Associated Seed Growers v. Geib, 4887.

• Decision Date: 12 February 1942
• Docket Number: No. 4887.,4887.
• Citation: 125 F.2d 683
• Parties: ASSOCIATED SEED GROWERS, Inc. v. GEIB et al.
• Court: U.S. Court of Appeals — Fourth Circuit

125 F.2d 683 (1942)

ASSOCIATED SEED GROWERS, Inc. v. GEIB et al.

No. 4887.

Circuit Court of Appeals, Fourth Circuit.

February 12, 1942.

Rignal W. Baldwin, Jr., of Baltimore, Md., and Thomas J. Keating, Jr., of Centerville, Md. (Semmes, Bowen & Semmes, of Baltimore, Md., on the brief), for appellant.

G. Elbert Marshall, of Easton, Md., and W. Brewster Deen, of Denton, Md. (William J. Rickards, of Denton, Md., and T. Hughlett Henry, of Easton, Md., on the brief), for appellees.

Before PARKER, SOPER, and DOBIE, Circuit Judges.

SOPER, Circuit Judge.

Associated Seed Growers, Inc., of New Haven, Connecticut, filed a claim in the sum of $14,638.52 as a secured creditor in the bankruptcy proceedings of the Talbot Canning Corporation of Maryland which were instituted on March 9, 1939. The claim was based on shipments of seeds grown by Seed Growers under contract with the Canning Corporation. The Security consisted of assignments by the Canning Corporation of monies that were expected to come into the hands of A. W. Sisk & Son of Preston, Maryland, canned goods brokers who furnished all of the cans needed by the canner, and were given the exclusive right to sell all of the canner's output. After the bankruptcy the brokers, having paid themselves the debt due them by the canner out of the proceeds of the sale of the goods, turned over to the trustee in bankruptcy a balance of $8,081.09, to which Seed Growers now make claim. The questions are, (1), whether the assignments were valid, and (2), whether they constituted voidable preferences under the Bankruptcy Act. The District Judge decided the first question in favor of the claimant and the second question against it, whereupon this appeal was filed.

For a number of years prior to 1937, the canner and its predecessors had been engaged in packing canned goods at Cordova and Willoughby on the Eastern Shore of Maryland. On January 12, 1937, as in prior years, it entered into contracts with Seed Growers for the growth and delivery of certain quantities of bean and pea seeds at certain prices. The contracts contained the provision that if at any time the financial condition of the purchaser should become unsatisfactory to the seller, the latter could require payment in advance of the delivery of the goods, and, in event that such payment was not made, could cancel the contract or demand damages for the buyer's breach. Seeds to fill this contract were grown during the season of 1937 and were delivered to and used by the canner in the following year.

On or about December 7, 1937, Seed Growers deemed the financial condition of the canner unsatisfactory, but instead of asking for payment in advance it began negotiations to obtain security for the indebtedness to arise under the contract upon delivery of the seed. As a result of the negotiations, it was verbally agreed in the month of December, 1937, that if the canner would get the brokers to lay aside certain monies out of the sale of the canned goods and pay Seed Growers, the latter would deliver the seed. Accordingly, the canner made a written assignment on February 3, 1938, in the form of a letter addressed to the brokers at Preston, Maryland, directing them to pay to Seed Growers the sum of $14,150.25 from the proceeds of the sale of goods to be manufactured by the canner in the season of 1938. This assignment was accepted by the brokers in writing and a copy was sent by the canner to Seed Growers on February 5, 1938.

In the meantime, on December 31, 1937, the canner had entered into a formal contract with the brokers whereby they agreed to sell to the canner and the canner agreed to buy from them all the cans and other supplies that it might require in the years 1938, 1939 and 1940 for its packing operations, title to all cans filled or unfilled to remain in the brokers until all indebtedness due them should be paid; and the brokers were given the exclusive right to sell and invoice all the canned goods on a five per cent commission; and the brokers were authorized to collect the accounts and pay themselves out of the proceeds, and remit any balance to the canner or to whomsoever might be entitled thereto. This sales contract was duly recorded pursuant to the requirements of the Maryland statutes affecting conditional sales. The money to be collected by the brokers under this contract was the subject of the assignment of February 3, 1938.

Certain details of the contracts between the canner and Seed Growers and of the letter of assignment from the canner to the brokers must now be more fully set out as they have a bearing upon the questions to be decided. The written contract of January 12, 1937 between the canner and Seed Growers above outlined called for the growth of 216,000 pounds of Asgrow Alaska pea seed at $.055 per pound, and 22,500 pounds of Henderson Bush lima bean seed at $.0875 per pound, f.o.b. Cordova. On February 5, 1938, after the assignment of February 3, 1938 had been made and accepted by the brokers in furtherance of the verbal agreement of December 1937 between Seed Growers and the canner, the latter wrote to Seed Growers enclosing a copy of the assignment and requested a modification of the contract of ...