Case Name: BUNDAY et al. v. HUNTINGTON
Court: United States Court of Appeals for the Eighth Circuit
Jurisdiction: United States
Decision Date: 1915-07-02
Citations: 224 F. 847
Docket Number: No. 4417
Parties: BUNDAY et al. v. HUNTINGTON.
Judges: Before ADAMS, Circuit Judge, and TRIEBER and REED, District Judges.
Reporter: Federal Reporter
Volume: 224
Pages: 847–858

Head Matter:
BUNDAY et al. v. HUNTINGTON.
(Circuit Court of Appeals, Eighth Circuit.
July 2, 1915.)
No. 4417.
1. Appeal and Error @=>1008-t-Review — Finding.
It is only in the absence of any request to find facts specially, or to find for plaintiff in error generally, that a general finding by the court, sitting as a jury, has the effect of a general verdict.
[Ed. Note. — For other cases, see Appeal and Error, Cent. Dig. §§ 3955-8960, 3962-3969; Dec. Dig. @=>1008.]
2. Appeal and Error @=>854 — 'Review—Affirmance.
Where judgment was for the right party, it will be affirmed, though the wrong reason was assigned.
[Ed. Note. — For other cases, see Appeal and Error, Cent. Dig. §§ 3403, 3404, 3408-3424, 3427-3430; Dec. Dig. @=>854.]
3. Bankruptcy @=>165 — Prefereínces—Contracts—Construction.
A contract of sale provided that the buyers should insure the property, which they were buying on installments, for the benefit of the sellers. A subsequent chattel mortgage given to secure the sellers was more favorable in many respects than the contract, but it did not provide that the property should be insured for the sellers’ benefit. Held, that the sellers could not claim insurance upon the property, the chattel mortgage having superseded the executory contract of sale, and hence, the property having been destroyed by fire, a payment of the insurance money by the buyers, who were insolvent and known to be, to the sellers, constituted a preference.
|Ed. Note. — For other cases, see Bankruptcy, Gent. Dig. §§ 259, 260, 266; Dec. Dig. @=>165.]
4. Contracts @=>170 — Construction—Construction by Parties.
Where the parties to a contract for the sale of goods treated it as not requiring the buyers to insure the property for the sellers’ benefit, such action constituted a practical construction to which effect will be given by the court.
[Ed. Note. — For other cases, see Contracts, Cent. Dig. § 753; Dec. Dig. @=>170.]
Heed, District Judge, dissenting.
In Error to the District Court of the United States for the District of South Dakota; James D. Elliott, Judge.
Action by Fred G. Huntington, as trustee in bankruptcy of Gideon N. Carlson and Adolph P. Rosdahl, against Ansel E. Sunday and another. There was a judgment for plaintiff, and .defendants brings error.
Affirmed.
This is an action at law instituted by the defendant in error against the plaintiffs in error, who will ha referred to herein as the “plaintiff” and “defendants,” as they were in the court below, to recover an alleged preference.
The plaintiff is the trustee in bankruptcy of Carlson &' Rosdahl, a mercantile firm, who had been in the retail mercantile business at Bruce, S. I)., from April 14, 1909, to May 3, 1910. On November 15, 1910, an involuntary petition in bankruptcy was filed against them, and they were adjudicated as bankrupts on December 2, 1910. Thereafter the plaintiff was duly elected as trustee of the bankrupt estate.
It is charged in the complaint that on May 3, 1910, the stock of merchandise of the bankrupts was destroyed by fire, being covered by insurance; that on July 16, 1910, within four months of the filing of the petition in bankruptcy, the bankrupts, being then indebted to the defendants, assigned and transferred to them the policies of insurance on the stock of merchandise, and the amounts due them thereunder; that the defendants collected the amounts due from the insurers; that at the time of the transfer and assignment of these policies Carlson & Rosdahl were insolvent, which fact was known to the defendants, and this transfer, and the collection of the insurance money by the defendants, enabled them to obtain a greater percentage of their claim than any of the other creditors of the same class, and was intended as a preference.
