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Reply Memorandum
Gerstl v. Galanis

UNITED STATES BANKRUPTCY COURT
DISTRICT OF CONNECTICUT
- - - - - - - - - - - - - - - - - - - -X
                                       :
ARTHUR J. GERSTL, INTERIM TRUSTEE,     :    Adv. No. 5-85-0024
                                       :    Ref. Civ. No. B-85-40
                        Plaintiff,     :    (EBB)
                                       :
             -against-                 :
                                       :    
JOHN P. GALANIS; MILTON I. SCHWARTZ;   :    
MISCO,  INC.; and ARMSTRONG CAPITAL,   :
S.A. and DAYTON COMPANY INC.,          :
                                       :
                        Defendants,    :
                                       :
- - - - - - - - - - - - - - - - - - - -X
                                       :
ARMSTRONG CAPITAL, S.A.,               :
                                       :    ADV. NO. 5-85-0025 
                        Plaintiff,     :    REF. CIV. NO. B-79-43
                                       :    (TFCD)
             -against-                 :
                                       :
FEINER, CURTIS, SMITH et al,           :
                                       :
                        Defendants     :
                                       :
- - - - - - - - - - - - - - - - - - - -X
                                       :
In re                                  :    Chapter 7
                                       :    Case No. 5-80-00302
          JOHN P. GALANIS,             :
                                       :
                          Debtor,      :
                                       :
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              ARMSTRONG CAPITAL'S REPLY MEMORANDUM



                                MORE, PHILLIPS & HULL, P.C.
                           Attorneys for Armstrong Capital, S. A. 
                                      63 Mason Street
                                Greenwich, Connecticut 06830
                                       (203) 629-2611

                                       JOHN C. KLOTZ
                           Attorney for Armstrong Capital, S. A. 

                                  217 Broadway, Suite 407
                                  New York, New York 10007
                                       (212) 308-1162




                        TABLE OF CONTENTS

                                                                  Page

Introduction ....................................................   1
                                                                   
POINT ONE: THIS  COURT  HAS  JURISDICTION TO  DETERMINE  THE       
           GALANIS  CLAIM TO THE LIMITED EXTENT THAT IT  MAY       
           BE CONSIDERED AN INDEPENDENT EQUITABLE ACTION FOR       
           FRAUD.  TO  THE EXTENT THAT IT IS POSTURED  AS  A       
           MOTION  PURSUANT TO RULE 60(b)(5) THE COURT LACKS       
           SUBJECT MATTER JURISDICTION...........................   3
                                                                   
                                                                   
POINT TWO: THE GALANIS RULE 60(b) CLAIMS ARE NOT TIMELY..........   6
                                                                   
                                                                   
POINT THREE: GALANIS HAS NOT PROVEN A "FRAUD UPON THE COURT......   9
                                                                   
                                                                   
POINT FOUR: NEW  YORK STATE GENERAL OBLIGATIONS LAW  SECTION       
            15-108 HAS NO APPLICATION TO PAYMENTS MADE PRIOR       
            TO  SEPTEMBER 1,  1974.  THEREFORE,  IT CAN  NOT       
            APPLY  TO  PAYMENTS  PURSUANT  TO  THE   DELFINO       
            AGREEMENT............................................  11
                                                                   
  Right of indemnification.......................................  12
                                                                   
                                                                   
POINT FIVE: THE GALANIS CLAIM RESTS ON THREE FACTUAL 
            FALLACIES: (1) THAT ARMSTRONG CAPITAL IS ITSELF        
            AN ASSIGNEE; (2) THAT THE CLAIM OF ITS PARENT'S        
            SHAREHOLDERS WAS LIMITED TO TWO MILLION DOLLARS;       
            (3) THAT IT SOUGHT "CONTRIBUTION" IN FEINER..........  13

  1. Armstrong Capital is not an assignee........................  13
                                                                   
  2. The claims of the shareholders of Armstrong Investors         
     have not been fully satisfied...............................  14
                                                                   
