John Deere Plow Co. v. McDavid

137 F. 802, 70 C.C.A. 422, 1905 U.S. App. LEXIS 4205

• Court: Court of Appeals for the Eighth Circuit
• Decided: April 19, 1905
• Docket: No. 2,117, 43
• Status: Published

Opinion

RINER, District Judge.

This was a case brought here on appeal from a decision of the District Court affirming an order of a referee in bankruptcy refusing to direct the return of certain personal property in the hands of a trustee, and to allow certain claims as pre-r ferred claims against the estate in favor of appellant and petitioner, John Deere Plow Company (hereinafter called the “Plow Company”), and also upon a petition for review. Under a stipulation of the parties, both cases are to be considered upon the same record.

In May, 1904, the Hymes Buggy & Implement Company (hereinafter called the “Implement Company”), a copartnership, was declared a bankrupt upon a petition in involuntary bankruptcy brought by the creditors of that firm, and the case was sent to a referee. The plow company presented a petition to the referee, in which it.set forth that on the 15th day of September, 1903, it entered into a written contract with the implement companjr for the consignment of goods to be sold on commission; that under the contract certain goods, wares, and merchandise were consigned to the implement company for sale on commission and at the time of the filing of the petition in bankruptcy the implement company had on hand goods consigned to it under the contract of the value of $1,390. It was also alleged that the implement company had sold, but had not accounted for to the plow company, certain other goods received and held under the contract to the amount of $1,442.25, and which sum the implement company had retained and placed in its' own business, in violation of the terms and provisions of the contract and without the knowledge or consent of the plow company. The petition prayed for an order for the delivery of the goods unsold and for the allowance of the claim of the plow company for $1,442.25 as a preferred claim.' The prayer of the petition was denied by the referee, and the case certified .to the District Court, where the finding of the referee was affirmed.

The contract between the plow company and the implement company is in the following, words:

•‘This agreement, made and entered into this 15th day of September, 1903. by and between John Deere Plow Co., of Kansas City, Missouri, incorporated under the laws of the State of Missouri, party of the first part, and Hymes Buggy & Impl. Co., of Springfield, County of Greene, State of Missouri, party of the second part.

“Witnesseth, That said first party, for and in consideration of the stipulations and agreements herein contained, have this day appointed and by these presents do hereby appoint the second party as their authorized agent.at Springfield, Mo., for the sale, on commission, of the consigned goods and articles of merchandise designated hereon or enumerated and described on schedules of said second party, to be attached hereto as hereinafter provided.

. “The party of-the first part-agrees to consign’to and upon the written request of the said second party, so long as said party of the first part has the goods in stock to enable it' so . to, do, during the continuance of this contract, the goods and articles of merchandise designated hereon, or on schedules or written requests-of said second-party hereafter made; said schedules or written requests to set forth the net amount to be received for the goods .by the party of the .first part after,the goods, shall have been sold by said party of the second part as such agent, and the place to which to be consigned, and when said ■ written requests or schedules properly signed by said second party are accepted by John Deere Plow Co., they shall be attached and made a part Of this contract,' reference being made to same on the face thereof, subject to the following conditions, agreements and obligations:

“The party of the second part agrees as follows:

.“1st. To receive from the Transportation Companies, and pay all transportation charges on same; the goods and articles of merchandise consigned under terms of this contract.

, “2nd. To furnish proper'warehouse room for all goods and articles of merchandise consigned under terms of this contract.

“3rd. To pay all Taxes, License," Rents and all other expenses incidental to the safe keeping and sale of the goods and articles of merchandise, and to waive all claims against John Deere Plow Co., for such expense. ,

. “4th. To keep said, goods and articles of merchandise insured for their fúll value, at expense of said second party, in the name and for the benefit of John Deere Plow-Co.,, in Companies approved by them, and to turn over the policies to them, the said John Deere Plow-Co., and in case of any neglect pr failure to insure as herein provided, to become personally responsible for any loss or damage that may occur to said goods while in the custody of said second party.

“5th. To keep samples of said goods and articles of merchandise set up in salesrooms -suitable for the purpose, and to make all reasonable efforts to sell the Same; and not to sell any other makes of like goods and articles of merchandise to the exclusion , of those consigned under the terms , of this contract.

