Source: https://law.justia.com/cases/federal/appellate-courts/F2/273/767/456027/
Timestamp: 2020-06-01 20:57:21
Document Index: 569839859

Matched Legal Cases: ['§ 1332', '§ 436', '§ 148', '§ 270', '§ 893', '§ 15', '§ 7']

Wickahoney Sheep Company, an Idaho Corporation, and Bank of Idaho (formerly Continental State Bank), an Idaho Corporation, Appellants, v. C. A. Sewell, Orene H. Sewell and Orville R. Wilson, Appellees, 273 F.2d 767 (9th Cir. 1959) :: Justia
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Wickahoney Sheep Company, an Idaho Corporation, and Bank of Idaho (formerly Continental State Bank), an Idaho Corporation, Appellants, v. C. A. Sewell, Orene H. Sewell and Orville R. Wilson, Appellees, 273 F.2d 767 (9th Cir. 1959)
US Court of Appeals for the Ninth Circuit - 273 F.2d 767 (9th Cir. 1959) December 11, 1959
Wickahoney made the original down payment, but failed to make the payment due on October 10, 1956, and sellers mailed a notice of default which was received by Wickahoney on January 17, 1957. A copy of the notice was sent to the Bank and received by it on January 16, 1957. Wickahoney failed to remedy the default within the 90-day period and the sellers, about two weeks thereafter, filed this action and demanded judgment against Wickahoney for recovery of possession of the property, together with the lambs and increase born of the sheep, or the value thereof. Appellees also sought return of all documents held by the Bank as escrow holder, which documents the Bank deposited with the Court.
Appellants are Idaho corporations and appellees are citizens of Nevada. Jurisdiction in the District Court derived from diversity of citizenship and the rights of the parties are governed by State law. 28 U.S.C.A. § 1332; Angel v. Bullington, 1947, 330 U.S. 183, 67 S. Ct. 657, 91 L. Ed. 832.
Judgment was entered against Wickahoney for $149,452.68, the total of the above amounts, and against the Bank for $86,082.50, the amount derived from the sale of sheep and lambs and turned over to the Bank by Wickahoney. All monies paid by the Bank on the judgment against it were to be applied in partial satisfaction, pro tanto, of the judgment against Wickahoney. The judgment further ordered the clerk of the court to deliver the escrow documents to appellees and to pay to appellees $54,655.04, the balance turned over to the clerk by the receiver after deduction of all receivership costs and expenses, this amount also to be applied in satisfaction of the judgment against Wickahoney.
The only provision in either agreement dealing with possible conflict between them is the following clause in the Escrow Agreement: "It is further agreed that if any part of the escrow agreement and this agreement are in conflict, then the provisions of this agreement shall govern." The ambiguity is apparent. If the term "escrow agreement" is literally read as such, and the term "this agreement" is taken to refer to the agreement in which it is found, the Escrow Agreement, then the provision in effect reads: "* * * if any part of the escrow agreement and the escrow agreement are in conflict, then the provisions of the escrow agreement shall govern." All parties agree that such a meaningless result is to be avoided, but differ as to the proper construction. The theory of appellees is that as the Escrow Agreement is clearly labeled as such, the term "escrow agreement" means just that, and the term "this agreement" must refer to the only other agreement involved, i. e., the Purchase Agreement, with the result that in the event of conflict the Purchase Agreement governs. Appellants, on the other hand, interpret "this agreement" as referring to the agreement in which the term is found, i. e., the Escrow Agreement, and thus the term "escrow agreement" must be taken to mean the agreement put in escrow, the "escrowed agreement," i. e., the Purchase Agreement. Under this construction, the Escrow Agreement would govern in the event of conflict.
It is true that forfeitures are regarded with disfavor and strict compliance with forfeiture provisions is traditionally required, Stockmen's Supply Co. v. Jenne, 1951, 72 Idaho 57, 237 P.2d 613; Marks v. Strohm, 1944, 65 Idaho 623, 150 P.2d 134; 12 Am.Jur. 1016 (Contracts § 436), but literal compliance in this case would have been a meaningless gesture.
