text:
    ROYAL AIR MAROC, Petitioner, v. SERVAIR, INC., Respondent.
    No. 84 Civ. 7513 (RWS).
    United States District Court, S.D. New York.
    Feb. 7, 1985.

      Surrey & Morse, New York City by Paul A. Koches, Surrey & Morse, Washington, D.C., for petitioner.
    Fried, Frank, Harris, Shriver & Jacobson, New York City, for respondent; Richard M. Michaelson, Linda R. Brower, New York City, of counsel.
   OPINION

SWEET, District Judge.

Petitioner Royal Air Maroc (“RAM”) and respondent Servair, Inc. (“Servair”) have moved for relief with respect to Servair’s effort to obtain arbitration, RAM to dismiss Servair’s counterclaim seeking enforcement of arbitration and Servair to enforce such arbitration under the Federal Arbitration Act, 9 U.S.C. § 4. For the reasons stated below, Servair’s motion to compel arbitration will be granted and RAM’s motion to dismiss the Servair counterclaim will be denied. The proceeding will be dismissed with leave to reopen if necessary to enforce the arbitration award or to take any further action to compel arbitration.

The Parties

Servair is a Delaware corporation with its principal place of business in McLean, Virginia. Servair contracts with air carriers to provide a range of “on. the ground” aircraft cleaning and handling services at various airports throughout the country. Servair maintains a facility at New York’s Kennedy Airport. RAM, the international airline of Morocco, is a Morocco corporation with its principal office in Casablanca, Morocco. RAM flies its planes into Kennedy Airport, among other places.

On March 10,1982, Servair entered into a written Ground Handling Agreement with RAM which contained an arbitration clause (the “Agreement”). Under the terms of the Agreement, Servair agreed to provide RAM with “on the ground” cleaning and handling services at Kennedy Airport through March 31,1983. RAM admits that certain aspects of the agreement were extended beyond its initial termination on March 31,1983, and that from April 1,1983 until August 30, 1984, Servair rendered ground handling services to RAM. On August 30,1984 RAM informed Servair that it was terminating the use of Servair’s services.

Prior Proceedings

By letter dated September 20, 1984, Servair demanded arbitration of the dispute pursuant to the arbitration agreement between the parties contained in the Agreement. RAM failed to comply with the terms of the arbitration agreement and, instead, commenced the above entitled proceeding in the Supreme Court of the State of New York, County of New York, to stay such arbitration. On October 18,1984, Servair removed the proceedings to this court. By agreement of the parties, this court has deemed RAM’s petition a complaint seeking to enjoin the arbitration demanded by Servair.

The RAM and Servair motions were heard and fully submitted on December 21, 1984, and neither side sought further discovery. The parties were not in dispute with respect to the facts, but of course urged opposite conclusions springing from those facts.

The Facts

The Agreement consists of three documents: the Main Agreement, Annex A, and Annex B. The Main Agreement sets forth all of the terms and conditions .under which Servair agreed to provide cleaning and handling services to RAM aircraft landing at Kennedy Airport. Annex A sets forth the specific description of the services to be rendered by Servair. Annex B provides for the unit charges for the services specified in Annex A. Although the Agreement was signed by Servair and sent to RAM for countersignature, consistent with RAM’s usual practice, Servair did not receive a copy signed by RAM. However, there is no dispute concerning the applicability or execution of the Agreement as such.

Paragraph 11.2 provided: “Modification of, or additions to this Agreement or its Annexes must be approved in writing by the parties.”

Paragraph 11.3 of the Main Agreement provided: “This Agreement may be can-celled provided the cause of such termination is due solely to the Handling Company’s [Servair’s] failure to maintain reasonable standards of performance ...” Also, in order to cancel under that provision, (i) RAM had to identify Servair’s alleged substandard performance with reasonable particularity; (ii) if Servair failed to achieve RAM’s standards within 30 days after notice then; (iii) RAM had the right to give Servair 60 days notice of cancellation of the Agreement.

Paragraph 11.4 of the Main Agreement permitted cancellation of some of the services described in Annex A. If either party wished to cancel “a portion of the assistance to be furnished [by Servair at Kennedy Airport]” sixty (60) days’ previous notice to the other party was required.

Paragraph 9.1 of Article 9 of the Main Agreement provides, in relevant part, that:

Unless otherwise agreed, any difference or dispute arising from the interpretation or the implementation of the present agreement or relating to any rights or obligations herein contained shall be referred to arbitration by a single independent arbitrator whose decision shall be final and binding upon both parties.

Paragraph 9.3 provided: “The applicable law shall be the law of the State of New York.”

No change occurred in the conduct of Servair and RAM at Kennedy Airport after March 31, 1983, the initial termination date of the Agreement. RAM continued to present its 747 and 707 aircraft landing at Kennedy Airport for cleaning and handling by Servair. RAM requested, accepted, and paid for the services specified in Annex A at the prices listed in Annex B. Servair proposed in letters dated April 8 and June 9, 1983 an 8% increase in the ground handling charges listed in Annex B, retroactive to April 1, 1983.

By letter dated June 10, 1983, RAM rejected Servair’s retroactive 8% price increase proposal, but referred to “Paragraph 11.10 of our Basic Agreement,” and asserted that Servair was obligated to give RAM 30 days advance notice of any “proposed price changes.” In the absence of such a notice provision in the Agreement, Servair’s representatives understood RAM’s reference to “paragraph 11.10 of our Basic Agreement” to mean that RAM wished to amend the Agreement to include the 30 day notice provision contained in paragraph 11.10 of the printed form of a model ground handling agreement issued by the International Air Transport Association (“LATA”).

By letter dated July 6,1983, Servair modified its April 8, and June 9, 1983 letters. Servair proposed that its 8% price increase in ground handling charges become effective on May 1, 1983 instead of retroactive to April 1, 1983, thereby complying with the requested 30-day notice requirement.

Negotiations on the price of the services to be provided were finally concluded at a luncheon meeting in November, 1983 attended by Zeroul Marchoudi (“Marchoudi”), RAM’s representative, John A. Mangano (“Mangano”) and Thomas J. Cason (“Ca-son”), Servair’s representatives. It was agreed that the ground handling charges set forth in Annex B would be increased by 6% in each of the years 1984 through 1986, inclusive. Marchoudi stated in response to Cason’s inquiry that he had the authority to act on behalf of RAM. By letter dated November 11, 1983, Mangano confirmed the modifications to Annex B which the parties had orally agreed to at the luncheon meeting.

Servair serviced RAM’s aircraft throughout 1983 without any increase, and serviced RAM’s aircraft from January 1, 1984 through August 30,1984 at the 6% increase agreed upon at the luncheon meeting in November, 1983. On or about February 28, 1984 Servair attempted to memorialize the price increase described in Mangano’s November 11, 1983 letter by preparing, signing and forwarding to RAM a document entitled “Amendment No. 1,” with an effective date of January 1, 1984. Amendment No. 1 addressed paragraph 11.3 of the Main Agreement (the period during which the price increase would be in effect), and Articles 1 and 3 of Annex B (the amount of the additional charges). Servair received no copy of Amendment No. 1 signed by RAM nor any acknowledgement or rejection of the Amendment. RAM continued utilizing and paying for Servair’s services at Kennedy Airport, as invoiced, at the prices agreed upon in November, 1983, anticipating the agreed upon term. Invoices were submitted during this period and checks were received from RAM in an amount totalling $205,789.02.

Paragraph 2.3 of Article 2 of Annex B provided that Servair was to present to RAM “Acceptance Tickets” reflecting the type and quantity of daily ground handling services provided to RAM aircraft. Acceptance Tickets were prepared weekly by Servair after January 1, 1984, stating, “as per contract charges.” A monthly invoice was prepared and sent to RAM. For each month of service, RAM paid the amount “as per the contract charges.” After January, 1984, however, RAM was billed — and it paid for — every service at a rate increased by 6%.

By letter of May 23, 1984, Marchoudi advised that RAM was “herewith cancel-ling, with immediate effect, the contract between Royal Air Maroc and Servair regarding the Ramp Handling and cleaning” of its aircraft. Marchoudi had received a telex requesting that he seek a reduction in the 60-day notice requirement of Article 11 of the Main Agreement.

