author: WISDOM, Circuit Judge:

text:
    In the Matter of SOUTHERN LAND TITLE CORPORATION, Debtor. In re SOUTHERN LAND TITLE CORPORATION and the Five Flags Building, Inc. Appeal of Albert J. WARD, Jr., Trustee,
    No. 71-1891.
    United States Court of Appeals, Fifth Circuit.
    March 19, 1973.

      John Pat Little, Charles J. Schwartz, Jr., New Orleans, La., for Ward.
    Carl W. Cleveland, C. Ellis Henican, Jr., New Orleans, La., for Henican, James, and Cleveland.
    James J. Morrison, James J. Morrison, Jr., New Orleans, La., for Debtor Corp.
    Clem H. Sehrt, Peter J. Butler, Moise S. Steeg, Jr., New Orleans, La., for ap-pellee.
    Before WISDOM, GOLDBERG and MORGAN, Circuit Judges.
   WISDOM, Circuit Judge:

Albert J. Ward, Jr., is the Trustee in bankruptcy for the debtor corporations, The Five Flags Building, Inc. and Southern Land Title Corporation. He appeals from the decision of the district court in a reclamation action against 225 Baronne Street, Inc. In this action the trustee sought the return of the building in New Orleans known as “225 Baronne” to Five Flags and the land on which the building is situated to Southern Land Title. The trustee alleged that the sale of the bankrupt’s property within one year before the filing of the petition in bankruptcy was a voidable preference under section 67, sub. d(2), and section 70, sub. e(l), of the Bankruptcy Act.

Five Flags is a wholly owned subsidiary of Southern Land Title Corporation. Five Flags Building, Inc. and Southern Land Title were two of the holdings in the so-called “Sam Recile Empire.” As is the case with some empires, Sam Re-cile’s had a spectacular rise and a swift decline. It was financed through the influence of Louis J. Roussel. Roussel was a member of the Board and Executive Committee of the National American Bank, and admittedly controlled the said Bank. Mr. Roussel personally, along with his family, or with nominees, owned almost fifty percent of the widely held stock of the Bank, and owned or controlled the majority of stock of Empire Land, Republic Petroleum Corporation, Universal Drilling Company, Bankers Union Life Insurance Company, and Gulf Natural Gas Corporation. These companies, along with the National American Bank, provided much of the financing of the debtor corporations and others in the “Recile Empire”. According to the trustee, Roussel knew of the financial distress of the Recile Empire, including especially the troubles of the debtors corporations, and he manipulated the whole situation so as to put the 225 Baronne Building beyond the reach of creditors to protect himself and the National American Bank. The trustee considers that both the transferor and transferee were in bad faith. The evidence in the record in support of the trustee’s position does not compel this Court to hold that the trial judge’s findings were clearly erroneous.

The district court denied reclamation, We affirm.

I.

In 1964, Five Flags obtained a loan of $2,350,000 from the National American Bank on the condition, among others, that it pledge non-interest bearing certificates of deposit totaling $1,500,000 with the Bank. Five Flags pledged the certificates, and they remained in the Bank’s custody until April 1965 when Philip James, as president of Five Flags, obtained the release of the proceeds. The Bank credited the proceeds to Five Flags’ checking account but received no additional security to replace the certificates.

In February 1965, the Bank demanded payment on the remaining principal due on the loan, which was then in default, and noted that the non-interest bearing certificates of deposit required by the loan agreement had never been replaced. Negotiations ensued, but the record indicates that on April 13, 1966, there was still owing a principal balance of $923,579.74 on the original loan. The Bank, however, finally withdrew its demand for immediate payment and agreed to an additional loan of $526,420.26 to Five Flags in return for its consent to several conditions expressed in a letter dated April 15, 1966, from Clem H. Sehrt, the president of National American Bank.

On June 1, 1966, the loan of $1,450,000 from National American Bank was still unpaid. On June 17, in accordance with Sehrt’s letter of April 15, and the previous understanding between Sehrt and Philip James, a collateral mortgage in the amount of $1,450,000 on the 225 Baronne Street Building was executed in favor of National American Bank and was recorded on June 20. There were two prior, unpaid mortgages on the property.

In August 1966, C. Ellis Henican succeeded Sam Recile as president of Southern Land Title Corporation. Roussel put two officers of the National American Bank on the Five Flags’ five-man board of directors. According to Heni-can, Roussel had become “disenchanted” with Recile, partly “because he no longer liked Mr. Recile, having been a very close associate of Recile from the inception”; partly because “he felt that the debts of the corporation were not being properly taken care”; and partly because somebody of “ [Henican’s] age and maturity and standing in the community should come forward and stabilize” the corporation.

The corporation’s financial problems continued, and Five Flags soon defaulted on both the second and third mortgages on the 225 Baronne Building. Five Flags was unable to pay even the principal sum of $25,000 due monthly on the Bank’s mortgage. As of September 21, 1966, Five Flags was delinquent from April 1, 1966, on the interest due the Bank on its loan and was delinquent on the $25,000 principal payments due for July, August, and September 1966.

Despite these financial difficulties, Henican believed that the debtor corporations could be rehabilitated and that the proper way to accomplish this was to sell as much of the assets as possible in order to reduce the company’s debt. Henican was also of the opinion that the rental income from 225 Baronne was being diverted to Southern Land and other entities and that this was a major factor in Five Flags’ default on the second and third mortgages encumbering the property. Accordingly, Henican offered to sell the 225 Baronne Building to Louis Roussel. Rousell, along with several others, then formed 225 Baronne Street, Inc. On September 21, 1969, 225 Baronne Street, Inc. paid $15,750,000 for the building and the land. 225 Bar-onne Street, Inc. also paid an additional sum of $256,457.05 to National American Bank for the credit of Five Flags. These funds represented the credit received by 225 Baronne Street, Inc. on its purchase of the second mortgage encumbering the property.

On December 7, 1966, Southern Land Title and Five Flags filed a voluntary petition for corporate reorganization under Chapter X of the Bankruptcy Act. The district court dismissed the petition on February 3, 1967. An hour later ten creditors of the debtor corporations filed an involuntary petition for corporate reorganization. The trustee later requested a hearing pursuant to sections 21 and 167 of the Bankruptcy Act. 11 U.S.C. §§ 44 and 567. By stipulation of the parties, this proceeding was converted into a summary-plenary proceeding for reclamation in which the central issue was whether the trustee could reclaim from 225 Baronne Street, Inc. the title of the land and building at 225 Baronne Street. After a lengthy trial, the district court on September 9, 1970, issued its decision denying reclamation, 316 F.Supp. 1059. The trustee appeals from that decision.

II.

The trustee’s first contention is that the sale of the land and building at 225 Baronne to 225 Baronne Street, Inc. is a voidable preference under section 67, sub. d(2)(a), (b), and (c) of the Bankruptcy Act. 11 U.S.C. § 107, sub. d(2)(a), (b), and (e) These subclauses provide that certain transfers made by the debtor within one year prior to the filing of a petition in bankruptcy are presumed to be fraudulent, regardless of actual intent, if made without fair consideration. As defined in subclause (d) (1) (e) (1), consideration given for the property of a debtor is fair “when, in good faith, in exchange and as a fair equivalent therefor, property is transferred or an antecedent debt is satisfied. . . .”11 U.S.C. § 107, sub. d(l)(e)(1). Thus, fair consideration requires both (1) a fair equivalent, and (2) good faith on the part of the transferee. Cohen v. Sutherland, 2 Cir. 1958, 257 F.2d 737, In re Messenger, D. C.E.D.Pa.1940, 32 F.Supp. 490; 4 Collier on Bankruptcy fl 67.33 (J. Moore, ed. 1967). As to the first requirement, the district court found that 225 Bar-onne Street, Inc. paid $15,750,000 to Five Flags for the Baronne Building and the land thereunder and paid an additional $256,457.05 to the National American Bank for the credit of Five Flags. The later sum represented the credit received by 225 Baronne Street, Inc. on its purchase of the second mortgage encumbering the property. The district court concluded that these amounts were a fair equivalent of the property transferred, and the trustee has not presented any evidence controverting that finding.

As to the second requirement, the district court found that the transfer was made in good faith. The trustee contends, however, that Louis J. Roussel and the other shareholders and directors of the transferee, 225 Baronne Street, Inc., knew in August 1966 that Southern Land Title and Five Flags were in severe financial distress and that they acted in bad faith to further their own financial interests and those of National American Bank at the expense of the general creditors of the bankrupt corporations. The trustee asserts that the directors of 225 Baronne Street, Inc. were either directors of National American Bank, members of an advisory board of one of its branches, or business associates of Roussel, the Bank’s principal shareholder. The trustee further contends that Roussel controlled and dominated both the Bank and 225 Baronne Street, Inc.; that the Bank’s outstanding loans to Five Flags gave Roussel a controlling influence over the bankrupt; and that Roussel used his influence to force the sale of the 225 Baronne Building to 225 Baronne Street, Inc., a corporation formed by Roussel for that specific purpose. 'The trustee would conclude that actions of Roussel and the directors of 225 Baronne Street, Inc. were in bad faith and were designed to enrich themselves and the Bank unjustly at the expense of the general creditors of the bankrupt.

Whether the transfer in the present case was made in good faith is a question of fact. Mayo v. Pioneer Bank & Trust Co., 5 Cir. 1959, 270 F.2d 823, rehearing denied, 274 F.2d 320, cert. denied 362 U.S. 962, 80 S.Ct. 787, 4 L.Ed. 2d 877. Wide latitude must be given to the trier of fact in resolving such questions. The immense record in this case reflects the district court’s efforts to ferret out the relevant facts and to resolve differences in testimonial and documentary evidence. We have examined the record and carefully considered the district court’s findings in light of the clearly erroneous standard. We conclude that the district court’s findings are not clearly erroneous.

