United States Shipping Bd. Emergency Fleet Corp. v. South Atlantic Dry Dock Co.

• Decision Date: 12 June 1924
• Docket Number: 4171.
• Citation: 300 F. 56
• Parties: UNITED STATES SHIPPING BOARD EMERGENCY FLEET CORPORATION v. SOUTH ATLANTIC DRY DOCK CO.
• Court: U.S. Court of Appeals — Fifth Circuit

300 F. 56

UNITED STATES SHIPPING BOARD EMERGENCY FLEET CORPORATION v. SOUTH ATLANTIC DRY DOCK CO.

No. 4171.

United States Court of Appeals, Fifth Circuit.

June 12, 1924

I. V McPherson, Sp. Asst. Atty. Gen., Wm. M. Gober, U.S. Atty., of Tampa, Fla., and Maynard Ramsey, Asst. U.S. Atty., of Jacksonville, Fla. (William M. Gober. U.S. Dist. Atty., of Tampa, Fla., Chauncey G. Parker, of Newark, N.J., Maynard Ramsey, of Jacksonville, Fla., Lake Jones, of Tampa, Fla and I. V. McPherson, of Aurora, Mo., on the brief), for plaintiff in error.

John W Dodge, of Jacksonville, Fla., for defendant in error.

Before WALKER and BRYAN, Circuit Judges, and ERVIN, District Judge.

WALKER Circuit Judge.

This was an action, brought December 1, 1919, by the defendant in error, a Delaware corporation, against the plaintiff in error, United States Shipping Board Emergency Fleet Corporation. The parties are herein referred to by their designation in the trial court. The case went to the jury on the first count of the declaration. That count embodied common counts for goods sold and delivered and for work and labor done and material furnished to defendant by plaintiff and its assignors, Duval Ship Outfitting Company and Duval Dry Dock Company; such assignors being partnerships which have been dissolved. A bill of particulars, which was made an exhibit to and a part of that count, shows that the amount claimed was the aggregate amount of vouchers for work and materials performed or furnished for or to named ships during several months beginning May 30, 1919, less the aggregate amount of payments made on account of such vouchers. In March, 1923, the defendant applied for leave to file the following pleas:

'(7) And for a seventh plea defendant says that the plaintiff ought not to further maintain this action against it, the defendant, for that since the institution of this suit, and on, to wit, the 27th day of January, A.D. 1923, Wm. D. Denney, Governor of the state of Delaware, under the laws of which state plaintiff was incorporated, issued his proclamation according to the provisions of sections 75 and 76, chapter 6, of the Revised Statutes of 1915 of the state of Delaware, declaring the charter of plaintiff repealed, and from and after said date it became unlawful for any person or persons to exercise, or attempt to exercise, any power under the charter of said corporation.

'(11) And for an eleventh plea defendant says that all of the said work done by plaintiff and its assignors was done for the United States of America, and the said ships on which said work was done were owned by the United States of America.'

The court denied that application. The case was tried on issues joined on defendant's plea of never indebted, and on its amended third plea, of which the following is a copy:

'(3) And for an amended third plea defendant says that on or before September, 1918, said L. W. Walters, James H. Strang, and H. C. Thomas became employed by defendant at its then district office in Jacksonville, Fla; that on or about said times said Walters, Strang, and Thomas were or became acquainted with each other, and were associated more or less in their work for defendant; that in December, 1918, and while in the employ of defendant, secretly, and without the knowledge of defendant or its officers in charge of said district office at Jacksonville, Fla., they organized a copartnership known as said Duval Ship Outfitting Company, and without disclosing to defendant and its said officers their connection with said Duval Outfitting Company, proceeded to procure for themselves, in the name of said partnership, orders for work on vessels referred to in said declaration.

'Defendant further says that shortly thereafter, and while said Walters, Strang, and Thomas were still in the employ of defendant, said Duval Dry Dock Company was secretly and without the knowledge of defendant or its said officers organized by said Walters and Strang, and took over the business of the former partnership, said Duval Ship Outfitting Company.

'Defendant further says that, after the formation of Duval Dry Dock Company as aforesaid, said parties proceeded to procure, without disclosing to defendant or its said officers their interest in either of said copartnerships, orders for work on vessels referred to in said declaration.

