AEROTRADE, INC. v. BANQUE NATIONALE DE LA REPUB. D’HAITI376 F.Supp. 1286 (1974)
AEROTRADE, INC. and Aerotrade International, Inc., Plaintiffs, v. BANQUE NATIONALE DE LA REPUBLIQUE D’HAITI, Defendant.
No. 74 Civil 82.United States District Court, S. D. New York.May 24, 1974.
Regan, Goldfarb, Heller, Wetzler & Quinn, New York City, for plaintiffs; Howard Breindel, Jan D. Atlas, Robert Aronson, New York City, of counsel.
Andreas F. Lowenfeld, New York City, for defendant.
EDWARD WEINFELD, District Judge.
This action, commenced by plaintiffs, two Florida corporations, against Banque Nationale de la Republique d’Haiti (“Banque”), a corporation organized under the laws of the Republic of Haiti, may be considered a “back stop” action to another suit previously commenced by plaintiffs against the Republic wherein plaintiffs attached funds to the credit of Banque upon a claim that it was an arm or alter ego of the Republic of Haiti. The court has this day upheld the Republic’s plea of sovereign immunity and vacated that attachment.1
Plaintiffs’ present application seeks an attachment of Banque’s property within this jurisdiction. The instant action involves the same contracts, equipment and services upon which plaintiffs’ suit against the Republic of Haiti was based. Plaintiffs here allege two causes of action. The first, that the agreements were with the Republic and Banque, and that defendant Banque has failed to make payments due thereunder; the second, that Banque represented it would make the payments required under the agreements and that such representations were false and fraudulent and made with intent to induce plaintiffs to enter into the agreements, which it did in reliance upon such representations. The court, in the consideration of the motion for an attachment of Banque’s funds, in addition to the affidavit submitted in support thereof, takes judicial notice of the record of the proceedings brought by plaintiffs against the Republic of Haiti.2
Plaintiffs, to obtain an attachment under New York law, which governs, are required to establish prima facie the existence of a cause of action,3 a requirement that must be met when such relief is sought in a federal court.4 The essential elements of the cause of action must be supported by evidential proof.5
Plaintiffs’ allegations that the defendant, as well as the Republic, was a party to the agreements are at once challenged by its own averments in the prior suit against the Republic, where no claim was then advanced against Banque. Quite the contrary, the essential claim was that plaintiffs’ contracts were with the Republic, and the written confirmation of their oral arrangement so indicates. All the invoices were directed to the Republic, as well as the correspondence. Indeed, plaintiffs submit in this action those very same documents, which by themselves show that their contracts and dealings were with the Haitian government and its officials. To be sure, while this is not conclusive, plaintiffs have presented no evidentiary matter in this action to support their claim that Banque also was a party to the agreement. The statement of plaintiffs’ president that with one exception the terms of the agreements with the Government of Haiti were negotiated in the defendant’s offices and that prior to the execution of the agreements he “was advised that it would be defendant’s obligation to make the payments pursuant to the aforesaid agreements,” does not establish that defendant became a party to the agreements. Who advised him of this? Was it an authorized representative of the defendant or of the Republic, or perhaps his own lawyer?
Equally questionable is plaintiffs’ claim for fraud and deceit. Here the plaintiffs’ president alleges that it was “only after the defendant’s promise to plaintiffs to make the various monthly payments” that the agreements were entered into, and had it not been for said promise plaintiffs would not have executed the agreements. The person who allegedly made the promise (just as the person who allegedly advised the affiant of defendant’s obligation) is not stated, nor is the representation articulated.6 If the claim of fraud is lack of intent to fulfill the promise at the time of its making,7plaintiffs have not offered any evidential support for such a claim. Upon the record as presented, there is sufficient doubt that plaintiffs have prima facie established their claims as to warrant denial, in the exercise of the court’s discretion,8 of the motion for the issuance of the attachment.
There is a second basis for denying plaintiffs’ motion. The New York Business Corporation Law9 prohibits a nonresident of New York or a foreign corporation from maintaining a suit in New York against a foreign corporation except in specified circumstances, none of which is present in this case. Farrell v. Piedmont Aviation, Inc.10 indicates that section 1314 must be given effect by a federal court in New York sitting in diversity cases. Plaintiffs and defendant are all foreign corporations. Since plaintiffs’ right to maintain this action is questionable, it affords a further ground for the court’s exercise of its discretion in denying plaintiffs’ motion.
