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The original documents are located in Box K37, folder "Taylor, A. Thomas" of the Arthur
Burns Papers at the Gerald R. Ford Presidential Library.
Copyright Notice
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photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
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copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box K37 of the Arthur Burns Papers at the Gerald R. Ford Presidential Library
Mr. A. Thomas TAYLOR
Chairman
Deltec International Limited
135 South LaSalle Street
Chicago, Illinois 60603
1/12/72
See Storage Files for complete file.
FORD & LIBRARY
Sandy aleyton 2221
Mrs. Mallardi
January 12, 1972
Dear Mr. Taylor:
I want to thank you for your letter of
December 17, 1971, and for the enclosures concerning the
difficultion Delter has been having in Argentina. 1 have
not had time to examine these documents personally, but
a member of our staff has gone OVER then. I an informed
that Deltec appears to have a strong case from the stand-
point of equity, and X approciate your calling this matter
to my attention. I agree that it would be in the best
interests of any developing country to accord the full
protection of the law to foreign investors and provide
the kind of treatment that would encourage the inflow of
capital from abroad. I have sade this point in discussions
with business leaders and officials of the developing
countries in the pact, and I shall continue to de 60 in
the future.
Sincerely yours,
Arthur F. Burna
Mr. A. Thomas Taylor
Chairen
Doltoc International Limited
135 South La Sallo Street
Chicago, Illinois 60503
RJI:sc
CC: Mrs. Mallardi (2)
FORD & LIBRARY GERALD
BS L
December 27, 1971
Dear Mr. Taylor:
Thank you for your letter of December 17th
which has been received in Dr. Burns' absence
from the office. I shall bring it to his attention
upon his return.
Sincerely yours,
Concetta M. Nobilio
Secretary
Mr. A. Thomas Taylor
Chairman
Deltec International Limited
135 South LaSalle Street
Chicago, Illinois 80603
FORD & LIBRARY GERALD
#1042
DELTEC INTERNATIONAL LIMITED
135 SOUTH LA SALLE STREET
CHICAGO, ILLINOIS 60603
U.S.A.
A. THOMAS TAYLOR
CHAIRMAN
December 17, 1971
Dr. Arthur F. Burns
Chairman
Board of Governors of the
Federal Reserve System
Federal Reserve Building
Washington, D. C. 20551
Dear Dr. Burns:
It is hard to conceive that the talented and richly endowed country
of Argentina will not resolve its political and economic problems and attain a
position as prosperous as its past.
The inequitable treatment and harrassment of Deltec in Argentina will
have a serious impact on the future of the country and you who have interests in
that country and are interested in its future might well study the attached
three documents which I enclose:
1) A brief summary history of the last two years of what has actually
taken place in Argentina in the matter of Swift de la Plata.
2) Judge Lozada's opinion in which he overruled the 86% favorable vote
of the Swift de la Plata creditors, throwing Swift de la Plata into liquidation
on the basis of political and economic philosophy rather than economic viability.
(our translation)
3) Brief of appeal by Allende & Brea, Buenos Aires, on behalf of Swift
de la Plata. The brief gives the entire history and all the pertinent factual
data of the case. (our translation)
This subject and its consequences are so vital to anyone doing business
in or who has interest in Argentina and the hemisphere that you might wish to
understand what is happening in this case and take steps to help stem the possible
expansion of this trend to other fields.
Anything that you might be able to do to guide Argentina into the proper
channels would be tremendously beneficial for that country.
Sincerely,
a Thomas Jaylor
A. Thomas Taylor
FORD i LIBRARY
Enclosures (3)
OCT 12 1971
Dear Mr. Taylor:
Thank you very such for your letter of
September 22, 1971, and for the copy of the state-
sent Deltee Losued to the press two days earlier
regarding the problems of Swift de la Plate.
I appreciate your thoughtfulness in informing -
of these developments.
Sincerely yours,
Arthur F. Durne
Mr. A. Thomas Taylor
Chairenn
Deltec International Limited
Deltee House
Cumberland and Marlborough Streets
RE 29
Massou, Bahamas
Wisse
10-8-71
Ref. #268
ect Mrs. Mallardi (2)
FORD & LIBRARY GERALD
We believe that a familiarity with the events of the last two years recited in the following
Summary History prepared by us is of fundamental importance to an understanding of one of the
major elements in Deltec's position in Argentina.
COMPAÑIA SWIFT DE LA PLATA
SUMMARY HISTORY
All peso amounts are in new Argentine pesos.
1. The price of cattle in November/December 1969 averaged about 0.69 pesos per kilo.
2. Swift bought less cattle in the Liniers auction market in January, February and March, 1970
because prices rose to about 0.82 pesos per kilo. Nevertheless, Swift's total slaughter was only modestly
down in these three months.
3. In April, 1970, in order to improve Swift's management (Swift had been losing money
every month for six months) and to begin Argentinizing the company, the management was changed
and Enrique Holmberg replaced Raford Herbert as President.
4. At the same time, we extended to Mr. Holmberg an option to assemble a group of Argentine
investors to acquire control of the company. When Mr. Holmberg found himself unable to form such
a group, we gave options successively to a prominent industrialist on October 8, 1970; to the company's
executives on February 9, 1971; and to another outside group on May 22, 1971. Finally we made a
firm agreement to turn over 100% of the equity to Swift's executives on October 14, 1971, subject only
to court approval of the creditors agreement that had been adopted on October 5.
5. Under the leadership of Mr. Holmberg and an all-Argentine management team, Swift made a
dramatic recovery. In March and April, 1970 and previously, production by Swift of frozen cooked
beef (the most remunerative meat product for Argentina to export) had been averaging 2,000,000
pounds per month. The new management succeeded in increasing this production to about 3,100,000
pounds in May, to 3,900,000 pounds in June and to 4,800,000 pounds in July, 1970. This was done
while costs were being reduced by the equivalent of approximately $12 million per year.
6. Swift lost money in April but about broke even in May and made profits of approximately
1,230,000 pesos in June, 1,140,000 pesos in July and 895,000 pesos in August.
7. This increase in production and profits was achieved in spite of the price of cattle rising
steadily throughout the period to 1.16 pesos per kilo in September and 1.34 pesos in October, 1970.
8. During these eight months Deltec, the principal stockholder of Swift, arranged substantial new
credits for Swift to purchase seed and cattle. However, Deltec did not ever receive one centavorofiat
own money back in either this period or in any previous or subsequent periods. The total funds and
1
GERAL
BRANY
resources that Swift obtained from abroad from the date that Deltec acquired the shares of Swift in
14. The total operating profit for the four months May through August, 1971 of 17,000,000 pesos
March, 1969 to the date of the petition for a "convocatoria" on December 18, 1970, were over U. S.
permitted the company to report at the end of August a small loss of 1,170,000 pesos for the eleven
$10,000,000. These additional funds were arranged by Deltec.
months. This was in spite of all its problems, having been substantially shut down throughout six
months, with all local credit in Argentina cut off, and with the price of cattle constantly rising. The
9. At the end of September, 1970 the price of cattle at the Liniers market went up to 1.30 pesos
price of cattle in March was 1.50 pesos per kilo and reached above 2.00 pesos a kilo in August.
per kilo while the rate of exchange remained unchanged, making exports of Argentine meat totally
uneconomic and forcing Swift and almost all of the other export plants in Argentina to close down.
15. Furthermore, between April 30 and August 31, 1971 there was a net increase in current assets
10. Thereafter, the Argentine Government took a number of measures to improve the situation,
in the form of cash inventories and receivables of 17,000,000 pesos, less a modest amount spent on
including making available credit through official banking institutions, which credit was limited, how-
sanitary requirements and labor indemnifications.
ever, to companies more than 51% Argentine owned. The Government was at all times aware of
Deltec's efforts to place the control of Swift in Argentine hands, and indeed one reason these
16. During the early part of 1971 the Argentine industry made a contract with the European
efforts were unsuccessful was the fact that the potential investors were never able to ascertain that,
buying group to sell specified quantities of meat extract at a price between U.S. $3.60 and $3.80 per
upon their purchase of control, Swift de la Plata would be treated as an "Argentine company" for all
pound. By June, Swift had completed its contract and found itself in the unique position of having
purposes.
produced additional quantities while other producers were still delivering against their original
contracts. After several months of negotiations, of which the Junta Nacional de Carne (National
11. In this situation, the owners of a number of foreign owned plants settled the liabilities
Meat Board) was kept currently informed, Swift succeeded in concluding a new contract with the
and one of them simply withdrew from the scene. For Swift, the largest unit in the industry, this
buying group for 477 tons at a price of U.S. $3.30 per pound. When the Junta refused to approve this
course of action was not possible and the only alternative that presented itself was insolvency
price as inadequate, the National Government, recognizing that Swift did not have the financial
proceedings. On December 18, 1970, Swift de la Plata S. A. F. applied to the competent court
capacity to carry the extract inventory, expropriated the first 100 tons which had been produced and
of the Argentine Republic for "convocatoria", a proceeding which contemplates (1) an immediate
in due course paid Swift for it. It is interesting to note that on the day the Junta Nacional de Carne
cessation of payment on all non-secured and non-preferential debts; (2) the continuation of the
turned Swift down on the exportation in question at $3.30, it authorized another company to export
business under its own management; (3) the appointment by the court of a referee to report on
extract at $3.00 per pound.
the business and the nature and amount of the assets and liabilities; (4) the proposal by the man-
agement of a creditors agreement for the orderly repayment of the debts; (5) a meeting of creditors
to accept or reject the proposal; and finally (6) the approval or disapproval of the agreement by the
17. On September 22, less than two weeks before the scheduled creditors meeting, the judge
court; the rejection of the agreement by the creditors or the disapproval by the court resulting auto-
intervened in Swift, replacing the Board of Directors by his own appointees.
matically in bankruptcy. The case was in due course assigned to Judge Salvador E. Lozada of the
Commercial Court, who in turn appointed the referee and scheduled October 4, 1971 as the date of
18. In the report of the Referee appointed by the judge to report on the financial and economic
the creditors meeting.
situation of the company, he stated that an independent valuation made at his request by the Uni-
versidad Tecnológica Nacional (Argentine University of Technology), showed a "going concern"
12. In the middle of January, 1971, Swift slowly began operations again, increasing them through
value of the total assets of 556,000,000 pesos (U.S. $111,200,000 at the rate of 5 pesos to the dollar)
the following months. By April, 1971 operations were once again back to normal.
of which 483,000,000 pesos (U.S. $97,000,000) were the value of the fixed assets. Total indebtedness
of the company, including Deltec Group claims, were about 175,000,000 pesos (U.S. $35,000,000).
13. During the following months, Swift made operating profits and effected substantial exports
Thus the report attributed a going concern value to the equity of about U.S. $86,000,000.
as per the following schedule:
Profits Arg. Pesos
May 1971
3,106,000
U.S. $ value of
19. On October 4, in spite of the Judge's disallowing all claims of Deltec and those of third
product exported
parties which in any way bore Deltec's name or endorsement, the other creditors voted in favor of
June 1971
5,104,000
from Swift plants
Swift's repayment plan by over 85% in both amount and numbers of creditors. Swift's plan provided
July 1971
4,100,000
during four months
for 100% payment of all creditors over four years with interest payable in the fifth and sixth years
GERALD
period: about
August 1971
4,785,000
U.S. $30,000,000
2
Deltec agreed, as part of Swift's plan, to capitalize its claim in the amount of U.S. $9,150,000.00 GERALD
3
20. The above shows the economic viability of the company and the repayment plan's excellent
chances of success.