By letter dated May 29, 1984, Servair offered to meet with a RAM representative to discuss the matter referred to in paragraph 11.3 of the Main Agreement which permitted cancellation “... only due to a failure to maintain a reasonable service,” and asserted that RAM’s action was in breach of the contract governing the parties’ relationship which the parties had extended until at least the end of 1986. A copy of Paragraph 11.3 of Article 11 of the Main Agreement was enclosed with the letter.

In a telephone conversation, Marchoudi stated that, rather than immediately cancel its contract with Servair, RAM was giving the 60-days’ notice required under Article 11 of the Main Agreement, and that the purported cancellation would become effective on July 31, 1984. Servair sent a telex to RAM that day reiterating Servair’s position that cancellation was inappropriate but offering to provide the services under a subcontract with Lufthansa.

Thereafter, Servair’s Associate Group Counsel advised RAM by letter dated July 13, 1984 that RAM’s letter of May 23, 1984 was in breach of the Agreement. In response, by letter dated July 27, 1984, RAM’s counsel stated that:

The only valid contract between your client Servair, Inc. and Royal Air Maroc was a one-year Ground Handling Agreement effective as of April 1,1982. While Servair requested a new three-year contract upon its expiration, Royal Air Maroc never agreed to the new contract, a decision based in part on the unacceptability of the proposed three-year term. It is our position that Servair’s services since April 1,1983 have been pursuant to an implied extension of the original contract, a contract which Royal Air Maroc is entitled to terminate at will, and without reference to the termination provisions of either contract, which provisions contemplate termination during the term of an unexpired contract.

On August 2, 1984 RAM’s counsel offered to pay for services “on the same basis as hitherto.” On August 30, 1984 RAM sent a mailgram terminating its use of Servair’s services.

The Agreement to Arbitrate

RAM and Servair are substantial entities daily performing important functions in a complex industry governed by international agreements and regulations, federal regulations, and commercial arrangements. This industry is no longer a barn-storming operation. Under Washington Heights v. District 1199, 748 F.2d 105 (2d Cir.1984), the court’s function must be to determine the intent of the parties with respect to their underlying agreements, including arbitration, prior to the termination of their relationship on August 30, last year. In view of the facts stated above, the terms and all the provisions of the Agreement were extended by Amendment No. 1, which simply altered the prices and duration of the Agreement.

The failure of RAM to countersign Amendment No. 1 in no way alters its intent which was exemplified by the November 1983 negotiations, the confirming correspondence, Amendment No. 1 itself, and the absence of any sign of protest by RAM to the expressed understanding of Servair. To deny Servair its bargain because of its failure to obtain a signed agreement from a foreign entity when the entity was in fact satisfying the terms of Amendment No. 1 and the underlying Agreement would be to exalt form over substance and to deny the realities of the complexities of the carriage of goods and passenger by air.

While in other types of transactions our Court of Appeals has insisted on the contract formalities, in Washington Heights v. District 1199, supra, the Court, through the opinion of its Chief, reversed this lower court and remanded for further proceedings, holding that the absence of a formally executed agreement to arbitrate did not preclude the enforcement of arbitration under an expired agreement if continued arbitration was the intent of the parties.

Here, of course, there was no cause for arbitration prior to termination as there had been in Washington Heights, where the parties had arbitrated without a formal agreement. However, by stating the alternatives available on remand, the Court fully demonstrated the victory of intent over form.

As already indicated, the formalism of Amendment No. 1 was alone sufficient to renew the Agreement in its totality. Further, the correspondence and performance of both Servair and RAM establishes their intent. As is occasionally stated to nonprofessional factfinders, the adage “actions speak louder than words” applies.

RAM relies on Korody Marine Corp. v. Minerals & Chemicals Phillipp Corp., 300 F.2d 124 (2d Cir.1962) for the proposition that a continued course of dealing without more cannot serve to extend an arbitration provision in a previous contract. In Korody, however, the court characterized the continued relationship between the parties as “some sort of informal arrangement.” Id. at 125. Here, of course, there is more, namely, Amendment No. 1. In addition, were it necessary to the decision here, the particulars of the continued course of dealing between Servair an RAM were such as to extend the term of the 1982 agreement.

RAM also relies on Waldron v. Goddess, 61 N.Y.2d 181, 473 N.Y.S.2d 136, 461 N.E.2d 273 (Ct.App.1984) for the general proposition that an arbitration clause cannot be extended by course of conduct. RAM seeks to draw too much from Waldron, for Waldron is distinguishable from the facts of this case. In Waldron, subsequent to expiration of the initial contract there was an express rejection of an offer to renew a written contract. Consequently, the court was unwilling to override this express rejection and to find the earlier, expired arbitration clause binding. Here, in contrast to the rejection of the written contract, I have found a renewal and extension of the Agreement. The concern of the Waldron court that a party might be required to arbitrate without having affirmatively demonstrated an intention to be bound by arbitration is therefore not relevant here.

The Statute of Frauds

RAM seeks to invalidate any extension of the Agreement by invocation of the Statute of Frauds, N.Y.Gen.Oblig.Law § 5-701(a) (McKinney) (the “Statute”). The short answer to the contention is that Amendment No. 1 satisfies the elements of the Statute. Under New York law, an integration of several documents satisfies the writing requirement of the statute where they refer to the same subject matter, together contain all the material terms, and at least one of which is signed or prepared by the party to be charged. Crabtree v. Elizabeth Arden Sales Corp., 305 N.Y. 48, 110 N.E.2d 551 (1953); Biggle v. Harper & Row Publishers, Inc., 675 F.2d 107 (6th Cir.1982) (applying New York law); Marcraft Recreation Corp. v. Frances Devlin Co., 506 F.Supp. 1081, 1085 (S.D.N.Y.1981); Great Destinations, Inc. v. Transportes Aereos Portugeses S.A. R.L., 460 F.Supp. 1160 (S.D.N.Y.1978).

In addition, RAM’s telex of May 1984, its letter dated May 23, 1984, and its cancelled checks in payment of Servair invoices for the 17-month period subsequent to March 31, 1983 all are further signed documents which acknowledge the continued existence of the terms of the Agreement in addition to Amendment No. 1.

Finally, New York has carved out a special exception to its statute of frauds which estops a party from asserting the statute as a defense under circumstances similar to the instant case:

Part performance that is clear, certain and definite in object and design as to be unequivocally referable to the agreement, and which will precipitate a fraud if the agreement is not enforced, removes the action from the defense of the statute of frauds.

Marcraft Recreation Corp., supra, 506 F.Supp. at 1085; Rose v. Spa Realty Associates, 42 N.Y.2d 388, 397 N.Y.S.2d 922, 366 N.E.2d 1279 (Ct.App.1977); Marine Midland Bank v. Quality Exterior Corp., 92 A.D.2d 662, 460 N.Y.S.2d 159 (3d Dep’t 1983).

For 17 months, Servair serviced RAM’s aircraft pursuant to the terms of the Agreement, and Servair abandoned its attempt to obtain retroactive 8% price increase and only charged a 6% price increase commencing in 1984. RAM accepted the benefits of the agreement for a period that is far in excess of the six days which was held sufficient as a matter of law in Matter of Helen Whiting, Inc. v. Trojan Textile Corp., 307 N.Y. 360, 365, 121 N.E.2d 367 (Ct.App.1954). Part performance under the extended Agreement is sufficient to estop RAM from asserting the statute of frauds as a defense.

Arbitration agreements are governed by CPLR § 7501, which requires only that the agreement to arbitrate be in writing and it does not require the signature of the party to be bound. N.Y.CPLR § 7501; Crawford v. Merrill Lynch, 35 N.Y.2d 291, 361 N.Y.S.2d 140, 146, 319 N.E.2d 408, 412 (1974). The cases clarify that the writing need not be signed by the party to be charged “so long as there is other proof that the parties actually agreed on it.” Matter of Helen Whiting, Inc., supra, 307 N.Y. at 368, 121 N.E.2d 367; Crawford, supra, 361 N.Y.S.2d at 146, 319 N.E.2d at 412. Whether or not the termination by RAM was appropriate under the Agreement is a matter not before the court and presumably will be presented, among other things, to the arbitrators.

