Moore, Friendly and Feinberg, Circuit Judges.
Fabric Garment Co., Inc. (Fabric), Mayflower Manufacturing Corp. (Mayflower), Joseph Abrams and Murray Berman appeal from a judgment for money damages entered against them in a conversion action tried without a jury in the District Court for the Eastern District of New York.
The plaintiff-appellee, the United States, through the New York Quartermaster Procurement Agency, during the course of 1951 had entered into four contracts with Fabric for the manufacture of Eisenhower military jackets. Under the terms of the contracts, the Government furnished Fabric with bolts of 18 oz. O.D. (Olive Drab) wool serge, out of which the jackets were to be made. Title to the material remained in the Government. Fabric was obliged to return to the Government all scrap and surplus material not returned in the form of acceptable jackets.
Fabric received a total of 578,147 linear yards of 55inch wide cloth and 141,336 linear yards of 56inch wide cloth, or, in all, the equivalent of 709,159 yards of 56inch wide cloth. Fabric returned 454,814 finished jackets, numerous sample jackets, and 89,238 lbs. of clippings. The clippings returned were the equivalent of 79,322.66 yards of 56inch cloth.
The gist of the Government's complaint is that Fabric did not return as jackets or as scrap all of the material furnished to it, but withheld and converted considerable amounts of the material to its own use. The complaint stated two claims: first, that Fabric, its president Hyman, and its secretary Abrams, had converted some 46,451 yards of the cloth; and second, that the same defendants, together with Mayflower and its president Murray Berman, had converted and sold approximately 19,000 yards of the same cloth, selling it to Alert Trading Corp. and David Q. Hartman.*fn1
The trial court found after a trial which lasted over five weeks that appellants had failed to account for 39,822 yards of 56inch cloth,*fn2 of which the court estimated 23,408 yards to be in the form of yard goods worth $6.12 a yard, and 16,414 yards to be in the form of scrap, clippings, and goods damaged in weaving or manufacture, worth a total of $1,846.50. The court accordingly awarded judgment against Fabric and Abrams*fn3 on the first claim in the amount of $145,103.46, with interest from July 21, 1952. The court found that Fabric through Abrams had supplied Mayflower with 19,551 7/8 yards of Government serge which Mayflower in turn sold although its president Berman knew that the serge had been converted by Fabric. The court accordingly awarded judgment against Fabric, Abrams, Mayflower and Berman on the second claim, in the amount of $119,657.47 plus interest from August 20, 1951.
1. The Use of the Prior Criminal Convictions.
In 1954, Abrams, Hyman, Fabric, Mayflower, Berman, Alert Trading Corp. and Hartman were indicted for unlawfully selling approximately 19,000 yards of Government-owned wool serge, in violation of 18 U.S.C. § 641, and for conspiring to defraud the Government and to make false statements to the Government in violation of 18 U.S.C. § 1001. In a separate indictment, joined with the first for purposes of trial, Abrams, Hyman and Fabric were charged in eight counts with making false statements as to the disposition of Government-owned wool serge, in violation of 18 U.S.C. § 1001. Both indictments concerned the same wool serge furnished to Fabric by the New York Quartermaster Procurement Agency which is the subject of the present action for conversion. The jury acquitted Alert Trading Corp. and Hartman; the other defendants were convicted on all counts charged. On appeal, we reversed for lack of evidence all of the convictions of Hyman and the convictions of Fabric and Abrams on two of the eight false statement counts. All other convictions were affirmed. United States v. Fabric Garment Co., 262 F.2d 631 (2d Cir. 1958), cert. denied, 359 U.S. 989, 79 S. Ct. 1117, 3 L. Ed. 2d 978 (1959).
In the present action for conversion, the Government moved for summary judgment on the grounds that many of the critical issues had been conclusively determined against the defendants in the criminal action. After careful analysis, the trial court denied the motion in part and granted it in part. It held that the 18 U.S.C. § 641 conviction did not conclusively determine that 19,000 yards of serge were converted by Fabric, Abrams, Mayflower and Berman, since the exact amount converted was not a necessary element of the criminal conviction and was not "'distinctly put on issue and directly determined' in the criminal prosecution." Emich Motors Corp. v. General Motors Corp., 340 U.S. 558, 569, 71 S. Ct. 408, 414, 95 L. Ed. 534 (1951). However, the court held that the § 641 conviction determined that Fabric, Mayflower, Abrams and Berman unlawfully, willfully, and knowingly sold, conveyed and disposed of wool serge made under contract for the Government. The court also held that the § 1001 convictions determined that Fabric and Abrams unlawfully, willfully and knowingly made materially false and fraudulent statements as to the amounts of inventory on hand under certain contracts and as to whether they had returned as jackets or as scrap all the material furnished to them by the Government.
Appellants contend that the trial court erred in holding that the previous criminal convictions determined these issues for the purposes of this case. They maintain that the trial court should have applied the law of New York with respect to the effect of previous judgments, under which law previous criminal convictions are no more than prima facie evidence of the material facts involved. Schindler v. Royal Ins. Co., 258 N.Y. 310, 314, 179 N.E. 711, 80 A.L.R. 1142 (1932). We do not need to decide whether the Schindler rule, the weakness of which was recognized by the Schindler court itself, is still the law in New York, see Hinchey v. Sellers, 7 N.Y.2d 287, 197 N.Y.S.2d 129, 165 N.E.2d 156 (1959), since it is clear to us that the trial court properly applied federal rather than state law. We have previously held that in an action to enforce a federal claim, here the Government's rights in its own property, the effect to be given a prior federal judgment is a matter of federal law. See Zdanok v. Glidden Co., 327 F.2d 944, 956 (2d Cir.), cert. denied, 377 U.S. 934, 84 S. Ct. 1338, 12 L. Ed. 2d 298 (1964).
Under federal law, a prior criminal conviction will work an estoppel in favor of the Government in a subsequent civil proceeding with respect to "questions 'distinctly put in issue and directly determined' in the criminal prosecution. * * * In the case of a criminal conviction based on a jury verdict of guilty, issues which were essential to the verdict must be regarded as having been determined by the judgment." Emich Motors Corp. v. General Motors Corp., 340 U.S. 558, 569, 71 S. Ct. 408, 414, 95 L. Ed. 534 (1951); see Local 167, Int'l Bhd. of Teamsters etc. v. United States, 291 U.S. 293, 298, 54 S. Ct. 396, 78 L. Ed. 804 (1934). The trial court, after the careful examination of the record as required by Emich, correctly determined the collateral estoppel consequences of the previous convictions.
We find no merit in appellants' contention that no weight should be attributed to the previous convictions because of allegedly improper suppression by the Government of exculpatory ...