judgment on the ground that discovery has established that no genuine issues of material fact exist which can prevent it from obtaining a judgment as a matter of law on each claim set forth in the Plaintiffs' Amended Complaint.
Bankers Trust filed this motion on March 4, 1993. Oral argument was heard on June 2, 1993, and the motion was considered submitted as of that date.
The gravamen of this action is the purported breach of an alleged agreement (the "Alleged Agreement") in which Bankers Trust was to make $ 2,265,000 available to Frutico in the form of either a loan or an investment.
At all times materially relevant to this action, Frutico operated a fruit juice processing business in Reynosa, Mexico and was the majority shareholder in Itex. Grupo was a major shareholder in Frutico and owned the land on which Frutico's plant was located. Itex sold products produced by Frutico in Mexico to purchasers in the United States and elsewhere.
The negotiations with Bankers Trust were conducted for Frutico by Garrison Valentine ("Valentine"), the de facto principal of Frutico, Grupo, and Itex.
During the period from January through November 1988, Valentine and Bankers Trust discussed various transactions that were to involve Interfruit Holdings, Inc. ("Interfruit Holdings") as the investment vehicle and/or borrower. Interfruit Holdings had been formed in the Cayman Islands for the purpose of holding shares of a new Mexican corporation that was going to buy the assets of Frutico.
BTCo had made loans to the Mexican Government and to related entities that had gone unpaid. During 1986 and 1987, the Mexican Government instituted a variety of programs through which public sector debt could be converted into investments in privately owned companies in Mexico. In late 1986, BTCo began conducting discussions with Valentine regarding a potential investment in Frutico through a "debt-for-equity" program sponsored by the Mexican Government. Frutico alleges that Bankers Trust initially agreed to finance the expansion of Frutico and another Valentine company, Frutindustrias de Mexicali ("Frumex"), with $ 4,200,000 in late 1987. This transaction was contingent on the Mexican Government's debt-for-equity program, and when that program was subsequently terminated so too was the proposed transaction involving the full amount of $ 4,200,000. According to Valentine, at that time, the proposed transactions were "changed by circumstances beyond the bank's and our control." Valentine Dep. at 306.
II. The Alleged Agreement
After the debt-for-equity swap program was suspended by the Mexican Government, discussions continued between Valentine and Bankers Trust regarding a possible term loan or investment transaction. The Plaintiffs contend that the Alleged Agreement became binding in early 1988 and resulted from a continuing commitment by Bankers Trust to Frutico which had its origin in a meeting between Valentine and Bankers Trust at that time. However, although Frutico contends that the Alleged Agreement was entered into at that time, Valentine acknowledges that it had not been determined whether the transaction was to take the form of a loan or an investment.
In light of the "changed circumstances" the terms and conditions of the Alleged Agreement went through several transformations, including alterations of the assets of Valentine's companies that were to be included in the proposed transactions. Originally, the assets of both Frutico and Frumex were to be included, but Valentine then removed Frumex from the proposal, and Bankers Trust correspondingly reduced its proposed commitment from $ 4,200,000 to $ 3,500,000.
III. The Short-Term Loans
During the course of the continuing discussions begun in 1987, BTCo made three loans (the "Short-Term Loans"), which Frutico characterizes as "bridge loans" and Bankers Trust characterizes as "short-term extensions of credit," to Frutico. Under the terms and conditions of the Short-Term Loans, Frutico incurred the following obligations to BTCo: $ 270,000 pursuant to drawings made against a letter of credit issued by Bankers Trust in August 1988; $ 700,000 pursuant to a loan agreement executed in November 1988; and $ 200,000 pursuant to a loan agreement executed in January 1989. Frutico further asserts that Bankers Trust agreed that the Short-Term Loans were to be used to finance equipment purchases until a reorganization agreement was drawn up.
IV. The Continually Evolving Terms Of The Alleged Agreement
Frutico alleges that in June 1988 the amount of funding under the Alleged Agreement was reduced to $ 2,350,000 because of changes in an equipment order. This amount was to be spent on machinery and equipment and infrastructure at Frutico to accommodate the new equipment. Frutico reduced the amount further to $ 2,200,000 upon realizing that it had calculated into the transaction an unnecessary piece of equipment.
