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JPMorgan Chase Bank, N.A. v. PT Indah Kiat Pulp and Paper Corp.

April 21, 2010

JPMORGAN CHASE BANK, N.A., SUCCESSOR IN INTEREST TO THE FIRST NATIONAL BANK OF CHICAGO, PLAINTIFF,
v.
PT INDAH KIAT PULP AND PAPER CORPORATION TBK, A CORPORATION DULY ORGANIZED UNDER THE LAWS OF THE REPUBLIC OF INDONESIA; PT PABRIK KERTAS TJIWI KIMIA TBK, A CORPORATION DULY ORGANIZED UNDER THE LAWS OF THE REPUBLIC OF INDONESIA; AND ASIA PULP AND PAPER COMPANY, LTD., A CORPORATION DULY ORGANIZED UNDER THE LAWS OF SINGAPORE, DEFENDANTS.



The opinion of the court was delivered by: James F. Holderman, Chief Judge

MEMORANDUM OPINION AND ORDER

Plaintiff JPMorgan Chase Bank, N.A., successor in interest to the First National Bank of Chicago (collectively "JPMorgan"),*fn1 alleges in its First Amended Complaint that defendants PT Indah Kiat Pulp and Paper Corporation, Tbk ("IK"), PT Pabrick Kertas Tjiwi Kimia, Tbk ("TK"), and Asia Pulp and Paper Company, Ltd. ("APP") (collectively "Defendants") are liable to JPMorgan for breaching the terms and conditions of certain promissory notes and guarantees. (Dkt. No. 12 ("1st Am. Compl.").) Each defendant has asserted several affirmative defenses in their answers to these claims, and APP has alleged a counterclaim under the Uniform Commercial Code ("U.C.C.") based on a breach of implied warranty. This court has subject-matter jurisdiction over the claims at issue in this case pursuant to 28 U.S.C. § 1332(a)(2).

On October 14, 2009, this court issued an order granting JPMorgan's Motion for Summary Judgment Against IK and TK in part, finding them liable for breach of contract. (Dkt. No. 258.) The court reserved the issue of damages. Now pending before the court is JPMorgan's "Motion and Memorandum of Law in Support of Summary Judgment Against Asia Pulp and Paper," (Dkt. No. 218 ("JPMorgan's Summary Judgment Motion")) as well as the issue of damages as to all three defendants: APP, IK, and TK. For the reasons set forth below, this court grants summary judgment in favor of JPMorgan.

BACKGROUND

When ruling on a motion for summary judgment, the court views the evidence in the light most favorable to the nonmoving party and draws all reasonable inferences in the non-movant's favor. Omega Healthcare Investors, Inc. v. Res-Care, Inc., 475 F.3d 853, 857 (7th Cir. 2007). In light of this principle, the following are the facts of this case, construed in the light most favorable to APP.

In 1996, APP and Beloit Corporation ("Beloit") entered into two contracts for APP's purchase of two paper-making machines known as the PPM3 and the MPM11. Subsequently in 1997, IK and TK assumed all of APP's rights and obligations pursuant to Clause 12 of the PPM3 and MPM11 contracts. Specifically, IK purchased the PPM3 machine and TK purchased the MPM11 machine. To facilitate Beloit's financing of the construction of these machines, on April 25, 1998 both IK and TK executed promissory notes in favor of Beloit. The original IK promissory note was in the amount of $21,809,962.00 and the original TK promissory note was in the amount of $16,213,352.00. The same day those promissory notes were executed, April 25, 1998, Beloit and JPMorgan entered into a Note Purchase Agreement whereby Beloit sold to JPMorgan all of its rights, title and interest in the two notes. In addition, Beloit executed and delivered to JPMorgan a Form of Notice and Endorsement, dated April 29, 1998, which assigned and transferred Beloit's rights, title and interest in the two notes to JPMorgan.

On September 24, 1998, IK and TK executed and delivered to Beloit new promissory notes which replaced and superseded the original notes in the principal amount of $26,701,678.00 ("IK Note") and $17,123,488.95 ("TK Note"). (JPMorgan's Summ. J. Mot., Exs. 12, 20.)*fn2 The Credit Agreement related to each respective note was amended to reflect the higher amounts. (Id. at Exs. 11, 19.)

Also on September 24, 1998, APP executed guarantees on both the IK Note and the TK Note (respectively "IK Guarantee" and "TK Guarantee") and delivered them to Beloit, unconditionally guaranteeing payment of all obligations of IK and TK arising under either note.

On September 30, 1998, Beloit and JPMorgan amended the Note Purchase Agreement to reflect the increased balance of both the IK and TK promissory notes. That same day, September 30, 1998, Beloit executed and delivered to JPMorgan a new Form of Notice and Endorsement which assigned and transferred all of Beloit's rights, title and interest in the IK and TK Notes to JPMorgan.

On October 3, 2000, IK, TK, APP, Beloit, Beloit Asia Pacific (L), Inc. ("BAPL"), Beloit Asia Pacific PTE, Ltd. ("BAP"), and Harnischfeger Industries, Inc. ("Harnischfeger"), entered into a Deed of Settlement ("Settlement") in order to settle disputes, claims, controversies, and other matters in conflict involving certain "Disputed Contracts," including the PPM3 and MPM11 contracts. (JPMorgan's Summ. J. Mot. 8.) The Settlement specifically released Beloit, BAP, BAPL, and Harnischfeger and its successors from all claims relating to the sale, installation, or operation of the PPM3 and MPM11 machines. The Settlement also recognized that IK, TK, and APP were not released from their obligations to repay the IK and TK Notes.

IK and TK made or caused to be made payments of interest and principal to JPMorgan on their respective Notes in 1998, 1999, 2000. IK and TK have not made any further payments since October of 2000. APP has also failed to make payments on the IK and TK Notes.

On September 14, 2001, JPMorgan sent notice to APP informing it that, based on its failure to make a payment on the Notes, it was in default under the terms of the IK and TK Guarantees as of April 2, 2001. Pursuant to an acceleration clause in the IK and TK Notes, JPMorgan declared all unpaid principal and accrued interest immediately to be due and payable. As no further payments have been made on either promissory note, JPMorgan filed this action on August 30, 2002 to collect monies allegedly owed on the IK and TK Notes based on APP's status as a guarantor.

PROCEDURAL BACKGROUND

This court previously found IK and TK liable to JPMorgan for breach of contract in an order dated October 14, 2009. (Dkt. No. 258 at 23.) At that time, the court encouraged the parties to discuss settlement and reserved its ruling on JPMorgan's Motion for Summary Judgment Against APP and JPMorgan's damages. Defendants requested further briefing on the issue of damages, which the court allowed. Subsequently, Defendants filed their "Memorandum of Law in Response to Plaintiff's Motion for Summary Judgment on Damages" (Dkt. No. 261 ("Defendants' Damages Memorandum")),*fn3 which JPMorgan responded to in its "Memorandum of Law Supporting Its ...


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