1. Aerotrade, Inc. v. Republic of Haiti, 376 F.Supp. 1281 (S.D.N.Y.1974).
2. See Bradford v. Amsterdam, 424 F.2d 282 (2d Cir. 1970); Rader v. Manufacturers Cas. Ins. Co., 255 F.2d 404 (2d Cir. 1958); Ralph Hochman & Co. v. Fort Stanwix Mfg. Co., 284 F.Supp. 1000, 1001 n. 2 (N.D.N.Y. 1968); Wallach v. Lieberman, 219 F.Supp. 247, 248 (S.D.N.Y.1963), aff’d, 366 F.2d 254 (2d Cir. 1966).
3. N.Y.C.P.L.R. § 6212 (McKinney’s Consol. Laws, c. 8, 1963).
4. See Glaser v. North American Uranium & Oil Corp., 222 F.2d 552, 554 (2d Cir. 1955); Reeder v. Mastercraft Electronics Corp., 297 F.Supp. 815, 818 (S.D.N.Y.1969); Worldwide Carriers, Ltd. v. Aris S.S. Co., 301 F.Supp. 64, 66 (S.D.N.Y.1968). See also Fed. R.Civ.P. 64.
5. Miller Bros. Const. Co. v. Thew Shovel Co., 248 App.Div. 150, 288 N.Y.S. 944 (1936); Pfaltz & Bauer, Inc. v. Wiener, 181 App.Div. 793, 169 N.Y.S. 223 (1918); 7A J. Weinstein, H. Korn & A. Miller, New York Civil Practice ¶ 6212.02 at 62-81 to 62-83 (1972).
6. Cf. Georgis v. Giocalas, 225 App.Div. 577, 233 N.Y.S. 16 (1929).
7. Cf. Deyo v. Hudson, 225 N.Y. 602, 122 N. E. 635 (1919); Adams v. Gillig, 199 N.Y. 314, 92 N.E. 670 (1910).
8. Cf. Waterman-Bic Pen Corp. v. L. E. Waterman Pen Co., 19 Misc.2d 421, 190 N.Y.S.2d 48 (Sup.Ct.), rev’d on other grounds, 8 A.D.2d 378, 187 N.Y.S.2d 872 (1958); Elliott v. Great Atlantic & Pacific Tea Co., 11 Misc.2d 133, 171 N.Y.S.2d 217 (City Ct. 1957) aff’d, 11 Misc.2d 136, 179 N.Y.S.2d 127 (Sup.Ct.1958).
9. § 1314 (McKinney’s Consol.Laws, c. 4 Supp.1973).
10. 411 F.2d 812, 815-817 n. 4 (2d Cir.), cert. denied, 396 U.S. 840, 90 S.Ct. 103, 24 L.Ed. 2d 91 (1969).
AEROTRADE, INC. v. REPUBLIC OF HAITI416 F.Supp. 1114 (1976)
AEROTRADE, INC. and Aerotrade International, Inc., Plaintiffs, v. REPUBLIC OF HAITI, Defendant.
No. 73 Civ. 3587.United States District Court, S. D. New York.
July 16, 1976.
AEROTRADE, INC. v. REPUBLIC OF HAITI376 F.Supp. 1281 (1974)
AEROTRADE, INC. and Aerotrade International, Inc., Plaintiffs, v. REPUBLIC OF HAITI, Defendant.
No. 73 Civil 3587.United States District Court, S. D. New York.
May 24, 1974.
Regan, Goldfarb, Powell & Quinn, New York City, Robert Aronson, Jan D. Atlas, Howard Breindel, New York City, for plaintiffs.
Andreas F. Lowenfeld, New York City, for defendant.
EDWARD WEINFELD, District Judge.
Plaintiffs, two Florida corporations, commenced this action against the Republic of Haiti to recover, among other items of damage,1 $867,000 for goods sold and delivered to the defendant and services rendered. The complaint alleges that the Republic is a foreign state and a nondomiciliary of the Southern District of New York. The plaintiffs applied for and were granted an order of attachment against the funds on deposit at the First National City Bank of New York (“City Bank”) to the credit of Banque Nationale de la Republique d’Haiti (“Banque”) upon an allegation that Banque is wholly owned by, and the alter ego of, the Republic of Haiti.2 The funds so attached totalled $867,000.
