Page images
PDF
EPUB

(289 F.)

liquidation purposes), and if then the banks had had and had exercised the right of set-off claimed by the present appellant, substantially all of the assets would have been appropriated by the bank creditors, leaving nothing for the general merchandise creditors. A result more obnoxious to the principle of equality, which underlies the Bankruptcy Act, can hardly be imagined. Compare In re Fairburn Oil & Fertilizer Co. (D. C.) 240 Fed. 835; First National Bank v. Harper, 254 Fed. 641, 166 C. C. A. 139.

The decree of the District Court is affirmed, with costs to the appellees.

In re CLARK & MCMASTER PIANO CO.

(Circuit Court of Appeals, Second Circuit. March 26, 1923.)

No. 58.

1. Bankruptcy 228-On review of referee's finding, exceptions to referee's report are improper.

On petition to review referee's finding, exceptions to the referee's report are improper, under General Order XXVII (89 Fed. xi).

2. Bankruptcy 463-Return of cause to District Court, to permit record to be corrected by inserting matters in summary of evidence, will be denied.

On appeal from order, a motion to return the cause to the District Court to correct the record by inserting matters in the summary of evidence to show that the finding below was erroneous, will be denied.

3. Bankruptcy 314(1)—Trustee held bound by bankrupt's agreement for settlement.

Where creditors agreed to surrender their claims in consideration of the debtor corporation's amending its articles of incorporation to permit the issuance of preferred stock and delivering to each creditor an amount of preferred stock, and the stock was delivered to one of the creditors for delivery to the others, held that, where one of the creditors and its subsequently appointed trustee in bankruptcy never accepted such stock, but the trustee filed claim against the estate of the debtor, who also became bankrupt, for the amount of such creditor's indebtedness, such claim was properly disallowed, the failure to accept the stock constituting a breach of the agreement only, so that the trustee of the creditor was bound by the agreement, though he never received the stock.

Appeal from the District Court of the United States for the District of Vermont.

In the matter of the Clark & McMaster Piano Company, bankrupt. From an order Charles H. Keith, as trustee in bankruptcy of the National Piano Company, appeals. Affirmed.

Appellant, Keith, represents as trustee in bankruptcy the National Piano Company (hereinafter called the National), and the order appealed from in substance refused to recognize said National or its trustee as a creditor having a provable debt against the estate of the Clark & McMaster Piano Company (hereinafter called Clark). Clark was adjudicated February 15, 1917. The National was similarly adjudicated in Massachusetts June 19, 1916.

On May 26, 1916, the National was a creditor of Clark in the sum of upwards of $19,000, almost wholly represented by promissory notes of Clark, and at the same time several other persons and corporations were similarly creditors of Clark, and all were desirous of strengthening Clark's financial situation. Moved by this consideration, these creditors, on the day last given, entered

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

into an agreement with each other and with Clark, whereby each creditor agreed to surrender or transfer his claim to Clark in consideration of the lat ter so amending its articles of incorporation as to permit the issuance of preferred stock and then delivering to each of the creditors aforesaid an appropriate allotment of said preferred stock. There were other details to this agreement, such as providing for representation of the creditors aforesaid in the management of Clark, but they appear to be immaterial.

In pursuance of the agreement aforesaid, Clark on June 9, 1916, filed in the proper office in Vermont a certificate amending its articles of association and providing (inter alia) for the issuance of the preferred stock aforesaid. On or about June 19, 1916, certificates of said preferred stock were in pursuance of the agreement hereinabove set forth lodged with one of the creditors aforesaid named Jordan, for delivery (inter alios) to National. But neither National nor its trustee in bankruptcy has ever applied for or accepted the shares of preferred stock aforesaid, but, on the contrary, filed a claim against the bankrupt estate of Clark on the indebtedness of the latter to National as the same existed on May 26, 1916.

After an extended trial before the referee in bankruptcy the claim was disallowed. The matter was taken by petition of review before the District Court, which affirmed the referee's finding, and this appeal followed.

Lee M. Friedman and Friedman, Atherton, King & Turner, all of Boston, Mass., for appellant.

Robert E. Healy, of Bennington, Vt., and Marvelle C. Webber and P. M. Meldon, both of Rutland, Vt., for appellee and sundry credi

tors.

Before ROGERS, HOUGH, and MAYER, Circuit Judges.

