Professional Documents
Culture Documents
Gemco v. Seiko, 1st Cir. (1995)
Gemco v. Seiko, 1st Cir. (1995)
Plaintiff.
v.
Defendant, Appellee.
__________
Appellant.
____________________
No. 94-1671
Plaintiff.
v.
Defendant, Appellant.
__________
Appellee.
____________________
____________________
Before
____________________
Mildred Caban
______________
with
whom
Jorge Souss
___________
and
Goldman Antonett
_________________
with whom
____________________
August 2, 1995
____________________
____________________
BOUDIN,
Circuit Judge.
_____________
Royal
Bank of
Canada ("Royal
in
civil
contempt for
assessing damages
costs.
in
an
attachment order
and
frustrating the
assets
violating
application
of an
attachment order
to
Because Royal
by
Royal Bank
under 28 U.S.C.
1291.
I.
The
attachment
January
order
("Gemco")
in
Earlier Gemco
watches
wholly
at
the amount
had been
and clocks
in
issue here
a New York
was
entered
on
of
$3.16
million plus
interest.
for Seiko
Puerto Rico.
Initially Gemco
was
a related company, the Watch and Gem Palace, Inc. ("Watch and
Pascual
pieces,
while
specializing
Watch
in
and
jewelry
Gem operated
and
two
time pieces
-3-3-
retail
(the
time
stores
Plaza
Las
Gemco secured
by a
factor's lien on
Gemco's inventory
and
L.P.R.A.
the funds
order
551 et seq.
_______
it borrowed
to finance
transfers
were
intercompany
Watch and
recorded
accounts
intercompany accounts
to Watch and
Gem's retail
in
payable
Watch
and
receivable.
operations; these
and
in
Gem in
Gem's
books
as
Gemco's
books
as
By early
In
March 1986,
Royal
Bank sought
to restructure
and
resecure
obtained new
Gem,
factor's liens
assignments of
mortgages on various
owing
to
To
from both
Gemco's
amount
as a much
and Watch
and Gem's
accounts
"intercompany receivables,"
cross-
the
bank
from
Gemco
at
the
and
time
and
The
of
restructuring was $1.25 million, while Watch and Gem owed the
In
October
arbitration award
1986,
Seiko
against Gemco
obtained
in New York,
$2.85
million
stemming from
-4-4-
Gemco.
on
was
registered
in the
provided to
district
for Seiko on
court
New York
in Puerto
judgment
Rico
on
December 16, 1986, and on January 13, 1987, that court issued
an
attachment order
satisfy Seiko's
and accompanying
$3.16 million
writ of
execution to
The
1) All
receivable belonging to
2)
the name of
Gemco in the
No. 132-420-
1) and
006-1919-14).
3)
Merchandise
inventory
located
San Jos
IBM
equipment
System
located
36
at
The
order also
Computer
the
second
brand
Seiko
and clocks
An
Colirbr
of
watches
4)
and
consisting
with
lighters,
peripheral
floor
of
the
instructed Gemco's
various
debtors to
to The
from
receivable
collect
deposited
of Canada,
and
any other
owed
Royal Bank
Palace, Inc.;
any
of
or bank
any amounts
in
any
Gemco by concept
the
attached
accounts.
the
-5-5-
debts, accounts
The Marshal
belonging to
of
of monies
shall
Gemco presently
aforementioned
bank
accounts.
of
the aforementioned
debts,
be
Any other
under any
accounts receivable or
course, it shall
the attached
in due
of
by any
Court . . ., where
be claimed by
Seiko Time
Corporation.
At the
account
loans
receivable arising
it had
made
from
to Watch
the
and
various
Gem over
intercompany
the years;
the
Royal
Bank was
served
obtained from
with a
1987.
copy
of the
Pascual an assignment of
order
of
the bank
from the
contemplated sale
of Watch
and
Gem's Plazas
Las
Gem
sold its
Plazas Las
Americas store
for $850,000.
By
Of the
$850,000
$797,219.73,
which
purchase price,
was
indebtedness, ostensibly
guaranty.
