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Compania Administradora de Recuperacion de Activos Administradora de Fondos de Inversion Sociedad Anonima v. Titan International

July 10, 2008

COMPANIA ADMINISTRADORA DE RECUPERACION DE ACTIVOS ADMINISTRADORA DE FONDOS DE INVERSION SOCIEDAD ANONIMA, PLAINTIFF-APPELLEE,
v.
TITAN INTERNATIONAL, INCORPORATED, DEFENDANT-APPELLANT.



Appeal from the United States District Court for the Central District of Illinois. No. 05 C 3071-Jeanne E. Scott, Judge.

The opinion of the court was delivered by: Ripple, Circuit Judge

ARGUED JANUARY 17, 2008

Before RIPPLE, ROVNER and TINDER, Circuit Judges.

Compania Administradora de Recuperacion de Activos Administradora de Fondos de Inversion Sociedad Anonima ("Compania") sued Titan International, Inc. ("Titan") for breach of a guaranty contract. As an affirmative defense, Titan asserted that Compania had impaired the collateral that secured the guaranteed debt. After discovery, Compania moved for summary judgment. The district court granted summary judgment in favor of Compania; it concluded that Titan had failed to present any credible evidence of the value of the collateral.*fn1 Titan timely appealed. For the reasons set forth in this opinion, we affirm the judgment of the district court.

I. BACKGROUND

Titan is an international tire manufacturer based in Illinois. In June 1998, Titan purchased a controlling interest in Fabrica Uruguaya de Neumaticos S.A. ("FUNSA"), a tire manufacturer based in Uruguay. At that time, FUNSA had an existing line of credit in the amount of $5 million from Banco de la Republica Oriental del Uruguay ("the bank"). The line of credit was secured by FUNSA property and equipment.

In April 1999, Titan requested additional credit from the bank to fund FUNSA's operations. The bank agreed to increase FUNSA's line of credit by $1 million if Titan would guarantee the increase. On April 19, 1999, Titan executed a document entitled "Garantia Solidaria" ("the guaranty"). Titan agreed to serve as a surety for any debt owed to the bank by FUNSA, up to $1 million. The bank, accordingly, increased FUNSA's line of credit, and this new debt was secured by a pledge of FUNSA's plant and equipment ("the collateral"), as well as by Titan's guarantee.

On March 4, 2002, FUNSA declared bankruptcy under Uruguayan law. As of the date of the bankruptcy filing, FUNSA owed more than $4 million to the bank. On December 31, 2003, the bank transferred its FUNSA indebtedness, including all of its rights in the collateral and all of its rights against Titan under the guaranty, to Compania.*fn2

Buyers were sought for the collateral both before and after it was transferred from the bank to Compania, but an agreement was never reached on a sale. In March 2004, Compania obtained a third-party appraisal of the collateral. The appraiser valued the collateral at between $1.5 million and $2.3 million. On May 6, 2004, Compania sold its interests in the collateral, along with a number of other outstanding notes, to a third party for $2 million. Compania, however, failed to notify Titan in advance of the sale. The third party subsequently foreclosed on the collateral, which was sold at public auction pursuant to Uruguayan bankruptcy law for $1 million.

With approximately $2 million of FUNSA's debt left unpaid, Compania then pursued other avenues of collection. It demanded that Titan pay it $1 million, the amount of FUNSA's debt that Titan had guaranteed. Titan, however, refused to pay under the guaranty. It contended, among other things, that Compania's failure to provide notice prior to the sale had impaired Titan's rights in the collateral that secured the debt. Consequently, Compania initiated this action to enforce the guaranty agreement.

During discovery, the district court issued a scheduling order that required the parties to disclose all of their expert witnesses by February 3, 2006. Titan did not disclose any expert witnesses prior to that date.

On February 21, however, nearly three weeks after the expert witness disclosure deadline and days before fact discovery was set to conclude, Titan served Compania with two expert declarations. In one of these declarations, Ricardo Olivera offered an opinion on the interpretation of Uruguayan law. In the other declaration, Mark Haron offered an opinion on the value of the FUNSA collateral based on his experience buying and selling tires and equipment on the worldwide tire market. Titan did not disclose any other experts at this time.

Compania moved to strike both experts' declarations as being untimely disclosed. On April 21, 2006, the district court granted Compania's motion to strike Titan's proffered expert declarations on the ground that the delay in disclosure was neither justified nor harmless.

On June 2, 2006, Compania moved for summary judgment. It contended that Titan had presented no credible evidence that the value of the collateral was, in fact, greater than the price for which it had been sold; accordingly, urged Compania, Titan could ...


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