  3. Armstrong Capital is not seeking contribution...............  15
                                                                   
                                                                   
CONCLUSION ......................................................  16



UNITED STATES BANKRUPTCY COURT
DISTRICT OF CONNECTICUT
- - - - - - - - - - - - - - - - - - - -X
                                       :
ARTHUR J. GERSTL, INTERIM TRUSTEE,     :    Adv. No. 5-85-0024
                                       :    Ref. Civ. No. B-85-40
                        Plaintiff,     :    (EBB)
                                       :
             -against-                 :
                                       :    ARMSTRONG CAPITAL'S
JOHN P. GALANIS; MILTON I. SCHWARTZ;   :    REPLY MEMORANDUM   
MISCO,  INC.; and ARMSTRONG CAPITAL,   :
S.A. and DAYTON COMPANY INC.,          :
                                       :
                        Defendants,    :
                                       :
- - - - - - - - - - - - - - - - - - - -X

                          Introduction

          This memorandum is submitted by ARMSTRONG CAPITAL, S.A. 
("Armstrong Capital") in reply to the Post-Trial Memorandum of 
JOHN P. GALANIS ("Galanis"). On page two his memorandum, Galanis 
admits the validity of the judgment obtained by Armstrong Capital 
in the United States District Court for the Southern District of 
New York in Armstrong Capital S.A. v. Feiner Curtis Smith &  
Goldman, Index No. 74 Civ. 3154, Hon. Lloyd F. McMahon, U.S.D.J., 
("the Feiner action) and summarizes his case as follows:

               "* * * Galanis has acknowledged the Armstrong 
     [Feiner] judgment and its registration in Connecticut. 
     The judgment however, should not be enforced.
          
          "Armstrong Capital initiated the action [Feiner] 
     in which the judgment was entered against Galanis as 
     assignee of the rights and interest of others, and 
     those rights have been fully satisfied. Further, 
     Armstrong Capital was a named joint tortfeasor of 
     Galanis who obtained its own release, and is therefore 
     not entitled to recover any judgment against Galanis 
     based upon the same claims asserted against it. 
     Alternatively, Galanis' co-defendant Yamada was 
     equally culpable as Galanis, and Galanis is therefore 
     liable for only 50% of the judgment. (Emphasis 
     supplied)

          In so far as the claim that the release of Yamada 
somehow benefits Galanis, that is discussed in POINT FIVE, pages 
16 et seq of Armstrong Capital's Post-Trial Memorandum and 
Armstrong Capital will not repeat those arguments in this reply 
memorandum. In addition, as argued in POINT SIX of the Post-Trial 
memorandum, the claims of fraud against the court are also time 
barred. However, the Galanis papers throughout this proceeding 
have been a repetitive incantation of three factual premises:

          (1) Armstrong Capital is an assignee;

          (2) the claims that it is enforcing have been 
     fully satisfied;
                   
          (3) that as a "named" joint tortfeasor who 
     previously obtained its own release, it may not obtain 
     "contribution."

          From the incantation of these "facts" (See POINT FIVE, 
infra) Galanis seeks to invoke Rule 60(b) in order to nullify the 
Feiner judgment. This memorandum will therefore focus on the 
legal ramifications of the Galanis factual incantations although 
those incantations have as much reality as an alchemist's 
formulation for turning lead to gold.

                            POINT ONE 

        THIS  COURT  HAS JURISDICTION TO  DETERMINE  THE 
        GALANIS  CLAIM TO THE LIMITED EXTENT THAT IT MAY 
        BE  CONSIDERED AN INDEPENDENT  EQUITABLE  ACTION 
        FOR FRAUD.  TO THE EXTENT THAT IT IS POSTURED AS 
        A  MOTION  PURSUANT TO RULE 60(b)(5)  THE  COURT 
        LACKS SUBJECT MATTER JURISDICTION. 

          On page "2" of the Galanis Post-trial Memorandum, it is 
stated "Galanis has acknowledged the Armstrong [Feiner] judgment 
and its registration in Connecticut."  On page 7 of his 
post-trial memorandum, Galanis cites Covington Industries, Inc. 
v. Resintex A.G., 629 F.2d 730, 734 (2d Cir. 1980) for the broad 
proposition that a motion pursuant to Federal Rules of Civil 
Procedure ("Rule") 60(b) may be brought in a court of 
registration.