21. Suprisingly, on November 8, Judge Lozada rejected the creditor's agreement and decreed
the bankruptcy of Swift de la Plata, on the grounds that by reason of its alleged conduct the company
did not deserve to survive and that the national interest and dignity must supersede the free will of
the creditors. He appointed as liquidator the National Government, which immediately appointed
an interventor. The interventor was instructed to continue the operations and the official banks were
instructed to make available to him all necessary credit. A few days later the Judge followed his
decree with a ruling that Deltec's remaining assets in Argentina were to be available to satisfy the
claims of any creditor remaining unpaid upon the liquidation of Swift.
22. Since the Argentine University of Technology report shows a value of net assets over liabilities
of the equivalent of approximately U.S. $86,000,000. Thus it is clear that as long as Swift continues to
operate one way or another as a going concern, the Argentine authorities' own valuation would far
exceed the claims of all the creditors.
23. Swift de la Plata and Deltec both have appealed to the Court of Appeals all of the action
taken by Judge Lozada as outlined above.
December 15, 1971
FORD i LIBRARY GERALD
4
IN THE MATTER OF
COMPAÑIA SWIFT DE LA PLATA S.A.F.
BRIEF ON APPEAL
ALLENDE & BREA
November 16, 1971
Abbreviated Translation from the Original Spanish
GOERAL FORD VIBRARY
PETITION
To the Honorable Court:
I, Enrique Garrido, an attorney licensed to practice law
under No. 12, 989, domiciled at Cerrito 836, 5th Floor, Law
Offices of ALLENDE & BREA, representing the Appellant
in the proceedings captioned: COMPANIA SWIFT DE
LA PLATA S.A.F. Creditors' Meeting, respectfully state:
CHAPTER I
That I appear to submit the brief in support of the ap-
peal filed at page 10,562, against the decision of November
8, 1971, in which the Judge decided not to confirm the
arrangement between the insolvent and its creditors, and
decreed the bankruptcy of my client.
I request the Honorable Court to revoke the appealed
decree in all its parts, to reject also the objections found
at page 10,006, and consequently to confirm the arrangement
adopted at the Creditors' Meeting.
CHAPTER II
Prior to entering upon a detailed refutation of the
Judge's decision, I deem it necessary to outline the main
procedural steps of this case, as well as to evaluate the
operative facts in the matter, in order to do justice to the
magnitude of the interests involved and the unlawfulness
of the decision against which I appeal.
#
The Judge decided the case with a total disregard of the
facts and without making an overall evaluation of the con-
tents of the case.
QERALD FORD VIBRARY
2
3
In addition, he has not taken into account the clear state-
ments of my client, which he did not even mention in his
CHAPTER III
opinion.
History of the Case
I wish to point out in this brief introduction that the
decision being appealed violates the legal principles and
As pointed out in the writ of error appearing at pages
rules of the general law and of the Bankruptcy Law and
9969/76, my client instituted these proceedings on Decem-
departs completely from the lucid rules on ratification of
ber 18, 1970. Its petition appears at pages 10/49 of the
creditors' arrangements laid down by the Honorable Court.
record and was supported by folders containing extensive
and orderly documentation, divided into exhibits, all in
Therefore, this decision is arbitrary in that it lacks a
strict compliance with the provisions of Article 10 of the
fundamental condition of validity since it is not a reasoned
Bankruptcy Law.
judgment under applicable law, with special reference to
the proven facts of the case.
It was pointed out at that time that the company ap-
pearing before this Court is the largest meat packing and
These questions will be examined in the following chap-
food industry in the Argentine Republic and one of the
ters of this brief.
largest industrial companies in the country, measured in
Chapter III: History of the case.
terms of volume of business, personnel employed, its in-
Chapter IV: Summary of the Grounds of the De-
dustrial, business and administrative organization, its cur-
cision.
rent assets and liabilities and especially of what it repre-
sents in the domestic and international markets in the
Chapter V: Objection to the Arrangement.
conduct of its business.
Chapter VI: Terms of the Arrangement which are
It should also be pointed out that the company's diver-
damaging to the general interest.
sified activities are carried out in a number of industrial
Chapter VII: Valuation of the Appellant.
plants, which at this time employ more than 11,000 workers
Chapter VIII: Summary of the Brief.
and employees, thus representing a source of livelihood for
Chapter IX: The Constitutional Issue.
more than 45,000 persons.
Chapter
X:
Relief requested.
The statement made by the Referee in his memorandum
sent to the company is also significant, both with regard to
the report and the findings of the survey made by the Uni-
versidad Tecnológica Nacional.
In this memorandum the Referee acknowledged the full
cooperation received from my client in the fulfillment of
his task
GERALD LIBRARY
4
5
Finally, Universidad Tecnológica Nacional, appointed by
his subjective decisional will on the search for or fabrica-
the Judge at the request of the Referee, to the report of
tion of elements unfavorable to my client.
which we must revert below, also indicates that the appel-
It was thus that he arrived at two fundamental deci-
lant cooperated toward completion of the task which had
sions: to remove my client's Board of Directors, and to
been entrusted to it.
disapprove the arrangement adopted by a large majority
The findings of said Institution were submitted in five
at the Meeting of Creditors.
folders appended to the record in a separate binding. I
Oddly enough, the Judge does not refer to the first of
wish to point out to the Honorable Court that in the opinion
these decisions in the second, which is the subject of this
of the Judge there does not appear a single reference, not
appeal, and therefore we cannot refer to it here as a spe-
even circumstantial, to the work done by Universidad Tec-
cific grievance. Undoubtedly, even at this late stage of the
nológica Nacional. This omission is not accidental. The
game, the Judge did not have the audacity to assert the
reason is that the findings of this survey, totally supported
presence of fraud and deceit (legal grounds for removal
by the Referee, completely destroy the assertions of the
of Board). If I refer here briefly to the earlier decision,
Court below.
it is because it was one of the unjust rulings that demon-
Appendix 3 (page 1) of this survey reads verbatim as
strate the arbitrary approach of the Court below.
follows:
In the writ of error brought by us in this Court to test
"This technical group obtained most of the information
the validity of the earlier decision, we brought out the
requested from the Swift Company in order to form
grounds for this arbitrariness. We summarize hereunder
an opinion on the assignment entrusted to our expert-
the arguments of the writ:
ise. We wish to emphasize the absolute level of co-
a) That the Judge left the Appellant totally defense-
operation rendered by the company, in terms of both
less, thus violating the fundamental rules of due proc-
the quality of and the speed with which answers were
ess and trampling upon express constitutional guar-
produced to the various questions raised by the ex-
antees. The grounds for an ostensibly unappealable
perts." (The italics are ours).
decision were established in ex parte proceedings, with-
out a hearing for either the Appellant or the Referee:
We must emphasize that the Appellant's economic and
the inadmissible depositions were obtained without
social size and significance-the dimensions of the interests
opportunity for cross examination or presentation of
at stake-require a particularly meticulous and scrupulous
evidence by the party affected. Their invalidity is
evaluation of the facts.
total and obvious.
This likewise has not occurred in our case. The Judge
b) None of the cited so-called facts, generated be-
does not submit to the light of critical examination much
hind the back of the affected party, constitute fraud
relevant background and attitudes, such as those to which
or deceit nor any other of the grounds contemplated
FORD
we have called the attention of the Court; rather, he focuses
by Article 20 of the Bankruptcy Law. Neither does
GERALD
LIBRARY
6
7
this decision represent a reasoned application of the
ment of the company and its future prospects, since with-
law.
out doubt the creditors, by their votes, passed judgment
These were the circumstances under which the Meeting
on the conduct of the debtor, the fairness of the proposed
of the Creditors took place on October 4, 1971. On that oc-
plan and the business outlook for the enterprise.
casion, the creditors expressed themselves on the arrange-
Specifically, it is worth pointing out that:
ment offered by my client, at page 1438/40, contemplating
the payment of 100% of the principal of all debts, with
a) The affirmative votes included those of the fed-
interest at 12% per annum on outstanding balances. The
eral and provincial banks, such as the Banco de la
principal of the general creditors' claims was to be paid
Nación Argentina, the Banco de la Provincia de Buenos
in four consecutive annual installments of 10%, 20%, 30%
Aires, the Banco de la Provincia de Entre Ríos and
and 40% respectively, and the interest in two equal con-
the Banco de la Provincia de Córdoba. This demon-
secutive annual installments in the fifth and sixth year
strates the concurrence of the Government, which
respectively.
through its credit institutions offered its support to
the Appellant. The private banks, both domestic and
In addition, there was anticipated the possibility of ac-
foreign, took the same position-more than 40 insti-
celerated repayment from the proceeds of sale of assets
tutions with broad knowledge and experience in the
not required for the present industrial operation.
matter.
Moreover, the company offered to accept the appoint-
b) Furthermore, the workers who were creditors
ment of a Creditors' Supervisory Commission which, with
voted in favor. They appeared at the Creditors' Meet-
some amendments proposed in open meeting and to which
ing in person, spontaneously and in masse, to give their
we acceeded, was approved by the creditors.
support to my client in the free expression of their
The removal of the Board imposed a special burden on
opinion. This is the best demonstration that there
my client in view of the fact that the time for the agreed
never existed any manipulation, trickery, deception,
installments began to run from the day after the Creditors'
coercion or pressure, as my client has always main-
Meeting. My client offered this so as to assure that any
tained and as the Referee confirmed (see page 1282).
possible delay in the judicial confirmation of the arrange-
c) The Creditors' Supervisory Commission was to
ment would not redound to the disadvantage of the creditors.
have been made up of five creditors, of which three local
The arrangement was adopted by the favorable vote of
banks, two private-Banco de Galicia y Buenos Aires
1,205 creditors, or 86.81% of the general creditors present
and Banco Popular Argentino-and one official-the
at the Meeting, who represented Arg. Ps. 105,851,071.15
Banco de la Provincia de Entre Ríos. The other two
out of total admitted claims entitled to vote of Arg. Ps.
creditors were to have been designated by the Judge
116, 914, 813.31, or 85.64%.
from among the most important creditors in terms
This affirmative vote on the arrangement unquestionably
of the size of their claims and their institutional ca-
represents a clear expression of confidence in the manage-
pacity, one to represent the cattle ranchers and
other the commercial suppliers.
GLRALD the LIBRARY
8
9
Similarly, the Judge was to designate two alternate
in the chain of political attacks to which it has been
members from among the same categories of creditors.
subjected.
The Commission was to have the broad powers of
My client respects all ideals and all ideologies, and recog-
audit and control conferred on it by the arrangement
nizes that even judges have the inalienable right to think,
agreement.
to express their thoughts and to fight for their convictions—
d) It is worth emphasizing that the two-way majority
as citizens. But when their ideology and their political and
called for by the law was amply exceeded, despite the
socio-economic ideas go beyond these limits and affect the
fact that the Judge did not recognize the claims of
application of statutes to a particular case, they neces-
the principal shareholders of the company nor those
sarily lead to arbitrariness and destroy those guarantees
of any company associated with it.
and rights, whose protection is the most sacred function
These circumstances counsel "that one proceed with
of the Judicial Branch.
extreme circumspection in regard to the grounds for
judicial rejection of an arrangement, and that for this
Even when faced with rulings as simply inexplicable as
purpose the opinion of the creditors must be accorded
many to which it has been subjected in these proceedings,
especial weight since they, being the ones most directly
my client was always confident that, in the end, it would
affected, are in the best position to consider the various
find in the Judge that guarantee of the right of defense
factors, the appropriateness of the arrangement and
and that impartial objective approach which are the pride
the chances of its being complied with." (Citations of
and tradition of the Argentine courts. Thus, for example,
several Court of Appeals cases omitted.)
my client, even when it disagreed with the manner in which
Notwithstanding the foregoing, the Judge, whose
the Judge disposed of certain aspects of the litigation,
approach in this case is directly opposed to this
as when he removed the Board of Directors without any
admonition, decided not to confirm my client's arrange-
reason whatever, never withdrew its support for the work
of the Court and continued to adhere to an approach of
ment agreement.
