Ellet-Kendall Shoe Co. v. Martin

• Decision Date: 26 March 1915
• Docket Number: 4135.
• Citation: 222 F. 851
• Parties: ELLET-KENDALL SHOE CO. v. MARTIN.
• Court: U.S. Court of Appeals — Eighth Circuit

222 F. 851

ELLET-KENDALL SHOE CO. v. MARTIN.

No. 4135.

United States Court of Appeals, Eighth Circuit.

March 26, 1915

E. S Ellis, of Kansas City, Mo. (C. F. Hutchings and Frank W Yale, both of Kansas City, Mo., on the brief), for appellant.

W. S McClintock, of Topeka, Kan. (A. L. Quant, of Topeka, Kan., on the brief), for appellee.

Before SANBORN, Circuit Judge, and TRIEBER and REED, District Judges.

REED District Judge.

Brown and Norris, a copartnership doing a general merchandise business at Osage City, Kan., and the individual members thereof, were adjudicated involuntary bankrupts August 16 1913, upon petition filed July 21st preceding, and W. S. Martin, the appellee, was thereafter duly appointed trustee in bankruptcy of their estates and qualified as such. The Ellet-Kendall Shoe Company, a corporation, which will be called the petitioner, in due time filed with the referee its petition claiming that certain shoes in the possession of the trustee, and claimed by him as a part of the bankrupt stock of merchandise, was the property of the petitioner, which it had consigned to the bankrupts in June, 1913, for sale on commission and which remained unsold at the time of the bankruptcy, and asked an order that the trustee be required to deliver to the petitioner such goods as its property. The trustee denied the claim of the petitioner and alleged that the shoes were bought outright by the bankrupts from the petitioner on credit and were a part of the bankrupts' estate at the time of the bankruptcy; or, if not so bought, the transaction between the petitioner and the bankrupts whereby said goods were consigned to the bankrupts amounted to a preference under the Bankruptcy Act. Upon a hearing the referee denied the claim of the petitioner, and adjudged the shoes to be a part of the bankrupt estate. On petition for review this order of the referee was approved by the District Court, and the petitioner appeals.

The proofs show without substantial dispute that on June 5, 1913, a traveling salesman of the Ellet-Kendall Shoe Company, a manufacturer and jobber of boots, shoes, and rubber goods at Kansas City, Mo., took from the bankrupts at Osage City, Kan., a verbal order for 73 dozen pairs of shoes of different sizes described by stock numbers and of the invoice value of $1,713 to be shipped at once by the petitioners from Kansas City to the bankrupts by rail, terms of payment one-half by November 1st, and the balance by December 1st following. On the same day the bankrupts gave to the salesman a statement in writing of their financial condition as a basis for obtaining credit, which statement showed their assets, including a homestead, to be $18,700, subject to a mortgage upon the homestead of $2,000, and liabilities for merchandise, $4,975, $200 of which was due at bank in 30 days; other liabilities, none. The next day, June 6th, the bankrupts wrote the petitioner as follows:

'Osage City, Kansas, June 6, 1913.

'Ellitt Kendall Shoe Co., Kansas City, Mo.-- Gentlemen: After taking into consideration the purchase of Shoes we made of you yesterday. We have decided that at this time And us being new here, And fixed Financially the way we are, That we bought two many Shoes.

'We hope in the near future we may be able to Buy your line of Shoes. But at the present time we feel like that it will be impossible for us to handle them.

'Resp. Yours,

Brown & Norris.'

On the morning of June 7th, the salesman of the petitioner at Kansas City wrote the bankrupts a letter, the material parts of which are:

'June 7, 1913.

'Brown & Norris, Osage City, Kans.-- Gentlemen: On my arrival in the house this morning I found your letter in regard to not shipping your bill of goods that I sold you Thursday. I am somewhat surprised to receive it.

'However, your order left the house here Friday afternoon. I sent the order in Thursday night and it was packed and shipped out Friday, and no doubt you will receive it sometime today. * * *

'Your order was shipped complete with the exception of the Children's High Cuts 5's to 8's also four dozen of Child's shoes, 2's to 5's and 5's to 8's in fancy patent leather, also one Doz. of Child's G. M. Btn. sizes from 8 1/2 to 12's in Goodyear Welt. All of the balance of the order was filled. These few items will go forward to you just as soon as we receive them from the factory. Do not let your financial condition worry you any with this shoe bill, as the proposition in the way I made it to you will be the easiest bill of goods you will ever pay in the shoe business if you stay in the business 50 years. Wishing you all kinds of success, and whenever you are in need of anything in our line let me know in regard to it and I will send it to you so as to keep your line in good shape for your fall shoe business.

