Federal Sugar Refining Co. v. United States Sugar Equalization Board, Inc.

• Decision Date: 24 June 1920
• Parties: FEDERAL SUGAR REFINING CO. v. UNITED STATES SUGAR EQUALI- ZATION BOARD, Inc.
• Court: U.S. District Court — Southern District of New York

268 F. 575

FEDERAL SUGAR REFINING CO. v. UNITED STATES SUGAR EQUALI- ZATION BOARD, Inc.

United States District Court, S.D. New York.

June 24, 1920

To the complaint herein the answer has interposed three affirmative defenses, and to each and every one of these defenses plaintiff has demurred. The complaint sets forth three causes of action, and, omitting formal allegations, the essential features set forth in these causes of action are as follows:

On or about August 27, 1917, under authority conferred by an act of Congress approved June 15, 1917, known as the Espionage Act (40 Stat. 217), the President of the United States, by proclamation, prohibited the exportation of sugar from the United States except in accordance with regulations prescribed by him. Under said regulations the power to issue export licenses, thereunder required, was vested in the Exports Administrative Board, and the proclamation and regulations thereunder and the embargo thereby established were enforced continuously thereafter during the times covered by the subsequent events alleged in the complaint. The Exports Administrative Board required that all licenses for the exportation of sugar be approved by the Food Administration, and under this requirement no license for the exportation of sugar was granted or could be secured, except upon the approval of Rolph, as head of the Sugar Division, as a consequence whereof Rolph was enabled to prevent the exportation of sugar from the United States.

The Norwegian Commission requested the Exports Administrative Board or its successor to issue a license for the exportation of the 4,500 tons of sugar above referred to, and this request was referred to Rolph, as head of the Sugar Division and was disapproved by him, and because of such disapproval the request was refused, and thereafter repeated requests similarly made, both by plaintiff and by the Norwegian Commission, were refused by Rolph. Because of the refusal to issue the license the Norwegian Commission was unable to take delivery of the same under the contract or to furnish shipping instructions therefor, and by reason of this on or about February 2, 1918, by mutual agreement the contract between plaintiff and the Norwegian Commission was modified by extending the date of delivery to June 1, 1918; and thereafter, on or about June 6, 1918, there was further modification by extending the date of delivery to October 1 1918, and by fixing the price for the sugar at $6.60 per 100 pounds, or any higher price demanded by the United States government.

Rolph while head of the Sugar Division, and on or about July 23 1918, subscribed to the certificate of incorporation of defendant and was one of its incorporators, and immediately thereafter was elected one of the directors and president of defendant, and duly qualified as such, and from July 23 1918, Rolph was continuously the president and a director of defendant. In August or September, 1918, defendant, through its president, Rolph, or its other officers and agents, 'well knowing that the aforesaid contract between plaintiff and said Norwegian Government Food Commission was in full force and effect, and wrongfully designing and contriving to deprive the plaintiff of the benefits of its aforesaid contract, and with the wrongful intent to secure the benefits of said contract for itself, wrongfully represented to the said Norwegian Government Food Commission that no refined sugar could be exported from the United States, nor would any license for the exportation of any sugar be issued, unless such sugar was purchased from or through the defendant, and further wrongfully represented that the said commission could not secure said forty-five hundred (4,500) tons of sugar contracted to be purchased from the plaintiff as aforesaid, except through the defendant, and wrongfully induced the said commission to believe said representations to be true; that prior to and at the time said wrongful representations were made to the said commission the said George M. Rolph, as head of the said Sugar Division, arbitrarily and in abuse of the discretionary power vested in him as such, refused and continued to refuse to approve the issuance of a license for the exportation of the said forty-five hundred (4,500) tons of sugar contracted to be sold by the plaintiff as aforesaid, as a consequence whereof the said commission, relying upon the aforesaid wrongful representations and believing the same to be true, agreed to and did purchase from the defendant forty-five hundred (4,500) tons of refined sugar in place of the said forty-five hundred (4,500) tons that it had theretofore agreed to purchase from the plaintiff; that said defendant delivered to the said commission forty-five hundred (4,500) tons of refined sugar, and the said George M. Rolph, as head of the Sugar Division aforesaid, wrongfully approved the issuance of the export license therefor, and the said commission received the said sugar, and exported the same, and paid to the defendant therefor approximately the sum of one million one hundred thousand dollars ($1,100,000).'

