Angel v. Seattle-First Nat. Bank

• Decision Date: 17 August 1981
• Docket Number: SEATTLE-FIRST,No. 79-4855,79-4855
• Parties: Solomon ANGEL, Plaintiff-Appellee, v.NATIONAL BANK, Defendant and Third Party Plaintiff-Appellant, v. UNITED STATES of America, Third Party Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1293

653 F.2d 1293

Solomon ANGEL, Plaintiff-Appellee, v. SEATTLE-FIRST NATIONAL BANK, Defendant and Third Party Plaintiff-Appellant, v. UNITED STATES of America, Third Party Defendant-Appellant.

No. 79-4855.

United States Court of Appeals Ninth Circuit.

Argued and Submitted June 1, 1981.

Decided Aug. 17, 1981.

Susan L. Barnes, Asst. U.S. Atty., Seattle, Wash., for third party defendant-appellant.

Dale E. Kremer, Seattle, Wash, for plaintiff-appellee.

Appeal from the United States District Court for the Western District of Washington.

Before WRIGHT and FERGUSON, Circuit Judges, and PANNER, ^* District Judge.

FERGUSON, Circuit Judge:

Pursuant to a sting operation designed to catch third-party smugglers, an agent of the United States Customs Service issued a receipt to Angel for $260,000 in the name of the Seattle-First National Bank. Although the agent was acting with the bank's permission, the bank thereafter refused to pay Angel the money evidenced by the receipt.

Angel sued the bank for $260,000. The bank cross-claimed against the United States for whatever amounts it owed to Angel. The district court found the bank liable to Angel and the Government liable to the bank, both for the full amount. We affirm.

I.

Plaintiff Solomon Angel is a citizen of Canada residing in Vancouver, British Columbia. In 1976, Mark Hartman, an undercover agent of United States Customs, approached Angel and offered to buy some of his and his wife's paintings. ¹ The purpose of the offer was to catch suspected smugglers, unrelated to Angel, transporting paintings into the United States without making the requisite customs declaration. ² The Government alleges that, to effectuate this purpose, it deceived Angel into selling his paintings so that they could be smuggled. Angel maintains that the Government entered into a contract to purchase the goods; he is not concerned with the purpose behind the transaction.

A Customs special agent posed as the buyer. Hartman played the part of the buyer's agent. The Angels asked $260,000 for the paintings while making no representations concerning them. Hartman agreed that his principal would pay the full $260,000. During the course of this litigation, it has been discovered that the Angels purchased the paintings for $531.25 in the early 1970's and that their present appraised value is between $2,475 and $13,000.

When the deal was ready to close, Angel insisted that the money be deposited in a bank and that the bank issue a receipt to him. Hartman brought $260,000 to the Seattle-First National Bank and placed it in a safety deposit box. A Customs officer posed as a bank employee and, with the bank's knowledge and consent, issued a receipt for the $260,000. The receipt was ultimately delivered to Angel. In exchange, Angel delivered to Hartman possession of and title to the paintings.

Once the paintings left Angel's possession, they were smuggled across the border by the targets of the sting operation. Those targets have been convicted. In addition, the paintings and the plane used to transport them have been forfeited to the Government's ownership. See 19 U.S.C. §§ 1462, 1581(e).

Angel sued the bank for the $260,000 evidenced by the receipt. The bank cross-claimed against the Government for indemnification of whatever amounts Angel should recover. Both plaintiff Angel and third-party plaintiff bank moved for summary judgment, which was granted respectively against the bank and the Government.

The Government concedes that the bank was acting as "an innocent tool of the Government." The Government is therefore not appealing the summary judgment against it in favor of the bank. Rather, the Government stands here in the bank's shoes appealing the summary judgment in favor of Angel.

II.

The district court found that the bank represented it was holding funds for Angel's account, that Angel relied on the bank's representation to his detriment, and therefore that the bank was liable to Angel for the amount of those funds. As has been discussed, the United States must indemnify the bank to the extent of the bank's liability. Therefore, the United States in effect has been ordered to pay Angel $260,000 for the paintings.

The Government seeks to avoid that liability. It relies entirely on public policy in advancing its position. First, it asserts that applying traditional concepts of commercial transactions to this case would be "legal sophistry." Next, it argues that the equities weigh against Angel. Third, it adduces public policy by analogy to four branches of cases. Finally, it relies on two statutory provisions. All these arguments fail.