The answer of the defendants, so far as it is necessary for a determination of the issues involved on this writ of error, is as follows:
The defendants allege that for many years prior to the 14th day of April, 1909, the defendants, Ansel 15. Bunday and Frank F. Ribstein, were copartners under the firm name and style of Bunday & Ribstein, and were engaged in the general retail merchandising business at Bruce, S. D., and on said 14th day of April, 1909, owned a stock of general merchandise of the value of $8,107; and that on said 14th day of April, 1909, when the said G. N. Carlson and A. P. Rosdahl were solvent, and the aggregate of their property at a fair valuation was more than sufficient in, amount to pay their debts, these defendants, as copartners aforesaid, made and entered into an agreement and contract in writing with the said Carlson & Rosdahl, in the names of G. N. Carlson and A. P. Rosdahl, respectively, wherein these defendants, among other things, agreed to sell to the said Carlson & Rosdahl the said stock of general merchandise, a copy of which said agreement and contract is hereto attached, marked “Exhibit A,” and made a part hereof.
The defendants further allege that thereafter, and in pursuance of said contract, an invoice of stock of merchandise was taken by the parties thereto, and the invoice price and value of said stock of general merchandise was found to be the sum of $8,107, which amount was the true value thereof, and which amount was agreed upon between the parties thereto as the purchase price of said stock of merchandise, and that thereupon these defendants sold, transferred, and delivered the said stock of merchandise to the said Gideon N. Carlson and Adolph P. Rosdahl, for the said sum of $8,107.
The defendants further allege that thereupon and on or about the 26th day of April, 1909, relying upon and in pursuance of said agreement, these defendants sold said stock of merchandise to the said Carlson & Rosdahl, and the said Carlson & Rosdahl paid unto these defendants the sum of $8,000, as a part of the consideration for said stock of merchandise, and as evidence of the indebtedness for the balance' of the consideration therefor the said Carlson '& Rosdahl, on the said 26th day of April, 1909, executed and delivered to these defendants their certain promissory note wherein and whereby, on or before the 19th day of April, 1914, they promised to pay to the order of these defendants the sum of $5,107, with interest thereon at 6 per cent, per annum until paid, payable annually, a copy of which note is attached hereto, marked “Exhibit B,” and made a part hereof.
The defendants further allege that on said 26th day of April, 1909, in pursuance of said contract, the said Carlson & Rosdahl, in their individual names, as additional security for the payment of said promissory note, executed and delivered unto these defendants their certain chattel mortgage, a copy of which is attached hereto, marked “Exhibit C,” which mortgage was on the 27th day of April, 1909, filed for record in the office of the register of deeds in and for Brookings county, S. D.
The defendants further allege that thereafter and in pursuance of said agreement, and in compliance with the terms of said chattel mortgage, the said Carlson & Rosdahl replenished said stock of merchandise and kept the value thereof in excess of $8,107, and accounted to these defendants for the sales made by them from said stock of merchandise from time to time, and paid to these defendants the following amounts at the times herein stated ; the same being 15 per cent, of the sales of merchandise so made by them under said contract and chattel mortgage, to wit:' June 3, 1909, $213.60; July 6, 1909, $156.45; August 6, 1909, $186.50; September 8, 1909, $105.73; October 9, 1909, $1SO.OO; December 10, 1909, $255.00; January 3, 1910, $165.00 ; March 2, 1910, $161.25 — making a, total sum of $1,373.55 so paid by them and received by these defendants prior to the time when said stock of merchandise was destroyed by fire, on the said 3d day of May, 1910, and at said time the said Oarlson & liosdahl were so indebted for and on account of the sale of said stock of merchandise by these defendants to them, and by reason of the said contract and the note and chattel mortgage hereinbefore described, in the sum of $3,'733.45, with interest as provided by said promissory note, contract, and chattel mortgage, and these defendants allege that at ail times prior to The said 3d day of May, 1910, the said Gideon, N. Oarlson and Adolph P. Rosdahl, as copartners, and as individuáis, were solvent, and that the aggregate of their property at a fair valuation was more than sufficient in amount to pay their debts, and lhat if they became or are insolvent they so became and are insolvent only by reason of the destruction of said stock of merchandise by the said fire on said 3d day of May, 1910.
