American-Hawaiian Steamship Co. v. Bowring & Co.

• Citation: 150 F. Supp. 449
• Parties: AMERICAN-HAWAIIAN STEAMSHIP COMPANY (DEL.), Plaintiff, v. BOWRING & COMPANY, General Steamship Corporation, Ltd., Ocean Freighting & Brokerage Corporation and Howell Barnard Smith and George V. Cutler, copartners doing business as Smith & Johnson, Defendants.
• Decision Date: 15 May 1957
• Court: U.S. District Court — Southern District of New York

150 F. Supp. 449

AMERICAN-HAWAIIAN STEAMSHIP COMPANY (DEL.), Plaintiff, v. BOWRING & COMPANY, General Steamship Corporation, Ltd., Ocean Freighting & Brokerage Corporation and Howell Barnard Smith and George V. Cutler, copartners doing business as Smith & Johnson, Defendants.

United States District Court S. D. New York.

April 19, 1957.

On Proposals to Limit Issues to Be Tried Preliminarily May 15, 1957.

Bigham, Englar, Jones & Houston, New York City, for plaintiff. J. Joseph Noble, New York City, of counsel.

Burlingham, Hupper & Kennedy, New York City, for defendants Smith & Johnson and Bowring & Co., Norman M. Barron, Gerard Harrington, Jr., Richard C. Hatch, New York City, of counsel.

Nelson, Healy, Baillie & Burke, New York City, for defendants Ocean Freighting & Brokerage Corp., and General S. S. Corp. Nicholas J. Healy, 3rd, John H. Thoerner, New York City, of counsel.

FREDERICK van PELT BRYAN, District Judge.

This is an action of interpleader brought under the Federal Interpleader Act, 28 U.S.C. §§ 1335, 1397 and 2361

Plaintiff, American-Hawaiian Steamship Company, was the owner of two vessels, the "Panaman" and the "Alaskan," which it sold to the Matson Navigation Company, not a party here. The defendants are ship brokers concerned in the transaction who are grouped into two pairs, one being Bowring & Company and Smith & Johnson as co-brokers, and the other being General Steamship Corporation, Ltd. and Ocean Freighting & Brokerage Corporation as co-brokers.

The complaint alleges that each pair of defendant co-brokers, adversely to the other, claims to be entitled to the sum of $40,000 representing the full brokerage commissions payable by plaintiff on account of the sale of these two vessels to Matson. Plaintiff has deposited this sum in the Registry of the Court and has secured a temporary restraining order enjoining the defendants from commencing any action against the plaintiff in so far as it may relate to or affect their claims to the $40,000 so deposited until further order of the Court.

Each pair of defendant co-brokers filed an answer which places in issue the plaintiff's right to interpleader. The answer of the General Steamship-Ocean Freighting pair also sets up a counterclaim in which it alleges, among other things, an independent agreement on the part of the plaintiff to pay it commissions of $40,000 on this sale, regardless of what plaintiff's liability for such commissions may be to the Bowring-Smith & Johnson pair. Plaintiff's reply to the counterclaim is, in substance, a general denial.

Plaintiff now moves for an injunction permanently granting the relief temporarily afforded by the restraining order. Both pairs of defendants assert that the temporary restraining order should be lifted rather than made permanent, and the Bowring-Smith & Johnson pair asks that the complaint be dismissed for failure to state a claim cognizable in interpleader.

The facts, as they appear from the affidavits submitted by the various parties on this motion, may be summarized as follows:

In January 1955 Matson asked defendant Bowring to canvass the field for two AP-3 type Victory vessels which it was desirous of purchasing. Bowring got in touch with defendant Smith & Johnson, which had acted on previous occasions for plaintiff American-Hawaiian, the owner of the two AP-3 Victories "Panaman" and "Alaskan", to discuss the availability of these vessels for sale. Bowring and Smith & Johnson agreed to work together on the deal with commissions to be split between them.

Shortly thereafter defendant Ocean Freighting, having learned that the "Alaskan" and "Panaman" were for sale, agreed with General Steamship to work on the deal together on a split commission basis, and the two vessels were then proposed by these co-brokers to Matson.

Some months of proposals, counter-proposals, bargaining and negotiation ensued in which the two pairs of cobrokers, acting quite independently of one another, participated in varying degrees. Indeed, plaintiff asserts that the defendant brokers were not the only brokers working to effect the sale.

During the late spring and summer of 1955 proposals by American-Hawaiian to sell the vessels to Italian interests fell through. American-Hawaiian then advised Ocean Freighting that it would consider an offer for sale under American registry.

