277 F. 680 | 8th Cir. | 1921
Lead Opinion
This appeal seeks a review of the action of the court below in disallowing a part of a claim filed against the bankrupt’s estate, and in allowing an offset in favor of the estate as against another part of the claim. The bankrupt corporation was engaged in the business of buying, selling, and shipping grain and .grain products. Its principal place of business was at Fremont, Neb., where its mill was situated. Fred M. Brown was in the active charge of its business, and was secretary and treasurer of the corporation. The plaintiffs were partners engaged in the grain commission business, having; a principal place of business at Chicago, but also having offices at Fremont and Omaha, Neb., in charge of employes wim solicited and received orders for dealing in grain, and this partnership will hereafter be referred to as the plaintiff.
The bankrupt shipped to the plaintiff, at various times, many carloads of grain, drawing upon the plaintiff, with bill of lading attached, for the estimated value of the grain. The plaintiff paid these drafts, and the first item of its claim was for overpayments made
• Upon a petition for review the District Court found the same balances to be due that the referee had found, and that neither the bankrupt nor plaintiff had had any intention, in-the disputed'transactions, that there should be any delivery of grain, and that these transactions were wagers, but also found that each order given by the bankrupt to the plaintiff’s agents was immediately transmitted to the plaintiff at Chicago, and corresponding orders were, by the plaintiff, executed on the floor of the Board of Trade,.and that both plaintiff and the brokers with whom they made such corresponding trades intended to carry out these contracts according to the rules of the Board of Trade, and to receive or deliver the grain contracted for, and to make payment therefor, unless the liability should be set off by other transactions, as authorized by the rules, and that plaintiff did make settlement of these contracts.
The evidence discloses that the bankrupt, acting through Brotyn, gave a series of orders to the plaintiff’s employés in charge of the Fremont and Omaha offices, directing the purchase or sale upon the Chicago Board of Trade of specified quantities of grain for future delivery, and .making deposits of money, unless the plaintiff already held a balance of the bankrupt’s money in its hands. When such an order was given, it was at once telegraphed to plaintiff by its agents, and the plaintiff at once purchased or sold corresponding amounts of grain in conformity to the bankrupt’s order; and a message was sent plaintiff’s agents, reporting the execution of the order, and the bankrupt was so inform.ed; but it was also informed that it was subject to confirmation at Chi
The conclusions already stated make it unnecessary to discuss other contentions. The decree of the lower court will'be reversed, with directions to allow the plaintiff’s claim as filed, and disallowing the trustee’s claim of set-off.
Dissenting Opinion
(dissenting). This is an appeal from the disallowance of part of a claim against the bankrupt estate of the Brown Consolidated Milling Company. The claim as filed totaled $7,-
The claim consisted of three general items: Of $1,284.49, constituting a balance of account arising out of a shipping account for the purchase and sale of actual grain; $5,191.67, representing a promissory note for $5,000, with accrued interest; and $670.36, a balance of account, alleged by the trustee to have arisen from grain option deals. The first two items were confessed by the trustee. He opposed the last item of $670.36, as arising out of gambling or option dealings. He also sought a reduction of the admitted claim by $4,-394.98, contending that the sum of $4,394.98 was a balance due the estate from the sum of $8,925, which had been paid claimant, on account of similar dealings. The trustee based his objections upon the grounds that the bankrupt had no charter authority to engage in such gambling transactions, that the official of the bankrupt using its funds therefor had no authority to so do from the stockholders or directors of the bankrupt, that the deals were purely option or gambling transactions, and that such were made in the state of Nebraska, where they were, declared by statute to be unlawful.
The findings of fact and conclusions of law of the referee were very meager, but were to the effect that the bankrupt, through its officers, had been engaged with the claimant in illegal grain option deals to the extent contended by the trustee, and, on that ground, disallowed the third item of the claim for $670.36, and allowed a reduction of the admitted claim by $4,394.98, leaving the claim as thus reduced and allowed at $2,081.18. "Upon a petition for review, the District Court, being of the opinion that the report of the referee did not sufficiently find the facts to enable the court to determine the same, heard the claim and objections thereto de novo upon the evidence submitted to the referee. The court found that the manager of the bankrupt, “purporting to act in the name of said corporation,” had engaged in unlawful grain option transactions with claimant in Nebraska in the particular and to the extent urged by the trustee, and reached the same result as the referee.
There are two points urged by appellant upon the merits: First, that the evidence does not sustain the finding by the referee and trial court that the questioned transactions were gambling deals; second, that, even though they were such, yet the trustee cannot avail himself of that condition. The first point must be examined in the light of the presumption as to the correctness of the finding, which can be overturned only if there is no substantial supporting testimony, or unless obvious error or- mistake is indicated. The evidence upon this point was conflicting, but there was very substantial, and even convincing, testimony in support of the finding, and no obvious error or mistake has been discovered.
Another point of fact, claimed by appellant to vitally affect the finding that the deals were gambling transactions, is whether the contracts are to be regarded as made in Nebraska or in Illinois; its contention being that the Illinois law governs, and that that law requires
The second contention is that, even though these transactions were gambling contracts, yet the trustee, as to them, stands in the shoes of- the bankrupt, and cannot defeat the claim for $670.36, nor offset the counterclaim for $4,394.98. Being a Nebraska contract, the right of recovery for losses would be governed by the law of that state. Lamson Bros. & Co. v. Bane, supra. The Supreme Court of that state, in case of Ives v. Boyce, 85 Neb. 324, 123 N. W. 318, 25 L. R. A. (N. S.) 157, which involved similar wagering dealings, has decided that no recovery can be had, but that the parties will be left as they are. This would conclude this claimant as to the item it claims of $670.36. Also see Embrey v. Jemison, 131 U. S. 336, 9 Sup. Ct. 776, 33 L. Ed. 172; Irwin v. Williar, 110 U. S. 499, 4 Sup. Ct. 160, 28 L. Ed. 225; Sprague v. Warren, 26 Neb. 326, 41 N. W. 1113, 3 L. R. A. 679. Supposing, for the moment, that the corporation is subject to the same rule, had it endeavored, by suit, to recover its losses of $4,394.98', would the same rule apply where it would seek to reduce a legitimate claim in suit by setting forth such losses as a counterclaim? It would seem that the rule applies to counterclaims and set-offs. Higgins v. McCrea, 116 U. S. 671, 6 Sup. Ct. 557, 29 L. Ed. 764; 20 Cyc. 951, and citations. Therefore the offset of $4,394.98 urged by the trustee cannot be sustained, .unless either a trustee in bankruptcy stands in a more favorable position than the bankrupt, or the transactions here involved were not authorized by the bankrupt. If the trustee occupies any such favored position, it must spring from his relation to and representation, in a sense, of the creditors of the bankrupt. A creditor of a gambler, however, is in no better position than the gambler as to recovery of gaming losses.
There remains the contention that these gambling transactions weret not authorized by the corporation, and not binding upon it. The charter powers of the bankrupt are set forth in the objections of the trustee to the claim. Such powers, while broad, give no basis for any claim that they authorize the bankrupt to engage in option grain dealings. It would be unbelievable that the state of Nebraska, which prohibits such contracts, would grant the bankrupt a charter right to
I conclude, therefore, that the result reached by the referee and trial coui't was correct, and should be affirmed.