Silva v. Bankers Commercial Corporation

• Decision Date: 30 July 1947
• Docket Number: No. 235,Docket 20546.,235
• Citation: 163 F.2d 602
• Parties: SILVA et al. v. BANKERS COMMERCIAL CORPORATION.
• Court: U.S. Court of Appeals — Second Circuit

163 F.2d 602 (1947)

SILVA et al. v. BANKERS COMMERCIAL CORPORATION.

No. 235, Docket 20546.

Circuit Court of Appeals, Second Circuit.

July 30, 1947.

Kirlin, Campbell, Hickox & Keating, of New York City (Charles R. Hickox and Ruth M. McElveney, both of New York City of counsel), for defendant-appellant.

S. F. Peavy, Jr., of New York City (John J. Cunneen, of New York City, of counsel), for plaintiffs-appellees.

Before SWAN, AUGUSTUS N. HAND, and FRANK, Circuit Judges.

AUGUSTUS N. HAND, Circuit Judge.

The plaintiffs, DaCosta E Silva and Diaz, doing business as co-partners under the firm name of Silva & Diaz, were awarded a judgment in the court below of $7,836.75 with interest thereon from June 24, 1943 against defendant Bankers Commercial Corporation, together with costs as taxed. The court found that pursuant to an agreement of December 4, 1942, Intercontinental Steamship Lines, Inc. had executed an assignment to defendant of all earnings, freight and income of the schooner Constellation, and had also executed a preferred ship mortgage on that vessel in consideration of loans made by the defendant. The District Court made the following additional findings of fact:

"Sixth: That during the month of January, 1943, at about the 15th and 25th days thereof, plaintiffs delivered certain merchandise to and which was put aboard the Schooner Constellation in the Port of New York for shipment to South Africa, which merchandise remained aboard said Schooner Constellation until on or about the 15th day of February 1943.

"Seventh: That upon delivery by plaintiffs of the merchandise aforesaid on board said Schooner Constellation, proper bills of lading were issued to plaintiffs covering said merchandise by the Intercontinental Steamship Lines, Inc., a corporation, which was the owner of said Schooner, which bills of lading were delivered to plaintiffs by the defendant.

"Eighth: That on the 15th day of January, 1943, and the 4th day of February 1943, plaintiffs paid the sums of $7,825.50 and $11.25 respectively by cheques on account of freight for said merchandise, placed aboard the Schooner Constellation, for transportation of said merchandise to South Africa and that said cheques were delivered to Caragol-Clark Co. Inc. who endorsed and immediately delivered them to and were collected by and appropriated by defendant and deposited in its general account and kept by it, defendant well knowing that said payments were on account of the freight aforesaid and on delivery of said cheques, proper bills of lading therefor were delivered by defendant to plaintiffs.

"Ninth: That at sometime between the 11th day of February and the end of February 1943, said merchandise of the plaintiffs was removed from the Schooner Constellation without the knowledge or consent of plaintiffs; and without the knowledge or consent of plaintiffs, the voyage of the Schooner Constellation to South Africa was abandoned at sometime prior to the 26th day of April, 1943 and that thereafter during the months of May or June, 1943, said merchandise so taken off the Schooner Constellation was returned to the plaintiffs.

"Tenth: That on the 24th day of June, 1943, plaintiffs demanded payment from Intercontinental Steamship Lines, Inc., and from this defendant of the monies so paid for freight and were told by this defendant that such freight monies would be repaid to it and plaintiffs agreed to accept notes of Intercontinental Steamship Lines, Inc., for $2,621.63, $2,621.62 and $2,621.62 payable respectively July 5th, July 15th and July 26th, 1943, and defendant thereupon assured plaintiffs that said notes would be paid; but the said notes were not paid, but were dishonored and returned by plaintiffs to the maker thereof.

"Eleventh: That defendant failed and refused to pay the plaintiffs the monies so paid by plaintiffs for freight and neither said freight monies nor any part thereof so had and received by defendant from plaintiffs have been paid or returned to plaintiffs.

