## Facts

- Venezolana de Cruceros del Caribe, C.A. (Cariven), a Venezuelan corporation, issued notes to finance a shipping venture.
- Corporación Venezolana de Fomento (CVF), a Venezuelan governmental development entity, guaranteed Cariven’s notes.
- The Merban Corporation (Merban), a Swiss corporation, purchased the notes and resold portions to various United States and Canadian banks, which later intervened in the litigation as noteholders.
- Cariven defaulted on the notes, exposing CVF to liability on its guarantees.
- CVF sued Vintero Sales Corporation, Vintero Corporation, Merban, and affiliated individuals in the Southern District of New York, asserting claims including fraud, breach of fiduciary duty, and related equitable theories tied to the structuring and marketing of the transaction.
- Intervenor banks asserted rights as purchasers/holders of the notes; related counterclaims and crossclaims followed.

## Issues

1. Whether CVF proved actionable fraud or material misrepresentation by Merban/Vintero sufficient to justify damages, rescission, or avoidance of CVF’s guaranty obligations.
2. Whether the transaction created a fiduciary or quasi-fiduciary relationship imposing heightened duties on Merban/Vintero toward CVF, and whether any such duties were breached.
3. Whether intervenor banks that acquired the notes from Merban were protected as good-faith purchasers (including holder-in-due-course-type protection) against CVF’s asserted defenses and equitable claims.
4. Whether equitable relief could be granted to limit or negate CVF’s guaranty obligations despite the notes having been resold to banks.

## Decision

- The Second Circuit largely affirmed the district court’s judgment adverse to CVF.
- The court upheld findings that CVF failed to establish fraud sufficient to obtain the relief sought or to defeat the noteholders’ rights.
- The court rejected CVF’s claim that the parties’ dealings created a fiduciary relationship; the transaction was treated as an arm’s-length commercial arrangement.
- The court sustained the intervenor banks’ ability to enforce their interests as good-faith purchasers of the notes, limiting CVF’s ability to assert upstream disputes as defenses.

## Legal Principles

- An arm’s-length commercial financing transaction does not create fiduciary duties absent evidence that one party accepted discretionary authority or undertook to act primarily for the other’s benefit.
- Under New York law, fraud requires proof (by a heightened evidentiary standard) of a material misrepresentation, scienter, justifiable reliance, and resulting injury; appellate review defers to trial-level factual findings absent clear error.
- A sophisticated entity’s access to information and participation in structuring a transaction can defeat claims of justifiable reliance in alleged misrepresentation disputes.
- Good-faith purchasers of negotiable instruments are generally protected from defenses based on alleged misconduct between earlier participants, restricting rescission-type equitable relief once obligations have entered the stream of commercial transfer.

## Conclusion

The Second Circuit treated the dispute as a failed international commercial financing rather than a fiduciary relationship, upheld trial findings rejecting CVF’s fraud-based effort to avoid its guarantees, and protected intervenor banks that acquired the notes in good faith from having their rights impaired by CVF’s claims against upstream parties.


Corporación Venezolana de Fomento v. Vintero Sales Corp., 629 F.2d 786 (2d Cir. 1980)