          In Covington , the Second Circuit limited the authority 
of the court of registration under Rule 60(b) to those areas 
where the jurisdiction of the court of origin is questioned and 
the facts are therefore not within the special competence of the 
court of rendition (629 F.2d 732 to 734). Thus the following 
factors decide the issue:

               "Although Rule 60(b) does not specify the 
     correct forum for presenting a motion for relief from 
     judgment, the motion is generally brought in the 
     district court rendering judgment.  * * * In the usual 
     case, the court of rendition will be more familiar with 
     the facts than  the court of registration and perhaps 
     more conversant with the applicable law. Where the Rule 
     60(b) motion is for relief from a default judgment, 
     however, the assumptions about the rendering court's 
     qualifications no longer apply. Where the defendant 
     does not appear to contest jurisdiction and the court 
     does not receive evidence or make findings in the 
     matter except on the issue of damages, the court of 
     rendition is no more familiar with the factual 
     situation than is the court of registration. Under 
     these circumstances the court of registration therefore 
     seems as qualified to determine jurisdiction of the 
     rendering court particularly when the later is a 
     federal court of coordinate authority.

               "Recognizing the power in a different court 
     to determine jurisdiction of the rendering court is 
     particularly appropriate when the party who obtained 
     the default is attempting to enforce it in another 
     court. * * *" (629 F.2d at 733)

          "In the instant case,  [defendants] did not appear 
     in the district court of Georgia to contest the court's 
     jurisdiction and thus they have not been heard on  this 
     issue." (629 F.2d at 734)

          This distinction between (a) those motions which sound 
in an equitable action to set aside a judgment as void for lack 
of jurisdiction or fraud and (b) other motions under Rule 60(b) 
was further articulated in Indian Head National Bank of Nashua v. 
Brunelle, 689 F.2d 245 (1st Cir. 1982) which discussed and 
explained the Covington decision in some detail (698 F.2d at 250, 
251).

          In Brunelle, the court determined that there were two 
categories of cases where Rule 60(b) could be entertained in the 
Court of registration. 

          "The first results from a parallel between 
     many of the grounds of relief and those which support 
     independent equitable actions. Because of this 
     overlap, courts other than rendering courts have in 
     some instances considered the requests of those who 
     proceeded by Rule 60(b) motions by treating the motions 
     as independent equitable actions. * * *" (689 F.2d at 
     249, 250).

          "There is a second category of cases in which 
     courts of registration have entertained requests  * * 
     *. Several courts of registration have considered Rule 
     60(b)(4) motions for relief from default judgments on 
     the grounds that the judgments were void because the 
     rendering courts lacked jurisdiction over the party  
     against whom enforcement is sought. * * *" 689 F.2d at 
     250)

          "* * * Neither the district court or 
     [defendant] cites a case, and we have found none, where 
     a court of registration was willing to entertain 
     directly a Rule 60(b) motion other than one attacking a 
     default judgment for lack of personal jurisdiction." 
     689 F.2d at 251

          To the extent that the Galanis case raises issues that 
may be classified as "fraud upon the court" this Court would have 
jurisdiction to hear his claim.  Such claims attack in a very 
real manner the competence of the original court to have heard 
the case and the ability of the defendant to present his claim. 
(See POINT THREE, infra). However, to the extent that he seeks 
relief pursuant to Rule 60(b) for matters that were within the 
competence and province of the rendering court, his claim may not 
be heard here. 

          These issues, involving so-called contribution by 
Armstrong Capital and credits against judgment arise out of 
events that occurred not later than 1972, two years before the 
Feiner action was commenced and four years before the Feiner 
judgment was entered. The facts on which Galanis relies were in 
fact placed before the Feiner  court. In this case, Galanis 
testified but claimed no memory independent of the transcript of 
the prior record from which two questions were read by his 
counsel. If there ever was a case where the competence of the 
court of rendition which heard all the evidence is manifest, it 
is this one.

          Moreover, Galanis appeared, answered and testified. 
There is no question of default or lack of jurisdiction. Thus, 
insofar as Rule 60(b) is concerned, the remedy is limited to 
those grounds that would support an independent equitable action. 
Only the presence of fraud that vitiates the Feiner judgment can 
be reached. 

