Crosby v. Pacific SS Lines, 10155.

• Decision Date: 16 March 1943
• Docket Number: No. 10155.,10155.
• Citation: 133 F.2d 470
• Parties: CROSBY v. PACIFIC S. S. LINES, Ltd.
• Court: U.S. Court of Appeals — Ninth Circuit

133 F.2d 470 (1943)

CROSBY v. PACIFIC S. S. LINES, Ltd.

No. 10155.

Circuit Court of Appeals, Ninth Circuit.

January 25, 1943.

Rehearing Denied March 16, 1943.

Hy Schwartz, of Los Angeles, Cal., and Samuel S. Stevens and Heller, Ehrman, White & McAuliffe, all of San Francisco, Cal., for appellant.

Keith R. Ferguson, of San Francisco, Cal., for appellee.

Before MATHEWS, HANEY, and HEALY, Circuit Judges.

HANEY, Circuit Judge.

Appeal was attempted from an order confirming a report of a special master recommending that appellant's petition for allowance of a commission be denied.

The parties assume that appellee is under the jurisdiction of the court below in a proceeding under § 77B of the Bankruptcy Act, 11 U.S.C.A. § 207. The record before us contains neither a petition nor an order disclosing that fact, but we treat the assumption of the parties as a concession of the fact.

Appellant filed a petition on June 17, 1941, alleging that within the preceding two years, appellee, by its president James, employed appellant as a ship broker to sell two ships belonging to appellee, known as S.S. "Emma Alexander" and the S.S. "H. F. Alexander", and agreed to pay appellant a commission of five per cent of the sales price "in the event he should produce a purchaser ready, willing and able to purchase said vessels on terms satisfactory" to appellee; that pursuant to the agreement appellant produced the British Ministry of Shipping as a purchaser ready, willing and able to purchase the vessels on terms satisfactory to appellee; that appellee sold the vessels to the British Ministry of Shipping for $1,250,000 on March 28, 1941; and that the commission due appellant was $62,500. He prayed that he be allowed that sum for the services rendered.

By answer, appellee denied the employment of appellee as alleged in the petition, admitted the sale of the vessels, and alleged that the sale was made directly by appellee without the aid of any broker or brokers whatsoever.

The matter was referred to a special master and subsequently re-referred. Before relating the evidence and because of the numerous parties involved, we state that the evidence is quite meagre regarding the British Ministry of Shipping.¹ The evidence indicates, that insofar as the United States is concerned, the "head" of the Ministry is Sir Ashley Sparks; that immediately subordinate to Sparks is one Boyd, an assistant to the former; that immediately subordinate to Boyd are several directors, two of whom are Rees and Bowring; and that the "representative" of the Ministry on the Pacific Coast was one Walsh. While Walsh testified that the "Ministry on the Pacific Coast is an individual, J. J. Walsh", there is other evidence disclosing that he was subordinate to Sparks, Boyd and the directors.

In August or September, 1939, James, President of appellee, authorized appellant to offer the Steamships "H.F. Alexander" and "Emma Alexander" for sale. Appellant has been for many years a ship broker and had previously sold several vessels for appellee and was paid a commission for his services. Appellant engaged the services of one Harrison, and the latter engaged the services of Bowring & Company. Later, appellant engaged the services of one Alexander, who engaged the services of one Fischer. Through one or more of these associates, the vessels were offered to representatives of the Ministry many times. They were offered to Sparks, Boyd, Rees and possibly Bowring of the Ministry and to Admiral Potts, Naval Attache to the British Embassy in Washington. Plans and other data were submitted and a great deal of time consumed in attempting to dispose of the vessels. The special master excluded evidence showing the money spent in attempting to negotiate the sales. There was evidence that the vessels were first offered to the Ministry by appellant's associates. The only answers obtained from these results were to the same effect — the Ministry was not then interested in the vessels.

During the period prior to 1941, James had attempted to dispose of the vessels to the Ministry through Walsh and through an advisor to the Ministry, but the latter showed no desire to purchase the vessels. The vessels had also been offered by another broker but with the same result. James testified that seven or eight other brokers, other than Crosby and his associates, were trying to dispose of the vessels, but it is not clear how many, if any, of them had offered the vessels to the Ministry.

