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REPUBLIC OF ITALY v. DE ANGELIS

August 19, 1952

REPUBLIC OF ITALY
v.
DE ANGELIS et al.



The opinion of the court was delivered by: WEINFELD

These are two motions, one by the individual defendant Anthony DeAngelis (hereinafter called DeAngelis) and the other by the partnership defendant composed of said Anthony DeAngelis and his wife Virginia (hereinafter called the DeAngelis partnership), to vacate attachments against their respective assets previously obtained by plaintiff pursuant to the attachment procedure authorized under the New York Civil Practice Act. The motion in each instance is based upon the papers upon which the warrant was granted pursuant to Sections 948 and 949 of the New York Civil Practice Act made applicable by Rule 64 of the Federal Rules of Civil Procedure, 28 U.S.C.A.

The plaintiff, although contending that the papers are sufficient and that no jurisdictional defect exists which requires the vacatur of the attachments, has submitted and requested the Court to receive supplemental affidavits pursuant to Section 822 of the New York Civil Practice Act, which provides:

'* * * If the application to vacate be to the court or a judge thereof, * * * this act shall not prevent the court or judge, in furtherance of justice, from allowing new proof, in behalf of the party opposing the application, to supersede or supply defects in the original proof, though the application to vacate be founded only on the papers on which the order or warrant was granted. * * *'

 I have decided to accept the additional affidavits tendered by the plaintiff. These serve to clarify matters adverted to in the original papers, and the disposition made of the major motion is not affected by their inclusion. Section 822, first adopted in the Civil Practice Act, was intended, in conjunction with Section 105 of the Act, to liberalize consideration of applications to vacate warrants of attachment and to relax the rigidity with which Courts had determined such applications under the predecessor Code of Civil Procedure. *fn1"

 The complaint which constituted part of the papers upon which the attachments were granted contains three separate claims: One against DeAngelis; a second against the DeAngelis partnership; and a third against Adolph Gobel, Inc., which is not involved in the present applications. Since the two motions to vacate involve different moving parties, different causes of action, different grounds upon which the attachments were granted and different grounds upon which vacatur of the attachments is sought, they will be treated separately. We consider first the application of the individual defendant DeAngelis.

 The suit stems out of four contracts entered into by plaintiff's representative in this country, the Italian Technical Delegation, with the DeAngelis Corporation, not a defendant herein, for the purchase of 5,300 tons of tallow, of which only 300 tons were delivered. The first count of the complaint states a claim against DeAngelis upon his express agreement to assume individual liability for losses sustained by plaintiff by reason of the breach of the four contracts by DeAngelis Corporation(in addition to the liability of said corporation). The attachment was obtained under Section 903, subd. 6, of the New York Civil Practice Act which authorizes the provisional remedy against the property of a defendant where 'In an action upon contract, express or implied, (he) has been guilty of a fraud in contracting or incurring the liability.'

 The affidavits upon which the attachment was granted indicate substantially the following: that in September 1950, during the course of negotiations for the purchase of tallow, DeAngelis, principal stockholder and executive officer of the DeAngelis Corporation, represented that his company was a going concern operating a meat processing plant in North Bergen, New Jersey, with a very large capacity for producing tallow sufficient to meet the requirements of the plaintiff. Immediately thereafter and in the month of September 1950, three contracts, and in November 1950, a fourth contract, were entered into with the DeAngelis Corporation for the purchase by the plaintiff from the DeAngelis Corporation of 5,300 tons of tallow; that these purchases were made in reliance upon such representations; that the representations were later renewed in the form of statements made in explanation of non-deliveries under the contracts, in one instance the DeAngelis Corporation stating over the signature of DeAngelis, its president, that commitments to the United States Government had prevented it from 'making shipments from our plant in New Jersey'; that by reason of the repeated representations, plaintiff's agents continued to believe that DeAngelis Corporation was a going concern, capable of fulfilling its contract commitments to plaintiff.

