BRADSHAW v. THOMPSON

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Docket Number

No. 71-1131.

Attorney(S)

George T. Eidson, Jr., and Gregory A. Presnell, Orlando, Fla., for appellant; Akerman, Senterfitt, Eidson Wharton, Orlando, Fla., of counsel. Ben Kingree, III, Shelbyville, Tenn., for Thompson; Ben Kingree, III, of Bobo, Tarpley Kingree, Shelbyville, Tenn., on brief. James C. Burns, Jr., Shelbyville, Tenn., on brief, for Martin. Jack M. Irion, Shelbyville, Tenn., for Brandon; Bomar, Shofner, Bomar Irion, Shelbyville, Tenn., on brief. Knox Bigham, Lewisburg, Tenn., for Beech; Bigham Binkley, Lewisburg, Tenn., on brief.

Judges

John Weld Peck

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Smart Summary

Factual and Procedural Background

This case originated from an agency contract between appellant C.E. Bradshaw, Sr., a Florida resident, and appellee Vic Thompson, a Tennessee resident. Under the contract, Thompson was tasked with selling approximately 60 Tennessee Walking Horses owned by Bradshaw at the best and highest cash price, while maintaining title in Bradshaw's name until sale completion. Thompson was also to care for the horses and remit to Bradshaw the proceeds less a 25% commission. Additional equine tack was to be returned upon contract termination. The horses were shipped to Thompson in Tennessee for sale.

Thompson subcontracted some horses to defendants Brandon and Martin to assist in sales. The horses were disposed of in various manners: sold for cash or credit, traded, given away as additional commission, sold to partnerships, auctioned, or died in Thompson's possession. Records of these transactions were scant. By October 1968, only about 21 horses remained, which Thompson entered in a public auction operated by defendant Beech.

Appellant Bradshaw filed suit in the Eastern District of Tennessee alleging fraud, conspiracy, breach of contract, and breach of fiduciary duty, initially requesting a jury trial but later amending to seek equitable accounting without jury demand. Defendants argued the action was legal, requiring a jury. The case was severed; liability was tried to a jury which found Thompson breached his fiduciary duty, while Brandon and Martin did not. Damages were awarded against Thompson.

Legal Issues Presented

Whether the appellant’s action was purely equitable, entitling him to an accounting and thus removing the case from jury determination.
Whether the agency relationship between the parties automatically entitled the appellant to an accounting.
Whether the District Court abused discretion in declining to appoint a master to assist the jury.
Whether the sale of a horse by sub-agent Martin at auction breached fiduciary duties and entitled appellant to an accounting.
Whether the defendant Beech was liable for transfer of title papers after the appellant attempted to rescind a sale.
Whether the District Court’s award of costs to Beech under Rule 37(c) was proper.
Whether the District Court’s failure to provide jury instructions prior to closing arguments under Rule 51 warranted a new trial.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Dairy Queen, Inc. v. Wood, 369 U.S. 469 (1961)	Legal claims framed as equitable accounting do not automatically remove right to jury trial; complexity of accounts must justify equity.	The Court relied on Dairy Queen to hold that the appellant’s claims were legal in nature and thus entitled to jury trial, rejecting appellant’s assertion that the case was purely equitable.
Beacon Theatres, Inc. v. Westover, 359 U.S. 500 (1959)	Legal claims require jury trial even if equitable claims are present; legal remedies are adequate unless complexity demands equity.	The Court cited Beacon Theatres to support the entitlement to jury trial on legal claims and to reject the appellant’s argument for equitable accounting.
Thermo-Stitch, Inc. v. Chemi-Cord Processing Corp., 294 F.2d 486 (5th Cir. 1961)	The presence of equitable claims does not justify depriving a party of a jury trial on legal claims.	Used to affirm that legal claims must be tried by jury despite concurrent equitable claims, limiting equitable trials without jury.
Robertson v. Chapman, 152 U.S. 673 (1894)	An agent employed to sell property cannot be purchaser at his own sale unless the agency has terminated.	Applied to reject appellant’s claim that sub-agent Martin’s purchase at auction breached fiduciary duty, since agency had ended before purchase.
La Buy v. Howes Leather Co., 352 U.S. 249 (1957)	Appointment of a master to assist the court is discretionary and not justified solely by case complexity.	Supported the Court’s finding that refusal to appoint a master to assist the jury was not an abuse of discretion.
Hardigg v. Inglett, 250 F.2d 895 (4th Cir. 1957)	Noncompliance with Rule 51’s requirement to provide jury instructions prior to closing arguments does not warrant new trial absent material prejudice.	Applied to uphold the District Court’s refusal to grant new trial despite failure to provide jury instructions in advance.

