Archawski v. Hanioti

PETITIONER:Archawski
RESPONDENT:Hanioti
LOCATION:

DOCKET NO.: 351
DECIDED BY: Warren Court (1955-1956)
LOWER COURT: United States Court of Appeals for the Second Circuit

ARGUED: Mar 05, 1956
DECIDED: Apr 09, 1956

Facts of the case

Question

Audio Transcription for Oral Argument – March 05, 1956 in Archawski v. Hanioti

Earl Warren:

Number 351, R.V. Archawski et al. versus Basil Hanioti.

Mr. Graham.

Harry D. Graham:

If it please the Court.

Well, this is — may I start Your Honor?

Yes, you may proceed.

Now, this is an admiralty action involving some 350 odd passengers who, back in 1947, prepaid passage fares for voyages on board a Honduran flagship known as the City of Athens, to various ports in Europe.

They had prepaid their fares for someone as prior to July of 1947 and the voyage as to which they had prepaid their fares were to commence with the voyage on July the 17th and thereafter.

The respondent, on the appointed date, did not provide the vessel to carry these passengers.

The vessel having been liable by a statutory creditor or lienor, and he was, therefore — he therefore default and then providing the transportation for these passengers, and these passengers sued in admiralty for the recovery of the prepaid fares which they had paid, which they received no transportation.

They received the decree in the District Court through Southern District of New York and they extended their respective fares which they paid and the Circuit Court of Appeals reversed the decree of the District Court holding that the jurisdiction of the causes of action for these passengers was not within admiralty.

And because (Inaudible) comes to this Court on writ — writ of certiorari granted on October the 24th, 1955, the questions involved are whether admiralty has jurisdiction of action seeking recovery of prepaid passage moneys paid as consideration on the maritime contracts of transportation?

Which maritime contracts have breached by nonperformance?

The second question is whether the jurisdiction of the subject matter, in admiralty, after the proofs are in, is controlled by allocations of the libel or by the proofs as reconciled to the libel, in other words, the scope of review in a Court of Appeals.

And the third question involved is whether the Circuit Court of Appeals actually had jurisdiction to review the District Court decree.

The facts, as found by the District Court, comes to this Court undisturbed by the Circuit Court of Appeals.

In the libel, the libelants alleged subordinate allocation showing fraud upon the part of the respondent such as absconding, concealing himself, making himself judgment proof during the time endeavoring to procure jurisdiction over him to pursue their causes of action.

The Court of Appeals for the Second Circuit held that the causes of action for these passengers was simply the old common law, form of indebitatus assumpsit, money having received in which admiralty had no jurisdiction.

Our contention is that admiralty does have jurisdiction.

The jurisdiction is conferred by the Constitution of the United States, Article 3 Section 2, conferring judicial power in the federal courts to all cases of admiralty in maritime jurisdiction.

Now, the jurisdiction on the federal courts, some few years shortly after the adoption of the Constitution was a subject for Congress.

And Congress, in 1789, rendered a legislative interpretation of the meaning of Article 3 of the Constitution and the scope of jurisdiction.

In 1848, this Court rendered its first decision wherein it covered the jurisdiction of admiralty over contract actions which prior to that — prior to 1848, apparently had not existed.

In that particular case, the New Jersey Steam Navigation against Merchants’ Bank, now this Court held that it’s the subject matter of the contract which determines the jurisdiction of the Court.

And once the admiralty has jurisdiction of the contract, the jurisdiction may not be confined to any one particular remedy on the contract, but all remedies are — are available.

But the question then now as it’s (Inaudible) down here, whether or not, because these petitioners brought their actions on admiralty, the remedies are less than they would have, had they pursued them at common law if they were able to pursue them in a common lower court.

Now, it has been held by this Court that freight is to consideration for the use of vessels.

And that it applies also to the consideration paid by passengers for their transportation.

Now, whether the transportation be for cargo, for cadavers, or for human beings, the consideration is freight.

And that the — the term “freight” is one which is always been within the jurisdiction of admiralty and the shipowner, for many years, has always been able to sue an admiralty to recover freight which he has earned for the performance of the contract of maritime transportation.

There had never been any question about that.

Harry D. Graham:

Now, the situation in this particular case is that the passengers prepaid the freight and they received no transportation.

It was our contention that, under the doctrine of equality, under the law or equal application of the law and plain common sense, that if the shipowner could sue a shipper or a passenger for the consideration due to him for contract of transportation, that passenger has reciprocal right to sue the shipowner in admiralty to recover the earnings of prepaid freights, which is what they did in this particular case.