          Galanis seems to read significance into Armstrong 
Capital's consent to allow this Court to issue a dispositive 
order beyond that plainly intended. The consent was to the 
Court's power to decide the issues in the first instance -- 
including the issue of jurisdiction of claims-- it was not a 
waiver of any jurisdictional defense to individual claims, 
particularly when the issue raised is just as applicable to a 
constitutional district judge as it is to this Court.

                            POINT TWO 

          THE GALANIS RULE 60(b) CLAIMS ARE NOT TIMELY.

          Rule 8 requires that claims of payment be affirmatively 
pleaded and Rule 9(a) requires that defenses of lack of capacity 
be pleaded with particularity. Therefore, the Galanis claims of 
"real party in interest," "payment" and "contribution," are bar-
red by the conclusion of the Feiner case and entry of judgment 
against him. See Fox v. McGrath, 152 F.2d 616 (2d Cir. 1945)  and 
the other cases cited in POINT TWO of Armstrong Capital's 
Post-Trial Memorandum. 

          Galanis seeks to avoid this by bringing a motion 
pursuant to Rule 60 (b)(5) that payment has been made. Certainly, 
the only manner in which Rule 8 and Rule 60(b)(5) can be 
harmonized is to understand that Rule 60(b)(5) by its plain 
meaning applies to payments after judgment (or at least after 
joinder of issue) and Rule 8 applies to payment prior to trial. 
In the instant case, the last "payment" (April, 1972; I-34, JPG 
Ex. 5)  predates the October 1975 Galanis answer (ARM. EX. Q, 
sub. ex. C). 

          Rule 60(b)(5) provides no escape for Galanis. Motions 
pursuant to Rule 60(b) must be made within a reasonable time but 
in less than a year. Amoco Overseas Oil Co. v. Compagne Nationale 
Algerienne de Navigation, 605 F.2d 648, 656 (2d Cir. 1979) 
(motion made within year but untimely because not within a 
reasonable time); Scola v. Boat Frances R, Inc., 618 F.2d 147, 
154, 155 (one month too long for motion).

          Specifically, in regards to claims of payment or 
release, delays of 13 months and 2 months have been held untimely 
and therefore fatal to such motions. Friedman v. Wilson Freight 
Forwarding Co., 320 F.2d 244 (3d Cir. 1963) (13 months); Willets 
v. Yellow  Cab Co., 214 F.2d 612 (7th Cir. 1954) (2 months).

          The cases cited by Galanis where credits for payments 
were allowed all involve applications brought within  weeks of 
final judgment. In Caraway v. Swain, 23 F.R.D. 657 (N.D. Fla. 
1959) cited on page 19 of the Galanis memorandum, the motion was 
made within 58 days of judgment and the court noted that the 
motion must be made within one year (23 F.R.D. at 559). In 
Snowden v. D.C. Transit System, Inc., 454 F.2d 1047, 1048-49 
(D.C. Cir. 1971) the motion had been made within 16 days of 
verdict. In no case does it appear that amendment was allowed for 
payments that preceded pleading. In Snowden for example the 
payment deducted occurred "during the course of trial."

          United States v. Karahalis, 205 F.2d 331 (2d Cir. 1953) 
did not involve claims of payment that ought to have been pleaded 
pursuant to Rule 8, but rather relief from a default judgment so 
that the merits of a deportation proceeding could be contested. 
The reason for the 17 year delay was that the defendant had been 
in Greece tending for his wife during her terminal illness when 
the proceeding was brought and that after she died, World War II 
prevented any action to lift the default. It is almost shameful 
for Galanis -- a convicted swindler who has not repaid one dime 
of the money he stole -- to cite the equities of such a case. In 
any event, in Amoco Overseas Oil Co. v. Compagne Nationale 
Algerienne de Navigation, supra, the Second Circuit denied a 
motion to reopen a default because of prejudice in attempting to 
reconstruct evidence even though the motion was brought within 
one year of the default. In the instant case, the delay is over a 
decade.

