Jamison Coal & Coke Co. v. Goltra

Decision Date23 August 1944
Docket NumberNo. 12823.,12823.
Citation143 F.2d 889
CourtU.S. Court of Appeals — Eighth Circuit

Lon O. Hocker, of St. Louis, Mo. (Jones, Hocker, Gladney & Grand and James C. Jones, Jr., all of St. Louis, Mo., on the brief), for appellant.

William G. Pettus, Jr., of St. Louis, Mo. (Nagel, Kirby, Orrick & Shepley and Frank H. Fisse, all of St. Louis, Mo., on the brief), for appellees-executors.

Henry T. Ferriss, of St. Louis, Mo. (Alvan J. Goodbar, of St. Louis, Mo., on the brief), for appellees-interveners.

Before STONE, WOODROUGH, and THOMAS, Circuit Judges.

THOMAS, Circuit Judge.

The appellant, Jamison Coal and Coke Company, a Pennsylvania corporation, brought suit in the district court against the executors of the estate of Edward F. Goltra, deceased, asking the court to declare an equitable lien upon funds in the custody of the defendants and to decree the specific performance of a written contract. Erastus Wells, J. Clark Streett and Tom K. Smith, Trustees, as creditors of the decedent's estate, intervened on behalf of the defendant executors. Motions of the defendants and interveners to dismiss the petition were sustained and a judgment of dismissal was entered from which this appeal is taken.

The cause of action alleged in the petition is based upon a written contract dated May 6, 1932, between Goltra as party of the first part and plaintiff as party of the second part, and upon the circumstances leading to and attending its execution.

The contract, which is made a part of the petition, recites that Goltra was then asserting a claim in damages against the United States and that bills were pending in Congress, not then enacted, for the purpose of enabling Goltra to bring suit on his claim and prosecute it to judgment; that Goltra had requested of plaintiff financial assistance to enable him to pay in part his expenses in procuring the enactment of the bills in Congress and in prosecuting the litigation; and that plaintiff owned $153,000 face value and unpaid interest coupons of an issue of mortgage bonds of the Mississippi Valley Iron Company of which corporation Goltra was an officer and stockholder.

Following these recitations the contract provided that the plaintiff on its part would furnish Goltra $2,500 concurrent with the execution of the contract and in the event the bills were enacted by Congress advance the further sum of $2,500 as soon as Goltra should bring his suit against the United States.

In consideration of the promised advancement by the plaintiff, Goltra agreed "that in the event he successfully prosecutes his claim and recovers a final judgment therein" he would "on the payment thereof", after deducting expenses, "apply the proceeds remaining in the purchase" at par of the bonds of the Iron Company owned by plaintiff in an amount proportionate to the amount of the net proceeds of the judgment; and in the event the net recovery should exceed $350,000 he would purchase all of the bonds of the Iron Company owned by plaintiff. The written contract, however, contains no correlative promise on the part of plaintiff to sell and deliver any of the bonds to Goltra.

An enabling act conferring jurisdiction upon the Court of Claims to hear, consider and render judgment upon Goltra's claim was approved April 18, 1934, 48 Stat. 1322, c. 150, and suit was accordingly commenced thereon.1

In accordance with the provisions of the contract the plaintiff advanced $5,000 to Goltra. After Goltra's death in 1939 the litigation was carried on by his executors. A judgment for $350,000 was finally recovered, and the net proceeds thereof in the amount of $281,415 was paid to the executors in 1943.

The facts and circumstances leading to the making of the contract of May 6, 1932, as alleged in the petition, may be stated briefly. The story relates principally to the value of the bonds referred to in the contract and the manner in which the plaintiff acquired them. At the request of Goltra the plaintiff during October, November, and December, 1920, sold coke to the Mississippi Valley Iron Company on open account in the amount of $167,377.40 for use in the manufacture of pig iron at St. Louis, Missouri. At that time Goltra represented that the Iron Company was short on working capital, but expected to accumulate capital from the proceeds of orders for pig iron then on hand. Soon thereafter the pig iron market suffered a collapse and the Iron Company, as a result, was compelled to cease the manufacture of pig iron. The account was not paid, and at the request of Goltra the plaintiff took trade acceptances in payment thereof. The trade acceptances were not paid when due, and thereafter, at Goltra's request, plaintiff accepted in their place 305 $500 mortgage 7% gold bonds issued by the Iron Company of the aggregate face value of $153,000, maturing in 1931 and bearing interest at 8% after due.