The evidence .indicates, and the district court found, that no officer or director of 225 Baronne Street, Inc. was ever furnished a financial statement indicating the condition of Five Flags or Southern Land Title in 1966. Nor was any such statement made available to the officers and directors of the debtor corporations. What information was available, however, indicated that the debtor corporations were not insolvent. As the district court found, in August 1966 both Henican, the president of Southern Land Title, and James, the president of Five Flags, believed that the rental income from the 225 Baronne Building was being diverted for improper purposes and that this was a major factor in Five Flags’ default on the second and third mortgages encumbering the subject property. As noted, Henican was convinced that the debtor corporations could be rehabilitated financially by selling as much of the assets as possible to reduce, the debt. His appraisal of the financial condition of Five Flags was communicated by letter to both 225 Baronne Street, Inc. and the National American Bank. None of the officers and directors of 225 Baronne Street, Inc. knew or had reasonable cause to suspect that Five Flags and Southern Land Title were insolvent — at least in terms of the sufficiency of the evidence in the record. We must conclude, therefore, as did the district court, that the trustee has failed to show any evidence of bad faith and that the transfer was made for fair consideration within the meaning of section 67 sub. d(2)(a), (b), and (c). 11 U.S.C. § 107, sub. d(2)(a), (b) and (c).

III.

The trustee’s second contention is that the sale of the Baronne Building is a voidable preference under section 67, sub. d(2)(d), 11 U.S.C. § 107, sub. d(2)(d). This section provides that even if the consideration is fair, a transfer of property is fraudulent if “made or incurred with actual intent as distinguished from intent presumed in law, to hinder, delay, or defraud either existing or future creditors.” In determining the applicability of section 67, sub. d(2)(d), it is necessary to examine both the intent of the bankrupt and the intent of the transferee. A fraudulent intent on the part of either party enables the trustee to avoid the transfer. 4 Collier on Bankruptcy 67.37 (J. Moore, ed. 1967).

With respect to the intent of the transferor, Five Flags, the trustee contends that both Henican and James, the presidents of Southern Land Title and Five Flags respectively, were guarantors on loans made by National American Bank to Five Flags and were therefore dominated by Louis Roussel. In addition, the trustee points out that two other directors of Five Flags, William La-Rose and Jennings L. Courville, were the Bank’s Executive Vice President and Vice President, respectively, as well as directors of the Bank. On the basis of these associations between the directors of Five Flags and National American Bank, the trustee argues that the sale of the Baronne Building was intended to enhance the personal financial condition of Henican and James and to insure that Roussel’s and the Bank’s interests would be preferred over those of the general creditors of the debtor corporations. With respect to the intent of the transferee, 225 Baronne Street, Inc., the trustee reiterates the general contentions made in relation to the alleged bad faith on the part of its directors.

After examining the record, we agree with the district court that there was no intent “to hinder, delay, or defraud either existing or future creditors.” The debtor corporations entered into the transaction for the purpose of rehabilitating themselves financially, and neither Henican nor James voted for the sale to defeat creditors of Five Flags or to prefer the National American Bank or Roussel to the detriment of the other creditors. The board of Directors of Five Flags, of course, included two officers of National American Bank. Courville and LaRose, who were elected to insure that the rental from 225 Baronne was applied to the debts of Five Flags. But there is no indication that these two men voted to defraud the creditors or to prefer the Bank. As the district court stated:

[Although the Board of Directors of Five Flags Building, Inc., consisted of five members acting independently, Henican, by letter dated September 14, 1966, advised Louis J. Roussel and associates, that he, Philip E. James and Middleton Wootten, constituted a majority of the Board, and regardless of the actions of the other two members [Courville and LaRose], the Board would vote for the sale of said property. The act of sale in question with reference to The Five Flags Building, Inc., was not passed pursuant to any vote of its Board of Directors, but was passed pursuant to a Unanamous Consent of its sole shareholder, Southern Land Title Corporation.

Furthermore, we note that it was Heni-can, not Roussel, who proposed the sale of the 225 Baronne Building, and the trustee’s argument that Henican and James were dominated by Eoussel finds no support in the record. We conclude that there was no fraudulent intent on the part of Five Flags or Southern Land Title.

In considering the intent of 225 Bar-onne Street, Inc., the district court found that 225 Baronne Street, Inc. paid a fair equivalent for the land and building; that 225 Baronne Street, Inc. was not in a position to control or domináte the bankrupt; and that 225 Baronne Street, Inc. had no intent to defraud or hinder other creditors. In addition, the court held that the National American Bank had a valid third mortgage on the Baronne Building; that it was entitled to protect its interest when the property was sold; and that it, too, had no intent to defraud or hinder other creditors. The record supports these findings.

As to the other alleged wrongdoings of Jennings Courville and the overline situation between the Bank and Southern Land Title, the district court held that these transactions were irrelevant to the present transaction, and we reaffirm that decision.

We conclude that the sale of the 225 Baronne Building is not a voidable preference under section 67, sub. d(2)(d) of the Bankruptcy Act.

IV.

The trustee’s final contention is that the transaction in the present case is voidable under section 70, sub. e(l), of the Bankruptcy Act, 11 U.S.C. § 110, sub. e(l), which provides: “A transfer made or suffered or obligation incurred by a debtor adjudged a bankrupt under this [Act] which, under any Federal or State law applicable thereto, is fraudulent as against or voidable for any other reason by any creditor of the debtor, having a claim provable under this [Act], shall be null and void as against the trustee of such debtor.” This section permits the trustee to avoid any transfer of the bankrupt’s property fraudulent under state law. Articles 1978 and 1984 of the Louisiana Civil Code are the only sections of state law directly relevant to the present case. Article 1978 provides:

No contract shall be avoided by this action but such as are made in fraud of creditors, and such as, if carried into execution, would have the effect of defrauding them. If made in good faith, it cannot be avoided, although it may prove injurious to the creditors; and although made in bad faith, it cannot be rescinded, unless it operates to their injury. La.Civ.Code art. 1978.

For a transfer to be fraudulent under this article, the presence of two elements is essential: (1) bad faith, and (2) injury to the creditors. Neither requirement is satisfied in the present case. The district court found that a fair equivalent was paid for the property and that both parties acted in good faith. Since we affirm those findings, the trustee is entitled to no relief under article 1978.

Article 1984 provides that “every contract shall be deemed to have been made in fraud of the creditors, when the obligee knew that the obligor was in insolvent circumstances, and when such contract gives to the obligee, if he be a creditor, any advantage over other creditors of the obligor.” La.Civ. Code, art. 1984. Again, the trustee has failed to prove that the sale was fraudulent under the statute. The district court found that the officers of 225 Baronne Street, Inc. were not furnished with a financial statement of Five Flags or Southern Land Title and that they were unaware of the insolvency of the bankrupt corporations. The trustee has not shown that finding to be clearly erroneous. Furthermore, there is no indication that either 225 Baronne Street, Inc. or National American Bank received any undue advantage as a result of the sale of 225 Baronne.

The record in this case does not carry the fresh air of spring, the scent of sweet olive in bloom, and the pleasing thought of young innocents at play. Instead, the record conveys an impression of the principals as tough-minded, sophisticated businessmen accustomed to taking care of their interests. Unfortunately for the debtor corporations and the general creditors, on the cold record before us, the trustee has not shown that the transferor — transferee sophisticates in this case executed a sale that was a voidable preference under section 67, sub. d(2), (a), (b), (c), and (d), or under section 70, sub. e(l) of the Bankruptcy Act.

The decision of the district court has to be affirmed under the clearly erroneous rule.

      . After the sale of the building, which was the sole asset of Five Flags Building, Inc., and the disbursement of the proceeds of said sale, the following debts were due and remain unpaid:
      National American Bank, $556,167.34; Unsecured creditors, $25,836.79;
      Assessment for Federal Taxes, $656,-424.00;
      Assessment for Interest and Penalties on Federal Taxes, $196,927.20

      . Although the district court made no finding on this specific point, the record indicates that the Bank’s loan was secured in part by a pledge of all the outstanding common stock of Five Flags. The third mortgage executed in favor of the Bank was intended to prevent the debtor corporation from diluting the value of the stock by insuring that no additional prior liens could be placed on the 225 Baronne Street Building, Five Flags’ sole asset.

      . The trustee’s appeal was originally joined in by the debtor corporations and their chief executive officers, C. Ellis Henican and Philip James. All appeals except the trustee’s have since been voluntarily dismissed.

      . Section 67, sub. d (2), 11 U.S.C. 107, sub. d(2), provides:
      (2) Every transfer made and every obligation incurred by a debtor within one year prior to the filing of a petition initiating a proceeding under this title by or against him is fraudulent (a) as to creditors existing at the time of such transfer or obligation, if made or incurred without fair consideration by a debtor who is or will be thereby rendered insolvent, without regard to his actual intent; or (b) as to then existing creditors and as to other persons who become creditors during the continuance of a business or transaction, if made or incurred without fair consideration by a debtor who is engaged or is about to engage in such business or transaction, for which the property remaining in his hands is an unreasonably small capital, without regard to his actual intent; or (c) as to then existing and future creditors, if made or incurred without fair consideration by a debtor who intends to incur or believes that he will incur debts beyond his ability to pay as they mature; or (d) as to then existing and future creditors, if made or incurred with actual intent as distinguished from intent presumed in law, to hinder, delay or defraud either existing or future creditors.

      . Whether fair consideration has been given for a transfer must depend-, on all the circumstances of the case. Fairness in every case is largely a question of fact, as to which considerable latitude must be allowed to the trier of the facts.
      4 Collier on Bankruptcy ¶ 67.38 (J. Moore ed. 1967), p. 508. See Roth v. Fabrikant Bros., Inc., 2 Cir. 1949, 175 F.2d 665.

