Gryphon Domestic VI, LLC v. APP International Finance Co.

41 A.D.3d 25, 836 N.Y.S.2d 4
CourtAppellate Division of the Supreme Court of the State of New York
DecidedApril 17, 2007
StatusPublished
Cited by31 cases

This text of 41 A.D.3d 25 (Gryphon Domestic VI, LLC v. APP International Finance Co.) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gryphon Domestic VI, LLC v. APP International Finance Co., 41 A.D.3d 25, 836 N.Y.S.2d 4 (N.Y. Ct. App. 2007).

Opinion

OPINION OF THE COURT

Catterson, J.

In June 1994, the defendant Indah Kiat International Finance Company B.V (hereinafter referred to as Indah Kiat International or the issuer), a Dutch corporation, issued $200 million of 11⅞% guaranteed secured notes due in 2002 (hereinafter referred to as the notes). The defendant PT. Indah Kiat Pulp & Paper Corporation (hereinafter referred to as ET. Indah Kiat or the guarantor), an Indonesian corporation, guaranteed payment. The notes were secured by collateral located in Indonesia.

It is uncontested that the notes, and the indenture pursuant to which they were issued, are governed by New York law. The defendants submitted to the nonexclusive jurisdiction of the state and federal courts located in New York City. They also appointed CT Corporation as their agent for service of process:

“As long as any of the Notes remain outstanding, each of the Issuer and the Guarantor will at all times have an authorized agent in New York City, upon whom process may be served . . . Service of process upon such agent and written notice of such service mailed or delivered to the Issuer or the Guarantor . . . shall to the fullest extent permitted by law be deemed in every respect effective service of process upon the Issuer or the effective service of process upon the Issuer or the Guarantor . . . Each of the Issuer and the Guarantor hereby irrevocably appoints CT Corporation as its agent for such purpose . . . Notwithstanding the foregoing, the Issuer or the Guarantor may, with prior written notice to the Trustee, terminate the appointment of CT Corporation and appoint another agent for the above purposes so that the Issuer and the Guarantor shall at all times have an agent for the above purposes in New York City.”

In March 2001, Indah Kiat International stopped paying on the notes. Despite due demand, ET. Indah Kiat, the guarantor, made no payment on the notes. After defaulting, the defendants (and the other members of the corporate family to which the defendants belong) engaged in negotiations with their creditors.

[28]*28At some point before March 11, 2003, the date of the amended complaint, the plaintiffs—whom this Court had previously described as “institutional traders in distressed debt commonly known as ‘vulture funds’ ”—purchased some of the notes.1 On October 20, 2003, the IAS court granted the plaintiffs summary judgment on their notes. This Court affirmed in relevant part. (Gryphon Dom. VI, LLC v APP Intl. Fin. Co., B.V, 18 AD3d 286 [2005].)

On November 13, 2003, evidently cognizant of the benefits of playing on one’s homefield, ET. Indah Kiat sued the plaintiffs in Indonesia, seeking, inter alia, annulment of the notes and the indenture and an injunction that would prevent the plaintiffs (now the defendants in the Indonesian action) from enforcing or collecting on the notes or indenture. To no one’s surprise, the Indonesian court issued the requested injunction.

In June 2004, the plaintiffs, undeterred by the rulings of the Indonesian court, served a restraining notice on each defendant. Each notice stated:

“to the extent you are in possession or in custody of property in which any or all of the judgment debtors . . . have an interest . . . YOU ARE FORBIDDEN to make or suffer any sale, assignment or transfer of, or interfere with, any such property or pay over or otherwise dispose of any such debt except as therein provided.”

In September 2004, the plaintiffs moved for a turnover order. The defendants’ counsel negotiated a briefing schedule and the plaintiffs thereafter served an amended turnover motion on the defendants’ counsel. The only substantive difference between the two motions for a turnover order was that the amended motion asked that personal property other than cash be turned over to the sheriff of New York County rather than to the plaintiffs’ counsel.

The plaintiffs first requested that the defendants pay the judgment from the property covered by the restraining notices. If that did not yield enough money to satisfy the judgment, the plaintiffs asked that the following items (among others) be turned over: all cash held in certain specified banks; all interests and holdings in certain specified finance and trading subsidiaries; certain paper, packaging and pulp mills located in Indonesia; [29]*29and “all real and tangible property securing the notes.” The plaintiffs submitted documents showing that the defendants owned the above assets.

Additionally, the plaintiffs made the following demand:

“To the extent the Judgment Debtors do not possess, have custody of or control the possession or custody of any stock or other certificates or instruments evidencing their ownership in any subsidiaries or other entities, we ask the Court to issue an order that itself will serve as an assignment ... to the Judgment Creditors, of each Judgment Debtor’s right, title and interest, in any such subsidiary or other entity in which such Judgment Debtor has an interest, and directing that the secretary or other custodian of each such subsidiary’s or other entity’s stock books and records, record such transfer to the Judgment Creditors on the stock books and records of such subsidiary or other entity.”

The defendants opposed the plaintiffs’ motion and cross-moved to vacate the June 2004 restraining notices, contesting service. The defendants also asserted that “a restraint on Indah Kiat’s . . . ability to make any payments or transfers of property anywhere in the world . . . would shut down APP’s business operations on a global scale.” APP is the parent company of both defendants. The defendants did not deny owning any of the assets listed by the plaintiffs.

Citing ABKCO Indus. v Apple Films (39 NY2d 670, 674-675 [1976]) and Matter of National Union Fire Ins. Co. of Pittsburgh, Pa. v Advanced Empl. Concepts (269 AD2d 101 [2000]), the court below vacated the restraining notices because the defendants’ “property is located outside of New York, and restraining notices issued by the Court do not reach property in other jurisdictions.”

But the court rejected the defendants’ argument that it could not compel them to turn over property located outside of New York. The court also rejected the defendants’ argument that the plaintiffs “never properly served them with notice of the turnover motion.”

The court described all of the plaintiffs’ attempts at service on the defendants and then held that,

“At least one of those methods constituted good service on the Judgment Debtors, namely mailing the [30]*30notice of motion by certified mail, return receipt requested, in October 2004 to CT Corp., while mailing a copy to the Judgment Debtors at their business addresses. The Judgment Debtors were contractually obligated to accept service by that method.”

The court rejected the defendants’ argument that they had discharged CT Corp. in September 2002, reasoning: “the Judgment Debtors breached their obligations under the indenture by failing to inform its trustee in advance that they were discharging CT Corp., and by failing to immediately name a replacement agent. As a result, the appointment of CT Corp. remained irrevocable under the Indenture.”

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Cite This Page — Counsel Stack

Bluebook (online)
41 A.D.3d 25, 836 N.Y.S.2d 4, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gryphon-domestic-vi-llc-v-app-international-finance-co-nyappdiv-2007.