Court's Reasoning and Analysis

The Court analyzed the nature of appellant’s claims, emphasizing that the existence of an agency relationship or a prayer for equitable accounting does not automatically remove the right to a jury trial. Citing Supreme Court precedents, the Court explained that only when accounts are so complicated that legal courts cannot handle them adequately, equity jurisdiction is proper. The Court found that the appellant’s claims for damages arising from breach of contract and alleged fraud were legal in nature and thus subject to jury trial.

The Court noted that the appellant had obtained extensive discovery, including detailed information about the disposition of each horse, undermining the need for an equitable accounting. The Court also rejected the argument that the sub-agent Martin’s purchase of horses at auction breached fiduciary duty because the agency relationship had terminated before the purchase, consistent with established precedent.

Regarding the refusal to appoint a master, the Court held that appointment is discretionary and that complexity alone does not justify it, especially in fraud cases. Concerning the sale of the horse "Rambler's Image B," the Court applied Tennessee’s adoption of the Uniform Commercial Code, concluding that title passed to the purchaser when the horse left the auction ring, terminating Beech’s authority.

The Court affirmed the award of costs to Beech under Rule 37(c) for appellant’s denial of a request for admission that was later proven true. Finally, the Court found no material prejudice from the District Court’s failure to provide jury instructions prior to closing arguments, and thus no basis for a new trial.

Holding and Implications

The Court affirmed the District Court’s judgment in all respects.

The holding confirms that legal claims involving breach of contract and fraud are entitled to jury trials even when equitable remedies such as accounting are sought. The decision emphasizes that agency relationships do not automatically confer rights to equitable accounting absent extraordinary complexity. The Court’s discretion in refusing to appoint a master and its application of the Uniform Commercial Code to auction sales were upheld. The ruling directly affects the parties by affirming damages awarded and costs assessed, but it does not establish new precedent beyond the application of existing law.

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C.E. BRADSHAW, SR., APPELLANT, v. VIC THOMPSON ET AL., APPELLEES.

JOHN W. PECK, Circuit Judge.

This case arose from an agency contract between the plaintiff-appellant, C.E. Bradshaw, a resident of Florida, and the defendant-appellee, Vic Thompson, a resident of Tennessee. The contract provided that Thompson was to sell some 60 Tennessee Walking Horses owned by Bradshaw at the best and highest cash price; that he was to house, feed and care for them; that the title to all horses was to remain in Bradshaw's name until after the sale; and that any check obtained by Thompson for the sale of any horse was to be made payable by the purchaser to Bradshaw, who would then remit to Thompson by separate check a twenty-five percent commission. Finally, the contract listed various items of equine tack belonging to Bradshaw which Thompson agreed to return upon termination of the agreement. The contract was signed and the horses were shipped to Thompson for sale in Tennessee.