      . These articles are part of Louisiana’s revocatory action. See generally, La.Civ. Code arts. 1963-1989; Comment, The Eevocatory Action, 9 Tulane L.Eev. 422, 436 (1935).; Slovenko, Treatise on Creditors’ Eights under Louisiana Civil Law 215, 923 (1968).


source: Caselaw Access Project

author: LEWIS R. MORGAN, Circuit Judge: CLARK, Circuit Judge

license: Public Domain

text:
    Charles Wendell COFFEE, Plaintiff-Appellee, v. The PERMIAN CORPORATION et al., Defendants-Appellants.
    No. 72-1814.
    United States Court of Appeals, Fifth Circuit.
    Feb. 20, 1973.
    Certiorari Denied May 29, 1973.
    See 93 S.Ct. 2736.
    Clark, Circuit Judge, concurred in part and dissented in part and filed opinion.

      F. H. Pannill, W. B. Browder, Jr., Midland, Tex., for defendants-appellants.
    Charles E. Galey, Lubbock, Tex., for plaintiff-appellee.
    Gerald Huffaker, Tahoka, Tex., for Layman.
    Before MORGAN, CLARK and IN-GRAHAM, Circuit Judges.
   LEWIS R. MORGAN, Circuit Judge:

In this case Charles Wendell Coffee brought suit against the Permian Corporation and several of its directors alleging a violation of § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) and Rule 10b-5 of the Securities Exchange Commission, 17 C.F.R. 240.-10b-5. Coffee claimed that defendants, as majority stockholders, engaged in a scheme to defraud him of the value of his stock in the J. B. Knight Company, Inc., by liquidating Knight Company when its stock had a value of approximately $20.00 per share. A jury found in favor of Coffee and defendants appeal on the grounds that the evidence was insufficient to support a finding of fraudulent plan of liquidation; that the evidence was insufficient to support the jury’s finding that some, but not all, of the defendants knowingly participated in the fraudulent scheme; that there was no proper proof of the value of plaintiff’s stock at liquidation; and that the court erred in allowing judgment for exemplary damages. Having considered all these assignments of error, we affirm the judgment below.

FACTS

On March 31, 1965, Coffee purchased 1,000 shares of stock in the J. B. Knight Company which was at that time principally owned by Mr. J. B. Knight and members of his immediate family. Shortly thereafter, Permian Corporation completed an agreement with Knight Company whereby Permian purchased 50% of Knight Company stock and agreed to furnish Knight Company with the necessary capital to finance the building and selling of farm irrigation systems. The financing was accomplished through a wholly owned Permian subsidiary, the Cambrian Finance Company. After the agreement was signed several members of the board of directors at Permian also became members of the board at Knight Company and Cambrian.

Due to a number of factors, Knight Company began losing money in its farm irrigation business and it became necessary to secure additional operating funds in addition to those already being received from Cambrian. Actual loans and loan commitments, all of which were guaranted by Permian, were obtained from the Midland National Bank. In June of 1966, Cambrian decided to go out of business and as a result the company was dissolved and its paper discounted for a total loss of $55,000.00. At a special board of directors meeting this loss was shifted to Knight Company by causing Knight Company to execute a note to Permian for the amount of the loss. Coffee was never informed of this transaction.

In August of 1966, appellant W. R. Davis, as president and chief executive officer at Permian, forced Mr. J. B. Knight to resign as president of the Knight Company by threatening to send Knight Company into bankruptcy by calling in all the demand notes held by Permian. Davis and appellant C. R. Herpich, a board member at both Permian and Knight Company, selected A. L. Bennett as the new president of Knight Company.

In November of 1966, Permian merged into Occidental Petroleum Corporation and shortly thereafter, on de-cember 27, 1966, the Knight family sold its stock back to the Knight Company and received a note in return. The Knight shares were then cancelled and Permian’s ownership in Knight Company increased to 80.02%.

During the month of August 1967, several of the board members indicated a desire to liquidate the Knight Company. At that point the company showed a profit of over $50,000.00 for the first seven months of 1967, and the financial statement listed the indebtedness to Permian and Midland National Bank as long-term liabilities. The balance sheet reflected a shareholder’s equity of $1,116,055.00. None of the above information was ever disclosed to Coffee. However, the financial statement of September 30, 1967, was presented to Coffee and this statement noted the indebtedness to Permian as a current liability. Shifting the indebtedness from a long-term to a current liability resulted, of course, in a drastic reduction in the amount of working capital reflected on the financial statement.

Knight Company called a meeting of its creditors, and on October 23, 1967, the directors showed the creditors the September 30th financial statement as evidence of the company’s financial condition. Subsequently, and without allowing the shareholders to vote as required by Texas law, Knight Company was liquidated. At some time during the liquidation process Permian purchased outstanding Knight Company accounts totaling $628,993.00 at a discount, paying only $390,230.05 for these accounts. In the meantime, the Knight family was paid less than 50% of the face value of its note which was executed when the family’s stock was sold back to the Knight Company. Permian’s parent company, Occidental, received a $115,000.00 tax benefit as a result of the Knight Company liquidation.

Plaintiff Coffee filed suit in federal district court on July 7, 1969, claiming that Permian Corporation and certain of its directors had engaged in a scheme to defraud him of the value of his stock in violation of the federal securities laws and the Texas statutes dealing with the rights of minority shareholders. Initially, the district court dismissed the complaint on the ground that plaintiff did not allege facts sufficient to demonstrate that he was a purchaser or seller of securities within the ambit of § 10(b)(5), supra. This court reversed, however, and held that plaintiff’s complaint alleging the liquidation of Knight Company gave him standing as a seller of securities. Coffee v. Permian Corporation, 5 Cir. 1970, 434 F.2d 383. On remand a trial was had before a jury which found in favor of plaintiff by returning answers to several interrogatories which will be discussed later.

I

Defendants’ principal assignment of error is that there was insufficient evidence before the jury to support a finding that they engaged in a scheme to cheat Coffee out of the value of his stock. Proof of a scheme to defraud failed, defendants claim, because there was no evidence that either Permian or the individual defendants took over the Knight Company assets after liquidation or that the defendants ever received any sort of financial gain or profit as a result of the liquidation. In our view this argument would, if accepted as a principle of law by this court, lead to results completely contrary to the intent and spirit of the Securities and Exchange Act of 1934, supra. We would be holding in effect that, regardless of the amount of evidence revealing a scheme to defraud, the perpetrators of the scheme could not be made to reimburse a minority stockholder unless the manipulative plan was successful and carried to its completion after liquidation. The flaw in such a proposition is immediately apparent. The interest of the minority stockholder, which is protected by the Securities Exchange Act, is not at all affected by whether or not the fraudulent plan actually brings a profit to the defrauding shareholders after the corporation is wrongfully liquidated. If the plan to dissolve is fraudulent the damage to the minority stockholder occurs at liquidation, and Congress could not have intended the right of recovery to depend, as a matter of law, on what happens after that point. Assuming the majority stockholders devised a fraudulent plan and liquidated the corporation, there exist any number of reasons why they might choose not to follow through and take their intended profit after the minority shareholders have been deprived of the value of their stock. For example, the majority stockholders might suddenly fear discovery of the plan and legal prosecution; or changing market conditions could render the initial scheme unprofitable. But regardless of the reason, the defrauded stockholder has suffered a loss and it is clear that his right of recovery cannot be foreclosed by whatever action the perpetrators of the scheme do or do not take after liquidation. What we hold, then, is that while lack of profit is certainly an element for the trier of the fact to consider, the plaintiff stockholder’s proof is not insufficient, as a matter of law, simply because there is an absence in the evidence of any gain on the part of the individuals who are charged with engaging in the scheme to defraud.

II

Having established that plaintiff Coffee need not necessarily prove gain by the defrauding stockholders, the next question is whether the evidence presented at trial was sufficient to support the jury’s verdict under the standards announced in Boeing Company v. Shipman, 5 Cir., En Banc, 1969, 411 F.2d 365. In that case this court set up the test to be applied in considering the sufficiency of the evidence:

On motions for directed verdict and for judgment notwithstanding the verdict the Court should consider all of the evidence — not just that evidence which supports the non-mover’s case —but in the light and with all reasonable-inferences most favorable to the party opposed to the motion. If the facts and inferences point so strongly and overwhelmingly in favor of one party that the Court believes that reasonable men could not arrive at a contrary verdict, granting of the motion is proper. On the other hand, if there is substantial evidence opposed to the motions, that is, evidence of such quality and weight that reasonable and fair-minded men in the exercise of impartial judgment might reach different conclusions, the motions should be denied, and the case submitted to the jury. A mere scintilla of evidence is insufficient to present a question for the jury. The motions for directed verdict and judgment n. o. v. should not be decided by which side has the better of the case, nor should they be granted only when there is a complete absence of probative facts to support a jury verdict. There must be a conflict in substantial evidence to create a jury question. However, it is the function of the jury as the traditional finder of the facts, and not the Court, to weigh conflicting evidence and inferences, and determine the credibility of witnesses, 411 F.2d at 374, 375.

A review of the record on this appeal reveals ample, indeed overwhelming, evidence from which reasonable men might infer that the defendants engaged in a scheme to defraud Coffee of the value of his stock. Evidence was introduced which, taken in the light most favorable to the jury’s verdict, revealed the following: The Knight Company stock had a value at liquidation of approximately $20.00; the defendants concealed pertinent information about the company’s financial condition by changing certain debts from long-term to current liabilities; the liquidation was effected without the usual shareholders’ vote and opportunity for dissent and appraisal which the defendants knew was required under Texas state law; a loss incurred by a subsidiary controlled by defendants was secretly shifted to the Knight Company; the defendant Permian Corporation was at all pertinent times a major creditor of Knight Company and by the time of trial the only creditor; Permian Corporation purchased Knight Company debts at a discount; Permian’s parent corporation, Occidental, received a tax benefit as a result of the Knight Company liquidation.

The jury obviously believed, and not unreasonably so, that at the time of liquidation the defendants in their dual capacity as creditors and majority shareholders planned to force the minority stockholders out of the corporation without paying them the value of their stock. Although this plan was not completed, the defendants brought about the liquidation for their own personal gain, and as majority stockholders they were under a fiduciary duty to act in the best interest of the minority shareholders.

