Colonial Airlines v. Janas

• Decision Date: 16 March 1953
• Docket Number: No. 135,Docket 22507.,135
• Citation: 202 F.2d 914
• Parties: COLONIAL AIRLINES, Inc. v. JANAS et al.
• Court: U.S. Court of Appeals — Second Circuit

202 F.2d 914 (1953)

COLONIAL AIRLINES, Inc. v. JANAS et al.

No. 135, Docket 22507.

United States Court of Appeals Second Circuit.

Argued January 5, 1953.

Decided March 16, 1953.

COPYRIGHT MATERIAL OMITTED

Henry N. Ess, III, New York City (Sullivan & Cromwell, Joseph L. Broderick and Marvin Schwartz, all of New York City, on the brief), for plaintiff.

Mortimor S. Gordon, New York City (Gordon, Brady, Caffrey & Keller, Herman Keller and Harry Balterman, all of New York City, on the brief), for defendant Sigmund Janas, Sr.

Gerald H. Ullman, New York City, for defendant Alfred N. Hudson.

Newell A. Clapp, Acting Asst. Atty. Gen. (Myles J. Lane, U. S. Atty., New York City, and Daniel M. Friedman, Sp. Asst. to Atty. Gen., John H. Wanner, Asso. Gen. Counsel, Emory T. Nunneley, Jr., Gen. Counsel, James L. Highsaw, Jr., Chief, Litigation and Research Division, and Jerome S. Boros, Atty., Civil Aeronautics Board, all of Washington, D. C., on the brief), for Civil Aeronautics Board as amicus curiae.

Before SWAN, Chief Judge, and CLARK and FRANK, Circuit Judges.

CLARK, Circuit Judge.

Colonial Airlines, Inc., brought this action to recover damages of $500,000 allegedly sustained through defalcations of three of its former officers and for rescission of a stock option agreement with one of these, Sigmund Janas, Sr., who until 1951 had been president and a director of plaintiff. The other individual defendants named are Alfred N. Hudson, plaintiff's Vice-President — Advertising and Publicity at the time of the acts complained of, as described below, and Sigmund Janas, Jr., then Vice-President — Traffic, who was accused of diverting company funds for personal use. Also joined as a defendant is Monroe Greenthal, Inc., a New York advertising agency, which is charged with having received and turned over to Janas, Sr., $1,200 of plaintiff's funds to which it was not entitled. Federal jurisdiction is founded upon the diverse citizenship of the parties.

The allegations against Janas, Sr., and Hudson, the only two defendants involved on these appeals, may be summarized as follows: Both Janas and Hudson, it is claimed, received "kickbacks" from Colonial's advertising agencies and also diverted substantial amounts of plaintiff's funds to their private use by submitting false and fictitious expense statements and by causing plaintiff directly to pay for goods and services destined for their personal benefit. From Janas alone, plaintiff seeks in addition to recover secret premiums which he obtained on transactions in Canadian and Bermudian currency with the use of corporate funds; reimbursement is also demanded from Janas for a fine imposed upon plaintiff by the Canadian government for violation of its exchange restrictions in connection with these transactions. Plaintiff further charges Janas with liability for losses which it incurred on loans extended to Canadian Air Express, Ltd., a Canadian corporation in which Janas owned a controlling stock interest. Finally, plaintiff seeks rescission of the stock options already referred to on the ground that Janas had obtained them by misrepresenting to plaintiff that he had in the past devoted his best efforts to the corporation's interest and would continue to do so in the future. The individual items of monetary damage charged to Janas amount to a total of $370,998.42; those charged to Hudson total $41,885.

In their answers, Janas and Hudson deny plaintiff's allegations of wrongdoing and set up various defenses, including that of accord and satisfaction. This defense is based upon a prior proceeding before the Civil Aeronautics Board to which plaintiff, Janas, Sr., and Hudson were parties. On April 13, 1951, the CAB had issued an order instituting an investigation to determine whether plaintiff or any of its officers had violated certain provisions of the Civil Aeronautics Act, 49 U.S.C. § 401 et seq., and the Board's Economic Regulations and Uniform System of Accounts for Air Carriers. A bill of particulars served on the parties by the CAB pursuant to this order, as amended on April 16, shows that the proposed investigation involved essentially the same acts and transactions upon which plaintiff predicates the present action. On June 15, 1951, the parties to the CAB proceeding submitted to the Board a "Proposal of Adjustment and Consent" in which they "proposed that the matters in issue between them and the Board be adjusted" on specified terms and consented to the entry by the CAB of an order requiring them to cease and desist from future violations. This cease and desist order incorporated by reference the terms of the "adjustment" which required Janas to resign as an officer of plaintiff, to pay plaintiff $75,000, and, together with plaintiff, to plead nole contendre to criminal informations to be filed against them; the parties also undertook not to contest or seek review of the cease and desist order.