The defendants further allege that in and by said contract, and as a part of the consideration for the sale of the said stock of merchandise by these defendants to the said Oarlson & Rosdahl, it was agreed by the parties theréto that the said Carlson & Rosdahl should insure said stock of merchandise in favor of these defendants to the amount of .$5,000, and that it was the intention-and understanding of said Carlson & Rosdahl and of these defendants that the said Carlson & Rosdahl, as a part of the consideration for the said sale, and as additional security for the purchase price of said stock of merchandise, should keep said stock of merchandise insured against loss by fire, to the amount of $5,000, with the loss, if any, payable to these defendants, as mortgagees, so far as tlieir interests might appear, and that in pursuance of said contract, and in accord with the intentions and understanding of the parties thereto, the said Oarlson & Rosdahl procured the insurance herein-before mentioned, and that it was the intention and understanding of said Carlson & Rosdahl, and these defendants, that the said insurance so procured and issued upon said stock of merchandise was in compliance with said contract, and that the same was so issued in favor of these defendants, but through inadvertence, oversight, and mistake, all of said policies of insurance so issued were taken in the name of said Carlson & Rosdahl, and the loss, in case of lire, made payable to said Carlson & Rosdahl, instead of in the name of these defendants as intended and understood between the parties to said agreement.
Contract of Sale.
This agreement made and entered into this 14th day of April, 1909, by and between A. 13. Bunday and F. F. Ribstein, copartners, doing business under the firm name and style as Bunday & Ribstein, parties of the first part, and G. N. Carlson and A. P. Rosdahl, parlies of the second part, witnesseth:
That said Bunday & Ribstein in consideration of the covenants hereinafter contained, will sell to said parties of the second part all of their stock of goods, wares and merchandise of every kind, character and description now being in their store, situated on lots 18 and 19, block <3, of the original plat of the town of Bruce, Brookings county, South Dakota, according to an invoice to be hereafter made by the parties hereto.
The parties of the second part shall pay for the same as follows:
For all dry goods, Including hats, caps, notions, overcoats, shirts and overalls, etc., invoice price with a discount of twenty per cent., two per cent, to be added for freight.
For all boots, shoes and rubbers, ten per cent, discount, with two per cent, added for freight.
For all groceries, including crockery, glassware and stoneware, and all other articles carried in the grocery department, net invoice price with two per cent, added for freight.
Both parties agree to deposit in the Bank of Bruce the sum of two hundred dollars each, maiding the whole amount four hundred dollars, to be forfeited by either party not living up to this contract.
In consideration hereof, the parly of the second part agrees to pay the party of the first part the sum of 83,000 in cash, the balance by note, bearing 6 per cent, interest secured by first mortgage on the whole stock of goods, said, ¿tote to be .payable on or before the 14th day of April, 1914, with a provision in said mortgage and note that fifteen per cent, of the amount of the sales of said goods shall be applied on said notes on the first day of each month until the same is fully paid or until such time when the same shall become due and payable in full.
It is further agreed by and between the parties hereto, that the stock in said store shall not be reduced more than two thousand dollars in value of the stock of goods now on hand, and that no goods shall be sold except in the ordinary ■ course of retail trade as shall be provided for in said mortgage, the parties of the first part further agree to lease real estate hereinbefore described to the parties of the second part to the 14th day of April, 1914, for the monthly rent of twenty-five dollars, to be paid in advance on the first day of each month, a written lease in the usual form to be executed by the said parties of the first part.
The parties of the first part do also lease the fixtures in said building for said period.
It is further agreed that the parties of the second part shall insure said stock of goods to the amount of five thousand dollars in favor of the parties of the first part.
It is further agreed that the fixtures and the inside room or rooms of said building shall be kept in repair by the parties of the second part, and that the parties of the first part shall have a ten per cent, discount on all goods purchased by them during the period of said lease.
Chattel Mortgage.