Despite asserting that the Alleged Agreement was binding as of early 1988, Valentine admitted that he "didn't feel absolutely confident that the bank and I had a total commitment until they made the first bridge loan," to wit, the letter of credit transaction of August 3, 1988. Valentine Dep. at 301; accord id. at 281. Furthermore, the structure of the offshore holding company, the establishment of the product invoicing and collection systems, and the terms of collateral to protect Bankers Trust were not agreed upon until December 1988.
Frutico also asserts that under the terms and conditions of the Alleged Agreement, Bankers Trust was to have an option to convert its debt into a joint venture, with Bankers Trust receiving 19.9% ownership in Frutico. However, Valentine admitted that Bankers Trust never was a partner of any of the Plaintiffs.
V. Similar Financing Sought By Frutico From Mexican Banks
Although Valentine testified that throughout 1988 he relied upon the Alleged Agreement with Bankers Trust to finance Frutico's expansion and renovation and made economic commitments based upon Bankers Trust's representations that it would furnish the funding, contemporaneous documents and the testimony of Raul DiBella ("DiBella"), Frutico's Director General and minority shareholder in Grupo, reveal that on July 11, 1988, a Frutico executive was authorized by the corporation to seek a line of credit for US $ 2,469,520 from Banco Nacional de Commercio Exterior in Monterrey, Mexico to purchase new equipment manufactured in the United States.
DiBella made a similar effort on September 29, 1988 to borrow money from Banca Serfin in Reynosa, Mexico to purchase new equipment and expand Frutico's plant. DiBella sought a total of US $ 2,506,794 for new equipment and construction, and among the equipment listed to be financed by Banca Serfin were several items that were included in the Alleged Agreement with Bankers Trust.
VI. Various Reorganization Proposals
The Alleged Agreement was complicated. The transactions underlying it involved reorganization agreements that were modelled on an offshore tax-advantaged structure initially agreed to by Frutico and ConAgra, Inc. ("ConAgra") in 1985. However, despite that previous model, the Bankers Trust documents were much more complex than ConAgra's in terms of the offshore structure which involved the Bahamas, the Cayman Islands, the Channel Islands, Mexico, and the United States. Given this complexity, the drafts of the reorganization agreement changed substantially over the course of the discussions between Frutico and Bankers Trust.
The two reorganization agreement drafts which circulated between January 21 and May 31, 1988 provided that Bankers Trust would invest in Interfruit Holdings, a Cayman Islands corporation. A third reorganization draft circulated in June 1988 provided that Bankers Trust would invest in Interfruit Holdings by transferring a portion of its Mexican public debt to The Valentine Group, a Cayman islands corporation. None of the three reorganization agreement drafts provided for a loan to or investment in Frutico or either of the other Plaintiffs. The Plaintiffs had no role in the proposed transactions other than a requirement to transfer Frutico and Grupo's respective assets to newly formed Mexican corporations or trusts.
In late November and December 1988 additional reorganization agreement drafts were circulated. None of these drafts provided that any money was to be loaned by Bankers Trust to any of the Plaintiffs. Rather, these drafts provided that BTNY was to invest in or lend funds to Interfruit Holdings or to Interfruit Industries, Ltd. ("Interfruit Industries"), which was proposed to be a Channel Islands corporation. The latter drafts provided that Interfruit Holdings or Inter fruit Industries would be the borrowing entity and, through a capital injection, would become the majority owner of Frutico.
VII. The Unenforceability Of The Drafts
During the course of discussions between BTCo and Valentine, numerous drafts of documents reflecting the proposed transactions were circulated among the parties. These drafts explicitly required the execution of written agreements before there would be any enforceable agreement among the parties. Specifically, each draft stated that it was a condition precedent to the consummation of the transaction contemplated by the proposed agreement set forth in the draft that the parties execute and deliver the agreement prior to its becoming effective. Each draft also provided that "This Agreement shall become effective when signed by all parties hereto . . . ." Bond Aff. Exs. T & U. Neither the Plaintiffs nor their counsel objected to this language in the drafts which conditioned the enforceability of any agreements on the execution and delivery by all of the parties.
On November 30 and December 1, 1988, meetings were held in New York with Valentine and Bankers Trust regarding the Alleged Agreement. The Plaintiffs allege that it was at that time that the loan amount of $ 2,265,000 was agreed upon and all of the remaining details of the proposed transaction were resolved. However, following that meeting, Valentine wrote to BTCo's Peter Miller, thanking him for the ...