185 F. 386 | 2d Cir. | 1911
The amount due the libelant under the original libel was not disputed, and the matters set up in the cross-libel do not constitute matters of defense thereto except as they may serve to diminish the amount recoverable if established as an affirmative demand in favor of the respond- . ent.
At the outset the libelant contends that the District Court had no power to entertain this affirmative demand and grant the respondent the relief prayed for in its cross-libel, because:
(1) Tlie relief sought is not based upon the same cause of action as the contract which is made the basis of tlie libelant’s claim.
(2) The relief sought is outside the jurisdiction of a court of admiralty.
The fifty-third rule in admiralty, under which the respondent claims the right to file its. cross-bill, is printed in the footnote.
A cross-libel may be filed “upon any counterclaim arising out of the same cause of action for which the original libel was filed.”
i “Whenever a cross-libel is filed upon any counterclaim arising out of the same cause of action for which ihe original libel was filed, the'respondents in the cross-libel shall give security in the usual amount and form, to respond in damages as claimed in .said cross-libel, unless the court on cause shown, shall otherwise direct; and all proceedings upon the original libel shall bo stayed until such security shall be given.”
“I am satisfied that the words the ‘same cause of action’ are here used in a more general sense, meaning the same transaction, dispute, or subject-matter which has been the cause of the action being brought.”
See, also, Genthner v. Wiley (D. C.) 85 Fed. 797; The Highland Light (D. C.) 88 Fed. 296.
The first inquiry then is whether the demand set up in the cross-libel grows out of the same subject-matter as the contract upon which the original libel is based.
As shown in the statement of facts, the contract for the unpaid lighterage services (the subject-matter of the libel) was entered into after said Groves ceased to be general manager of the respondent, and is not subject to the objection that he was a common officer of both contracting corporations. It is true that this contract related to the same vessels which he had previously hired, and that the services were of the same nature, but the terms were different, and the later contract was in law a new one. As well said by the district judge:
“It does not advance matters to speak’ of tbis conversation as a modification of an existing contract. A contract once made cannot be modified except by a new meeting of minds, and when suck mind-meeting occurs a new contract springs into existence.”
The respondent’s demand in its cross-libel has wholly to do with the earlier contract. ■ It -is based upon the theory that this contract was voidable because Groves, was an officer of both contracting corporations, and was so unreasonable and unfair as to be practically fraudulent.
Contracts between corporations having common officers are closely scrutinized by the courts. There is always the possibility of a cpnflict between interest and duty. But such contracts are not necessarily void, nor are they constructively fraudulent. If, however, there be actual fraud, or if undue advantage be taken in favor of one party over the other, the courts will grant relief.
But in this case the demand for relief based upon the fraudulent character of the earlier transactions — transactions completed and the consideration paid — bore no relation to the suit to recover the amount admitted to be due under the later contract which was concededly valid. Such a demand did not arise “out of the same cause of action for which the original libel was filed” and could not be set up by way of counterclaim in it. See, in addition to the cases already cited upon this point, Davidson v. Greer (D. C.) 127 Fed. 999; Hastorf v. Degnon-McLean Contracting Co. (D. C.) 128 Fed. 982; Emery v. Tweedie Trading Co. (D. C.) 143 Fed. 144; The Frank Gilmore (D. C.) 73 Fed. 686.
We think it clear‘that the counterclaim did not come within the rule. Still for the purpose of testing the claims we will assume that the rule would permit the demand to be set up if it were otherwise unobjectionable. Upon this assumption we have to meet the libelant’s
Ordinarily to obtain relief against a fraudulent contract made by a common officer of two corporations resort must be had to equity. Suit may be brought to enjoin the consummation of the transaction, or, if completed, it may be set: aside. So, under certain circumstances, a bill will lie for an accounting.
In the present case the respondent contends that it is not required to go into equity, and says:
“The remedy of tlie Transportation Line, were it a plaintiff in an independent action, would not he in nil action in equity for a rescission of the contract which it never made or ratified or if made by it were an oral contract, but would ho an action at law based upon the equitable principle underlying the action for money had and received based upon implied contract or legal fraud.'’
Of course the action of assumpsit for money had and received, while in form an action of law, is based upon equitable principles, and it is by no means obvious that it would be broad enough to afford relief in the case of such a transaction as is stated in the cross-libel. Still, for the purposes of this case, we will assume that the contention of the respondent is well founded, and that an action at law would lie against the libelant corporation upon its implied promise to repay moneys received by it which in justice and good conscience it ought not to retain.
But the conclusion that an action of assumpsit might be maintained lends no support to the claim that the> demand can be the subject of a suit in admiralty. Courts of admiralty have no more jurisdiction over actions at law (unless the subject-matter be maritime) than they have over suits in equity. Similarly, we think that a court of admiralty has no more power to take cogni/.ance of a distinctly equitable or legal demand when it is set up in a cross-libel than when it is the subject of an independent suit. Probably a court of admiralty lias incidental chancery powers and may afford some degree of equitable relief in matters subsidiary to and dependent upon the cause of action of which it lias jurisdiction. Hut no such exception to the rule could arise in this case. While the vessels involved in the different transactions were the same, relief against the alleged fraudulent contract was in no sense dependent upon or subsidiary to the cause of action for the moneys admittedly due.