'Defendant further says that some of said orders aforesaid, on which plaintiff is basing this suit, were executed by one of the copartners above mentioned; that a great many of said orders given during the months of February, March, and April, 1919, were executed by one of said copartners above mentioned, with full knowledge of the other said copartners.

'That said Walters remained in the actual employ of the defendant during said times until about the 1st of March, 1919, and said Strang and Thomas remained in the actual employ of the defendant during said times until on or about the 31st day of May, 1919, at which time defendant became aware of the facts hereinabove stated, and discharged said Strang and Thomas; that during all the time said Walters, Strang, and Thomas remained in the employ of defendant as aforesaid each of them was on the pay roll of the United States of America, and was paid his salary semimonthly in the form of checks drawn upon the Treasury of the United States.

'Defendant further says that on or before May 31, 1919, when defendant became aware of the facts above mentioned, it paid said Walters, Strang, and Thomas large sums of money, sufficient to and which did cover the actual cost of all work done by said partnerships, including labor, material, and overhead charges, and, in addition thereto, a very substantial profit in connection with said orders and work and on account thereof.

'Defendant further says that from and after said May 31, 1919, after the discovery by defendant of said facts as aforesaid, defendant has continued to pay said partnerships and plaintiff sums sufficient to pay and cover all labor and material bills and all actual overhead and other actual expenses in connection with the completion of the work on vessels referred to in said declaration for which orders had previously been given.

'Defendant further says that the sums for which plaintiff sues do not cover work done or material furnished by either plaintiff or its said assignors for or on behalf of defendant, nor interest therein, but represent an illegal and unearned profit, and for which defendant is not indebted, in that the contract or orders under which it is claimed that said balance is due arose in fraud and were and are illegal and void and contrary to the laws of the United States of America.'

There was evidence tending to prove the following: From about September, 1918, and throughout part of the year 1919, James H. Strang was chief inspector, and L. W. Walter and H. C. Thomas were inspectors of hulls, for defendant at Jacksonville, Fla. During December, 1918, they, without the knowledge or consent of defendant, formed a partnership under the name of Duval Ship Outfitting Company, and as such procured contracts from defendant for repairing and finishing up work on ships. Those contracts were made by the partnership accepting orders given for specified work and material to be done and furnished for specified ships. The amounts to be paid for such work and material were determined by rates prevailing at the Navy Yard at Charleston, S.C. The compensation for labor performed, or for materials furnished, was the amount paid for labor or materials plus a fixed per cent. of that sum for overhead, and plus a fixed per cent. of the aggregate of the amounts paid for labor or materials and overhead, as profit. Vouchers were made out and rendered weekly, showing separately amounts earned for labor or material, for overhead, and for profit, and payments on such vouchers were made as the work progressed. Some time after that partnership was formed, the name of it was changed to Duval Dry Dock Company. Said three hull inspectors were forbidden by the defendant to engage in such a partnership, and were told that, if they did so, they must separate themselves from the defendant. While they were accepting orders, doing work and furnishing materials as above stated, they denied to officials of the defendant that they were interested in such partnership. On January 22, 1919, Strang signed an instrument which purported to evidence a transfer of his interest in the partnership to his brother. On April 18, 1919, Thomas assigned his general interest in the partnership to Walter, but retained his interest in contracts upon which the firm was then engaged. Walter resigned his position as hull inspector on March 15, 1919. He ceased to act as an employee of the defendant about two weeks before that date. The duties of the three employees mentioned included that of inspecting work done by the firm of which they were members.

On May 31, 1919, defendant discovered that its employees had been and were interested in said partnership, and on that date discharged Thomas and Strang. At that time defendant took from said partnership all ships upon which no work had been done, and allotted to others contracts for labor and materials for such ships. The work of completing repairs on ships upon which the work contracted for was then partially performed was allowed to be finished by the firm as then constituted and by the plaintiff after it was incorporated in July, 1919, and, as assignee, succeeded to the rights of the contractors. After May 31, 1919, payments were made from time to time for work and labor on the contracts retained by the partnership, but part of the amounts called for by vouchers rendered was withheld by the defendant; the aggregate...