Finally, in the course of reviewing the Agreement I became aware for the first time that Servair was a subsidiary of Dynalectron Corporation (“Dynalectron”). For a relatively brief period in 1973 the firm of which I was a member represented Dynalectron in seeking to obtain certain rights at Kennedy Airport for the benefit of Servair, and I performed services for Dynalectron in that connection. The matter was unrelated to this dispute, and I have had no dealings with Dynalectron or Servair since that time. None of the persons that I now recall dealing with at that time are mentioned in any of the documents before me. It would ill serve the interests of justice to recuse myself at this time, given the fulsome submissions and arguments presented. Further, such recusal is not required under the authorities, National Auto Brokers v. Gen. Motors Corp., 572 F.2d 953 (2d Cir.1978), cert. denied, 439 U.S. 1072, 99 S.Ct. 844, 59 L.Ed.2d 38 (1979). However, it is in my view appropriate that the findings include the facts just stated.

The motion to compel arbitration is granted, and judgment will be entered granting the relief sought in Servair’s counterclaim. Leave is granted to reopen the action should it be necessary to do so to further implement the court’s judgment or to enforce any arbitration award. It is intended, however, the judgment to be entered will be final in order to avoid questions such as those presented in Hartford Financial Systems v. Fla. Software Serv., 712 F.2d 724 (1st Cir.1983) (stay issued under arbitration act ordinarily not appeal-able for it is neither final nor an injunction); Standard Chlorine of Delaware, Inc. v. Leonard, 384 F.2d 304 (2d Cir.1967) (order staying action pending arbitration not final).

IT IS SO ORDERED.


source: Caselaw Access Project

author: SWEET, District Judge.

license: Public Domain

text:
    UNITED STATES of America, v. Vanessa MELTON, Defendant.
    No. 84 Cr. 322 (RWS).
    United States District Court, S.D. New York.
    Feb. 7, 1985.

      Eudolph W. Giuliani, U.S. Atty., S.D. N.Y., New York City, for the U.S.; Jess T. Fardella, Asst. U.S. Atty., New York City, of counsel.
    Caesar D. Cirigliano, The Legal Aid Soc., New York City, for defendant; John P. Curley, New York City, of counsel.
   OPINION

SWEET, District Judge.

Defendant Vanessa Melton (“Melton”) has moved post-trial for an acquittal or new trial pursuant to Fed.R.Crim.P. 29 and 33. For the reasons stated below, the motion is denied.

Prior Proceedings

Melton was charged in Counts One and Four of a four-count indictment with conspiracy to distribute heroin in violation of 21 U.S.C. § 846 and distribution of heroin and possession of heroin with intent to distribute on March 26, 1984 in violation of 21 U.S.C. § 841 and 18 U.S.C. § 2. Calvin McLean (“McLean”) was charged in all four counts of the indictment and Jerry Braddy (“Braddy”) and Nathan Graham (“Graham”) were also charged as conspirators under . Count One and as aiders and abettors of McLean in the actual distributions of heroin which formed the basis of Counts Two and Three, respectively. On August 2, 1984, after a four-day trial at which she did not testify, Melton was convicted on Count Four of the indictment charging possession of heroin with intent to distribute and distribution of heroin. The jury was unable to reach a verdict on the conspiracy count as to Melton.

Statement of the Government’s Evidence

Early in 1984 Detective Marcellus Ward (“Detective Ward”) of the Baltimore City Drug Enforcement Task Force was working in an undercover capacity with the New York Drug Enforcement Task Force under the name “Mike” or “Skinny Pimp.” Detective Ward had been introduced to McLean by a confidential informant known as “Concrete” at 2531 Eighth Avenue, New York, New York. Detective Ward and Concrete had given McLean $3,500 in cash, in return for which McLean promised to provide them with an ounce of heroin with the understanding that he would eventually receive an additional $4,000. Concrete subsequently on January. 19 lost the money when the transaction could not be completed. Thereafter, McLean offered Detective Ward a chance to earn back lost money by fronting him a “spoon” (i.e., a tablespoon full) of heroin, along with some dilutants (approximately 89 grams of mannitol and quinine).

On February 6, 1984, Detective Ward, wearing a Nagra body recorder, met with McLean in the vicinity of 2531 Eighth Avenue, where he gave McLean $1,000 for the heroin previously “fronted” him on January 19, and $3,000 for another purchase of heroin. In return, McLean provided him with 8.9 grams of 40.5 percent pure heroin. On March 14, 1984, Detective Ward, after making contact with McLean through Graham and Braddy, gave McLean an additional $2,000 for more heroin and on March 26, 1984, McLean called Detective Ward at his undercover telephone in Baltimore and told him to come to New York to pick up his package.

At approximately 9:00 p.m., Detective Ward, again wearing a Nagra body recorder, arrived in the vicinity of 2531 Eighth Avenue and met Braddy. At approximately 10:15 p.m., McLean arrived in a gypsy cab and advised Detective Ward that his girlfriend “Vanessa” would arrive shortly with the package containing five and one half “spoons” of heroin at the Blue Note Bar on the corner. During the next hour, McLean and Detective Ward waited in the latter’s car. Finally McLean had Braddy take Detective Ward’s car to pick up Melton. As Braddy departed, McLean and Detective Ward went across the street into the Blue Note Bar, which was noisy and crowded.

A short time later, Melton arrived, and McLean told her he had been concerned that she had been stopped or had gotten in trouble with the package. Detective Ward had seen Melton on two prior occasions, both in the vicinity of 2531 Eighth Avenue, once when she was with McLean and once when she was looking for McLean. Confirming that she had the package, Melton pulled out a tinfoil packet which was later established to have contained 15 grams of 34.5 percent pure heroin from her pocketbook and showed it to McLean. With Melton watching, McLean opened the packet, displayed its contents, and announced “that’s white, that’s good stuff.” He then refolded it, and directed Detective Ward to the storefront on the first floor of 2531 Eighth Avenue to wait for Braddy’s return. Melton also went into the storefront.

McLean took the tinfoil packet back from Detective Ward and gave it to Graham, and then retrieved it from Graham and placed it atop a refrigerator under a newspaper. Melton, McLean and Detective Ward went to the back of the storefront where McLean asked Melton if she had the other package. She replied in the affirmative and retrieved another tinfoil packet from her pocketbook similar to the one she had previously given McLean for Detective Ward. McLean opened the packet and with a $10 bill scooped out some of the white powder, refolded it, and placed it atop the refrigerator where he had previously placed Detective Ward’s packet. Then McLean asked Melton for “pot,” and she gave him a plastic bag containing a green leafy brown substance. McLean then removed the tobacco from a cigarette and replaced it with some of the marijuana from the plastic bag and some of the heroin from the $10 bill. He then twisted the top of the cigarette, lighted it, and passed it around to various people, including Melton, who puffed on it. Graham took a snort of the white powder from the $10 bill. McLean’s daughter, in Melton and McLean’s presence, expressed her disappointment to Detective Ward that he had come to New York because she had expected to make some money by taking the package to him in Baltimore. No statements were attributed to Melton.

Subsequently, an individual unknown to Detective Ward drove up to the store-front in a red Porsche. McLean engaged in conversation and McLean gave the newcomer the second tinfoil packet. Braddy returned with Detective Ward’s car, Detective Ward then returned to the DEA office with the first tinfoil packet of heroin Melton had brought that night.

On April 24, 1984, McLean, accompanied by another girlfriend of his called “Peaches,” met Detective Ward at a Baltimore area restaurant. In the presence of Peaches and over dinner, McLean and Detective Ward negotiated for the purchase of additional heroin. After the meal, Detective Ward gave McLean a brown paper bag with cut newspaper, intended to look like a bag of cash, and McLean was arrested as he pulled out of the parking lot.

Later that same evening, Task Force Officers and agents went to the apartment complex at 309 North Broadway in Yonkers to execute an arrest warrant for Braddy. Their knock on the door of Apartment 2C was answered by Melton. She stated that Braddy was her boyfriend, that he lived there only occasionally and that she herself lived there. The officers and agents then left the apartment and then went to a pay phone about two blocks away, where they placed a call to an Assistant United States Attorney and received authorization to arrest Melton. As they were returning to 309 North Broadway approximately ten minutes later, they saw Melton enter a taxi which went to the railroad station. There they found Melton waiting on the platform for a northbound train, whereupon they placed her under arrest and advised her of her Constitutional rights.

