United States v. Johnson

• Decision Date: 09 August 1938
• Docket Number: No. 11133.,11133.
• Citation: 98 F.2d 462
• Parties: UNITED STATES et al., to Use of MERCHANTS & MANUFACTURERS SECURITIES CO. v. JOHNSON et al.
• Court: U.S. Court of Appeals — Eighth Circuit

98 F.2d 462 (1938)

UNITED STATES et al., to Use of MERCHANTS & MANUFACTURERS SECURITIES CO. v. JOHNSON et al.^*

No. 11133.

Circuit Court of Appeals, Eighth Circuit.

August 9, 1938.

William G. Boatright, of Kansas City, Mo. (Edward Rothbart and J. M. Rosenfield, both of Chicago, Ill., I. J. Ringolsky and Harry L. Jacobs, both of Kansas City Mo., Rothbart & Rosenfield, of Chicago, Ill., and Ringolsky, Boatright & Jacobs, of Kansas City, Mo., on the brief), for appellants.

Hale Houts and R. R. Brewster, both of Kansas City, Mo. (Henry L. Jost, L. E. Durham, and Wright Conrad, all of Kansas City, Mo., on the brief), for appellees.

Dupuy G. Warrick, of Kansas City, Mo., as amicus curiæ.

Before GARDNER, WOODROUGH, and THOMAS, Circuit Judges.

GARDNER, Circuit Judge.

Appellants brought this action against Nelson E. Johnson, principal, and Columbia Casualty Company, surety, on a bond given by Nelson E. Johnson as equity receiver of Atlantic, Pacific & Gulf Oil Company and Pennsylvania Petroleum Company and other subsidiary companies. The bond was conditioned that the receiver "shall well and faithfully perform the duties of his office and perform all orders of the court concerning said receivership." The bond ran to the United States, and the action was brought by the obligees for the use of Merchants and Manufacturers Securities Company.

Johnson was appointed receiver of the two corporations by the lower court but not by the judge who heard this case, on December 21, 1931, and gave the bond in that proceeding. He continued as receiver until June 19, 1934, when a petition was filed for reorganization of the corporations under Section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207, and on June 20, 1934, he was appointed temporary trustee in that proceeding, and by direction of the court, turned over to himself as temporary trustee all the assets of the corporations then in his possession as receiver. He continued as temporary trustee until February 18, 1935, at which time he resigned and a successor was appointed, who was ordered to liquidate the assets still in existence. In his capacity as receiver, he came into possession of the proceeds arising from the collection of certain accounts, which, prior to the receivership, had been assigned to and were owned by appellant Merchants and Manufacturers Securities Company.

Appellant Merchants and Manufacturers Securities Company intervened in the receivership proceeding in February, 1932, claiming that under certain contracts made by it with the corporations, it became the owner by assignment of certain accounts receivable, notes, and other choses in action, which had come into the hands of the receiver and were being collected by him; that the accounts and moneys so collected were a trust fund in the hands of the receiver. The intervener prayed that an order be entered adjudging that the title to the accounts were vested in it and that the receiver be directed to deliver to it all moneys by him collected; that the receiver discontinue further collection of the accounts, or in any manner interfering with intervener's dominion over the same. In that proceeding, the amount of the indebtedness of the corporations to the intervener was not contested, but the receiver denied appellant's title to the accounts, or the existence of a trust. The lower court, after trial of the issues, held the case under advisement for nearly a year and then entered a decree allowing the intervener's claim as a general one, but denied its right to enforce the assignment. An appeal was taken to this court (Merchants' & Manufacturers' Securities Co. v. Johnson, 8 Cir., 69 F.2d 940), and a decision entered March 5, 1934, which, reversing the lower court, concluded as follows (page 946):

"The judgment appealed from is reversed, and the cause is remanded to the lower court, with directions to enter decree in favor of the appellant for the sum of $32,489.01, with interest thereon from December 21, 1931, at the rate of 6 per cent., dismissing appellee's counterclaims on the merits, and adjudging that the decree for the recovery of said amount shall constitute a special lien upon all of said accounts receivable still unpaid to the appellant and upon the proceeds of same in the hands of the appellee, and requiring the appellee to pay to appellant all proceeds of such accounts collected by him not in excess of the amount so due the appellant, and, if said appellee shall have disposed of any of such proceeds, that he replace same out of the general funds of said receivership to the amount sufficient to satisfy said part of said judgment and decree * * *."