Now, there are not many cases involving passengers in the law reports.

But those cases which are on the law reports hold that passing these actions for recovery of prepaid freights are within the admiralty jurisdiction.

A hundred years ago, the Second Circuit held in (Inaudible) that the moneys having received pursuant to a contract for passenger transportation was within the jurisdiction of admiralty that the duties, the implied duties annexed to a marine contract of carriers just as maritime as to contract itself.

And that the implied duty to refund, money having received to which the shipowner having earned was just as maritime passed the contract.

Now, during the tendency of this cause before this Court on the writ, the Second Circuit Court of Appeals has rendered the decision which I have arranged with the clerk to provide to the Court on February the 24th, 1956, which, in effect, repudiates the authorities upon which that same court had reversed the decree in this particular case, the Archawski case.

The decision on reargument, dated February the 24th, 1956, virtually adapts the argument of the petitioners in this particular case.

And it clarifies its previous original decision of December, 1955, which had not yet been reported at the time of the briefs in behalf of the petitions were filed in this Court.

Now, this Court has stated back around 1933 in Krauss against Dimon Lumber Ship Company, that admiralty is not concerned with the form.

Admiralty is concerned only with the subject matter.

And it is — this Court has held time and time again that when a case is up for review, the reviewing court must take the whole record before end and reconcile the facts to the pleadings to do justice where justices do.

Felix Frankfurter:

What was the theory — what was the theory of decisions told here?

What was the theory of the cases which reflected or which took the line of this decision, namely, quasi contractual recovery though it’s really a form of — of remedy under a — existing contract — repudiated contract or a frustrated contract is outside of the admiralty committee.

What was the theory?

How did they get that one?

Harry D. Graham:

They cited two of their own precedents, Your Honor.

Felix Frankfurter:

Yes I know but why do I want know way back that sends their precedence.

What is the — what’s the source of — what seems to me a staged briefly?

Harry D. Graham:

One, is a question — is a question of whether or not these passenger’s actions are in quasi contract.

Felix Frankfurter:

Well I assume they are — assume that —

Harry D. Graham:

Assume they are?

Felix Frankfurter:

Just law of recovery if the contract is frustrated.

Harry D. Graham:

Well that was the very subject the Chief Clark left with Your Honor and —

Felix Frankfurter:

I —

Harry D. Graham:

He apparently doesn’t know the history.

Felix Frankfurter:

I would like to know that — there must have been something as I can go very objective to that inclusion, what was it?

Harry D. Graham:

The earlier cases were the two cases that this Court itself had cited.

It’s on two — two opinions.

Silva against Bankers Commercial and the —

Felix Frankfurter:

You tell me — you said a little while ago the play back (Inaudible)

Harry D. Graham:

Yes.

Felix Frankfurter:

(Inaudible)

Harry D. Graham:

That’s correct, sir.

Felix Frankfurter:

Now, how did they get off and what do regard as the right (Inaudible)

Harry D. Graham:

The passengers on the Cobb case, there had been a breach of the contract of carriage.

And the passengers in the Cobb case were suing for the considerations which they had paid for the contract of carriage.

And the Court there labeled them as money haven’t received.

And they held —

Felix Frankfurter:

But it can’t be — it’s common law — on a contract (Inaudible) as something, that was a technical common law action on the contrary.

Harry D. Graham:

Well, they held that that was an implied agreement annexed to the contract of transportation.

And that where a contract, by implication arises, it acquires the same cloak as the original contract.

Felix Frankfurter:

Well, what I want to know is well, what lead the Court to disregard in event that the — I did a content in order find out the source of error and error received.

Harry D. Graham:

Well, on that — on that particular question, Your Honor, I cannot answer what was in the minds of the Court of Appeals.

A similar situation to the case that bars the Henry W. Breyer which arose down in the Fourth Circuit, and then which the shipowner at the time he was soliciting the freights or the cargos was insolvent.

And the only reason the vessel did not break ground was because of insolvency.

There, the Court held that the breach of contract was not only cognizable and the admiralty is a breach of contract but it was also a maritime tort.

And that constructively, the shipowner was guilty of fraud and it was within the admiralty of jurisdiction and the — they permitted the shippers to recover their prepaid unearned freights.

Now, the server on the United Transport and Company cases cited by the Second Circuit when they reversed the Archawski case are not even apposite particularly a case at — at bar.