The Republic of Haiti moves to dismiss the complaint upon the grounds: (1) that it is entitled to sovereign immunity with respect to plaintiffs’ claim; (2) that the court lacks subject matter jurisdiction under New York State’s statute dealing with actions by non-resident corporations;3 and (3) that the court lacks jurisdiction in that the defendant has not been served with process nor has any of its property or assets been attached within the state, based upon a denial that Banque is its alter ego. Any one of these contentions, if valid, would entitle defendant to prevail on its motion to dismiss the complaint. We consider first its claim of sovereign immunity.
The defendant, asserting that plaintiffs’ claim is based upon military procurement contracts, sought a suggestion from the State Department to this court that it was entitled to sovereign immunity and that the action be dismissed and the attached funds released. Prior to the hearing of argument on this motion, the defendant withdrew its request. Thus the matter is one for the court’s determination without the benefit of any position by the State Department.4
Since 1962, when the well-known Tate letter was issued, our government has adhered to a policy under which the rule of absolute sovereign immunity is relaxed in favor of a restrictive theory of sovereign immunity as to private acts or commercial transactions (jure gestionis) and is continued as to a foreign government’s public and governmental functions (jure imperii).5That restrictive policy was more precisely defined, for those cases where the State Department had not passed upon a request for immunity, by our Court of Appeals in Victory Transport, Inc. v. Comisaria General.6 The court there held that among the acts of a foreign state which still continued to enjoy sovereign immunity were those “concerning the armed forces,” and this is the issue presented in the instant case.
The parties have submitted extensive affidavits, documents and briefs, and after argument, at the court’s instance, additional affidavits and briefs directed to specific points of contention. The court is satisfied each side has presented all available information pertaining to the issue of sovereign immunity based upon “acts concerning the armed forces” and that pretrial procedures or a plenary trial will not yield additional relevant factual material.7
In support of its claim of sovereign immunity, the Republic of Haiti contends that the subject matter of the contract sued upon was military procurement for its air, land and naval forces. The written confirmation, dated January 20, 1972, of the oral agreement between the plaintiffs and the Republic was signed on defendant’s behalf by its Minister of Defense and Finance. From this document and the invoices attached to the complaint, it is clear that the goods covered by the contracts, for which plaintiffs seek recovery in this action, include armed patrol boats, armed helicopters, machine guns, rifles, anti-aircraft guns and ammunition. The nature of the material and the function of plaintiffs with respect thereto is underscored by a letter by defendant’s Secretary of Foreign Affairs sent to our Department of State, advising that “Mr. James Byers [plaintiffs’ president] has been selected as exclusive representative of the Haitian Government to the United States of Ameria for any purchase of arms and military equipment.” Additionally, defendant submits a letter signed and sent by plaintiffs’ president to the president of the Republic less than two months before the filing of this lawsuit, when the relationship of the parties was strained and defendant planned to terminate their contractual arrangement. Among other matters, plaintiffs’ president referred to “our contract of January 20, 1972 covering naval patrol vessels and helicopters.” Throughout the letter there are descriptions of material delivered and to be delivered which clearly are for armed forces, including naval patrol boats, weapons, pistols, revolvers, grenades, machine guns, cannons, armored vehicles, rifles and other military equipment. The writer stresses that except for plaintiffs’ efforts, the defendant “at this time would not have any Air Force or Naval Force, nor the brave Leopards8to protect the Duvalier family and the Government”; that the present administration of the Republic of Haiti has permitted plaintiffs “to give you . . . what you require, namely, for the Air Force, the Naval Force, and Leopards . . . .” The letter is replete with other references to “arms and ammunition” relating to the subject matter of plaintiffs’ claim. The defendant has presented such substantial evidence that the subject matter of this suit involves transactions “concerning the armed forces,” that prima facie it is entitled to defeat plaintiffs’ claim upon a plea of sovereign immunity.