At the DEA offices, Melton was informed that she was being charged with conspiracy and was readvised of her Constitutional rights by Agent Stanley Morrissey. She then asked Agent Morrissey, “How can I be charged with a sale if I didn’t receive any money.” Agent Morrissey then recounted the events of the evening of March 26, 1984 in the Blue Note Bar regarding Melton’s providing the packet to McLean for Detective Ward, whom Agent Morrissey explained was actually an undercover agent named “Marty.” Melton replied “Oh, Marty, or whatever his name is, he’s one cute dude.” Melton also gave her home telephone number as (914) 969-8020, the same number written on a playing card found in Graham’s possession when he was arrested. She also later acknowledged that Apartment 2C at 309 North Broadway was “Calvin’s apartment.”

The Issue

Melton maintains that the evidence recounted is insufficient to permit the jury to reach its verdict of guilty on the substantive count of possession with intent to distribute. Both the Government and Melton agree that the issue is whether the facts stated above permit the inference that Melton knew what was in the packet and assisted in its distribution.

Conclusions

At the outset, the jury’s inability to reach a verdict with respect to Melton’s participation in the conspiracy must be put aside. Even if the jury had acquitted on the conspiracy count, and even if the difference between conspiring and aiding and abetting is difficult, if not impossible, to perceive, such an inconsistent verdict would be upheld under the authorities. United States v. Powell, — U.S. —, 105 S.Ct. 471, 83 L.Ed.2d 461 (1984); Dunn v. United States, 284 U.S. 390, 52 S.Ct. 189, 76 L.Ed. 356 (1932).

The framework for the court’s consideration of the issues presented is familiar. A defendant advancing a claim based on insufficiency of the evidence carries “a very heavy burden.” United States v. Carson, 702 F.2d 351, 361 (2d Cir.), cert. denied, 462 U.S. 4108, 103 S.Ct. 2456, 2457, 77 L.Ed.2d 1335 (1983); United States v. Losada, 674 F.2d 167, 173 (2d Cir.), cert. denied, 457 U.S. 1125, 102 S.Ct. 2945, 73 L.Ed.2d 1341 (1982). “The verdict of a jury must be sustained if there is substantial evidence, taking the view most favorable to the Government, to support it.” Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680 (1942). In addition, “pieces of evidence must be viewed not in isolation but in conjunction.” United States v. Carson, supra, 702 F.2d at 362 (citation omitted); see also United States v. Cicale, 691 F.2d 95, 103 (2d Cir.1982), cert. denied, 460 U.S. 1082, 103 S.Ct. 1771, 76 L.Ed.2d 344 (1983); United States v. Geaney, 417 F.2d 1116, 1121 (2d Cir.1969), cert. denied, 397 U.S. 1028, 90 S.Ct. 1276, 25 L.Ed.2d 539 (1970). The reviewing court must draw all available inferences, and resolve all issues of credibility, in favor of the jury’s verdict. United States v. Bagaric, 706 F.2d 42, 64 (2d Cir.), cert. denied, — U.S. —, 104 S.Ct. 134, 78 L.Ed.2d 128 (1983). Moreover, because intent and knowledge are subjective facts, see United States v. Sheiner, 410 F.2d 337, 340 (2d Cir.), cert. denied, 396 U.S. 825, 859, 90 S.Ct. 68, 127, 24 L.Ed.2d 76, 110 (1969), the requisite criminal intent may be established through circumstantial evidence. United States v. Sanzo, 673 F.2d 64, 69 (2d Cir.), cert. denied, 459 U.S. 858,103 S.Ct. 128, 74 L.Ed.2d 111 (1982).

Melton put two tinfoil packets in her purse, turned the one later proven to contain heroin over to McLean in a crowded bar, heard him declare, “that’s white, that’s good stuff,” witnessed the transfer to Detective Ward, went across the street, turned over the second packet which was opened, a portion of white powder was extracted, used by Graham, mixed in a cigarette with marijuana and smoked. No statement is attributed to Melton concerning these events. Upon learning that Braddy was being sought, she left the apartment in Yonkers and was waiting for a northbound train when arrested. At a later time she stated: “How can I be charged with a sale if I didn’t receive any money?”

Even if Melton’s role as McLean’s girlfriend is excluded from consideration as bearing only on the conspiracy charge, still the transfer of a tinfoil packets in a crowded bar, her participation in the events across the street, and her statement after arrest are enough to permit the jury to infer that she knew the contents of the packet. The casual treatment of the first packet, left on the refrigerator under a newspaper, is susceptible to an inference that the transfer and handling of such packets was commonplace and accepted and does not necessarily rebut her inference of knowledge. This is not the ample evidence as characterized by the Government, but it is enough, unless, of course, upon reflection certain of the evidentiary rulings at trial were erroneous and sufficient to require retrial.

The post-arrest statements just referred to were, of course, prejudicial, and in my view, at the time and now, properly before the jury for their evaluation. Melton’s post-arrest statement that the Yonkers apartment was McLean’s and that she was going to return to her mother’s was relevant. Her knowledge of the ownership of the apartment, her presence there at the time of arrest and McLean’s statement on the night of the transfer as to the origin of her trip to the bar, all facts from which it could be inferred that the packet came from McLean’s apartment under circumstances under which Melton’s knowledge of its contents and the nature of McLean’s transaction could also be inferred. Knowledge of ownership of the apartment in which she was found, while certainly not determinative, was at least relevant.

Although counsel was not present at the time of making the statement, it was clearly voluntary, Rhode Island v. Innis, 446 U.S. 291,100 S.Ct. 1682, 64 L.Ed.2d 297 (1980), and no objection was lodged on the grounds of counsel’s absence.

Of course, the evidence of Melton’s post-transfer act was prejudicial to Melton on the very issue of her knowledge. The instruction relative to the use and possession of marijuana must be credited as effective. See United States v. Reed, 639 F.2d 896, 907 (2d Cir.1981); United States v. DiGeronimo, 598 F.2d 746, 754 (2d Cir.), cert. denied, 444 U.S. 886, 100 S.Ct. 180, 62 L.Ed.2d 117 (1979). The issue remains close, however, but the view held at trial has not been changed by the post-trial submission.

The statements attributable to Melton’s daughter were sufficient to place her within the ambit of the conspiracy charged. At best the statement was relevant only to the conspiracy charge and were not relevant to the substantive count involving the earlier transfer. No request for a limiting instruction was made, nor was the statement objected to except on the grounds of relevance.

The Government’s Summation

The Government’s summation was appropriate in light of the issues raised by the defense. United States v. Modica, 663 F.2d 1173, 1181 (2d Cir.1981).

The motions are denied.

IT IS SO ORDERED.


author: HUNGATE, District Judge.

text:
    Michael CROW, Barbara Crow, Plaintiffs, v. NEWSPAPER DEALER SUPPLY, INC., Dennis W. Ramsey, Defendants.
    No. 83-0986C(3).
    United States District Court, E.D. Missouri, E.D.
    Feb. 7, 1985.

      Martin P. Zucker, Peper, Martin, Jensen, Maichel & Hetlage, St. Louis, Mo., for plaintiffs.
    Eric J. Snyder, St. Louis,' Mo., for defendants.
   MEMORANDUM

HUNGATE, District Judge.

This matter is before the Court for a decision on the merits on the claim of plaintiffs, Michael and Barbara Crow, against defendants, Newspaper Dealer Supply, Inc., and Dennis Ramsey. Plaintiffs bring this action to recover on a promissory note executed by defendants. Defendants assert various defenses, and counterclaim for breach of contract and fraud.

The Court held a nonjury trial in this cause on September 17, 1984, allowing the parties a full opportunity to present evidence.

Having carefully considered the pleadings, trial testimony, exhibits, stipulations, and memoranda of the parties, and being fully advised in the premises, the Court hereby makes and enters the following findings of fact and conclusions of law.