Know all men by these presents:
This mortgage, made the 20th day of April, in the year, A. D. 1909, by G. N. Carlson and A. P. ftosdahl, in the county of Brookings, state of South Dakota, by occupation merchants, mortgagor, to A. E. Bunday and E. E. Rib-stein, by occupation merchants, mortgagee, witnesseth: That said mortgagor, being justly indebted to said mortgagee, in the sum of $5,107.00, which is hereby confessed and acknowledged, have for the purpose of securing the payment of said debt, granted, bargained, sold and mortgaged, and by these presents do grant, bargain, sell and mortgage unto said mortgagee and their assigns, all that personal property described as follows, to wit: All of the goods, wares and merchandise of every kind consisting chiefly of dry goods, hats, caps, notions, overcoats, shirts, overalls and other goods kept in a dry goods store, and also boots, shoes and rubbers, and all groceries, including crockery, glassware and stoneware, and all goods and articles of merchandise now contained in ’a certain building. situated on lots eighteen and nineteen of block six of the original plat of the town of Bruce, Brookings county, South Dakota, and also all new goods and articles of merchandise, which shall be hereafter purchased by the said mortgagors and kept in connection with said stock in replenishing or adding to the said stock of goods.
It is further agreed that the said mortgagors may remain in possession and conduct said store and sell said goods in the ordinary course of retail trade, and that the said mortgagors shall make daily deposits of all moneys and proceeds from said sales, and shall on the first day of each month make a just and true account to the mortgagees of all sales made, and that proceeds of all sales shall on the first day of each month be applied to the extinguishment of the mortgage indebtedness mentioned herein, provided that out of said proceeds the mortgagors shall replenish the said stock of goods and keep the said stock of goods at its present value, provided further that if the said stock of goods be reduced below its present value of $8,107.00, all of the proceeds of such sales shall be applied to the extinguishment of the mortgage indebtedness, and provided further that at no time shall less than fifteen per cent, of the monthly sales be applied to the payment of this mortgage.
All the said property being now in the possession of said mortgagor, in the county of Brookings, and state aforesaid, and is free from all incumbrance.
To have and to hold all and singular, the personal property aforesaid, forever as security for the payment of the note and obligation hereinafter described, provided always, that these presents are upon this express condition. That if the said mortgagor shall pay or cause to ba paid unto the said mort gagee, their executors, administrators or assigns, the sum of five thousand one hundred and seven dollars according to the conditions of one certain promissory note payable to A. E. Bunday and If. F. Ribstein, for $5,107.00, dated April 26, 1909, due April 14, 1914, with interest at six por cent, per annum until paid.
Then these presents to be void and of no effect. But if default should be made in the payment of said sum of money or the' interest thereon, at the time said note shall become due, or if any attempt shall be made to dispose of or injure said property or to remove said property from said county of Brookings or any part thereof by the mortgagor or any other person, or if said mortgagor do not take proper care of said property, or if said mortgagee shall at any time deem themselves insecure. Then, thereupon find thereafter it shall be lawful, and the said mortgagor hereby authorizes said mortgagees, tlieir executors, administrators or assigns or tlieir authorized agent to take said property, wherever the same may be found, and hold or sell and dispose of tlie same and all equity of redemption, at public auction, with notice as provided by law, and on such terms as said mortgagee or * * * agent may see fit, and the said mortgagee may become the purchaser of said property at said sale, retaining such amount as shall pay the aforesaid note and the interest thereon, and an attorney’s fee of SI 0.00 and such other expenses as may have been incurred, returning the surplus money, if any there be, to said mortgagor or tlieir assigns, and the said mortgagor hereby, waives demand and personal notice of the time and place of sale. And as long as the conditions of this mortgage are fulfilled, the said mortgagor to remain in possession of said property, and in consideration thereof they agree to keep said property ip as good condition as it now is, at their own cost and expense.
They also pray in their answer: ‘‘That these defendants be found, adjudged, and decreed to have been the equitable owners of the stock of merchandise mentioned and described herein, and of the insurance policies Issued upon said stock by the insurance companies herein mentioned and described, and of the proceeds derived from such insurance policies.”
By written stipulation a trial by jury was waived and the court made a general finding in favor of the plaintiff on all the issues and rendered judgment in his favor. The defendants asked the court to make a number of special findings, which the court refused to make, and proper exceptions were preserved to his refusal.