The plaintiffs, recognizing but not conceding the force of the plea, seek to overcome it by arguing “it does not necessarily follow that the procurement of supplies such as helicopters or boats will be utilized for a public purpose or in connection with the armed forces of a government.” We pass for the moment the question whether, once it is established that the subject of plaintiffs’ suit is a transaction or act “concerning the armed forces,” further inquiry may be made as to the use to which the sovereign puts any goods it receives. Plaintiffs offer the affidavit of a helicopter pilot and instructor employed by plaintiffs who was stationed at Port Au Prince, Haiti, for seventeen months until the defendant relieved him of his duties. The substance of his affidavit is that the only military utilization of the aircraft was during the training of some twelve to fourteen Haitian students; that the missions flown by him were “predominantly of a commercial nature.” These averments do not defeat Haiti’s right to sovereign immunity. The affiant does not state that the helicopters were not used by the Haitian armed forces, and the uses to which he states the helicopters have been put were not inconsistent with their being used by armed forces. Indeed, as noted, the affidavit acknowledges that the helicopters were used for the military training of Haitian students.
Most of the other uses cited, such as rescue operations for civilians after a flood, Medivac missions for civilian personnel who are ill and located in inaccessible parts of the country, and missions in support of the customs agency to prevent smuggling into and out of Haiti are not unusual for a military unit in time of peace and are governmental acts. If our military forces were used to aid civilians in disaster areas and military planes were used to carry out such missions of mercy, it would be no less a political or governmental act than if the military forces and planes were engaged in actual combat against a foreign enemy.9
In addition, the affidavit alleges that at various times the planes were used to fly foreign executives interested in Haiti’s economy, or foreign diplomats and dignitaries visiting the country, or for flying religious missions for the installation of new bishops or priests. However, this and the other allegations already referred to as to the uses to which the helicopters were put after their delivery into Haiti do not in any way contradict the fact that the contract upon which this suit is based and the goods sold thereunder involved equipment for the armed forces of Haiti. If the contract sued upon and the performance thereunder fall within one of the categories of public or political acts, as set forth in Victory Transport,the contracting nation is entitled to a grant of immunity. Once that fact is established it is largely irrelevant how the equipment was used after its delivery. To pursue the subject matter of the transaction into the foreign country and to inquire whether in fact the materials were being used solely and only for the armed forces would be an unwarranted intrusion into the internal affairs of a foreign government.10
This is not a case where the nature of the contracts entered into by plaintiffs with the Republic of Haiti was in doubt. Plaintiffs knew a sovereign government was a party to the contracts; they knew that the subject matter of their transactions involved military equipment for Haiti’s armed forces; they knew that in the event of a claimed breach of their agreements the defendant had the right to assert a plea of sovereign immunity. In such circumstances the actual uses to which the foreign country may have put the equipment are irrelevant. There may be cases where the terms of the contract are so ambiguous or the nature of the commodities involved so general, or where the identity of the contracting party is in such doubt that further inquiry, such as the actual use to which the foreign sovereign put the items, would be justified in order to decide the issue. But this is not such a case.
Grants of sovereign immunity in contract cases are often objected to on the ground that they force the private party to the contract “to decide at his peril whether the goods ordered from him are those which only a sovereign may own or use, or how ordinary trade goods are to be used.”11 This concern makes a rule based upon the nature of the transaction at the time of contracting, rather than the use to which the goods are eventually put by the purchasing nation, all the more sensible. Such a rule fairly apprises both parties to the contract of the probable consequences in the event that a dispute over the contract arises and does so at a time when each party can weigh the disadvantages of such consequences against the advantages of entering into a contractual relationship.
Thus, the helicopter pilot’s affidavit does not aid plaintiffs’ position. First, it does not raise a material issue of fact as to whether the equipment was used by the armed forces.12 Second, it does not dispute the fact that the contracts at issue here were for equipment and services for the armed forces. In sum, the court is satisfied that the contracts at issue and the claims sued upon concern the armed forces of Haiti, and plaintiffs have not raised a material question of fact to defeat the Republic’s defense of sovereign immunity. This disposition makes it unnecessary to consider the other two grounds urged for dismissal or the plaintiffs’ motion for an order directing proper service of process upon the defendant.
The complaint is dismissed and the order of attachment vacated.
1. These include primarily lost profits in connection with undelivered portions of the alleged contracts set forth in the complaint.
2. Plaintiffs had obtained a prior order of attachment, but after its service City Bank filed a statement with the United States Marshal that the defendant, the Republic of Haiti, had no bank account with it, nor was it in possession or control of any funds or property belonging to the defendant. Thereafter plaintiff obtained the present attachment.