Thompson then contracted with and delivered certain horses to the defendants-appellees Wallace Brandon and Joe Martin for the purpose of assisting in the sale of the horses. The remainder of the horses were retained by Thompson, and were disposed of in various ways: some were sold to purchasers who remitted checks payable to Bradshaw as contemplated by the contract; some were given away by Thompson as additional commission for assisting in the sale of other horses; some were sold on credit; some were traded to third parties in exchange for other horses; some were sold for cash or for check made payable to Thompson; some were sold to a partnership consisting of various named defendants; some were sold at public auction and purchased by Thompson or by one or more of the other defendants; some were sold directly to Brandon who eventually resold them; and some horses died while in the possession of Thompson. The appellees produced no records of any of these transactions, other than a few bank deposit slips. By October of 1968, all but approximately 21 of the horses had been disposed of. These remaining horses were entered by Thompson in the Murray Farm Sale, a public auction owned and operated by the defendant Beech.

When the appellant became aware that he could not ascertain what was happening in Tennessee to his horses, he filed this action in the District Court for the Eastern District of Tennessee basing jurisdiction on diversity of citizenship. In his original complaint, Bradshaw made allegations of fraud, conspiracy, breach of contract and breach of fiduciary duty, and requested a trial by jury. This complaint was later amended to delete the jury request and to include a request for an equitable accounting. The defendants contended that the action was one at law and requested a jury trial. The case was severed, and on the issue of liability, the jury found that Thompson, Brandon and Martin were all duly appointed agents and sub-agents of Bradshaw, but that only Thompson had breached his fiduciary duty to his principal. The issue of damages was then tried to the jury, and an award of $12,323.27 compensatory and $1,000.00 punitive damages was made against Thompson.

The appellant's prime contention on appeal is that the Court erred in submitting the case to the jury. He insists that his action is purely equitable and that only through an accounting will he be able to determine what sums are owed to him, but the existence of an agency relationship does not automatically entitle the principal to an accounting, nor does a prayer for an accounting automatically take the case away from the jury. Dairy Queen, Inc. v. Wood, 369 U.S. 469, 82 S.Ct. 894, 8 L.Ed.2d 44 (1961), Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 79 S.Ct. 548, 3 L.Ed.2d 988 (1959). The law on this first point is accurately summarized by the comment to § 399(e) of the Restatement of Agency:

[U]nless there is such a complication of accounts that it is difficult for the machinery of the law courts to cope with them, the principal ordinarily cannot bring an action in equity for money due; if his remedy otherwise would be solely in the courts of law, he cannot bring an action for an account merely on the ground of the agency relation.

In Dairy Queen, Inc. v. Wood, the Supreme Court noted that insofar as the complaint requested a money judgment, it presented a claim which was unquestionably legal. The fact that the complaint was cast in terms of an accounting rather than in terms of an action for debt or damages did not alter the right to a trial by jury. 396 U.S. at 476, 82 S.Ct. 894. See also Beacon Theatres, Inc. v. Westover, 359 U.S. at 503-504, 514, 79 S.Ct. 548 (dissenting opinion) (1959). The problem of the instant case seems to have been anticipated by the Court when it commented in Dairy Queen upon the broad powers of discovery now available in suits at law:

Consequently, in order to maintain such a suit on a cause of action cognizable at law, as this one is, the plaintiff must be able to show that the "accounts between the parties" are of such a "complicated nature" that only a court of equity can satisfactorily unravel them. In view of the powers given to District Courts by Federal Rule of Civil Procedure 53(b) to appoint masters to assist the jury in those exceptional cases where the legal issues are too complicated for the jury adequately to handle alone, the burden of such a showing is considerably increased and it will indeed be a rare case in which it can be met. 369 U.S. at 478, 82 S.Ct. at 900.

The appellant sought recovery from Thompson for damages arising out of an alleged breach of contract. He alleged, among other things, that Thompson fraudulently withheld and concealed portions of the consideration which was the subject matter of the contract. He sought compensatory damages, including all commissions paid by appellant, lost profits for Thompson's failure to obtain the best and highest cash price for the animals, and punitive damages for fraud. These claims are unmistakably legal, and the defendants were entitled to a jury trial on all contested issues of fact. Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 79 S.Ct. 548, 3 L.Ed.2d 988 (1959).