This reduced
fully
credited
under Watch
and
Bank
received
against
Gemco's
Gem's March
then
Royal
On that day,
1986
Bank to
Royal Bank.
According
to Royal Bank,
-6-6-
this
loan
equivalent
simply
erased
Gemco's
debt
and
created
an
At the same
credit
to Watch
December 1987,
time, Royal
and
Gem for
a line
of
"working
capital".
Through
borrowed a
total of
$200,000
loan
to
maintain
Gemco
continue a New
Seiko.1
as a
viable
During this
entity
that it
so
into court
At no
could
against
some direct
owing on
the
intercompany debt.
Gemco's other
Gemco's debt to
Royal Bank.
for
a finding of contempt
the
Pascuals.
After
On
Gem's satisfaction of
a hearing,
the Puerto
moved
Rico district
Pascuals in
from Seiko.
On March
18, 1988,
____________________
1This litigation
See
___
by Gemco was
ultimately unsuccessful.
Seiko Time Corp.
_________________
671 F.
-7-7-
Seiko
filed
a motion
for contempt
against Royal
Bank and
court permission
Old San
Juan store
indebtedness [Watch
Canada."
Bank
In
seized
in order "to
and
late June,
the
Gem]
owes
to the
inventory
of
the
Royal
to the
Bank
took place,
Old San
Juan
of
Royal
store--
On January
that
Royal Bank
Bank in contempt.
had aided
and abetted
The
an 18-
court found
a violation
of the
funds
to repay
Gemco's debts
instead of paying
that money
into court.
Royal Bank,
reasoning that
funds
would
have
if not improperly
eventually
calculated damages to be
gone to
Seiko.
diverted, the
The
1.
$797,219.73 from
Plazas Las
court
the sale of
Americas store,
the proceeds
of which
-8-8-
2.
$52,780.27
landlord for
that
Royal Bank
Watch and
directed
to the
Americas
store;
3.
$250,000
that
had
constituted a
"loan"
to
had used to
creditors and
which Royal
creditors directly;
to pay Watch
and Gem's
4.
$530,000
from
Royal
Bank's
seizure
of
sale of the
store to a
willing
II.
In
reviewing
inferences if
district
court's
contempt
and reasonable
Project B.A.S.I.C. v.
__________________
civil contempt
Id. at 16.
___
A nonparty, although
its terms.
order, we
by the
if it knowingly aids or
court order.
G. & C. Merriam
_______________
Co.
___
Cir. 1980).
On
Watch
appeal, Royal
and Gem
terms of
that
Bank
to Royal
argues that
Bank did
not violate
even if they
or abet the
the payments
-9-9-
the specific
did, Royal
violation.
from
Bank says
Alternatively,
to seize the
attachment.
We will address
in question despite
each of these
Seiko's
other, in turn.
1.
By its
owing
from [Watch
Gemco
bank
and
Gem]" and
accounts (which
shall be
henceforth remitted
the
directed that
marshal
was to
apart from
collect),
to this Court
. . ."
. .
We
over $1 million.
Instead,
there
followed
series
of
payments
to
or out of
first and
largest
of these
of Royal Bank.
payments was
The
the diversion
of
proceeds from the sale of Watch and Gem's Plazas Las Americas
over
$50,000 went
to
Gemco's landlord.
This
transaction
occurred in April 1987, well after the bank had been notified
is not
easy to
discern from
that document
bank
-10-10-
thinks
that
these
"henceforth remitted"
payments
were
directive in
consistent
with
the
The
other provisions
_____
of the
order
but it
largely ignores
the
provision
Gemco
directing Watch
directly to
district
the
and Gem
court, a
court's contempt
to pay
what it
owed to
provision stressed
in the
Queen Victoria's
famous
order.
The
bank
was
made to
legitimate
paying
the
enough money
The
discharge Watch
and Gem's
own allegedly
bank instead
of the
court,
when there
But
is not
bank says that the attachment order did not forbid Watch
and Gem from paying its own debts, but an $800,000 payment of
another
debt patently
frustrated
and Gem's
the clear
money be
held for
intent of
the
Seiko.
Cf.
___
314, 319
symbolically in the
defense to the
charge of contempt,
assets had
priority.
