135 S.W. 1135 | Tex. App. | 1911
Lead Opinion
Appellants, the Atlantic National Bank, the First National Bank of Atlanta, and the Atlanta Lumber Company, and appellee, the Four States Grocer Company, are creditors of the Alamo Mills, a corporation, whose property was placed in the hands of a receiver by an order of the district court of Cass county made July 22, 1909. -By an intervention in the receivership suit appellee obtained a judgment against said Alamo Mills for the sum of $7,828.48, due on certain promissory notes, and for the sum of $3,667.37, claimed by the grocer company to be due it on an open account against said mill company. The $3,667.37 was adjudged to be a lien on certain lumber belonging to the mill company, and to be entitled to priority of payment, as against appellants’ claims, out of the proceeds of a sale of said lumber made by the receiver after he took charge of the property of said mill company. As found by the trial court, the facts were: Prior to October 16,J 1908, the mill company owned a sawmill plant, situated near Atlanta, but owned no timber accessible to its mill. It wished to remove its plant to a site near Queen City, where it owned timber. It was indebted to appellants and appellee in sums it was unable to pay, but was not indebted to any one else. On said October 16, 1908, said mill company and appellants and appellee entered into an agreement as follows: “It is agreed: First. That each and all of the above-named creditors of said Ala mo Mills agree to extend the time of payment of their respective debts against the said Alamo Mills for a period of four months from this date, so as to enable said Alamo Mills to move its mill and put same in proper condition for operation. Second. Now if at the expiration of said four
The principal contention made by appellants is that the finding of the trial court that appellee had a lien on the lumber cut by the mill was without evidence to support it. Cavin, appellee’s manager, testified: “We agreed to furnish them (the Álamo Mills) goods, provided that we could collect our‘ money before any of the past indebtedness commenced. We were to come in like the. balance of the creditors for our notes. But the goods we furnished them were to be paid for first, out of the proceeds of the lumber.” Willis, the cashier of the Atlanta National Bank, testified: “I understood an agreement to this effect: Tom Johnston, manager of the Alamo Mills, said, if he could just get some groceries for the men to live on, they were willing to work without any money until after he got started and began shipping lumber so that he could pay and liquidate his labor account first. The Russ Daniel Grocer Company (which afterwards became the Four States Grocer Company by an amendment of its charter, it seems) were also creditors, and he owed them between $4,000 and $5,000, perhaps, at the time. That was on the old score before they moved, at the Piney Grove Church. They owed Daniel, and the Four States Grocer Company, the successor to the Daniel Grocer Company, then said that they would furnish him some groceries and feed for the men, if the other creditors would be willing to let them pay them this current account; that is, after they moved and got started, before they paid anything else. On the old score the Daniel Grocer Company would come in like the balance of us, when they did get the money and prorate it like the other. Well, the creditors, as I understood it, agreed to this proposition. In other words, that the Russ Daniel Grocer Company will, again, now, furnish them some groceries to operate this mill on, and you can pay them this current account for the stuff they furnish you now, until it is all paid, before you pay the balance of the creditors any money; then on the old score, what they owed prior to this, they would come in like the balance of us and be prorated. * * * The First National Bank and the Atlanta National Bank and the Russ Daniel Grocer Company and the Atlanta Lumber Company were the main creditors. The way I remember it, these creditors were either there or represented there. They agreed to this arrangement; that is. if the
There can be no doubt from the evidence that it was the intention of the mill company to charge the fund it expected to own from the operation of the mill with the payment of the indebtedness it had arranged to incur to appellee for the goods to be furnished for the purpose of operating the mill. There can be no doubt that appellee sold the
The amount of appellee’s account was $3,-519.77. To this the court added interest thereon from January 1, 1910, to the date of
Appellee in its brief suggests that, if we should reach the conclusion that it was not entitled to recover the interest allowed, the cause need not therefore be reversed. We agreed it need not be. The judgment will be so reformed as to adjudge a recovery in favor of appellee for the sum of only $3,519.77, the amount of its account; and, as so reformed, it will be affirmed. The costs of this appeal will be adjudged against the appellee,.
Lead Opinion
The principal contention made by appellants is that the finding of the trial court that appellee had a lien on the lumber cut by the mill was without evidence to support it. Cavin, appellee's manager, testified: "We agreed to furnish them (the Alamo Mills) goods, provided that we could collect our money before any of the past indebtedness commenced. We were to come in like the balance of the creditors for our notes. But the goods we furnished them were to be paid for first, out of the proceeds of the lumber." Willis, the cashier of the Atlanta National Bank, testified: "I understood an agreement to this effect: Tom Johnston, manager of the Alamo Mills, said, if he could just get some groceries for the men to live on, they were willing to work without any money until after he got started and began shipping lumber so that he could pay and liquidate his labor account first. The Russ Daniel Grocer Company (which afterwards became the Four States Grocer Company by an amendment of its charter, it seems) were also creditors, and he owed them between $4,000 and $5,000, perhaps, at the time. That was on the old score before they moved, at the Piney Grove Church. They owed Daniel, and the Four States Grocer Company, the successor to the Daniel Grocer Company, then said that they would furnish him some groceries and feed for the men, if the other creditors would be willing to let them pay them this current account; that is, after they moved and got started, before they paid anything else. On the old score the Daniel Grocer Company would come in like the balance of us, when they did get the money and prorate it like the other. Well, the creditors, as I understood it, agreed to this proposition. In other words, that the Russ Daniel Grocer Company will, again, now, furnish them some groceries to operate this mill on, and you can pay them this current account for the stuff they furnish you now, until it is all paid, before you pay the balance of the creditors any money; then on the old score, what they owed prior to this, they would come in like the balance of us and be prorated. * * * The First National Bank and the Atlanta National Bank aid the Russ Daniel Grocer Company and the Atlanta Lumber Company were the main creditors. The way I remember it, these creditors were either there or represented there. They agreed to this arrangement; that is, if the *1137 Russ Daniel Grocer Company would take the risk and furnish them they would be paid first. Now that payment was to come from the operation of the mill. * * * It was agreed between those that were there, and Tom Johnston for the Alamo Mills, and the Russ Daniel Grocer Company, now the Four States Grocer Company, that if any one would furnish this mill they should be paid first out of the cut from the mill when they began operation and began to liquidate. Tom Johnston was present as manager of the Alamo Mills."