3. N.Y. Business Corporation Law § 1314 (McKinney’s Consol.Laws, c. 4, Supp.1973).
4. See Republic of Mexico v. Hoffman, 324 U.S. 30, 34-35, 65 S.Ct. 530, 89 L.Ed. 729 (1945); Isbrandtsen Tankers, Inc. v. President of India, 446 F.2d 1198 (2d Cir.), cert. denied, 404 U.S. 985, 92 S.Ct. 452, 30 L.Ed. 2d 369 (1971); Victory Transport, Inc. v. Comisaria General, 336 F.2d 354, 360 (2d Cir. 1964), cert. denied, 381 U.S. 934, 85 S.Ct. 1763, 14 L.Ed.2d 698 (1965).
5. 26 Dept.St.Bull. (1952); see New York & Cuba Mail S.S. Co. v. Republic of Korea, 132 F.Supp. 684 (S.D.N.Y.1955).
6. 336 F.2d 354 (2d Cir. 1964), cert. denied, 381 U.S. 934, 85 S.Ct. 1763, 14 L.Ed.2d 698 (1965). See also Heaney v. Government of Spain, 445 F.2d 501 (2d Cir. 1971).
7. The plea of sovereign immunity constitutes an affirmative defense, see Petrol Shipping Corp. v. Kingdom of Greece, 360 F.2d 103, 106 (2d Cir.), cert. denied, 385 U.S. 931, 87 S.Ct. 291, 17 L.Ed.2d 213 (1966), and as such, defendant’s motion may be considered under Rule 12(b) (6) of the Federal Rules of Civil Procedure as one for dismissal of the complaint for failure to state a claim for relief. See Miller v. Shell Oil Co., 345 F.2d 891, 893 (10th Cir. 1965); Butcher v. United Elec. Coal Co., 174 F.2d 1003, 1006 (7th Cir. 1949); Bradley v. American Radiator & Std. Sanitary Corp., 6 F.R.D. 37, 39 (S.D. N.Y.1946), aff’d, 159 F.2d 39 (2d Cir. 1947). Since the parties have submitted affidavits to support their respective positions, the Rule 12(b) (6) motion may be disposed of as one for summary judgment as provided in Rule 56.
8. A para-military or police force assigned to guard the president and other members of the Haitian government.
9. Moreover, goods need not be of an exclusively military nature (i. e., weapons) for the contracting sovereign to be entitled to a grant of immunity, as long as they are for the use of its armed forces. The court in Victory Transport, for example, would apparently have granted sovereign immunity in the case of a nation purchasing shoes for its army. 336 F.2d at 359. Cf. Isbrandtsen Tankers, Inc. v. President of India, 446 F.2d 1198, 1200 (2d Cir.), cert. denied, 404 U.S. 985, 92 S.Ct. 452, 30 L.Ed.2d 369 (1971); Heaney v. Government of Spain, 445 F.2d 501, 503-504 (2d Cir. 1971). See also Kingdom of Roumania v. Guaranty Trust Co., 250 F. 341 (2d Cir.), cert. denied, 246 U.S. 663, 38 S.Ct. 333, 62 L.Ed. 928 (1918) (nation entitled to sovereign immunity in suit on contract for purchase of boots for its army); Comment, Judicial Adoption of Restrictive Immunity for Foreign Sovereigns, 51 Va.L.Rev. 316, 323-24 (1965). But see Et Ve Balik Kurumu v. B.N.S. Int’l Sales Corp., 25 Misc.2d 299, 204 N.Y.S.2d 971 (Sup.Ct.1960), aff’d, 17 A.D.2d 927, 233 N.Y.S.2d 1013 (1962) (purchase of meat supply for army held not to be a public act); Article, New Developments in the Law of Sovereign Immunity, 36 Modern L.Rev. 18, 23 (1973).
10. Cf. Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 416, 84 S.Ct. 923, 11 L.Ed.2d 804 (1964); Underhill v. Hernandez, 168 U.S. 250, 252, 18 S.Ct. 83, 45 L.Ed. 456 (1897).
