Bunday v. Huntington

• Decision Date: 02 July 1915
• Docket Number: 4417.
• Citation: 224 F. 847
• Parties: BUNDAY et al. v. HUNTINGTON. [1]
• Court: U.S. Court of Appeals — Eighth Circuit

224 F. 847

BUNDAY et al. v. HUNTINGTON. ^[1]

No. 4417.

United States Court of Appeals, Eighth Circuit.

July 2, 1915

The defendants further allege that thereafter and in pursuance of said agreement, and in compliance with the terms of said chattel mortgage, the said Carlson & Rosdahl replenished said stock of merchandise and kept the value thereof in excess of $8,107, and accounted to these defendants for the sales made by them from said stock of merchandise from time to time, and paid to these defendants the following amounts at the times herein stated; the same being 15 per cent. of the sales of merchandise so made by them under said contract and chattel mortgage, to wit: June 3, 1909, $213.60; July 6, 1909 $156.45; August 6, 1909, $136.50; September 8, 1909, $105.75 October 9, 1909, $180.00; December 10, 1909, $255.00; January 3, 1910, $165.00; March 2, 1910, $161.25-- making a total sum of $1,373.55 so paid by them and received by these defendants prior to the time when said stock of merchandise was destroyed by fire, on the said 3d day of May, 1910, and at said time the said Carlson & Rosdahl were so indebted for and on account of the sale of said stock of merchandise by these defendants to them, and by reason of the said contract and the note and chattel mortgage hereinbefore described, in the sum of $3,733.45, with interest as provided by said promissory note, contract, and chattel mortgage, and these defendants allege that at all times prior to the said 3d day of May, 1910, the said Gideon N. Carlson and Adolph P Rosdahl, as copartners, and as individuals, were solvent, and that the aggregate of their property at a fair valuation was more than sufficient in amount to pay their debts, and that if they became or are insolvent they so became and are insolvent only by reason of the destruction of said stock of merchandise by the said fire on said 3d day of May, 1910.

The defendants further allege that in and by said contract, and as a part of the consideration for the sale of the said stock of merchandise by these defendants to the said Carlson &amp Rosdahl, it was agreed by the parties thereto that the said Carlson & Rosdahl should insure said stock of merchandise in favor of these defendants to the amount of $5,000, and that it was the intention and understanding of said Carlson & Rosdahl and of these defendants that the said Carlson & Rosdahl, as a part of the consideration for the said sale, and as additional security for the purchase price of said stock of merchandise, should keep said stock of merchandise insured against loss by fire, to the amount of $5,000, with the loss, if any, payable to these defendants, as mortgagees, so far as their interests might appear, and that in pursuance of said contract, and in accord with the intentions and understanding of the parties thereto, the said Carlson & Rosdahl procured the insurance hereinbefore mentioned, and that it was the intention and understanding of said Carlson & Rosdahl, and these defendants, that the said insurance so procured and issued upon said stock of merchandise was in compliance with said contract, and that the same was so issued in favor of these defendants, but through inadvertence, oversight, and mistake, all of said policies of insurance so issued were taken in the name of said Carlson & Rosdahl, and the loss, in case of fire, made payable to said Carlson & Rosdahl, instead of in the name of these defendants as intended and understood between the parties to said agreement.

This is an action at law instituted by the defendant in error against the plaintiffs in error, who will be referred to herein as the 'plaintiff' and 'defendants,' as they were in the court below, to recover an alleged preference.

The plaintiff is the trustee in bankruptcy of Carlson & Rosdahl, a mercantile firm, who had been in the retail mercantile business at Bruce, S.D., from April 14, 1909, to May 3, 1910. On November 15, 1910, an involuntary petition in bankruptcy was filed against them, and they were adjudicated as bankrupts on December 2, 1910. Thereafter the plaintiff was duly elected as trustee of the bankrupt estate.

It is charged in the complaint that on May 3, 1910, the stock of merchandise of the bankrupts was destroyed by fire, being covered by insurance; that on July 16, 1910, within four months of the filing of the petition in bankruptcy, the bankrupts, being then indebted to the defendants, assigned and transferred to them the policies of insurance on the stock of merchandise and the amounts due them thereunder; that the defendants collected the amounts due from the insurers; that at the time of the transfer and assignment of these policies Carlson & Rosdahl were insolvent, which fact was known to the defendants, and this transfer, and the collection of the insurance money by the defendants, enabled them to obtain a greater percentage of their claim than any of the other creditors of the same class, and was intended as a preference.