The purpose of notice of default in the usual case is to give the party allegedly in default an opportunity to remedy the default and meet his obligator, Bintz Company v. Mueggler, 1944, 65 Idaho 760, 154 P.2d 513, and notice in the prescribed manner is not required where a party has actual notice and has not suffered prejudice. Quinn v. Hartford Accident & Indemnity Co., 71 Idaho 449, 232 P.2d 965. Conceding a somewhat stricter standard is applicable where a forfeiture is sought, we do not think appellees' failure to follow the circuitous procedure of the Escrow Agreement prejudiced appellants. Both Wickahoney and the Bank received notice of default directly from appellees by registered mail and there is no question of the adequacy of the notice itself. To have routed one copy through the Bank would have given Wickahoney nothing more than it received directly.2
The parties agree that in an action of claim and delivery the general rule in Idaho is that property is to be valued as of the time of taking. Tannahill v. Lydon, 31 Idaho 608, 173 P. 1146; Unfried v. Libert, 20 Idaho 708, 119 P. 885; Cornwall v. Mix, 3 Idaho 687, 34 P. 893. Appellees, however, submit that jurisdictions, such as Idaho, which accept market value at time of wrongful taking as the proper measure recognize an exception and allow the prevailing party a higher value where an enhanced price is realized or could have been realized within a reasonable time after taking. 46 Am.Jur. 80 (Replevin § 148); 77 C.J.S. Replevin § 270, p. 194. It does not appear that the courts of Idaho have been called upon to pass on this question, but there is good reason for adopting this "exception" in this case.
C. A. Sewell, one of the sellers, testified that he had run the sheep company for some years prior to the sale to Wickahoney, and that winter lambs "stayed on their mother" until shipment, which began around the first of July. Had Wickahoney returned the sheep to appellees after the forfeiture was declared, appellees could have sold the lambs at the usual market time and realized the same price as Wickahoney. To allow appellants the benefit of any lower price would be in effect to award them profits which but for their wrongful withholding would have gone to appellees.
It may be noted in this connection that Wickahoney failed and refused to turn over or to account to the receiver for a vehicle being sold under the Purchase Agreement. Sewell was asked by his counsel if he had any opinion as to the fair market value of the truck, whereupon appellant's counsel stated: "I will object unless he fixes a time." It is thus apparent that appellants were alert to the relevance of time of valuation, and if they felt they were prejudiced by admission of evidence of value of the other property as of the time of its sale, they could have interposed a like objection. This they failed to do.
Appellants' third principal point is that appellees were in default under the Purchase Agreement and thus not entitled to declare a forfeiture. On December 15, 1955, the same day the parties entered into the Purchase Agreement, they entered into a Modification of Lease, which recited that prior thereto, on October 18, 1955, the Sewells as lessors and Wickahoney as lessee executed a lease covering certain real and personal property, and it was the desire of the parties to enter into a corrected and modified lease. Under the Modification of Lease the Sewells leased to Wickahoney the "Coig Property," including all grazing rights the Sewells held under the Taylor Grazing Act by virtue of ownership of any of the property.
"Whereas it is contemplated by the parties that additional grazing rights shall be transferred from Sewells to Wickahoney, said grazing rights to be in addition to those covered by said Lease and Option;
"Now Therefore * * * it is agreed:
"1. Sewells agree to lease to Wickahoney, Taylor grazing rights of not less than eight hundred (800) A.U.M.'s for a period of ten (10) years, and simultaneously with the execution of said lease, to grant to Wickahoney an option to purchase not only said grazing rights, but sufficient deeded lands to comply with the requirements of the United States Grazing Service. Said lands to be adjacent and accessible to the "Coig property".