At the time of his death Goltra was insolvent, and claims in excess of $300,000 have been filed and allowed against his estate. The Mississippi Valley Iron Company has been adjudged a bankrupt, and it is alleged that the bonds issued by it and owned by plaintiff "have little or no value." The petition does not state when the Iron Company became insolvent or when the bonds ceased to have any substantial value. It is obvious from the foregoing facts, however, that both these events had occurred, or were imminent, at the time the contract of May 6, 1932, was executed. All the bonds were delinquent and unpaid at that time.

Upon the basis of the net recovery of $281,415, the petition alleges that the executors were obligated under the terms of the contract to apply $105,707 to the purchase of bonds, and that plaintiff had tendered and offered to deliver to the executors 212 of the bonds involved of the aggregate face value of $106,000 upon payment to it of $105,707, and that the tender had been refused.

The petition further alleges that under the written agreement of May 6, 1932, plaintiff has an equitable lien on the net proceeds of the judgment collected by the executors to the extent of $105,707; that said sum is a trust fund in the hands of the executors for the purchase price of the bonds; and that plaintiff has no adequate remedy at law.

It is also alleged that there was a moral and equitable obligation on the part of Goltra, in addition to the $5,000 advanced for expenses, to protect the plaintiff against loss on its transactions with the Iron Company.

The relief asked is a decree (1) declaring an equitable lien and (2) granting specific performance of the contract of May 6, 1932. There is no demand for a general judgment to be satisfied out of any property belonging to the estate of Goltra.

The relief demanded is dependent upon the construction and legal effect of a contract entered into in Pennsylvania. The suit was brought in equity in a federal court in Missouri. Jurisdiction is predicated upon diversity of citizenship. Under these circumstances, is the interpretation of the contract governed by the laws of Pennsylvania, by the laws of Missouri, or by the "federal common law"? It has not been definitely settled by the Supreme Court whether the doctrine of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487, applies in such a case. See Note 3 to Mr. Justice Jackson's concurring opinion in D'Oench, Duhme & Co., Inc., v. Federal Deposit Insurance Corporation, 315 U.S. 447, 467, 62 S.Ct. 676, 86 L.Ed. 956. We need not determine this question here. The parties have presented the case on the theory that the legal effect of the contract is controlled by federal law and have cited no cases from either Pennsylvania or Missouri. We assume, therefore, that the laws of both states are the same as the federal law.

First to be considered is whether the contract of May 6, 1932, viewed in the light of attending circumstances, created an equitable lien in favor of plaintiff upon a part of the proceeds of the judgment recovered by Goltra against the United States.

Since the question here arose on a motion to dismiss plaintiff's petition, there is no dispute about facts to be considered. It is not alleged that prior to the execution of the contract of May 6, 1932, Goltra was indebted to plaintiff, or that he was under any legal obligation to purchase the bonds. The Iron Company, not Goltra, issued the bonds owned by the plaintiff. The only obligation of Goltra to the plaintiff arose out of the contract of May 6, 1932, and depended upon the consideration of $5,000 therein expressed. If Goltra felt, as plaintiff argues, that he was under some intangible moral obligation to plaintiff to save it from loss on the bonds, that fact is immaterial to the existence or non-existence of an equitable lien. The $5,000 was sufficient legally to support a valid promise, and the assumed moral consideration would add nothing. Moreover a moral consideration will not support an equitable lien, 33 Am.Jur., Liens, § 18; 37 C.J., Liens, § 24; Stansell v. Roach, 147 Tenn. 183, 246 S.W. 520, 526, 29 A.L.R. 143.

The contract relied upon is a contract to purchase bonds in the future. The promise of Goltra to purchase was a contingent one; it was contingent (1) upon the adoption of an enabling act by Congress, (2) upon obtaining a judgment in litigation pursuant to such legislation, and (3) upon the payment by the United States of the judgment when and if rendered in such litigation. These contingencies were all conditions precedent, and the agreement to purchase did not become effective until they had all occurred approximately 11 years after the contract was executed. No claim is made that any right or interest in or lien upon the proceeds of the judgment in fact resulted from the contract of May 6, 1932, while the proceeds of that judgment remained in the possession of the government. No notice of the existence of the contract or any claim...

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