*

HOUGH, Circuit Judge (after stating the facts as above). [1] One point of practice may be noted. The statement prefixed to this opinion consists of the material findings of fact made by the referee. When by petition of review appellant took the matter before the District Judge, he filed elaborate exceptions to the referee's report. This is not the practice. The matter of review by the District Court is fully regulated by the twenty-seventh General Order in Bankruptcy (89 Fed. xi), which requires the petitioner to file his petition "with the referee setting out the error complained of." This is the only exception or assignment of error required or permitted. By the same order the referee is required to certify to the judge the question presented, and to submit his finding and order together with a summary of the evidence. Exceptions such as are shown in this transcript merely incumber the record. We hear the case, as did the District Judge, on the referee's return.

[2] Since the argument of this appeal appellant has moved to return the cause to the District Court in order that the "record may be * * * corrected." Argument shows that this really means to insert in the summary of evidence certain matters calculated to show that the proceedings on the part of Clark, resulting in the issue of preferred stock, were so defective that there never was any valid preferred Clark stock. The conclusion sought to be reached is directly opposed to a finding made by the referee and supported by evidence. Whatever virtue there was in this contention has been apparent from the beginning, and it is much too late to raise the point in this court. The motion is denied.

(289 F.)

[3] The statement prefixed to this opinion also shows that there was an agreement or contract duly formed between certain creditors of Clark inter sese, and also with Clark. This contract necessarily remained executory until (e. g.) Clark delivered the preferred stock and National surrendered its notes. We agree with the referee's finding that National committed a breach of this agreement, but whether that breach occurred before petition filed against National, or whether the latter's bankruptcy itself constituted the breach, remains uncertain; but this is immaterial.

It suffices that there was a breach of a valid agreement as found by the court below, a result with which we agree. It therefore follows that National's trustee (the present appellant) is substantially claiming that by the proven breach he has become entitled to prove on the original debt. The unusual facts at bar present a question of more curiosity than importance, viz.: Was the contract one for an accord and satisfaction, or one of compromise and settlement; or was it a composition with creditors?

In the court below it was treated as one of compromise and settlement, and governed by Boston, etc., R. R. Co. v. Union, etc., Co., 92 Vt. 137, 143, 101 Atl. 1012; and this was clearly right, if the agreement was properly called a compromise and settlement, because the contract was fair and just, compromises are favorably regarded in a court of equity, and a court of bankruptcy is one of equity, which should therefore uphold and enforce any compromise agreement which does not override any other principle guiding chancery in the enforcement of contractual obligations. If the agreement be regarded as a composition with creditors, we find present all the elements necessary for the validity of such a contract, to wit, good faith, absence of secret preferences, and stipulations by and between, not only debtor and creditor, but between the creditors themselves.

The appellant now claims that the agreement was one of accord and satisfaction, and that, inasmuch as National never received the consideration agreed on, it may still sue on the original debt. It is true that, at law, a plea of accord and satisfaction must not only allege the agreement clearly, but declare that it was executed by the acceptance of the agreed consideration. Young v. Jones, 64 Me. 563, 18 Am. Rep. 279. The court, however, in that case, added that the remedy of the defendant, whose offer of the consideration had been refused, was to sue the plaintiff for failure to perform his end of the contract. does not follow that such circuity of procedure is necessary in equity, but every composition agreement is a species of multiple accord and satisfaction, and it is an exception to the rule of law just referred to, so that in cases of composition the contract for the same is a bar even to an action at law to recover on the original debt by one who agreed to the composition, although the same remains executory at date of action brought. Kromer v. Heim, 75 N. Y. 574, 31 Am. Rep. 491.

It

Thus we are not concerned to assign with nicety this contract to any particular legal pigeonhole. In truth it partakes of the nature of all three; but, whatever it be called, the result is the same, and the action of the court below was both morally and legally right.

Order affirmed, with costs.

1. Sales

GILBERT GROCERY CO., Inc., v. HOWELL et al.

(Circuit Court of Appeals, Fourth Circuit. May 17, 1923.)

No. 2085.

22 (3)-Recognition of contract binding on defendant buyer. Where, on receipt of defendant's order for sugar, plaintiffs returned to defendant, through a broker, a so-called confirmation, having stamped on it, "Ship sight draft against B/L," a departure from the usual terms, this amounted to a counter offer on new terms, and by defendant's repeatedly recognizing, in subsequent letters to seller, the existence of a contract between it and the seller, such altered terms were accepted by defendant.

2. Sales 384(7)-Seller held to have right to resell.

Where defendant buyer rejected sugar in August, and seller stored it in a warehouse and resold it in November, seller held entitled to recover the difference between the contract and resale price, whether or not title had passed at time of resale.