          Because more than a year as elapsed since entry of 
judgment, the Galanis claim is untimely as a Rule 60 motion and 
must therefore be weighed as a "independent equitable action." 
Pfotzer v. Amercoat Corp., 548 F.2d 51 (2d Cir. 1977).


                           POINT THREE

            GALANIS HAS NOT PROVEN A "FRAUD UPON THE COURT."

          The evidence is beyond cavil that adversaries of 
Armstrong Capital in the Feiner litigation were completely 
informed of all the facts that constitute the Galanis claim and 
placed these facts before the Court. For an exceptionally 
detailed recitation of those facts, the Court is respectfully 
referred to the "Order to Show Cause and Petition for Writ of 
Mandamus to Honorable LLoyd F. Mc Mahon"  dated March 23, 1976 
(ARM. EX. L) particularly par. 8 to 11 beginning on page 5 of the 
petition).  There can be no question that at the time of that 
application in 1976, the Feiner defendants had been fully 
informed of the intimate details of the Delfino settlement and 
afforded an opportunity to depose an officer of Citibank, Mr. 
John Rulon-Miller (ARM. EX. W).

          It is impossible, therefore, to discern the reason for 
Galanis citing Israel Aircraft Ind. Ltd. v. Standard Precision, 
559 F.2d 203 (2d Cir. 1977) and Kuperfman v. Consolidated 
Research & Mfg. Corp., 459 F.2d 1072, 1078 (2d Cir. 1972) in 
support of his claim of fraud upon the court. Kuperfman is 
discussed on page 12 of Armstrong Capital's Post-trial 
Memorandum. That case specifically held that the belief of 
counsel that his adversary possessed a crucial release,  meant 
that counsel's failure to reveal the same was not "fraud upon the 
court." (459 F.2d at 1081). In the Israel Aircraft case, the 
Court of Appeals reversed the dismissal of a complaint for fraud 
against the court where there was no evidence of intentional 
deception in the concealment of a crucial document.

          In the Feiner case, there is no evidence of any 
concealment. All the necessary documents were made available to 
the defendants during discovery and an officer of Citibank 
appeared and testified during discovery in complete candor about 
the nature of the Delfino agreements.

          Mr. McIntyre's affidavit was argument about the legal 
effect of documents in possession of his adversary. If his 
adversary thought they were deceitful in anyway, he could have 
taken action at that time. To the contrary, before the Court of 
Appeals, the Feiner defendants argued not that McIntyre was 
concealing evidence but that he had -- in the same affidavit 
cited by Galanis-- admitted everything. On page 9, the Feiner 
defendants' petition for mandamus (ARM. EX. L), states:

          "12.  This motion returnable on March 12, 1976 [to 
     implead  Citibank]  was denied in its entirety  despite 
     the fact that counsel for plaintiff, by affidavit sworn 
     to by James J.  McIntyre on March  11,  1976,  admitted 
     that the shareholders of Armstrong Investors, S.A. (the 
     parent  of  the instant plaintiff in the sense that  it 
     owned  all  the plaintiff's stock) had  assigned  there 
     shares   of  stock  to  an  independent  affiliate   of 
     [Citibank]  as  part of the Delfino  settlement.*  *  * 
     (Emphasis supplied)

          Under all the circumstances, to hold that a lawyer 
committed a fraud in arguing the legal effects of documents that 
he knew -- and which were in fact -- in possession of its 
adversary, is to make a shambles of the concept of the 
adversarial system. Under the authority cited by Galanis it just 
isn't so. There can be no concealment when the documents are in 
possession of the adversary. 

                           POINT FOUR

          NEW   YORK  STATE  GENERAL  OBLIGATIONS   LAW 
          SECTION 15-108 HAS NO APPLICATION TO PAYMENTS 
          MADE PRIOR TO SEPTEMBER 1,  1974.  THEREFORE, 
          IT  CAN NOT APPLY TO PAYMENTS PURSUANT TO THE 
          DELFINO AGREEMENT.

