Boyle v. Gray, 2198

• Decision Date: 27 August 1928
• Docket Number: 2199.,No. 2198,2198
• Citation: 28 F.2d 7
• Parties: BOYLE v. GRAY et al. SAME v. WEATHERBEE et al.
• Court: U.S. Court of Appeals — First Circuit

28 F.2d 7 (1928)

BOYLE v. GRAY et al.^*

SAME v. WEATHERBEE et al.

Nos. 2198, 2199.

Circuit Court of Appeals, First Circuit.

August 27, 1928.

Joseph B. Jacobs, of Boston, Mass. (Maurice E. Rosen and Frank H. Haskell, both of Portland, Me., on the brief), for appellant.

Frank Fellows, of Bangor, Me. (Ballard F. Keith and J. F. Gould, both of Bangor, Me., on the brief), for appellees.

Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.

BINGHAM, Circuit Judge.

These two proceedings are bills in equity, under the provisions of section 70e of the Bankruptcy Act of 1898 and amendments thereto (11 USCA § 110(e), brought by James L. Boyle, trustee in bankruptcy of Frank H. Gordon. The first is brought against Frank H. Gordon, Frank H. Gordon, Inc., and Herbert Gray; and the second against Frank H. Gordon, Frank H. Gordon, Inc., Artemus Weatherbee, and Patrick H. Gillin, the two latter being receivers of Frank H. Gordon, Inc., in a receivership suit brought by Frank H. Gordon, as stockholder and creditor, against the corporation in the Maine court, and also receivers or custodians under a bill in equity brought in the Maine court by Walter V. Wentworth against Frank H. Gordon, Frank H. Gordon, Inc., et al. In both proceedings the trustee seeks to recover certain real estate and personal property used in the construction and operation of certain fox ranches and a large number of foxes, or the proceeds thereof, all of which the trustee claims as the property of Frank H. Gordon, the bankrupt. In the District Court, both proceedings were dismissed, and the trustee appealed.

In 1922 Frank H. Gordon began the business of selling and ranching silver black foxes, and, in carrying on that business, entered into contracts for the sale and ranching of the foxes sold. Sales were made to a large number of persons during the year 1924, and to a limited extent during 1922 and 1923. By December 31, 1924, he had sold about 1,250 pairs at $2,000 per pair and taken in about $2,500,000. In these sale contracts it was stipulated that Gordon "hereby sells and delivers to the party of the second part one pair of silver black foxes," and further agrees to ranch said foxes "from the date hereof to the date of the birth of the first offspring of said foxes after the first breeding season, * * * and said pair of foxes and said offspring from the date of their birth to the 1st day of January next following * * * without further expense" to the purchaser, and for that purpose was to have "sole possession of said foxes * * * during said season." In the contracts made down to August, 1924, Gordon guaranteed that a pair of foxes sold under a given contract would produce 100 per cent. of offspring for the first breeding season following the date of the contract, and, if less than two were produced by said pair of foxes, to supply young foxes to make up the 100 per cent. production. All offspring produced in excess of 100 per cent. were to belong to Gordon. In the sale contracts made subsequent to August, 1924, the guaranty was reduced to 50 per cent. By the fifth article of the contract the purchaser gave to Gordon an option to purchase the two offspring when produced for $1,500, which option was to continue from the birth of said offspring to January 1st next following. The sale contracts made after August, 1924, also included a provision that the foxes sold should be "segregated and designated by number at some appropriate time during the life of this contract consistent with necessary breeding and ranching arrangements, reserving also the right to substitute other similar foxes for those thus designated, should ranching or breeding necessities demand such substitution."

From and after August, 1924, if not earlier, pens on a designated ranch were numbered, and the pair of foxes in a particular pen so numbered were allotted to a given purchaser or purchasers of a pair of foxes under his or their contracts theretofore issued, and to a purchaser or purchasers of a pair of foxes under sales contracts thereafter issued. This was done in this way: Each ranch where the foxes sold were being ranched contained pens numbered consecutively from 1 to 100. In Gordon's office were kept sheets of paper, each sheet being devoted to and representing a particular ranch, which was divided into squares, representing pens, numbered from 1 to 100. Each sales contract was numbered, and in each square on a sheet, representing a like numbered pen on a described ranch, was inserted the number or numbers of the sales contract or contracts relating to the pair of foxes segregated in that particular pen, and the proportion or fraction of the pair of foxes in that pen assigned or allotted to a particular contract or contracts, thus designating the owner or owners of the pair of foxes in that pen, and whether they had been sold to one or more persons. In all sale contracts made after August, 1924, either by Gordon or his successor, Gordon, Inc., this method of segregating a pair of foxes and allotting them to a particular contract or contracts was followed.

