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Conseil Alain Aboudaram, S.A. v. De Groote

June 7, 2004

CONSEIL ALAIN ABOUDARAM, S.A., PLAINTIFF,
v.
JACQUES DE GROOTE, DEFENDANT.



The opinion of the court was delivered by: John D. Bates, United States District Judge.

MEMORANDUM OPINION

In this action for breach of contract, Conseil Alain Aboudaram, S.A. ("CAASA") seeks to enforce two promissory notes under which it agreed to lend funds to Jacques de Groote ("de Groote") and took a security interest in one of de Groote's residences. De Groote asserted, in various counterclaims, that his debt to CAASA was more than offset by commissions due to him for his participation in certain of CAASA's business ventures. After a five-day trial, a jury found that there was an enforceable contract between the parties as to the promissory notes, that de Groote had breached the contract by defaulting in payment, and that CAASA was entitled to $536,263.55 in damages. The jury rejected de Groote's counterclaims.

The issue now before the Court arises from the fact that, although he is neither named as a plaintiff in this case nor as a lender on the promissory notes, Alain Aboudaram ("Aboudaram"), CAASA's principal shareholder, claims to have himself made advances to de Groote enforceable under the notes. Indeed, the jury's award clearly reflects monies that all concede were loaned by Aboudaram in his personal capacity to de Groote. Notwithstanding the language of the promissory notes – which identifies CAASA, not Aboudaram, as the lender and payee – Aboudaram insists that the parties intended the notes to cover funds advanced both by CAASA and by him personally. Accordingly, CAASA has moved to amend its complaint to conform to the evidence presented at trial and for reformation of the promissory notes. De Groote has moved for judgment under FED. R. CIV. P. 50(b), claiming that the promissory notes on their face do not encompass the monies he owes to Aboudaram, and that he has repaid the entire debt to CAASA embodied in the notes.

BACKGROUND

CAASA, a Swiss corporation with its principal place of business in Lausanne, is a financial consulting company. It provides advisory services and arranges trade finance for industry and government clients in many countries. See Trial Transcript ("Tr.") Feb. 26, 2004, at 27.*fn1 Aboudaram and members of his family own substantially all of the company's stock, and he is its president. Aboudaram met de Groote, a Belgian national and one-time Executive Director of both the World Bank and the International Monetary Fund, in 1990. Id. at 32. Over the next several years, de Groote introduced Aboudaram to various business contacts in the developing world and international finance community. According to Aboudaram, he and de Groote had a loose understanding whereby, in exchange for introductions and information about business opportunities, Aboudaram periodically helped de Groote meet his personal financial obligations. See id. at 42-45. The parties did not understand this to be a binding commitment. Id.

Among de Groote's obligations was a mortgage on his home in Washington, D.C. Aboudaram testified at trial that, after de Groote had been notified that he was in default on the mortgage in 1991 or 1992, de Groote asked Aboudaram to intervene on his behalf with the mortgage lender. Id. at 49. Aboudaram did so, and proceeded over the following years to help de Groote make his mortgage payments. See Tr. Feb. 23, 2004, at 7; Tr. Feb. 26, 2004, at 50. Between 1994 and 1998, Aboudaram's payments to de Groote in connection with the mortgage totaled $396,357.59. Stipulated Ex. 2. Aboudaram testified repeatedly that these payments were personal loans, see Tr. Feb. 23, 2004, at 60, and de Groote has conceded that he continues to owe repayment of these loans to Aboudaram, see Tr. Feb. 24, 2004, at 55.

In addition to de Groote's personal dealings with Aboudaram, de Groote had a professional consulting relationship with CAASA. CAASA's business records contain an account for de Groote, which shows a stream of payments to him for his services in connection with various transactions during the 1990s, amounting to $1,400,119.76. See Stipulated Ex. 1C; Tr. Feb. 26, 2004, at 50.*fn2 At trial, de Groote claimed that among these transactions was CAASA's representation of SkodaExport, a Czech company. Skodaexport sought financial advice in reducing its tax liability to the Czech government and to obtain a contract through the World Bank to build an oil pipeline in India. Tr. Feb. 24, 2004, at 139-40. Presumably relying on his contacts, de Groote obtained a copy of a relevant study that the World Bank had done in India, explored the status of the project at the World Bank, determined how much money had been earmarked for it, identified SkodaExport's potential competitors, and introduced Aboudaram to the World Bank official in charge of the project. Tr. Feb. 26, 2004, at 64-65. De Groote testified that, in return, he was to receive one-third of the fees paid by SkodaExport to CAASA.*fn3 Tr. Feb. 24, 2004, at 140-41. CAASA has vigorously denied throughout this litigation that the parties had any such oral agreement to share the Skodaexport fees.*fn4

