Citibank, N.A. v. Aralpa Holdings Limited Partnership

Background

Citibank sued Aralpa Holdings Limited Partnership for breaching a promissory note and sued Rodrigo Lebois Mateos for breaching his personal guaranty. The note required Aralpa to pay Citibank $35,000,000, plus other amounts owed. It was secured by Lebois’s approximately 53% stake in Unifin Financiera, held through Promexcap Spain, S.L. Lebois guaranteed Aralpa’s payment obligations as a primary obligor.

The note identified several events of default, including failure to comply with its covenants, insolvency-related events, debt rescheduling, a specified credit-rating decline, failure to maintain required collateral coverage, and failure to provide requested bank or brokerage statements. The note allowed Citibank to declare the debt immediately due and payable if an event of default continued.

Citibank notified the defendants of defaults in 2022. Aralpa acknowledged certain collateral-coverage defaults in limited waiver agreements, but those waivers lasted only through specified dates, ultimately October 15, 2022. Aralpa also admitted that it did not provide the bank and brokerage statements Citibank requested. Promexcap filed a September 8, 2022 pre-insolvency notification stating that it was insolvent. Citibank filed this action on October 17, 2022.

Motions and legal standard

Citibank moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). That motion asks whether, based on the complaint, answer, and documents properly considered with the pleadings, the plaintiff is entitled to judgment as a matter of law. The court applies the same general standard used for a motion to dismiss, while accepting the nonmoving party’s properly considered factual allegations as true.

Citibank also sought prejudgment attachment of the defendants’ assets. The court separately considered which materials it could judicially notice, meaning officially accept as reliable or publicly established for purposes permitted by the evidence rules.

Judicial notice

The court took notice of the fact that certain Unifin press releases and other materials had been published, without accepting every statement in them as true. It took judicial notice of Promexcap’s Spanish-court filing because the filing and a certified translation were provided. It declined to take judicial notice of later November 2022 Unifin documents because those events occurred after the complaint was filed and had not been pleaded. It also declined to take judicial notice of a Yahoo! Finance stock-price chart because the record did not establish that its source and contents could not reasonably be disputed.

Events of default

The court considered five categories of alleged defaults:

1. Unifin credit-rating downgrade. Citibank argued that Unifin’s ratings fell below the note’s specified thresholds. The court denied judgment on this basis because the provision referred to Moody’s and Standard & Poor’s ratings using language that was ambiguous. The provision could reasonably be read to require a rating from either agency or from both agencies, and the record did not conclusively establish that Moody’s had no rating for Unifin.

2. Failure to provide bank and brokerage statements. Aralpa admitted that it had not provided the statements requested under the note. The court rejected the defendants’ argument that other financial statements satisfied this requirement. The note required statements concerning the borrower or guarantor, in a form and substance satisfactory to Citibank. The court held that this admission established an event of default and supported judgment for Citibank.

3. Collateral coverage deficiency. Aralpa had twice acknowledged collateral-coverage defaults, and Citibank had temporarily waived them. The court held that the waivers expired before Citibank filed suit and expressly reserved Citibank’s future rights. The defendants did not dispute that the deficiency remained uncured. The court therefore held that the admitted collateral-coverage defaults supported judgment.

4. Promexcap’s insolvency. The court did not decide that the Spanish filing necessarily began insolvency proceedings or involved debt rescheduling because additional information about Spanish law would be needed. But the filing expressly stated that Promexcap was insolvent. The court held that this was a written admission by an obligor of an inability to pay its debts generally, which independently triggered an event of default under the note.

5. Unifin’s later insolvency filing. The court did not grant judgment based on Unifin’s November 8, 2022 insolvency filing because it declined to take judicial notice of that event and the complaint did not plead it. The court also stated that it did not need to decide whether Unifin’s earlier August 8 announcement independently constituted an event of default because other defaults were sufficient.

Effect of the defaults

The court found at least three established events of default: failure to provide the requested bank and brokerage statements, the collateral coverage deficiency, and Promexcap’s written admission of insolvency. Under the note, these continuing defaults made the principal and interest immediately due. The court rejected the defendants’ arguments that Citibank’s acceleration notices were ineffective or that the failure to provide financial statements was too minor to support recovery. It also rejected the contention that Citibank’s limited waivers prevented enforcement after their expiration.

Guaranty and affirmative defenses

The parties agreed that the guaranty claim depended on the note claim. Because the guaranty made Lebois primarily and unconditionally responsible for Aralpa’s guaranteed obligations, the court held that the same established defaults supported judgment against Lebois.

The defendants argued that Citibank had waived the defaults or should be prevented from enforcing them because of its conduct. The court found those defenses implausible. The note and guaranty contained no-waiver provisions, the limited waivers were specific and temporary, and they expressly reserved Citibank’s rights. The defendants’ other affirmative defenses were treated as abandoned because they were not pursued in opposition to the motion.

Disposition

Judge Rochon granted Citibank’s motion for judgment on the pleadings as to both claims. Judgment was to be entered in Citibank’s favor against Aralpa and Lebois, jointly and severally, for the outstanding balance of the note plus interest. The court denied Citibank’s motion for prejudgment attachment as moot because judgment would be entered forthwith. The opinion does not add a “with prejudice” or “without prejudice” designation to these rulings.