| IRB-Brasil Resseguros, S.A. v Inepar Invs., S.A. |
| 2011 NY Slip Op 03275 [83 AD3d 573] |
| April 26, 2011 |
| Appellate Division, First Department |
| IRB-Brasil Resseguros, S.A., Respondent, v IneparInvestments, S.A., Defendant, and Inepar S.A. Industria e Construçðes,Appellant. |
—[*1] Skadden, Arps, Slate, Meagher & Flom LLP, New York (Lea Haber Kuck of counsel), forrespondent.
Judgment, Supreme Court, New York County (Shirley Werner Kornreich, J.), enteredDecember 4, 2009, in favor of plaintiff and against defendants in the principal amount of$27,772,409.86, plus interest at the rate of 9.9% per annum from October 22, 2009 andpostjudgment interest at the rate of 9.9%, and bringing up for review orders, same court andJustice, entered August 3, 2009, which denied defendant Inepar S.A. Industria e Construçðes' (IIC) motion for summary judgment and granted plaintiff's motion for summary judgment asto liability, unanimously modified, on the law, to limit the rate of postjudgment interest to thestatutory rate of 9% per annum, and otherwise affirmed, without costs. Appeals from theaforementioned orders, from a judgment, same court and Justice, entered August 19, 2009, infavor of plaintiff on the issue of liability, and from an order, same court (Beverly S. Cohen,J.H.O.), entered November 9, 2009, unanimously dismissed, without costs, as subsumed in theappeal from the December 4, 2009 judgment.
Plaintiff established a prima facie case on its motion for summary judgment by submittingevidence of an absolute and unconditional guarantee, the underlying debt and the guarantor'sfailure to perform (see Bank of Am.,N.A. v Solow, 59 AD3d 304 [2009], lv dismissed 12 NY3d 877 [2009]).
In support of its motion for summary judgment and in opposition to plaintiff's motion, IICsubmitted admissible evidence, as well as an expert opinion on Brazilian law, to demonstrate thatthe two officers who signed the guarantee lacked actual authority under Brazilian law. However,the guarantee, which is in an amount greater than $250,000, contains a New York choice of lawclause.
General Obligations Law § 5-1401 (1) provides, in pertinent part:[*2] "The parties to any contract, agreement or undertaking, contingentor otherwise, in consideration of, or relating to any obligation arising out of a transactioncovering in the aggregate not less than two hundred fifty thousand dollars . . . mayagree that the law of this state shall govern their rights and duties in whole or in part, whether ornot such contract, agreement or undertaking bears a reasonable relation to this state."
General Obligations Law § 5-1402 (1) additionally provides, in pertinent part: "[A]nyperson may maintain an action or proceeding against a foreign corporation, non-resident, orforeign state where the action or proceeding arises out of or relates to any contract, agreement orundertaking for which a choice of New York law has been made in whole or in part pursuant tosection 5-1401 and which (a) is a contract, agreement or undertaking, contingent or otherwise, inconsideration of, or relating to any obligation arising out of a transaction covering in theaggregate, not less than one million dollars, and (b) which contains a provision or provisionswhereby such foreign corporation or non-resident agrees to submit to the jurisdiction of thecourts of this state."
These two statutes implement the public policy that favors New York courts retaining anddetermining actions where New York law is applicable to the dispute pursuant to the agreementof the parties and New York is the designated forum. Some federal courts have held that thechoice of law provisions within section 5-1401 are enforceable unless procured by fraud oroverreaching (see Sabella v Scantek Med., Inc., 2009 WL 3233703, *13, 2009 US DistLEXIS 88170, *35-36 [SD NY 2009]; Sun Forest Corp. v Shvili, 152 F Supp 2d 367,388-389 [SD NY 2001]; Lehman Bros. Commercial Corp. v Minmetals Intl. Non-FerrousMetals Trading Co., 179 F Supp 2d 118, 136 [SD NY 2000].
The enforcement of such clauses is favored since it "protect[s] the justifiable expectation ofthe parties who choose New York law as the governing law" in international financialtransactions (Banco Nacional DeMÉxico, S.A., Integrante Del Grupo Financiero Banamex v Societe Generale, 34AD3d 124, 130 [2006]; Lehman Bros. Commercial Corp., 179 F Supp 2d at136-137).
Thus, where, as here, the parties affirmatively choose New York law and a New York forumin a transaction in United States dollars, New York law will be applied to determine whether theagreement, allegedly executed by a person lacking actual authority under foreign law, isenforceable by a third party (Indosuez Intl. Fin. v National Reserve Bank, 98 NY2d 238[2002]).
Under New York law, an agreement executed without proper authority may be enforceableunder the doctrines of apparent authority and ratification (id. at 245-246). Plaintiff failedto establish its entitlement to summary judgment pursuant to the doctrine of apparent authoritysince it submitted no evidence that it relied on any words or conduct of IIC that the two officerswere authorized to execute the guarantee (see Standard Funding Corp. v Lewitt, 89 [*3]NY2d 546, 551 [1997]; Hallock v State of New York, 64NY2d 224, 231 [1984]). However, as in Indosuez, the transaction was implicitly ratifiedby IIC since, as a result of the transaction, IIC's subsidiary received $30 million, which was usedfor investments undertaken pursuant to a strategy set by IIC's administrative council. IIC'sacceptance of benefits flowing from an agreement that it now asserts was unauthorized whenexecuted constitutes an affirmance of the agreement giving rise to a ratification (see Goldston v Bandwidth Tech. Corp.,52 AD3d 360, 363-364 [2008], lv denied 14 NY3d 703 [2010]; Matter ofCologne Life Reins. Co. v Zurich Reins. [N. Am.], 286 AD2d 118, 127 [2001]).
Plaintiff demonstrated its status as a relevant account holder entitled to sue on the guaranteeby submitting Euroclear account statements identifying BB Securities as the account holder and adisavowal and assignment agreement executed by BB Securities in favor of plaintiff (see IRB-Brasil Resseguros S.A. v EldoradoTrading Corp. Ltd., 68 AD3d 576 [2009]; see also Allan Applestein TTEE FBOD.C.A. v Province of Buenos Aires, 415 F3d 242 [2d Cir 2005]). Regardless of when itobtained proof of its right to bring suit, plaintiff timely commenced the action, and, in any event,IIC waived any affirmative defense of untimeliness by failing to plead it.
Since the guarantee does not contain a clear, unambiguous, and unequivocal expression thatinterest will be paid at the rate higher than the statutory rate until the judgment is satisfied, thestatutory rate of interest will be applied (see Banque Nationale De Paris v 1567 BroadwayOwnership Assoc., 248 AD2d 154, 155 [1998]; CPLR 5004; compare Retirement Accounts, Inc. v PacstRealty, LLC, 49 AD3d 846, 846-847 [2008]). Concur—Sweeny, J.P., Catterson,Moskowitz, Renwick and Richter, JJ.