The answer of the defendants, so far as it is necessary for a determination of the issues involved on this writ of error, is as follows:

The defendants allege that for many years prior to the 14th day of April, 1909, the defendants, Ansel E. Bunday and Frank F. Ribstein, were copartners under the firm name and style of Bunday & Ribstein, and were engaged in the general retail merchandising business at Bruce, S.D., and on said 14th day of April, 1909, owned a stock of general merchandise of the value of $8,107; and that on said 14th day of April, 1909, when the said G.N. Carlson and A. P. Rosdahl were solvent, and the aggregate of their proverty at a fair valuation was more than sufficient in amount to pay their debts, these defendants, as copartners aforesaid, made and entered into an agreement and contract in writing with the said Carlson & Rosdahl, in the names of G. N. Carlson and A. P. Rosdahl, respectively, wherein these defendants, among other things, agreed to sell to the said Carlson & Rosdahl the said stock of general merchandise, a copy of which said agreement and contract is hereto attached, marked 'Exhibit A,' and made a part hereof.

The defendants further allege that thereafter, and in pursuance of said contract, an invoice of stock of merchandise was taken by the parties thereto, and the invoice price and value of said stock of general merchandise was found to be the sum of $8,107, which amount was the true value thereof, and which amount was agreed upon between the parties thereto as the purchase price of said stock of merchandise, and that thereupon these defendants sold, transferred, and delivered the said stock of merchandise to the said Gideon N. Carlson and Adolph P. Rosdahl, for the said sum of $8,107.

The defendants further allege that thereupon and on or about the 26th day of April, 1909, relying upon and in pursuance of said agreement, these defendants sold said stock of merchandise to the said Carlson & Rosdahl, and the said Carlson & Rosdahl paid unto these defendants the sum of $3,000, as a part of the consideration for said stock of merchandise, and as evidence of the indebtedness for the balance of the consideration therefor the said Carlson & Rosdahl, on the said 26th day of April, 1909, executed and delivered to these defendants their certain promissory note wherein and whereby, on or before the 19th day of April, 1914, they promised to pay to the order of these defendants the sum of $5,107, with interest thereon at 6 per cent. per annum until paid, payable annually, a copy of which note is attached hereto, marked 'Exhibit B,' and made a part hereof.

The defendants further allege that on said 26th day of April, 1909, in pursuance of said contract, the said Carlson & Rosdahl, in their individual names, as additional security for the payment of said promissory note, executed and delivered unto these defendants their certain chattel mortgage, a copy of which is attached hereto, marked 'Exhibit C,' which mortgage was on the 27th day of April, 1909, filed for record in the office of the register of deeds in and for Brookings county, S.D.

Contract of Sale.

This agreement made and entered into this 14th day of April, 1909, by and between A. E. Bunday and F. F. Ribstein, copartners, doing business under the firm name and style as Bunday & Ribstein, parties of the first part, and G. N. Carlson and A. P. Rosdahl, parties of the second part, witnesseth:

That said Bunday & Ribstein in consideration of the covenants hereinafter contained, will sell to said parties of the second part all of their stock of goods, wares and merchandise of every kind, character and description now being in their store, situated on lots 18 and 19, block 6, of the original plat of the town of Bruce, Brookings county, South Dakota, according to an invoice to be hereafter made by the parties hereto.

The parties of the second part shall pay for the same as follows:

For all dry goods, including hats, caps, notions, overcoats, shirts and overalls, etc., invoice price with a discount of twenty per cent., two per cent. to be added for freight.

For all boots, shoes and rubbers, ten per cent. discount, with two per cent. added for freight.

For all groceries, including crockery, glassware and stoneware, and all other articles carried in the grocery department, net invoice price with two per cent. added for freight.

Both parties agree to deposit in the Bank of Bruce the sum of two hundred dollars each, making the whole amount four hundred dollars, to be forfeited by either party not living up to this contract.

In consideration hereof, the party of the second part agrees to pay the party of the first part the sum of $3,000 in cash the balance by note, bearing 6 per cent. interest secured by first mortgage on the whole stock...