"2. Said Lease and Option agreements shall be made and entered into as soon after the execution of this Memorandum Agreement as the necessary information can be obtained as to the acreage involved and the numbers of the grazing rights * * *"
Appellants claim that the Purchase Agreement, Modification of Lease and Memorandum Agreement disclose an integrated transaction, the Purchase Agreement relating to the sheep and other personal property, and the latter two agreements relating to the land upon which the sheep "spread" would be maintained. Appellants admit the Sewells transferred the Taylor Grazing Rights, but contend they refused to sell or lease the Nit Creek lands which had been selected by McDowell. They say that the Coig Property lands covered by the Modification of Lease were insufficient to carry the sheep, that compliance by the Sewells with the agreement to sell additional grazing rights and land was necessary to sustain Wickahoney's operation, and conclude that as appellees themselves were in default with respect to the Nit Creek lands they could not declare a forfeiture. Huggins v. Green Top Dairy Farms, Inc., 75 Idaho 436, 273 P.2d 399; Giffen v. Faulkner, 50 Idaho 190, 294 P. 521.
"I don't think we have any major problem, but I wish to be sure that we are in common agreement as to mechanics of the transfer of grazing rights.
"You, undoubtedly, know that Charlie [Sewell] sold his Idaho Blue Creek Ranch, but the Nit Creek property and the grazing rights to be transferred to you were reserved from the transaction.
"As soon as you and I can exchange views about how to handle the movement of grazing rights, we shall forward the instruments for signature."
"The Court: Assuming that that is true, does that give you a basis for an action for fraud and misrepresentation, or breach of contract?
"Mr. Hawley [Wickahoney's counsel]: I think fraud and misrepresentation."
Even assuming the Sewells may have had some affirmative obligation to initiate action looking to leasing the Nit Creek lands, Wickahoney was not prejudiced as it had the use of the land during the period in question. As the president of Wickahoney testified, with directness and cogency not easily matched, "We don't have to lease it cause we got it."
Appellants next contend Wickahoney is entitled to an offset for the expense of care and maintenance of the sheep and the expenses of the operation of the company. No claim for any such offset was raised in the pleadings, but "When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. * * *" Federal Rule of Civil Procedure 15(b), 28 U.S.C.A. Appellants introduced Statements of Income and Expense for the periods October 18, 1955, to September 30, 1956, and October 1, 1956, to October 8, 1957. These Statements were prepared by Wickahoney's bookkeeper and show, for the respective periods, the totals of broad categories of expenses, such as feed, salaries, freight and so on. Appellees introduced a Statement of Income and Expense for the period January 1, 1956 to October 31, 1956. This is a copy of a statement furnished appellees by the Bank and contains some of the information included in the statements introduced by appellants. This statement was apparently acquired by the Bank in connection with loans the Bank made to Wickahoney, and was introduced by appellees in connection with these loans and various chattel mortgages executed by Wickahoney in favor of the Bank. The loans and mortgages are of no concern on this appeal.
Appellants have not attempted to show which of the various categories of expenses, totalling more than $225,000, are thought to be attributable to maintaining the particular property for the value of which appellees were given judgment. Nor have appellants indicated the periods for which they claim they should be allowed an offset. Taking an item at random, the Statement for the period October 1, 1956, to October 8, 1957, shows an expense of $5,095.20 for "Maintenance and Repairs." There is nothing to show whether this money was spent on property being sold under the Purchase Agreement or on other property belonging to Wickahoney. Neither is it shown when the money was spent nor what relation the expenditures making up the total have to caring for and maintaining the lambs or other property.
When appellants offered the Statements, the trial Court commented he did not "see the materiality at the moment," but would admit them for what they were worth. After the trial appellants asked for "a credit against the purchase price of $86,082.50, received by defendant Wickahoney Sheep Company and transmitted to defendant Bank of Idaho, for the necessary and proper expenses incurred by defendant Wickahoney Sheep Company in caring for and operating the sheep. * * *", but they apparently offered nothing at the trial to indicate the purpose for which the Statements were submitted.