By this time Matson was aware of the availability of the vessels and American-Hawaiian was aware that Matson was in the market for vessels of this type. By mid-November of 1955 it seemed clear that the views of the prospective buyer and seller as to price were not irreconcilable.

The Ocean Freighting-General Steamship pair alleges that at this point Ocean Freighting was advised by American-Hawaiian that it was almost ready to talk to Matson and asked whether Ocean Freighting would accept a lump payment of $20,000 per vessel if and when the sale to Matson was consummated. The Ocean Freighting pair further alleges that this proposal was made because American-Hawaiian believed that the sale would be facilitated by direct negotiations between the principals, which was an unusual arrangement, that the proposal was approved by the pair, and that American-Hawaiian was so advised.

This proposal forms the basis of the Ocean Freighting-General Steamship claim that plaintiff incurred an independent liability to pay this pair $40,000, whether or not it was the procuring cause of the sale, "when, as and if the sale of the vessels was completed."

The Bowring-Smith & Johnson pair also learned that the principals desired to talk directly. It maintains that Matson agreed to talk directly with American-Hawaiian only upon the proviso that the ground was not cut from under Bowring and Smith & Johnson who were handling the business. It asserts that American-Hawaiian agreed to this and understood that it was Bowring to which Matson had brought its original inquiry about the availability of such vessels.

The affidavits of the respective parties are contradictory as to whether or not plaintiff, through its officers, (a) asserted that Ocean Freighting was the broker of record, and that it alone would receive notice of any sale, (b) inquired whether Smith & Johnson would be willing to divide the commissions with Ocean Freighting instead of Bowring, or with Bowring to the exclusion of the Ocean Freighting-General Steamship pair, or (c) urged that the commissions be divided three ways, with General Steamship being excluded.

However, it appears that on December 21, 1955 contracts of sale were drawn and plaintiff indicated that a letter from Matson as to who its broker was might be helpful. By letter dated December 28, 1955 Matson stated that it had been primarily dealing with Bowring, although it had had some communication with General Steamship on the subject. The contracts of sale were executed on December 27, 1955, subsequently amended on January 13, 1956, and thereafter consummated. As recently as June 19, 1956, however, plaintiff still asserted that it was not clear as to which broker had represented Matson and as to which pair of co-brokers was entitled to the conceded commissions of $40,000.

In September 1956 plaintiff brought the present action.

Plaintiff asserts that, upon these facts, it is entitled in interpleader, (a) to a permanent injunction restraining defendants from instituting or prosecuting any proceedings affecting its obligation for brokerage commissions on the sale of these two vessels, (b) to be discharged from all liability for any such commissions, and (c) to compel the two pairs of defendants to litigate as between themselves their rights to the commissions in the sum of $40,000 deposited by plaintiff with the Court.

Defendants, on the other hand, contend that plaintiff is not entitled to relief in interpleader upon two grounds. First, they assert that plaintiff is barred from this equitable remedy because it is itself responsible for creating the confusion which led to this situation, and does not come into Court with clean hands. Secondly, defendants claim that plaintiff has an obligation to pay $40,000 as commissions on this sale to the Ocean Freighting-General Steamship pair as alleged in their counterclaim, which is separate and apart from any obligation for commissions which plaintiff may have to the Bowring-Smith & Johnson pair. Defendants therefore maintain that since there are two separate and independent claims for two amounts of $40,000, both of which plaintiff may have to pay, instead of conflicting claims to a single sum of $40,000, plaintiff has failed to establish a basic element of interpleader, viz., the absence of an independent liability to one of the defendants apart from and beyond the conceded stake deposited with the Court.

The Judicial Code and Judiciary Revision Act of 1948, June 25, 1948, Chap. 646, 62 Stat. 869, redistributed the provisions of Title 28 U.S.C., 1940 Ed., § 41(26) (often referred to as the Federal Interpleader Act). They now appear in revised form in Title 28 as follows: § 1335 deals with jurisdiction; § 1397 deals with venue; and § 2361 with process and procedure. (See, also, Rule 22 of the Federal Rules of Civil Procedure, 28 U.S.C., which supplements the statute.) The mandatory requirements of the statute are that there be two or more adverse claimants, who are citizens of different states or of a state and a foreign country, and who have conflicting claims of the value of $500 or more arising out of money or property in the custody of, or an obligation owing by, the party invoking the remedy. Railway Express Agency, Inc. v. Jones, 7 Cir., 106 F.2d 341.

All the essential elements required by the statute are alleged in the complaint and, indeed, are not controverted in the papers submitted by the parties.

The defendants do, however, contend that plaintiff should not be entitled to relief in a court of equity since it has allegedly dealt with two sets of brokers without notice to...