In the Silva case, the shipowner had extended himself and had a mortgage on the vessel and he was assigning the unearned freight moneys as they came in to the mortgagee.

The mortgagee collected them with the knowledge that they were not earned.

The shippers did not sue the shipowner, they sued the mortgagee directly which is distinguished in this particular case to case before the bench.

And there —

Stanley Reed:

That was the Silva case?

Harry D. Graham:

That was the Silva case, Your Honor.

And then the — the allocation lied upon by the Circuit Court or the Court of Appeals in the Second Circuit which is by Judge Learned Hand, United Transportation and Lighterage Company against Baltimore and Ohio Railroad.

The libelant and the proctor are — the respondent, both corporations had a common officer amongst them or between them, and there had been some fraud on the part of this common officer.

And each of the corporations were suing the other in admiralty and they endeavored to set up what purported to be a cross libel for a contract entered into by this officer on the ground of fraud.

And this contract had nothing whatsoever to do with the contract that was on before the Court which is entirely distinct in the situation that we’re confronted with here in the case at bar.

The very simple proposition here in this case, and it brings itself right down to this, that if a shipowner can sue a shipper or a passenger for the transportation which he assigned by performing the contract, then on the reciprocity, or under equal application of the law, the passenger should have the same right and same relief to sue the shipowner for the prepaid earning passage moneys.

Felix Frankfurter:

I don’t rest on the Krauss case.

Harry D. Graham:

I — I rest on the Krauss case, You Honor.

I think the Krauss case clarifies the manner and I also rest upon the decision of the Second Circuit, this recent decision which they have practically repudiated their other decisions.

Felix Frankfurter:

That would rest down the Krauss case.

Harry D. Graham:

That is correct, sir.

Felix Frankfurter:

That Judge Hand said that they — they did not (Inaudible)

Harry D. Graham:

That’s correct, sir.

Felix Frankfurter:

Some of the very (Inaudible)

Harry D. Graham:

It was dicta, Your Honor.

In the Krauss case, it appeared to be dicta.

Felix Frankfurter:

What?

Harry D. Graham:

It appeared to be dicta in the Krauss case.

Felix Frankfurter:

Do you think there’s a difference between saying the contract imply the facts that they shouldn’t overcharge and say the contract implies with the fact that if you don’t get any report, you stay back for the considerations.

Harry D. Graham:

I see no distinction whatsoever.

Felix Frankfurter:

I don’t see why — I don’t see why it’s particularly there.

Harry D. Graham:

The question before the Court in Krauss case was whether or not, the libelant could enforce his claim for this overpayment in rem.

That was the question before the Court.

But during the argument, counsel for the respondent first raised the argument.

He said, “This Court is without jurisdiction.

The cause of action for money had been received.”

And because he raised it from — my reading in the case because he raised it, Mr. Justice Stone commented upon it.

And he said it was immaterial in the form of the action —

Felix Frankfurter:

But if he didn’t have the cause of action, he wouldn’t have a lien to being derived from the cause of action.

Harry D. Graham:

That’s correct.

Can you give one second to your argument if the deal was too late?

Harry D. Graham:

Oh I’m sorry.

Yes, sir.

The notice of appeal in the final decree was filed 108 days filing the entry of the final decree.

And there was no leave of the court below extending the time within which to appeal procured by the respondent.

We contend that an appeal is not a matter of constitutional right, it is a statutory right and compliance with the statute must be met.

Harry D. Graham:

In admiralty, a respondent has 90 days within which to take an appeal.

We’re not concerned with the common law or the civil rules that were stated here, we’re concerned with admiralty where they have three times to figure this within which to appeal.

And we say that the Court of Appeals had no jurisdiction over the decree of the District Court.

And respectfully request that the Circuit Court or the Court of Appeals for the Second Circuit be reversed and the instruction be — we happen to give in to the District Court for the Southern District of New York to reinstate its final decree.

Israel Convisser:

May it please the Court.

Earl Warren:

Mr. Convisser.

Israel Convisser:

I was retained to argue this case only about a week ago, and so I must apologize to this bench for the fact that my research has not been as extensive as I should have liked to have been.

And in view of the fact that I propose to argue a point not raised in the brief and propose to cite some cases not cited in the brief, I respectfully ask leave to file the supplemental memorandum, if I may.

Earl Warren:

So you’re going to raise — raise things not raised heretofore?

Israel Convisser:

That is correct, Your Honor.