The leading opinion subsequent to Beacon Theatres and Dairy Queen appears to be Thermo-Stitch, Inc. v. Chemi-Cord Processing Corp., 294 F.2d 486 (5th Cir. 1961). There it was held that ". . . the mere presence of an equitable cause furnishes no justification for depriving a party to a legal action of his right to a jury trial." 294 F.2d at 490-491. In a footnote to that opinion it is noted that the result of Beacon Theatres will be a sharp reduction in the number of cases in which trial by a court without a jury may be held. 294 F.2d at 491, n. 12. See also McCoid, Procedural Reform and the Right to Jury Trial: A Study of Beacon Theatres, Inc. v. Westover, 116 U.Pa.L. Rev. 1 (1967). The availability of declaratory judgments and the liberal discovery procedures of the Federal Rules operate to make the legal remedies more "adequate" than before. This case is an example of that fact.

The appellant obtained by discovery all information to which he could have been entitled in an accounting. Information concerning the disposition of each horse, including purchase price, name of purchaser and the consideration received was obtained and was set forth in the pretrial order. Furthermore, the Court allowed the appellant a reasonable time after the jury had reported its verdict to request any further equitable accounting from Thompson. No request was every received.

An accounting is a species of disclosure, predicated upon the legal inability of a plaintiff to determine how much, if any, money is due him from another. It is an extraordinary remedy, and like other equitable remedies, is available only when legal remedies are inadequate. We find no basis for disturbing the District Court's conclusion that the procedures of the Federal Rules for causes at law were fully adequate to provide the relief sought by the appellant.

The appellant contends that the duty of the defendants Thompson, Brandon and Martin to render an accounting arose when the jury found that they were duly appointed agents and sub-agents of the appellant. He contends that he had shown that the defendant Martin had purchased several of his horses at the Murray Farm Sale, thereby breaching the duty of an agent not to purchase the property of his principal which has been entrusted to him to sell, and that this breach of fiduciary duty by his sub-agent gives him a right to an accounting. We cannot agree with this contention. As pointed out earlier, the existence of an agency relationship does not automatically entitle the principal to an accounting. Furthermore, it was stipulated that Martin's responsibility as a sub-agent terminated upon the return of the horses to Thompson at the Murray Farm Sale. Thus, by the terms of the agreement, the sub-agency relationship terminated prior to any purchase by Martin at the auction. The rule that an agent employed to sell property cannot himself become the purchaser at his own sale would not apply here, where the agent acquired an interest in the property by a bona-fide sale after the termination of the agency. Robertson v. Chapman, 152 U.S. 673, 683, 14 S.Ct. 741, 38 L.Ed. 592 (1894).

The appellant further contends that the Court abused its discretion in declining to appoint a master to assist the jury. The decision to appoint a master whose function is to aid the judge in the performance of specific judicial duties, is within the discretion of the District Court. La Buy v. Howes Leather Co., 352 U.S. 249, 256, 77 S.Ct. 309, 1 L.Ed.2d 290 (1957). The fact that "the case involves complex issues of fact and law is no justification for reference to a Master, but rather is an impelling reason for trial before an experienced judge." Bartlett-Collins Co. v. Surinam Nav. Co., 381 F.2d 546, 551 (10th Cir. 1967); see also In re Watkins, 271 F.2d 771 (5th Cir. 1959). The overall mandate of Rule 53(b) is that reference to a master is to be the exception and not the rule. Actions for fraud are particularly inappropriate for reference to a master, "save in extraordinary or exceptional cases." Irving-Austin Bldg. Corp. v. Cunningham, 100 F.2d 574 (7th Cir. 1938). We find no abuse of discretion in the Court's refusing to appoint a master to assist the jury.