Findings of Fact

1. Plaintiffs, Michael and Barbara Crow, are citizens of the State of Illinois and residents of DuPage County, Illinois.

2. Defendant, Newspaper Dealer Supply, Inc. (Newspaper Dealer Supply), is a corporation incorporated under the laws of the State of Missouri and a resident of St. Louis County, Missouri.

3. Defendant, Dennis W. Ramsey, is a citizen of the State of Missouri and a resident of St. Louis County, Missouri.

4. Nike Plastics Company (Nike) was a manufacturer of plastic film and bags located in Missouri and employing approximately forty persons.

5. On or about July 1, 1978, Michael Crow left the employ of a company that sold plastic products similar to those manufactured by Nike, moved from Michigan to Missouri, and entered into an employment contract with Nike as a salesman and marketing specialist.

6. Jerome Stan, the president of Nike, signed the employment contract on behalf of Nike which provided for a stock purchase agreement whereby Crow could purchase up to ten shares of Nike’s common stock for a total of $2,000.00 per share.

7. On or about September 25, 1978, Crow paid $7,500.00 to Nike by personal check which entitled him to three and three-quarters shares of Nike stock according to the terms of the stock purchase agreement. On or about January 27, 1979, Crow paid $5,000.00 to Nike by personal check for an additional two and one-half shares of Nike stock.

8. Between July 1,1978, and January of 1979, Crow incurred business related expenses in the amount of approximately $2,500.00 for which Nike did not reimburse him as required by the employment contract. Crow entered into an oral agreement with Stan on behalf of Nike whereby he would be entitled to one and one-quarter additional shares of stock in lieu of reimbursement.

9. At no time were stock certificates or securities issued to Crow to represent the number of shares owned by him, nor were any such certificates requested by Crow.

10. In early 1979, Dennis Ramsey was president of Newspaper Dealer Supply which was Nike’s largest customer. Nike was also the sole supplier of plastic bags to Newspaper Dealer Supply.

11. Nike’s financial situation deteriorated throughout 1978 on into 1979, losing money during virtually every month during that period. On occasion, customers were required to guarantee Nike’s raw material purchases to insure the manufacture of products they purchased from Nike. Newspaper Dealer Supply advanced money to Nike for raw materials, outstanding bills and payroll expenses, and those amounts were credited to Newspaper Dealer Supply’s account with Nike.

12. By early 1979, Nike’s financial position was so poor that capital contributions had been depleted and the shareholders were no longer willing to make additional investments to keep Nike afloat.

13. In early 1979, Ramsey entered into negotiations with officers of Nike including Stan concerning the possibility of Ramsey and Newspaper Dealer Supply gaining control of Nike to keep it from closing.

14. On March 12, 1979, a meeting of members of the board of directors and shareholders of Nike was held in Chicago, Illinois, for the purpose of reorganizing Nike so that Ramsey would own one-half of all Nike shares and be elected to the board of directors. All other shareholders had agreed to reduce the number of shares they held so as to accommodate Ramsey, and in return Ramsey was to infuse capital and equipment into the faltering company.

15. According to a resolution of the board of directors dated March 13, 1979, and signed by Ramsey as a member of the board of directors, Ramsey became owner of one-half of all the outstanding shares of Nike and the amount of stock owned by Crow was reduced from seven and one-half shares to six and three-quarters shares. All the other shareholders had their shares reduced also, and none have been heard to complain. No certificates of stock were issued to Ramsey, Crow, or any of the other stockholders.

16. Between March 13 and March 30, 1979, Ramsey entered discussions with Crow regarding the possibility of purchasing Crow’s stock. It was Ramsey’s intent to gain control of Nike by owning more than fifty percent of the outstanding shares.

17. On March 30, 1979, Newspaper Dealer Supply, by its president, Ramsey, and by Ramsey individually, executed a promissory note payable to the order of the Crows as joint tenants with right of survivorship, in the amount of $15,000.00.

18. The note executed by the defendants recited value received and called for installment payments of $500.00 per month commencing on April 15,1979, and continuing thereafter until the entire sum was paid in full. The promissory note provided that if any installment was not paid when due, the entire balance of the note would, without notice, become immediately due and payable at the option of the holder and would bear interest at the rate of ten percent per annum after the date of default until paid. The note further provided that if default was made and the note placed in the hands of an attorney for collection, the makers and endorsers agreed to pay a reasonable attorney’s fee for such collection.

19. Ramsey did not make the first two payments as scheduled, and then on June 1, 1979, Crow executed a so-called stockpower to Ramsey, whereby Crow purported to sell, assign, and transfer to Ramsey all of his rights, titles, and interest in any and all of Nike stock, and thereby irrevocably constitute and appoint Ramsey attorney to transfer the said shares on the books of Nike with full power of substitution in the premises. He further agreed to cooperate and execute all corporate resolutions that required his signature to reflect corporate action taken during the time he served as an officer of Nike. Ramsey signed the document as a witness.

20. On or about June 15, 1979, defendants paid $500.00 as the first installment on the promissory note, and thereafter made no further payments, claiming that Stan would not honor the power. The Crows demanded payment from defendants on October 11, 1979, and February 28, 1980.

21. Ramsey refused to pay and announced a rescission, claiming that Crow had defrauded him, that Crow violated the contract, a failure of consideration, and that Crow failed to deliver the shares of stock contracted for.

22. After the March 13 resolution, Ramsey spent time and money in an attempt to save Nike. An account was set up whereby Ramsey and Newspaper Dealer Supply could advance funds to Nike and Ramsey could draw checks on Nike.

23. In spite of Ramsey’s efforts to turn Nike around, operations ceased in 1979 and the company was later dissolved in bankruptcy.

24. It was later discovered that the corporate charter of Nike was forfeited on January 1, 1979, when, through inadvertence, the corporate attorney or officers of Nike failed to file the appropriate franchise tax forms with the State of Missouri. When Nike was so informed by the Internal Revenue Service, the necessary steps were taken to restore the corporate charter, and on March 11, 1980, the Secretary of State of Missouri certified that the forfeiture was rescinded.

Conclusions of Law

1. This Court has jurisdiction over this cause pursuant to 28 U.S.C. § 1332(a)(1) as there exists complete diversity of citizenship between the parties and the amount in controversy exceeds the. sum of $10,000.00 exclusive of interest and costs.

2. Where an obligee brings an action to recover on a promissory note and the note imports consideration, as in this case, and the defendants makers/obligors assert a failure or insufficiency of consideration, the burden is upon the defendants to come forward and establish their defenses “by a clear preponderance of credible evidence, and their proof must be cogent and convincing.” Empire Gas Corp. v. Small’s LP Gas Co., 637 S.W.2d 239, 246 (Mo.App.1982), citing Gover v. Empire Bank, 574 S.W.2d 464, 468 (Mo.App.1978).

3. The fact the physical stock certificates representing shares of stock in Nike were not issued to the plaintiffs when they paid for the shares is not dispositive of the plaintiffs’ ownership of said shares.

It has long been held in Missouri that a share of stock is the actual property of the shareholder, an intangible property in the nature of a chose in action; the certificate of stock is a “muniment of title.” Title to the shares may exist without the stock certificate, which is only evidence of the shareholder’s property interest. Duncan v. Kelly, 435 S.W.2d 29, 33 (Mo.App.1968).

Kaiser v. Moulton, 631 S.W.2d 44, 48 (Mo. App.1981) (plaintiff recognized as shareholder in spite of ineffective delivery of stock certificate where corporate resolution and minutes signed by defendant showed plaintiff to be a shareholder). Plaintiffs paid $2,000.00 pursuant to a stock purchase agreement for six and one-quarter shares of stock, and there exists no conflicting claim of ownership of those shares. Accordingly, the Court finds plaintiffs held, at the least, an equitable ownership interest in those shares.

