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Cooperative Centrale Raiffeisen- Boerenleenbank, B.A. v. Navarro

Supreme Court of New York, First Department

January 16, 2014

Cooperative Centrale Raiffeisen- Boerenleenbank, B.A., etc., Plaintiff-Appellant,
Francisco Javier Herrera Navarro, Defendant-Respondent, The Estate of Eduardo Guzman Solis, Defendant.

Haynes and Boone LLP, New York (Jonathan D. Pressment of counsel), for appellant.

Curtis, Mallet-Prevost, Colt & Mosle LLP, New York (T. Barry Kingham of counsel), for respondent.

Mazzarelli, J.P., Sweeny, Saxe, Moskowitz, Manzanet-Daniels, JJ.

Order, Supreme Court, New York County (Charles E. Ramos, J.), entered December 12, 2012, which, insofar as appealed from as limited by the briefs, denied plaintiff's motion for summary judgment in lieu of a complaint, reversed, on the law, without costs, and the motion for summary judgment granted. The Clerk is directed to enter judgment accordingly.

Nonparty Agra Services of Canada, Inc. (Agra Canada), a Canadian corporation, was in the business of trading agricultural commodities between Mexico and Canada. The company was the sole shareholder of nonparty Agra USA, a Delaware corporation. Defendant Francisco Javier Herrera Navarro (Herrera) was a director of both Agra Canada and Agra USA but was largely uninvolved in either company's business operations. Eduardo Guzman Solis, a former defendant in this action, operated both companies.

In September 2004, Agra Canada and plaintiff Cooperatieve Centrale Raiffeisen Boerenleenbank, B.A., Rabobank International, New York Branch (Rabobank) entered into a Receivables Purchase Agreement (RPA). Under that agreement, Rabobank was to buy certain receivables belonging to Agra Canada in exchange for regularly scheduled payments to Rabobank. Guzman was responsible for managing Agra Canada's and Agra USA's relationship with Rabobank under the RPA.

In September 2005, in connection with the RPA, both Herrera and Guzman executed personal guaranties in Rabobank's favor. In section 1(a) of the guaranty, Herrera unconditionally guaranteed the amounts due on the receivables that Agra Canada sold to Rabobank, and in section 1(b), he unconditionally guaranteed the obligations of Agra USA. The definition of "obligations" comprised "all obligations and liabilities of [Agra USA] to [Rabobank] now or hereafter existing... whether for principal, interest, fees, expenses or otherwise." Herrera's guaranty also contained a paragraph stating that his agreement to pay the obligations was "absolute and unconditional irrespective of any lack of validity or enforceability of such agreement [or] any other circumstance which might otherwise constitute a defense available to, or a discharge of, [Agra Canada] or a guarantor." Agra USA also entered into a guaranty in Rabobank's favor; as had Herrera, Agra USA unconditionally guaranteed Agra Canada's payment obligations arising under article 9.02(a)(iii) of the RPA.

Guzman died in December 2011 [1]. Soon afterward, Rabobank told Herrera that Agra Canada had failed to remit its regularly scheduled quarterly payment under the RPA. When Herrera retained an independent accounting firm to investigate, he discovered that Guzman had been running a Ponzi scheme and that the receivables were, in fact, nonexistent. By then, Agra Canada owed Rabobank approximately $42 million under the RPA.

Rabobank sought to enforce Herrera's and Guzman's guaranties of Agra Canada's obligations. To that end, in January and February 2012, Rabobank obtained control over Agra Canada, placed it into receivership in Canada, and arranged the appointment of Deloitte & Touche Inc. as receiver and trustee.

On March 2, 2012, Rabobank commenced a federal action against Agra Canada, Agra USA, Herrera, and Guzman's estate in the United States District Court for the Southern District of New York, seeking to recover the receivables allegedly due under the guaranties. Agra USA did not respond to the complaint. Accordingly, on April 3, 2012, Rabobank filed a request under Fed.R.Civ.P. 55(a) for entry of a default against Agra USA, and the Clerk issued a certificate of default.

On April 11, 2012, Agra Canada, as sole shareholder of Agra USA, voted to remove all officers and directors of Agra USA, including Herrera. Agra Canada then elected an employee of Deloitte to serve as sole officer and director of Agra USA.

On April 16, 2012, Rabobank filed an order to show cause in federal court requesting the entry of a default judgment against Agra USA (see Fed.R.Civ.P. 55[b][2]). Three days later, on April 19, 2012, Rabobank voluntarily discontinued the federal action as against Herrera and Guzman's estate, and filed a declaration in support of its order to show cause.

By letter dated April 25, 2012, Hayes and Boone, LLP, counsel for both Rabobank and Deloitte, instructed a lawyer for Herrera to secure and return to Deloitte any assets belonging to Agra USA. Counsel also noted in that letter that Deloitte's representative held " exclusive corporate authority" over Agra USA. Finally, on April 30, 2012, the federal court entered a default judgment against Agra USA in the amount of $41, 991, 980. Rabobank commenced this State action on the same day, seeking to recover the amount of the default judgment from Herrera. In its motion for summary judgment in lieu of a complaint, Rabobank asserts that Herrera is liable under sections 1(a) and (b) of the guaranty.

Herrera argues that plaintiff Rabobank, which controlled Agra Canada, also controlled Agra USA. What is more, Herrera asserts, by the time the federal court granted entry of the default judgment, he was only nominally a director of Agra USA. As a result of these circumstances, Herrera concludes, Rabobank engineered the default judgment by collusion, and the judgment therefore does not actually constitute an "obligation" of Agra USA under section 1(b) of the ...

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