The
following is the opinion of the district judge (SEAMAN
District judge):
'The
amount involved in this controversy is considerable, and
the testimony has been heard in open court. The absence of
conflict in matters material to the issue is noteworthy,--
especially in view of the disputes heretofore existing,--
and the issues are thereby simplified. No actual fraud
appears, and the issue raised as to constructive fraud is
clearly set aside by the testimony. The contract in writing
between the bankrupts and the Jones Company, which was made
August 9, 1899, was unmistakably an executory agreement of
bargain and sale for the logs, and lumber to be
manufactured out of the same,-- for the season's cut
and purchases of logs. The advances to be made by the Jones
Company, and which were made in fact, were for purchase
money, and in no sense to be treated as loans. The
securities taken directly and taken up by the Jones Company
were solely for the same object, and were securities merely
in favor of the Jones Company to make good their advances
(1) for deliveries of the lumber as contracted; and (2) to
cover any shortage arising from the possible excess of
advances. The subsequent arrangement of making notes for
the advances does not change this status, as it was
manifestly intended only to enable the Jones Company to
borrow of the banks the amounts thus called for in excess
of the advances contemplated by the contract. The rule
applicable to chattel mortgages and to loans secured upon
personal property is not applicable to these transactions.
'The
first contention on behalf of the trustee is that deliveries
were not so made and perfected as to make complete execution
of the contract, but the testimony is uncontradicted that the
logs were marked as the contract required when hauled to the
yards; that the piles of lumber were so marked when the piles
were completed, as taken from the mill. The absence of marks
in piles which were broken for the purpose of shipment is not
material, nor would it be material if piles were in fact
overlooked and left unmarked; the general intention appearing
to give this indicia of delivery, and there being no
concealment or intentional evasion. As so piled for the
purpose of delivery under the contract, the delivery was made
as contemplated by the contract; and all the lumber was thus
delivered to the Jones Company, and was in their possession
as purchasers.
'The
contention that the transaction was void by reason of the
agreement to permit retail sales by the bankrupts is equally
untenable. In the first place, the agreement permitted such
sale only before advances were made; and the fact that sales
were suffered afterwards for small amounts, even with the
knowledge of the Jones Company, cannot be treated as a
transaction in fraud of creditors, in respect of a contract
of absolute purchase, as here shown. It was plainly a case of
taking back from the purchaser so much as required for such
purpose, or of withholding that much from delivery under the
contract, and was inconsiderable in amount, and, so far as
permitted, was neither harmful to creditors, nor so intended.
'An
order will be entered accordingly.'
On
December 20, 1900, the appellant filed his petition in the
court below, setting forth the adjudication of August F.
Rusch and Ferdinand O. Rusch as bankrupts, and his election
as trustee in bankruptcy, and its confirmation by the court;
that he had in his possession and under his control a certain
large quantity of lumber then situate on the mill property
upon section 8 in the village of Wabeno, Wis.; that the G. W.
Jones Lumber Company, a corporation of the state of
Wisconsin, claimed a lien upon the lumber, which the trustee
denied, and that such company threatened to take forcible
possession of the lumber, and that the trustee had placed a
custodian in charge, with instruction to hold possession by
force, and praying judgment directing the trustee of sell the
lumber; that the G. W. Jones Lumber Company may be summoned
to answer the petition, and in the meantime may be restrained
from interfering with his possession. On the 2d of January,
1901, the G. W. Jones Lumber Company answered the petition,
denying possession and control of the specified lumber by the
trustee, and alleging that the lumber was at the time of the
adjudication of
bankruptcy, and still is, in the possession and control of
the G. W. Jones Lumber Company. It denied it claimed to have
any lien upon the lumber, but alleged that it was the sole
and absolute owner thereof, in possession thereof, and denied
the threats to take possession, because it already had
possession and was maintaining that possession.
At the
hearing of the cause a large amount of testimony was taken
before the court, and the court on the 2d day of February,
1901, found the following facts and conclusions of law:
'First.