          The preponderant part of the Galanis claim is that 
because of the payments and relationships arising from the 
settlement agreement in the Delfino case, that Armstrong Capital 
is an "assignee" who has "paid for its release" and is therefore 
barred from seeking contribution pursuant to N.Y. General 
Obligations Law, {15-108(c). Factually, this is simply not true. 
In any event, all the shareholders of Armstrong Investors except 
the Delfino plaintiffs had executed the agreements in 1971 and 
the Delfino plaintiffs executed theirs in April, 1972 (JPG  EX. 
2) and were the last of the shareholders to sign (II-68).

          However, that provision of General Obligations Law 
Section 15-108 did not become effective until September 1, 1974. 
It has been specifically held that a tortfeasor who settled prior 
to September 1, 1974 may seek contribution after September 1, 
1974. Gates-Chili Central School District v. State, 55 A.D.2d 44, 
389 N.Y.S.2d 716 (4th Dept. 1976). In Gates-Chili, the New York 
court said:

          "* * * The settling tort-feasor may reasonably be 
     deemed to have acted with full knowledge of the law as 
     it existed at the time the release was executed. [cita-
     tion omitted] Consequently in would be inappropriate on 
     these facts to undo what had been done and, on the 
     basis of present law, to nullify actions taken by  
     parties in reliance  on the law as it then stood. 
     [citation omitted]

          "We thus reject the State's position and hold that 
     where the settlement agreement was executed prior to 
     September 1, 1974, any rights of contribution which 
     existed at the date settlement are not affected by the 
     1974 amendment of Section 15-108 of the General 
     Obligations Law despite the fact that the claim for 
     contribution may not have been asserted until after the 
     effective date of the amendment." 55 A.D.2d at 47.

          Thus, even if all the factual leaps and incantations of 
Galanis were conceded [and they aren't -- see POINT FIVE, infra] 
General Obligations Law {15-108 would not apply to Armstrong 
Capital's claim in Feiner. Under New York State law since the 
Delfino agreement predated September 1, 1974, an individual 
claimed to be a tortfeasor in the Delfino action could seek 
contributions for payments made pursuant to the agreement. See 
Dole v. Dow Chemical Co., 30 N.Y.2d 143 (1971).

          Armstrong Capital must emphasize that it does not 
accept the Galanis description of the legal relationships between 
it, Armstrong Investors, the Shareholders of Armstrong Investors 
and Citibank. But even if Galanis were accurate, Gates-Chili 
Central School District v. State, supra, holds conclusively that 
Armstrong Capital would not be barred from any claim.

Right of indemnification.

          Moreover, there can be no doubt that upon all the 
evidence before the Court, that whatever liability that may have 
existed -- and none has been proven -- Armstrong Capital was not 
in pari delicto with Galanis who was its fiduciary and thus 
Armstrong Capital was entitled to common law indemnification. 
Those rights have survived the enactment of {15-108 even after 
September 1, 1974. See N.Y. Civil Practice Act and Rules, 
{1404(b); McDermot v. City of New York, 50 N.Y.2d 643 (1980).

          In McDermot, the New York Court of Appeals explicitly 
held that the General Obligations Law was not a bar to a 
tortfeasor seeking indemnity from one who was primarily liable. 
Defenses of pari delicto would  apply but that, like payment, is 
an affirmative defense. Under McDermot, even if everything 
Galanis claimed was relevant, he would still be required to 
allege and prove as an affirmative defense that Armstrong Capital 
-- or Citibank -- was in pari delicto and therefore barred from 
seeking indemnity. 

                            POINT FIVE 

       THE GALANIS CLAIM RESTS ON THREE FACTUAL FALLACIES:

          (1) THAT ARMSTRONG CAPITAL  IS ITSELF AN ASSIGNEE;
          (2) THAT THE CLAIM OF ITS PARENT'S SHAREHOLDERS 
              WAS LIMITED TO TWO MILLION DOLLARS;
          (3) THAT IT SOUGHT "CONTRIBUTION" IN FEINER.

          Galanis has created an Alice-in-Wonderland world where 
nothing is quite what it seems. Central to his claim are three 
propositions that simply aren't true.

