Tidewater Coal Exchange v. New Amsterdam Casualty Co., 4.

• Decision Date: 02 July 1927
• Docket Number: No. 4.,4.
• Citation: 20 F.2d 951
• Parties: TIDEWATER COAL EXCHANGE, Inc., v. NEW AMSTERDAM CASUALTY CO.
• Court: U.S. District Court — District of Delaware

20 F.2d 951 (1927)

TIDEWATER COAL EXCHANGE, Inc., v. NEW AMSTERDAM CASUALTY CO.

No. 4.

District Court, D. Delaware.

July 2, 1927.

Andrew C. Gray and James H. Hughes, Jr. (of Marvel, Layton, Morford & Hughes), both of Wilmington, Del., for plaintiff.

Charles F. Curley, of Wilmington, Del., for defendant.

MORRIS, District Judge.

In this action at law, brought by Tidewater Coal Exchange, Incorporated, a dissolved Delaware corporation, through its receivers, against New Amsterdam Casualty Company, surety upon three several indemnity bonds wherein Coale & Co. is principal, the breaches of condition alleged are that the principal in the bonds has not indemnified and saved harmless the plaintiff against loss and damage which the plaintiff has suffered by reason of (1) certain credits in coal extended by the plaintiff to the principal; (2) certain credits in money extended to the principal on account of demurrage; and (3) money paid out by the Exchange for the principal's share of the running expenses of the plaintiff. The matter now before the court is a motion of the plaintiff to strike out or dismiss for want of equity an asserted equitable answer, filed by the defendant under section 274(b) of the Judicial Code (Comp. St. § 1251b).

The first defense set up by the answer is that the title to the coal, for which, under the rules and regulations promulgated under authority of the charter by the board of directors for the management and conduct of the affairs of the exchange, credits were properly extended by the exchange to the principal, was not in the exchange, but in certain of its members, and that consequently the declaration fails to show that plaintiff has been damaged by the first of the alleged breaches. The same defense was heretofore made by a common-law plea, a demurrer to which was sustained. It may be that the plea was bad because it was directed, not to the cause of action alleged, but only to the damages arising from the breach of the conditions, and yet failed at all events to negative nominal damages. The order sustaining the demurrer, however, was based upon the conclusion that the facts alleged in the declaration are adequate to show in the plaintiff a complete cause of action on the bonds for the full value of the coal, regardless of the whereabouts of the legal title to the coal, not its own, obtained by the principal in the bonds from the exchange. The authorities relied upon to support this finding were 1 Chitty on Pleading, 9; Home Insurance Co. v. Baltimore Warehouse Co., 93 U. S. 527, 543, 23 L. Ed. 868; Knight v. Davis Carriage Co., 71 F. 662, 669 (C. C. A. 5).

Upon a reconsideration of the question I arrive at the same conclusion. The declaration discloses that the plaintiff was organized in April, 1920, and duly dissolved in September, 1921. It was not conducted for profit. It had no capital stock. Its purposes, stated at large in Read v. Tidewater Coal Exchange, 13 Del. Ch. 195, 199, 116 A. 898, 900, were, in the main, to foster the business of coal producers, railroads, and others by facilitating and expediting the transshipment of coal at tidewater, to grade, classify, and pool coal, and to take bonds for the benefit of the corporation. The members consist of the incorporators and other persons admitted to membership under the provisions of the by-laws. The method or manner of conducting its business was fixed by rules promulgated, under authority of its charter, by its board of directors. By these rules it was provided that all coal consigned to tidewater points for reshipment by members of the exchange should be consigned to the exchange for the account of such members; that all such coal should be graded and classified in designated pools by the exchange; that the members of the exchange, as a condition of membership, should file with it a bond, with corporate surety satisfactory to the exchange in an amount not less than $10,000, to guarantee the credits extended to the members from time to time; that the debits of any member in any pool should be promptly made good on the demand of the exchange, and that failure on the part of any member in this respect should result in a proceeding upon his bond to cover defaults in this respect; that the account of a member in one designated pool should not have any bearing on his account in another pool at the same or other piers, unless such member should neglect to make up existing shortages; and that in closing accounts, where there exist differences between the tonnage of coal shipped by a member and the tonnage of coal shipped into vessels for his account, and the differences could not be adjusted either by additional shipments or exchange of coal, the executive committee of the exchange should name a price to the commissioner of the exchange for the tonnage involved, and said commissioner of the exchange should authorize such debits or credits as might be necessary to properly adjust the difference.

Under these and other rules, set out in the pleadings herein and stated more at large in Read v. Tidewater Coal Exchange, supra, the Chancellor of the state of Delaware, in Id., 13 Del. Ch. 253, 118 A. 304, held that the title to the coal was in the members of the several pools, and that the exchange acquired and possessed no property other than office equipment, and that it was "a sort of trade agency." He found support for his conclusion in the findings of Judge Learned Hand in New River Collieries Co. v. Snider (D. C.) 284 F. 287, Coyle v. Morrisdale Coal Co. (D. C.) 284 F. 294, and Coyle v. Archibald McNeil & Sons Co. (D. C.) 284 F. 298. But in no one of these cases was there before the court the right of the exchange to recover upon a bond given to it by a member, with surety, as a condition precedent to membership, and without which coal in excess of the amount delivered to the exchange could not have been obtained by such member upon credit.

The bonds in suit provide in part:

"Whereas, the said principal herein has agreed and does hereby agree to indemnify and save harmless the Tidewater Coal Exchange, Inc., against any and all loss, damage, costs, and expenses, which it may hereafter suffer, incur, be put to, pay, or lay out by reason of any credit or credits in money or property extended to said principal, or by reason of any money or moneys paid out on account of said principal, and has agreed and does hereby agree to pay and discharge forthwith on the demand of the Tidewater Coal Exchange, Inc., each and every such debt, obligation, or claim which shall be made, assigned, or apportioned against said principal by the Tidewater Coal Exchange, Inc., absolutely, hereby waiving all defenses both of law and equity:

"Now, therefore, the condition of this bond is such that, if the said Coale & Co., Inc., their heirs, executors, administrators, successors, or assigns, shall perform the aforesaid agreement, and shall well and sufficiently save and keep harmless and indemnified the said Tidewater Coal Exchange, Inc., its successors or assigns, from all cost, loss, and damages which it may be put to, suffer, or incur by reason of any credit or credits in money or property extended to it, them, him, or by reason of any money or moneys paid out on its, their, his account, then this obligation to be null and void; otherwise, to remain in full force and virtue in law. * * *"

Such a bond is...