De Rees v. Costaguta, 247.

• Decision Date: 01 June 1921
• Docket Number: 247.
• Citation: 275 F. 172
• Parties: DE REES v. COSTAGUTA et al. [1]
• Court: U.S. Court of Appeals — Second Circuit

275 F. 172

DE REES v. COSTAGUTA et al. ^[1]

No. 247.

United States Court of Appeals, Second Circuit.

June 1, 1921

The bill alleges that plaintiff was a member of a copartnership the two partners being himself and the firm of David Costaguta & Co. (hereinafter called Costaguta). He is a resident of New Jersey; all the individual defendants except Taffell are nonresident aliens, residing in Buenos Aires where the firm of Costaguta has its home office and transacts the major portion of its business. Taffell is an alien resident in New York, and agent for Costaguta. The corporate defendant (hereinafter called trading company) is chartered by New York.

The partnership alleged is pleaded as existing by written contract, a document drawn and executed in Buenos Aires and in the Spanish language. By order of the trial court plaintiff produced and filed a literal translation of this contract, which was then regarded as part of the bill. This document (omitting some plainly irrelevant portions) is as follows:

In the city of Buenos Aires, the first of November 1917, between Messrs. David Costaguta, of the one part, and Mr. Henry S. De Rees, of the other, the following has been agreed Under this agreement De Rees worked for some time, buying hosiery in the United States, usually for shipment to South America, and sometimes to be sold again in North America.

Differences arose between plaintiff and Costaguta, and on August 22, 1919, De Rees gave notice of termination under paragraph 10 of the contract. Transactions in hosiery in the United States had been carried on by De Rees in the firm name of Costaguta. At the expiration of the three-month period, the bill alleges that there was on hand in New York merchandise belonging to the 'hosiery section' of large value, and Costaguta had bank accounts in and near New York containing the commingled moneys of the Costaguta firm generally and of the so-called 'hosiery section.'

In January, 1920, Costaguta caused to be incorporated the trading corporation, which the defendant partnership entirely controlled, and to this company there was transferred all the property, including cash, of Costaguta, arising not only out of hosiery, but out of other transactions in New York and perhaps in the United States.

While not specifically alleged, it is a fair inference from the bill that Costaguta is charged with refusing any part to De Rees in the liquidation or winding up of the 'hosiery section.'

On these allegations plaintiff prayed for a receiver to 'take and administer the property and liquidate the affairs of the said copartnership,' i.e. the hosiery section, together with appropriate demands for a receivership pendente lite, with injunctions against all the defendants assigning or transferring any property belonging to said section.

The trading company was duly served with subpoena. All the individual defendants were returned not found. Thereupon plaintiff applied for service on the nonresident defendants pursuant to Judicial Code, Sec. 57 (Comp. St. Sec. 1039). The trading company appeared generally and the nonresident defendants specially in order to object to the jurisdiction. Plaintiff then moved for the above-indicated relief pendente lite, and after hearing the trial court refused all relief and wholly dismissed the bill, from which decision this appeal is taken.

1. Messrs. David Costaguta & Co. establish in their own house a special section which will be called 'hosiery section,' for the purchase and sale of hosiery in general and other articles of knit goods or any other line of goods, which by common accord it is agreed to exploit, authorizing Mr. De Rees to manage the section.

2. Messrs. David Costaguta & Co. will pass on and fix the credits and conditions of sale for the clientele.

3. Mr. De Rees, during his stay in Buenos Aires, shall submit to the approval of Messrs. David Costaguta & Co. the arrangements of purchases, whereas when he goes to North America or Europe to make purchases he shall have complete liberty of action, within the sums which Messrs. David Costaguta & Co. shall fix in writing.

4. (Relates to expenses, whereof some 'shall be charged to the section' and some 'for the exclusive account' of Costaguta & Co.)

5. On October 31st of each year a balance shall be struck, and the deductions which it shall be deemed advisable to make in the merchandise as well as in the credits, shall be determined by common accord between Messrs. David Costaguta & Co. and Mr. De Rees. From the resulting profits, there shall be deducted six per cent. (6%) annual interest on the capital which Messrs. David Costaguta & Co. may have supplied to the section, and the remainder shall be distributed in the following proportion: Fifty-five per cent. (55%) to Messrs. David Costaguta & Co. and forty-five per cent. (45%) to Mr. De Rees. The losses shall be borne in the same proportion. The calculation of interest shall be made every six months, an account current being established with the disbursements and receipts of funds, and in case the earnings of the fiscal period do not cover the interest, the balance shall be passed to the following period.

6. (Relates to monthly withdrawals for 'personal account' by De Rees.)

7. Mr. De Rees may withdraw his share of the profits only to the amount of fifty per cent., being under the obligation to leave the balance thereof on deposit with Messrs. David Costaguta & Co., drawing an annual interest of six per cent. (6%).

8. It shall be the duty of Mr. De Rees to devote all his activity to the service of the section, and he obligates himself not to participate directly or indirectly in any other commercial business, nor to be interested in any other manner foreign to the section. It is agreed between the parties that the violation by Mr. De Rees of what is provided in the preceding sentence shall entitle Messrs. David Costaguta & Co. to not recognize in favor of Mr. De Rees the profits which are earned during the fiscal period in which the violation has taken place.

9. (Immaterial.)

10. The parties reserve the right to terminate the present agreement by giving notice of three months by registered letter. In case Mr. De Rees is absent, Messrs. david Costaguta & Co. will advise him by cable, which they shall address to the last address indicated by Mr. De Rees.

11. Both Messrs. David Costaguta & Co., and Mr. De Rees on receiving the notice of termination of the present contract may request the liquidation of the merchandise existing in the house, in the Custom House, in transit, or in course of manufacture, pertaining to this section, Mr. De Rees obligating himself to give his co-operation up to the moment the liquidation be terminated, and Messrs. David Costaguta & Co. as sole owners of the business shall pay to Mr. De Rees the amount corresponding to him in installments which are established in the following article.

12. In case this agreement is terminated and the preceding article is not applied in so far as it refers to an eventual liquidation of the stock in hand, a balance shall be made, observing with regard to deductions the form indicated in article 5, and Messrs. David Costaguta & Co. shall take charge of the assets and liabilities, paying the amount which results in favor of Mr. De Rees in four equal installments, the first in cash, and the others in installments of six, twelve and eighteen months, with interest at 6%.

13. In case of the death of Mr. De Rees, Messrs. David Costaguta &amp Co. will liquidate the stock in hand within the period of one year from the date of death; they will make a balance and pay the heirs of Mr. De Rees the...