There was also kept in the office of Gordon, and later on in the office of Gordon, Inc., a card index system, in which every contract holder had a card assigned to him containing his name, against which was set the date, the number, and the amount of his contract, the date payment was made on it and how paid, cash or otherwise, and the designation of the particular ranch and pen in which the foxes sold under that contract were.

December 1, 1924, the corporation known as Frank H. Gordon, Inc., was organized under the laws of Maine for the purpose of taking over and conducting the fox business carried on by Frank H. Gordon, and on December 31, 1924, Gordon entered into a contract with Gordon, Inc., whereby he transferred to it his fox business and all the property real and personal used by him in conducting said business, the consideration therefor being all the stock ($300,000) of the corporation and an agreement on its part to assume all the obligations and liabilities of Gordon arising out of his conduct of the business. The property thus transferred included "all the silver black foxes remaining unsold and belonging to me" Gordon, designating their location, being about 250 foxes ($84,600 was paid for them, at about $350 apiece, or $700 a pair); "all buildings and structures upon leased or rented land," specifying them; "all stock on hand, materials, machinery, pens, tools, lumber," etc., belonging to "Frank H. Gordon and used by him in his business of silver black fox buying, selling, and ranching," particularly describing the property and designating the ranch or place where the same were situated; some 45 automobiles and 7 trucks, owned and used by Gordon in the fox business; personal property, consisting of a moving picture department; 35 lots of land, situated in Maine and elsewhere; all rights in "the contracts now in force between me and purchasers of foxes from me, having particular reference to my interest and right in and to the option for the purchase of offspring, mentioned and specified in said contract," giving a schedule of the sales contracts; and all accounts due and receivable contracted in the fox business, including general accounts, "accounts receivable from owners," and notes payable.

October 26, 1925, Gordon filed a bill in equity against Gordon, Inc., in the Supreme Court of Maine, asking for a receiver, wherein he alleged that he was a stockholder and creditor of the corporation and that it was solvent. He signed the bill and made oath that the facts therein stated were true. On that day an answer was filed, admitting the allegations of the bill, and thereupon it was decreed that the bill be sustained, that P. H. Gillin and Artemus Weatherbee be appointed temporary receivers of the property of the corporation, with power to carry on its business pending final decree, that a temporary injunction be issued, and that notice be given of a hearing November 17, 1925, for the appointment of permanent receivers. This bill was brought under the provisions of section 23, c. 81, of the Revised Statutes of Maine. The receivers thereupon took possession of all the property of the corporation and of all the foxes in its possession as bailee under its sales contracts, or under sales contracts made by Gordon, for ranching foxes.

November 2, 1925, Walter V. Wentworth, on behalf of himself and all other contract holders numbering about 2,500, brought a bill in equity in the Supreme Court of Maine under chapter 82, § 6, par. 7, Rev. Stats. of Maine, against Gordon, Gordon, Inc., and Gillin and Weatherbee, as receivers of the corporation, setting out the sales contracts; that subsequent to their execution the foxes thus sold were set apart, segregated, and put in designated pens on the ranches, and that the sales contracts were numbered and entered upon the books of the defendants Gordon and Gordon, Inc., as the property of the contract holders; that none of the foxes in the possession of the receivers were the property of Gordon, or of Gordon, Inc., but were the property of the contract holders; that the foxes belonging to the contract holders had been negligently or willfully intermingled and confused by the defendants, so that it was impossible to identify those belonging to a given contract holder; and praying that the court determine and decree the respective rights of the parties to the foxes, order distribution of them to their owners, or make such other disposal as equity and good conscience required; and that P. H. Gillin and Artemus Weatherbee, receivers of Gordon, Inc., be appointed receivers of all the foxes on the ranches of Gordon, Inc., and hold and care for the same "in the interest of the owners thereof until further order of the court."

An answer to this bill having been filed by the defendants Gordon, Gordon, Inc., and others, admitting the facts alleged in the bill, and Gordon...