As
against
the district
correctly explained:
owed
GEMCO, for
the
-11-11-
ultimate
Court the
benefit of
court
SEIKO TIME.
its
of
that
the
not limit or
restrict
rather, the
Court ordered
could
then
resolve
any
question
of
priorities.
attachment order, the proper course was to pay the money into
district court
App.
III, R.
to modify
21.5
claiming property
(right
its attachment.
to
intervene of
attached by order
See
___
ask the
32 L.P.R.A.
third
parties
of the court);
R. 21.6
the court's
order,
was
not permissible.
See
___
Matter of
__________
were violated,
the violations.
The
Here
to have orchestrated
bank had
worked "hand in glove" with Pascual, Gemco and Watch and Gem,
those parties,"
order
loans to [Gemco]."
Royal
Bank's
brief
in this
court makes
no serious
effort to
show that
-12-12-
2.
Las
Gem
creditors; and
still
sale
of
Implicit
the later
later by
the
bank's seizure
of
that store
to a
third
party for
about $530,000.
This
to
the landlord.
allocation
the
This
payment was
part of
a prearranged
lion's share
allocation, and
for
itself, was
the allocation
clearly involved
of the $52,000
in the
violated the
court's
discussed in
connection with
Having
It
$250,000 in
payments to
or the
bank frustrated
former
were
third-party creditors of
the sale
of the
apparently included
-13-13-
occurred when
on
the
Gemco and
the
store.
The
theory that
they
like the
creditors
into court.
Gem which, by
pay
of being paid
off various
Gemco creditors
was designed to
other than
Seiko, thereby
If
the $250,000 is
treated as
Watch and
Gem's money,
The bank
Seiko
transaction as
the
a loan to
there is
decision to pay
own funds as
depriving
to give
dangerous to describe
the loan as a
sham.
Anyway, it
does
seizing
Watch
and
the bank
Gem assets,
it
by
effectively
violating
the
appears that
the bank
did
attachment order.
Although
proposed sale
party buyer)
the third-
-14-14-
have
But
again
the bank
makes
no
such
argument, and
instead
implies (quite
approval
of
the
seizure
trumped
local court's
the
district
alleged
court's
attachment order.
attachment
order
violation.
or
Absent
ourselves
in
parties.
FDIC v.
____
F.3d 18, 21
civil
that
it aided
and
abetted
extraordinary circumstances,
cases
to
the arguments
any such
we confine
made
by
Whether or
the
35
3.
Even
though
Royal Bank's
conduct
violated
the
otherwise
1991).
damage
F.2d 798,
802 (1st
In re
_____
Cir.
award--although
not
the
finding
of
contempt--by
have
Neither
bank ever
made this
argument in a
-15-15-
straightforward fashion.
these
contempt occurred.
brief discussion
of its various
arguments that no
damages
but to
contempt.
court's
discussion
is
For this
directed not to
purpose, the
strictly speaking
district
unnecessary,
for
reproached
on both grounds:
it makes
bank can be
no argument assuming
__
and
to
the extent
it
discusses the
priority
issues, the
quite unpersuasive.
lien
or the
try to build
1986
liens and
a case
assignments
-both as to
the Puerto
assignment
of accounts
gave the
factor's
bank
statute and
receivable statute--is
at the
the
same
statutory
language).
(Factor's
of Accounts
See
___
Receivable Act).
10
L.P.R.A.
et seq.
________
The security
-16-16-
551
(in
transactions in
peculiar.
We
clear
have now
path
spent an
through
this
that could be
claims
used to
against
description
of
perplexities,
answer
it.
undue amount
morass
in
futile
seeking a
effort
to
reduce or even
Although
false starts
and
eliminate the
we
spare
dead
the central
of time
question, short
the
damage
reader
ends and
remaining
there is
no way to
of a
remand, extensive
Given
the
bank's
effective
waiver
or Seiko to engage
of
the
damages
We cannot require
in further litigation
based
on
argument
mere suspicion
that
diverting them
funds to
the
bank
might have
_____
an
be paid into
court instead
of
on its priority
contempt.
Affirmed.
_________
-17-17-
its