I should also call the attention —

Earl Warren:

What — what — what point is that that you’re going to do?

Israel Convisser:

That this is an action in tort which is exclusively a land tort and basically outside the cognizance of admiralty that the rule in admiralty is that jurisdiction of torts is controlled by locality or situs.

And that if this is, in fact, an action in tort, all of the alleged acts of fraud having been committed upon the land, there was no maritime situs to give it admiralty jurisdiction.

That point has not been argued in the brief.

The brief has argued the lack of jurisdiction of this case if it be deemed to be an action upon contract which I think is demonstrably not so.

But before I touch that argument, I must —

Stanley Reed:

Does the record show those are the facts that support that argument?

Israel Convisser:

The case came up on very shortened transcripts.

It’s about 10 pages long but I have looked at the record of the case.

The libel is there.

And the libel, I submit, is clearly a libel in tort.

And I propose to demonstrate that, if I may.

But before I reach that point, in view of the fact that the Court of Appeals for the Second Circuit found a maze of complications in this case with many questions of which they determined only one, namely, the jurisdictional question, should this Court disagree with the Second Circuit?

I submit that the appropriate thing to do would be to remand that to afford the Court of Appeals an opportunity to consider the other questions of which there are many in this case.

Would you raise your broader point to point for a degree, wouldn’t you?

Israel Convisser:

Yes, but it’s treated or as though it were a contract action based upon fraud.

And my position is that the libel is exclusively a libel in tort.

Do you argue on page 48 that the Government of the libelous fraud that’s — not a french fraud that’s real fraud.

Israel Convisser:

Well, I must — I must apologize and say that I didn’t try to brief.

Israel Convisser:

But I think that the — the context of the brief is such that the argument went all upon the theory that even if this were a contract based upon fraud, it would not be cognizable.

Now, I would like to call some facts —

Felix Frankfurter:

Before you — before you move on, may I ask, what is a form that we can look to?

What — what is the record?

Is there anything else (Inaudible)

Israel Convisser:

Well I —

Felix Frankfurter:

I’m — I’m —

Israel Convisser:

Yes.

I wish to answer your question, sir.

Felix Frankfurter:

I’m not arguing on that.

Israel Convisser:

Yes, I understand.

They came up to this Court.

Parts of the transcripts are the hearings in the Baltimore case of Todd against City of Athens which was the foreclosure of the lien of the Todd Shipyards of a repair bill on the ship that was supposed to convey these passengers.

There was also a portion of the record in the hearing held by Judge Ryan in the Southern District of New York to consider whether or not to vacate the attachment of another vessel owned by the Basil Shipping Company, and that attachment was vacated.

Now that is the entire record in this case.

And I suggest to the Court that that record does not support any of the allegations of this libel.

I also —

Felix Frankfurter:

(Voice Overlap) may I ask (Inaudible) more should the decree on page 12 was entered upon all trial proceedings seeking for proof.

Now — now that enumeration of equal materials were all trial proceedings and pleadings before the Court of Appeals?

Israel Convisser:

I presume that the record that I saw here was before the Court of Appeals.

I cannot answer your question more categorically.

Felix Frankfurter:

Does the record — is the libel in the record?

Israel Convisser:

This transfer, it has the libel.

It has a copy of the libel.

It does not have a copy of the answer.

Felix Frankfurter:

Well, then you, am I right in suggesting that you must argue from the libel, the libel in the libel or as for a tort.

Israel Convisser:

I believe sir, that it is self-evident than it is —

Felix Frankfurter:

(Inaudible)

Israel Convisser:

— and I do so argue.

Felix Frankfurter:

I — I have — I have the remotest idea where it’s so and I —

Israel Convisser:

I do so argue.

Felix Frankfurter:

I just want to know on the basis of what — to what I must address myself.

Israel Convisser:

Yes, sir.

Felix Frankfurter:

Now, you say that this libel on the face show that it is a fraud action (Inaudible)

All I have to do is read the libel.

Israel Convisser:

That is correct.

Felix Frankfurter:

And I don’t have to bother by anything else.

Israel Convisser:

That is correct, sir, unless, you wish to read some of the other questions in the case.

Felix Frankfurter:

Well, I mean on which point as whether what is — what the cause of action is for.

Israel Convisser:

Yes, sir.

I think the libel —

Felix Frankfurter:

Isn’t that the statement in the (Inaudible) of the libel, I will throw this out of being a libel for land cause.