Therefore, in light of the evidence presented at this trial, and applying the standards enunciated in Boeing Company v. Shipman, supra, it was within the province of the jury to reach a conclusion in favor of the plaintiff.

Ill

Federal law is not clear concerning exemplary damages in 10b-5 lawsuits, but that need not trouble us here. By way of pendent justification a violation of state law is also present and it is well established that exemplary damages may be awarded if allowable under state law when a state law violation is joined with the 10b-5 complaint. Young v. Taylor, 10 Cir. 1972, 466 F.2d 1329. See also Herpich v. Wallace, 5 Cir. 1970, 430 F.2d 792.

After careful and thorough research there is no doubt that exemplary damages are allowed in Texas for a violation of this type where the jury finds they should be awarded. Hughes v. Halliday, 471 S.W.2d 88 (Tex.Civ.App. 1971), Collins v. Miller, 443 S.W.2d 298 (Tex.Civ.App.1969), V.A.T.S. Bus. & C. § 27.01 (formerly Article 4004 V.A. T.S.). We note that in this case the district court charged the jury as to exemplary damages in terms of fraud, breach of fiduciary duty, and the elements which must be present under Texas law to justify these exemplary damages. We feel that there was ample evidence before the jury for it to find both a violation of state law and that exemplary damages were proper for such violation.

Appellant Permian raises various other suggestions of error and insufficiency. We have carefully reviewed the trial record and find these assertions without merit. Therefore, the opinion of the district court is

Affirmed.

CLARK, Circuit Judge

(concurring in part and dissenting in part):

After the verdict in this case the judge who tried it observed that had he been the fact finder he would have reached a different result. My study of this record leaves me with the same impression. Therefore I cannot say that the evidence of fraud in this case in any way approached the “overwhelming” mark recorded by the majority opinion. Nevertheless, this study does convince me that the case was properly submitted to the jury to determine the basic issue of 10b-5 liability. I therefore concur in that portion of the result reached by the majority opinion which would affirm that action.

The majority held that “. . . majority stockholders . . . [have] a fiduciary duty to act in the best interest of the minority shareholders.” Such a rule overstates my conception of this legal duty. While a majority shareholder’s dealings with a corporation are subject to rigorous scrutiny for basic fairness, an inherently fair transaction should be upheld even though it not be in the best interest of the minority. For example, a majority shareholder should not be precluded from collecting a valid debt which the corporation owes to him, though it obviously would be in the minority’s best interest for him to fore-go collection.

I respectfully dissent from the award of exemplary damages. First, I do not believe that such an award can be upheld in this ease as a pendent Texas law claim. The record shows that the jury was charged only in terms of a 10b-5 cause of action. Since that is the case that was presented, I would hold it was the only case decided. Second, my view on pendent jurisdiction indicates that I must reach the question the majority pretermits — does I0b-5 allow the award of exemplary damages? This dissent is an inappropriate place for extended reasoning. Suffice it to say that I would generally follow the reasoning of the Second and Tenth Circuits in concluding that this provision will not support such an award. See deHass v. Empire Petroleum Co., 435 F.2d 223 (10th Cir. 1970); Green v. Wolf Corp., 406 F.2d 291 (2d Cir. 1968), cert. denied, 395 U.S. 977, 89 S.Ct. 2131, 23 L.Ed.2d 766 (1969).

      . Art. 5.10, Tex.Bus.Corp.Act, V.A.T.S.

      . Art. 5.11, Tex.Bus.Corp.Act.

      . Arts. 5.10-5.13, Tex.Bus.Corp.Act.


author: PER CURIAM:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Noah W. CROSS, Defendant-Appellant.
    Nos. 72-2290, 72-2349.
    United States Court of Appeals, Fifth Circuit.
    March 30, 1973.

      Norman Magee, Ferriday, La., for defendant-appellant.
    Donald E. Walter, U. S. Atty., R. Perry Pringle, Asst. U. S. Atty., Shreveport, La., for plaintiff-appellee.
    Before WISDOM, GEWIN and COLEMAN, Circuit Judges.
   PER CURIAM:

Noah Cross, Sheriff of Concordia Parish, Louisiana, was convicted on two counts of perjury. 18 U.S.C. § 1621. The basis for this conviction was his testimony before a federal grand jury that he had never received any payoff for allowing the Marville Lounge in Con-cordia to conduct prostitution and gambling activities.

On appeal Cross makes these contentions :

(1) A new trial should have been granted on the basis of new evidence discovered subsequent to the verdict of guilty.
(2) The court erred in refusing to challenge for cause prospective juror Milford W. Crumpler, who stated that he would give more credibility to an FBI agent than to any other witness.
(3) There was insufficient evidence ■ from two credible witnesses to deny Cross’ motion for directed verdict of acquittal at the close of the government’s case and motion for new trial at the close of the whole case.
(4) The Government knowingly used perjured testimony of J. D. Richardson and Truman E. Sanford in this case. Richardson, one of the operators of the lounge, testified that he had agreed to pay Cross $200 a week for protection. Sanford testified that he was with Richardson on two occasions when Richardson made payoffs to Cross.
(5) The trial court erred in permitting testimony describing the activities of the Marville Lounge.
(6) In the circumstances, the trial court improperly questioned a juror regarding an alleged contact by a deputy sheriff.

There is no merit to these contentions.

With respect to the fourth contention, we note that this was a perjury case; that Cross was not tried and convicted of violating the anti-racketeering statute, 18 U.S.C. § 1962, as was Richardson. The credibility of both Richardson and Sanford was challenged: their testimony before two previous grand juries was different from their testimony at Cross’ trial. Although credibility is a question for the jury to decide, the use of such witnesses in a trial for perjury suggests that the Court scrutinize the record for corroborative evidence. Here there was evidence in the record to corroborate Richardson’s and Sanford’s testimony and this evidence was sufficient to persuade the jury that indeed Cross was guilty as charged.

The judgment is affirmed.


text:
    UNITED STATES of America, Plaintiff-Appellee, v. James E. WILLIAMS, Defendant-Appellant.
    No 72-3119
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    March 2, 1973.
    E. Louis Adams, Albany, Ga., Court-appointed, for defendant-appellant.
    William J. Schloth, Macon, Ga., for plaintiff-appellee.
    Before WISDOM, AINSWORTH and CLARK, Circuit Judges.

       Rule 18, 5 Cir., Isbell Enterprises, Inc. v. Citizens Casualty Company of New York et al., 5 Cir. 1970, 431 F.2d 409, Part I.

   PER CURIAM:

James E. Williams was convicted of a violation of 18 U.S.C. § 371 under an indictment alleging a conspiracy (a) to defraud the United States Government by stealing, forging, and negotiating United States Treasury checks in violation of 18 U.S.C. § 495 and (b) to steal state welfare checks from the United States mails in violation of 18 U.S.C. § 1708. Williams contends on appeal that the government failed to prove either that the conspirators stole and forged Treasury checks or that the state welfare checks which were cashed were stolen from the mails.

To sustain a conviction under 18 U.S.C. § 371, the prosecution must demonstrate an unlawful agreement and at least one independent act in furtherance of the agreement. It need not show that the conspirators committed the substantive crime which is charged in the indictment as the object of the conspiracy. Yates v. United States, 354 U.S. 298, 334, 77 S.Ct. 1064, 1084, 1 L.Ed.2d 1356, 1384 (1957). Nor is it necessary to substantiate each of the overt acts alleged in the indictment. Bradford v. United States, 413 F.2d 467 (5th Cir. 1969).

Assuming arguendo that the evidence in the present case was insufficient to establish the specific violations of 18 U.S.C. § 495 and 18 U.S.C. § 1708 alleged in the indictment, it was amply sufficient to establish both the conspiracy alleged and numerous overt acts in furtherance of that unlawful agreement.

The appellant’s conviction is

Affirmed.


text:
    In the Matter of SUN OIL COMPANY, as owners of the M/T MAUMEE SUN, Petitioner-Appellee, v. Peter J. GOVOSTES et al., Claimants-Appellants.
    No. 484, Docket 72-1754.
    United States Court of Appeals, Second Circuit.
    Argued Feb. 27, 1973.
    Decided Feb. 27, 1973.
    Wilbur E. Dow, Jr., New York City, for claimants-appellants.
    Frank J. Maley, New York City (Men-des & Mount, and Wilbur H. Hecht, New York City, on the brief), for petitioner-appellee.
    Before KAUFMAN, ANDERSON and MANSFIELD, Circuit Judges.
   PER CURIAM:

One of the bases for the trial court’s decision in denying a salvage award to members of the crew of the American Pilot for services provided after her collision with the Maumee Sun, was the fact that the Pilot rendered no voluntary aid to the Sun, but was, instead, acting out of concern for her own safety. In Re Sun Oil Co., 342 F.Supp. 976 (S.D.N.Y.1972). This finding, although disputed by the appellants, was supported by substantial evidence.

The appellants further argue that a settlement between the owners of the two vessels for a salvage award of $4,000 to the owner of the Pilot is dis-positive on the liability question. There is no merit in this contention. Settlements are not to be used to establish liability against a party in other suits arising out of the same occurrence, Seaboard Shipping Corp. v. Jocharanne Tugboat Corp., 461 F.2d 500, 505 (2 Cir. 1972); Hawthorne v. Eckerson Co., 77 F.2d 844, 847 (2 Cir. 1935).

Because the finding and conclusion of the district court that there was no voluntary aid were sufficient to support the judgment, it is unnecessary to consider the question of whether or not the Stand By Act, 33 U.S.C. § 367 also would preclude recovery on the part of the crew.

The judgment is affirmed.


text:
    UNITED STATES of America, Plaintiff-Appellee, v. Jay HERRERA, Defendant-Appellant.
    No. 73-1321.
    United States Court of Appeals, Fifth Circuit.
    Feb. 28, 1973.
    Rehearing Denied April 3, 1973.
    Jay Herrera, pro se.
    •Anthony J. P. Farris, U. S. Atty., Houston, Tex., for plaintiff-appellee.
    Before GEWIN, COLEMAN and MORGAN, Circuit Judges.
   PER CURIAM:

The United States moves to have the appeal dismissed pursuant to Local Rule 20. We grant the motion and dismiss the appeal.

