Southern Cotton Oil Co. v. Elliotte

• Decision Date: 13 November 1914
• Docket Number: 2480.
• Citation: 218 F. 567
• Parties: SOUTHERN COTTON OIL CO. v. ELLIOTTE. In re BEJACH.
• Court: U.S. Court of Appeals — Sixth Circuit

218 F. 567

SOUTHERN COTTON OIL CO. v. ELLIOTTE.

In re BEJACH.

No. 2480.

United States Court of Appeals, Sixth Circuit.

November 13, 1914

Metcalf & Metcalf, of Memphis, Tenn., for appellant.

C. S Dashiell, of Memphis, Tenn., for appellee.

Before WARRINGTON, KNAPPEN, and DENISON, Circuit Judges.

DENISON Circuit Judge.

This case is here on petition to revise and on appeal. In order to receive consideration, the appeal must be thought of as one pertaining to section 24a of the Bankruptcy Law, since more than ten days elapsed after the entry of the order and before filing the petition for appeal, and an appeal under section 25a could confer no jurisdiction on this court.

It is clear also that the petition to revise must be dismissed. Whether the matter sought to be reviewed was a controversy arising in bankruptcy or was a proceeding in bankruptcy is far from clear; but, if it was at all of the latter character, it was an order rejecting a claim, and so could be heard only by appeal under section 25a, and not by petition to revise under section 24b. In re Mueller (C.C.A 6) 135 F. 711, 68 C.C.A. 349; In re Loving, 224 U.S. 183, 32 Sup.Ct. 446, 56 L.Ed. 725. The proceeding below partook of the character of an independent intervention, thus presenting a controversy in bankruptcy, and also of the character of a proof of claim, partly secured, thus presenting a matter leading to an appeal under section 25a. It seems unlikely that the distinction, with its important consequences, occurred at any time to any of the counsel. No point is made thereon, and we have examined the question only because we must do it to know that we have jurisdiction. The precise situation is not likely ever to arise again, and it is enough to say we think that, in spite of the serious inconsistencies, the matter may fairly be treated as an independent intervention. See Rode & Horn v. Phipps (C.C.A. 6) 195 F. 414, 115 C.C.A. 316. Accordingly we consider the merits as if they arose under an ordinary appeal pursuant to section 128 of the Judicial Code (Comp. St. 1913 Sec. 1120).

Bejach the bankrupt, had conducted, at Kerrville, Tenn., a general store, cotton gin, etc., and had been in the habit of buying cotton seed. In April, 1910, the Southern Cotton Oil Company, the claimant or intervener herein (hereafter called the Company), loaned Bejach $1,500, taking his notes therefor, and they made a written agreement by which Bejach could store in the Company's warehouse, at Kerrville, his cotton seed, and by which he agreed 'to ship all of his seed to the Southern Cotton Oil Company at equal prices with other buyers; seed to be sold to others only after giving the Southern Cotton Oil Company refusal'-- and agreed to pay storage for use of the seedhouse for seed which might be sold to others than the Company. The money then loaned was for general use by Bejach, and was so used by him in his general business. The cotton seed season opened in September, 1910, and Bejach began at once to apply to the Company for advances of money with which to buy seed. It made these advances by check, some of which were sent directly to him, and by him put into his account count in a Memphis bank, and some of which were deposited by the Company to his credit in that account. Each of these checks bore, stamped upon its face, the words, 'To be used only for the purchase of cotton seed, which seed must be shipped only to the Southern Cotton Oil Company. ' Whatever inference might be drawn regarding Bejach's acceptance of this limitation merely because of his personal use of some of the checks so indorsed, all of the funds now involved were so advanced pursuant to Bejach's letter of October 25th, which said, 'Please * * * deposit for me in Manhattan Savings Bank * * * to my credit $2,000, with which to buy cotton seed to be shipped to you,' and his letter of November 12th, saying: 'I wish that you would deposit at the Manhattan Bank * * * $500 with which to buy seed. ' While the second letter is not so explicit as the first, the two must be read together, and they establish beyond dispute the fact that these funds were advanced by the Company and received by Bejach for the sole purpose of buying cotton seed to be shipped to the Company. They are quite inconsistent with a general and unqualified title in Bejach to the seed bought with this money, permitting him to ship and sell to whomsoever he wished.

At the time of the bankruptcy there was on hand, in this Kerrville warehouse of the Company, cotton seed of the agreed value of $563.76. Of this a portion had been purchased by Bejach directly with the money from the special bank deposit; that is, he had paid for the same with his check drawn on that account. Another portion was composed of seed which he had paid for either with goods from his store or with the services of his cotton gin. There is no method of ascertaining how much of the seed belonged in one and how much in the other class. After the bankruptcy, the trustee took possession of this seed, and the present intervention is to recover its value from the trustee. Both the report of the referee and the opinion of the District Judge go upon the theory that to so much of the seed as was purchased by Bejach from the store or from the gin he had full title free from any claim by the Company, and that, since that part of the seed purchased with the so-called trust funds could not be separately identified, it followed that the intervener had no claim against any of the seed.

It is doubtless true that since the amendment of June, 1910, the test to be applied in such a controversy must be whether, under the law of the state, the intervening claimant could have maintained his claim, by way of title or by way of lien against a creditor levying an execution, but we find no Tennessee statute or decision fairly covering such a situation, and so the question must be decided under general rules.

The matter would be differently presented if it was our duty to assume that the contract of April 11th contemplated and reached such purchases of seed as were made by Bejach in October, out of money furnished under these later special limitations. It is perhaps a natural first impression that the contract was intended to cover and fix the rights of the parties with relation to all seed which Bejach should buy, either with the money then loaned or with his own money, or with future funds coming from the Company. Even in that view of the facts, the contract provision would seem to be merely an option extended to Bejach, and giving rise to a right on his part only on the happening of a condition subsequent which never did happen, viz., that the Company would refuse to allow the maximum price.

We think the facts do not permit us to approve this first impression. While, if the October advances had been made in general form, it might be presumed that property purchased with them would be within the purview of the April contract such presumption cannot survive the specific later understanding evidenced by the limitation on the face of the checks and by Bejach's letter. These funds were not to be used to buy cotton seed which Bejach might ship where he wished. They were to be used only to buy seed 'which seed must be shipped only to the Southern Cotton Oil Company. ' The April contract still continued in force over what it purported to cover, viz., Bejach's obligation to 'ship all of his seed,' and this continued to refer to seed which he purchased with his own money or with money which...