“6th. To. sell the goods and articles of merchandise consigned under this contract for enough more (that) the net amounts to be received therefor by said party of the first part, as above stated, and set opposite said goods in the said written request and schedules attached, to pay all freights, taxes, expenses, charges, compensation and commissions for the handling and selling of said goods as herein provided, and the doing of all things herein provided to be done by the party of the second part; it being mutually understood that the said net amounts set opposite said goods in the attached schedules and written requests, are the net prices at which said goods and articles of merchandise are to be consigned for sale, and are the net amounts, which said second party agrees to account for and deliver to the John Deere Plow Co., for said goods when sold, as per terms of this contract. The full charges, compensation, commission and expenses of said second party for the handling and selling of said goods as herein provided, and the doing of all .things herein provided to be done by the party of the second part, to be the 'difference between said net amounts and the gross amounts received from the sale of said goods.

“7th. To sell all goods and articles of merchandise consigned under this contract, subject to .the Manufacturer’s regular printed Warranty, and to settle all claims for breakage and defects in accordance therewith. .And agrees not to part possession with, any of the said goods until full and satisfactory settlement shall have been made for same by purchaser, and will not allow, under any circumstances, any of said goods to be taken away on trial before such settlement is made; and that all proceeds of such sales, whether cash, or notes, shall be kept separate and distinct from said second party’s Oilier business.

, “8th. The second party further agrees to make put and render to the said first party, on the first day of’.each month, and oftener if so requested, a full, and complete report of all sales, made the month previous, or since the last report’made;: 'and to accompany said report with a full settlement in accordance with this contract for all goods so reported sold, said settlement to be made with cash for all sales less 5% discount for all cash, -—:— months from date of same and bearing interest at-per cent., per annum from-. And the second party further agrees that when purchaser’s notes are given in settlement for sales made as herein provided, said notes will be on blanks furnished by John Deere Plow Co., and are to be taken only from good, prompt paying purchasers. And the second party further agrees to endorse all such notes given to said first party in the following manner, to-wit:

“For value received, I or- we hereby guarantee the payment of the within note at maturity or at any time thereafter, and waive demand, protest, notice of protest and nonpayment.

“9th. It is further agreed and understood, that the goods and merchandise to be supplied hereunder are to be consigned simply, and that the title to and ownership of all goods and articles of'merchandise consigned to said second party under the terms of this contract, and all proceeds of the sale of same, shall remain vested in said first party, and be its sole property and subject to its order, until the full amount to be received for said goods, as herein provided, shall have been received by said party of the first part.

“It is further agreed that this contract is to remain in force unless can-celled and annulled by said first party, until Oct. 1st, 1904, at which time said second party agrees if required by said first party, to return all goods remaining on hand unsold at the expiration, of this contract to them at their warehouse in Kansas- City, in good order and free of all freights and charges.

“This contract is not transferable and should the second party hereto sell out or otherwise dispose of his business at any time prior to its expiration, the right to declare this contract cancelled and annulled from and after the date of such sale or transfer is reserved to party of the first part without prejudice.

“The second party hereby agrees to forward any goods received on this contract at any time, and as said John Deere Plow Co., or their authorized agents may direct, charging only actual cost of freight and drayage, collecting same from transportation company as back charges.

“It is also agreed that the contract held by John Deere Plow Co., is to be considered the original, ánd to be the binding agreement ,in case the duplicate varies from it in any particular. And that the same may be terminated at any time at the option of the John Deére Plow Co., and the goods remaining on hand unsold shall be subject to the same terms and conditions as herein provided for.

“It is understood and agreed that, in writing and printing, this paper con■tains the full and entire agreement between the parties hereto, and that no outside oral or written under standing with any traveling, agent of John Deere Plow Co., is of any force or effect whatever.

“Executed in duplicate.

“Given under our hands this 15th day of September, 1903, in the town of Kansas City, County of Jackson, State of Missouri.

“John Deere Plow Co. .

“Per C. S. Wright, Traveling Agent.

“Subject to the approval, of John Deere Plow Co.

“Approved: Hymes Buggy & Implement Co.

“Party of the Second Part.”

On the 15th of September, 1903, the implement company forwarded' tó the plow company an order for certain goods, which, so far as it is important in the determination of the questions involved in this case, is in the following words:

“Kansas City, Mo., 9/15/1903.

■ “John Deere Plow Co., Kansas City, Mo.—Gentlemen: Please ship us the following named articles from Moline, on or about soon as can, or as soon after as possible, marked Hymes Buggy & Implement Co., assemble at Mo-line, Springfield, Mo. Ship via-. Prices below are based tipon K. C. frt. allowed delivery.

