Ira S. Bushey & Sons v. WE Hedger Transp. Corp.

• Decision Date: 27 February 1948
• Docket Number: Docket 20747.,No. 97,97
• Citation: 167 F.2d 9
• Parties: IRA S. BUSHEY & SONS, Inc. v. W. E. HEDGER TRANSP. CORPORATION.
• Court: U.S. Court of Appeals — Second Circuit

167 F.2d 9 (1948)

IRA S. BUSHEY & SONS, Inc. v. W. E. HEDGER TRANSP. CORPORATION.

No. 97, Docket 20747.

Circuit Court of Appeals, Second Circuit.

February 27, 1948.

COPYRIGHT MATERIAL OMITTED

Horace M. Gray, of New York City, for respondent-appellant.

Christopher E. Heckman, of New York City (Foley & Martin and James A. Martin, all of New York City, on the brief), for libellant-appellee.

Before SWAN, CLARK, and FRANK, Circuit Judges.

CLARK, Circuit Judge.

This is a later stage of a case previously before us and reported as W. E. Hedger Transp. Corp. v. Ira S. Bushey & Sons, 2 Cir., 155 F.2d 321. That appeal involved solely a question of jurisdiction. Hedger, the owner of tugs and vessels subject to a preferred ship mortgage, had consented to a decree of the district court, March 8, 1945, foreclosing the mortgage. Then on April 4, 1945, it instituted a suit by summons and complaint asking for the vacation of the consent decree, an accounting, damages, and other relief. The district court dismissed this suit for lack of jurisdiction, holding that its powers would be limited to consideration of a libel in review, to the exclusion of a "bill in equity to nullify the consent decree and to recover damages." This court agreed with the lower court on the issue of substance, holding that its powers were restricted by the limitations of federal jurisdiction to what it could appropriately do on a libel in review or, within the term, a petition to vacate the decree; it differed with the district judge as to the procedure, however, since it thought that the so-called complaint would actually fulfill all the functions of such a libel or petition. Accordingly it affirmed the decree so far as that dismissed a claim of a third individual (Hedger individually), but reversed it as to the Hedger Company and directed that the complaint be considered a petition in the foreclosure suit to vacate the decree. It did, however, exclude therefrom certain claims for damages for abuse of process and for repayment of sums paid under a mutual mistake of fact (Arts. 67-69 of the complaint) as not being within the admiralty jurisdiction. It expressly refrained from passing upon the legal sufficiency of the complaint as a petition for the purposes stated.¹

Upon the going down of the mandate the district court transferred the case from its equity docket to the admiralty docket as a part of the former foreclosure case. Then it set the case for a hearing before the same judge who presided at the foreclosure hearing. He heard the parties and thereafter dismissed the complaint for legal insufficiency, writing a lengthy opinion, 70 F.Supp. 578. Respondent then filed a motion to expunge this opinion on the grounds that there was no motion regularly before the court and that the judge was disqualified, since he had conducted the original foreclosure hearing. This was heard and denied by another district judge. Next respondent filed a motion to vacate the decree, which was heard and denied by the original judge upon consideration of a further brief from respondent. This appeal is from not only the original decree of dismissal, but also the two further orders denying respondent's motions.

The substantial question on this appeal is whether the "complaint," now become a petition to reopen and vacate, is sufficient in law, or more particularly whether it shows a legal basis for vacating a formal decree of the district court. True, respondent also states, without argument, its contention that it was denied due process of law by reason of the disqualification of the judge and the latter's treatment and dismissal of the petition. But in any event we can see no error here if the judge's main legal conclusion was and is sound. The mandate of this court directed certain actions by the district court, and no motion of the parties was necessary to stimulate the judge to obedience. We see no ground of disqualification in that the issue was referred to the judge who should know most about it — a course which seems sensible and is not a statutory ground of disqualification. 28 U.S.C.A. § 24. Nor are we cited to precedents otherwise. Compare Frank, Disqualification of Judges, 56 Yale L. J. 605 et seq. And the judge certainly allowed respondent full opportunity to present its legal claims, as we are doing on this appeal. We are sure that respondent has been deprived of no constitutional or other rights by the course the proceedings have taken, and we pass therefore to the substantive issue decided below in libellant's favor.

