Kohn v. Dravis

• Decision Date: 24 April 1899
• Docket Number: 1,130.
• Citation: 94 F. 288
• Parties: KOHN et al. v. DRAVIS.
• Court: U.S. Court of Appeals — Eighth Circuit

94 F. 288

KOHN et al. v. DRAVIS.

No. 1,130.

United States Court of Appeals, Eighth Circuit.

April 24, 1899

On January 4, 1893, Theodore H. Dravis, the defendant in error was a merchant in business at Sibley, in the state of Iowa. He had a stock of merchandise, whose cost price was $8,000. He mortgaged these goods to Kohn Bros., the plaintiffs in error, to secure the payment of $3,816 which he owed them. The mortgage contained a stipulation that 'the mortgagee has permission to take immediate possession of such merchandise, and sell the same at retail only, but not at a price less than cost, and sufficient of such goods as will pay the debt hereby secured, with costs. ' The mortgagees took possession of the goods, and sold such a part of them as cost $3,500. They then sold the remainder at auction, and Dravis brought this action. In his petition he set forth the foregoing facts, and alleged that Kohn Bros., by accepting the mortgage, became the trustees of an express trust, that by selling at auction they had violated this trust, and prayed for a judgment for $8,234.90, the damages which he claimed he had sustained by their auction sale. Kohn Bros answered that the defendant in error owed them $3,816 on January 4, 1893, that he gave them the mortgage to secure them the payment of this debt, and that they took possession of the stock of merchandise under it; but they denied all the other allegations of the petition. On the day before the case came on for trial in the court below, they filed an amendment to their answer, in which they averred that on January 4, 5 and 7, 1893, Dravis gave five subsequent mortgages, to five mortgagees, whom they named, on this same stock of merchandise, to secure the payment of debts which amounted to $5,122.88, that the aggregate amount of these several mortgages was greater than the value of the goods, that the subsequent mortgages were unpaid, that the mortgagees were entitled to enforce any claim which existed against the plaintiffs in error on account of their sale of the mortgaged property in their order of priority, and that the mortgagor had no interest in the property or its conversion. They prayed that the subsequent mortgagees might be made parties to the action, and might be required to state their respective claims under their mortgages. On the first day of the trial of the case, they made a motion in accordance with this prayer; but the court denied it, and struck from the files the amendment to their answer. On the trial the court refused to permit them to prove the market value of the goods, and instructed the jury to return a verdict against them for the cost price of the stock of merchandise, less the $3,816 and interest which was due to them on the original debt of Dravis and the costs of the sale. This instruction resulted in a judgment against the plaintiffs in error for $4,666.44, which this writ of error challenges.

Deloss C. Schull (William H. Farnsworth, James M. Flower, Frank J Smith, and Harrison Musgrave, on brief), for plaintiffs in error.

George W. Argo and D. J. Murphy, for defendant in error.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

SANBORN Circuit Judge, after stating the facts, .

The mortgage authorized the plaintiffs in error to sell the merchandise at retail only, and at not less than cost, until they realized the amount due them and the cost of this sale. This limitation of the amount and the method of the sale raised the implied agreement that, when the limit of the sale had been reached, the unsold remainder of the goods should be returned to the mortgagor. Those who avail themselves of the power of sale in a mortgage must strictly pursue its terms. By accepting the mortgage, and the benefit of the power it contained, these mortgagees agreed that they would sell the stock of goods in accordance with its terms until they realized their claim, and that they would return the unsold remnant to the mortgagor. They violated this contract. After they had sold at retail such a part of these goods as cost $3,500, they sold the remainder at auction. What is the proper measure of the mortgagor's damages for this breach of the agreement? The court below held that it was the cost price of the entire stock mortgaged, less the amount due on the debt of the mortgagor and the costs of the sale, and this ruling is assigned as error.

If the plaintiffs in error had bought these goods at the cost price or if they had agreed to pay the cost price for them, that price would have been the measure of the mortgagor's damages for the violation of that contract. Wicker v. Hoppock, 6 Wall. 94, 99, 100. But they made no such agreement. The extent of their contract was that they would sell from their stock at retail and at cost until they obtained proceeds enough to pay the costs of such a sale and the debt of the mortgagor to them, and that they would return the remainder of the goods to him. What, then, would the mortgagor have received if they had fulfilled their agreement? Evidently, the unsold remnant of the stock, after a sufficient amount had been sold from it to pay his debt and the costs of the sale,-- nothing more, and nothing less. What, then, was the real and entire effect of the breach of the agreement upon the rights of the mortgagor? It was that the mortgagees sold at auction, and thus converted to their own use, the unsold remnant of the mortgaged stock which they had agreed to return to him. They had the right to apply all the stock, except this remainder, to the payment of the debt and costs, by the terms of the mortgage; and, if the mortgagor received the benefit of this entire remnant, he could not suffer any loss by the method which the mortgagees adopted in disposing of their part of the property. If Kohn Bros. had agreed to buy this remnant at its cost price; if they had agreed to pay its cost price, at any time or in any way; if they had even contracted to sell it at its cost price,-- they might have been liable to the mortgagor for that amount. But the limit of their undertaking here was that they would return this remainder of the goods to the mortgagor, and this was the only stipulation of the contract which was violated to his prejudice. They failed to return this remnant, and they converted it to their own use; but the measure of the liability could not exceed its market value at the time of its conversion, because the mortgagor could not have obtained more than that amount for it if it had been returned to him. The difference between that which the injured party would have received if the contract had been performed, and that which he did receive, is the true standard for the measure of damages for a breach of a contract, because that measure gives the sufferer that full and exact compensation for his injury which it is the aim of the law to bestow, Kingman & Co. v. Western Mfg. Co., 34 C.C.A. 489, 92 F. 486. The mortgagor in the case at bar would have received the remnant of his stock of goods, after a sufficient amount had been sold from it at retail and at cost to pay his debt and the costs of the sale, if the contract had been performed. By the breach of the agreement he lost nothing but this remnant, and the mortgagees converted this to their own use by their sale of it at public auction. The measure of damages for the conversion of personal property or for the sale...