We thus reach the question whether the demand of the respondent was maritime in its nature so that it could come either by original or cross-libel within the jurisdiction of a court of admiralty.
It is, of course, well settled that courts of admiralty have no general equitable jurisdiction. When a maritime contract is broken, the admiralty can only award damages for its breach. This is the remedy which a court of law would give; but a court of admiralty in granting it acts in no sense as a court of common law. The admiralty grants relief, legal in its nature, when, and only when, the subject-matter of the suit is maritime. Admiralty has jurisdiction over maritime contracts, but it has none over contracts leading up to the execution of maritime contracts. And, upon similar principles, it can
In Minturn v. Maynard, 17 How. 477, 15 L. Ed. 235, the Supreme Court of the United States said:
“The court below very properly dismissed the libel, for want of jurisdiction. There is nothing in the nature of a maritime contract in the case. The libel shows nothing but a demaud for a balance of accounts between agent and principal, for which an action of assumpsit, in a common law court, is the proper remedy. That the money advanced and paid for respondents was, in whole or in part, to pay bills due by a steamboat for repairs or supplies, will not make the transaction maritime, or give the libelant a remedy iu admiralty.”
And in the later case of The Eclipse, 135 U. S. 599, 608, 10 Sup. Ct. 873, 876 (34 L. Ed. 269), the Supreme Court again said:
“While- the court of admiralty exercises its jurisdiction upon equitable principles, it has not the characteristic powers of a court of equity. It cannot entertain a bill or libel for specific performance, or to correct a mistake (Andrews v. Essex Ins. Co., 3 Mason, 6, 16 [Fed. Cas. No. 374]); or declare or enforce a trust or an equitable title (Ward v. Thompson, 22 How. 330 [16 L. Ed. 249]; The Amelia, 6 Ben. 475 [Fed. Cas. No. 6,487]; Kellum v. Emerson, 2 Curtis, 79 [Fed. Cas. No. 7,669]); or exercise jurisdiction in matters of account merely (Grant v. Poillon, 20 How. 162 [15 L. Ed. 871]; Minturn v. Maynard, 17 How. 477 [15 L. Ed. 235]; The Ocean Belle, 6 Ben. 253 [Fed. Cas. No. 10,402]); or decree the sale of a ship for an unpaid mortgage, or declare her to be the property of the mortgagees and direct possession of her to be given to them (Bogart v. The John Jay, 17 How. 399 [15 L. Ed. 95]). The jurisdiction embraces all maritime contracts, torts, injuries, or offenses, and it depends, in cases of contract, upon the nature of the contract, and is limited to contracts, claims, and services purely maritime, and touching rights and duties appertaining to commerce and navigation. People’s Ferry Co. v. Beers, 20 How. 393, 401 [15 L. Ed. 961]. There was nothing maritime about the claim of the interveners, and the intervention was properly dismissed for want of jurisdiction over the subject-matter.”
And in the leading case of Suffolk Bank v. Lincoln Bank, 3 Mason, 1, 16, 17, Fed. Cas. No. 13,590, Judge Story said:
“To be sure in a certain sense, and in the exercise of their general jurisdiction, courts of admiralty may be properly said to be courts of equity, that is, courts proceeding ex aequo et bono, and not confined to the narrow notions of the common law. But courts of admiralty have no general jurisdiction to administer relief as courts of equity. They cannot entertain an original bill or libel for specific performance, or to correct a mistake, or to grant relief against a fraud. * * * If, therefore, anything in point of law, material to the plaintiffs case, depends upon this clause, and a mistake has occurred in omitting it, my judgment is that a court of admiralty is incapable of administering the proper relief. The remedy lies at common law, for damages for nonperformance of the original agreement, or in equity, for a specific performance by reforming the policy. In the present suit I can only deal with the policy, as it stands.”
See, also, Meyer v. Pacific Mail Steamship Co. (D. C.) 58 Fed. 923; Marquardt v. French (D. C.) 53 Fed. 603; Williams v. Providence Washington Ins. Co. (D. C.) 56 Fed. 159; The City of Clarksville (D. C.) 94 Fed. 201; Dean v. Bates, 2 Woodb. & M. 87, Fed. Cas. No. 3,704; The S. C. Ives, 1 Newb. Adm. 205, Fed. Cas. No. 7,958.
The maritime contract was the one which the respondent says was fraudulent. It does not seek to enforce but to avoid that. It can
As we have already stated, the remedy of the respondent, if its charges be well founded, would seem to be in equity to set aside the alleged wrongful agreement and to compel an accounting. Perhaps, as we have also seen, an action in assumpsit for money had and received would lie. . But a court of admiralty cannot afford the necessary equitable relief; nor can it grant the legal relief, because the implied promise to repay the moneys which cannot in good conscience be retained — necessary to support the action for money had and received — is not a maritime contract.
The decrees of the District Court are affirmed, with interest and costs.