Israel Convisser:

Yes, sir.

Felix Frankfurter:

That’s your proposition?

Israel Convisser:

That is my proposition, sir.

Now, I have also — I already mentioned —

Stanley Reed:

Do you speak with the Court of Appeals here?

Israel Convisser:

I believe that’s in that transcript that Justice Frankfurter just pointed out.

Yes, sir.

(Inaudible) first page.

Israel Convisser:

Yes, sir.

But what the Court of Appeals did in the substance was to say, “Well, maybe you could read this as a tort but will construe the — the plaintiff most favorably to sustain the cause of action.

Israel Convisser:

I presume so, but they did note, sir, that that is presumably what the libelants intended.

No, let me say that, as if the libel is here to stating having dealt with it as a suit, a quasi contract they — then the judge ends up and says that the libel in view to stating some sort of a claim based upon tortuous conduct in the nature of fraud.

It seems to have been the intent of the pleader in a case against (Inaudible) jurisdiction even clearer.

Israel Convisser:

Yes, sir.

Felix Frankfurter:

Yes.

I — I should think by that, then all you have to do is to blow away paragraph 6 of the libel.

Anything of that remains on the face of it, I don’t have to travel outside of that.

It’s a cause of action for breach of an obligation.

Israel Convisser:

Not of a tort, sir?

Felix Frankfurter:

I don’t know what that means.

They say an obligation that — the tort is an obligation imposed by law whereas an undertaking by a person is an obligation (Inaudible) to which the law (Inaudible)

Israel Convisser:

Well, is it not the remedy that is imposed by law and does not the law describe the act out of which the remedy arises either as a contract or a tort?

Felix Frankfurter:

Well if I — if I can construe it one way or the other and (Inaudible) say that everybody could complete the cause of action.

Israel Convisser:

Very well, sir, then I — I must try to — to persuade you against your — your judgment now.

But in order to —

Felix Frankfurter:

(Voice Overlap) why do — do you have to try to establish that a pleading, even assuming its ambiguous phrase which heretofore by all the parties and by all the Courts as indeed a controversy arising out of an agreement can’t be construed there’s a controversy arising out of this.

Israel Convisser:

May I call Your Honors attention to the fact that has not yet been mentioned.

That the cooperate owner of the City of Athens, a Hungarian Corporation by the name of Sociedad Naviera Transaltantica, was not named as a respondent in this libel.

That the single respondent named in this case is Basil Hanioti.

He is the only person who was sued here.

And I submit to Your Honors, if you read this libel in connection with that fact, in context with that fact, you must reach the conclusion that this is an action against Basil Hanioti for his fraud as a result of which the libelant sustained — that is, they do not even asked for damages for the fraud.

If you will read the ad damnum clause, they seek restitution as on a recession of the contract for fraud.

Felix Frankfurter:

But they also mentioned it on the argument and was not reasonable.

Israel Convisser:

Sir, I — I submit to Your Honor that what they alleged is that Hanioti set up this corporation to limit his liability.

And that that itself is not sufficient to create alter ego —

Felix Frankfurter:

But this isn’t — well, this is the place to argue.

Israel Convisser:

Well I’m sorry, sir.

Then I — I perhaps, I don’t recognize the scope of my own argument.

I thought that this case was here for review of all questions.

I — I would — I would be happy to limit myself to whatever question you think is appropriate.

Felix Frankfurter:

I don’t think for myself to suggest the libel which charges that the named libelee is an alter ego for somebody not sued and no adjudication is made on that, no contest is made in reference to that, I should think it really late in the game at the third and the second appellate review to open up questions which might properly be opened up and not just right.

Israel Convisser:

Sir, I — I question whether no objection has been raised.

I don’t have the — I don’t even have the answer to the libel here.

Felix Frankfurter:

Either had we —

Israel Convisser:

But —

Felix Frankfurter:

— therefore, we restrict it within the scope of review.

This is not an (Inaudible) of hearing.

Israel Convisser:

May I say, sir, that so far as I understand the law of alter ego, it is not sufficient that there be merely limitation of liability.

Israel Convisser:

There must be something in addition to that and I think that the cases so hold that these libelants recognized that that was their problem, and that seeking to hold Basil Hanioti, who by the way has been subjected to an order of arrest because of fraud, that in seeking to subject the — this person, Basil Hanioti, they necessarily have to allege that he committed a fraud upon them in order to be able to effect the piercing of the corporate there.

The cases hold that mere limitation of liability is not enough.

