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P.T. BANK CENT. ASIA v. WONG

October 11, 1995

P.T. BANK CENTRAL ASIA, Plaintiff, against FAN WONG, KIT HING WONG, CHING FUN LI, AND JACK LEE, Defendants.


The opinion of the court was delivered by: TRAGER

 TRAGER, District Judge:

 The plaintiff, P.T. Central Bank Asia, ("Bank"), moves for summary judgment against the defendants Ching Fun Li and Jack Lee, to enforce their liability as guarantors for the debts of LCL Trading Corp. ("LCL") to the Bank. *fn1" Ching Fun Li has cross-moved for summary judgment and for sanctions. For the reasons set forth below, the court grants plaintiff's motion for summary judgment against both defendants and denies Li's cross-motion. Plaintiff's motion for attorneys' fees and costs is also granted.

 Background

 Defendants guaranteed the debt of LCL, a wholesale seafood company that is now bankrupt. (LCL's trade creditors filed a Ch. 7 petition in April 1992.) Kuwera Aff. dated December 22, 1993, ("Aff. II") Ex. 1-H. LCL had a revolving trade credit line at the Bank from 1986 through 1992. Kuwera Aff. II P3, September 7, 1995 ("Aff. III") P 6. Under this credit line, in a manner usual for such trade credit lines, LCL was permitted by the Bank to defer payments on unpaid principal, and thus rolled over loans when due with new loans, by paying the interest that was due. *fn2" Kuwera Dep. pp. 149-50. Kuwera Aff. II P3.

 The credit line, originally $ 200,000, was increased at several points, rising to $ 600,000 on June 22, 1988, and then to $ 700,000 on February 28, 1989. Kuwera Aff. II Ex. 1-F. The amount outstanding under the credit line rose to a maximum of $ 650,000 in May 1990 and remained at that level until it was paid down to $ 168,967 in 1992, immediately prior to the bankruptcy. Kuwera Aff. III P7, Ex. 6. (Subsequent to the bankruptcy the Bank collected $ 51,079 through foreclosure of its secured interests. Kuwera Aff. II P8.)

 On July 26, 1990, LCL executed a promissory note for $ 700,000 in favor of the Bank. Kuwera Aff. II P11, Ex. 1-C. On that same date, Ching Fun Li executed a continuing guarantee to secure all of LCL's liabilities to the Bank. Kuwera Aff. II P14, Ex. 1-F. The Bank has also provided a copy of a similar continuing guarantee dated July 26, 1990, signed by Jack Lee. Kuwera Aff. II P 15 Ex. 1-G.

 Ching Fun Li and Jack Lee had previously guaranteed LCL's credit line with the Bank. Ching Fun Li executed guarantees on May 15, 1986 and March 15, 1989. Kuwera Aff. II P12, Ex. 4 & 5. Jack Lee executed guarantees on October 21, 1987 and March 25, 1989. Kuwera Aff. II P16, Ex. 9 & 10. However, although Lee admits the validity of his signature on the continuing guarantee dated July 26, 1990, he denies signing the document on that date. *fn3" Lee Aff. P6. Instead, Lee claims that he signed an undated continuing guarantee in December 1990, at the request of Fan Wong, the president of LCL. Fan Wong allegedly assured Lee that this guarantee, printed on Bank Central Asia letterhead, "had nothing to do with the $ 700,000.00 line of credit," and concerned only "other" credit lines extended by the Bank to LCL. Lee alleges that he had numerous conversations with Paul Kuwera with regard to his refusal to sign a guarantee for a $ 700,000 line of credit in May-July 1990. Lee Aff. P4. Kuwera denies recollection of such conversations and offers documentary evidence demonstrating that the line of credit had already been extended to $ 700,000 in March 1989. Kuwera Aff. III P13. Another guarantor of the loan, Yoi Kin Li, provided Lee with an affidavit concerning his participation, at the direction of LCL president Fan Wong, in obtaining Lee's signature in blank on a guarantee form in December 1990. *fn4" Yoi Kin Li Aff. P4 & 5.

 In accordance with its previous practice regarding the revolving trade credit line, the Bank periodically extended the due date for the July 26, 1990 promissory note. Kuwera Aff. II P4. These rollovers were registered on the Bank's Line of Credit Control Ledger. Kuwera Aff. II, Ex. 6.

 By letter dated November 25, 1991, Ching Fun Li terminated her continuing guarantee. Li Aff. Ex. E. At that time, the unpaid balance on the line of credit was $ 650,000. Kuwera Aff. II, Ex. 6. In January 1992, the Bank issued new rollovers to cover this liability, as it had done previously. LCL, during this period, reduced the outstanding balance in 1992 from $ 600,000 at the end of 1991 to $ 168,967 in April 1992. Kuwera Aff. III Ex. 6. Ultimately, however, in the end, LCL lacked the financial resources to pay off its remaining debt.

 On April 1, 1992, three of LCL's main trade creditors filed an involuntary petition under Chapter 7 of the Bankruptcy Code against LCL. The automatic stay was vacated to permit the Bank to foreclose on its security interests in certain of LCL's assets. Kuwera Aff. II P8. However, with accumulated interest, LCL still owed the Bank over $ 100,000 on the line of credit after this foreclosure. Kuwera Aff. August 12, 1993 ("Aff. I") P19. The Bank then attempted to collect on LCL's debts from its guarantors, the defendants. Kuwera Aff. I P9, Ex. 1-J. When it was unsuccessful it commenced this suit in April 1993 to enforce its continuing guarantees against the defendants.

 Discussion

 (1)

 Ching Fun Li

 Ching Fun Li is the ex-wife of the former vice-president and manager of LCL, Yoi Kin Li. Li did not contest the assertion in the bank's affidavit that Li executed the last guarantee during her divorce proceeding and separation from her husband and only cancelled it one year after the divorce judgment. Platek Aff. P17. Li's cancellation preceded by only four months the LCL trade creditors' filing of Ch. 7 bankruptcy proceedings and may have resulted from inside knowledge of LCL's declining fortunes. *fn5" Li's ex-husband, Yoi Kin Li, filed for bankruptcy protection on February 5, 1993 and thus, although also a guarantor on the loans, is not a defendant in this suit. *fn6" Plaintiff's Mem. 8/18/93 at 3.

 Ching Fun Li claimed that she should not be held liable for LCL's debts to the Bank because the liability at issue arose from January 1992 loans, which were issued approximately two months after she terminated her continuing guarantee. This argument is simply erroneous, factually and legally.

 The factual argument, which has contributed greatly to delay this case, was given surface plausibility because the complaint identified the loans sued upon as made in January 1992 based upon of the Bank's practice of denominating rollover funding as "Loans," each with a new identifying number and issue date. Although defendants had deposed the Bank's loan officer, Paul Kuwera, on October 21, 1993, because of remaining ambiguities in the record the court felt it appropriate to grant the attorney for Mrs. Li the opportunity to conduct additional discovery with respect to the documentation of the loan transactions. *fn7" As a result, defendant Li was permitted to conduct extensive additional discovery of the Bank to obtain documentation to support her claim that the loans sued upon represented new advances of credit rather than a refunding of existing trade credit.

 The extensive examination of the Bank's records of the line of credit and the related loan transactions has produced no evidence that the monies due represent anything other than a refunding of a line of trade credit. Despite the fact that renewed discovery has removed any doubts on the issue, defendants ...


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