As we will show in the following chapters, this de-
cooperation and procedural fidelity rare in this type of
cision has no basis in law. Its bases are ideological,
proceeding.
political, perhaps moral within the private conception
It is for this reason that one can only characterize as a
of the Judge, but not legal and much less statutory.
bitter disappointment what my client was forced to realize
in the end-that it never had the slightest chance to re-
The Appellant cannot disguise its bitter disappointment,
ceive justice, because, come what may, His Honor was de-
having achieved a legal and practical solution for its
termined to find it a noxious entity which he, with his are
creditors, its personnel and all those for whom it repre-
thority as National Commercial Judge, wished and was
sents the means of livelihood, after months of exhausting
bound to cause to disappear.
effort, to overcome the obstacles, not always natural or
spontaneous, that blocked the path to its survival-after
Like any political decision, Dr. Lozada has already FOORD
all this to find that the Court below was but another link
ceived the benefit of enthusiastic support from those who
GERAL
LIBRARY
10
11
share his ideas, and violent criticism from those who think
a) The Appellant is an integral part of the "Deltec
otherwise.
Group".
But those of us who are parties or participants in a
b) That it sought to acknowledge the disputed claims
judicial proceeding and as such must test whether the
of other entities of the "Deltec Group", something the
decision applies existing law, irrespective of conviction or
Judge characterized as an attitude of accommodation
political purpose, can arrive at only one conclusion: your
and helpfulness on the part of my client.
Honorable Court is bound to reverse this decision because
c) That the Appellant had merged with La Blanca,
it would set a serious precedent of judicial arbitrariness
S.A. and Frigorífico Armour de la Plata, S.A. and
and because, whether or not it is right in its ideological
that this also evidenced an accommodating attitude on
focus, the outcome puts the finishing touches on a picture
the part of my client.
of the complete defenselessness of participants in judicial
proceedings and of judicial lawlessness, which, if affirmed,
d) That the Appellant had made loans to Provita,
would violate fundamentally the guaranty of the process,
S.A. which had recently been placed in default by the
the only suitable means for achieving the ends of the
Judicial Administrators.
Judicial Branch.
e) As arguments of supererogation, the Judge
pointed out that the Appellant was involved in two
criminal proceedings, in one of which a prima facie
CHAPTER IV
case of the existence of a violation had just been
Summary of the Grounds for the Decision
established.
f) Further, he indicated that the Appellant was the
There are two grounds propounded by the Judge for not
extension in Argentina of a multinational company,
confirming the arrangement approved at the Meeting of
citing in this connection a pronouncement of His Holi-
Creditors.
ness Paul VI which required him, as he says, to examine
1) The approved arrangement, " in that it implies
with greater thoroughness the chances of existence of
the continuation of this business entity, is damaging to the
this legal entity.
public interest and must be disapproved." Later on, the
g) Finally, he refers to my client's behavior as ex-
Judge tests the continuation of the company from the
porter in which he observes a "tendency" to sell to
viewpoint of the public good and in this context refers to
"Deltec companies" at lower prices than to others.
"
conduct incompatible with the benefit of the arrange-
This must be put in context, according to the Judge
ment solution and that an analysis of its conduct reveals
in a rather disconcerting statement, of the recent ex-
that it does not deserve to continue to engage in business."
propriation of meat extract, the out-of-line price for
which was supposed to have endangered the production
For the Judge, the following are the facts deemed to be
of the country.
incompatible with the continuation of the business:
GERALD FORD LIBRARY
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By the same token he states that "the Judge must
does not extend to the power to establish the law itself
reject the arrangement solution when the debtor has
nor to assume the power of legislation which they do
acted in bad faith, because only those debtors whose
not have."
economic troubles are due to causes beyond his control
On the other hand, the Judge is persuaded of the excel-
and ability may be permitted to continue to conduct
lence of my client's industrial plants and wishes to provide
their business
arguments regarding which the
for the continuation of operations
"for the obvious
Judge thereafter maintains a significant silence. In the
social and economic reasons, considering that the Referee
light of the seriousness of the charges hinted at but not
has highlighted at page 4161 the efficient productivity and
spelled out nor PROVEN, this silence speaks for itself
appropriate technology of the industrial plants, particu-
about the value as a judicial pronouncement of the
larly the one in Rosario."
decision being appealed.
For the Judge, social peace and the public good, the
2) The second argument of the Judge refers to the ob-
social and economic order, hold the highest priority. No
jection found in page 10,006 of the record, alluding to
doubt every citizen is concerned with these values. But
various facts which in his opinion bring the case within
in the process of totally ignoring the law and usurping
the terms of paragraphs 2 and 5 of Article 38 of the
legislative authority, it would appear that the Judge has
Bankruptcy Law.
left the creditors holding the bag. He carriers his pro-
tective instinct to the point of leaving exposed the very class
Even though logically it would have been proper for the
of those who are the most directly concerned and for
Judge to have dealt with the objection referred to above in
the defense of whose rights, as well as those of the debtor,
the first instance, as we propose to do in this brief, the
the law was enacted. For how long is the liquidator's
Court below reverses the treatment of the questions pres-
management to last? For 10, 15 or 20 years? Until the
ented. From this it would appear that the Judge, too,
assets are liquidated? Until the creditors have collected!
regards the objection as an a fortiori argument insufficient
Does he really care what happens!
in and of itself as a basis for the decision of the Judge.
I maintain that in the case at bar there are no grounds
We cannot fail to emphasize that the Judge's refusal
for applying paragraphs 2 and 5 of Article 38 of the
to confirm the arrangement becomes in the end an act of
Bankruptcy Law; that the general interest has not been
legislation, the Judge thus usurping powers which the law
injured. The decision of the Court below violates express
in no way confers upon him, when he purports to give
statutory provisions and is diametrically opposed to the
instructions to the Executive about the management and
uniform interpretation laid down in decided cases by all
eventual conveyance of title to the assets of the Appellant,
three panels of your Honorable Court.
in disregard of the principle of the separation of powers
and in clearcut violation of his judicial obligation, forget-
FORD
ting that-in the words of your Honorable Court-"the
enormous role of the judges in the development of the law
GERALD
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It should also be pointed that even under the hypo-
CHAPTER V
thetical assumption that the representation of the three
deponents were invalid, their votes were neither necessary
The Objection to the Arrangement
nor determinative for the approval of the arrangement. In
addition, even if an attempt were made to deny the validity
The legitimate right of some creditors to sign powers of
of the 90 powers of attorney which Notary Fraccia de-
attorney in blank, a decision which as we have seen in no
clared to have certified and the 20 of Notary Rivas, such
way lacked content but which rather tended to facilitate
an invalidation also would not affect the percentage of
the execution of the will of the principals, is a solution
creditor votes present required by the Bankruptcy Law.
completely accepted by the provisions of applicable law.
In fact, the arrangement was approved by a majority
In fact, the law provides that even assuming that the
of 1,205 creditors out of a total of 1,388, SO that if 110
signatory of a blank document should want to object to its
powers of attorney were deducted, assuming they were in-
contents, "evidence to that effect cannot be given by wit-
valid, a favorable vote of 1,095 creditors out of a total of
nesses."
1,388 creditors present would have been obtained, which
Moreover, there can be no invalidity when the issuance
represents 78.89%, that is to say a higher percentage than
of a power of attorney, signed by the creditor and delivered
that required by law.
to a third party to be completed with the name of the
On the other hand, if these creditors, not identified
person who will act as representative at the meeting, con-
individually in any way but rather only by the regions
stitutes a business transaction.
in which they reside, are eliminated in the computation
of percentage of total indebtedness, the result would not
In fact, when one delivers a proxy to a person with the
have affected the majority required by the law. The
name in blank, it is because one entrusts to such person
reason for this is that the total amount owed to all creditors
the selection of the representative as a measure of one's
in these regions, not three, nor ninety nor one hundred
confidence in him. From the moment the power of attorney
ten, amounts approximately to Arg. Ps. 550,000. Obviously
is filed in court, the relationship between creditor and
this total does not alter in the slightest the percentage
representative at the Meeting is governed by the terms
obtained in the vote.
of the power and the grantor of the power may demand
an accounting.
It is incredible, Honorable Court, for the Lower Court to
It should furthermore be pointed out that false is the
find alleged improper representation based on the testi-
opposite of true, and it is therefore inexplicable how the
mony of nine persons, four witnesses for the intervenor
Judge can characterize the execution of powers of attorney
and five witnesses for my client, all in total accord, and
as false when the witnesses for the intervenor themselves
then, to find alleged fraudulent collusion, for the Judge to
testified that they had acted freely, as confirmed by the
throw out the same testimony as "highly debatable".
testimony of the deposing notaries.
FORD & LIBRARY 074479
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dicts these statements and without ever referring either
CHAPTER VI
to the terms of the arrangement or to the arrangement itself.
Terms of the Arrangement Which Are Damaging to the
Furthermore, it should be noted that the Judge does
General Interest
not express any objections to the actual arrangement, nor
to the effective possibility of its being fulfilled, nor does
It is now appropriate to deal specifically with the
he contend that its terms are frivolous or lack serious
argument invoked by the Judge below that the arrangement
bases.
approved by the creditors is damaging to the general
interest.
Had he done so, he would have had to prove that one
of the assumptions was infringed by the terms of the
Article 40 of the Law in question provides that "Even
arrangement and not just in any manner, but in a damaging
though the arrangement may not be contested, the Judge
manner, or more precisely, manifestly damaging. And if
shall deny confirmation in cases provided by Article 38
damaging means burdensome, encumbering, limiting, di-
or when he deems that the terms accepted by the majority
minishing or weakening, manifestly is an adverb meaning
are manifestly damaging to the general interest."
that the damage must be public and known by all, or in
It is true that the Judge has the power to deny confirma-
other words, that the offense must be evident, clearly
tion on his own motion, but this power is not absolute and
outstanding. The Judge could not say any of this about
he may only exercise it under two assumptions:
my client's arrangement which had been evaluated and ap-
proved by the creditors; therefore he did not say it.
a) When he ascertains any of the situations which
would have allowed the creditors to object to the
For the Judge then, the arrangement is damaging to the
arrangement in accordance with article 38 of the Bank-
general interest
"
since it implies continuation of this
ruptcy Law; or
business entity."
b) If the terms of the arrangement offend against or
It can be observed that this criterion not only contradicts
affect the general interest.
the precedents of this Court, but it impairs to the roots
the purposes of the Bankruptcy Law. This body of law
The meaning and scope of the phrase: "terms of the
allows the businessman who is in financial or economic
arrangement which are manifestly damaging to the general
difficulties to institute a proceeding to forestall bankruptcy
interest" have been clearly established by repeated state-
for his own benefit, that of the creditors, and that of the
ments of the Honorable Court which constitute uniform
business community in general. The specific and concrete
case law of the Commercial Court, as will be demonstrated
purpose of the institution of the preventive creditors
below.
arrangement is clearly to enable the debtor to continue his
The Judge applies the criterion of general interest to
activities, and therefore this purpose, specifically provided
reject the arrangement in a manner that expressly contra-
for by law, cannot as such constitute something that
damages the general interest. The principle of the pre
RD
GERALD
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servation of the company is implicit in Article 40 of the
possible or very difficult to fulfill or if it deceives the
law in question. Therefore, the argument of the Judge
interest of the creditors, as well as when the debtor has
lacks seriousness by failing to adhere to the standard set
demonstrated fraudulent conduct or bad faith in his
by the Supreme Court which has required that judicial
business affairs or toward his creditors."
decisions must have serious grounds, opining that the
3) To continue with the chronological development
"obligation to justify a decision tends to document that the
of the Honorable Court's decisions, the en banc deci-
decision in the case is a reasoned derivation from appli-
sion of the Court on June 10, 1970 (No. 18,030) re:
cable law and not from the individual will of the Judge."