11. Reeves, The Foreign Sovereign Before United States Courts, 38 Fordham L.Rev. 455, 479 (1970).
12. Other exhibits submitted by plaintiffs similarly fail to raise a material issue of fact. A letter, dated November 29, 1973, from an official with the United States Department of the Navy, written in response to a letter from plaintiffs’ counsel, merely states that the Navy will not assist Haiti in obtaining “items which may duplicate the orders Aerotrade was under contract to fill and deliver.” It in no way indicates that the contracts between plaintiffs and defendant did not concern the Haitian armed forces. In addition, plaintiffs have submitted “summaries,” apparently written by plaintiffs’ president, “of the nature and character of the goods and services” that are the subject matter of this lawsuit. These “summaries” are not affidavits and are not the type of material that may be considered by a court on a motion for summary judgment. See Fed.R.Civ.P. 56(e). In any event, they do not raise substantial issues of fact as to the non-military nature of the contracts.
Regan, Goldfarb, Heller, Wetzler & Quinn, New York City, for plaintiffs; Howard Breindel, Robert Aronson, New York City, of counsel.
Andreas F. Lowenfeld, New York City, for defendant.
Hendler & Murray, New York City, for Hartford Acc. and Indem. Co.; Jerome Murray, Jason Wallach, New York City, of counsel.
EDWARD WEINFELD, District Judge.
Plaintiffs applied for and were granted an attachment on October 5, 1973 against the funds on deposit at the First National City Bank (“Citibank”) to the credit of Banque Nationale de la Republique d’Haiti (“Banque”) on the ground that Banque was wholly owned by and the alter ego of the defendant Republic of Haiti (“Haiti”). Pursuant to the attachment the funds were levied upon and Citibank delivered out of Banque’s account $867,000 to the United States Marshal; in addition, in accordance with its established policy when a depositor’s account is attached, it segregated an overrun of $216,750. Thereafter, on May 24, 1974, this Court vacated the attachment upon Haiti’s plea that it was entitled to sovereign immunity with respect to plaintiffs’ claim which involved military procurement for Haiti’s air, land and naval forces.1
The plaintiffs, to obtain the attachment, filed an undertaking as required by an order of this Court pursuant to the New York Attachment Law,2 of which $35,000 was to secure payment of Haiti’s legal costs and damages for which plaintiffs would be liable in the event the attachment were vacated. Upon Haiti’s motion to enforce the terms of the undertaking against Hartford Accident and Indemnity Co. (“Hartford”), the matter was referred to Magistrate Schreiber to hear and report as to the amount due to Haiti.
The matter is now before the Court on the report of the Magistrate, who recommended that Haiti was entitled to reimbursement in the sum of $13,553 for counsel fees and disbursements incurred in connection with the attachment. However, the Magistrate rejected Haiti’s further claim for damages for the sum paid by it to Banque representing interest charges made against Banque for overdrafts on Banque’s account at Citibank on the ground that Haiti was under no legal obligation to reimburse Banque for the interest charges.
The withdrawal of more than $1,000,000 from Banque’s account by reason of the attachment so depleted the account that it necessitated the issuance of overdrafts. Under a prior arrangement between Banque and Citibank, overdrafts were permitted but Banque was required to pay and in the instant situation did pay interest on the overdrafts during the period the attachment remained in effect. Those interest charges were a direct consequence of the attachment against Haiti based upon plaintiffs’ claim that Banque was the alter ego of Haiti.
The record establishes that not only did Haiti agree to reimburse Banque for the interest charges, but also that under the law of Haiti, Banque could have sued to recover such interest charges. The fact that Haiti’s agreement to reimburse Banque was not in writing at the date of the attachment is immaterial; there is no requirement that such obligation be written. So, too, it is immaterial that Banque may have a separate and independent claim against plaintiffs based upon an improper attachment of its funds.
Since the interest charges paid by Haiti to Banque were a direct consequence of the withdrawal from and the depletion of its account by reason of the attachment against Haiti, Haiti is entitled to recover the sums so paid as damages under the terms of the undertaking in its favor.
Hartford seeks to have the matter re-referred to the Magistrate on the issue of mitigation of damages. However, were the interest rate substantially reduced (even at six per cent per annum), the undertaking would still be insufficient to meet the interest obligation over and above $13,553, the amount allowed for legal fees. Hartford’s further argument that Haiti was obliged to have effected a discharge of the attachment and thereby mitigated damages by giving an undertaking in an amount equal to the attached funds pursuant to section 6222 of the new York Attachment Law3 is without substance. That section is permissive and not mandatory; moreover, to furnish an undertaking would require the payment of a premium, and in view of the amount of the claim would probably require the posting of a fund equal to the amount attached.
