In Re: IIG Global Trade Finance Fund Ltd.

Background

San Agustin Energy Corp. appealed an April 27, 2023 order by United States Bankruptcy Judge Michael E. Wiles. That order granted summary judgment—a ruling entered when there is no genuine dispute about an important fact and one side is entitled to judgment under the law—in favor of IIG Global Trade Finance Fund Ltd. and IIG Structured Trade Finance Fund Ltd., and denied summary judgment in favor of San Agustin.

The appeal concerned whether San Agustin became responsible for the borrowers’ obligations under two loan agreements. San Agustin had signed a conditional guaranty concerning the March 2014 loan agreement. After the loans were not repaid, San Agustin and Trade Financial Trust discussed amendments that would consolidate the loans. In October 2019, Trade Financial Trust signed one version of a Fifth Amendment, and San Agustin later signed a version with minor differences, including different “as of” dates. The Fifth Amendment stated that it would become effective on the date of its signature, that San Agustin assumed the borrowers’ rights and obligations, and that it was governed by New York law.

The Fifth Amendment also stated that San Agustin would deliver a new promissory note, officer certificates, and a stock pledge. San Agustin later sent a proposed modified amendment that would have extended the final maturity date to April 30, 2020, but Trade Financial Trust did not sign that proposed modification. The funds later brought an adversary proceeding in bankruptcy court to recover the unpaid loan obligations. The bankruptcy court held that the Fifth Amendment was valid and enforceable, that its effective date was October 28, 2019, and that the proposed modified amendment never took effect.

Issues on Appeal

The appeal’s sole issue was whether the bankruptcy court erred in finding that the parties entered into an enforceable agreement under which San Agustin assumed the borrowers’ obligations. San Agustin argued that the two signed versions contained material differences, that delivery of the additional documents was required before the amendment became effective, and that outside evidence showed the parties did not intend to be bound. The opinion states that San Agustin was no longer pursuing a separate issue concerning the amount of damages.

Court’s Analysis

The district court applied New York contract law because the Fifth Amendment contained a New York choice-of-law provision and the parties did not dispute that New York law applied. Under that law, a contract requires a sufficiently definite expression of mutual agreement on all material terms—terms that significantly affect the parties’ rights and obligations.

The court held that the differences between the versions signed by Trade Financial Trust and San Agustin were not material. Although the versions used different “as of” dates, both expressly stated that the effective date was the date of signature. The court therefore held that the amendment became effective on October 28, 2019, when it was fully signed. The court also rejected San Agustin’s argument that the counterparts had to be identical, explaining that the minor changes did not prevent the parties from forming a binding contract.

The court next held that delivery of the promissory note, officer certificates, and stock pledge was not a condition that had to occur before the contract was formed. Under New York law, a condition precedent to contract formation prevents a contract from arising until the specified event occurs. Such a condition generally must be stated in clear language. The court found that the Fifth Amendment’s statements that San Agustin “will deliver,” “shall deliver,” and “shall execute and deliver” the documents did not clearly make those deliveries conditions to formation.

The court also held that the Fifth Amendment was not ambiguous. Because its language clearly addressed the effective date, the additional documents, and the parties’ binding obligations, the court found it unnecessary to consider outside evidence about the parties’ intent. The court noted that both parties had signed language stating that the amendment was a valid and binding obligation. It also held that the integration clause—language stating that the written agreement was the complete agreement—prevented reliance on outside evidence to change the meaning of the unambiguous contract.

Disposition

Judge Ramos affirmed the bankruptcy court’s order. The clerk was directed to terminate the appeal in each consolidated case and close both cases.