"Dante Martiri S.A." should be mentioned.
1. Teaching of the Commercial Court.
In that decision, the Court lays down the following
two criteria:
We shall now examine the Honorable Court's teaching
regarding the interpretation of the concept "manifestly
a)
"
that the power of the court to deny con-
damaging to the general interest" contained in Article 40.
firmation on its own motion is not absolute, that is
to say that judges may only exercise such power in
1) In "Del Atlántico S.A./Bankruptcy" of June 2,
cases in which they ascertain one or more of the
1966, the Court considered it as explicitly estab-
situations which might have served as a basis for a
lished that " if there do not exist the operative
creditor's attack under Article 38, or where the terms
facts (listed in Article 38), it is not in order to deny
are contrary to general interest.
confirmation unless the second hypothesis applies, that
is to say, if the terms of the arrangement offend against
b) That the sense expressed by the latter concept
or affect the general interest, meaning by this terms
is that terms are to be understood as such, " when
that render an arrangement frivolous; conversely,
they make for a frivolous arrangement or conversely
terms that would render the approved proposal pre-
would render the approved proposal presumptively
sumptively impossible or very difficult to fulfill; or
impossible or very difficult to fulfill, etc.
similar situations."
4) After this, the Honorable Court reiterates this
2) This same criterion has been repeatedly reiter-
interpretative approach in "La Asturiana S.A./Bank-
ated in the Honorable Court's decisions. In "Suffern
ruptcy" (10-15-70, Decision No. 152,257) and more re-
Moine y Cademartori S.A./Bankruptey", it was decided
cently in "Hot-Tur, Compañia de Hoteles y Turismo
that " it is necessary to reach a firm convic-
S.A./Bankruptcy" of May 24, 1971 (No. 153,872). In
tion objectively based on actual data of the financial
this latter decision, the Honorable Court states that
and economic situation of the debtor, as well as the
according to the theory upheld by the Court "
in
opinion of the directly interested creditors, showing
these situations, it is always appropriate to favor
that the general interest of credit and commerce are
preservation of the enterprise in that it represents a
perceptively affected; for example, when the arrange-
definite source of work and credit and is therefore
ment appears to lack serious terms or it appears im-
favorable to the intentions of the law."
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21
Finally in this decision the Court added that the declara-
of its business. He attributes fault, but fault is not deceit,
tion of bankrupty, a serious and extreme measure, is a
fraud nor, even less, bad faith
"
situation which is obviously not sought by the Law nor
required, without more, by the general interest."
The Judge overlooks the meat problem; the well-known
The departure in the decision of the Judge below from the
historic debates in the National Cabinet concerning the
clear, uniform and binding teaching of the Honorable Court
matter; the sad and desperate situation of the export
renders the decision clearly void and arbitrary under the
industry, of which Cia. Swift de la Plata is a vital part;
decisions of the Supreme Court.
the notorious fact that we have had for more than ten
months a restriction on consumption to enable the export
2. Accumulated Charges Claimed.
industry to generate foreign exchange for the country and
thus strengthen the balance of payments; the fact that the
We will proceed to analyze accumulation of the facts re-
three remaining large export packers are in an extremely
lied on by the Judge, which he described as behavior in-
serious economic situation, that Anglo has closed down
compatible with the arrangement solution.
and that its foreign stockholders have sold their participa-
Further on, I shall refer to the company as such, to its
tion to local stockholders; already the insolvency of FASA
productive capacity, to its ability to overcome the current
is widely known, and only the Banco Nacional de Desarollo
crisis in the meat industry, without precedent in our his-
and the famous law to channel official credit to Argentine-
tory, to the value and condition of its assets as analyzed
owned meat packers have so far prevented that firm from
by Universidad Tecnológica Nacional, to the capacity and
filing insolvency proceedings. As to the Corporación
skill of its personnel, all of which are fundamental factors
Argentina de Productores de Carnes (CAP), its losses
in evaluating the desirability of its survival in the busi-
for the last fiscal year amounting to 6,000,000,000 old pesos,
ness world. First, however, before we consider the
that is to say, four times as much as the losses of Compañia
alleged charges, we must address ourselves to two serious
Swift de la Plata
insinuations by the Judge below: the bad faith of the debtor
We will now review the facts alleged by the Judge:
and absence of causes beyond the control and ability of
1) That the Appellant forms an integral part of the
the debtor, which, according to the Judge, prevent con-
"Deltec Group."
firmation of an arrangement. Now in this connection it
can be observed that the Judge does not specifically at-
It should first be pointed out that this is not the litiga-
tribute bad faith to the Appellant, but he implies that
tion in which to put on trial the principal stockholder
Compañía Swift de la Plata is a bad faith debtor, even
of the Appellant, which has not at any time had the desire
though such an assertion is not supported by any proof
or intention to hide its position. On the contrary, the
in the record. The Judge cannot even cite the "Referee
Appellant furnished this information in its petition.
of extraordinary diligence" in this connection, since he
However, it would appear that the subjective charac-
does not attribute bad faith to my client in the conduct
teristics of the majority stockholder have the strange FORD effect
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of converting an arrangement approved by the creditors
crime and protect from deceit; see the famous holding of
into something that might be contrary to the general in-
the Supreme Court of the United States in Sanbourg VS.
terest. To this end, the Judge decided to apply the theory of
Milwaukee Refrigerator Transit Co., 142 F. 247. Although
penetration: he cited the report of the Referee and a well
the theory is not part of the Argentine legal structure,
known definition of a business corporation by Chief Justice
which establishes a clear distinction between a company
Marshall under United States law and added:
and its shareholders in the event of bankruptcy, as has been
clearly stated by the Honorable Court (Citation omitted), it
"to assume that this task in the service of truth and
behooves us to point out again that its presuppositions are
justice may imply legal uncertainty or insecurity
not applicable to these proceedings.
suggests a grave indulgence of bad faith, fraud and
defenselessness of the public contracting with these
To place the problem in its proper perspective, the
companies."
following should be stated:
a) The theory of penetration is a creation of the
Once again the Lower Court speaks of bad faith and fraud,
Anglo-Saxon courts, where judges may create law, as
but it does not say on what it bases such a statement, nor
shown by Cueto Rúa in his magnificent work on "The
does it explain what it consists of. The Referee did not
Common Law". Argentine judges are not permitted
accuse my client of any fraudulent act, even though he
to do so; they must judge according to the law and
acted with "extraordinary diligence", in the words of the
not of the law.
Judge, nor did he consider that the creditors had been
deceived.
The "equally alert" Judge rejects confirmation
b) Where applicable, the theory is applied in certain
of the arrangement by applying the theory of penetration
situations-based on deceit and fraud, which do not
which in United States law is availed of to determine
appear in these proceedings-but in no case is the
certain rights of the principal shareholders and not to judge
nature or condition of the controlling company applied
actions of corporations in which they participate. It may
to evaluate the acts of the controlled company.
be that an error in the documentation has led the Judge to
c) In these proceedings, it is the commercial activity
act along these lines, inverting the problem and the theory.
of Cia. Swift La Plata which is being judged and not
What is being judged in these proceedings, as has been
the activities of its shareholders. Therefore, there are
admitted by the Judge, is the business conduct of Cia. ,Swift
no grounds for invoking said theory to judge my client.
de La Plata and not that of other companies. The theory
of penetration, as American authors have described and
d) The dogmatic statement of the Judge regarding
commented on it (see Fletcher on Corporations; Ballantine
the noxious influence of Deltec on ,Swift is an individual
on Corporations; Stevens "Corporation Encyclopedia";
evaluation, supported only by his own statement, and
Cary William "Corporate Law")-as have also European
therefore constitutes an obvious fundamental ingre-
and Argentine authors in their writings on the subject-
dient of arbitrariness, according to the interpretation
this theory tends and is applied to prevent fraud, punish
of the Supreme Court.
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25
Thus, it appears that in the personal opinion of the
2) That an attempt has been made by other companies of
Judge the existence of a shareholder owning 99% of the
the "Deltec Group" to prove claims in the proceedings
shares and is, in addition, a foreigner, is conclusive to
and that this constitutes an attitude of accommodation
prevent confirmation of an arrangement which has been
on the part of my client.
approved by the creditors. It does not appear to matter
Exhibit 9 annexed to the petition initiating these pro-
that the debtor company had been organized long before
ceedings contains the list of creditors required by para-
and without having the participation of the shareholder
graph 2, Article 10. This Exhibit shows the liabilities to
in question. Deltec is a "bad" shareholder and "bad" share-
all creditors as recorded in my client's books, including
holders, like the luck of King Midas, render noxious any
among others the debts due to the so-called "Deltec Group".
company in which they participate. This, to put it bluntly,
constitutes the theory of penetration as applied by the
In answer to the request of the Judge, page 51, for in-
Lower Court.
formation on the Deltec loans, my client included with his
presentation (pages 92/94) three additional folders, among
The Judge establishes new rules in the field of corpora-
them Exhibits "O" and "P" intended to satisfy said re-
tions, new rules on stock ownership and new grounds for
quest. My client again referred to this matter in Chapter V
rejecting arrangements which have been approved by
of its brief at pages 1170/1236 (pages 104/261 of the ob-
creditors.
jection).
Today he holds as contrary to the law and not entitled
The Referee recommended that these claims not be ad-
to the benefit of an arrangement a corporation whose
shares are held by another to the extent of 99%. Tomorrow
mitted, applying of the so-called "theory of penetration" for
the ratio might be reduced to 90, to 80 or to 75%. Why not?
this specific purpose only. He does not characterize my
client's acknowledgment of these claims as a wrongful act,
much less one that is deceptive or having a tendency to
Now then, the "accommodation" consists in certain credi-
prejudice the creditors.
tors (the Deltec Group) attempting to prove claims, repre-
senting 40% of the total liabilities, which the Judge rules to
be non-existent. This ruling is startling and I shall deal with
It is here relevant to point out that the Referee con-
it further below. But more noteworthy is that the sums
firmed the company's receipt of funds and that a substantial
owed by my client to the majority shareholder, the entry of
portion of the claims originated prior to the date on which
which was confirmed by the Referee, only demonstrate that
Deltec International Limited became a stockholder of the
the party most injured by cessation of payments is the so-
company. None of these claims was termed by the Referee
called "group", which has suffered a loss equal to almost
as "non-existent" or falsified; in fact, he recognized the
40% of my client's total liabilities. What were these funds
transactions, but the Judge, departing from applicable law,
used for? We will see that they were used for the common
rejects the claims by application of the "penetration"
benefit of all the creditors.
doctrine.