Haiti is entitled to recover, in addition to the counsel fees, the interest it paid to Banque, but only on the sum of $867,000 and for the period from the date of the levy upon Banque’s funds, that is, October 5, 1973 to June 10, 1974, when the Marshal returned the $867,000 to Citibank.
Judgment may be entered accordingly.
1. Aerotrade, Inc. v. Republic of Haiti,376 F.Supp. 1281 (S.D.N.Y. 1974).
2. N.Y.C.P.L.R. § 6212(b). Jurisdiction was based on diversity.
3. N.Y.C.P.L.R. § 6222.
AEROTRADE, INC. v. REPUBLIC OF HAITI552 F.2d 60 (1977)
AEROTRADE, INC. and Aerotrade International, Inc., Plaintiff, v. REPUBLIC OF HAITI, Defendant-Appellee, v. HARTFORD ACCIDENT & INDEMNITY COMPANY, Appellant.
No. 599, Docket 76-7425.United States Court of Appeals, Second Circuit.
Argued March 17, 1977.Decided March 17, 1977.Opinion March 30, 1977.
Jason D. Wallach, New York City (Hendler & Murray, and Jerome Murray, New York City, on the brief), for appellant.
Andreas F. Lowenfeld, New York City, for defendant-appellee.
Before LUMBARD and TIMBERS, Circuit Judges, and DAVIS, Judge, Court of Claims.*
This appeal arises out of a proceeding under Rule 65.1, F.R.Civ.P., to enforce a bond issued by appellant Hartford Accident & Indemnity Company as a condition for an attachment order obtained ex parte by plaintiffs Aerotrade, Inc. and Aerotrade International, Inc. at the beginning of their action in the Southern District of New York against defendant-appellee Republic of Haiti. The principal action was dismissed by Judge Edward Weinfeld on the ground of sovereign immunity, and the order of attachment vacated. Aerotrade, Inc. v. Republic of Haiti,376 F.Supp. 1281 (S.D.N.Y. 1974). No appeal was pursued as to that judgment. The Republic of Haiti then brought this proceeding to collect on the bond. Judge Weinfeld ruled in favor of the Republic and awarded the full amount of the bond available to it, plus interest. Aerotrade, Inc. v. Republic of Haiti,416 F.Supp. 1114 (S.D.N.Y.1976). This appeal followed. At the oral argument we announced our decision affirming the judgment and we now record that disposition.
The facts are stated in Judge Weinfeld’s two opinions. See also Aerotrade, Inc. v. Banque Nationale de la Republique d’Haiti, 376 F.Supp. 1286 (S.D.N.Y.1974). The main issue concerns Haiti’s right to include in its damages, resulting from the attachment, payments made by it to Banque Nationale de la Republique d’Haiti, the New York funds of which were attached by Aerotrade on the sworn allegation that Banque is wholly owned by, and the alter ego of, the Republic of Haiti. These payments reimbursed the Banque for interest charges levied against it, by the New York bank in which it kept the attached funds, for overdrafts resulting from the attachment.
In affirming, we do so without considering whether the District Court was correct with respect to the existence of some legal obligation running from Haiti towards the Banque. We affirm on the separate ground, also set forth in Judge Weinfeld’s opinion, that the interest charges paid by the Banque “were a direct consequence of the attachment against Haiti based upon plaintiff’s [i.e. Aerotrade’s] claim that Banque was the alter ego of Haiti” in that those interest charges “were a direct consequence of the withdrawal from and the depletion of its account by reason of the attachment against Haiti,” and therefore that “Haiti is entitled to recover the sums so paid as damages under the terms of the undertaking in its favor.” 416 F.Supp. at 1115. We agree that, in the particular circumstances of the case — including Aerotrade’s representation that Banque, a non-party, was the alter ego of Haiti and for that reason should be subject to attachment in this suit against Haiti — the Republic’s reimbursement of the Banque was a direct, foreseeable consequence of the attachment against the Banque’s funds as those of Haiti. The attachment thus caused and produced the reimbursement of the Banque by Haiti. We also concur with the District Court on mitigation of damages.
* Hon. Oscar H. Davis, Judge, U.S. Court of Claims, sitting by designation.
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