That on the 9th day of August, A.D. 1899, the said
bankrupts, together with the G. W. Jones Lumber Company,
entered into the contract which is set forth by copy in the
proof of claim filed in this matter by the said G. L. Jones
Lumber Co., and therein marked for identification
'Exhibit A.'
'Second.
That in the making and in the carrying into execution of
said contract there was neither actual nor constructive
fraud.
'Third.
That said contract was an executory agreement of bargain
and sale for the logs therein specified, and the lumber to
be manufactured therefrom; that the advances to be made by
the G. W. Jones Lumber Co., and which were in fact made,
were for purchase money, and in no sense to be treated as
loans; that the securities taken directly to, and also
those purchased and taken up by, the G. W. Jones Lumber
Company were so taken and so purchased for the same object,
and were securities merely in favor of the said lumber
company to make good their advances (1) for deliveries of
the lumber as contracted, and (2) to cover any shortage
arising from the possible excess in advances.
'Fourth.
That it was the intention of the parties to said contract
that the title to and possession of the logs therein
specified should pass to The G. W. Jones Lumber Company as
fast as the same were delivered in the mill yard of the
Rusch Bros. at Wabeno, and marked with the mark of the
Jones Lumber Company; that the lumber in question was
manufactured from logs that were actually so delivered and
so marked; that it was also the intention of the parties
that the lumber in question, as fast as manufactured and
piled up in the mill yard, should be marked with the mark
of the G. W. Jones Lumber Company, as further evidence of
its title and possession, and said lumber was accordingly
actually marked with the said lumber company's mark for
the purpose aforesaid as fast as the same was stacked up in
piles in said mill yard by the Rusch Bros.; that said logs
were all delivered as aforesaid prior to April 1, 1900, and
said lumber and other products of logs were all
manufactured, piled, and marked as aforesaid prior to
October 5, 1900.
'Conclusions
of Law.
'As
conclusions of law the court holds:
'First.
That at the time of filing the petition in bankruptcy in
this matter The G. W. Jones Lumber Company was the
absolute owner as purchaser of all the lumber, lath,
shingles, slabs, railroad ties, and other products of
logs piled upon the aforesaid section eight in the
vicinity of the Rusch Bros.' sawmill at Wabeno,
Forest county, Wisconsin, and as such purchaser The G. W.
Jones Lumber Company had all of said lumber, lath,
shingles, slabs, railroad ties, and other products of
logs in its actual and lawful possession.
'Second.
That the aforesaid temporary injunction ought to be
dissolved, and that the petition of the said trustee for
leave to sell and dispose of said lumber ought to be
denied, with costs.
'Third.
That The G. W. Jones Lumber Company did not enter into or
carry into execution said contract of August 9, 1899,
with intent to hinder, delay or defraud the creditors of
said Rusch Bros. The contention that the transaction was
void by reason of the agreement to permit retail sales by
the bankrupts is equally untenable. In the first place,
the agreement permitted such sales only before advances
were made; and the fact that sales were suffered
afterwards for small amounts, even with the knowledge of
the Jones Company, cannot be treated as a transaction in
fraud of creditors in respect of a contract of absolute
purchase and sale, as here shown. It was plainly a case
of taking back from a purchaser as much as required
for such purpose, or of withholding that much from delivery
under the contract, and was inconsiderable in amount, and, so
far as permitted, was neither harmful to creditors, nor so
intended.
'Fourth.
That the said G. W. Jones Lumber Company ought not to be
interfered with by the trustee, nor by him in any way
prevented from shipping and disposing of, as its own
property, the aforesaid lumber and other product of logs in
all respects as provided by said contract of August 9,
1899.'
And
thereupon rendered judgment dismissing the petition of the
trustee, from which decree this appeal is taken.
The
contract referred to in the findings is as follows:
'Memorandum
of contract and agreement entered into this 9th day of
August, 1899, made in duplicate by and between Rusch
Brothers, of Wabeno, Wisconsin, party of the first part, and
G. W. Jones Lumber Co., of Appleton, Wisconsin, party of the
second part. Said Rusch Brothers, party of the first part
for consideration hereinafter named, sell their entire stock
of basswood, pine, and hardwood lumber,...