4. Evidence at trial supported plaintiffs’ claim that Nike was indebted to them for approximately $2,500.00 in business related expenses for which the company was bound to reimburse him pursuant to the employment contract. In Missouri, shares of stock may be issued by a corporation in return for the forgiveness of a debt. Mo.Rev.Stat. § 351.160; Mo. Const. Art. XI § 7 (statutory and constitutional prohibitions of watered stock requiring shares be paid for property or services and not a loan from the issuing corporation). In this case, although no certificates were issued, plaintiffs exchanged valuable consideration for the additional one and one-quarter shares of stock. Accordingly, the Court finds plaintiffs to be the equitable owners of those shares. Kaiser, supra. The Court therefore finds the plaintiffs to have been the equitable owners of a total of seven and one-half shares of Nike stock at the time of the board of directors meeting in March.

5. The Court finds no evidence of fraud in the circumstances surrounding the March, 1979, board meeting in Chicago where the meeting was solicited by the defendants for the purpose of accommodating his wish to become a one-half owner of Nike and he signed the resolution drafted as a result of the meeting.

6. The Nike corporate resolution dated March 13, 1979, shows that the number of shares owned by plaintiffs was reduced from a total of seven and one-half shares to six and three-quarters shares, that defendants were issued fifty shares. “In the absence of fraud in the transaction, the judgment of the board of directors as to the value of the consideration received for the shares will not be interfered with.” Saigh v. Busch, 403 S.W.2d 559, 564-65 (Mo.1966). The Court finds, therefore, that as a result of this meeting and resolution, plaintiffs were the owners of six and three-quarters shares of Nike stock and defendants owned fifty shares.

7. Defendants have insisted that even if plaintiffs properly owned shares of Nike stock, they violated the contract for the sale of said stock by failing to deliver the securities or certificates of said stock to defendants as required by the Missouri Uniform Commercial Code (UCC) at Mo. Rev. St at. § 400.8-309. The Investment Securities portion of the Missouri UCC cited by defendants governs the sale and negotiability of “securities” which are instruments or writings issued in bearer or registered form commonly recognized as a medium for investment which evidences a share, participation, or other in property or an enterprise, or evidences an obligation of the issuer. Mo.Rev.Stat. § 400.8-102. This section of the UCC governing the transfer of securities instruments, legal title of such instruments, and their negotiability, is not intended to “embrace the broad field of equitable rights and interests and their methods of transfer.” Duncan v. Kelly, supra, 435 S.W.2d at 29 (distinguishing between the equitable ownership of a share of stock and the transfer of legal title without delivery of a certificate under the Uniform Stock Transfer Law, the predecessor to the Securities section of the UCC); see also Mo.Rev.Stat. § 400.8-101 Missouri Code Comment. Accordingly, defendants’ reliance upon the Missouri UCC — Investment Securities, Mo.Rev.Stat. §§ 400.8-101 through 400.8-406, is misplaced as to matter of endorsement, delivery, breach of warranty and rescission.

8. Now that it is established that plaintiffs owned shares in Nike, the issue is whether that ownership interest was transferred to defendants in consideration for defendants’ promissory note. The “stock power” or assignment executed by plaintiffs and witnessed by defendants, by its terms purports to make just such a transfer.

Missouri has the view of 6 A.C.J.S., Assignments, ¶ 49, p. 664, that “any language, however informal or poorly expressed, if it shows the intention of the owner of the property or chose in action to transfer it, clearly and unconditionally, and sufficiently identifies the subject matter will be sufficient to vest the property therein in the assignee.” See Hal vorson v. Commerce Trust Co., 222 S.W. 897, 898(1) (Mo.App.1920).

Greater Kansas City Baptist and Community Hospital Association, Inc. v. Businessmen’s Assurance Company, 585 S.W.2d 118, 119 (Mo.App.1979). Therefore, the Court finds that defendants received all of plaintiffs’ interest in Nike in return for defendants’ promissory note. Defendants’ defense of insufficiency or lack of consideration must fail as value was recited and given.

9. Defendants suggest that plaintiffs’ ability to sue on the note may be affected in some way by the fact that Nike’s corporate charter was forfeited from January 1, 1979, until the Secretary of State rescinded the forfeiture on March 11, 1980. To the extent that the dealings of the parties in this case could have been limited by a forfeiture, Mo.Rev.Stat. § 351.540(2) provides that corporate acts during forfeiture are certified and validated upon rescission.

The effect of [§ 351.540(2)] for all practical purposes is to treat the forfeiture as if it had never occurred. In plain language the amendment provides for the restoration of all corporate rights and privileges to become effective from the very date of forfeiture and all acts taken between forfeiture and rescission are confirmed and held to be valid. Thus, even though it is unlawful for persons to exercise corporate powers after a charter has been forfeited, once that forfeiture has been rescinded the legislature has forgiven the illegal use of corporate powers.

A.R.D.C., Inc. v. State Farm Fire & Casualty Co., 619 S.W.2d 843, 846 (Mo.App. 1981) (footnote omitted). The forfeiture of Nike’s charter in this case, therefore, has no bearing on the rights of the parties.

10. Defendants also challenge the validity of the March 12 meeting and resulting resolution. They claim that not all of the board of directors were present, some shareholders were not notified, that only the new directors signed the resolution, and the meeting itself was improperly held outside the State of Missouri. However, the meeting was not held outside of Missouri to inconvenience the defendants, defendants sought the meeting itself, the purpose of the meeting was to accommodate defendants’ ownership goals, all other shareholders agreed to reduce their shares in reliance upon defendants’ assurances that he would help Nike survive, defendants signed the resolution as a member of the board of directors, and none of the other shareholders or board members are heard to complain. Even if defendants have the standing to raise these issues on behalf of others, the Court finds the defendants estopped to complain of these actions taken by Nike at his urging and with his full cooperation where plaintiffs have relied on same and as a result ended up owning fewer shares of stock and the company is now out of business. See Central Microfilm Service Corp. v. Basic/Four Corp., 688 F.2d 1206, 1218 (8th Cir.1982), cert. denied, 459 U.S. 1204, 103 S.Ct. 1191, 75 L.Ed.2d 436 (1983) (“The Missouri cases consistently construe an estoppel claim to have three elements: (1) an act or statement inconsistent with the right later asserted; (2) reliance on such act or statement; and (3) injury.”)

11. After careful consideration of the entire record, the Court concludes that plaintiffs did own shares of Nike stock and those shares were transferred to defendants as consideration for defendants’ promissory note. For the reasons discussed above, judgment will be entered for plaintiffs and a reasonable attorney’s fee, plus prejudgment interest at the rate of ten percent per annum from July 15, 1979, will be awarded to plaintiffs as agreed by the parties in the promissory note.

JUDGMENT

In accordance with the memorandum opinion of the Court filed this day, which is incorporated into and made a part of this judgment,

IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that judgment be and the same is entered in favor of plaintiffs, Michael and Barbara Crow, and against defendants, Newspaper Dealer Supply, Inc., and Dennis W. Ramsey, in the amount of $14,500.00, plus prejudgment interest thereon at the rate of ten percent per annum from July 15,1979, a reasonable attorney’s fee, and costs.

IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that, within ten days, defendants shall respond to plaintiffs’ affidavit for attorney’s fees, filed as plaintiffs’ exhibit 9 at trial.


author: McLAUGHLIN, District Judge. JOHN L. CADEN, United States Magistrate.

text:
    UNITED STATES of America, Plaintiff, v. ONE 1980 CADILLAC ELDORADO, Defendant.
    No. CV-82-1712.
    United States District Court, E.D. New York.
    Feb. 8, 1985.

      Raymond J. Dearie, U.S. Atty., E.D.N.Y., for plaintiff; Anne E. Stanley, Asst. U.S. Atty., Brooklyn, N.Y., of counsel.
    Lawrence R. Wild, Brooklyn, N.Y., for claimant.
   ORDER

McLAUGHLIN, District Judge.

The annexed Report and Recommendation of Hon. John L. Caden, United States Magistrate, is hereby adopted as the opinion of this Court. No objections were filed within the time permitted. Fed.R.Civ.P. 72(a).

The Clerk of the Court is hereby ORDERED to enter judgment for plaintiff in accordance with the Magistrate’s Report and Recommendation.

SO ORDERED.

REPORT AND RECOMMENDATION

February 7, 1985

JOHN L. CADEN, United States Magistrate.

