Carroll v. Stern

DENISON, Circuit Judge

(after stating the facts as above). [1] Under our settled practice not to set aside the concurrent fact findings of the referee and the District Judge, except in a clear case (Wabash Ry. v. Compton, 172 Fed. 17, 21, 96 C. C. A. 603; Naylon & Co. v. Christiansen, 158 Fed. 290, 292, 85 C. C. A. 522; Constam v. Haley, 206 Fed. 260, 261, 124 C. C. A. 128), this order could not be reversed, .unless we were thoroughly satisfied that the credit was given solely to the Keck Company; yet we are not inclined to dispose of the case under this rule, because we think the controversy should be decided upon somewhat broader grounds than the mere existence of the debtor and creditor relationship.

[2, 3] The trustee puts particular dependence upon the act of Stern Bros, in taking notes from the Keck Company for this debt, and in participating as a creditor of the Keck Company in the above-recited ineffective dealings. These things constitute evidence of intention, and are of importance so far as the question of intention itself would be important; but they do not amount either to an estoppel_ or an election which will of itself bar S'tern Bros, from the remedy they now seek. The element of misleading, whereby some one who has relied upon the former action would be prejudiced if -the position were shifted— and which element is essential to an estoppel — is quite lacking. Neither can an effective election be deduced from the facts. Such election would imply that Stem Bros, had a debt which could be successfully asserted against either the Duhme Company or the Keck Company at the will of the creditors. This does not seem to be the situation. Their claim was against whichever party might be in truth the real purchaser, and any position which they took on this subject, before knowing.all the facts,'should be classed as a mistake — “not an election, but an hypothesis.” Northern Co. v. Grand Co., 203 U. S. 106, 108, 27 Sup. Ct. 27, 51 L. Ed. 109; Bierce v. Hutchins, 205 U. S. 340, 346, 27 Sup. Ct. 524, 51 L. Ed. 828.

Another requisite of a binding election is that the two things between which choice is made should be inconsistent with each other,. We do not find such inconsistency between the earlier mere assertion 'of a personal claim against the Keck Company and the present reliance upon the right to get payment out of a particular fund; and this leads us to what we think the controlling feature.

[4] The first order of the District Court, which is now in the course of execution, and which provided that the Duhme assets should be used to pay those creditors who had dealt with that company in good faith, should be interpreted according to the purpose and effect which would have been most rightful, and which are consistent with its language. The result by which the assets of a separate — and, as the event proved, solvent — corporation were brought for administration into the estate of another and certainly bankrupt corporation, was an unusual result. It has been acquiesced in and cannot be questioned; but the bankrupt estate, which has thus presumptively profited from the exercise of such a power, should do equity to the fullest extent. The bankruptcy trustee was ultimately entitled only to the surplus which should remain out of the Duhme assets after the payment of all debts which properly attached to those assets. Thus this property came to the trustee charged with a prior trust, and it was this prior trust which the first order and opinion of the District Court undertook to declare. We see no reason for excluding from their language creditors who had dealt with the Duhme Company as Stern Bros. had. Their right to1 be beneficiaries of the trust was of no less rank than that of other creditors who might have dealt with and known the Duhme Company only, but whose dealings had not operated to create the trust fund. Creditors who received ah order from the Duhme Company, and shipped their goods to the Duhme Company, and so contributed to the fund to be distributed, must be regarded as among “those who dealt in good faith with that company,” even though they might have supposed that the debt would be paid by the chief stockholder.

Because we regard this as the proper interpretation of the order, and because the action appealed from was in full accord with that interpretation, we think it unnecessary to decide the other questions argued ; and the order of the court below is affirmed, with costs.