Frontera Fruit Co. v. Dowling

• Citation: 91 F.2d 293
• Decision Date: 13 August 1937
• Docket Number: No. 8260.,8260.
• Parties: FRONTERA FRUIT CO., Inc., v. DOWLING et al.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

91 F.2d 293 (1937)

FRONTERA FRUIT CO., Inc., v. DOWLING et al.

No. 8260.

Circuit Court of Appeals, Fifth Circuit.

July 13, 1937.

Rehearing Denied August 13, 1937.

J. E. Meredith, Robt. T. Ervin, Jr., and C. M. A. Rogers, all of Mobile, Ala., and Louis B. Claverie and Charles Payne Fenner, Jr., both of New Orleans, La., for appellant.

Clarence J. Dowling and George Piazza, both of New Orleans, La., for appellees.

Before FOSTER, SIBLEY, and HOLMES, Circuit Judges.

HOLMES, Circuit Judge.

The original libel in this proceeding was brought in the district court by the Frontera Fruit Company against the steamship Gaston to enforce an alleged lien for money advanced for payment of seamen's wages in the amount of $2,868.87. On motion of appellee Dowling, charterer of the vessel, bond for damages for an illegal seizure was given, and thereupon said appellee filed a cross-libel claiming damages in various items aggregating $26,000. On the hearing the ship was ordered released and the claims of said appellee were denied, except for an award of $652.06 damages for detention of the vessel, and $300 for "attorney's fees." From the decree allowing these awards, this appeal is prosecuted by the original libelant.

Since these awards are necessarily based on findings of bad faith, malice, or such negligence as would constitute bad faith, it becomes necessary to examine the facts and the legal relationship of the parties resulting therefrom, and to determine what notice thereof appellant had when the libel was filed, or to what extent it was charged with notice.

Prior to November 3, 1935, the incorporators of the Frontera Fruit Company, appellant herein, were brought in touch with one Manuel Jaidar by an officer of the Poydras Fruit Company. As a result of the negotiations between the three interests thus identified and represented, the Frontera Fruit Company was organized, and a contract executed between it and Manuel Jaidar, on the above-mentioned date, pursuant to which Jaidar purchased the steamship Gaston from the Poydras Fruit Company by act of sale dated November 6, 1935.

After reciting that appellant was desirous of engaging in the business of importing bananas from Mexico and Central America, and selling them in the United States, and that Manuel Jaidar was in a position to furnish the bananas, the contract provided that Jaidar purchase the Gaston from the Poydras Fruit Company and furnish its use to appellant for the purpose of making four trips to Mexico to transport bananas at $1,200 per trip, appellant to advance $3,000 to Jaidar for supplies and labor in Mexico and $1,000 for the expenses of loading the first cargo and to pay to Jaidar the cost price of the bananas when delivered in New Orleans, less the advances of $3,000 and $1,000 above mentioned; and appellant further agreed to pay Jaidar 45 per cent. of the profits from the sale of the bananas, profits to be determined by deducting from the sale price, the cost of the fruit, cost of sales, cost of supervision, and office expenses in Mexico not to exceed 3 cents per stem, the expenses of the vessel, and any other expenses incident to the business not including salary to the officers of the corporation.

Pursuant to this contract, a written act of sale was executed by the Poydras Fruit Company and Jaidar, for the sale of the Gaston, on credit, for $10,000, payable as evidenced by three notes in the amounts of $1,000, $3,000, and $6,000; Jaidar agreeing that 50 per cent. of his share of the profits from the sale of the bananas be withheld by appellant and paid on the notes, that the Poydras Fruit Company retain title to the ship as security for payment of the notes, and that the vessel be not alienated, deteriorated, or encumbered to the prejudice of the mortgage. Appellant joined in the act of sale to bind itself to retain and pay to the Poydras Fruit Company the 50 per cent. of the profits of Jaidar allocated to the payment of the purchase price, subject, however, to the right to retain the first $3,000 thereof to reimburse itself for a loan of $3,000 made by it to the Poydras Fruit Company to pay off an outstanding lien on the ship at the time of the sale, and secured by the pledge of the Jaidar note payable to the Poydras Fruit Company in the amount of $3,000.

When arrangements were made for the first voyage, appellee was named agent for the ship in New Orleans, and Jaidar proceeded to Mexico to handle the purchase, loading, and movement of the bananas. All of the amounts required by the contract were advanced by appellant. Jaidar did not return to the United States, but allowed the appellant to handle all of the business there for him, even to the selection of the ship's agent, master, crew, purchase of supplies, obtaining repairs, and payment of all charges against the vessel. There were delays and difficulties encountered on the first trip which increased the cost thereof to $1,100 more than the contemplated $1,200 to be paid by appellant as freight. Before the ship arrived, appellant arranged through appellee Dowling, as agent of Jaidar, to advance this sum and have the master execute a receipt therefor, reciting that the sum was advanced and used solely for the purpose of paying the wages of the ship's crew. Due to legal difficulties, the ship returned to other ports than New Orleans on the second, third, and fourth voyages, and similar arrangements were made through the ship's agents, selected by appellant; the total amount advanced being $2868.87, as above stated. In the discussions leading up to this arrangement, it appeared that appellant was chiefly concerned with the continuation of the banana business, made the advances for the purpose of continuing it, and took the receipts of the master as a subrogation of the lien of the seamen as additional security for these advances. It will be noticed that appellant had advanced $3,000 to the Poydras Fruit Company in the transaction in which Jaidar became the equitable owner of the vessel, and that it held the note of Jaidar, in this amount, as security for that advance. Presumably, appellant had the same security for this $3,000 as the Poydras Fruit Company for the balance of the purchase price of the ship.

After the fourth voyage, appellant took complete charge of the vessel and made a fifth voyage, after which the vessel was laid up and negotiations were opened for its purchase from the Poydras Fruit Company. The chief difference between the parties was whether or not the $2,868.87 advanced by appellant should be credited on the purchase price. On May 28, 1936, appellee Dowling chartered the vessel from the Poydras Fruit Company, and demanded possssion from appellant. Possession was delivered to him on June 2, 1936, and on the same day a libel was filed, in the Southern District of Mississippi, and the ship seized under the claim of appellant for its lien as subrogee to the claims of the seamen. This libel was dismissed for want of a bond for damages for the wrongful seizure of the vessel, and thereafter this proceeding was begun after the ship had proceeded to Mobile, taken fuel oil, stores, supplies, and equipment preparatory to making a voyage.

There is little or no dispute about the facts outlined above. On the trial, the court found that appellant and Jaidar were engaged in a joint venture and that appellant was not entitled to subrogation; that appellant attempted to raise the asserted liens to protect itself from loss in the venture; and that the libel was brought in bad faith, in that appellant was attempting to shift its losses to the Poydras Fruit Company.

From the facts stated, the conclusion that appellant and Jaidar were engaged in a joint venture is inescapable. It is equally clear that the purchase, ownership, and management of the steamship Gaston was incidental to and a part of the prosecution of the venture. It is insisted that Jaidar was a penniless Mexican. Certain it is that he could not have purchased the steamship Gaston on his credit alone in the absence of a showing that it would be engaged in a lucrative business, or that he had the financial backing of responsible parties. In fact, it...