Janas and Hudson allege in their answers that the $75,000 was paid by Janas and received by plaintiff "in full satisfaction and discharge of any amounts due the plaintiff" from these defendants for the matters complained of. Janas' answer further alleges that the CAB warned him that his failure to accept the "Proposal" (whose terms both defendants aver had been suggested by the Board) would lead to revocation of plaintiff's Certificate of Public Convenience and Necessity, thus preventing plaintiff from operating as an air carrier. On the basis of this assertion, which is categorically denied by the CAB in its amicus curiae brief submitted to us, Janas counterclaims for $75,000, plus interest, to "prevent unjust enrichment of plaintiff."

Plaintiff moved to dismiss this counterclaim on the ground that the district court lacked jurisdiction over its subject matter in view of the action previously taken by the CAB. Before the return day of this motion, Janas, Sr., Janas, Jr., and Hudson cross-moved for dismissal of the complaint on the same ground. The district court granted the motions of Janas, Sr., and Hudson and dismissed the complaint as to them, but denied the similar motion by Janas, Jr., since he was not a party to the CAB proceeding. It also granted plaintiff's motion to dismiss the counterclaim. In rendering these rulings, the district court was of the opinion that the CAB had assumed exclusive jurisdiction over the present dispute in so far as it involved the parties to the Board's action. Plaintiff thereupon moved for reargument of defendants' motions and the CAB moved for leave to participate as amicus curiae. Both these motions were granted, and at the reargument the CAB took the position that the subject matter of neither the complaint nor the counterclaim was within the purview of its own jurisdiction. The district court accepted "the Civil Aeronautics Board's self-imposed limitation of jurisdiction," but adhered to its earlier disposition of defendants' motions with the succinct explanation that "Absent any indication that Colonial, when it entered into the compromise of June 15, 1951 with the defendants, was under the defendants' control or for any other reason not acting freely, the said agreement of June 15, 1951 appears to present the requisite elements of an accord and satisfaction." Since the court's dismissal of the counterclaim was apparently not challenged on reargument, that ruling also remained intact.

In the order entered upon its opinion, the district court made the determination under F.R. 54(b) that there is no just reason for delay in entering final judgment dismissing the complaint as to Janas, Sr., and Hudson and also dismissing the counterclaim. It accordingly directed the entry of judgment to this effect, thus paving the way for the present appeals by plaintiff and Janas from the portions of the judgment adverse to them.

I. Plaintiff's Appeal

The first question for consideration on plaintiff's appeal is whether the district court could properly dismiss the complaint by sustaining the defense of accord and satisfaction on motion to dismiss for lack of jurisdiction over the subject matter. The court in substance treated these motions to dismiss as motions for summary judgment. Cf. Suckow Borax Mines Consolidated v. Borax Consolidated, Limited, 9 Cir., 185 F.2d 196, certiorari denied 340 U.S. 943, 71 S.Ct. 506, 95 L.Ed. 680. F.R. 12(b) as amended shows the entire propriety of such a course where the motion to dismiss is made on the ground of failure to state a claim upon which relief can be granted. Since the motions actually made relied on the same facts — the CAB proceeding and order — upon which a motion to dismiss for failure to state a claim would have been based, and since the course of procedure is entirely the same, i. e., through motion supported by affidavit, the court was justified in viewing these motions as likewise converted into motions for summary judgment. 2 Moore's Federal Practice ¶ 12.09, 2d Ed.1948; Allison v. Mackey, 88 U.S.App.D.C. 154, 188 F.2d 983; William J. Kelly Co. v. R. F. C., 1 Cir., 172 F.2d 865. The fact that accord and satisfaction is an affirmative defense under F.R. 8(c) does not prevent adjudication on summary judgment where the essential facts are made clear of record. W. E. Hedger Transp. Corp. v. Ira S. Bushey & Sons, 2 Cir., 186 F.2d 236; Albrecht v. Indiana Harbor Belt R. Co., 7 Cir., 178 F. 2d 577, certiorari denied 339 U.S. 949, 70...