FORD LIBRARY
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27
The general statement of the Judge, to the effect that the
In fact, my client could not have acted in a manner
requests for verification "affect the objective justice, violate
different from the manner in which it acted because:
the ends of the legal entity, are based on a simulation of
a) The liabilities appear in its books of account;
juridical acts repudiable under the legal order
contrary
to morality and ethics", lacks all legal foundation. There ex-
b) They have been entered in the corresponding
ists no rule which prohibits a shareholder, or other affiliated
balance sheets;
companies, to make loans or render services. In fact, what
c) No state organ, neither the National Meat Board,
more common transaction can there be than for a company
nor the Inspección General de Personas Juridícas
to receive financial support from its shareholder? No one
(Office of the General Inspector of Corporations), has
has shown why my client is incompetent to receive such
ever raised any objection to nor made any comment
financial assistance.
on this treatment.
It should be noted that further on, the Judge states that
d) My client was also bound to proceed in this
Deltec withdrew its financial support and left my client to
manner because applicable law requires it, as do the
its own fate.
regulations governing corporate financial statements
I really fail to understand, Honorable Court, how it is
and the corresponding tax laws.
possible to label the performance of an act as repudiable
e) No expert accountant formulated or could recom-
under the legal order and contrary to so many principles,
mend anything other than what appears from the
and immediately thereafter to criticize the non-performance
facts: a loan can only be accounted for as such.
of the same act. The logic of the Judge does not withstand
analysis. It is self-contradictory, and an obvious form, if
f) The law grants to all creditors the right to ini-
not the supreme form, of arbitrariness.
tiate the procedure provided by Articles 27, 77 and
parallel provisions of the Bankruptcy Law, only upon
On the other hand, it should be pointed out that the
the conclusion of which can there be a final decision
loans were used by my client for the modernization of its
on disputed claims.
industrial plants, both for reequipment and for sanitary
improvements, as well as for working capital. More than
g) The majority shareholder in a further spirit of
US $30,000,000 were applied to these two purposes during
support offered to capitalize its claims, subject to
the last five years, with the result that my client had the
the confirmation of an arrangement as can be seen at
best and most efficient industrial plants in the Argentine
pages 4670/77. All rights are subordinated to the prior
Republic. There are only three industrial plants in the
collection by the other creditors in that the shares to
country authorized to export worldwide, of which two
be issued cannot be redeemed or accrue dividends until
belong to my client and are located in Berisso and Rosario
after all of the other claims have been paid.
respectively.
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3) That the Appellant merged with La Blanca S.A. and
officer, after giving the reasons for his request and stating
Frigorífico Armour de la Plata S.A. and this also re-
the nature of the institution, underscores his authority to
veals the accommodating attitude of my client.
comment on its report
The Judge states that the only reason for the merger
Upon submitting his Report, the Referee did not object
was to avoid dissolution of the absorbed companies for
to the appraisal made by said University; quite on the
loss of capital, to the prejudice of the creditors at the time
contrary, he completely accepted its conclusions as his own.
of the merger; that the economic asphyxia of my client
Now then, despite the foregoing, the Referee maintains
was in great measure voluntarily decided by Deltec in the
that the value of the merged assets is irrelevant to his
interest of the group and without justifiable economic
judgment on the merger. The position of the Referee is
reason; and that this led to a weak capital structure to
which the Deltec group later cut off its financial support.
entirely inconsistent.
In fact, it should be noted first of all that, as pointed out
a) It is not true that the merger resulted in a reduc-
by Universidad Technológica at page 51, Appendix 1 of its
tion of the Appellant's liquidity or its capacity to
study, part of the Armour industrial installations were
moved to the Swift plant, which was one of the reasons
meet its obligations by saddling it with increased in-
for the merger as amply explained in the record.
debtedness, nor an erosion of its assets resulting from
the cancellation of its receivable from the absorbed
The decisive fact is that the study, as previously ob-
companies or from receiving overvalued assets which
served, shows much higher realizable values than the book
it did not need. This was mathematically demonstrated
values, supposedly inflated through the accounting devices
by the merger balance sheet, the items in which were
mentioned by the Referee
discussed in the above mentioned briefs and which
But there is a still more decisive fact, which is the
actually show a favorable difference for my client of
value of the Appellant's corporate assets compared with
1,815 million old Argentine Pesos.
its liabilities.
As to the fixed assets, the argument of overevalua-
tion was categorically squelched by the survey made
The summary appearing on page - shows that the Ref-
by the Universidad Tecnológica Nacional of a large
eree values the assets of the company at 556,223,360 new
portion of my client's assets. In fact, the forced sale
Argentine Pesos and the liabilities, including contingent
values attributed by this survey to the assets in ques-
liabilities, at 143,480,787.25 new Argentine Pesos; that is
tion are considerably higher than the book values of
to say, there is a 412,742,572.75 new Argentine Pesos dif-
total assets of the three merged companies.
ference between the assets and liabilities of my client.
b)
In other words, according to the opinion of the Referee,
my client's assets amount to four times its liabilities.
FORD
In the memorandum in which the Referee proposed the
It should then be asked, how can there have been any
appointment of the Universidad Tecnológica Nacional, that
prejudice to the Appellant's creditors when economically
LIBRARY
30
31
they were actually benefited by the merger and the con-
4) That the Appellant made loans to Provita S.A., which
solidation of net worth.
had recently been declared in default by the Judicial
Administrators.
Nor can we fail to point up some of the other aspects
Here again, the Judge draws the most unfavorable con-
that we consider of importance to the examination of the
clusions, without taking into account the total picture drawn
transactions in question. In fact, the merger of companies
by the Referee.
is a legitimate transaction, not only authorized but en-
couraged by applicable legislation as a means toward
I must point out that the shares of Provita S.A. are
achieving greater productivity and a reduction in industrial
owned by Ganados S.A., a company the outstanding shares
costs.
of which belong to my client.
The transaction was effected with all safeguards required
In his evaluation of this phase the Referee reports
by law, and was authorized by the Inspector General of
that as my client markets the products of the above men-
Corporations, publicly registered and recorded in the Pub-
tioned companies, he believes that it is fair to point this out,
lic Commercial Registry.
"since it provides the explanation that by making the loans
the company was protecting its own interests, an explana-
All of the elements of the proceedings called for by the
tion with which this office does not agree."
law were completely documented with the data submitted
upon the filing of the original petition.
I have also referred to this point in my objections to the
In addition, even though the regulatory authority for
Referee's report and it should be pointed out that these
corporations does not require the publication referred to
loans did not violate any legal rule that might have inhibited
in Law 11,867, my client nevertheless effected publica-
my client from acting as it did.
tion so that interested parties might be duly informed
In addition, although one may not share the opinion
and raise objections if they so desired. None of the
of my client as a matter of business judgment, neither
creditors at the time of the merger raised an objection of
the Referee nor the Judge in his decision held that the
any kind whatsoever, although there was the opportunity
loans amounted to deceit or fraud.
to do so, and for this reason, the Judge may not claim non-
existent prejudice which was never asserted nor suffered by
On the other hand, it is irrelevant that the Judicial
any interested party.
Administrators have, as the Judge says, declared Provita
S.A. in default, since such default is automatic as a matter
It is important to point out that the Referee did not make
of law.
any charges of deceit, fraud, bad faith, nor even of negli-
gence.
Noone has said that the debt is uncollectible nor that
Nor did the Referee object to any of the legal formalities,
somehow, including liquidation of the debtor company which
but on the contrary he undertook to confirm that they had
in its last fiscal year showed earnings of 1,250,000 old
been strictly complied with.
Argentine Pesos, these advances could not be recovered: nor
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33
that the debtor might not, as it actually does, have valuable
to a conviction, will again be reversed, but we will never-
assets.
theless maintain the same prudent attitude as we demon-
strated at the beginning of these proceedings.
5) It is furthermore appropriate to deal with the argu-
ments of supererogation brought up in the appealed
However, this has not been the attitude of the Judge,
decision.
who inexplicably takes notice of the existence of a pending
action in which only an interlocutory order has been issued,
a) The first of these arguments is that my client is
in which no final judgment has been rendered and in which
involved in two criminal actions, one of them for monopoly
the interlocutory order is being appealed.
and other violation of exchange regulations. The Judge
does not make any further reference to the latter, since
It is unfortunate that the Judge should refer to this
no decision has been rendered against my client in that
matter, albeit as superrogation, to prove that my client
action.
is not worthy of the benefits of an arrangement which,
in addition to being a benefit, is a right granted by law.
On the other hand, he says that in the monopoly action,
there has been established a prima facie case of violation,
consisting of restraining free competition in the Liniers
b) The Judge makes reference to multinational corpora-
market during the period 1965 to 1970.
tions, and for this purpose he a cites a papal document
from which he infers that this condition requires a stricter
I must point out to the Honorable Court, that in the
evaluation of the chances of survival of a corporation of
initial pleadings, my client informed the Judge of the ex-
this nature when involved in insolvency.
istence of this action based on the unilateral and voluntary
We have said that the Judge's ideological convictions
decision of my client to buy less cattle during the months of
appear to us eminently respectable.
February to April, 1970 (not the period referred to by the
Judge).
This is fine for the street or for the classroom; here,
on the Bench, the Judge is called upon and obligated to
At that time, since the action was pending, my client
decide in compliance with applicable law!
abstained from commenting on this matter, despite the
fact that the Court of Appeals for Economic Crimes
It is especially serious that the Judge should construct
had already reversed the decision of the Lower Court, in
a new legal category of corporations which is not provided
an opinion dated December 10, 1970 and published in the
for by law, to the extent that they are supposed to be
April 13, 1971 edition of La Ley and subsequent issues.
dealt with more strictly. Once again, he attempts to
establish an absolute identity between my client and its
Recently-there is no mention of this in these proceed-
majority shareholder, in violation of express legal rules
ings-the Judge in that action ordered a trial, which order
(Citations omitted.)
was again appealed by my client. My client has good
reasons to expect that this order, which in no way amounts
Not even His Holiness has said that such a "type" of
corporation is bad, nor does the Judge prove in these
LIBRARY
34
35
proceedings that my client or its majority shareholder
2) Control of Production Process: For this purpose, it
have committed acts of cultural, political and economic
should suffice to indicate that in the plant located in La Plata
domination. Neither could he do so, in view of my client's
alone, the regulatory authorities have more than 120 per-
insolvency, the prolix and detailed regulation of the meat
sons working full time on sanitary inspection.
industry, and the broad powers of the regulatory authori-
Sanitary aspects are of prime importance in the meat
ties.
products industry and are perhaps more rigorously ob-
c) The Judge's last argument refers to the fact that the
served by my client than by any other company.
Referee observed "
a tendency to sell merchandise at
3) Cost Control and Departmental Accounting of the
lower prices to other Deltec companies, to which it directs
Entire Operation:
the major part of its production, than to buyers not form-
4) Control of Export Sales: The procedure established
ing part of the 'Deltec Group". The Judge adverts fur-
by current regulations is based on the construction of a
ther to " the recent expropriation of the Appellant's
system designed to protect our country's prices.
meat extract, which had been sold at out-of-line prices that
would have endangered the production of the country."
Therefore, unless the National Meat Board has previ-
ously authorized a respective sale, it cannot be concluded
Special attention must be given to this statement of the
by the exporters.
Judge.
The exporters are required to submit forms A 631 and
By virtue of the powers conferred by Decree Law No.