The special findings asked by the defendants, so l’ar as they are material to the determination of this cause, and which were the only ones presented to the court iu the briefs and oral argument of counsel for the defendants, are:
(1) That as a matter of law and in equity, under said contract, Bunday & Ribstein acquired an equitable lien upon said fire insurance and the policies so obtained by Carlson & Rosdahl, to the extent of tlieir interest in said stock of goods under their note and chattel mortgage, which, at the time of the fire, was about $3,700.
(6) That in order to facilitate the collection of the amount of the insurance to the extent of their interest therein, and upon which the defendants had said equitable lien, certain written orders were given by Carlson & Rosdahl to the defendants on or about, July 16, 1910, directing the following insurance companies to pay the amount of the loss as adjusted to these defendants, to wit: The Merchants’ Mutual Eire Insurance Company of Redíield, S. 11.; the ¡Druggists’ Mutual Fire Insurance Company of Bake Preston, S. D.; the South Dakota Mutual lire Association, of Aberdeen, S. D.; ami the Retail Merchants’ Fire Insurance Company, of Sioux Falls, S. D. The face value of which policies for $4,500, but tlie amount at which the losses had previously been, adjusted thereon was $3,328.34, being less than the amount of the balance due to defendants under said note and mortgage. That said orders were given pursuant to said contract of April 14, 1909, and the rights of the defendants to said insurance related back to the date of said contract, note, and mortgage. And that such equitable lien upon said insurance and insurance policies and the proceeds thereof is a valid lion acquired in good faith and superior to any claims of the plaintiff as trustee.
Philo Hall, of Brookings, S'. D. (J. P. Alexander and Wallace E. Purdy, both of Brookings, S. D., on the brief), for plaintiffs in error.
H. H. Flor, of St. Paul, Minn. (A. E. Boyesen, of St. Paul, Minn, and Ohas. O. Bailey and John H. Voorhees, both of Sioux Falls, S. D., and M. E. Culhane, of Brookings, S. D., on the brief), for defendant in error.
Before ADAMS, Circuit Judge, and TRIEBER and REED, District Judges.
Rehearing denied September 27, 1915.

Opinion:
TRIEBER, District Judge
(after stating the facts as 'above). While the court, sitting as a jury, made only a general finding of all the issues in favor of the plaintiff, the request for special findings made on behalf of the defendants, and which was by the court refused, and proper exceptions saved, enables us to review the evidence for the purpose of determining whether it was of such a nature as to make it the duty of the court to make these findings, and whether the refusal to do so is reversible error.
It is only in the absence of any request'to find facts specifically, or to find for the plaintiff in error generally, that a general finding by the court, sitting as a jury, has the effect of a general verdict by a jury. National Surety Co. v. United States, for use, etc., 200 Fed. 142, 118 C. C. A. 360. As the defendants, the plaintiffs in error, requested special findings, which, if made by the court, would entitle them to a judgment, it is our duty to examine the evidence for the purpose of determining whether the court erred in refusing to make these findings, or such of them as would entitle the defendants to a judgment in their favor.
It will be noticed that the findings asked by the defendants are/eally in the nature of conclusions of law. There were other requests for findings of facts made by the defendants which, in view qf the conclusions reached by us, it is unnecessary to notice in this proceeding.
If, upon an examination of all the evidence, the judgment of the trial court was for the right party, it is the duty of the appellate •court to affirm it, even if a wrong reason was assigned therefor. Latting v. Owasso Mfg. Co., 148 Fed. 369, 78 C. C. A. 183. The insolvency of the bankrupts at the time this transaction took place, and that the defendants had reasonable cause to know that fact, is not disputed.
The original contract made on April 14, 1909, between the defendants and the-bankrupts, provided for a mortgage to secure the unpaid purchase money, amounting to $5,000, on the stock of. goods sold, and that 15 per cent, of the amounts realized from sales of said goods should be applied on the note; that this 15 per cent, should be paid by the bankrupts to the defendants on the 1st day of each month until the same is fully paid or until such time when the note shall become due and payable in full. It also contains a provision that the bankrupts shall insure said stock of goods to the amount of $5,000; also, that "the stock in said store shall not be reduced more than $2,000 in value of the stock of goods now on hand, and that no goods shall be sold except in the ordinary course of retail trade, as shall be provided in said mortgage." The note was to become due five years after date. Each of the parties was to deposit in the Bank of Bruce, S. D., $200 to be forfeited by either party "not living up to this contract."