There must be something else and I should like to submit the cases to Your Honors.

Stanley Reed:

What would you say if the case had been against to Sociedad Naviera?

Israel Convisser:

A different situation might have been presented, sir.

Stanley Reed:

Well, isn’t it —

Israel Convisser:

If —

Stanley Reed:

— just the same as though it had been brought against that?

Israel Convisser:

But before any question can be raised as thought this were the Sociedad Naviera.

The fact is justifying the piercing of the corporate veil must first be — be alleged and proved.

Were — were Sociedad Naviera a defendant?

Perhaps, it’s still dubious in my mind but I don’t have the time to argue.

Perhaps, a cause of action in contract might be made out against Sociedad Naviera, and an — as an ancillary to that, under the Swift case, it might have been held or alleged that Basil Hanioti, by virtue of his fraudulent acts, utilized the corporation as his alter ego and therefore was responsible.

Stanley Reed:

He — he simply used it as another way of doing business.

That’s — that’s what the allegation is.

Israel Convisser:

But they — they have to — they have to make an allegation to justify the piercing of a corporate veil and that is where their — their allegations of fraud come in.

I would like to — to submit to Your Honors this basic dilemma that I think confronted the petitioners in this case.

As I have note — as I have mentioned to you, the decree of the District Court provided for an order of arrest, this was pursuant to the Civil Practice Act of New York.

Their dilemma, however, was this, that if they brought the action for breach of contract in this case, they will not entitle to an order of arrest under the New York Civil Practice Act.

The case of Novotny against Kosloff, decided by the New York Court of Appeals in 214, New York 12 so held and the Court actually said, “A liability to responding damages for a nonperformance of the contract in refusing to carry it out.”

In this case, for discharging the plaintiff in violation of its terms, it cannot be said to be incurred until the breach is actually committed, and is unrelated to the fraud in the making of the contract.

Now, on the other hand, the Civil Practice Act provides for an order of arrest for an action in fraud.

But in that case, they are impelled upon the other one of the dilemma because an action in fraud, a land tort is not cognizable in admiralty.

And I submit to Your Honors that you must read the libel with this in mind.

This is the dilemma that confronted the risk for the petitioners.

This is the dilemma that they had to solve.

And if — if you hold that this was an action for breach of contract cognizable in admiralty, which I respectfully submit would not be warranted, then it seems to me this case should go back to the Court of Appeals to consider whether there was warrant for issuing the order of arrest.

If on the other hand, you read the libel as I submit it must be read as one stating a cause of action in tort against an individual with whom there was no contractual liability alleged or proved except on the basis of the theory of alter ego, then you have a case clearly sounding in fraud which is a land tort.

I have jumped into my argument because of the questions that were raised, but I wish to submit to the Court some of the facts that I have gleaned from the record in this Court.

The City of Athens was purchased by this Hungarian corporation for $430,000.

Israel Convisser:

So far as this record shows, that ship was held free and clear of any lien or mortgage, however, substantial repairs and under — and alterations were undertaken of this vessel and were performed by the Todd Shipyard Corporation.

The evidence shows that it was expected, that the bill would run anywhere from $80,000 to $200,000.

The total repair bill, and there was a second repair necessitated by heavy weather damage, ran to close to $750,000.

Nevertheless, the City of Athens had completed four roundtrip voyages.

The sail of the City of Athens, a forced sail, brought $400,000.

Now, these libelants intervened in the proceedings in Baltimore in order to assert a lien for their passage money and they were represented by their present counsel.

They asserted that that money was used for the purchase of supplies, for the payment of the crew, and for the payment of part of the Todd Shipyards bill.

And indeed, the record shows that $270,000 were paid to Todd Shipyards.

The commissioner who heard the evidence made this finding.

He said a shipowner must necessarily secure funds from freight or passengers, and if it purchases supplies for its vessels or has them repaired, it is only from such funds unless it borrows the money on its personal credit or that of the vessel, that such purchases are — or repairs can be paid for.

From the record here, it may be assumed that the passage moneys were so employed resulting in certain liens being reduced or paid off.

Any of this — in this record before us?

Israel Convisser:

It is not in the transcript but the record is here.

I examined the record here.

If you wish the page citation, sir, this that I read to you is from the hearings before the commissioner, page 71 of the record in the case of Todd against the City of Athens.

A transcript of some of the testimony is here in this Court, sir.

Felix Frankfurter:

Are you going to argue the question on which they presumably the case was essentially voir dire?