Shortly prior to January 3, 1941, Walsh advised James that the Ministry might then be interested in the two vessels. Plans were submitted to Walsh. About January 3, 1941, Crosby and Alexander conferred with James who told them that the vessels had been offered to the Ministry through Walsh. Alexander then telegraphed Boyd in part: "Have been informed that John Walsh * * * has made formal offers to owners of Emma Alexander three hundred thousand dollars for British Ministry Shipping, also tentative offer for H.F. Alexander * * *" Boyd replied by telegram as follows: "Walsh is ministry representative San Francisco but has not made any offers for Alexander vessels stop there is just a possibility we might be interested in H.F. and I suggest you give us refusal of her for as long time as possible * * *."

It is the custom, in connection with sales of vessels, that, when a broker finds a prospect showing interest, he obtains from the owner a commitment commonly called an option by which the broker may give the prospect a right to purchase the vessel at the stated price at any time before a fixed date. Boyd, by using the words "refusal" of the vessel, was referring to such a commitment.

By a letter dated January 17, 1941, James informed appellant that

"The Pacific Coast representative of the British Ministry of Shipping obtained from us some time ago the particulars of the vessel and cabled them to London. The fact that he has done so was confirmed through one of our directors.

"In view of the foregoing we could not consistently offer any one else the refusal of the ship for sale to this prospective purchaser."

There was evidence that Crosby, or one of his associates, informed James that if the sale were consummated with the Ministry, Crosby was expecting to be paid a commission.

The negotiations through Walsh resulted in the purchase of the vessels by the Ministry for the total amount of $1,250,000, about March 18, 1941. From various statements in the record it may be inferred that a petition for approval of the sale was filed in and granted by the court below: and that James claimed and was paid a commission on the sales by order of the court below. There are no petitions or orders in the record supporting either of these statements.

There were excerpts from periodicals showing that negotiations for the purchase of the vessels were being carried on with the Ministry, and announcing the sales of such vessels. This is particularly pertinent in view of the discussion herein of evidence of "state" secrets. Delivery of the vessels was made to a nominee of the Ministry in Canada.

Appellee called Walsh as a witness on its behalf. On cross-examination, Walsh was asked if he had any correspondence with the New York office relating to the vessels. He replied in the affirmative. Appellant then demanded production of the correspondence. Walsh replied: "I will produce it if given authority by the British Government to do it, because that correspondence, in most instances, is mixed with other correspondence that has nothing to do with this case". At this point, over appellant's objection, appellee's counsel questioned Walsh and elicited the following facts: that the correspondence was of an official nature, belonging to the British Ministry of War Transport which is an arm of the British Government, and "The correspondence all belongs to the British Government; all the correspondence of the British Government, under my instructions, is confidential, not to be disclosed to anyone outside of the British Government".

After some statements of the special master, appellant's counsel and appellee's counsel, the following occurred:

"Mr. Stevens for appellant: I will state this: I made an examination of the authorities since this witness' deposition was taken, and I have been unable to find any authority which authorizes an official, such as a Deputy Minister of Shipping, to refuse to produce documents.

"The Master: If there is no law on it, I will make the law right now.

"Mr. Ferguson for appellee: There is the provision in your own Civil Code of Procedure.

"Mr. Stevens: I say to the Court —

"The Master: You do not need to cite law. I will make the law on it."

Upon the basis of the testimony of the witness previously given, the special master refused to compel Walsh to produce any correspondence which he, Walsh, considered confidential.

Thereafter, Walsh testified that some of the correspondence referred only to the vessels, while other correspondence included other matters. He at no time testified that he had been directed by any superior to treat any correspondence confidential, or that any other officer (if he is such) of the British Government considered the correspondence as confidential, or that he had been directed to refuse to produce any correspondence in conformity with order of court, or the extent of the authority, if any, he had. He gave no evidence directly or indirectly to show why or in what manner he considered the correspondence confidential. Appellant moved to strike all evidence of the witness on the ground that he had refused to produce the correspondence on cross-examination. The special master denied the motion. Insofar as the record discloses, the special master insisted on "making" the law and showed no interest in any argument thereon. The only authority mentioned was § 1881, Calif. Code of Civil Procedure, read by appellee's counsel to appellant's counsel.

The special master's...