Fernandina Shipbuilding & Dry Dock Co. v. Peters

• Citation: 283 F. 621
• Decision Date: 17 August 1922
• Docket Number: 866.
• Parties: FERNANDINA SHIPBUILDING & DRY DOCK CO. v. PETERS et al.
• Court: U.S. District Court — Southern District of Florida

283 F. 621

FERNANDINA SHIPBUILDING & DRY DOCK CO. v. PETERS et al.

No. 866.

United States District Court, S.D. Florida.

August 17, 1922

[Copyrighted Material Omitted]

The statute of frauds, being an affirmative defense, cannot be considered on demurrer to the complaint.

The declaration alleges: That the plaintiff, prior to March 28 1918, was incorporated under and doing business pursuant to the laws of the state of Delaware, with an authorized capital stock of 10,000 shares, of the par value of $100 each, 2,500 shares preferred, and 7,500 shares common. That it was a citizen of the state of Delaware, United States of America. That defendants were citizens of the Southern district of Florida, United States of America. That on or about the said 28th day of March, 1918, the plaintiff entered into a contract with the republic of France, filed therewith and marked Exhibit A, providing that the plaintiff should construct and sell to the republic of France 12 steel tugs and 12 steel barges, in accordance with the plans and specifications attached to the contract, at a total estimated price of $5,130,000; that all vessels were agreed to be constructed, classed for registry, tried for performance, and delivered to the republic of France at Fernandina, Fla., in the manner set out in detail in the contract. Such deliveries were to begin within 8 months after the payment of the first installment of the purchase price, and all within 14 months therefrom. Payments for construction and delivery of the vessels were to be as follows: Ten per cent. in five days after receipt of permit from the United States Shipping Board, allowing the prosecution and performance of the agreement, and the balance as work progressed in detail as specified in the contract.

April 9, 1918, the plaintiff procured from the United States Shipping Board the requisite permission, which was filed with the declaration as an exhibit and made a part thereof. May 8 1918, the republic of France made its first payment to the plaintiff in the sum of $513,000, by voucher No. 28876 of the banking firm of J. P. Morgan & Co. of New York. This voucher was filed as an exhibit to the declaration and made a part thereof. May 9, 1918, the plaintiff furnished to and the same was accepted by the republic of France, in accordance with agreement, a surety performance bond of the Fidelity &amp Deposit Company of Maryland, paying therefor the sum of $5,130, which was filed as an exhibit to the declaration and made a part thereof.

That upon the signing and delivery of the contract between the plaintiff and the republic of France the payment by the republic of France to the plaintiff of the first payment on said contract of $513,000, and the delivery of the performance bond above mentioned to the republic of France, the contract between the plaintiff and the republic of France became effective, binding, and obligatory on the respective parties. That the plaintiff took the steps and proceedings necessary to carry out and fulfill such contract on its part and behalf. That it employed certain officers and financial agents, secured adequate shipbuilding site and facilities, and arranged for the necessary machinery, tools, and equipment, and all things requisite and necessary in the enterprise, at an outlay of actual cash of $50,000, and liabilities incurred in the sum of $500,000. That in furtherance of said enterprise the plaintiff proceeded to make the necessary financial, executive, and administrative arrangements.

That the defendants entered into negotiations with the plaintiff with a view of supplying the latter with the necessary financial assistance and executive and administrative abilities. That such negotiations were carried on through the plaintiff's officers and agents, A. W. Knowles and others, acting for and in behalf of the plaintiff and in their own behalf and interest. That such negotiations were conducted and continued until on or about the 14th day of June, 1918, when a memorandum of agreement was entered into by three of defendants, Peters, Ward, and Goodman, and witnessed by the other defendant McNair, which agreement was file with the declaration and made a part thereof. That on June 17, 1918, a definite agreement, provided in the provisional agreement above mentioned, was formally and in detail agreed upon with the plaintiff by all the defendants, but was never actually signed. A copy of such agreement so agreed upon and unsigned is filed with the declaration as a part thereof.

