444 F.2d 451 (5th Cir. 1971), 29464, James Talcott, Inc. v. Allahabad Bank, Limited
|Citation:||444 F.2d 451|
|Party Name:||JAMES TALCOTT, INC., Plaintiff-Appellee, v. ALLAHABAD BANK, LTD., Bank of Baroda, Ltd., Bank of Tokyo, Defendants-Appellees. CITY TRADE & INDUSTRIES, LTD., Defendant-Third-Party Plaintiff-Appellant, v. NEW CENTRAL JUTE MILLS COMPANY, Ltd., Third-Party Defendant-Appellee.|
|Case Date:||May 05, 1971|
|Court:||United States Courts of Appeals, Court of Appeals for the Fifth Circuit|
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W. Ward Newton, Lyons, Ga., Marshal C. Berger, New York City, Sharpe, Sharpe, Hartley & Newton, Lyons, Ga., for defendant-third party plaintiff-appellant.
Joseph M. Oliver, Thomas S. Gray, Savannah, Ga., Francis J. Ryan, Hahn, Hessen, Margolis & Ryan, New York City, Oliver, Maner & Gray, Savannah, Ga., for plaintiff-appellee.
George W. Williams, Bouhan, Williams & Levy, Robert M. Williams, Savannah Ga., Kenneth Carroad, Edward B. Connolly, New York City, for third party defendant-appellee.
Kennedy & Sognier, Adams, Adams & Brennan, Edward T. Brennan, Savannah, Ga., for Intervenor.
Malcolm Maclean, Mark M. Silvers, Jr., Connerat, Dunn, Hunter, Houlihan, Maclean & Exley, Savannah, Ga., for defendants-appellees.
Before THORNBERRY, GOLDBERG and AINSWORTH, Circuit Judges.
THORNBERRY, Circuit Judge:
In this multiparty, multi-issue, multisuit litigation, 1 CTI appeals from adverse judgments below 2 awarding the contested fund in interpleader to the Indian Banks, quashing service of process against the New Central Jute Mills, and dismissing its counterclaim against James Talcott, Inc. On account of the complex nature of the proceedings, we
shall take up CTI's claims against each of the three appellees separately. First, however, because a full understanding of this controversy and the results we reach is impossible without knowledge of what has transpired to date, we present the factual and procedural history of this litigation.
FACTS AND PROCEDURAL HISTORY
A. RELATIONSHIP OF THE PARTIES
City Trade & Industries, Ltd., a New York corporation (CTI), the appellant herein and a defendant-third party plaintiff below, entered an agreement in 1959 with New Central Jute Mills, a concern in India, which produces jute backing for rugs and carpets. By the terms of the agreement, CTI was appointed New Central's exclusive distributor for the sale of jute backing in the United States for a period extending to March 31, 1964. CTI alleges that under this agreement financing between itself and New Central was arranged especially for New Central's convenience to enable New Central to comply with the laws of India.
According to CTI, the laws of India prohibited New Central from exporting jute to the United States unless there existed in the United States a purchaser who had paid or promised to pay for the goods in United States dollars. Further, CTI claims that New Central was required by the laws of India
to engage in the export of jute only with the permission (of) the Reserve Bank of India (which, incidentally, CTI identifies with the Banks in the instant action, since, according to CTI, the Banks herein are members of the Reserve Bank).
CTI then charges that
such permission was obtained from the Reserve Bank by New Central with respect to each and every shipment of jute by New Central to CTI during the years 1959 through 1964. The permission thus granted by the Reserve Bank to New Central required that New Central's shipments of jute would be paid for by CTI within 180 days in United States dollars, and in representing the transactions to the Reserve Bank, New Central formerly characterized CTI as a purchaser of New Central's jute. In point of fact, however, the Reserve Bank has full knowledge of the relationship between New Central and CTI as that of principal and exclusive distributor and selling agent for New Central * * *.