Thereafter, on about September 20, 1918, the Norwegian Commission refused to receive any sugar from plaintiff under its contract, or to furnish shipping instructions, and informed plaintiff that the cause of its refusal was that it had already filled its contract and satisfied its requirements through defendant, and had received or would receive the 4,500 tons of sugar thereunder from defendant upon the representations aforesaid. Defendant represented to the Norwegian Commission that the United States government demanded that said sugar be sold at 11 cents per pound, and the commission believed said representations to be true, and agreed to pay and did pay to defendant 11 cents per pound for the 4,500 tons of sugar delivered to the commission by defendant. 'Each and all of the aforesaid acts of the defendant were pursuant to and in execution of the wrongful design and contrivance aforesaid, to the injury of the plaintiff and to its damage in excess of two hundred and nineteen thousand dollars ($219,000).'

The net profit on the sale by defendant to the Norwegian Commission amounted to $219,744, 'which said sum was in the month of September or October, 1918, had and received by the defendant to and for the use of the plaintiff, which in equity and good conscience the defendant should not retain. ' Plaintiff demands from defendant the sum of $219,744, 'the money of the plaintiff so had and received by the defendant,' but no part has been paid.

Defendant wrongfully induced the commission to believe these representations, and to believe that in receiving the 4,500 tons of sugar from defendant the commission was fulfilling its contract with plaintiff, and the commission, relying thereon, agreed to take and did take and receive the 4,500 tons of sugar from defendant in fulfillment of its contract with plaintiff. Subsequently the commission refused to take any sugar from plaintiff under the contract, and informed the plaintiff that it had satisfied its requirements through defendant. Each and all of the acts of defendant were pursuant to and in execution of 'the wrongful design and contrivance aforesaid,' to plaintiff's damage in excess of $219,000.

Defendant represented to the Norwegian Commission that the United States government demanded that the sugar be sold at 11 cents per pound, and the commission believed the representation to be true, and paid this sum for the 4,500 tons of sugar delivered to the commission by the defendant. Defendant received as net profit on this sale to the Norwegian Commission the sum of $219,744, 'which said sum of money was had and received by the defendant to and for the use of plaintiff, which in equity and good conscience the defendant should not retain.'

On or about August 27, 1917, under authority of statute, the President prohibited the exportation of sugar from the United States, except in accordance with regulations which required that a license therefor be first obtained in each case from the Export Administrative Board, and thereafter on or about October 12, 1917, by executive order, the President established the War Trade Board as the successor to the Export Administrative Board and vested in the War Trade Board all the power and authority of the Export Administrative Board, and from and after August 27, 1917, at all times mentioned in the complaint, it was settled policy of the Export Administrative Board and its successor, War Trade Board, to refuse all licenses for export of sugar from this country.

In or about September, 1918, upon the representations of the Norwegian minister of the urgent need of sugar in Norway, the Food Administrator directed defendant to sell and deliver 4,500 tons of sugar to the Norwegian Commission for export to Norway, and in obedience to said direction defendant thereupon sold and delivered in this country 4,500 tons to the Norwegian Commission, which was thereupon exported by them upon a license therefor duly issued by the War Trade Board, all of which was done under the authority and direction of the Food Administrator and the President of the United States in pursuance of lawful statute. The 4,500 tons of sugar sold as aforesaid are the 4,500 tons of sugar mentioned in the complaint as sold by defendant to the Norwegian Commission.

Said sale and delivery of the 4,500 tons of sugar was purely a governmental transaction between the United States through its Food Administration, and the government of Norway through its Norwegian Commission, which said sale and delivery was arranged and carried out upon governmental orders and instructions through governmental agencies, and the act of the defendant in selling to the Norwegian...