“The goods as' below enumerated to be well made, of good material, ancT to work when properly managed, according to the Manufacturer’s Printed Warranty.

■ .‘T, or we, hereby agree to make you payment for same in Kansas City par funds. (Exchange and express charges prepaid.)

“If account is not paid when'due, to draw interest at 10 per cent, from maturity. •

“I, or we, hereby agree to give notes or acceptances for the amount of goods, as per terms of payment, when called upon to do so, and to make no claim for shortage or damage after ten days from receipt of goods.

■ “No interpretation or verbal understanding of this contract not mentioned herein will be recognized.

“All orders taken subject to approval of John Deere Plow Co., and also .agree that the title to and ownership of all goods which may be (shipped as herein provided, shall remain in, and their proceeds in case of sale, shall be the. property of John Deere Plow Co., and subject to their order until full paymént shall have been made.

“If owing to the large lines you carry, you find it necessary to ship short a portion of'the orders, you may do so and we will make no claims for any allowance therefrom.

“Prices subject to change without notice.

“Order taken by C. S. Wright.

‘‘Signed—Hymes Buggy & Implement Co.

We think the questions presented by this record can all be disposed of on the appeal. Dodge v. Norlin (C. C. A.) 133 Fed. 363, 366, 367; Hewit v. Berlin Machine Works, 194 U. S. 296, 24 Sup. Ct. 690, 691, 4.8 L. Ed. 986. The case presents two principal questions : First, whether the contract and order above set out, taken together, constitute evidence of a conditional sale or of an agency; second, whether or not the plow company is entitled to have the sum of $1,442,25, the proceeds of sales of goods made under the contract, and which had not ' been paid to it, allowed as a preferred claim. We think it was an agency contract. It is not a contract in which the consignee can sell at any price, or on any , terms he may choose, but, as we understand it, it is a contract or consignment of goods to be sold on commission by the consignee, as agent for the consignor, for cash. The plow company had the right, under the contract, to require the goods returned, and in this it lacks one of the necessary elements of a contract of sale, namely, to pay money, or its equivalent, for the goods delivered, with no obligation to return. In'the case of Met. Nat. Bank v. Benedict Co., 74 Fed. 182, 20 C. C. A. 377, this court had under consideration a contract wherein the consignee agreed “to realize for consignment of ready-made clothing of Benedict Company, as per memorandum received of Henry Benedict, president of the Benedict Company, net prices as per memorandum, without any charges of commission, freight, or any other charges,” and in which the consignee also agreed “to keep the amount of the consignment at all times, until the agreement expires, fully insured'against fire or other damage, and that no part of the assignment shall remain unsold nor unpaid by February 1st, 1895.” And the court held that the contract was not a sale, but a contract of factorage, which passed no title to the consignee. In disposing of the case, the court, speaking through Judge Caldwell, said:

“The- money to be paid by the commission company was not upon a sale of the goods to that company, but upon a sale of the- goods by that company. The commission company was never to pay for the goods as upon a purchase by it, but only to account for the proceeds of the sale of them at prices fixed by the- contract.”

Other authorities to the same effect are Sturm v. Boker, 150 U. S. 312,14 Sup. Ct. 99, 37 L. Ed. 1093; Davis v. National Exchange Bank, 91 U. S. 618, 23 L. Ed. 214; Hunt v. Wyman, 100 Mass. 198; Powder Co. v. Burkhardt, 97 U. S. 110, 24 L. Ed. 973.; Reaper Co. v. Raynor, 38 Wis. 119; Union Stockyards & Transit Co. v. Western Land & Cattle Co., 59 Fed. 49, 7 C. C. A. 660; Weir Plow Co. v. Porter, 82 Mo. 23; Mon. Man. Co. v. Jones, 96 Wis. 619, 72 N. W. 44; In re Galt, 120 Fed. 64, 56 C. C. A. 470. In the case last cited, in considering a contract quite similar to the one here, the court said:

“It was nof contemplated that Galt should ever own these wagons. He was to sell them to others for the company; his commissions to be the amount which he1 might receive over the prices stated in the contract. The proceeds, whether in' cash or in notes of the purchasers, were to be immediately returned to the company; the notes being- guarantied by Galt. This was a del credere commission, and not a sale. The company could compel a return of the goods not sold. Galt had not the option to pay for them in money. Even with respect to the goods unsold within twelve months, the option for their return or payment was with the company, and not with Galt; ' and nowhere in the agreement does the latter covenant to pay for these goods, as in the case of a sale.”