'Yours truly,

Ellet-Kendall Shoe Co., 'W. E. McNaughton.'

A few days later there were delivered to the bankrupts at Osage City several boxes of shoes from the petitioner via the Atchison, Topeka & Santa Fe Railway Company; and by mail they received an invoice from the petitioner dated June 7th, which corresponds with the shoes ordered, except that the invoice was short some 10 dozen pairs of shoes, which the petitioner did not have in stock, to be forwarded later, and there was substituted for 1 dozen pairs of the shoes ordered a different lot, but of the same value. The bankrupts did not open the boxes when received, and on June 12th went to Kansas City for a conference with the petitioner. At this conference after considerable discussion it was finally agreed between the bankrupts and the petitioner that the order of June 5th should be rescinded by the bankrupts because the goods shipped did not conform to the goods ordered, and because they had countermanded the order on June 6th; and by the petitioner because the financial statement made by the bankrupts as a basis for the credit was not correct (the bankrupts then informing the petitioner that they had omitted therefrom $5,500 of their indebtedness at the time it was made), and that the order would not have been accepted or the goods shipped had it known that the statement was not correct. Upon that date the bankrupts signed a letter to the Ellet-Kendall Shoe Company in the office of that company as follows:

'Kansas City, Mo., June 12, 1913.

'Ellet-Kendall Shoe Company, Kansas City, Mo.-- Gentlemen: Referring to your invoice of June 7th, total amount $1,713.40, we will return these invoices to you to be exchanged for consigned invoices, as we cannot accept the goods on any other terms than as a consignment.

We carry insurance on our general stock and we will see that our insurance policy reads to cover consigned goods.

'Yours truly,

Brown & Norris.'

It was thereupon agreed that the goods should be kept by the bankrupts for sale on commission to be paid for as sold. This agreement was reduced to writing, dated June 7th, and reads in this way:

'Whereas, Ellet-Kendall Shoe Company are consigning boots and shoes to Brown & Norris, located at Osage City, Kansas, said Brown & Norris hereby agree to guarantee the sale of all such consignments made at the net marked prices named in the bills, without expense to Ellet-Kendall Shoe Company. That said Brown & Norris also agree to keep said stock insured and that any unsold merchandise which may in the future be necessary to take back, or which Brown & Norris may return to Ellet-Kendall Shoe Company, said Brown & Norris agree to make a loss on said goods in the return of same of (30%) thirty per cent. of the original cost. Said Brown & Norris further agree to make weekly reports to Ellet-Kendall Shoe Company showing the articles and lot numbers that have been sold, and accompany said reports with check covering payment of goods that have been sold. Brown & Norris further agree to energetically and diligently push the sale of these consigned goods. It is further agreed that this consigned account shall be fully settled and accounted for in six months from this date, or a final settlement shall be made in less time than six months if it can conveniently be done.

'Ellet-Kendall Shoe Co., 'By T. C. Ellet, Pres. 'Brown & Norris, 'By I. F. Brown.

'Kansas City, Mo., June 7th, 1913.'

This contract was never recorded or filed for record.

Pursuant to this agreement the bankrupts returned to Osage City unboxed the goods previously received, and placed them in their store in the cartons or cases in which each pair of shoes was contained, and labeled with the petitioner's name and made sales therefrom from time to time for which they remitted to the petitioner on June 14th, 30th and July 22d statements of sales to those dates, respectively, and checks or drafts for the amount thereof which were duly paid, amounting to some $75. On July 19th the bankrupts made a general assignment for the benefit of their creditors, but did not include therein the remaining shoes received from the petitioner, and they remained in the store when the bankruptcy proceeding was commenced. It is admitted that the shoes were later identified as shoes received from the petitioner under the order of June 5th, and finally accepted by the bankrupts pursuant to the agreement of June 12th. Upon these facts the referee and court held that the contract of June 12th, was in effect, but a confirmation of the purchase of goods by the...