United States v. Newton Livestock Auction Market, Inc.
| Decision Date | 16 September 1964 |
| Docket Number | No. 7602.,7602. |
| Citation | 336 F.2d 673 |
| Parties | UNITED STATES of America, Appellant, v. NEWTON LIVESTOCK AUCTION MARKET, INC., Jeff H. King, Sr., President, Jeff H. King, Jr., Secretary-Treasurer, Newton Industrial Foundation, Inc., Sammie C. Hill, Russell Ellsaesser, W. G. Conner and Florence Conner; Jeff H. King, Jr., and Marion King, Jeff H. King, Sr., and Mildred King, Appellees. |
| Court | U.S. Court of Appeals — Tenth Circuit |
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John C. Eldridge, Washington, D. C. (John W. Douglas, Asst. Atty. Gen., Newell A. George, U. S. Atty., and Alan S. Rosenthal and Kathryn H. Baldwin, Attys., Dept. of Justice, were on the brief), for appellant.
George Stallwitz, Wichita, Kan., for appellees Newton Livestock Auction Market, Inc., Sammie C. Hill, and Russell Ellsaesser.
Malcolm Miller, Wichita, Kan. (Robert C. Foulston, Wichita, Kan., was with him on the brief), for appellees Jeff H. King, Sr., Mildred King, Jeff H. King, Jr., and Marion King.
Roy H. Wasson, Wichita, Kan., filed a statement on behalf of appellees W. G. Conner and Florence Conner.
No appearance for appellee Newton Industrial Foundation, Inc.
Before MURRAH, Chief Judge, and BREITENSTEIN and SETH, Circuit Judges.
The Small Business Administration (SBA), an agency of the United States, loaned $120,000 to appellee Newton Livestock Auction Market, Inc., (Newton). The loan was secured by mortgages on Kansas real and chattel property and by three separate guaranty agreements, each for $40,000. The guaranties were made by Jeff H. King, Sr., and his wife Mildred, by Jeff H. King, Jr., and his wife Marion, and by W. G. Conner and his wife Florence, all of whom are appellees and are herein referred to jointly as guarantors.
Newton failed to pay any part of the principal. The United States sued the guarantors in three separate actions. Later, on June 30, 1961, the United States sued to foreclose its mortgages and joined as defendants Newton, the guarantors, a junior lien holder, and two lessees. The four actions were consolidated without objection. Sale of the real property was ordered; and at the sale the property was bid in by SBA for $43,000. The United States moved for confirmation of the sale; Newton and the guarantors objected. At the subsequent hearing evidence showed that after the judgment of foreclosure, but before the sale, the property was damaged to the extent of $30,000 by a severe windstorm. At the time of the storm SBA did not have possession of the mortgaged premises.
The mortgages required Newton to insure the property. After the foreclosure action was brought Newton notified the insurance carrier that it could not pay a premium due. The insurer presented the question of insurance to representatives of SBA who replied by letter that the policies should lapse and that "the Government is its own insurer in all cases and agencies." The termination of the policies occurred more than six months before the storm damage.
The trial court held that the fair value of the property at the time of the sale was $108,000 and gave the United States the option of moving for a second sale with an upset price of that amount or of having the judgment credited therewith. The United States accepted the alternative of crediting the judgment and does not attack this portion of the judgment.
On the matter of the storm loss the trial court held that SBA, having elected to become a self-insurer "assumed the obligation of applying the amount of damages caused by storm hazards to the debt so guaranteed." The court ordered that the United States "apply such part of the sum of $30,000 as proceeds from the self-insured loss which occurred as a result of the storm of May 24, 1962, to plaintiff's judgment which together with the upset price of $108,000 is necessary to fully satisfy the judgment."
The trial court also held that interest was due from the United States on the $138,000 which the court ordered credited on the indebtedness and that such interest and that due from Newton should be offset from the date of the sale to the date when the $138,000 was credited. The merits of the appeal concern those portions of the judgment relating to the $30,000 credit for the storm loss and to the offsetting of interest.
Newton has moved to dismiss the appeal on the ground that the United States has acquiesced in, and accepted the benefits of, the judgment by crediting the $108,000 instead of having a second sale of the property. The theory is that evidence showed the appraised value of the property to be over $140,000 and the United States received a benefit by the permission to credit the judgment with $108,000. Newton did not attack, by objection or appeal, the finding that at the time of the sale the property had a fair value of approximately $108,000. In the absence of a showing that a second sale might have brought a price over $108,000 the claim of benefit to the United States does not rise above speculation. Even if the permission to credit the upset price was a benefit to the United States, the rule is that when a judgment adjudicates separable or divisible controversies, a party may accept benefits of the separate features of the judgment and challenge the features adverse to him.1 The motion to dismiss is without merit.
The trial court did not make clear the legal theory which it applied in obligating the United States to credit against its judgment the $30,000 storm damage. The positions of the mortgagor, Newton, and of the guarantors are different and require different treatment. We first consider the situation of the mortgagor.
The question is not the application of proceeds from an insurance policy but whether the United States did effect, or had an...
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