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B. M. HEEDE, INC. v. WEST INDIA MACH. & SUPPLY CO.

June 23, 1967

B. M. HEEDE, INC., Plaintiff,
v.
WEST INDIA MACHINERY AND SUPPLY CO., Defendant



The opinion of the court was delivered by: TENNEY

TENNEY, District Judge.

 Defendant moves herein for an order of this Court: (a) pursuant to Rule 12(b) of the Federal Rules of Civil Procedure dismissing this action on the ground that it involves questions of the construction, effect and validity under the Constitution of the United States of the so-called "Dealer Law" of Puerto Rico, 10 L.P.R.A. § 278a, which this Court should abstain from deciding; (b) dismissing or staying this action on the grounds that there is presently an action pending in Puerto Rico commenced by defendant which involves all the issues raised in the instant action and that Puerto Rico is the only convenient forum to decide such issues; and (c) alternatively, pursuant to 28 U.S.C. § 1404(a), transferring the within action to the United States District Court for the District of Puerto Rico. After due consideration, defendant's motion is in all respects denied.

 Plaintiff is a New York corporation having its principal place of business in Rye, New York, and also apparently maintaining offices in California and Canada. All of its records are kept in New York and all its executives and officers either reside in New York or Connecticut.

 Defendant is a Puerto Rican corporation engaged in the business of acting as a distributor in Puerto Rico for nationally known manufacturers of construction, industrial and agricultural equipment. Its only office and principal place of business is located in San Juan, Puerto Rico. Defendant alleges that it does no business in New York and that is has never had any office, representative, telephone listing or post office address in New York. All of its records are located in San Juan, Puerto Rico, and all of its officers, directors and employees reside there.

 In the early part of February 1965, B. M. Heede, Sr. president of plaintiff, visited defendant's San Juan offices and proposed that defendant act as exclusive distributor of certain construction equipment in Puerto Rico, the Dominican Republic and the Virgin Islands. An oral agreement was allegedly reached at that time. For the next month discussions took place, culminating in the formalization of plaintiff's proposals in two contracts which were executed during the early part of March 1965. Although there is some dispute concerning the place of negotiations, it seems fairly clear that most of the negotiations took place by mail but that some discussion took place at defendant's offices in San Juan. There is no allegation that any employees or officers of defendant came to New York during the course of such negotiations. The contracts were allegedly executed by defendant in San Juan and by plaintiff in New York.

 Appearing immediately prior to the signatures in each agreement was the following provision:

 
This Agreement shall be governed by the laws of the State of New York, and the parties hereto consent to and accept the jurisdiction of the Courts of the State of New York with respect to the determination of any claim, dispute or disagreement which may arise from the interpretation, performance or breach of this Agreement, or with respect to any matter involved herein.

 On November 17, 1966, plaintiff, by letter, tendered notice of termination of the contracts effective thirty days thereafter. Paragraph 20 of both contracts provided for unilateral termination by either party and stated the following:

 
This Agreement shall continue in full force and effect for the term of one (1) year from the date hereof and shall automatically be renewed and extended from year to year on the anniversary date hereof; provided, however, that after the first year either party shall have the right to terminate this Agreement by giving the other party thirty (30) days written notice of its intention to terminate.

 Defendant, by its attorney, advised plaintiff that the termination was ineffective since it was in violation of Puerto Rican Law No. 75, 10 L.P.R.A. § 278a, which provides in pertinent part:

 
Notwithstanding the existence in a dealer's contract of a clause, reserving to the parties the unilateral right to terminate the existing relationship, no principal or grantor may directly or indirectly perform any act detrimental to the established relationship or refuse to renew said contract on its normal expiration, except for just cause.

 After negotiations took place, the within action was commenced on March 10, 1967. One month later, on April 18, 1967, an action was commenced by defendant against plaintiff in the Superior Court of Puerto Rico. On May 11, 1967, the action in the Superior Court was removed by plaintiff to the United States District Court for the District of Puerto Rico.

 The complaint in the instant action (1) alleges defendant's breach of contract in failing to carry out its obligations under the agreements; (2) seeks a declaratory judgment that the agreements were validly terminated; and (3) seeks a declaratory judgment that Puerto Rican Law No. 75, 10 L.P.R.A. § 278a is unconstitutional as an invalid ...


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