The appellant's claim against the defendant Beech differs substantially from his claims against the other defendants, and it can be considered separately. On the night of October 16, 1968, one of Bradshaw's horses, "Rambler's Image B," was purchased at the Murray Farm Sale by Mrs. Wallace Brandon. The purchaser did not pay for the horse that night, and the transfer papers were not executed until the following morning. On the morning of October 17, prior to the execution of those papers, the appellant phoned Miss Wiggins, an employee of Beech, and instructed her that the sale was not to be completed because the value of the horse had been depressed because the horse had been led rather than ridden through the sale ring. Nevertheless, Miss Wiggins was instructed by Beech to sign over the title papers to the purchaser.

The appellant's contention that the transfer of these papers was a violation of the power-of-attorney relationship which had been created to allow Miss Wiggins to complete these sales for the appellant belies a misunderstanding of the sale. All the rights, duties and obligations of the Beech-Bradshaw relationship arose out of contract. Section 2-328(2) of the Uniform Commercial Code, adopted in Tennessee as T.C.A. § 47-2-328(2), governs all sales made by auction and is dispositive of the issue concerning the sale of the horse "Rambler's Image B." This section provides that "a sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner . . .." The "customary manner" of this particular auction is set forth in boldface type in the sale catalogue published by Murray Farm:

Cosigners will have the privilege of no sale if they do not wish to sell for the last bid on the animal, however, let it beknown [sic] before leaving the sale ring.

Thus a seller could withdraw a horse from sale even after the fall of the hammer, but only before the horse was taken from the sale ring. When this horse was taken from the ring after being sold, all title and interest passed to the purchaser. Thereafter, Beech's authority in the horse was terminated, as was Bradshaw's, and the seller was required to do all that was necessary to conclude the transaction. The delivery of papers providing evidence of ownership was not necessary to pass title. The District Court did not err in directing a verdict in favor of Beech.

Nor can we find any abuse of discretion in the award of costs in favor of Beech under F.R.Civ.P. 37(c). On August 6, 1969, prior to trial, Beech served on the appellant a request to admit that neither Bradshaw nor anyone on his behalf let it be known before the horse left the sale ring that the appellant desired to "no sale" the horse. This request was denied by the appellant, both in his pleadings, and at the pretrial conference. On June 29, 1970, the fifth day of the trial, the appellant finally stipulated:

. . . neither Beech nor any representative of Murray Farm was advised by the plaintiff or any of his agents or employees that Rambler's Image B was to be no saled prior to the time that the horse was taken from the sale ring after being auctioned on the night of October 16, 1968.

At this point, the Court directed a verdict in Beech's favor. An award of $4,026.37 was made pursuant to Rule 37(c) to Beech for the amount claimed by him as his reasonable expenses incurred in making proof of this fact denied upon the request for admissions. This rule requires the Court to award expenses including reasonable attorney's fees to a party whose request for the admission of the truth of any matter under Rule 36 is denied and who thereafter proves the truth of the matter, unless any one of four conditions is found to exist. The District Court found that none of the four enumerated conditions was present in this case, and we will not disturb that finding, and we do not find any abuse of discretion in the amount of the award. The determinative fact upon which Beech's liability would depend was whether he had received a no sale instruction from the appellant before the horse had been taken from the ring, and the entirety of Beech's defense was directed toward establishing this one fact.

The appellant also objects to the District Court's refusal to inform counsel of its intended jury charges prior to the closing arguments as required by Rule 51. The Court noted only that "mechanical and administrative reasons" existed for this failure. Although this does not satisfy the unconditional mandate of the rule, noncompliance does not warrant a new trial unless material prejudice is shown to exist. Hardigg v. Inglett, 250 F.2d 895 (4th Cir. 1957). Appellant has failed to show that material prejudice resulted because of the failure of the District Court to comply with this aspect of Rule 51, and therefore the order of the District Court is, in all respects, affirmed.