The petition is long and detailed, containing seventy-one paragraphs or Articles, of which, as we have seen, three have been eliminated on the previous proceedings. It also contains seven prayers for relief. Not unnaturally for so lengthy a document it tends to be both verbose and abstract and conclusory in its allegations. Nevertheless, the main gravamen of the petition, as we pointed out in the earlier appeal, can be discovered; and we are now aided by the complete record of the earlier hearing. Respondent complains because the trial judge in his opinion regretted the absence of these records before the court on the earlier appeal, "as they will be in an appeal from this decision," 70 F.Supp. 578, 581, saying that this constitutes an admission that the judge considered proceedings in the foreclosure action. But he would have been remiss in his complete consideration of the case had he not done so to the extent that they were relevant. It is of course thoroughly settled that the court takes judicial notice of its own records, particularly in the very case;² and it is hard to see how a petition to vacate a decree can be intelligently appraised without examining the circumstances under which the decree was entered. Here the transcript of the earlier hearing adds life and color to what doubtless would be apparent from the more formal documents of record and furnishes the background against which this quite remarkable claim must be viewed.

The proceedings began in a normal way in the district court on February 10, 1945, with a libel for a foreclosure of a preferred ship mortgage and the issuance of process in rem against the vessels. This is not only usual, but is also the only way of proceeding in the case of these mortgages, which since 1920 have been brought within the exclusive jurisdiction of admiralty. 46 U.S.C.A. § 951, providing for enforcement "by suit in rem in admiralty," with original jurisdiction granted "to the district courts of the United States exclusively."³ After citation and notice to the Hedger Company, the owner and respondent-appellant here, the latter on February 21, 1945, filed its answer, in which, while it admitted the execution of the preferred mortgage of March 21, 1939, it denied that it received good and valid or adequate consideration for the notes secured, as well as "any present obligation to pay any sum of money or interest to the libellant." It then went on to state in some detail its defense which again figures prominently in the present proceedings. This grows out of an asserted joint venture between the Hedger and Bushey interests beginning on July 30, 1932, from operation of the Hedger boats, purchased upon foreclosure by the New York Scow Corporation, a Bushey subsidiary, and then subjected to a mortgage of about $155,000 to a third party. The Hedger Company was formed to operate the vessels and to pay off the indebtedness. According to respondent's assertions a large sum of money had been paid from the earnings by the 23d day of December, 1938, but the Bushey interests then represented to Hedger that there was approximately $400,000 due on open account and that certain other boats should be purchased for $200,000, with the result that certain transactions were had by which the Hedger Company gave the mortgage in question to the Scow Corporation on March 21, 1939, for $600,000, $400,000 representing the amount claimed for barge and tug hire and repairs, and the balance the purchase price of the additional vessels. It was asserted that these amounts were not due, although Hedger was unable to obtain an accounting from the libellant, now assignee of the mortgage. Further, it was said that on December 21, 1944, the Hedger Company and Hedger individually had brought an action in the Supreme Court of the State of New York against the Bushey interests to compel an accounting. The answer concluded with not only general prayers for dismissal of the libel, for damages, and for other and further relief, but specific prayers that the action be deferred until the conclusion of the state court action, that a joint receiver with Hedger be appointed under 46 U.S.C.A. § 952 to operate the vessels, and that, if the court determined that it would proceed in this action without regard to the state court action for an accounting, then the matter be referred to a special master for an accounting between the parties.

No attempt having been made by respondent to secure release of the vessels, permitted by filing a bond or security pursuant to the statute, 28 U.S.C.A. § 754, Admiralty Rule 12, 28 U.S.C.A. following section 723, or the local rule, E.D.N.Y. Admiralty Rule XXI, the libellant took steps to ask for an immediate hearing, which the court proceeded to grant. This was also in accordance with a local rule to avoid long and expensive custody of many vessels, here 32 in number, by the United States marshal. Respondent, however, made extensive efforts to delay the hearing, by direct application, by filing exceptions to answers which the libellant had made with promptness to its interrogatories, by asking for preliminary hearing on such exceptions, and so on. This is a significant feature of this case in connection with respondent's main contention on this appeal, namely of coercion through libellant's abuse of process. The normal form of such duress is by steps taken to prevent a litigant from reaching a court to...