Israel Convisser:

Yes, sir.

If I — if you wish.

Felix Frankfurter:

I don’t ask or wish on this but —

Israel Convisser:

Very — very well, sir.

Felix Frankfurter:

I just want to argue.

Israel Convisser:

Oh, yes.

That — before I get to that, there is one further point that I wish to make.

The passage tickets in this case were purchased according to the record on file here from the months of February until July.

Between February and July, at least two and possibly three roundtrip voyages were made by the vessel.

The ship was libeled on January — on July 15, I believe.

Only five tickets were sold after that date and since tickets were being sold all over the United States and Europe, it may reasonably be assumed, I submit, that this was simply because of the difficulty in time of getting it known that the voyages would have to be canceled.

I think from this, it is difficult to assume that there was any fraud here.

The District Court rounded its decision on the insolvency of the corporate owner of the vessel.

Israel Convisser:

But there is nothing in the record to show that it actually was insolvent, you had a ship for which $430,000 was paid.

Surely, it was worth more than that after the expense of repairs and alterations.

What was the value of that ship?

No evidence of what money there was in the treasury of the corporation.

The fact —

Felix Frankfurter:

(Voice Overlap) suppose everything you’re saying so — suppose everything you’re saying so —

Israel Convisser:

Yes, sir.

Felix Frankfurter:

— that deal with the core of a problem that money was paid for a trip and they didn’t get the trip.

Israel Convisser:

Sir, if I understand the question, the core of the problem is whether there is admiralty jurisdiction.

Felix Frankfurter:

Yes, what I’m saying — but you’re now saying that there was or wasn’t a fraud at a different offense.

Certainly, the core of the problem is admiralty jurisdiction.

Israel Convisser:

Sir, I do not deny —

Felix Frankfurter:

If it’s fraud, it doesn’t mean if a fellow pays — pays in advance or passing them on in advance is for any reason, the best reasons in the world.

The ship doesn’t go, the money has to be restored.

Israel Convisser:

That is correct, sir.

Felix Frankfurter:

Very well.

And it doesn’t make any difference whether that was fraud or not.

Israel Convisser:

One further thing on the — on the question of fraud and then I shall go to the question — the other question.

I respectfully submit that if you read this libel and script from it the allegations of fraud, it does not state a cause of action against anyone.

And if I am given leave to submit a — a supplemental memorandum, I think that perhaps I can satisfy the Court of the points that I have made on the question of jurisdiction considering this to be a case in fraud that is in tort.

Now, with respect to the argument that this, as an action in contract, is cognizable in admiralty.

The Bryer case which is relied upon rather heavily by the petitioners was one in which there have been a union of ship and cargo.

The failure of the ship to carry the goods gave the case a maritime situs.

And in that sense, it is not analogous to this case where there was no union of ship and cargo or ship and passengers.

The only other real case on which the petitioners rely is the case of Swift against Compania Columbiana which is cited both in the petitioner’s brief and in respondent’s brief.

In that case, this Court pointed out that fraud is not the business of admiralty.

And I presume that they were there talking about fraud irrespective of whether it was in tort or in contract.

However, the Court said that that would not prevent admiralty from protecting its jurisdiction once it have it.

But I submit that before there was any jurisdiction for admiralty to protect, it must first acquire it.

Now, in the Swift case, what happened was that a libel was filed for the cargo damage arising out of negligence of a ship that was presumably wrecked.

Israel Convisser:

The libel was filed against the corporate owner of the vessel and an attachment was asked against another vessel that it owned.

The next day, a supplemental and demanded libel was filed alleging that the corporation had transferred the vessel to a dummy corporation that it had set up for that purpose.

The Court held that having had jurisdiction of the original libel as it clearly did, it could protect its jurisdiction even with respect to the allegations of fraud.

Now, the — the case of Silva versus the Finance Company, and United Transportation both decided in the Second Circuit, I submit, are sound law today.

As this Court has sometimes noted, decisions are sometimes made in general terms.

But in those cases, the quasi contracts which they said were not cognizable in admiralty arose in the case of United Transportation out of a fraud because of the common officer of the two corporations who put through this contract.

And in the Silva case, because it was an action against a person who was not a party to the maritime contract, namely, the Finance Company.

Before my time expires, I wish to address myself to one question and that is the appealability of the orders.

A decree was entered on December 6th.

On December 7th, a motion was made to vacate the default.