A 989, called "export applications" or vulgarly "calzadas",
8509/56 and supplementary legislation, the National Meat
copies of which were appended by my client as Exhibit IV
Board inspects the entire commercial and industrial process
to the document appearing at pages 194/261.
and, in addition, the Department of Industry and Com-
In other words, these export sales applications are sub-
merce (known today as Ministry of Commerce) establishes
mitted to the National Meat Board for approval. The
rules for the regulation of export prices in the national
latter, in turn, returns one of the copies with its approval
interest.
to the exporter, who requires this document to effect the
Once again, it should be of interest to mention at this
transaction. In this manner, the State confirms, after prior
point that the regulation of the industry, which is one of
approval by the competent body, the price agreed upon by
the most controlled in the country, applies fundamentally to
the parties for the purchase and sale transaction.
the following:
Further on I shall deal with the expropriation of meat
1) Purchase of Cattle: For this purpose, one must sub-
extract in light of the evidence appearing in the record.
mit to the National Meat Board detailed information in-
But except for that case, none of the many transactions
cluding, among other things, the names of the sellers and
effected by my client have been rejected by the Board. This
corresponding prices.
means that they were approved because they were made at
prices satisfactory to the national interest.
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37
These circumstances have also been fully supported in
dated September 2, and my client immediately informed the
the Report of the Referee, which states the following:
Referee about the situation. On the same date, telegrams
to the same effect were sent to the President of the Nation
and to Ministers and Government officials, all as contained
"During this period, the Referee has paid particular
in the Report submitted to the Court.
attention to export sales and especially to the selling
prices. In this respect the following is pointed out: 8.1.
The examination of the sales price schedules pertain-
The official answer requested by the Judge was submitted
ing to several shipments, which had been submitted
by the Board, and no mention was made therein of any fact
for such purpose to the National Meat Board, were
that might invalidate my client's position. On the contrary,
generally confirmed by the latter with respect to prices
it was alleged and proved that on August 26, 1971 that is
or they had previously authorized the corresponding
to say the very same date of my client's application, the
shipments."
National Meat Board authorized the exportation of the
same product at a considerably lower price than that of my
My client has nothing further to add to this clear posi-
client. Such authorization was granted to SOMASCHINI,
tion, since the tendency alluded to by the Judge in the
ABRANTE y CIA., who exported to Genoa a total of 5,080
context of the expropriation of meat extract is inadmis-
kilos of first quality meat extract at a price of US$3.00 per
sible. Even should such a tendency exist, one must take into
pound, that is to say, lower by 23.4 cents per pound. Ship-
account a fact of life of business, that sales volume influ-
ping License No. 065547, duly authorized by the National
ences price, and larger volume sales will always be at a
Meat Board on August 26, 1971, was duly enclosed. Another
lower price than smaller volume sales.
copy thereof was enclosed by Customs in reply to the official
statement requested by my client and which can be ex-
It now behooves us to refer to the expropriation of meat
amined by the Honorable Court, since it is filed at page
extract referred to in the decision, to the firm attitude of
10,434 of the record.
my client and to the evidence adduced in the rcord, all of
The record also shows that the "El Centenario" company
which the Judge ignores as if they were "non-existent".
exported two shipments of the same product at lower prices
On August 26, 1971, my client requested authorization
than those of my client.
from the National Meat Board, in accordance with normal
In its brief appearing at pages 1388/9, my client also
procedure, to export 477 tons of first quality beef meat
enclosed Information Bulletin No. 174 of the National Meat
extract in the total sum of US$3,400,886, that is to say, a
Board, dated September 9, 1971. This Bulletin shows that
unit price of US$3.234 per pound.
the best prices obtained for this product during the first
In view of the fact that the Board normally issues the
six months of the year were those of Capistrana S.A. and
authorization within a short period of time, and since my
Compañía Swift de la Plata S.A.F. The National Meat
client had not received an answer, he decided to press the
Board has nothing to say about these facts that might
matter. This was accomplished through a notarial act
explain away the information appearing in its own, pub-
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38
39
lished releases. The Board limited itself to an obvious and
license was a considerably smaller lot and, therefore, the
eloquent silence.
price should have been considerably higher than my client's
It should be noted that the sale of the expropriated
price. What happened was exactly the opposite.
product had been agreed to at the price of US$3.234 per
To erase any doubts which might arise as a result of the
pound (US$7.129 per kilo), which is higher than the overall
conceptual connection made by the Judge, we might add
average of all exports of such product during the first six
that this shipment of my client was not intended for the
months of the year of US$3.21 per pound (US$7.06 per
"Deltec Group".
kilo). The schedule appearing on the reverse of page 1388
shows that CAP, an institution founded for the protection
Summarizing:
of the producers, exported this product at US$2.49 per
a) The facts brought forth supporting my client's
pound (US$5.48 per kilo) during the same period.
claims have been fully proven;
When the National Government decided to sanction the
b) The company suffered unnecessary damage as a
Expropriation Act, my client forwarded to the Minister of
result of the arbitrary attitude of the National Meat
Agriculture the letters dated September 13 and 15 (ap-
Board, which has not been explained or denied.
pended to the briefs appearing on pages 1328/9 and 1388/9)
which explained the damages my client could suffer, in
c) The Referee did not make any charge or accusa-
view of the fact that based on the price established by the
tion whatsoever and, in the light of this fact, my client
Act, in order to come out even, my client was entitled to
has assumed a firm attitude to protect its interests, as
the payment of the premiums or exemptions corresponding
is also supported by the record.
to the exports of such products. It was also pointed out
that since the Act left no alternative, and in view of the
CHAPTER VII
circumstances of fact and law indicated in the latter of
such letters, my client accepted the price shown in the
Valuation of the Appellant
letter of September 11.
In order to evaluate the company, it is necessary to de-
In any event, the arbitrary attitude of the Board seri-
scribe the company's activities, its technical and production
ously damaged my client, since payments began only one
capability and its organization as an industrial complex.
month and several days after the expropriation and the
All this is necessary to the confirmation of the arrangement
claimed items have not yet been cleared up. This represents
approved by the creditors.
a damage to my client in the approximate sum of US$500,-
000. In other words, the company received payment, under
In its original petition, my client presented an outline
protest, only upon the intervention of the Judicial Admin-
of its activities. Its primary function is the production
of meat and I wish to inform the Honorable Court that
istrators.
my client is not an ordinary slaughter house dedicated
It should also be pointed out that the export authorized
merely to the slaughter and sale of carcass meat. ToR the
by the Board in accordance with the above mentioned
contrary, we are dealing with a sophisticated and complex
LIBRARY
40
41
industrial activity in which the raw material is processed
Furthermore, the plants show a high degree of industrial
into a final product containing a high percentage of value
integration; with the most modern equipment they produce
added. It is a process in which the raw material is utilized
their own containers for products sold in the domestic and
almost in its entirety. They say in Swift's plants, in a very
foreign markets.
graphic expression, that "everything is utilized except the
Nor is this my client's only activity. The Rosario plant
mooing of the cow".
also has an oil producing plant which is the second largest
Especially relevant in such process is the product mix.
in the country after Molinos Rio de La Plata. In the same
The Appellant, a leader in its field, has been one of the
complex, powered milk, cheeses and other similar products
originators of new products through research in its labora-
are produced, and my client has its own creameries located
tory, the only one of its kind in all of South America. This
in various parts of the country. The company also has
has opened to our country unsuspected possibilities for
plants producing dried beef and pork seasoned for sausages,
export of non-additional products such as frozen cooked
as well as a large chain of distributors both for its own
beef, which was invented and developed by Swift and is
products and for products manufactured by others, and
sold abroad to be used as raw material in the production
branches throughout the national territory which it ac-
of canned foods.
quired through the merger of La Blanca S.A.
Of extreme importance in this process are sanitary pro-
There is enough supporting data in the record to appraise
cedures which undergo continuous change to ensure the
the value of the entire operation, its efficiency and its specific
highest quality of the product. This is a requirement of
characteristics. Nevertheless I believe important the find-
all Governments to assure the protection and safety of the
ings of the experts arising out of the performance of their
consumer.
assignment in these proceedings.
The requirements for exporting countries are manifold.
In the folder Exhibit 1, page 1, the Universidad Tecno-
Each one has its own rules, SO that whoever wishes to par-
lógica says, with reference to the plant located in La Plata:
ticipate in the market must of necessity satisfy all these
requirements. You either comply or you don't export. This
"The industrial installations, the details of which can
special characteristic of the industry has compelled my
be found in the following pages, are in good operating
client to make large investments, especially during the last
condition and have recently been modernized for the
five years. These investments have of course not been
production of frozen cooked beef, in accordance with
superfluous, since they have resulted in a great improve-
the strictest sanitary rules. These meat products proc-
ment and perfection of my client's industrial plants.
essed by the plant are therefore not subject to any
restriction for export to any country in the world.
The characteristics of the plants have been examined by
Frozen cooked beef, a product which is in great de-
the Referee and by the Universidad Technológica Nacional.
mand and which obtains the best prices internationally,
They constitute a substantial part of an extremely valuable
constitute the major export item, and it is anticipated
asset, the value of which has been cited above.
that it has the greatest potential for the future."
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43
"Similarly, the section devoted to the manufacture of
been increased in this appraisal by 54% for the Rio Gallegos
canned goods, especially Corned Beef, is entirely mod-
plant, 430% for Puerto San Julian and 142% for Puerto
ern and all areas are covered with stainless steel. This
Santa Cruz, so that the average appraisal for the total is
section has the most modern canning and sterilization
119% higher than the value shown in the books."
machinery."
Possibly the most representative comments by the ex-
"The same may be said of its production line for both
perts are those contained in Exhibit 2, item 12 of which
its edible products and non-edible products, constitut-
states: "We have placed emphasis on the functional aspect
ing an integrated plant which is highly mechanized
of this plant, which is derived from its favorable location,
and one of the most modern and functional of South
the topography and nature of the terrain on which it is
America."
located, and the rational and compact distribution of the
operating sectors of the meat packing industry. This pro-
"It is worthwhile mentioning that this plant produces
vides an evident flexibility to adapt -to the various types
beef extract concentrated from bones and is the only
of production or to change the existing methods of this
plant processing this product, which is totally geared
functionalism, which is its characteristic. Proof of this is
for exports."
the project, already underway with satisfactory results,
"It also has a high speed container installation which
of incorporating and installing its own plant for producing
permits a production of more than a million containers
dried beef and seasoned pork sausage to supply the domestic
per day."
market. This plant started with the production of fresh
sausages and will enter into production of dried sausages,
"In short, the manufacturing plant, despite the age of
to be followed by other products immediately thereafter."
some of its parts, has been entirely modernized and is
able to produce a large variety of meat products which
The Vegetable Oil Plant was commented on in a similar
comply with the strictest current sanitary and quality
manner: "One of the largest complete cycle industrial
requirements."
plants in the country and one of the leading plants in Latin
America, not only for its capacity to produce oil products,
The comments by the Universidad regarding other assets,
but also for its extremely up-to-date technology."
contained on pages 29, 52 and 53 of said folder, are also of
Referring to the plant for dairy products, the Uni-
interest.
versidad states— "whose daily drying volume compares
In folder No. 3, Universidad Tecnológica refers also to
well with the largest competitors in the country, such as
the plants in the southern part of the country, where opera-
Nestle, San Cor and then Cotar
Swift's container line
tions have had to be suspended because of the great shortage
is considered among the best in the country as shown by
of animals in that region.
periodic comparisons with products of other manufacturers,
the analysis of which shows that Swift's efficiency of
On page 5 of that folder, however, the experts make an
vacuum, residual oxygen and nitrogen always show a higher
interesting remark regarding the value of these assets: "It
ORD
index."
is easy to see that the book values reported by Swift have
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45
Lastly, we cannot overlook the statement made in point
"The spirit of this plant, which maintains its cohesion
15 of this Exhibit, wherein the experts say the following:
and its dynamism, is of great importance and we feel that
"
Although it might appear irrelevant to the purposes
it might be the principal element pushing toward improve-
of this report, we can not omit comment on two outstand-
ment and continuous progress of the plant."
ing aspects, demonstrated and recognized in the plant
itself and which to our knowledge represent a very favor-
I submit to the Honorable Court that the meat packing
able contribution toward the entire operation and the antici-
industry has experienced an unprecedented crisis in our
pated results of this plant."
national history.