3. Sales 334-Seller may resell at any time while default continues.

Under Virginia law, on buyer's default, if seller elects to resell, he is not bound to make such election immediately after vendee's default, but may do so at any time while the default continues.

In Error to the District Court of the United States for the Western District of Virginia, at Lynchburg; Henry Clay McDowell, Judge. Action by Frederick H. Howell and others, doing business under the firm name of B. H. Howell, Son & Co., against the Gilbert Grocery Company. Judgment for plaintiffs, and defendant brings error. Affirmed.

J. Field Wardlaw and A. R. Long, both of Lynchburg, Va. (Harrison, Long & Williams and Wilson, Manson, Hobbs & Wardlaw, all of Lynchburg, Va., on the brief), for plaintiff in error.

S. V. Kemp, of Lynchburg, Va. (Kemp, Barksdale & Abbot, of Lynchburg Va., on the brief), for defendants in error.

Before WOODS, WADDILL, and ROSE, Circuit Judges.

ROSE, Circuit Judge. This is one of the many sugar cases with which, since August, 1920, the courts have been called upon to deal. In what is here said, it will be convenient to refer to the parties by the position they occupied below; that is, the defendants in error will be called the plaintiffs, and the plaintiff in error the defendant. The former are citizens of New York, trading under the firm name of B. H. Howell, Son & Co. They were, at the time the controversy arose, extensive dealers in sugars, as they had been for many years before. The defendant was a corporation of Virginia, carrying on the business of a wholesale grocer at Lynchburg. For a decade or more, it had been a regular customer of the plaintiffs. Its orders for sugar were usually given through the plaintiffs' only representative in Lynchburg, a merchandise broker named Lee. The terms of payment, 2 per cent. off for cash in seven days, had been unchanged for years, and the defendant, in ordering sugars, never said anything about them. July 12, 1920, there were still unfilled orders for sugars of an aggre

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

(289 F.)

gate price of upwards to $9,000. On that day, defendant gave Lee orders for two more cars, the price of which, at the stipulated figure of 22 cents a pound, was approximately $30,000. Lee, as was his practice, put these orders in quintuplicate, upon the regular blanks of the plaintiffs, and sent four of them to the latter, retaining one for his own files. Upon these blanks, as usual, appeared the statement that delivery was complete on receipt of goods by carrier. When the plaintiffs' credit man received these orders, he noticed that the possible or probable effect of filling them upon the terms of payment which had theretofore governed the dealings would be to give the defendant a credit of almost $40,000, when it never before had owed the plaintiffs more than one-fourth of that sum.

[1] It was well understood that no contract was concluded until the plaintiffs had accepted the order sent by the broker. Its acceptance was habitually evidenced by the return to the broker of one of the copies he had sent the plaintiffs. In trade parlance, the one which came back was called the "confirmation." For many years the business relations between the parties had been so much of a matter of course that the broker had not delivered these confirmations to the defendant, or even shown them to it. In the instant case, however, the plaintiffs, before returning the confirmation, stamped on it, "Ship sight draft against B/L," and as this was a departure from the usual terms, the broker, so soon as the so-called confirmation reached Lynchburg, apparently on July 17th or 18th, took it to the defendant and showed it to the president of the latter. That gentleman asked why the plaintiffs had changed the usual terms. The broker did not know. It was suggested that it was unintentional, perhaps a clerical error. The broker said he would write and inquire about it. He apparently did so, but he never had anything more to say about it to the defendant, and, what is more important, the defendant never said another word about it to him. There was no possible question of plaintiffs' right to alter the terms of the order, if they chose, and, of course, equally none of defendant's right to refuse to contract upon the new terms; but, if the defendant exercised this privilege, there was obviously no agreement at all between the parties.

By July 18th the earlier orders had been delivered, and, unless the agreements dated the 12th were in force, the plaintiffs owed no sugar to the defendant. Nevertheless, beginning on August 4th, at least 17 days after defendant had seen the confirmation in the form in which plaintiffs had put it, and continuing up to the 19th of August, there are in the record no less than six letters or telegrams from the de-. fendant to the plaintiffs, each recognizing the existence of a contract between them. The earlier of these urged the prompt shipment of sugars; then followed others asking that the delivery be withheld, and then some which sought to cancel the orders, on grounds now conceded to be insufficient, if a contract had been made at all. It was not until the 25th of August, the defendant for the first time set up the claim that it had never agreed to the altered terms, and that, in consequence, no contract had ever been entered into.

Upon this state of facts, the learned judge below was right in in

« PreviousContinue »