That in order to secure the services, financial standing, and business ability of the defendants, the plaintiff agreed to cause, through the interposition of said A. W. Knowles, 6,079 1/2 shares of full-paid, nonassessable stock to be transferred and delivered to the defendants in consideration of the defendants advancing to it or paying into its treasury the sum of $150,000 in cash, upon delivery to them or their nominee by the plaintiff of its 6 per cent. note or notes payable on or before 14 months from date, and in further consideration of the defendants subscribing for and paying into the treasury of the company at least $15,000 of the unissued preferred capital stock. That negotiations, meetings, interviews, and dealings were conducted and carried on by the plaintiff with the defendants in the absolute good faith and belief by the plaintiff that the same would be conducted by the defendants in good faith, and that the defendants would carry out their promises and undertakings in absolute good faith, and were able financially and personally to give to the plaintiff the necessary financial, executive, and business abilities required by it for its successful operations. That in furtherance of said negotiations the plaintiff put the defendants in full possession of all the controlling facts and circumstances relating to the enterprise and the situation and condition of itself in relation thereto.

That as a matter of fact the defendants were not acting in good faith in said negotiations, but conspiring and confederating together, and craftily, secretly, stealthily, and in fraud of the rights of the plaintiff, merely conducting said negotiations for the purpose of obtaining substantially all information, misleading the plaintiff, and inducing it to rely solely upon the defendants, and thereby obtain no other or different assistance, until the time should elapse when the work under said contract with the republic of France should have been commenced and carried on.

The declaration then concludes: 'That the defendants so combined and confederated together to defraud the plaintiff in the premises, and underhandedly, secretly, and without the knowledge of the plaintiff undertook to negotiate or obtain a contract with the French Commission and sought to induce the French Commission, representing the republic of France, to grant a contract to the defendants in lieu or in substitution of the contract awarded by the republic of France to the plaintiff, in their own behalf and interest, and in behalf and interest of themselves and their associates, and thus induce the republic of France to cancel its contract with the plaintiff, recover the unused money previously paid by the republic of France as aforesaid, and thus totally ruin and destroy the plaintiff's business prospects, and as a result obtain the full benefit and advantage of the contract for themselves, the said defendants. That by reason of the premises aforesaid, the false and misleading promises and conduct of the defendants as aforesaid, and the reliance thereon by the plaintiff as aforesaid, the time within which to commence operations under said contract was allowed to expire, whereupon the said republic of France did, on, to wit, the 17th day of July, 1918, formally cancel the same, and on the 17th day of July, 1918, received from the plaintiff payment and refund of $514,941.94, which included the amount of the first payment made by the republic of France to the plaintiff, with interest allowed by the bank during the time the funds remained unused, by the check of the plaintiff on the Chase National Bank of New York, which was duly paid to the republic of France on the 24th day of July, 1918, which check, showing the said payment, is filed herewith, marked Exhibit G, and deemed a part hereof, the same and with like force and effect as though fully and at large set forth herein. That by reason of the premises aforesaid, and the combining, conspiring, and confederating of the defendants as aforesaid, and the actual fraud perpetrated upon the plaintiff and committed by the defendants as aforesaid, the said plaintiff has lost and been deprived of all the values acquired and secured by it as aforesaid, and been compelled to relinquish and thereby lose all opportunities which it might and otherwise could have made in and about carrying out the said contract, Exhibit A, and in establishing a successful shipbuilding going concern, and in taking and obtaining other and different contracts at a great profit to it, and has thereby lost and been deprived of all investments, advances, and expenses paid and incurred, and all profits which it might have made on said contract, Exhibit A, to the damage of the plaintiff in the sum of $800,000. And therefore the plaintiff claims damages in the sum of $800,000.'

To this declaration the defendants demurred, alleging 31 specific grounds, that are considered in the opinion of the court. Demurrer overruled.

Cromwell Gibbons, of Jacksonville, Fla., for plaintiff.

H. S. Anderson, of Jacksonville, Fla., for defendants.

CLAYTON, District Judge (after stating the facts as above).

This is an action of trespass on the case. It is sounding in tort. It is not brought for a breach of a contract or for a false...