We referred to the fact that the
seriousness of the situation led to the National Government,
"The first refers to the prevailing sanitary conscientious-
in an act without precedent, to hold public debates on tele-
ness. For a food products industry, as the one we are
vision in which the problem was extensively discussed.
dealing with, sanitary techniques and rigorous quality con-
There were published the opinions of the President of the
trol in all processes and activities, starting from its modern
Republic, of the Minister of Economy, of the Secretary of
and well equipped bacteriological laboratory (containing
Agriculture and of other high dignitaries, in which were
a chromatograph) to the Quality Control Division, through
recognized the scope and extent of the problem with which
the sanitary installations and the continuous diffusion of
we are dealing.
sanitary and health regulations.
Despite all this, the Appellant has succeeded in over-
"This concept has been inculcated in all levels and it
coming these difficulties and has reopened its industrial
is satisfying to observe the strict compliance with these
plants which had been paralyzed at the time the petition
regulations, no doubt uncommon in other facilities."
was filed. It has been operating since March and earning
"The second refers to the 'spirit of the plant. Modern
significant profits in the succeeding months, not just oper-
authors (Chiselli and Brown: Industrial Psychology) main-
ating profit but net profit, after charging exchange losses
tain that in addition to the physical, functional and stan-
resulting from successive devaluations.
dards elements forming part of a manufacturing opera-
Therefore we are convinced, as maintained at the begin-
tion, there exists an imponderable element which distin-
ning of these proceedings, that the company's commercial
guishes one industry from another, one plant from an-
and industrial capacity, its organization and the esprit de
other."
corps and capability of its personnel will enable it to over-
"In the case of ,Swift in Rosario, there can clearly be
come the difficulties that it has encountered. This judgment
perceived at all levels of its operation a sense of integra-
is being shared by the official banks, by the company's
tion, each individual's backing of 'his' plant, an uninhibited
workers and employees and by the other creditors in these
and spotaneous support to what is considered the em-
proceedings.
ployee's source of work, a team spirit and a common pur-
The decisive point in light of the evidence discussed
pose to overcome problems and go forward. All of this
above is that the company committed to the judgment of
becomes something really praiseworthy."
this Honorable Court is seen to be an organized business,
QUERLO FORD LIBRARY
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47
and it is therefore beyond dispute that it is "appropriate
7) The concept of general interest, as applied by
to maintain the corporation in existence, since it represents
the Judge, violates the very purposes of the Bank-
a source of work and credit, thus favorable to the intent of
ruptcy Law, since in no way did he reject the creditors
the law," as has been said by this worthy Court.
agreement because it contained terms "manifestly bur-
densome to the general interest."
CHAPTER VIII
8) The sense and scope of this concept has been
established by the Honorable Court in repeated, ex-
Summary of the Brief
press and specific pronouncements, summarized in the
Summarizing the contents of this brief in support of
en banc proceedings cited in this brief, so that the
the challenged decision, I submit the following:
teaching is binding upon Judges of the Lower Court.
This teaching has been repeated in later decisions of
1) The decision is void and arbitrary because its
this Honorable Court.
grounds are not based on the evidence in the case and,
furthermore, contradict applicable law.
9) The conduct of the Appellant has not been char-
acterized as either deceitful or fraudulent. Neither
2) The decision of the Judge expressed his ideo-
did the Referee charge my client with bad faith nor
logical conviction, which is obviously foreign to
did the Judge specify in what it consisted.
grounds for a judicial determination.
10) The charges made by the Judge do not consti-
3) The decision of the Judge amounts to an inad-
tute nor characterize bad faith, since they deal with
missible act of legislation, which is expressly for-
legally valid acts, authorized by applicable law and
bidden to him.
performed under the supervision of competent au-
4) In these proceedings there have been taken deci-
thorities, and we have refuted them in detail in this
sions that are violative of prudence and sound judg-
brief.
ment, and which do not constitute a reasoned inter-
11) The Appellant is an organized enterprise, with
pretation of applicable law.
productive and economic capacity. It owns industrial
5) The arrangement was approved by a large ma-
plants without peers in the country which are a source
jority of creditors, including four official banks, and
of livelihood for more than 45,000 persons, whose ex-
a supervisory commission was to be appointed to
port capacity generates foreign exchange of over one
assure compliance.
hundred million dollars per year, all of which estab-
lishes this company as leader in its field. All of the
6) The objection lacks all basis; the evidence sub-
above demonstrates and counsels the advantages of
mitted in the record and the rules invoked demonstrate
its preservation in compliance with the principle of
that there do not exist any of the grounds contem-
the Bankruptcy Law itself.
plated in paragraphs 2 and 5, Article 38 of the Bank-
ruptcy Law.
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48
49
6) The Judge usurps powers which the law confers
CHAPTER IX
on other branches of the government and, in an act
The Constitutional Issue
of legislation, instructs the Executive to sell the as-
sets to the personnel, in application of a standard
Constitutional issues have been raised in these pro-
foreign to judicial decisions and violative of the prin-
ceedings at various occasions. My client again reserves
ciple of the separation of powers (Articles 1, 67, par.
all rights to file extraordinary appeal before the Supreme
11 of the National Constitution).
Court of Justice against a decision that is arbitrary and
7) He makes dogmatic judgments which reflect only
violates express constitutional guarantees, especially with
the subjective will of the magistrate.
regard to due process, because:
8) He purports to apply a theory which is foreign to
1) It lacks serious grounds that would support it as
our law without enunciating its presuppositions, con-
a judicial decision.
tent, limits or scope, thus deciding "contra legem".
2) It appraises evidence appearing in the record by
9) The decision being appealed, rendered in an in-
ignoring the depositions of witnesses when they are
solvency proceeding of the importance of the case at
contrary to the opinion of the Judge and using them
bar, threatens legal certainty, violates the purposes of
only when they favor it, and by considering facts as
the law, injures the interests of the creditors and con-
proven when the evidence is to the contrary.
stitutes an arbitrary act.
3) It ignores the fundamental background of the
case, such as the study made by the Universidad
CHAPTER X
Tecnológica Nacional, the conclusions of which the
Relief Requested
Referee has adopted as his own and which find the
existence of assets amounting to almost four times
Wherefore, I respectfully request that the Honorable
the liabilities.
Court:
4) The Judge refers to evidence which does not
3) reverse the decision appealed from in all its
appear in the record and draws conclusions from
parts, ordering the confirmation of the arrangement
pending actions.
approved by my client's creditors.
5) It clearly departs from the provisions of the
I pray the Honorable Court to provide accordingly, THAT
Civil Code, the Commercial Code and the Bankruptcy
JUSTICE SHALL BE DONE.
Law as well as of the teaching of the Commercial Court
of Appeals in an act of inadmissible judicial arbi-
trariness.
BERRLO FORD LIBRARY
466
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IN THE MATTER OF
COMPANIA SWIFT DE LA PLATA S.A.F.
OPINION OF JUDGE SALVADOR E. LOZADA
November 8, 1971
Unofficial Translation from the Original Spanish
BERALD FORD LIBHARY
Opinion of Judge Salvador E. Lozada
Judicial Power of the Nation
Buenos Aires, November 8, 1971
WHEREAS: It is my duty to pass judgment on the ar-
rangement accepted by vote of the creditors of Frigorífico
Swift de la Plata, S.A.
AND CONSIDERING: That it is important in the first in-
stance to determine the sense of this decision which bank-
ruptcy law confers on the court in the arrangement pro-
ceedings. As pointed out by a commentator, the judge has
broad powers to decide the rejection or approval of the
arrangement because the law empowers him freely to con-
sider whether the action accepted by the majority is or is
not contrary to the public interest, and authorizes him to
decide whether or not the debtor, in the light of his behavior
in the conduct of his business, deserves the benefit of the
law, since public interest and commercial good faith over-
ride the consent of the creditors, and in the light of these
considerations the judge must reject the arrangement solu-
tion where the debtor has acted in bad faith, because only
those good-faith debtors whose economic troubles are due
to causes beyond their control and ability, and who do not
constitute a danger for the health of commerce or for
credit, i.e., for the public interest (F. Garcia Martinez,
"Composition and Bankruptey"-Book 1, Page 292), may be
permitted to continue to conduct their business.
Similarly, the Supreme Court of the Province of Buenos
Aires has ruled that if an analysis of the debtor's behavior
reveals that he does not deserve to continue in the conduct
of his business, the arrangement must be rejected even
though it may be advantageous for the creditors who have
agreed to it. (J.A. Contemp. Series V.7 Page 648).
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The decision on the approval of the arrangement is, in
cially applicable to the situation of Swift as an only for-
one of its substantial aspects, a value judgment on the
mally erentiated part of the Deltec structure. Further-
debtor who has requested the arrangement and on the
more, it must be stated here that this theory is the one
convenience of his continuation from the point of view of
that better permits the revelation of that "objective legal
the public interest.
truth" which the Supreme Court has often pointed out as
A thoughtful examination of the proceedings accumu-
an essential element of the due process of law. (Judge-
lated during these last ten months, which now exceed 10,500
ments of the Supreme Court, Volume 268, Page 415, Inter-
pages, grouped in 51 volumes with more than 40 additional
alia). To the commentaries and precedents referred to in
files, leads me to the clear conviction that the arrangement
the Referee's report and in Annex 3.1.6., to which I refer
accepted by the creditors of Frigorífico ,Swift de la Plata
for the sake of brevity, I will only add the decision of
S. A., in that it implies continuation of this business entity,
Chamber C of the Court of Appeals in the proceedings
offends against the general interest and must be dis-
"S.A.C.I.M.I.E.S.C.A. vs. S.A.C.I.M.I.E.S.C.A., etal" of
approved.
November 25, 1970, wherein by affirming the judgement of
Judge Dr. Julio P. Quinterno declaring void a transfer of
I proceed from the fact that Frigorífico Swift de la Plata
title, this theory is given retroactive effect, in that
S.A. is a part, fraction or section of "a unified structure of
S.A.C.I.M.I.E. and A.C.I.F., parties to said transfer, are
decision and interest which makes it one unit, with the
companies of the same group, formed by persons related
same and common profit objective, and a single acting and
to each other by links of family and interest and all sub-
coordinating will carried out by the same group of men,"
ject to a common direction, and thus in fact one and the
as it is stated by the Referee (Page 4122). This unified
same person.
structure is the so-called Deltec Group, "a single economic
group which operates with its interests intermingled so
As stated by Chief Justice Marshall in the famous "Dart-
that the differentiated economic conduct of its units has
mouth College" case, the legal personality of business
disappeared and so that it has been necessary to penetrate
corporations "is an artificial being," "invisible, intangible,
the corporate personality," as it is also indicated by the
and existing only in contemplation of law" (See William
Referee (Page 4168). This unitary condition has been in-
R. Bandy, Eugene W. Nelson and Tannell A. Shadid, "Busi-
controvertibly demonstrated by the Referee, it appears
ness Law" page 710) i.e., only an instrumental means for
from Deltec's own documents and Swift itself has assented
the purposes of the law. Once this legal instrument is used
to this affirmation in the Referee's report at the time of
in an illegal manner in order to cover a different reality,
filing its objection against it (Page 9830 and foll.).
it is imperative, as it has so often been said, to lift the
corporate veil and then face the real situation.