1. Armstrong Capital is not an assignee.

          The evidence is absolutely clear that the claims of the 
shareholders of Armstrong Investors were assigned to Citibank and 
its nominee who was not Armstrong Capital but First National 
Nominees Ltd. (JPG EX. 28, pg. 8, par. 7). There is no evidence 
of any transfer of anything to Armstrong Capital. There is 
evidence cited and recited by Galanis that Citibank, having 
undertaken to pursue Galanis, fostered the retention of Weisman, 
Celler, Spett, Modlin and Wertheimer ("Weisman, Celler) as 
counsel for Armstrong Capital and obtained the consent of the 
former shareholders to that retention. However, nothing was 
assigned to Armstrong Capital and Weisman Celler pursued claims 
against Galanis that were the property of Armstrong Capital (JPG 
EX. 9, paras. 3, 8; I-79, 81; II-52, 53, 57 to 59).

          No matter how many frequently or vigorously asserted 
and/or chanted by Galanis, the simple fact remains that no claims 
were assigned to  Armstrong Capital and the claim asserted in 
Feiner was not an assigned claim. That Citibank fostered the 
retention of Weisman, Celler pursuant to its obligations under 
the Delfino agreement did not effect a transfer of property to -- 
or from-- Armstrong Capital. The fundamental relationship of 
Armstrong Investors to Armstrong Capital as parent-subsidiary 
remained unchanged.

          The simple fact that shareholders of the parent would 
be the ultimate beneficiaries of the recovery by Armstrong 
Capital has no effect on the rights of Armstrong Capital to 
recapture the property looted by Galanis and his confederates.

2.  The claims of the shareholders of Armstrong Investors have
    not been fully satisfied.

          Also crucial to the Galanis claim is that the rights 
"assigned" have been "fully satisfied." Even a cursory reading of 
the Delfino complaint reveals that the claims of the shareholders 
and thus the assigned claims reached $22.8 million. At the very 
least, the claims of the shareholders equaled $4 million -- 
their investment in the Armstrong Investors. They received 
one-half that sum in the Delfino agreement. Therefore, even if 
Armstrong Capital were an assignee -- and it was not -- the 
assigned claims have not been fully satisfied by the payments in 
Delfino. The best descriptions of the true situation appear in 
papers filed by former adversaries. For example, the petition for 
mandamus to the Court of Appeals for the Second Circuit filed by 
the Feiner defendants (ARM. EX. L). 

3. Armstrong Capital is not seeking contribution.

          Armstrong Capital never paid out any money to anyone. 
It was a victim whose property was stolen. The complaint in the 
Feiner action is not a complaint for contribution. It is a 
complaint for the property of Armstrong Capital embezzled by 
Galanis and his confederates in the United Assets "joint 
venture." In support of the Feiner complaint, Galanis was called 
as a witness and testified. A verdict was directed against him. 
That was more than a decade ago. No matter how many times Galanis 
may chant that the Feiner claim was an application for 
contribution, the fact remains that it was not -- and the 
evidence is uncontroverted that the proceeds of the Feiner 
settlements -- for which Galanis did get credit -- were paid to 
Armstrong Capital and no one else (II-69; ARM. EX. J). 

                           CONCLUSION

          John Peter Galanis and his confederates embezzled the 
property of Armstrong Capital in the United Assets "joint 
venture." Armstrong Capital in Feiner recovered a judgment for a 
part of the damages suffered at the hands of Galanis. All of the 
facts concerning the Delfino settlement were known to the 
adversaries of Armstrong Capital at the time of the Feiner 
action. The claim that the Delfino settlement is "payment" is 
untimely if asserted pursuant to Rule 60(b) and totally without 
merit -- and time barred -- if pursued as an independent 
equitable action. Armstrong Capital is entitled to judgment upon 
the law and the facts granting its claim and denying that of 
Galanis.

Dated: New York, New York 
       October 22, 1986

                                   Respectfully submitted,




                                       JOHN C. KLOTZ
                               Attorney for ARMSTRONG CAPITAL 
                                  217 Broadway, Suite 407
                                  New York, New York 10007
                                       (212) 308-1162

                                    WILLIAM A. PHILLIPS
                                MORE, PHILLIPS & HULL, P.C.
                           Attorneys for Armstrong Capital, S. A. 
                                          63 Mason Street
                                    Greenwich, Connecticut 06830
                                          (203) 629-2611
 



 
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