A. Angel is Entitled to Recovery Under Commercial Law.

The district court found Angel entitled to recovery whether on the theory of contract, promissory estoppel, or bailment. The Government does not take issue with the substance of those doctrines. Rather, it argues that these doctrines advance policy goals which would be frustrated here by application of the established legal concepts.

That argument is specious. It is true, as the Government asserts, that legal doctrines develop to effectuate policy goals. But it does not follow that a court is free to ignore legal doctrine in order to serve underlying policy. If the law operated that way, there would be no need for any legal principles. Each party could argue fundamental rights, and the court could dispense intuitive justice commensurate with the equities.

The Government has offered no reason why the bank is not liable under commercial law. Nor has it argued that Angel does not deserve recovery under the relevant jurisdiction's commercial law. It merely asserts, without citation, that because it was "engaged in a sham to catch smug- glers," normal commercial concepts are inapplicable.

It is hard to imagine that under any commercial law, the subjective intent of a party to commit a sham excuses him from contract responsibility for his action. In any event, the Government, as appellant, bears the burden of demonstrating the judgment below erroneous. It has failed to offer any reason to suspect that the court below reached an erroneous result under commercial law. Therefore, this ground furnishes no basis for reversal.

B. The Equities Favor Angel.

The Government devotes so much of its effort on appeal to contentions of public policy that it is well to reflect on the parties' relative equities. These tilt decisively in Angel's favor, even though he thereby reaps windfall profits out of his transaction with the Government.

The Government tries to cast Angel in the role of an underworld figure, but the record contains no evidence that he is less than law-abiding. Further, on the facts of this case it is difficult to perceive what illegitimate motive Angel may have had. Even had he known that the paintings were to be smuggled, he could not derive any benefit thereby because there was no customs fee to cheat the art could be taken into the United States duty-free, as Angel informed Hartman. See 19 U.S.C. § 1202, schedule 7, part 11.

For aught that appears in the record, Angel is an angel. The same cannot be said of the Government. Its agents impersonated both a buyer and his agent, setting up the purchase from Angel solely for the purpose of trapping suspected smugglers. That purpose has now been accomplished four convictions have been won, the smuggled artworks and an airplane have been forfeited. Having achieved its objective by the use of Angel's artwork, the Government now wants to ignore its agreement with Angel.

The Government claims that it should not have to pay Angel the amount bargained for his art. However, it does not advance any legal theory such as mistake of fact or failure of consideration. Rather, it asserts that it should not be held to its contract because it foolishly agreed to pay one hundred times more than it would receive. That fact, however, is not persuasive.

The Government maintains that

(s)ince the United States is legally entitled to keep the smuggled art as forfeited, plaintiff (sic) claims to the value of it should be as invalid as his claim to return the goods since he has failed to petition for them.

All the Government need do under this reasoning is to send its agents to the home of a wealthy foreign citizen, offer the owner millions of dollars for various objets d'art, take delivery, have the goods smuggled across the border, keep the goods pursuant to the statutory forfeiture power, and then tell the hapless former owner that he has no rights in his former property, either to its value or to the benefit of his bargain with the Government.

Equity strongly favors Angel.

C. Public Policies Do Not Favor the United States.

The Government forthrightly admits that no case has been found on point. It seeks nonetheless to overturn the judgment below by analogizing to four different public policies. None is relevant.

1. Forfeiture Cases.

First, the Government cites various forfeiture cases, notably Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 94 S.Ct. 2080, 40 L.Ed.2d 452 (1974). That case held that the lessor of a yacht could not complain of the yacht's forfeiture after a lessee had been caught on board with one marijuana cigarette. Pearson affords the Government no support. The yacht in that case was seized pursuant to a statute which provided for the forfeiture of any vessel used to transport controlled substances. Id. at 665-67, 94 S.Ct. at 2082-84. Thus, at the time the yacht was seized, it was being used in contravention of the statute.

The relevant statute in the instant context provides for the forfeiture of smuggled goods. Pursuant to that statute, the artworks have been forfeited to the Government subsequent to their being smuggled across the border. At all times of Angel's involvement, however, his artwork was used for legal activity. In order for Pearson to apply to Angel, its holding would have to be extended so that the yacht...