In connection with the rejection of the supposed claims
of different units of the Deltec group against Swift, I have
To assume that this task in the service of truth and
already affirmed that I completely share the theory of the
justice may imply legal uncertainty or insecurity suggests
disregard of the legal entity. This theory becomes spe-
a grave indulgence of bad faith, fraud and defenselessness
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of the public contracting with these companies, together
which prejudices the creditors of the debtor at the time of
with a dangerous indifference to the public interest affected
the merger." It must be stated that economic asphyxia of
by these concealments of a real unity, governed by a sole
Swift has been voluntarily decided to a substantial extent
center of economic decision, under the appearance of dif-
by Deltec through this merger of Armour and LaBlanca
ferent personalities.
"for reasons of apparent convenience to the group and
From these proceedings there appears that the same
without justifiable economic reason," as stated in P. 4139
components of this unified structure, which is the "Deltec
Rev., to which it must be added, as stated on the next page,
that the financial debility of Swift was "voluntarily in-
Group," have pretended to be the holders of claims against
Swift aggregating almost 40% of the liabilities reported
creased" by giving Swift a falling capital from which there-
by Swift, intending to prove these supposed claims against
after the Deltec group later cut its financial support, "leav-
the debtor which is also Deltec, and the latter has attempted
ing it to its own fate," as the Referee put it.
to recognize as such claims these pretensions of the other
To all this must be added the other cause of Swift
components of the Deltec structure. As the Referee has
hemorrhage, which is the loans it has made to other com-
maintained, these pretensions "affect objective justice, vio-
panies of the Deltec group, including loans characterized
late the ends of the legal entity, are based on a simulation
by the Referee as "unacceptable transfers of financial re-
of juridical acts repudiable under the legal order in that
sources to Provita in astonishing amounts," considering
they damage third parties (the real and unquestionable
that the lender was suffering from such great penury.
creditors), constitute an act which may be repudiated as
And which is also decisive while ,Swift was transferring
contrary to morality and ethics" (p. 4123 Rev.) and must
funds to the Deltec companies which appeared as supposed
be considered as position of accommodation and helpful-
creditors, those who were apparent debtors refrained from,
ness to the other companies of the Deltec Group, which is
refunding the loans granted by Swift. In this respect,
directly and immediately reflected in damage to the true
Provita, which owes 1,105,501,568 pesos M/N, was declared
creditors (p. 4168 Rev.). As a result, had it not been for
in default only last October 20th, by the Judicial Adminis-
the zealous action of a Referee of extraordinary diligence
trators appointed when the Board of Swift was separated
and of an equally alert court, these genuine creditors would
from the administration of its business, as it appears from
have seen the common guarantee of their claims diminished
the telegram in p. 10129 and the letter in p. 10138.
in a proportion equal to these 40% of non-existent liabilities.
There is therefore no doubt that the unified structure of
Also relevant, on the point of the accommodation of
Deltec has voluntarily placed Swift as a part of itself in
Swift to the other Deltec companies, is the merger into
a weakened condition, causing serious harm to the Argen-
Swift of Armour and LaBlanca, because, as also indicated
tine economy, to its creditors and to thousands of worker
by the Referee on page 4169 the sole purpose was to avoid
families threatened by unemployment.
the dissolution of the two absorbed companies, likewise
In the face of these facts, I am convinced that Swift's
Deltec, due to total loss of their capital-"in a decision
conduct is incompatible with the benefit of the arrangement
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solution and that an analysis of its conduct reveals it does
lower prices than to buyers not forming part of the Deltec
not deserve to continue to engage in business. Therefore,
group. This points to another source of risk for the Argen-
I must oppose my authority as National Judge of Com-
tine economy, with a company inclined to effect within the
merce to the harmful possibility of the survival of this
Deltec group a deterioration in the price of meat exports.
insolvent corporation.
In this respect, reference must be made to the recent ex-
propriation of meat extract of the debtor at out-of-line
As supererogation, it may be pointed out that two crim-
prices that would have endangered the production of the
inal actions have been initiated against Swift: One on the
country.
grounds of antitrust law infringement and another for
violation of exchange regulations, both before the National
Bankruptcy, a consequence of my rejection of the Swift
Court for Economic Crimes Number 4. In the first of the
arrangement, should not aggravate the social problems of
above referred lawsuits, a prima facie case of violation
the country. It is necessary to avoid the problem created
has been established, consisting in acts tending to inhibit
by this company's insolvency. Bankruptcy should not result
free competition in the Liniers market during 1965/1970.
in suspension of operations at the plants which are pres-
ently working. These should continue under the direction
It may be pointed out also that ,Swift is one of the exten-
of the liquidator, applying the provisions of articles 195
sions in Argentina of one of the multinational enterprises,
and 198 of the Bankruptcy Law. There is no doubt that
a new species born, as has recently been said, under the
the packing industry is of "national interest." Suffice it to
impulse of new systems of production which eliminate na-
recall the case "Inchauspe" of September 1st, 1944, wherein
tional boundaries and generate new economic powers which,
the Supreme Court declared constitutional the organization
due to the concentration and flexibility of their resources
of the National Meat Board. "The progress of national econ-
are able to carry out autonomous strategies, largely inde-
omy is closely related to said industry," said the court
pendent of national public authorities and, therefore, with-
composed of Doctors Repetto, Sagarna, Nazar Anchorena
out control from the point of view of the public interest
and Ramos Mejia.
in the spread of their activities "these private organiza-
tions may lead to a new abusive form of economic domina-
The liquidator shall maintain at least the present levels
tion in the social, cultural and even in the political field
of employment. For purposes of the provisions in third
(Paulo VI-Apostolic Letter to Cardinal Roy "Octogesimas
paragraph of Art. 150 of the Bankruptcy Law, the liquida-
Adveniens"). This circumstance makes necessary to evalu-
tor, as soon as he has accepted his commission and assumed
ate with greater strictness the possibilities of survival of
his duties, shall consider the possibility that the employees
a corporation of this kind when it becomes insolvent.
of the company or some of them, with the participation of
the creditors and other interested parties, might acquire
It has to be pointed out also that, with regard to the
the parts of the company in operation, in order to reduce
export policy of the debtor, the Referee has observed a
the period during which the liquidator functions as the
tendency to sell merchandise to other Deltec companies
authority for the continuing of the activities of the debtor.
(to which it directs the major part of its production) at
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delivered said documents to an officer of Swift who paid
Such continuation is imperative for obvious social and
the respective fees. Notary Rivas for his part on page
even economic reasons, considering that the Referee has
10251 testifies to the same effect, stating that he had deliv-
highlighted p. 4161 the efficient productivity and appropri-
ered the powers of attorney in blank to a manager of
ate technology of the industrial plants, particularly the one
Swift. This Notary was a creditor and also delivered a
in Rosario.
power of attorney in blank. He stated that he did not know
As for the appointment of a liquidator, I have no doubt
who was the attorney who represented him at the creditor's
that it is appropriate to designate the National Govern-
meeting. Hugo Serra (page 10255) declares that he does
ment. Not only because of the size of the claims of the
not know who represented him at the meeting. The same
various agencies and the significance of the "contingent
occurs with Delivio Andreolo (page 10256). A manager of
liabilities" referred to by the Referee and related to pay-
Swift had requested him to sign a power of attorney to
ment by the State of the "guaranteed wage," but also above
avoid a trip to Buenos Aires and in order to obtain the
all for reasons exceeding mere arithmetic. The condition of
approval of the arrangement. He continued by stating that
being the more injured creditor is rooted in the fact that
he did not know who represented him at the meeting, that
the State is the organ of the community profoundly injured
he also did not know the proposal for the arrangement
by the breach of values higher than economic values: social
and that he did not give any instructions to the person who
peace and solidarity-and it is also the one which is in the
requested him to sign the power in blank.
best position to solve the problems caused by ,Swift's insol-
Manager Lopez himself, who organized the obtaining of
vency.
powers of attorney in blank, admits (p. 10256) that some
Likewise, the possibility of continuing operations de-
of the grantors never knew the identity of the attorneys.
pends on the State, since one of the major industrial plants
A mandate in which the principal cannot select the manda-
is constructed on State property and, therefore, requires
tary, where his name is inserted by a third party to whom
the permission of the State for its continued use.
he cannot give instructions and from whom he cannot de-
It is also my duty at this time to pass judgment on the
mand an accounting or information on the fulfillment of
the contract, is not mandate. There is no doubt that in all
objection at page 10,006.
these cases the representation at the creditor's meeting has
For this purpose, I consider it important to point out
been vitiated. The practice of powers in blank, in the first
that the evidence adduced has corroborated the complaint
place, disregards the freedom of the principal to appoint
about the granting of powers of attorney in blank by numer-
the attorney, implicit in Article 1896 of the Civil Code
ous creditors (p. 1337, 1347, 1394, 1395, 1399, 1400 to 1435,
(Salvat, Contract II, Number 1791). In the second place,
1441, 1442, 1472 and 4449 to 4529 and 4539). In fact, in
it disregards the principle that the mandate is based on the
p. 10,250 Notary Fracchia states that he has certified the
confidence of the principal in the mandatary, a principle
signature of almost 90 grantors of powers of attorney
implicit in Article 1970 of the Civil Code. In the third
without mentioning the name of the attorney, i.e., in blank
place, a mandate in which the principal does not know the
-he continued by stating that after certification he had
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mandatary's identity frustrates the former's right to de-
in the objection, it must be considered to be June 20, 1970,
mand from the latter an accounting (Article 1909 Civil
since these reasons were not overcome by the arguments
Code) or information (Borda, Contracts II p. 438). Finally,
of the debtor which I have carefully examined.
no representation exists when the one who is represented
For the above reasons, and as provided in Articles 40,
does not know the matter in which the representative is
38 Par. 2 and 5 and 53 of Law 11719, I resolve:
to act on his behalf, does not know who he is to be, and
consequently cannot instruct him as to the position he is
To reject the arrangement and to declare the bankruptcy
to take.
of Compañía Swift de la Plata S. A. Frigorífica, appoint-
ing as liquidator the National Government, represented by
It is true that the objecting party has invoked only
the National Executive Power upon whom notice shall be
Article 38 Par. 5 and that the facts described, mentioned
served through the Secretary of Planning and Government
also on the back of page 10007, fall within Par. 2 of said
Action, who shall continue the operation of the active sec-
provision which refers to "false representation of credit-
tors of the company, maintaining the present levels of
ors" but it is no less true that the principle "iuria curia
employment, considering forthwith the possibility for the
novit" may be applied.
personnel or part thereof with or without the participation
Moreover, the minutes of the Sociedad Rural de Lincoln
of creditors or other interested parties to purchase the
at pages 10261 to 10281 also prove the grounds for apply-
referred to operating parts of the company.
ing paragraph 5, since in these minutes comes up the offer
Let the pertinent notices be issued and the corresponding
to pay the debt in ten monthly installments in exchange for
measures be taken.
the signature of the power of attorney in blank (pages
10261 and 10277). These minutes, which were drawn up a
long time prior to the vote on the arrangement and the
objection thereto, have a very strong persuasive force par-
ticularly because of their coincidence with the report on
page 4658 based on the deposition on page 1338 in connec-
tion with the document on page 1337, which overcomes the
persuasive force, under any circumstances highly debat-
able, of the testimony submitted after the vote on the
arrangement. The evaluation of this evidence corresponds
to the provisions in Article 181, in fine, of the Code of
Procedure.
As for the date of suspension of payments, I rule that
based on the strength of the reasons given in the Referee's
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report on this point as well as on the other points made
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