Consequently, CTI alleges, it made payments for jute exported to the United States to meet sales commitments it had made in New Central's behalf, as if it, CTI, were the purchaser. For the purpose of making these payments, CTI established irrevocable letters of credit in favor of New Central for ninety-five percent of the cost of freight port of distribution price. For the remaining 5% Of the cost and freight price, New Central drew sight drafts upon CTI payable within 90 days. As a general rule, the source of payment of the drafts at maturity was the proceeds of the sale of jute by CTI in the United States. Occasionally, however, New Central exported jute to the United States when no actual sale of the jute had been made. When this occurred, the jute would be delivered to the account of CTI as buyer and stored until market conditions were favorable to a sale. In these instances, the invoice was accompanied by a draft drawn by New Central on CTI, which CTI would accept in exchange for the documents of title to the jute. Generally, the drafts were payable within ninety days. If CTI had not managed to sell the jute within the ninety day period, CTI would require outside funds to pay the outstanding drafts. CTI would then turn to James Talcott, Inc., a factor, and the plaintiff-appellee herein, who would advance the needed funds in exchange for a first security interest in quantities of jute.
The relationship between New Central and CTI proceeded on the basis described above until 1964, when the 1959 agreement
expired. The parties attempted, but failed, to negotiate a new contract; and so in 1964 they ceased doing business together. At this time there was allegedly over $900,000.00 in drafts outstanding against CTI, and inventory in CTI's possession representing payments by CTI to New Central allegedly approximating $3,500,000.00. CTI contends that New Central agreed to take over this inventory against payment to CTI of the cost plus expense incurred by CTI in holding the goods, and that in exchange CTI would pay the outstanding drafts of $900,000. According to CTI, however, New Central never paid the stated amount and CTI therefore sold certain of the jute over which it had control and reduced the claimed debt owing to approximately $1,500,000.
B. PREVIOUS LITIGATION
At this point, the Indian Banks, to whom New Central had negotiated the drafts, filed a suit of attachment against the remaining jute in Chatham County Superior Court, in the State of Georgia. The Banks were suing as purported holders of CTI's outstanding drafts, claiming that CTI was indebted on those drafts and was selling the property liable for the payment of the drafts to avoid payment of its debt. City Trade & Industries v. allahabad Bank, Ltd. et al., 114 Ga.App. 12, 150 S.Ed.2d 182 (1966).
During the pendency of these attachment proceedings, the price of jute skyrocketed, so all the parties agreed to release the jute for sale to the order of James Talcott, Inc. Talcott was then to hold the fund derived from the proceeds, allegedly as a neutral stakeholder, awaiting a resolution of the various conflicting claims to the money.
Shortly after the sale of the jute, CTI instituted a separate proceeding in New York, in June 1965, against New Central for an accounting on their 1964 agreement. The suit, however, was not prosecuted by either party for two years, for reasons not entirely clear from the record, but apparently at the agreement and convenience of both parties.
Meanwhile, back in Georgia, the Indian Banks, on February 7, 1966, instituted garnishment proceedings in the Georgia courts against Talcott, who was holding the contested fund. And, not to be outdone, CTI sued Talcott on April 12, 1966, in the Supreme Court of the State of New York, claiming the sole right to the proceeds of the jute sale held by Talcott. Thus besieged, Talcott in October 1966 instituted this statutory interpleader action 3 in federal district court in Georgia.
As a result of Talcott's filing of the statutory interpleader action, and pursuant to the district court's authority to enjoin other proceedings in state or federal court affecting the property involved in the interpleader action, 4 the Indian Banks and CTI were restrained from further prosecuting their Georgia and New York suits against Talcott. The filing of the interpleader action, however, apparently revived CTI's interest in its New York suit for an accounting against New Central, and the prosecution of that previously dormant suit was renewed in 1967. Thus, while the instant suit was proceeding to its conclusion in
Georgia, CTI's suit against New Central was also progressing separately in New York.
Since what happened in the New York courts in effect controlled the outcome of the suit below between CTI and the Indian Banks on the issue of collateral estoppel, we will describe the New York proceeding in more detail later in this opinion when we take up that issue. At this point, it is sufficient to say merely that the New York suit was an action for accounting by CTI against New Central under their original 1959 contract; that New Central defended by filing a motion to stay the suit until CTI carried out its obligations under a certain clause of their contract, which New Central contended required arbitration, 5 that CTI then responded, arguing among other things not relevant here, that New Central had waived its right under the contract to demand arbitration by instigating, through the Indian Banks as 'alter egos' or 'fronts,' the attachment proceedings against CTI in Georgia. The trial court in New York, the Appellate Division, and the New York Court of Appeals each rejected CTI's 'alter ego' contention flatly. City Trade & Industries, Ltd. v. New Central Jute Mills Co., 25 N.Y.2d 49, 302 N.Y.S.2d 557, 250 N.E.2d 52 (1969).
CTI v. INDIAN BANKS...
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