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Cargill, Inc. v. Sabine Trading & Shipping Co.

February 21, 1985

CARGILL, INCORPORATED, PLAINTIFF-APPELLANT,
v.
SABINE TRADING & SHIPPING CO., INC. AND GEORGE P. MACDONOUGH, DEFENDANTS-APPELLEES



Appeal from an order entered in the Southern District of New York, John M. Cannella, District Judge, vacating an order of attachment and denying appellant's motions for an injunction and the appointment of a receiver. Affirmed in part; reversed and remanded in part.

Kaufman, Timbers, And Rosenn,*fn* Circuit Judges

Author: Timbers

TIMBERS, Circuit Judges:

This appeal presents the question of whether a state statute authorizing limited appearances in quasi in rem actions is applicable in a federal diversity action. We hold that it is and that the filing of an answer containing a counterclaim arising from the attachment of appellees' property does not subject appellees to full in personam jurisdiction.

The appeal is from an order entered in the Southern District of New York, John M. Cannella, District Judge, granting appellees' motion to vacate an order of attachment, denying appellant's motion for a preliminary injunction, and denying appellant's motion for the appointment of a receiver to marshal the assets of appellees. For the reasons stated below, we affirm in part and reverse and remand in part.

I.

Appellant Cargill, Inc. ("Cargill") is a Delaware corporation with its principal place of business in New York. Appellee Sabine Trading & Shipping Co., Inc. ("Sabine") is a Texas corporation not qualified to do business in New York. Appellee George P. MacDonough is a domiciliary of Texas and is alleged to be the "alter ego" of Sabine. The jurisdiction of the district court is based upon diversity of citizenship. We shall briefly summarize only those facts believed necessary to an understanding of our rulings on this appeal.

In November and December 1981, Cargill and Sabine entered into a contract whereby Cargill would sell and Sabine would buy 10,000 metric tons of rice for $5,180,810. Sabine thereafter contracted with T.J. Stevenson & Co. ("Stevenson") to ship the rice to Warri, Nigeria. Delays in shipping and payment followed, caused in part by restrictions imposed in April 1982 by the Nigerian government on currency conversions.

The parties and Stevenson entered into a new contract on April 23, 1982. This new contract required Sabine to pay Cargill $5,362,370 and $90,000 representing the purchase price of the rice and $271,560 in interest, to pay Stevenson $895,000 and $90,000 for shipment, to establish an escrow account in amount of $636,296.95 for the benefit of all parties, and to pay daily interest into the account at an annual rate of 17%. Sabine also agreed to submit Stevenson's $450,000 demurrage claim to arbitration.

In its complaint, Cargill alleged that Sabine and MacDonough breached the April 23, 1982 agreement by failing to establish the escrow account and by failing to pay interest accruing after April 30, 1982. Cargill also alleged that a $90,000 balance of interest on the purchase price was still owing. Cargill sought $2.5 million in damages plus interest.

On December 19, 1983, the same day that it filed its complaint, Cargill moved in the district court for an ex parte order of attachment. Judge Richard Owen ordered the attachment against appellees' property in amount of $2.5 million. Cargill filed an undertaking of $250,000. Levy was made on December 20, 1983 when the order of attachment was served on appellees' bank, the First Chicago International Banking Corp., in New York City.

Appellees pleaded a number of defenses in their answer, including the allegation that an escrow account had been established in Nigeria in an amount equivalent to U.S. $90,000 for eventual transfer to Cargill. They further alleged that, despite their "best efforts", they had been unable to effectuate a conversion of this amount into U.S. currency as a result of the aforementioned Nigerian governmental restrictions. Appellees also asserted a counterclaim against Cargill arising from the "unjustified" attachment of their funds in New York. They sought $1 million in damages.

On January 24, 1984, appellant moved in the district court, before Judge Cannella, for leave to prove the grounds for the attachment. Appellees filed a counter-motion to vacate the attachment. Judge Cannella entered an order on May 21, 1984 confirming the attachment and denying appellees' motion to vacate it.

Appellant thereafter moved pursuant to Fed. R. Civ. P. 64 and 65 for a preliminary injunction, seeking to enjoin appellees from transferring or encumbering "any real or personal property the title of which, in whole or in part, is held by [appellees]". At the same time, appellant moved for the appointment of a receiver to marshal the assets of appellees. Oral argument was heard on May 25, 1984 before Judge Cannella. On November 1, 1984, the court entered an order denying the injunction and the appointment of a ...


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