The moving party urged not only that the default was not willful, but also that the warrant of attachment was not authorized.

The Court so treated the motion because in the opinion, which is in the transcript, he addressed himself to the propriety of the issuance of the warrant of attachment.

And so as I submit that a motion to modify a judgment as this in effect was at least involved is a rule under 50 — is within rule 59 (e) which timely filed as this one was, told the time within which the statute of — the — the time to appeal starts to run.

And Rule 73 so holds.

I think it’s Rule 73 which says that a rule made under Section — Rule 59 — stops the time running.

In any event, there were two other motions — two other appeals filed from the denial of the motion to vacate the default, they were timely made, they were appealable orders and the case was properly before the Court of Appeals and once surely a court can decide the jurisdictional question at any time.

Besides, I regret that I have not been able to argue this thing more extensively, may I have leave to file a supplemental memorandum.

Earl Warren:

Mr. Convisser, we don’t want this case re-briefed.

You said you wanted permission to file your authorities on the question of whether this was strictly a tort action.

Israel Convisser:

Yes, sir.

Earl Warren:

You may have until tomorrow evening to serve counsel and the Court with that — with that memorandum.

Israel Convisser:

May I have it typed or (Voice Overlap)

Earl Warren:

You may have it typed, yes, not necessarily — to print it.

You may have two days after that if you desire to answer it.

Israel Convisser:

(Inaudible) I desire — one way, I desire in the (Inaudible) question by Mr. Justice Frankfurter?

Earl Warren:

Certainly, you have some time left to —

Israel Convisser:

And that is respect — with respect to the proofs as introduced in this case on trial in the Southern District.

We had intervened that the interim action in Baltimore back in 1947 and hoped and tried to establish a maritime lien.

Since our contracts were all executory, the decisions were that we had no maritime lien.

But at that time, annuity was lowered back from France where he had fled.

Israel Convisser:

And he appeared before the District Court, a man on his own, and said he’s going to tell the Court the truth.

He testified before a commissioner, missed to put questions to him.

He admitted under oath that these corporations were simply paper corporation’s dummies.

He controlled them all, it’s in the record — it’s in the record on file on this Court.

It’s libellant’s Exhibit 2.

And that testimony, under oath in the Baltimore District Court was introduced in evidence in Southern District.

And I think that answers Mr. Justice Frankfurter’s question on the evidence and Judge Walsh went through the evidence very carefully and so that the District Court and the Circuit Court of the Fourth Circuit in the in rem proceeding and their decisions have been (Inaudible) substantially the same.

Felix Frankfurter:

So, their decisions on the question whether these were — these were screened.

Israel Convisser:

That’s correct, sir.

Felix Frankfurter:

These were very precious appearances and not reality.

Israel Convisser:

That’s correct, sir.

Felix Frankfurter:

That it was decided by the Court of (Inaudible)

Israel Convisser:

Oh, yes, sir.

Felix Frankfurter:

What was their decision?

Israel Convisser:

It’s in the brief, Your Honor.

Felix Frankfurter:

(Inaudible)

Israel Convisser:

(Inaudible) Your Honor.

Felix Frankfurter:

Which was (Inaudible)

Israel Convisser:

It’s the District Court decision is under the name of Acker and others against the City of Athens, 1 — no, I’m sorry, that’s the court — Circuit Court, 177 F.2d, 961.

The District Court decision is under the name of Todd Shipyards against the City of Athens, 83 F.Supp.67 and Judge Chestnut went into a — quite extensively wrote quite a length of the opinion and he held there that these passengers’ claims were clearly within admiralty.

But unfortunately, they were enforceable in rem because the passengers never set for the board to ship, they got to New York and he didn’t bring the ship to New York.

Todd hit it and that was it.

Felix Frankfurter:

Let’s see if I understand it (Inaudible) you say that the issue where the (Inaudible)

Israel Convisser:

That’s correct, sir.

Felix Frankfurter:

Well, that has been actually adjudicated in the Fourth Circuit —

Israel Convisser:

That’s correct, sir.

Felix Frankfurter:

— was the matter which you suggested to Judge Walsh.

Israel Convisser:

That’s correct, sir.

Felix Frankfurter:

And he passed on it.

Israel Convisser:

He found the same thing, Your Honor.

Israel Convisser:

He found it on — and he owns his own admission of his own testimony.

He asked the — commissioner asked the question, “Do you mean to tell me these were nothing but paper corporations?”

And these were practically his words.

“Yes, sir, I control them all.”