Howell v. War Finance Corporation

• Citation: 71 F.2d 237
• Decision Date: 31 May 1934
• Docket Number: No. 7037.,7037.
• Parties: HOWELL v. WAR FINANCE CORPORATION.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

71 F.2d 237 (1934)

HOWELL v. WAR FINANCE CORPORATION.

No. 7037.

Circuit Court of Appeals, Ninth Circuit.

May 31, 1934.

W. E. Ferguson, of Holbrook, Ariz., for appellant.

J. O. Seth, of Santa Fé, N. M., and C. B. Wilson and Orinn C. Compton, both of Flagstaff, Ariz., for appellee.

Before WILBUR, SAWTELLE, and GARRECHT, Circuit Judges.

SAWTELLE, Circuit Judge.

The facts as disclosed by the record are as follows: In the year 1921, E. P. Howell, a cattle grower of Navajo, Ariz., now deceased, sought the assistance of his business associate, Julius Wetzler, of Holbrook, Ariz., in arranging a loan of $25,000, to be used in paying a prior indebtedness of Howell to the Arizona State Bank, of Winslow.

The precise business relations between Howell and Wetzler are not entirely made clear in the record, for it does not disclose the earlier dealings between the two men. In one of his letters to Wetzler, however, under date of August 1, 1921, Howell stated that their business affairs were "badly mixed up."

The earliest exhibit now before us is a letter from Howell to Wetzler, dated July 26, 1921. In that letter Howell said: "* * * there is only one way out. I have a chance to borrow $25,000, providing my financial statement shows up all right. Now there is only one way for this to be done, and this is for you to buy back a one-half interest until this $25,000 is paid off, and then I will buy it back, as I do not want to sell, but it's our only way to save ourselves, and possibly can get $10,000 on the land. * * * I can pay off $18,000 next year out of steers * * * and possibly $5,000 out of odds & ends. You know what this means to us both. * * * I will come down and we will put everything in shape and secure the loan and go ahead with our business."

In his letter of August 1, 1921, Howell elaborated upon the plan:

"Here is the proposition: You would be getting at least 1,000 head of cattle, 300 calves and ½ of all ranch and horses and the increased value of the land for what I owe you, me to buy it back as soon as the mortgage was paid, unless you preferred to keep it. This would make it possible for us to raise the necessary money to pay off the bank and the land. * * * This would assure you of your money no matter what came up, and I would feel much easier if I knew you were paid, for you will agree with me, that our business affairs are badly mixed up, and if for any reason they got into the courts, you and I would get off at the short end.

"* * * Send me the contract to sign. There is no use planning on buying more cattle on time until we get this business entirely straightened out. Then we can get busy and buy all we can, and get down to making money again. I have studied this from all standpoints, and see no other way out for either of us.

"* * * For I am doing my best to see you get your money out of this outfit."

It appears, however, that Howell's "financial statement" did not "show up all right," for we find testimony by T. M. Quebedeaux, vice president of the Navajo County Live Stock Loan Company, and president of the Arizona State Bank, to the effect that Quebedeaux told Howell that the former believed "Wetzler could make a statement that would warrant my making paper with title to the property."

Be that as it may, on October 7, 1921, a note and chattel mortgage for $28,200 was executed in favor of the Navajo County Live Stock Company by Wetzler. The chattel mortgage covered 2,200 head of cattle, therein specifically described by brands and earmarks, and located on the Ed Howell ranch. The latter instrument was properly recorded on October 18, 1921.

In this connection, it should be stated that, at the trial in the court below, excerpts from a referee's transcript in the case of Wetzler v. Howell, 37 Ariz. 381, 294 P. 611, in the state court, were admitted over the appellants' objections. In these excerpts was contained the following stipulation:

"It is stipulated that prior to the execution of the instrument or contract between the plaintiff Wetzler and the defendant Howell, on November 3, 1921, marked plaintiff's exhibit number two in this case, plaintiff made and executed and delivered to the Navajo County Live Stock Loan Company a second certain? note and chattel mortgage upon the live stock involved in this action, which said mortgage was recorded in the office of the county recorder of Apache County, Arizona, on or about the 18th day of October, 1921, and that said note and mortgage was given in lieu of and in payment of and the proceeds used in the payment of the indebtedness evidenced by notes now in evidence in this case.

