Segal Brokerage Co. v. Lloyd L. Hughes, Inc.

• Decision Date: 13 April 1938
• Docket Number: No. 8643.,8643.
• Citation: 96 F.2d 208
• Parties: SEGAL BROKERAGE CO., Inc., v. LLOYD L. HUGHES, Inc.
• Court: U.S. Court of Appeals — Ninth Circuit

96 F.2d 208 (1938)

SEGAL BROKERAGE CO., Inc., v. LLOYD L. HUGHES, Inc.

No. 8643.

Circuit Court of Appeals, Ninth Circuit.

April 13, 1938.

D. V. Morthland and Lane Morthland, both of Yakima, Wash, for appellant.

Cheney & Hutcheson, Joseph C. Cheney, and Elwood Hutcheson, all of Yakima, Wash., for appellee.

Before DENMAN, MATHEWS, and HEALY, Circuit Judges.

HEALY, Circuit Judge.

The appeal is from an order of the District Court approving the report of a special master rejecting claims of appellant for administrative expenses against appellee Lloyd L. Hughes, Inc., in proceedings for reorganization under section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207 and note.

The petition for allowance set up two claims. One of these was based upon commissions said to have been earned by appellant under a brokerage contract for the sale of hops. The other claim is for the reasonable value of services alleged to have been rendered in negotiating a settlement between appellee and the E. B. Hittleman Brewery, a concern which appellant had procured as purchaser of the hops. For convenience appellant will be referred to as Segal, the appellee as Hughes, and the purchaser as Hittleman.

Segal's petition alleges that on May 19, 1933, he entered into a written agreement with Hughes whereby he was appointed exclusive sales agent for Hughes in an eastern territory for a period of five years. Pursuant to this agreement, Segal negotiated several contracts with Hittleman for the sale of hops to be grown during the years 1934 to 1937, inclusive. Hittleman failed to perform these contracts; and Segal was requested to assist in negotiations "relative to the said contracts and deliveries under the terms thereof," and his assistance resulted in the execution of a note by Hittleman to Hughes and the extension of time for the delivery of the 1934 crop.

It is alleged that in the spring of 1935 Hughes filed a petition for reorganization under the Bankruptcy Act, and thereafter reached a settlement with Hittleman whereby the latter paid the sum of $38,000 in full satisfaction of all claims arising out of his defaulted contracts to purchase. The petition claims commissions in the amount of approximately $13,000, based upon the brokerage contract. There is an alternative count in quantum meruit.

The second claim set up in the petition is for services alleged to have been rendered at the request of Hughes in the negotiations leading to the settlement. The reasonable value of these services is claimed to be $2,000.

The special master, to whom the claims were referred, found that Hittleman was unable to perform his contracts of purchase because of financial difficulties, and that he defaulted also in the payment of the note given by him to Hughes, representing advances which he had undertaken to make. The negotiations carried on by Segal were found to have been in connection with efforts to obtain new contracts with Hittleman concerning the sale of the hops; but these efforts were unsuccessful. It was further found that Hughes commenced two suits against Hittleman, one for the collection of the note and the other for damages for the breach of the contracts, and that in August, 1935, a settlement was made whereby Hughes was paid $38,000 in full satisfaction of all claims.¹

The master found that Segal took no part in the settlement and conducted none of the negotiations leading up to it. He concluded that Segal was not entitled to anything, and his findings and report were approved by the trial court.

The brokerage contract between Hughes and Segal (providing a commission of one cent per pound for hops sold) contained the following provision:

"8. The brokerage of the agent to be computed on the amount of each invoice Further brokerage will be deemed to be earned on acceptance and payment of each order or installment of each order. It is further mutually understood and agreed that in the event of any default on the delivery or payment, no brokerage will be deemed to be earned on such defaulted installment or defaulted sale." (Italics supplied.)

The finding below, based on conclusive evidence, is that no deliveries were made under the Hittleman contracts for the reason that Hittleman was unable to pay for the hops he had agreed to purchase from Hughes. Appellant does not contend that there was an actual performance of the contracts. His contention seems to be that the settlement with Hittleman was the substantial equivalent of performance, and that therefore he was entitled to his brokerage commissions. He cites cases for the proposition that a broker may, under certain circumstances, be entitled to his commissions even though the...