In the context of these somewhat confusing personal and professional financial interactions, Aboudaram and de Groote executed the two promissory notes that initiated this litigation and are the focus of the current motions. In the first, dated December 19, 1995, de Groote promised to pay on demand"to the order of Conseil Alain Aboudaram S.A.... the principal sum of $400,000 or, if less, the aggregate principal amount of all advances hereunder by the Lender to the Borrower (including advances made prior to the date hereof), outstanding at the time of such demand, together with interest" at a set rate. First Am. Compl. Ex. A. The note identified CAASA as the"Lender" and de Groote and his wife, collectively, as the"Borrower."*fn5

Id. The note further provided that"[a]ll advances made by the Lender to the Borrower hereunder and all payments made on account of principal hereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Demand Promissory Note." Id. The note was secured by a deed of trust"granted by the Borrower to the Lender and covering the premises having the address of 1675 34th Street, N.W., Washington, D.C." – de Groote's Washington home. Id. Finally, the note provided that it was to be"governed by and construed in accordance with the laws of the State of New York." Id. A second promissory note, dated October 13, 1998, with a face value of $100,000, is similar to the first in all other relevant regards. See First Am. Compl. Ex. B.

According to Aboudaram, he and de Groote understood that the promissory notes would cover Aboudaram's personal loans to de Groote as well as any loans made by CAASA.*fn6 Tr. Feb. 26, 2004, at 75-76 ("[de Groote] knew perfectly well at the time that he signed that promissory note that the promissory note would cover all the monies that I had paid personally from my own pocket... and that I would pay subsequently"); Tr. Feb. 23, 2004, at 60 ("I said I lent the money. I repeat I lent the money personally."). Aboudaram testified at trial that his goal was to have his company act on his behalf should collection efforts ever be required. See id.; Tr. Feb. 23, 2004, at 65-66.*fn7 The promissory notes were drawn up for CAASA by Isam Salah ("Salah"), an attorney with the firm of King & Spalding. At trial, Salah testified that he had carefully drafted the notes, stated that the notes"[define] CAASA as the lender," Tr. Feb. 23, 2004, at 93, and confirmed that the notes"evidence[d] a debt owed by the borrower to the lender." Id. at 90.

De Groote's testimony about the intended scope of the promissory notes differed importantly from Aboudaram's. De Groote insisted that he did not understand Aboudaram's personal advances to be covered by the promissory notes. See Tr. Feb. 24, 2004, at 12-13. Instead, de Groote testified that he had expected to receive a promissory note naming Aboudaram as the lender as to the personal loans, which he admittedly still owed. Id. at 12-13, 17. When he saw that the notes named CAASA as the lender, de Groote understood them to apply exclusively to advances made to him on his account with CAASA. However, he also said that he viewed Aboudaram as the ultimate source of all the payments at issue.*fn8 Id. at 13. The notes represented, in his thinking,"a sort of line of credit" which could cover past and future advances made by Aboudaram through CAASA. Id. at 16.

CAASA and de Groote, the parties to this action, agree that de Groote had by the end of 2000 transferred approximately $200,000 to CAASA, although de Groote does not now characterize those remittances as payments under the promissory notes.*fn9 See id. at 30; compare Pl.'s Supp. Mem. [Docket No. 140] at 3 n.2 and Joint Pre-Trial Statement at 6. Those payments notwithstanding, CAASA itemized its damages as follows: $421,576.67 as unpaid principal under the promissory notes, $96,902.58 in interest, and $1,863,348.41 in expenses of enforcement, for a total of $2,381,827.66. Joint Pre-Trial Statement at 14.

ANALYSIS

A. Applicable Legal ...


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