The receiver filed petition for rehearing, which was denied, whereupon he obtained a stay of the mandate and applied to the Supreme Court for certiorari, which was denied October 8, 1934. 293 U.S. 569, 55 S.Ct. 80, 79 L.Ed. 668. The mandate of this court was filed in the lower court October 17, 1934, and a decree was entered pursuant thereto on October 19, 1934, which by its terms was made effective as of March 6, 1933, the date of the original decree from which the appeal had been taken.

The receiver had knowledge of the contracts between appellant and the corporations at the time of his appointment. During all the time that he acted as receiver, he denied the validity of the contracts, collected the moneys due on the assigned accounts, mingled them with the general funds of the receivership, and paid them out in carrying on the business of the corporations.

At the conclusion of the evidence, both parties moved for a directed verdict. The lower court declined to rule upon the motions at that time, but took them under submission and sent the case to the jury upon instructions, to which exceptions were saved. A verdict for defendants was returned by the jury and received conditionally by the court, and appellant was permitted to file motion for judgment non obstante veredicto. The court then overruled motions of both parties for a directed verdict, as well as the motion of appellant for judgment notwithstanding the verdict, and entered judgment upon the verdict for defendants.

In the lower court, the amount of appellant's claim was not in dispute. The sole question before the court was whether or not the condition of the bond was breached by the receiver. On this appeal, appellant urges that the court erred (1) in overruling its motion for a directed verdict and for judgment non obstante veredicto, and (2) in giving certain instructions to the jury.

At the very threshold of the case, we are met by the contention of appellees that appellant waived its right to urge its motion for a directed verdict and that the court was without power to render judgment non obstante veredicto. We shall first consider this question of procedure.

Appellees rely upon the decision of the Supreme Court of Missouri in Everhart v. Bryson, 244 Mo. 507, 149 S.W. 307, establishing a rule of practice in that court to the effect that where a plaintiff, at the close of all the evidence, requests a directed verdict in his favor, which request is overruled, and he thereafter requests and secures instructions on the merits and goes to the jury, he should be held to have waived the objection to the erroneous overruling of his request for a directed verdict. We think there are at least two answers to appellees' contention. In the instant case, the court did not overrule appellant's motion for a directed verdict until after the jury had returned a verdict. Counsel for appellant insisted at all times that his motion should be sustained, and after the return of the verdict he insisted that judgment should be entered for appellant notwithstanding the verdict. At no time did he take inconsistent positions. But this is a matter of Federal appellate practice, which is not governed by the Conformity Act, 28 U.S.C.A. § 724. Camp v. Gress, 250 U.S. 308, 39 S.Ct. 478, 63 L.Ed. 997; Chicago Great Western R. Co. v. Le Valley, 8 Cir., 233 F. 384; Burke Grain Co. v. St. Paul-Mercury Indemnity Co., 8 Cir., 94 F.2d 458.

In the last-cited case we held that appellant had not waived its right to a jury trial by having requested special findings after the court had denied defendant's request to go to the jury, notwithstanding a rule to that effect in the state court. In the course of the opinion in that case, it is, among other things, said (page 463):

"The only way of challenging the sufficiency of the evidence under the federal practice is by motion for a directed verdict, whereas, under the South Dakota practice this question is raised by appeal from the order denying a motion for new trial based upon the alleged insufficiency of the evidence. A waiver must of necessity be an intentional act. The defendant had to meet the situation as the court presented it, even though it acted erroneously."

We conclude that appellant did not waive its motion for a directed verdict.

We think the controlling question is whether or not appellant was entitled to a directed verdict. A consideration of this question necessitates a somewhat detailed recital of the facts involved, but which are undisputed.

Johnson was appointed receiver in a friendly suit. At and prior to the time of his appointment, he was and had been vice-president, director, stockholder, and general counsel of the parent company and all its subsidiaries. The son of the president of the corporations and the several subsidiaries was plaintiff in the receivership suit. It was alleged that the companies, although financially embarrassed, were entirely solvent and that the interests of the creditors and stockholders could best be preserved through a receivership. On the same day of the filing of this suit, the bill of complaint in which was prepared by Johnson, although signed by other counsel, the defendants filed answer admitting the allegations of the bill and consenting to the appointment of a receiver. Not only did Johnson prepare the bill of...