"Twelfth: That on April 15th, 1943, the defendant still had on hand out of the funds realized from the freight monies collected by it, for freights on the Schooner Constellation more than $21,000.

"Thirteenth: That on or about April 15, 1943, Intercontinental Steamship Lines, Inc., requested an advance of further monies from the defendant herein in the sum of $20,000 in response to which request, defendant then or shortly thereafter advanced the sum of $10,000 but the defendant received new consideration for such advances, to wit, an agreement to reimburse defendant for legal expenses, an assignment of right, title and interest in a protecting and indemnity policy and also an assignment of all the Intercontinental Steamship Lines' right, title and interest in and to an insurance claim on the Schooner Theoline, in which the defendant then had an interest of $28,000 plus interest, but that the other $10,000 of the advance requested by Intercontinental Steamship Lines, Inc., by letter of April 15th, 1943, was not advanced by the defendant until on or about July 17th, 1943."

Judge Symes, before whom the case was tried without a jury, decided that "when the defendant accepted * * * freight money through their agent at the office of the freight agent of the ship, they were charged with knowledge of the purpose for which it was paid and also with the rule of law * * * to the effect that if the freight movement is not completed the freight money should go back to the consignor." He further said that the decision "was based on equitable principles; that is, that the plaintiffs paid money which the defendant took with full knowledge that it was freight money; that the consideration for which it was paid was not received by the plaintiffs, that is, the freight money was never earned; that the defendant, the Bankers, really got this money as managers of the Schooner Constellation; that they really managed the affairs of the Intercontinental; and that therefore on equitable principles and good conscience and justice they should pay it back for the reason that they took it with full knowledge of all the rights of the plaintiffs thereto."

In the first place, it is argued on behalf of the defendant that the issues involved in the present suit are maritime and are governed by the the rules of admiralty. We do not agree. The plaintiffs' claim is based on the assumption that the maritime contract upon which the freight moneys were paid was rescinded and that the defendant ought in equity and good conscience to return to them an equivalent amount with interest because it received the freight moneys knowing that they were paid for a voyage that was abandoned by the Intercontinental Steamship Lines with the consent and assistance of the defendant. The plaintiffs' claim is not simply one for breach of a maritime contract but for unjust enrichment by deliberate retention of credits received from Intercontinental that had been destined to pay for a voyage that was completely abandoned with the defendant's acquiescence and aid. The Constellation returned to the plaintiffs the cargo that she had taken on board, for which she had issued bills of lading; abandoned her original voyage to South Africa and undertook an entirely different voyage to South America. She could not have done this without the consent of the defendant who was actively financing her adventures and collaborated in depriving plaintiffs of the benefits of their contract. The claim asserted is in the old commonlaw action of indebitatus assumpsit, over which a court of admiralty has no jurisdiction. It would make no difference whether the claim was based upon unjust enrichment or fraudulent representations — of which there were none in this case; in neither event would recovery lie in admiralty. United Transp. & L. Co. v. New York & Baltimore T. Line, 2 Cir., 185 F. 386, 389; Minturn v. Maynard, 17 How. 477, 15 L.Ed. 235; Israel v. Moore & McCormack Co., D.C., 295 F. 919. The jurisdiction of the District Court was based on diverse citizenship of the parties. The action is for recovery at common law and under the rule of Erie R. v. Tompkins, 304 U.S. 64. 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487, is governed by the law of the State of New York.

The New York Appellate Division, First Department, rendered a decision in McInnes v. Equitable Trust Co., 197 App. Div. 649, 189 N.Y.S. 518, involving a state of facts closely similar to those here. The defendant there was a creditor of the shipowner. The shipowner, in order to secure a loan by the defendant, vested the latter as mortgagee with the legal title to the vessel and thus enabled its creditor to control the disposition of the vessel. The parties had an arrangement whereby the shipowner, with the knowledge and consent of the defendant, operated the steamer, entered into affreightment agreements, and issued bills of lading for the carriage of freight by the steamer. Under the contract between the defendant and the shipowner, the freight moneys received...