 It now appears that the DeAngelis Corporation, acting principally through DeAngelis, at the very time it entered into the first three contracts was, and for some time prior thereto had been, engaged in the process of disposing of all its inventory, merchandise, equipment, processes and formulae to Adolph Gobel, Inc. and surrendering the unexpired portion of its lease of the processing plant in North Bergen, New Jersey, to the DeAngelis partnership, which was the owner and lessor thereof; that at the time the fourth contract was entered into in November 1950, dissolution papers for the corporation had been previously executed on October 31, 1950, which were subsequently filed and the corporation dissolved. In any event, by the end of October 1950, when the bulk of the deliveries were yet to be made under the four contracts, the DeAngelis Corporation had ceased to exist as a going concern. These facts were not disclosed by DeAngelis to plaintiff's representatives.

 The first three contracts specified delivery at the seller's option in October, November and December 1950, and the fourth in December 1950, January and February 1951, with a thirty day grace period. With the exception of the 300 tons of tallow delivered in October, no other deliveries were made.

 The DeAngelis Corporation in December 1950 sought an extension of delivery dates. (It was on this occasion that DeAngelis stated the seller's commitments to the United States Government were 'preventing us from making shipments from our plant in North Bergen'.) The request was refused. Thereafter, when the defendant failed to make deliveries by the end of December and it was evident that there would also be noncompliance with the terms of the fourth contract, plaintiff's representatives and DeAngelis met in a conference on January 29, 1951, which resulted, as plaintiff alleges, in the contract set forth in the first count of the complaint, on the basis of which, and of representations then made by DeAngelis, the attachment was procured.

 The affidavits further aver that at this conference DeAngelis Corporation was in default under the four contracts and stated that its inability to make the balance of deliveries was due to financial difficulties; that he requested a ten day extension to make financial arrangements which would permit performance of the contracts and delivery of the tallow by the DeAngelis Corporation; that in consideration of the ten day extension, which was granted, he assumed personal liability for any defaults under the contracts, and in the event of continued default following the extension, the plaintiff was authorized to buy the undelivered balance of tallow in the open market at prevailing prices and DeAngelis assumed individual liability for any loss sustained. A written memorandum, the nature and effect of which the defendant disputes, was signed by all present, including DeAngelis. It contains enough upon which plaintiff may predicate its claim asserted against the defendant in the first count. Corroboration that an agreement was entered into by him on January 29th is contained in his letter of March 2, 1951, on which day Adolph Gobel, Inc., of which he was then majority stockholder and president, sold to plaintiff at prices considerably in excess of the original contract price a substantial portion of the defaulted deliveries of tallow.

 The plaintiff, for the purposes of this motion, has sustained its burden of establishing a prima facie cause of action for breach of contract and in this respect has met the first requirement of the right to attachment under Section 903, subd. 6, of the New York Civil Practice Act. The contentions that the memorandum of January 29, 1951, fails to show any manifestation of intent by DeAngelis to enter into binding obligations and that plaintiff failed to show that any consideration was given for the contract upon which the action rests, are based upon disputed issues of fact which need not be determined on this motion. *fn2"

 But, in addition to establishing that it has a prima facie cause of action in contract, plaintiff, to sustain the attachment, must also show under Section 903, subd. 6, of the New York Civil Practice Act that the defendant 'has been guilty of a fraud in contracting or incurring the liability.' And it is here that the defendant centers his principal attacks. First he contends that the original affidavits are fatally defective in that plaintiff has failed to establish those elements that are basic in an action for fraud and deceit: representation, falsity, scienter, reliance and damage. *fn3"

 On January 29, 1951, when DeAngelis secured the ten day extension and agreed to make good plaintiff's losses in the event of continued non-delivery, he again failed to disclose to, and continued to conceal from, plaintiff's representatives the true status of the DeAngelis Corporation: that instead of being an active organization it was non-existent and had been completely denuded of all its assets. The continued operation and existence of the DeAngelis Corporation as a going and functioning concern, capable of either acquiring or processing the tallow to meet deliveries under its contracts with plaintiff and possessed of legal status to undertake necessary legal commitments was material. The failure to disclose the pertinent facts with respect to the transfer of its machinery, equipment and inventory and its dissolution constituted fraud upon the plaintiff. Clearly, DeAngelis was aware, and the papers so establish, that the ...


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