Appellant filed a motion in the district court seeking to obtain a copy of his trial transcript in order to examine it to prepare an attack on his conviction collaterally. The district court denied the motion on grounds that the transcript is not available for a “fishing expedition.” This appeal followed.

This Court has consistently held that a federal prisoner is not entitled to obtain copies of court records at the government’s expense to search for possible defects merely because he is an indigent. Cowan v. United States, 5th Cir. 1971, 445 F.2d 855; Brown v. United States, 5th Cir. 1971, 438 F.2d 1385; Bennett v. United States, 5th Cir. 1971, 437 F.2d 1210; Skinner v. United States, 5th Cir. 1970, 434 F.2d 1036. Therefore, the appeal is hereby dismissed.

Appeal dismissed

      . If upon the hearing of any interlocutory motion or as a result of a review under Rule 17, it shall appear to the court that the appeal is frivolous and entirely without merit, the appeal will be dismissed without the notice contemplated in Rule 18. See Nevels v. McCall, 5th Cir. 1969, 407 F.2d 390, and United States v. Minor, 5th Cir. 1971, 444 F.2d 521.

      . It is appropriate to dispose of this case summarily. See Groendyke Transport, Inc. v. Davis, 5th Cir. 1969, 406 F.2d 1158.


text:
    HOOVER, INC., Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
    No. 72-1775.
    United States Court of Appeals, Sixth Circuit.
    Argued Feb. 9, 1973.
    Decided Feb. 27, 1973.
    James Clarence Evans, Charles Carter Baker, Jr., Nashville, Tenn., for petitioner-appellant.
    Scott P. Crampton, Asst. Atty. Gen., Tax Div., Lee H. Henkel, Jr., I. R. S., Richard Farber, Washington, D. C., for respondent-appellee.
    Before PECK and KENT, Circuit Judges, and YOUNG, District Judge.

       Honorable Don J. Young, United States District Judge for the Northern District of Ohio, sitting by designation.

   ORDER

This is an appeal from the Tax Court’s holding that the appellant in substance acted merely as a conduit by which its controlling shareholder, as guarantor of a loan, paid the debt owed by John L. Burns, Inc. to a bank, and, therefore, the appellant taxpayer was not entitled to any deduction arising out of the transaction. Clearly, our review of tax court decisions is the same as the standard applied in the review of District Court decisions. Kunz v. C. I. R., 333 F.2d 556 (6th Cir. 1964). In its opinion (T.C. Memo. 1972-54), the Tax Court stated:

“Also, petitioner and Hot Mix, both wholly owned by Hoover, were guarantors of this debt [the debt which gave rise to the claimed deductions].”

To this extent the Tax Court’s opinion is clearly erroneous. It appears affirmatively that the petitioner-appellant was not a guarantor of the debt in question. In all other respects we conclude that we cannot find the Tax Court’s findings of fact to be clearly erroneous. The law was properly applied.

Now, therefore, it is ordered that the decision of the Tax Court be and it is hereby affirmed.


text:
    Robert Benjamin HAYNIE, Petitioner-Appellant, v. UNITED STATES of America, Respondent-Appellee.
    No. 72-3527
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    March 2, 1973.
    Robert Haynie, pro se.
    John L. Briggs, U. S. Atty., Harvey E. Schlesinger, Asst. U. S. Atty., Jacksonville, Fla., for respondent-appellee.
    Before BELL, GODBOLD and IN-GRAHAM, Circuit Judges.

       Rule 18, 5 Cir., Isbell Enterprises, Inc. v. Citizens Casualty Company of New York et al., 5 Cir., 1970, 431 F.2d 409, Part I.

   PER CURIAM:

Appellant pleaded guilty to an indictment and to informations which charged him in a total of seven counts with multiple violations of 18 U.S.C.A. § 2314 (interstate transportation of falsely made and forged securities). He was sentenced to five years on each of the seven counts with the sentences to run concurrently. He could have received a maximum sentence of seventy years.

This appeal is from the denial of a motion to vacate the sentences. Appellant alleged that the district court had sentenced him in reliance upon a pre-sentencing report that contained a record of three constitutionally infirm prior state convictions. He urged that in light of these alleged infirmities, he was entitled to be resentenced under the holding of United States v. Tucker, 404 U.S. 443, 92 S.Ct. 589, 30 L.Ed.2d 592 (1972). The district court denied relief summarily. We vacate and remand for further proceedings.

The claim alleged fits well within the teaching of United States v. Tucker, supra, as construed by this court in Lipscomb v. Clark, 5 Cir., 1972, 468 F.2d 1321 [1972]; and as extended to non-maximum sentence cases in Russo v. United States, 5 Cir., 1972, 470 F.2d 1357 [1972]. The district court did not have the benefit of these decisions at the time judgment was entered. The case must be reconsidered on remand in light of these decisions and handled pursuant to the procedure outlined in Lipscomb v. Clark.

Vacated and remanded with direction.


author:
COLEMAN, Circuit Judge:
      WISDOM, Circuit Judge PER CURIAM: WISDOM, Circuit Judge,

text:
    Erma W. HINES, Plaintiff-Appellant, v. CENLA COMMUNITY ACTION COMMITTEE, INC., Defendant-Appellee.
    No. 72-1845.
    United States Court of Appeals, Fifth Circuit.
    Feb. 6, 1973.
    Rehearing En Bane Denied April 10, 1973.
    Wisdom, Circuit Judge, filed dissenting opinion and dissented from the denial of rehearing.

      Chris J. Roy, Alexandria, La., for plaintiff-appellant.
    Louis Berry, Daniel E. Broussard, Jr., Alexandria, La., for defendant-appellee.
    Before WISDOM, BELL and COLEMAN, Circuit Judges.
   COLEMAN, Circuit Judge:

The plaintiff, Erma W. Hines, Executive Director of the Cenia Community Action Committee, Inc. (hereinafter called CCAC), was dismissed from her employment by a 14-13 vote of the Board of Directors of CCAC which occurred on February 28, 1972. CCAC was organized as a community action agency to combat poverty in Rapides Parish, Louisiana, under Section 210 of the Economic Opportunity Act of 1964, Title 42, U.S.C. § 2790 et seq. CCAC was incorporated under Louisiana law as a private nonprofit corporation.

The plaintiff appealed her dismissal concurrently to the Regional Counsel of Region VI of the Office of Economic Opportunity, to the Board of the Personnel Committee of CCAC, to the Coordinator of Urban Development of Region VI, and to the Administrative Committee of CCAC. In her letter of appeal, the plaintiff claimed her termination was “null and void ab initio”, since she was entitled as an employee of CCAC to an administrative appeal under the Personnel Policies Manual of CCAC as well as under Region Vi’s Guide to Grantee Personnel Management. Mrs. Hines claimed that under these provisions, she was required to be given (1) one month’s time to bring her job performance up to the proper standards, (2) corrective counseling, (3) written charges, and (4) an opportunity for a hearing.

Henry C. Gillian, Deputy Director for Region VI of the Office of Economic Opportunity, replied in writing that the appeal procedures cited by the plaintiff did not apply to the executive director, since the executive director is “directly answerable to the board, and the board has the power to hire and fire [him], and there is no higher authority than the board to whom the director can appeal.”

The plaintiff then filed suit in the United States District Court for the Western District of Louisiana. The amended complaint asserted jurisdiction under 28 U.S.C.A. § 1331. It was charged that plaintiff had been “arbitrarily, capriciously, and without cause dismissed and/or terminated from her position.” The plaintiff also stated that because she had no written notice of unsatisfactory work and no opportunity to appeal any adverse action taken against her she had been denied “due process of law” under § 2796(a) of the Economic Opportunity Act.

Further, the plaintiff sought to enjoin CCAC from advertising for a new director and employing a new director until the rights, of the petitioner had been fully determined.

The defendant, CCAC, filed a motion to dismiss in' that (1) the complaint failed to state a claim against the defendant upon which relief could be granted; (2) the service of process was improper; and (3) the court lacked federal question jurisdiction because the case did not arise under the Constitution, laws, statutes, and treaties of the United States, nor did it involve citizens of diverse states.

The District Court granted the motion to dismiss for lack of jurisdiction over the subject matter. It did not pass on the other reasons assigned for dismissal. The stated reasons for the dismissal were that:

1. The mere fact that a claim had its origin in federal law did not necessarily confer jurisdiction upon the federal courts;
2. The statute upon which the plaintiff relies, 42 U.S.C. § 2796(a), did not actually constitute a grant of the right which she sought to enforce, i. e. nothing in the Act indicated that it accorded anyone any rights with regard to employment;
3. Plaintiff alleged no facts to indicate that she was discharged as retribution for her exercising any constitutionally protected rights; and
4. The mere fact that a corporation had been set up to receive and to dispense federal funds did not make it a public entity nor did it make the plaintiff a public employee.

We affirm the judgment of the District Court.

The Law

The plaintiff contends that general federal question jurisdiction exists under 28 U.S.C. § 1331(a) because her claim “arises under” either a federal statute or under the Constitution of the United States.

A. Jurisdiction Arising Under a Federal Statute.

Plaintiff asserts two bases for federal question jurisdiction as arising under a federal statute.

First, it is argued that the construction of a federal statute, 42 U.S.C. § 2796, is involved; that 42 U.S.C. § 2796 gave plaintiff certain rights as an employee of the Office of Economic Opportunity because that section ordered the Director of the Office of Economic Opportunity to prescribe rules regarding personnel policies. Plaintiff asserts that CCAC’s “Personnel Policies Manual” and Region Vi’s “Personnel Guide” were created in direct compliance with the “federal command found in 42 U.S. C. § 2796,” hence whether 42 U.S.C. § 2796 requires the formulation of personnel rules involves the construction of a federal statute. Plaintiff argues that federal jurisdiction exists, based on Gully v. First National Bank, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70 (1936), because her claim will be supported if the federal statute is given one construction and defeated if it receives another.