This forfeiture proceeding arises out of the government’s seizure of claimant Marie Gregoris’ 1980 Cadillac Eldorado automobile after her husband was arrested for his involvement in an illegal sale of heroin. The government alleges that the Cadillac Eldorado was used to facilitate the drug sale and should therefore be forfeited to the United States pursuant to 21 U.S.C. § 881(a)(4) and 49 U.S.C. § 782. The plaintiff now moves under Rule 56 of the F.R. Civ.P. for summary judgment.

FACTS

On May 27, 1981, Drug Enforcement Administration (“DEA”) agents observed Nicholas Gregoris leave his home in the 1980 Cadillac Eldorado sought to be seized in this action and drive past the home of Thomas LaRocca. The agents observed Gregoris wave at LaRocca and then continue driving to the expressway heading towards New York City. During this period, LaRocca discussed a sale of heroin with a DEA informant and stated that the heroin supplier had gone to the city for the pickup and would deliver the heroin at 9:00 p.m. At approximately 8:40 p.m. that evening, Gregoris arrived at LaRocca’s residence, stayed a few minutes inside the residence and then left in the defendant vehicle. The DEA informant then met LaRocca at LaRocca’s residence and proceeded to buy heroin from him.

Nicholas Gregoris was then placed under arrest and charged with conspiracy to distribute heroin (21 U.S.C. § 841) and in a superseding indictment was charged with intent to distribute heroin. On November 1, 1981, DEA agents seized the defendant motor vehicle pursuant to 21 U.S.C. § 881.

On May 8, 1982, while awaiting trial on the narcotics charge, Nicholas Gregoris, along with his stepson Ralph Specia, were killed in a shootout, in a wholly unrelated incident. The claimant, Marie Gregoris, bought the defendant motor vehicle on December 6, 1979, as co-owners with her son Ralph Specia and her brother Joseph Licari. The car was purchased for a sum of $16,528.60 with a cash downpayment of $8,267.60 supplied by both claimant and her son. The balance was financed and Ralph Specia made all monthly installment payments. The car was registered in Marie Gregoris’s name, however, according to the claimant, the vehicle was bought for her son and he was the principal user. The claimant also alleges that her husband, Nicholas Gregoris, used the car occasionally but she did not authorize such use. Nicholas Gregoris did not have a set of keys to the car and he had another car which he regularly drove, a 1976 Seville Sedan which was also registered in her name but for which her husband had made the downpayment and monthly payments. (Deposition of Marie Gregoris dated August 10, 1983).

DISCUSSION

I. THE GOVERNMENT HAD PROBABLE CAUSE TO SEIZE AND RETAIN THE DEFENDANT VEHICLE

To justify seizure and forfeiture, the government must show that probable cause existed to believe that the vehicle was used to transport or facilitate the transportation or sale of controlled substances, 21 U.S.C. § 881(a), and that the probable cause continued to exist at the time the action was commenced. United States v. One 1975 Lincoln Continental, 72 F.R.D. 535, 540 (S.D.N.Y.1976). Probable cause for the forfeiture of an automobile exists if there are facts sufficient to show that the government had “reasonable grounds for belief of guilt supported by less than prima facie proof but more than mere suspicion.” United States v. 1975 Ford Pickup Truck, 558 F.2d 755, 756 (5th Cir.1977), quoted in United States v. One 1980 BMW 3201, 559 F.Supp. 382 (E.D.N.Y. 1983).

Facilitation has been broadly construed to mean any use or intended use of a vehicle which makes trafficking in contraband “less difficult and laborious,” it is not necessary that contraband be actually found within the vehicle. United States v. One 1974 Cadillac Eldorado Sedan, 548 F.2d 421, 426 (2d Cir.1977); accord, United States v. Fleming, 677 F.2d 602, 610 (7th Cir.1982). For example, in this Circuit it is well established that a vehicle is subject to forfeiture if it was used to transport the peddler or his confederates to the scene of the sale or to a meeting where a sale is discussed. United States v. One 1974 Cadillac Eldorado Sedan, supra at 426.

Applying this standard to the facts and circumstances of this case, it is clear that the government had probable cause to believe that the Cadillac Eldorado was used to facilitate the sale of narcotics. Thomas LaRocca sold heroin to a DEA informant. Prior to the sale, the DEA agents were aware that the ultimate source of the heroin would be going to the city to obtain the heroin and drop it off at LaRocca’s residence. Given the movements of Nicholas Gregoris, prior to the drug transaction, the agents could have reasonably believed that Gregoris was transporting and delivering the heroin to LaRocca where the sale was consummated. Therefore, it is clear that the government had probable cause to seize the Cadillac Eldorado and hence, probable cause to commence this action.

Once probable cause for forfeiture of the car exists, the claimant has the burden of demonstrating a defense sufficient to absolve the seized property from culpability. United States v. One 1972 Toyota Mark II, 505 F.2d 1162, 1165 (8th Cir.1974); United States v. U.S. Currency, 495 F.Supp. 147 (E.D.N.Y.1980). In her answer to the Complaint, the claimant, Marie Gregoris, who is the registered owner of the car asserts as an affirmative defense that she did not authorize or intend her husband to use the car. Therefore, she seeks to come within the express statutory exception to forfeiture where the property had been taken from the owner without her privity or consent. 21 U.S.C. § 881(a)(4)(A). However, in order for an owner to sustain a defense to a forfeiture action based on unauthorized use of the vehicle, the claimant must establish that the user was in possession of the vehicle unlawfully and that the user acquired possession of the vehicle by a criminal action. United States v. One 1978 Chrysler Le-Baron, 531 F.Supp. 32 (E.D.N.Y.1981). In this case, Marie Gregoris has acknowledged that her husband had driven the car on several occasions to go to the shore. (Deposition of Marie Gregoris at 8). Moreover, there is no claim that the automobile was stolen. Therefore, in the context of the relationship between the parties, and the prior unrestricted use of the vehicle by Nicholas Gregoris it cannot be said that the possession and acquisition of the vehicle was unlawful.

II. CLAIMANT’S INNOCENCE OF CRIMINAL WRONGDOING DOES NOT DEFEAT THE FORFEITURE

The issue of claimant’s lack of involvement in and awareness of the criminal activity poses a more difficult question. It is well established that an owner who is innocent of any wrongdoing may still be compelled to forfeit his vehicle which was used in an illegal transaction. See, CaleroToledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 94 S.Ct. 2080, 40 L.Ed.2d 452 (1974); United States v. One 1974 Cadillac Eldorado Sedan, supra. However, the Supreme Court, in dicta, has opined that forfeiture could violate the due process rights of an owner where the innocent owner showed “not only that he was uninvolved in and unaware of the wrongful activity, [but also that he] had done all that reasonably could be expected to prevent the proscribed use of his property ...” Calero-Toledo v. Pearson Yacht Leasing Co., supra at 689, 94 S.Ct. at 2094.

Courts which have applied this standard have found no defense for an innocent owner where the owner had notice of the user’s involvement in drug trafficking, but took no steps to avoid having her vehicle used for an unlawful purpose. United States v. One 1980 BMW 3201, supra; United States v. One 1976 Buick Skylark, 453 F.Supp. 639, 643 (D.Colo.1978). See also, United States v. One 1973 Buick Riviera Auto., 560 F.2d 897 (8th Cir.1977) (innocence no defense where owner-father knew of user-son’s prior narcotics arrest and allowed son to operate car with little restriction); United States v. One 1971 Chevrolet Corvette, 393 F.Supp. 344 (E.D.Pa.1975) (innocence no defense where wife knowing husband’s prior criminal activity purchased the car, put title to car in both names and gave husband a set of keys).

The availability of the defense to forfeiture is a close one in this case since the claimant purchased the car in her own name for her son’s use and it is possible that she did not have reason to believe that her husband would use the car in connection with a criminal enterprise. In fact, Marie Gregoris denies that during her 18 years of marriage to Nicholas Gregoris she had any knowledge of her husband’s drug activity; she alleges that she never knew he was arrested before this incident, and never saw him use drugs. She also stated that her husband did not have a set of keys to the car.