The trade was finally consummated on April 26, 1909, $3.,000 being paid in cash and a note for $5,107 executed by the bankrupts, and the mortgage, hereinbefore set out, executed by them for the purpose of securing the note for the unpaid purchase money.
It will be noticed that the mortgage differs in several material respects from the agreement, and is much more favorable to the defendants than the terms of the original contract entitled them. It contains every obligation agreed to be assumed by the bankrupts under the contract except the promise to insure the stock of goods for the benefit of the defendants. It contains the following provisions not required of them in the executory contract:
While the contract only requires a mortgage on the goods sold, the mortgage includes all after-acquired goods of the bankrupts. Under the contract only 15 per cent, of the amount of the sales of "said goods" was to be applied to the payment of the note on the 1st day of each month, and that the stock of goods should not be reduced more than $2,000 in value of the stock now on hand, the mortgage provides that:
"The mortgagors shall make daily deposits of all moneys and proceeds from said sales, and shall on tlie first day of each month make a just and true account to the mortgagees of all sales made, and the proceeds of all sales shall on the first day of each month he applied to the extinguishment of the mortgage indebtedness mentioned herein, provided, that out of said proceeds the mortgagors shall replenish the said stock of goods and keep the said stock of goods at its present value; provided further, that if the said stock of goods be reduced below its present value of §8,107.00' all of the proceeds of such sales shall bo applied to' the extinguishment of the mortgage indebtedness, and provided further, that at no time shall less than 15 per cent, of the monthly sales be applied to the payment of this mortgage."
The mortgage therefore varies in several respects from the contract, and is much more favorable to the defendants, but, as before stated, omits the obligation on the part of the mortgagors to insure the goods for the benefit of the mortgagees. Assuming, without deciding, that the provision to insure contained in the contract gave the defendants an equitable lien on the proceeds of the insurance policies, and that this equitable lien is superior to the rights of the plaintiff as trustee in bankruptcy, although the mortgage', which was of record (the contract was not recorded), fails to show it, the judgment of the court is, in our opinion, correct. Whenever an executory contract is executed by a new contract in writing, the latter is presumed to express the final agreement of the parties, and conditions in the former agreement not included in the last, nor reserved or continued by its terms, are, in the absence of fraud, or mistake, deemed waived. 'And this is especially true when the last contract is more favorable to the party complaining than was the preliminary contract. Andrus v. St. Louis Smelting Co., 130 U. S. 643, 647, 9 Sup. Ct. 645, 32 L. Ed. 1054; American Colortype Co. v. Continental Colortype Co., 188 U. S. 104, 108, 23 Sup. Ct. 265, 47 L. Ed. 404; Grand Trunk W. Ry. Co. v. Chicago, etc., R. R. Co., 141 Fed. 785, 73 C. C. A. 43; Wheeden v. Fiske, 50 N. H. 125; Ford v. Smith, 25 Ga. 679; Ellis v. Lockett, 100 Ga. 719, 28 S. E. 452; Parmly v. Buckley, 103 Ill. 119; Slocum v. Bracy, 55 Minn. 249, 56 N. W. 826, 43 Am. St. Rep. 499; Hubachek v. Brown's Estate, 126 Minn. 359, 148 N. W. 121; Keator v. Colorado Coal, etc., Co., 3 Colo. App. 188, 32 Pac. 857.
In addition to this, the construction of the mortgage by both parties evidently was that there was to be no insurance for the benefit of the mortgagees; for, although more than a year had elapsed since the execution of the mortgage, none of the insurance policies were made for the benefit of the defendants, but all were made payable to the bankrupts. This was a practical construction of the last contract by the parties and will be given effect by the courts, even if there was an ambiguity. Barber Asphalt Paving Company v. City of St. Paul, 224 Fed. 842, - C. C. A. -, decided at the present term of this court.
The judgment is affirmed.