Second, plaintiff states that she is a beneficiary of the Economic Opportunity Act under the rationale of the decisions in Gomez v. Board of State Employment Services, 5 Cir., 1969, 417 F.2d 569; Cook v. Ochsner Foundation Hospital, 319 F.Supp. 603 (E.D.La.1970); and Euresti v. Stenner, 10 Cir., 1972, 458 F.2d 1115.

The plaintiff asserts that as a beneficiary of the Economic Opportunity Act, she could sue a local community action agency in federal court for its failure to accord to her rights provided in the Economic Opportunity Act.

1. Construction of a Federal Statute

A suit to enforce a right which takes its origin in the laws of the United States is not necessarily, or for that reason alone, one arising under those laws, for a suit does not so arise unless it really and substantially involves a dispute or controversy respecting the validity, construction, or effect of such a law, upon the determination of which the result depends.

Shulthis v. McDougal, 225 U.S. 561, 569, 32 S.Ct. 704, 706, 56 L.Ed. 1205. See also Annot.: 12 A.L.R.2d 5, 20 (1950).

This rule of Shulthis v. Mc-Dougal has as its basic premise the idea that the “[federal] right to be established is decisive (emphasis added) [and] not the source of the authority to establish it.” Puerto Rico v. Russel & Co., 288 U.S. 476, 483, 53 S.Ct. 447, 449, 77 L.Ed. 903 (1933). In the present case, plaintiff’s right to employment by a private corporation is not based on a federal statute. “Federal jurisdiction may be invoked to vindicate a right or privilege claimed under a federal statute, [but] [i]t may not be invoked where the right asserted is nonfederal, merely because the plaintiff’s right to sue is derived from federal law.” Id. The plaintiff’s claim must be founded directly upon federal law. Gully v. First National Bank in Meridian, 299 U.S. 109, 112, 57 S.Ct. 96, 97, 81 L.Ed. 70 (1936); Bell v. Hood, 327 U.S. 678, 681, 66 S.Ct. 773, 775, 90 L.Ed. 939 (1946) and Johnston v. Byrd, 5 Cir., 1965, 354 F.2d 982, 984. In short, the statute which the plaintiff seeks to invoke creates no explicit right of action to enforce her right to employment by CCAC. See T. B. Harms Co. v. Eliscu, 2 Cir., 1964, 339 F.2d 823, 827.

We do not agree that we have here a federal statute which requires construction. A case arises under federal law if rights claimed by one party may be defeated by one construction of the statute and sustained by opposite construction, Gully v. First National Bank of Meridian, supra, 299 U.S. at 112, 57 S.Ct. 96. Construction of a statute so as to sustain federal jurisdiction does not mean that the “case will necessarily turn upon an interpretation of the statute, but simply that the complaint must set forth a cause of action of which federal law is an essential ingredient, and which may, therefore, properly involve a construction of that law.” McGoon v. Northern Pacific Railway Co., 204 F. 998, 1001 (D.C.N.D.1913). See also International Ass’n of Machinists v. Central Airlines, Inc., 5 Cir., 1961, 295 F.2d 209, 218 n. 23. The Economic Opportunity Act was not an ingredient of the plaintiff’s claim; for the Act provided simply the impetus for the contract upon which the suit was brought. See Gully v. First National Bank in Meridian, supra, 299 U.S. at 114, 57 S.Ct. 96; Chaskin v. Thompson, 9 Cir., 1944, 143 F.2d 566 and eases cited therein; and Toledo, P. & W. RR v. Brotherhood of Railway Trainmen, 7 Cir., 1942, 132 F.2d 265, 268. Quite clearly, this case involves only private contractual rights. When a controversy between the parties may be decided under local law without the necessity of interpreting a federal statute, there is no federal jurisdiction. Cabana Management, Inc. v. Hyatt Corp., 5 Cir., 1971, 441 F.2d 862, 864.

2. Beneficiary Theory under Rationale of Gomez v. Board of State Employment Services

In Gomez v. Florida State Employment Services, supra, the Court said that the plaintiffs could “obtain relief through the Federal Court only if damage was done to a federal right that the Federal Courts are empowered to protect.” Gomez v. Florida State Employment Service, supra, 417 F.2d at 575. The Court went on to say:

The existence of the federal right . turns on whether the Wagner-Peyser Act, 29 U.S.C.A. § 49 et seq., and the regulations of the Secretary of Labor promulgated pursuant to the Act bestow rights that the workers may assert, and if so, whether the Wagner-Peyser Act and the regulations created a federal remedy
We start with the proposition that there can be no doubt that the regulations of the Secretary of Labor were intended to protect the interest of the workers .
A civil remedy may be given to those protected by statutes or regulations by implication.

In the present case the Economic Opportunity Act does not give the plaintiff a contract right for an alleged breach of an employment contract. Nor do we think that a contractual remedy can be implied or inferred from the Act since employees of these community action agencies were not the intended beneficiaries of the Act. The beneficiaries of the Act are poverty stricken individuals and families. The basic purpose of community action agencies is stated in 42 U.S.C. § 2781.

Employees of community action agencies are not mentioned as beneficiaries of the Act in this Congressional statement of purpose. See Euresti v. Sten-ner, supra, 458 F.2d at 1118.

B. Jurisdiction under Constitution of the United States

Plaintiff contends that she had been “denied due process of law guaranteed her by the Fifth and Fourteenth Amendments of the Federal Constitution, when a grantee agency of the Office of Economic Opportunity deprived her of her position as a permanent employee without notice and a hearing.”

1. Jurisdiction Based on the Fifth Amendment

CCAC did not become a public corporation merely because it received federal funds. Mitchell v. Boys Club of Metropolitan Police, D.C., 157 F.Supp. 101, 107 (D.C.D.C.1957). The distinction between a public corporation and a private corporation that has a charitable purpose was made in the case of the Trustees of Dartmouth College v. Woodward in the concurring opinion of Justice Story:

“When, then, the argument assumes, that because the charity is public, the corporation is public, it manifestly confounds the popular, with the strictly legal, sense of the terms * * * When the corporation is said, at the bar, to be public, it is not merely meant that the whole community may be the proper objects of the bounty, but that the government have the sole right, as trustee of the public interest, to regulate, control and direct the corporation, and its funds and its franchises, at its own will and pleasure. Now such an authority does not exist in the government, except where the corporation, is in the strictest sense, public; that is, where its whole interests and franchises are the exclusive property and domain of the government itself.”

17 U.S. (4 Wheat.) 518, 636, 4 L.Ed. 629 (1819).

The Office of Economic Opportunity did not control the activities of CCAC so as to make CCAC a public corporation. See 42 U.S.C. § 2790(a)(2) and (b). We reached this same conclusion in Robles v. El Paso Community Action Agency, Project Bravo, Inc., 5 Cir., 1972, 456 F.2d 189, where we said;

As a community action agency, the El Paso Community Action Agency Project Bravo, Inc., receives federal assistance by grant from the Office of Economic Opportunity to carry out a community action program pursuant to the provisions of the Economic Opportunity Act of 1964, Title 42, U.S.C. § 2790 et seq. It receives at the same time funds from county agencies, local merchants, private citizens, school districts, and the City of El Paso. Once federal funds are granted for the purposes of such program, the El Paso Community Action Agency Project Bravo, Inc., is required to carry out its program in accordance with the terms of the federal funds grant and the general and special conditions that may be laid down as the terms on which federal funds will be made available. These terms and conditions include requirements that funds be spent only for purposes specified in the approved application, requirements for accountability by means of internal fiscal controls, regular financial reports, and independent audits, and assurances against . . . discriminatory treatment of beneficiaries on grounds of race or color.
Such terms and conditions do not give the Office of Economic Opportunity the right to direct the manner of carrying out the approved program, nor do they give the Office of Economic Opportunity the right to select or discharge Project Bravo employees.

Robles v. El Paso Community Action Agency, Project Bravo, Inc., supra at 190-191.

Since CCAC was not a public corporation controlled by the federal government, the plaintiff could not be a federal employee. Therefore, CCAC as a private employer had complete freedom of action and was not bound by the due process clause of the Fifth Amendment. See Cafeteria and Restaurant Workers Union v. McElroy, 367 U.S. 886, 897, 81 S.Ct. 1743, 6 L.Ed.2d 1230 (1961).

2. Jurisdiction Based on the Fourteenth Amendment

[T]he right to work for a living in the common occupations of the community is of the very essence of the personal freedom and opportunity that it was the purpose of the [Fourteenth] Amendment to secure,

Truax v. Raich, 239 U.S. 33, 41, 36 S.Ct. 7, 10, 60 L.Ed. 131 (1915). See also Meyer v. Nebraska, 262 U.S. 390, 399, 43 S.Ct. 625, 626, 67 L.Ed. 1042 (1923).

This right applies only to jobs held in public employment. See Perry v. Sin-derman, 408 U.S. 593, 597, 92 S.Ct. 2694, 2697, 33 L.Ed.2d 570 (1972) and especially see the concurring opinion of Burger, C. J., in Perry v. Sinderman, supra at 603, 92 S.Ct. 2694.

Since the plaintiff in the present case was not employed by the state and .there was no state involvement in her employment, procedural safeguards guaranteed by the Fourteenth Amendment did not apply to her private contractual employment. See Burton v. Wilmington Parking Authority, 365 U.S. 715, 722, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961).

The judgment of the District Court is affirmed.

WISDOM, Circuit Judge

(dissenting):

I respectfully dissent.

On the face of the complaint a federal question is present within the ambit of 28 U.S.C. § 1331. The district court had subject matter jurisdiction. Whether the complaint stated a cause of action is a different question. Whether, on the merits, the plaintiff is entitled to relief under the provisions of 28 U.S.C. § 2796(a) is a different question. The majority fuses these three questions into one. The result is to submerge the federal jurisdiction issue. See Gully v. First National Bank, 1936, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 72; Bell v. Hood, 1946, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939. And see Gomez v. First National Bank, 5 Cir. 1969, 417 F.2d 569.