However, a careful review of the record leads to the conclusion that Marie Gregoris’s alleged innocence should not be a bar to forfeiture since she fails to fall within one of the narrow exceptions enunciated in Calero. The car was bought for and primarily used by her son Ralph Specia and all incidents of ownership of the car— repairs, monthly installment payments, insurance, etc., were in fact her son’s. She used the car, if at all, with her son’s permission, but did not need it daily because she did all her work at home. (Deposition of Marie Gregoris at 15-17). From this it is clear her ownership of the car is in title only, and there is nothing in the record to show she attempted to exercise any control over it.

Finally, even if her assertion of ownership were to be credited, she cannot be said to have done all that could reasonably be expected to prevent the illegal use of the automobile. Given the facts in this case, that claimant lived with her husband for 18 years of marriage and her husband had been arrested at least twice before, one time on narcotics charges, it is not unreasonable to infer that claimant had notice of her husband’s involvement in drug trafficking. Under the circumstances, she had a duty to try to prevent any illegal use of the car. Her failure to fulfill this duty prevents her from asserting her innocence as a defense to forfeiture.

Accordingly, the government’s motion for summary judgment should be granted.

Any objections to the recommendation of this report should be filed with the Honorable Joseph M. McLaughlin within 20 days of your receipt of this report.

      . The undersigned acknowledges receipt and has considered in this case the Affidavit In Opposition To Motion For Summary Judgment by the claimant, dated January 25, 1985. Claimant’s statements vary from her deposition testimony to the extent that she now alleges that her son never allowed her husband or herself to use the defendant vehicle and it was used exclusively by her late son. (Affidavit by Marie Gregoris at 2, January 25, 1985).


text:
    INTERNATIONAL PAPER COMPANY, Plaintiff, v. TRANSPORTES NAVIEROS ECUATORIANOS, Defendant.
    84 Civ. 4601 (RWS).
    United States District Court, S.D. New York.
    Feb. 12, 1985.

      Gilbride, Tusa, Mirone, Last & Spellane, New York City, for plaintiff; Robert C. Mirone, New York City, of counsel.
    Nourse & Bowles, New York City, for defendant; John E. Bradley, New York City, of counsel.
   OPINION

SWEET, District Judge.

This is a motion for summary judgment brought by defendant Transportes Navieros Ecuatorianos (“Transportes”) in an admiralty action filed by plaintiff International Paper Co. (“Paper”). The motion is granted, and the case is dismissed.

Facts

The facts necessary to resolve the motion are undisputed. Transportes is an ocean common carrier, serving ports on the United States’ Atlantic and Gulf coasts and ports in Ecuador. At all times material to this action Transportes was a member of the United States Atlantic & Gulf/Ecuador Freight Conference (the “Conference”), an association of three ocean common carriers serving the same region. The Conference has published a freight tariff which sets forth the specific rates and charges to be applied by Conference members on various routes. The tariff is on file with the Federal Maritime Conference (“FMC”).

On September 7, 1983, Edward Massoni (“Massoni”), an employee of Paper, placed an order with Hansen & Tidemann, Inc. (“H & T”), Transportes’ agent, for the shipment of nine, 40' containers said to contain 360, 380 pounds of boxboard from New Orleans to Ecuador. Massoni alleges that H & T quoted a price of $80.00/short ton when the shipping order was placed and later confirmed that price. The containers were delivered to Transportes in New Orleans on September 19, and a bill of lading reflecting the delivery and a shipping rate of $156.00/short ton was issued by H & T, as agent for Transportes. On September 23, 1983, upon receiving the bill of lading reflecting the $156.00 rate, Massoni called H & T to clarify the discrepancy in rates. Massoni claims that an H & T employee acknowledged that the rate was $156.00/short ton, not $80.00/short ton as previously stated, and that on October 4, 1983, H & T advised Paper that a letter of correction would be sent. The $156.00 rate resulted in a bill of $28,109.64, while the $80.00 rate, applied without a minimum, would produce a bill of $14,415.20.

At all times relevant to this proceeding the tariff rate applicable to the goods shipped was controlled by the twelfth revision of page 128-1 of the Conference Tariff (“Exhibit One”). The tariff was $156.00 for “Boxboard, in 40' carrier’s containers,” a tariff which was not subject to minimum revenue requirements. The tariff was $80.00 for “Boxboard, not corrugated,” a tariff which was subject to minimum revenue requirements.

Discussion

Transportes charged based on a tariff of $156.00/short ton and was accordingly paid $28,109.64. Paper claims that the appropriate rate was $80.00/short ton and that it has paid excess charges of $13,694.44.

46 U.S.C. § 817(b)(1) (1984 Supp.) provides in relevant part as follows:

Every common carrier by water in foreign commerce and every conference of such carriers shall file with the [Federal Maritime] Commission and keep open to public inspection tariffs showing all the rates and charges of such carrier or conference of carriers for transportation to and from United States ports and foreign ports between all points on its own route and on any through route which has been established.

46 U.S.C.A. § 817(b)(3) provides that:

No common carrier by water in foreign commerce or conference of such carriers shall charge or demand or collect or receive a greater or less or different compensation for the transportation of property or for any service in connection therewith than the rates and charges which are specified in its tariffs on file with the [Federal Maritime] Commission and duly published and in effect at the time; nor shall any such carrier rebate, refund, or remit in any manner or by any device any portion of the rates or charges so specified nor extend or deny to any person any privilege or facility, except in accordance with such tariffs....

As a means of enforcing the foregoing section, Congress provided for the assessment of stringent civil penalties for each violation of section 18(b)(3):

Whoever violates subsection- (b)(3) hereof by means of rebates or refunds, shall be subject to a civil penalty of not more than $25,000 for each shipment on which a rebate or refund was paid and to suspension by the [Federal Maritime] Commission of any or all tariffs filed by or on behalf of such carrier, or suspension of the carrier’s right to utilize any or all tariffs of conferences of which that carrier may be a member, for a period not to exceed twelve months.”

46 U.S.C.A. § 817(b)(7) (1984 Supp.)

The statutory structure requires a carrier to charge the commodity rate appearing in its tariff or its conference tariff. The courts have held consistently that a carrier must charge the published tariff rate, and may not deviate from that rate due to mistake, inadvertance, or contrary intentions of the parties. See Sea-Land, Serv., Inc. v. American Intern. Movers, 528 F.Supp. 224, 225-26 (W.D.Wash.1981) (“Despite America’s insistence that some agent for Sea-Land quoted a rate less than that now demanded, the proof conclusively establishes that proper charges were made through a correct application of [the tariff]. The law is well-settled that a carrier must charge rates in accordance with filed tariffs, and that even a misquotation by the carrier or its agent of proposed shipment charges will not preclude later action for the proper freight charge, with is mandatory.”); United States v. Seatrain Lines, Inc., 370 F.Supp. 483, 484 (S.D.N.Y.1973) (“[The tariff] rate must be charged and paid regardless of seemingly innocent justifications for departure such as mistake, inadvertance or contrary intention of the parties ... [citations omitted]. Indeed, courts have consistently held that in an action predicated on a failure to comply with a published tariff the balance of equities between the parties is not even to be considered[.]”) See also, Louis & Nash. R.R. v. Maxwell, 237 U.S. 94, 35 S.Ct. 494, 59 L.Ed. 853 (1915).

As a matter of law, consequently, a rate stated on the tariff must be charged. Paper’s assertion that rates other than those stated on the tariff were quoted to Paper does not serve to limit Paper’s liability for the full tariff rate. Paper’s somewhat belated allegation of fraud is neither pled in the complaint nor substantiated with any facts.

The application of the tariff rates (Exhibit One) to the goods shipped requires a selection between the two boxboard rates. Because only the $156.00 rate is exempted from the minimum revenue requirements, Paper actually saved $13,965.36 by application of the higher per ton rate (Affidavit of John O’Neil). Only by application of the $80.00 per ton rate without the minimum revenue requirements would Paper save money and be able to recover. The $80.00 rate is not exempt from the minimum revenue requirements, however. Only a specific exemption in the tariff can eliminate the minimum requirements, and Paper’s assertion that H & T had not made clear that a minimum revenue requirement applied to the $80.00 rate is unavailing. The stated tariff rate determines the proper charge.

Conclusion

The motion for summary judgment is granted, and the case is dismissed. The clerk is directed to enter judgment.

IT IS SO ORDERED.