The contract in this case must be read in its entirety, and its construction is not to be gathered from any separate provision of it. It is upon the whole contract that we must search for the intention of the parties, and a careful scrutiny of the agreement before us, in the light of legal principles, compels us to the conviction that it must be held to be a contract of agency, and that the title to the goods in the hands of the" implement company at the time of the adjudication in bankruptcy did-not pass to. the trustee.

A careful examination of this record and the adjudicated cases leads us to the conclusion that the plow company is not entitled to a priority over other creditors to funds in the hands of the trustee. to the amount of. $1,442.25, for the reason that it does not appear that any of the money received from the sale of goods made under the contract actually passed into the hands of, or are held by, the. trustee. The owner of a fund which has been misappropriated by one who held it in trust cannot follow it in the hands of the trustee unless he can trace the trust fund in kind or in specific property into • which it has been converted, or, if the fund has been mingled with the trustee’s other property, to establish a charge on the mass of such property for the ámbunt óf this fund. In other words, he can secure a preference out of the proceeds of the estate of the insolvent only where he can trace the trust property or fund, in its original or pome substituted for,m, in the estate which comes-into the hands of the trustee. . , . . _ •

In the case of Spokane Co. v. First Nat. Bank, 68 Fed. 979, 16 C. C. A. 81, in disposing of a similar question, the court said:

“We are jinable, to assent, to the proposition that, because,a trust..fund; has been .used by the insolvent,in .the .course of his. business, the general creditors of the estate aré by that amount benefited,-and that, therefore, equitable consi,derationa require that Iffe owner of the trust fund be paid out of the estate to their postponement or exclusion. * * * Both .the settled principles of equity and the weight of authority sustain the view that the plaintiff’s right to establish-his trust-and'recover -his fund must :depend upon his ability- to prove that his property is. in. its original or a substituted form in the hands of the defendant.” ". ’ . ,

■ Met. Nat. Bank v. Campbell Com. Co. (C.C.) 77 Fed. 705 ; Bank v. Latimer (C. C.) 67 Fed. 27; Little v. Chadwick; 151 Mass. 109, 23 N. E. 1005, 7 L. R. A.. 570; Cavin v. Gleason, 105 N. Y. 256, 11 N. E. 504; Bank v. Armstrong (C. C.) 39 Fed. 684; Frelinghuysen v. Nugent (C. C.) 36 Fed. 229; Beard v. Ind. Pella City, 88 Fed. 375, 31 C. C. A. 562; Montagu v. Pacific Bank (C. C.) 81 Fed. 602; City Bank v. Blackmore, 75 Fed. 771, 21 C. C. A. 514; Standard Oil Co. v. Hawkins, 74 Fed. 395, 20 C. C. A. 468, 33 L. R. A. 739.

-.. While conceding the rule to be as above stated, it is said on behalf of the plow company that this was .a Missouri- contract; therefore the decisions of' that state; shoü’ld be taken as controlling. in this ease. The decisions- óf . Abe-. Supreme Court of Missouri to which our attention has been, directed are to the- effect -that, where the trust futid is mingled--with the property of the trustee, thé owner of the trust fund is entitled; to a preference upon the, entire body of the trustee’s estáte in insolvency upon the ground' that -the - trust fund has enhanced the estate, and thus given to. the cestui,.que tru’st'an equity superior to that of general'creditors. ’The"trouble in applying this proposition to :the present casé' ife that-the evidence in the cáse, as We have already suggested, does hot sliow' that' the proceeds of the goods sold bythe bankrupt prior to the adjudication, which were received, but not accounted for, by it, ever came ill to the hands of the trustee in 'bankruptcy, either in their original or in some substituted form. But be this'as it may, the question is not upon the construction of'a contract, but upon a . rulé of preference in équity, and upon that question the fedérál decisions must control in this court, and they'are ¿11 to! the effect that iii a cáse such as the one before us the preference cannot be.allowed. '

It follows from thesé conclusions thát the order of the District Court must be reversed, with directions to entei* an order directing that the plow company recover from, the trustee in bankruptcy the property which the trustee received from the bárikrupt, or thé proceeds of it; that its'claim! for the proceeds of the property sold, but not accounted for, prior to; the Adjudication in bánkriiptcy, be allowed, and that'the last-mentioned claim be permitted to participate in any dividend or dividends upb'n the same basis as other creditors of the bankrupt. '