Cenia Community Action Committee, Inc., domiciled in Rapides Parish, enjoys the domestic benefits of a Louisiana charter. But it is not a private, unfettered corporation in any real sense. Cenia owes its birth and continued existence to the beneficence of the United States government. In return, it is subject to the control of the federal government through the Office of Economic Opportunity under 42 U.S.C. § 2781 et seq.

As appears from the complaint, Cenia was organized for the purpose of qualifying as a grantee community action agency of the OEO under 42 U.S.C. § 2781. Congress adopted the Equal Opportunity Act to combat poverty, to create jobs, to disburse money for the reduction or elimination of poverty, all on a national scale. To insure federal supervision and uniformity, OEO divided the country into regions and adopted guidelines. Cenia, for example, is directly responsible to Region VI of OEO in Dallas, Texas. It must comply with the guidelines and policies formulated by Region VI in Dallas. In the event of any conflict between the policies and practices of Cenia with those of Region VI or federal legislation (as interpreted by OEO), Cenia must yield. In accordance with OEO Guidance VI 6900-1, “ Guide to Grantee Personnel Management,” Cenia promulgated a “Personnel Policies Manual” incorporating to a great extent provisions of OEO Regulations. This manual provides explicit safeguards for disciplinary action against an employee and also an appellate administrative review by Region VI in Dallas. The plaintiff, Mrs. Hines, attempted to appeal her dismissal as Executive Director of Cenia by a letter to the Regional Counsel in Dallas. The Deputy Regional Counsel replied, not stating that Region VI had no jurisdiction over Cenia but stating that:

Where the director himself is terminated, that action is by the board itself, which has the power to do so, and there is no place from there to appeal. We do not interfere with an agency’s personnel policies, even though the Regional Office reserves the right to approve all CAA personnel policies. As a practical matter, the CAP appeal procedures simply would not apply to the director because of the above reasons.

Mrs. Hines contends that under 28 U.S. C. § 2796(a) and the interpretation placed by Region VI in its Guide to Grantee Personnel Management, as well as by Cenla’s own Manual, she is entitled to all the protection of any employee. She asserts, therefore, that she was denied due process as well as the rights accorded her under the Economic Opportunity Act and all the OEO regulations under that Act.

All of this appears on the face of the complaint. There is far more federal involvement here than there is in a parking garage or a Hill-Burton hospital. See Burton v. Wilmington Parking Authority, 1961, 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45; Simkins v. Cone Mem. Hosp., 4 Cir. 1963, 323 F.2d 959. Moreover, ours is a Court which puts substance above form, facts above needless fictions, and national interest above all.

Congress provided $811,300,000 for community action agencies similar to Cenia. Congress does not give away that kind of money without strings. Here there are federal statutes, rules, regulations, agency policies, and practices — so many federal strings that it is both naive and obdurately parochial for the Court to conclude that Cenia was a purely private corporation and that no federal law was involved. Justice cannot be done in this case without construing the Equal Opportunity Act and the federal regulations under it which control the policies and practices of the grantee community action agencies. The only thing that is not federal in this case was the charter. At issue is a federal question for the district court to recognize and decide.

PER CURIAM:

A member of the Court in active service having requested a poll on the reconsideration of this cause en banc, and a majority of the judges in active service not having voted in favor of it, rehearing en banc is denied.

WISDOM, Circuit Judge,

dissenting:

I dissent from the Court’s denial of a rehearing for the reasons stated in my dissent to the original opinion of the panel.

      . The plaintiff admits that her dismissal was not racially motivated. Plaintiff does not allege that this court had jurisdiction under 28 U.S.C. § 1343.

      . 28 U.S.C. § 1331(a) states:
      The district courts shall have original jurisdiction of all civil actions wherein the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs, and arises under the Constitution, laws, or treaties of the United States.

      . 42 U.S.C. § 2796 states:
      (a) Each community action agency shall observe, and shall (as appropriate) require or encourage other agencies participating in a community action program to observe, standards of organization, management and administration which will assure, so far as reasonably possible, that all program activities are conducted in a manner consistent with the purposes of this subchapter and the objective of providing assistance effectively, efficiently, and free of any taint of partisan political bias or personal or family favoritism. Each community action agency shall establish or adopt rules to carry out this section, which shall include rules to assure full staff accountability in matters governed by law, regulations, or agency policy. Each community action agency shall also provide for reasonable public access to information, including but not limited to public hearings at the request of appropriate community groups and reasonable public access to books and records of the agency or other agencies engaged in program activities or operations involving the use of authority or funds for which it is responsible. And each community action agency shall adopt for itself and other agencies using funds or exercising authority for which it is responsible, rules designed to establish specific standards governing salaries, salary increases, travel and per diem allowances, and other employee benefits; to assure that only persons capable of discharging their duties with competence and integrity are employed and that employees are promoted or advanced under impartial procedures calculated to improve agency performance and effectiveness; to guard against personal or financial conflicts of interest; and to define employee duties of advocacy on behalf of the poor in an appropriate manner which will in any case preclude employees from participating, in connection with the performance of their duties, in any form of picketing, protest, or other direct action which is in violation of law.
      (b) The Director shall prescribe rules or regulations to supplement subsection (a) of this section, which shall be binding on all agencies carrying on community action program activities with financial assistance under this subchapter. He may, where appropriate, establish special or simplified requirements for smaller agencies or agencies operating in rural areas. These special requirements shall not, however, affect the applicability of rules governing conflicts of interest, use of position or authority for partisan or nonpartisan political purposes or participation in direct action, regardless of customary practices or rules among agencies in the community. The Director shall consult with tlie heads of other Federal agencies responsible for programs providing assistance to activities which may be included in community action programs for the purpose of securing maximum consistency between rules or regulations prescribed or followed by those agencies and those prescribed under this section.

      . See infra our discussion of whether OOAC was a private corporation.

      . No questions arise in this case that would require federal courts to apply a uniform rule of federal common law. See Ivy Broadcasting Co. v. American Tel. & Tel. Co., 2 Cir., 1968, 391 F.2d 486, 491.

      . 42 U.S.C. § 2781 states:
      Congressional statement of purpose
      (a) This subchapter provides for community action agencies and programs, prescribes the structure and describes the functions of community action agencies and authorizes financial assistance to community action programs and related projects and activities. Its basic purpose is to stimulate a better focusing of all available local, State, private, and Federal resources upon the goal of enabling low-income families, and low-income individuals of all ages, in rural and urban areas, to attain the skills, knowledge, and motivations and secure the opportunities needed for them to become fully self-sufficient. Its specific purposes are to promote, as methods of achieving a better focusing of resources on the goal of individual and and family self-sufficiency—
      (1) the strengthening of community capabilities for planning and coordinating Federal, State, and other assistance related to the elimination of poverty, so that this assistance, through the efforts of local officials, organizations, and interested and affected citizens, can be made more responsive to local needs and conditions;
      (2) the better organization of a range of services related to the needs of the poor, so that these services may be made more effective and efficient in helping families and individuals to overcome particular problems in a way that takes account of, and supports their progress in overcoming, related problems;
      (3) the greater use, subject to adequate evaluation, of new types of services and innovative approaches in attacking causes of poverty, so as to develop increasingly effective methods of employing available resources;
      (4) the development and implementation of all programs and projects designed to serve the poor or low-income areas with the maximum feasible participation of residents of the areas and members of the groups served, so as to best stimulate and take full advantage of capabilities for self-advancement and assure that those programs and projects are otherwise meaningful to and widely utilized by their intended beneficiaries; and (5) the broadening of the resources base of programs directed to the elimination of poverty, so as to secure, in addition to the services an assistance of public officials, private religious, charitable, and neighborhood organizations, and individual citizens, a more active role for business, labor, and professional groups able to provide employment opportunities or otherwise influence the quantity and quality of services of concern to the poor.
      (b) It is further declared to be the purpose of this subchapter and the policy of the Office of Economic Opportunity to provide for basic education, health care, vocational training, and employment opportunities in rural America to enable the poor living in rural areas to remain in such areas and become self-sufficient therein. It shall not be the purpose of this subchapter or the policy of the Office of Economic Opportunity to encourage the rural poor to migrate to urban areas, inasmuch as it is the finding of Congress that continuation of such migration is frequently not in the best interests of the poor and tends to further congest the already overcrowed slums and ghettos of our Nation’s cities.

      . See the discussion of the “right” and not the “privilege” to public employment in Board of Regents v. Roth, 408 U.S. 564, 571 n. 9, 92 S.Ct. 2701, 33 L.Ed.2d 548.


text:
    LAKE CITY STEVEDORES, INC., Plaintiff-Appellee-Cross Appellant, v. EAST WEST SHIPPING AGENCIES, INC., Defendant-Appellant-Cross Appellee.
    No. 72-1366.
    United States Court of Appeals, Fifth Circuit.
    March 5, 1973.

      Brunswick G. Deutsch, New Orleans, La., Donald F. Mooney, New York City, for plaintiff-appellee-cross-appellant.
    E. F. Barnett, Lake Charles, La., for defendant-appellant-cross-appellee.
    Before RIVES, WISDOM and RO-NEY, Circuit Judges.
   WISDOM, Circuit Judge:

In this case a stevedoring company seeks to recover from a subagent of a ship-charterer the value of services rendered to the ship. The district court held that although the defendant acted as an agent for a disclosed principal it bound itself for fifty percent of the stevedoring charges. We reverse on this issue.

I.