"Signed by Everett P. Howell and Lillian S. Howell and Julius Wetzler, under date of January 1, 1921, in the principal sum of twelve thousand five hundred dollars — twelve thousand fifty-one dollars, * * * together with the interest on said notes."

Supplementing the foregoing stipulation, it was conceded in open court at the trial below, that the note represented the indebtedness of Mr. and Mrs. Howell to the Arizona State Bank. And the mortgage from Wetzler to the live stock loan company and that given by Howell to the bank covered the same cattle.

The excerpts from the state proceedings above referred to also contained testimony by Howell that Wetzler "was to pay all indebtedness to the Arizona State Bank." The record herein clearly shows that Wetzler did pay Howell's notes to the Arizona State Bank with the funds derived from the note of October 7.

On November 3, 1921, the Howells executed a bill of sale of the cattle involved in the instant case to Wetzler, for the recited consideration of $50,000. This instrument was recorded in "Book No. 2 of B. of S. Page 142" of the records of Apache county, on November 9, 1921.

The appellee insists that the bill of sale was reduced to writing some time in the month of October, 1921; and, indeed, the document itself bears internal evidence that this surmise is probably correct. We cannot agree, however, with the appellee's similar inference as to the contract, infra, which bears no such internal evidence.

On November 3, 1921, there was executed by Wetzler and Howell a "Contract" upon which both parties herein strenuously rely. This document was recorded on November 4, 1921, in a book of "Agreements and Leases," in the records of Apache county.

The contract or agreement, as it is variously denominated, recites that Howell had on that day conveyed, "by deed, and bill of sale, and assignment of contract," copies of which were thereto attached, certain described real and personal property, the latter including the cattle involved in the instant case.

The agreement also sets forth that Howell shall have the right to repurchase the cattle from Wetzler for $50,000, payable in five years; that "the said transfer is being made only for the purpose of securing" Wetzler "for all sums of money now due" from Howell to Wetzler "and such other sums as may become due under the conditions of this contract"; that Howell shall remain in charge and possession of all the property, except in case of forfeiture as thereinafter provided; and that, where certain brands of stock are mentioned, it shall be understood to cover all increase of said stock, and all sales of increase shall be for the benefit of Howell.

The contract also contains the following provisions:

"All money borrowed hereafter on above described real and personal property to be put back into outfit by purchase of live stock, after payment of balance due on land and Government loan the loan involved herein, but no purchases are to be made without mutual consent of both parties hereto. O.K. J.W. O.K. E.P.H.

"It is further agreed that the interest on a like amount of the above money owing to the Santa Fé Pacific Railroad Company and to the Navajo County Live Stock Loan Company shall be charged at the rate which" Wetzler "may have to pay said railway company and said loan association on any money borrowed or now owing to them. Interest on balance of said money shall remain as above.

"Outfit not to be mortgaged to exceed $1000,000.00 $100,000.00? O.K. J.W. O.K. E.P.H.

"It is further agreed that both real and personal property shall be held by the first party Wetzler as full security for both sums hereinabove mentioned as repurchase money and that the second party Howell may pay off any part or all of the said money above mentioned at any time, excepting such money as may be borrowed by the first party and which he is bound to keep for a specified time within the term of this contract.

"It is further agreed that all of said property herein above described shall remain as security to cover any and all advances made by the first party for running expenses of the second party and such advances as shall be deemed a part of the repurchase money necessary to be paid each year with the other payments specified, with like interest as above set forth. And the first party agrees to furnish not to exceed Three Thousand Dollars per year for running expenses, as the same may be actually needed; and the first party agrees to deposit $250.00 per month with any bank designated by second party to credit of second party, out of which he shall pay lease money and running expenses; and the second party shall have the right, in the event of the failure of the first party to furnish expenses as aforesaid, to sell cattle to the extent of Three Thousand Dollars per year for the payment of such actual and necessary running expenses.

"The party of the first part hereby agrees to assume and pay all money due to the Santa Fé Pacific Railroad Company on lands hereinabove described, and also all money owing by the second party to the Arizona State Bank of Winslow, Arizona, and the Gallup State Bank of Gallup, New Mexico, and said payments are included in the above mentioned repurchase money in full."

The day before the bill of sale was recorded, an application for the loan from the appellee was made...