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BANDES v. HARLOW & JONES

July 22, 1983

SALVADOR BANDES, Plaintiff, against HARLOW & JONES, INC., Defendants; HARLOW & JONES, INC., Interpleader-Plaintiff, against SALVADOR BANDES and DAVID ALVAREZ, Interpleader-Defendants.


The opinion of the court was delivered by: OWEN

OPINION AND ORDER

OWEN, District Judge

 In 1979 during the final days of the Nicaraguan civil war, his factory a casualty of mortar fire, Salvador Bandes and his family fled to neighboring Honduras fearing for their safety because of his association with the tottering Somoza regime. At that time Bandes's company had paid an American firm, Harlow and Jones, Inc., the sum of $460,000 for steel billets which had not been, and because of events, never were delivered. Shortly thereafter, having prevailed in the war, the Sandinista revolutionary forces "intervened" -- Bandes claims "confiscated" -- Bandes's company. Today, representatives of the Sandinista government run his factory. The said $460,000, less some $40,000 of offsets, is the subject of this interpleader action.

 In more detail the undisputed facts are as follows. Bandes's company, Industria Nacional de Clavos y Alambres de Puas, Sociedad Anonima ("INCA") is engaged in the business of manufacturing and selling steel products, such as nails, barbed wire, and steel construction rods.INCA markets its products within Central America. At full production, it employed approximately 350 workers and supplied in excess of 50% of the domestic Nicaraguan need for such commodities.

 INCA's principal place of business is Masaya, Nicaragua, a city of some 35,000 people. It has been in business since 1960, initially having been formed as a partnership called Salvador Bandes & Co. In 1964, this partnership was reformed under its present name. In 1976, apparently as a condition of doing business in Nicaragua, INCA issued approximately 18% of its shares to General Jose Somoza, the brother of dictator General Anastasio Somoza. At the time of the events in issue, mid-1979, Salvador Bandes and the members of his family controlled approximately 75% of the stock, General Somoza owned 18% and some 6% was in the hands of others. Bandes was the president of its board of directors and its general manager, as well as being its majority stockholder.

 In 1978, INCA ordered 2,000 metric tons of steel billets from H & J, a company located in Stamford, Connecticut. Subsequently, INCA and H & J agreed to reduce the size of that order to 2,000 tons of billets. In January and February, 1979, INCA paid H & J $460,000 for those billets in three installments. INCA has never taken delivery on the billets.

 Thereafter, Bandes, acting pursuant to a long-held general power of attorney, commenced negotiations for the return of the money and, after the revolutionists' intervention of INCA, on September 8, 1979, concluded a settlement agreement with H & J pursuant to which H & J was to refund to Bandes $420,000 and release INCA from its obligation to take delivery of the steel billets. The approximately $40,000 retained by H & J represented both a deduction of some $20,200 in payment of an obligation owed by INCA to H&J and the cost to H & J of the rescission.

 Two days prior to the settlement, however, interventor Alvarez sent a telex to H & J stating that only the Nicaraguan State Fideicommisary was authorized to represent INCA, that he was that Fideicommissary, and that INCA was presently under investigation by the state and was operating under government administration. The clear intention of the telex was to put into question the authority of Bandes to represent INCA in any transactions and particularly in the settlement agreement finalized two days thereafter.

 Confronted with this development, H & J turned to this court, interpleading Bandes and Alvarez, both of whom move for summary judgment. Central to the resolution of the issues before me are the decrees and acts of La Junta de Gobierno de Reconstruction Nacional de la Republica de Nicaragua (the "Government Council") following its take-over on July 19, 1979.

 On July 20, 1979, the Government Council issued Decree No. 3, *fn1" thereby empowering the Attorney General of Justice of Nicaragua "to proceed immediately with the intervention, requisition and confiscation of all assets of the Somoza family, military personnel and civil servants who have abandoned the country since December, 1977." On July 22, 1979, the Government Council, by the issuance of Decree No. 10, *fn2" declared that "presidents, directors, managers, administrative heads of departments and/or those responsible for any working equipment in private business that refuse to go back to work, abandon it or hinder the working of these businesses" have committed a crime, carrying a "penalty from 3 months to 2 years of public service." Decree No. 10 also empowered the state, "through the competent authorities, to intervene those businesses whose proprietors abandon them or refuse to put them back in operation." *fn3"

 Some six days later the holdings of Bandes and his family in INCA were "intervened" by the Attorney General *fn4" and the shares of INCA held by Somoza were "confiscated." At the same time, the Attorney General Authorized the Fideicomiso de Reconstruccion Nacional ("Fideicomiso") to be the administrator of INCA with the power

 To represent the company in and outside of Nicaragua, in the capacity of General Administrator; [and] to represent the stock which was intervened in the General Assembly.

 David Alvarez was thereupon appointed representative of the Fideicomiso and interventor of INCA. Three others were appointed to represent the INCA shares of the Bandes family and the Nicaraguan government at a general assembly of the shareholders of INCA which was to be held on August 1, 1979.

 On that same date, a meeting of these newly appointed representatives was held and the following actions -- the legitimacy of which Bandes strenuously contests -- were taken. Bandes and his wife were removed from their positions as officers of INCA; Bandes and the previous board of directors were stripped of all powers and mandates, and expressly the power to represent INCA in any type of litigation or contract; a new board of directors was appointed to manage INCA, and Alvarez was granted a General Power of Administration. Alvarez now continues to ...


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