The plaintiff-appellee in this case, Lake City Stevedores, Inc. is engaged in the business of providing stevedoring services and acting as agent for ships in Lake Charles, Louisiana. The defend- ' ant-appellant, East West Shipping Agencies, Inc., is a New York Corporation in the business of furnishing various services to ship owners, operators, and others involved in the carriage of goods by sea. The present dispute arises from a contract negotiated by East West for its principal, Merchants Maritime Agency, Inc., for Lake City to provide services to the S.S. LA GRANDE ABETO while in the Port of Lake Charles between January 29, 1970, and February 4, 1970. Merchants Maritime, Inc. was, in turn, general agent for Phoenix Maritime Co., Ltd., the time-chartered owners of the vessel.

In November 1969 Merchants Maritime, as general agent for the vessel LA GRAND ABETO, appointed East West Shipping Agencies, Inc., as subagent for the United States East and Gulf Coast ports. On January 15, 1970, the operations vice-president of East West, A. F. Elia, called the general manager of Lake City, M. C. Hall, to ask whether Lake City would act as agent and stevedore for the ship while it docked in the Port of Lake Charles, and if so what its charges would be. The information requested by East West was provided by Lake City in a letter of the same day. Later conversations occurred and East West verbally appointed Lake City as agent and stevedores on January 20, 1970. Initially, Lake City requested a .deposit of 60 percent of the estimated expenses, but after negotiations agreed to accept 50 percent. East West informed Merchants Maritime of that condition and was given permission to agree to that term. Merchants Maritime advised East West that, as was the usual procedure, a cheek for the estimated deposit would be forewarded immediately.

By letter of January 21, 1970, East West confirmed the verbal appointment of Lake City and agreed to send 50 percent of the stevedoring costs involved with the balance of funds to be paid upon receipt of all stevedoring invoices. Attached to that letter was a copy of the charter party which revealed that Merchants Maritime Agency, Inc., was the agent for Phoenix Maritime Co., Ltd., the time-chartered owners.

When the vessel arrived at Lake Charles on January 29, 1970, the steve-doring advance had not yet been paid, Lake City provided services to the ship from January 29, 1970, to February 4, 1970. The stevedores loaded the ship with 4500 long tons of rice destined for DaNang, South Vietnam. During that period frequent calls were made between Lake City and East West concerning the overdue advance. Finally, the ship sailed without any payment having been made to Lake City. For security, Lake City refused to release the bills of lading until a guarantee of payment would be made. On March 11, 1970, East West quoted to Lake City a message which had been sent by Merchants Maritime the previous day. On March 10, 1970, Merchants Maritime had stated in a letter to East West: “This is to confirm that stevedore’s expenses will be paid out of the captioned vessel’s freight.” In addition to forwarding the guarantee of Merchants Maritime, East West requested Lake City to: “Please confirm your agreement to the above in order to resolve the situation. . . .” That same day Lake City acknowledged receipt of the East West message which quoted the “telex received from Merchants Maritime Agency, Inc., relative payment guaranteed of total disbursements. . . .” Lake City immediately released the bills of lading to East West. East West then forwarded them to Merchants Maritime. Though presumably Merchants Maritime received payment for the freight, neither Lake City nor East West was paid.

The plaintiff commenced this suit on August 18, 1970, contending that East West had bound itself to pay the value of the services rendered to the ship which amounted to $38,801.73. The district court concluded that East West was an agent for a disclosed principal and therefore was not bound as a principal for the full value of the services. Though East West was only an agent, the court concluded, it bound itself personally for 50 percent of the stevedoring charges by agreeing in its letter of January 21, 1970, to forward that amount to Lake City. The stevedoring charges were $34,458.41. Judgment therefore was rendered in favor of Lake City for $17,229.21.

II.

At the outset we consider that portion of the district court’s opinion holding that East West was not a principal to the contract, and we affirm that conclusion. The copy of the charter party, attached to the letter of January 21, 1970, clearly revealed in its first paragraph that Merchants Maritime was the general agent for the time-chartered owners. The charter party further stated in clause 17 that “loading expenses are for the vessel’s account.” Moreover, on January 29, the day the ship arrived in port, East West telexed Lake City requesting information as to the status of the ship. East West stated: “Owners pressing this info.” This acknowledgement by East West, before the commencement of work by Lake City clearly informed Lake City that East West was acting for another. Though Lake City disputes that it was aware of the agency relationship at that time, it is uncontested that it was aware of the agency relationship before it released its ultimate security, the bills of lading. The district court concluded that Lake City actually became aware of the agency relationship as early as during the loading process before Lake City had completed performance. For these reasons we conclude that the district court correctly decided that both parties were aware that East West was an agent acting within the scope of its authority. Thus, East West was not a principal to the contract.

III.

Though the district court held that East West was not a principal, it held that East West had become personally responsible for 50 percent of the steve-doring charges and that this responsibility arose from East West’s letter of January 21, 1970, in which it was stated: “As arranged we will forward a check for approximately 50% of the stevedor-ing costs involved and balance of funds will be paid upon receipt of agency proforma and all invoices on stevedoring.”

One who acts in the capacity of an agent for a disclosed principal is not liable for claims arising out of a contract executed by the agent on behalf of his principal. Strachan Shipping Co. v. Alexander Eccles & Co., 5 Cir. 1928, 25 F.2d 361; Valkenburg, K.-G. v. The S.S. Henry Denny, 7 Cir. 1961, 295 F.2d 330; E.I. Dupont de Nemours & Co. v. Barge Carriers, 1944, D.Fla., 55 F.Supp. 728; Restatement of Agency 2d, §§ 320, 328 (1958); 2 Williston On Contracts, § 288 (1959). An agent may however bind himself if he conducts himself in such a way as to indicate an intent to be bound. Whitney v. Wyman, 1880, 101 U.S. 392, 25 L.Ed. 1050; Castor v. Coppock, 8 Cir. 1954, 211 F.2d 136; See United States Shipping Board Merchant Fleet Corp. v. Harwood, 1929, 281 U.S. 519, 50 S.Ct. 372, 74 L.Ed. 1011. In the absence of an unambiguous contract, all relevant extrinsic evidence may be ,considered in determining whether an agent has sufficiently indicated an intent to become personally bound. Strachan Shipping Co. v. Alexander Eccles & Co., 5 Cir. 1928, 25 F.2d 361; Restatement of Agency 2d, § 323 (1958). Here, weighing all verbal and written communication, we conclude that East West did not express an intent to be personally bound for payment of 50 percent of the stevedoring charges.

The letter by East West of January 21 did not unequivocally state that East West intended to be bound personally; rather, its words “as arranged” referred to discussions in prior telephone conversations. The testimony is in conflict as to what point in time East West explicitly stated that it would await receipt of funds from Merchants Maritime before forwarding payment • to Lake City. Mr. Allen Elia of East West testified that he told Lake City early in their negotiations that he was awaiting an advance from Merchants Maritime. He further testified that at the time of loading, when Lake City inquired why the advance had not been forwarded, he informed Lake City that he had not yet received the advance from Merchants Maritime. In conflict with this is the testimony of Mr. Monty Hall of Lake City who testified that he was not aware of the agency relationship until after he had fully performed. Still, Lake City does not dispute that it received a copy of the charter party prior to performance. This put Lake City on notice of the agency relationship and created an inference that East West would not be responsible as a principal unless clearly expressing such an intention. Restatement of Agency 2d, § 320 (1958); W. Seavey, The Law of Agency § 70(d), at 120 (1964). “The intent developed is alone material, and when that is ascertained it is conclusive. Where the principal is disclosed, and the agent is known to be acting as such, the latter can not be made personally liable unless he agreed to be so.” Whitney v. Wyman, 1880, 101 U.S. 392, at 396, 25 L.Ed. 1050, at 1052. United States Shipping Board Merchant Fleet Corp. v. Harwood, 1929, 281 U.S. 519, 50 S.Ct. 372 65, 74 L.Ed. 1011; Marcus Loew Booking Agency v. Princess Pat. Limited, 7 Cir. 1944, 141 F.2d 152; Walford v. McNeill, 1939, 69 App.D.C. 247, 100 F.2d 112; American Guild of Musical Artists v. Atlanta Municipal Theater Inc., 1971, N.D.Ga., 322 F.Supp. 1154; Mid-Continent Tel. Corp. v. Home Tel. Co., 1970, N.D.Miss., 319 F.Supp. 1176.

Furthermore, there was no valid business reason for East West to bind itself. It had nothing to gain and everything to lose by doing so. Lake City never directly requested a personal guarantee and none was ever offered. East West had been appointed as Gulf Coast agent only two months prior to the appointment of Lake City. East West was itself unfamiliar with the reliability and stability of Merchants Maritime.

The record contains no clear expression of intention by East West to accept personal responsibility. On the contrary, the defendant resisted any implication of that intention and protected its position as a mere conduit of funds. In March 1970, when payment was long overdue, Lake City requested a guarantee of payment before releasing the bills of lading. Without offering any guarantee of their own, East West forwarded the verbatim guarantee of Merchants Maritime, which Lake City accepted.

The earlier agreement of East West for the mere transmission of partial payment through itself as an agent is not, without more, sufficent to indicate an intention to be personally bound. Nor is it sufficient that Lake City, a subsubagent, might ordinarily have relied upon a subagent, such as East West, to collect and forward funds due for services rendered to the principal. That an agent acts as surrogate or substitute for a disclosed principal does not per se bind the agent, because it is the essence of agency that an agent act as a principal but not be bound as one.

For these reasons we conclude that East West did not demonstrate an intention to be bound for 50 percent of the stevedoring charges.

IV.

Because we have concluded that the plaintiff is not entitled to recover from the defendant, the issue of judicial interest is moot.

The judgment of the trial court is affirmed in part and reversed in part. The case is remanded for further proceedings not inconsistent with this opinion.

      . Lake City, is proceeding against Merchants Maritime but in another jurisdiction (S.D.N.Y.70 Civ. 5346).

      . Even when a party signs his own name to a contract with a notation “agent”, if he has been in the habit of expressing, in that way, his representative capacity in dealing with a third party, it would be presumed that the intent of the parties was not to bind the agent personally, Metcalf v. Williams, 104 U.S. 93, 26 L.Ed. 665.