We do not think mere introduction of the Statements was sufficient to constitute a trial on the issue of set-off "by express or implied consent of the parties," and for the reasons indicated we think the Statements are wholly inadequate as proof of the claimed set-off, assuming that even if established the items could be allowed, which is questionable. Cunningham v. Stoner, 1904, 10 Idaho 549, 79 P. 228.
Lastly, appellants suggest that Wickahoney, as conditional vendee under the Purchase Agreement, received the essential incidents of the property along with possession, and had implied authority to sell the lambs and wool resulting from the band of sheep, Coffin v. Northwestern Mutual Fire Association, 43 Idaho 1, 249 P. 89, 48 A.L.R. 1225, and contend that appellees were title holders for security purposes only, and should be limited to the balance due on the contract. Appellees were given judgment for $149,452.68. The balance due on the contract was $106,700, plus interest.
A factual situation in many respects similar to the one here was presented in Casper v. Spaulding, 1956, 78 Idaho 282, 301 P.2d 1097, except that there the seller sued for and recovered the balance due on a conditional sales contract, whereas here the seller sued for possession or value of the property being sold. As appellants interpret the case, the proper measure of damages here is the balance due on the conditional sales agreement, rather than the fair market value of the property. Appellees submit the case stands simply for the proposition that on default by a conditional vendee, the vendor is entitled, at his election, to either (1) sue for the balance of the purchase price, as was done in Casper, or (2) bring an action in claim and delivery to recover the property being sold, or its value, as appellees did here. Appellees point out that the text in 47 Am.Jur. 102 (Sales §§ 893, 894), cited in Casper, supports this interpretation. We agree, and think that appellees had the right to bring an action in claim and delivery, which entitled them to possession of the property, or, as delivery could not be had, to its value. Largilliere Co., Bankers v. Kunz, 41 Idaho 767, 244 P. 404; Tannahill v. Lydon, 31 Idaho 608, 173 P. 1146; Bates v. Capital State Bank, 21 Idaho 141, 121 P. 561; Oakes v. Lake, 1933, 290 U.S. 59, 54 S. Ct. 13, 78 L. Ed. 168. It is admitted the increase of the sheep belongs to the owner of the mother. Arkansas Valley Land & Cattle Company v. Mann, 1889, 130 U.S. 69, 9 S. Ct. 458, 32 L. Ed. 854; 2 Am.Jur. 703 (Animals § 15); 3 C.J.S. Animals § 7, p. 1090; see Cunningham v. Stoner, supra.
"* * * should Purchaser be in default in any of the terms or conditions of this agreement, Sellers shall give Purchaser notice of such claimed default in writing, * * * to be sent by registered or certified mail, postage prepaid, return receipt requested, and thereafter Purchaser shall have ninety (90) days within which to remedy the claimed default. Should the Purchaser fully perform those matters claimed to be in default as set out in said notice within said ninety-day period, no forfeiture may be declared or shall become effective. However, in the event that Purchaser fails to remedy the claimed default within the ninety-day period, Seller may claim a forfeiture of this agreement and shall have the right to retake possession of the personal property herein described, or its replacements, and the Sellers may retain all payments made hereunder as liquidated damages."
"* * * in the event the Seller shall declare a default, he shall deliver to the bank as Escrow Holder, Notification of Default, in duplicate, with written instructions to the Escrow Holder to mail the original to the Purchaser by United States Registered Mail. In case the delinquent payment or payments or other causes of default shall not be made or corrected as specified in the Notification of Default within a period of thirty days from the date of mailing of the Notice of Default to the Purchaser then all documents shall be returned to the Grantors. * * * All notices given pursuant to the terms of any agreement placed in escrow herewith must be given through the Escrow Holder as hereinbefore provided, and said Escrow Holder shall not be required to recognize service of notice given in any other manner. The duplicate notice shall be retained with the escrow file. * * *
"It is further agreed that if any part of the escrow agreement and this agreement are in conflict, then the provisions of this agreement shall govern. * * *"