National City Bank of New York v. United States

• Decision Date: 08 March 1921
• Citation: 275 F. 855
• Parties: NATIONAL CITY BANK OF NEW YORK v. UNITED STATES.
• Court: U.S. District Court — Southern District of New York

275 F. 855

NATIONAL CITY BANK OF NEW YORK v. UNITED STATES.

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

March 8, 1921

Shearman & Sterling, of New York City (Carl A. Mead and Philip A Carroll, both of New York City, of counsel), for plaintiff.

Francis G. Caffey, U.S. Atty., of New York City (Earl B. Barnes Asst. U.S. Atty., and Theodor Megaarden, Sp. Asst. U.S Atty., both of New York City, of counsel), for the United States.

MAYER District Judge.

This case is brought under section 10 of the so-called Lever Act (Comp. St. 1918, Comp. St. Ann. Supp. 1919, Sec. 3115 1/8ii) to recover such sum as, added to 75 per cent. of the award made by the President, will constitute 'just compensation' for 20,000 bags of Santos and Guatemala coffee commandeered by the Navy Department in November, 1918. For the purpose of this proceeding it is agreed that the coffee weighed 2,737,064 pounds, and consisted one-half of Santos and one-half of washed Guatemala of certain grades.

Section 10 of the act, supra, provided:

'That the President is authorized, from time to time, to requisition foods, feeds, fuels, and other supplies necessary to the support of the army or the maintenance of the navy, or any other public use connected with the common defense, and to requisition, or otherwise provide, storage facilities for such supplies; and he shall ascertain and pay a just compensation therefor. If the compensation so determined be not satisfactory to the person entitled to receive the same, such person shall be paid seventy-five per centum of the amount so determined by the President, and shall be entitled to sue the United States to recover such further sum as, added to said seventy-five per centum will make up such amount as will be just compensation for such necessaries or storage space, and jurisdiction is hereby conferred on the United States District Courts to hear and determine all such controversies. * * * '

The two main questions here presented are: (1) Whether plaintiff can maintain this action as 'the person entitled to receive' compensation; and (2) what is 'just compensation'?

1. The coffee here concerned was imported by coffee dealers at various dates, but in any event all was imported prior to January 18, 1918. On that date the coffee was brought on a cable order from North Oceanic Steamship & Trading Company, a Russian corporation located at Archangel (hereinafter called the Russian Company) to Francisconi & Co., a New York firm. The coffee was purchased for export to Northern Russia, where there was great need of foodstuffs. Plaintiff (hereinafter called the Bank) paid for this coffee under a letter of credit in favor of Francisconi & Co. and Hard & Rand, coffee dealers, for account of the Russian corporation. These payments resulted in an overdraft, which on November 21, 1918, amounted to $13,324.60, and on July 5, 1919, amounted, according to the Bank's figures, to $94,312.42. The overdrafts were secured by a lien upon the coffee, and the warehouse receipts for the coffee were taken in the Bank's name.

On November 21, 1918, the navy commandeered the coffee. On February 17, 1919, the government awarded the sum of $423,536.69 at the price of 15.29 cents per pound f.o.b. warehouse as compensation for the coffee. On July 5, 1919, the Bank notified the government that the award was not satisfactory. The government on August 26, 1919, paid 75 per cent thereof-- i.e., $313,356.77--to the bank; the debit balance in favor of the Bank being at that time $94,763.61. This debit balance was wiped out by the payment aforesaid, and on September 19, 1919, when this action was commenced, there was nothing due the bank.

At the outset, it may be stated that the evidence clearly leads to the conclusion that the coffee was seized and that the award was made under the so-called Lever Act, and not under other provisions of law. At the time when the coffee was purchased by the Russian Company, the provisions of the Lever Act and the rules and regulations of the United States Food Administration had not been extended to coffee. On January 30, 1918, however, the President placed green coffee on the conservation list by a proclamation which read in part as follows (40 Stat.pt. 2, p. 1742):

'All persons, firms, corporations, and associations engaged in the business of importing or distributing green coffee are hereby required to procure a license on or before February 4, 1918.'

Clearly the Bank was not then engaged in the business either of importing or distributing coffee, and neither the proclamation nor the rules applied to it, and the Russian Company was not then engaged in the business of importing coffee. But it is claimed that the Russian Company was engaged in the business of distributing. The coffee was purchased for export, and, had it been attempted to export the same, there was a regulation made in March, 1918, which required a license to export green coffee.

No attempt was ever made either by the Bank or the Russian Company to distribute the coffee here. The Bolsheviki had cut off Archangel from the rest of Russia in April, 1918, and the Allies did not drive them out until August, 1918. Later, under the Tchajkowsky government, one Danischewski, who was the managing director of the Russian Company, became a member of the Supply Committee of the Northern Region government, whose object was to supply Northern Russia with all kinds of food. He then sought to send the coffee and other food supplies to Archangel.

The coffee was intended for the use of the Northern District, under the control of the Archangel government. A large part of it was sold to the Northern Region Supply Company, which was organized by and under the control of that government. Danischewski was not in the United States between February and December, 1918. He was sent to the United States by the Supply Committee of the Northern Region Government, but he did not arrive here until March, 1919. Until his arrival here he had no knowledge of the American regulations in regard to dealing in coffee. He never made any contract to sell the coffee in America, and made no effort to do so until after he had heard that it had been commandeered by the government. The futile efforts of the Russian Company, per Danischewski, to supply coffee in Northern Russia, took the form of sales made there, and not here, in June, July, and September, 1918.

The proclamation of the President, supra, and the rules made thereunder, cannot be strained to cover attempted distribution in Russia by sales made in Russia, when there was no exporting, and hence no need for a license to export, and when the Russian Company was neither engaged in importing coffee here nor distributing it here. This disposes, inter alia, of the contention that the Bank or the Russian Company was hoarding, contrary to rule 5, because that rule applied only to licensees, and neither the Bank nor the Russian Company was required to be a licensee under the President's proclamation.

It thus appears that on November 21, 1918, when the Navy Board commandeered this coffee, as it had the right to do, the Bank had the legal title to the coffee, and had its lien thereon, and was holding the coffee lawfully, and that the Russian Company's beneficial interest was lawfully held. At any time up to August 26, 1919, when the government paid 75 per cent. of the award, the Bank was clearly the 'person entitled to receive compensation,' and was so recognized by the government. When the Bank received that compensation, it became a trustee to pay over to the rightful owners the balance after retaining the amount due it. But its duty did not end there.

The warehouse receipts had all issued to the order of the Bank and were negotiable; hence they gave to the Bank the legal title to the coffee. New York General Business Law (Consol. Laws, c. 20) Sec. 125. This section, which is a provision of the Uniform Warehouse Law, contains the following: 'A person to whom a negotiable receipt has been duly negotiated acquires thereby:

'(a) Such title to the goods as the person negotiating the receipt to him had or had ability to convey to a purchaser in good faith for value, and also such title to the goods as the depositor or person to whose order the goods were to be delivered by the terms of the receipt had or had ability to convey to a purchaser in good faith for value.'

In this case, the Bank itself, acting, however, for account...