American Union Line, Inc. v. Oriental Nav. Corp.

• Decision Date: 16 December 1924
• Citation: 239 N.Y. 207,146 N.E. 338
• Parties: AMERICAN UNION LINE, Inc., v. ORIENTAL NAV. CORPORATION.
• Court: New York Court of Appeals Court of Appeals

239 N.Y. 207

146 N.E. 338

AMERICAN UNION LINE, Inc.,

v.ORIENTAL NAV. CORPORATION. ^*

Court of Appeals of New York.

Dec. 16, 1924.

Action by the American Union Line, Inc., against the Oriental Navigation Corporation. From so much of a unanimous judgment of the Appellate Division (209 App. Div. 260, 204 N. Y. S. 501) as reversed an order denying a motion made by defendant for judgment on the pleadings and granting such judgment dismissing complaint, plaintiff appeals. Judgment of Appellate Division reversed, and order of Special Term affirmed.

The judgment of the Appellate Division also provided on the application of defendant's counsel, and with consent of plaintiff's counsel, that the cause be separated into two actions, one of which should embrace plaintiff's alleged cause of action and the other defendant's alleged counterclaims.

See, also, 199 App. Div. 513, 192 N. Y. S. 154.

Appeal from Supreme Court, Appellate Division, First Department.

Frederick B. Campbell, of New York City, for appellant.

Herman S. Hertwig and Russell T. Mount, both of New York City, for respondent.

HISCOCK, C. J.

There was made between plaintiff and defendant in February, 1918, a contract for the purchase and sale of a steamship at the price of $185,000, and of which $50,000 was paid at or before the execution of the agreement. In addition to many other provisions which are not involved in the present controversy the contract contained a clause whose interpretation is decisive of this appeal. Said clause reads as follows:

‘7. Neither party to this contract shall become liable to the other in any manner whatsoever for failure to perform this contract owing to perils of the seas or of navigation, arrests, restraints or acts of princes, rulers, governments or people, or owing to any other cause beyond the control of any such party. Provided, however, that in the event that this contract shall be or become impossible of performance owing to the causes hereinabove mentioned or any of them, the sums paid to the vendor by the purchaser shall be forthwith repaid to the purchaser by the vendor without interest.’

The following controlling facts calling for the interpretation of said clause are alleged in the complaint, which has been dismissed as not stating a cause of action for the recovery back under said clause of the amount paid on the contract: The plaintiff is a corporation organized under the laws of the state of New York. At the time the agreement was made all of its capital stock had been placed in the possession of one Engel, who was a citizen of the United States, under a written agreement dated June 20, 1917, between the Interchange Limited, a Danish corporation, and one Shapiro, a citizen of the United States, whereby it was provided that said stock was to be held by said Engel in trust until the amount owing by plaintiff to said Interchange Limited should have been paid, and that on the payment of such indebtedness Engel should deliver to Shapiro or his designees all of the capital stock thenceforth to be his or their property free, clear and discharged of all claims or interest therein of said Interchange Limited. Said agreement also contained the provision that prior to June 23, 1917, a statement of the amount due from plaintiff to Interchange should be prepared and certified in writing by Interchange and Shapiro, and which amount should be paid within a certain time therein specified. Notwithstanding repeated demands and attempts by plaintiff to procure it so to do, said Interchange, which had possession of the necessary books and papers, neglected and refused to prepare or certify any statement of the indebtedness claimed to be due to it from plaintiff, and finally demanded the payment of the sum of $100,000, which amount was not due to it, and which plaintiff and Shapiro declined to pay.

In May, 1918, the War Shipping Board having ascertained the situation of this capital stock refused, under certain statutory provisions, to which reference will hereafter be made, to consent to the transfer of the ship as provided in the agreement between plaintiff and defendant, and continued in this decision notwithstanding all of the efforts of plaintiff to procure it to modify the same. The ground of such decision was that under the situation hereinbefore disclosed and the United States statutes pertaining to such subject it did not satisfactorily appear that plaintiff's stock was owned by citizens of the United States. In accordance with an informal suggestion made by the Board that no consent would be given to such transfer until the rights of Shapiro to the ownership of plaintiff's capital stock had been duly adjudicated by a court of competent jurisdiction, Shapiro commenced an action in the United States court against said Interchange, and to which plaintiff was made a party, asking to have ascertained the amount of indebtedness for which said capital stock was being held and to have the ownership of said stock by said Shapiro adjudicated. Notwithstanding every possible effort was made by plaintiff to expedite said suit, it was not able until after the date for the transfer of said ship had passed to secure judgment in said suit and which fixed the amount of the indebtedness due from plaintiff to said Interchange at $1,702.66 instead of $100,000, which said Interchange had demanded. By general as well as special statements it is alleged that plaintiff made every possible effort to secure a statement from and settlement with Interchange to expedite said litigation and to procure the governmental consent to the transfer of the vessel. Upon these allegations and others which supplement but do not change the tenor thereof a demand for the return of $50,000 which plaintiff had paid on the contract is based under the provision in the contract first above quoted on the ground that performance of the contract had become impossible.

These allegations are to be considered in the light of certain United States statutes known as the United States Shipping Act and the United States Trading with the Enemy Act, and of which the provisions of the Shipping Act are the ones especially applicable to this case. They prohibited the transfer of any vessel such as was the one involved in this case to any one not a citizen without the approval of the Shipping Board, and defined citizenship in the case of a corporation as follows:

‘No corporation * * * shall be deemed a citizen of the United States unless the controlling interest therein is owned by citizens of the United States.’

It was under this provision that the governmental boards created refused to permit the transfer of the vessel because of the situation of plaintiff's capital stock, which has been fully described.

[1] With this rather lengthy but necessary statement of facts we come to the questions presented by the appeal. Some contention is made that it will not lie without permission, which was not obtained. We think that there is nothing in this argument. The Special Term denied defendant's motion for judgment on the pleadings; the Appellate Division reversed this action, and made an order granting said motion, and also, on the motion of defendant's counsel with the consent of plaintiff's counsel made an order severing into a separate action plaintiff's alleged cause of action. On this order final judgment was entered dismissing plaintiff's complaint which is to be regarded as one of reversal. Sultzbach v. Sultzbach, 238 N. Y. 353, 144 N. E. 638. We therefore have a final judgment dismissing plaintiff's complaint, and see no reason why the appeal does not lie. This brings us to a consideration of the merits of the appeal and leads us back to the clause relating to impossibility of performance which has already been quoted and which we are called on to interpret from the standpoint of the plaintiff for the purpose of deciding whether under it the complaint does allege a right to the recovery of the money paid on the contract.

The provision consists of two entirely distinct clauses. The first one protects this defendant from legal responsibility for failure to transfer the vessel as the result of any cause beyond its control, and no attempt is now being made by plaintiff to recover damages for breach of contract. The second clause literally entitles the plaintiff to recover back the moneys paid on the contract if defendant has been prevented from performance by a cause beyond its control, and, concededly, such cause has arisen.

We shall assume, however, upon the allegations of the complaint that our interpretation ought not to be literal, but should embrace two qualifications of plaintiff's right to recover back...