We are of the opinion that the testimony recited was sufficient to support the findings of the court that appellee was entitled to have its claim for the goods furnished paid out of the proceeds of the sale of the lumber before any part of said proceeds should be applied to the payment of the claims of appellants. It will be noted that, according to the findings of the court, the position of the parties before they entered into the agreement of October 16, 1908, set out above, was as follows: The mill company owned a sawmill plant which had to be moved from its site to another one where it had timber, before it could be operated. It was indebted to the other parties to the agreement, and not only was without means with which to pay such indebtedness, but was without means with which to pay the expense of moving its plant and afterwards operating same until it could realize from sales it might make of lumber it might manufacture. The other parties to the agreement were, it seems, without security for their claims against the mill company and it may be inferred that whether they would be able to obtain payment in full of their respective claims, or not, depended upon whether the mill plant could be moved and then operated at a profit or not. Such being the situation, it seems that all the parties concerned reached the conclusion, and so agreed, that the mill should be moved and then operated solely for the benefit of said creditors until their respective debts had been paid out of the proceeds of sales of products of the mill. That this was the purpose of the agreement is shown by stipulations therein denying to the mill company a right, without the consent of all the other parties to the agreement, to use any of its assets for the purpose of securing any of its creditors, directing the use to be made of money which might be realized from the sale of products of the mill, conferring upon the creditors who executed the agreement a right to stop the operation of the mill, if it could not be profitably operated, and requiring the mill company to make to such creditors, monthly, statements showing the condition of its affairs. By their agreement the creditors in a sense became jointly interested in the operation of the mill, for the effect of the agreement, if carried out according to its terms, would be to have the mill operated for the benefit of all of them alike, until their respective claims against the mill company had been fully paid out of funds realized from sales of lumber manufactured by it. That they contemplated that the expenses of operating the mill should be paid out of such funds before any of same should be applied to the payment of their debts is conclusively shown by the fact that they expressly so provided in the contract. The plant having been removed to the new site, as it was intended by the parties it should be, it still could not be operated because the mill company was without means to pay the expense of its operation. It appeared, therefore, that the purpose of the parties would fail of accomplishment if such assistance as would enable it to meet operating expenses was not furnished to the mill company. It was then that the manager of the mill company, after he had failed to procure such assistance from other sources, applied to appellee and received from it the aid which enabled it to do what all the parties to the agreement, when they made it, intended should be done; that is, to operate the mill for the benefit of the creditors who had executed the agreement. In other words, appellee supplied the means necessary to carry out as contemplated the plan all the parties had agreed upon as the one to be pursued to accomplish their common purpose, to wit, to operate the mill and out of funds realized thereby pay the mill company's indebtedness. From the testimony of Cavin and Willis it clearly appeared that it was understood and agreed between the mill company and appellee that the proceeds of sales of lumber manufactured by the mill should constitute a fund for the payment of the sum to become due the latter for goods, wares, and merchandise furnished by it. Appellants had expressly agreed that the payment of their claims out of such proceeds should be postponed until such expenses had been first paid. So it appeared that all the parties concerned were in the attitude of agreeing that the indebtedness claimed by appellee for furnishing means to operate the mill should become and be a charge on that fund. This, we think, created an equity in appellee's favor that the court had a right to enforce in the distribution of the funds in the hands of its receiver arising from a sale of the lumber manufactured by the mill company. All that was required to create such an equity was that "the intention of the parties, as deducible from the contract, be clear in its purpose to pledge the fund as a security for the debt created." Powell v. Jones,
There can be no doubt from the evidence that it was the intention of the mill company to charge the fund it expected to own from the operation of the mill with the payment of the indebtedness it had arranged to incur to appellee for the goods to be furnished for the purpose of operating the mill. There can be no doubt that appellee sold the *1138
goods on the faith of the agreement that it should be paid out of that fund before any part of it should be applied to the payment of the other indebtedness of the mill company. There can be no doubt that the complaining creditors at the time they entered into the agreement of October 16, 1908, intended that the fund should be applied to the payment of the expenses necessary to be incurred in operating the mill, before any part of their respective claims should be paid out of such fund. Appellee's account being (admittedly, it seems) for goods used in meeting the expenses necessary in operating the mill, to deny to it the preference the court awarded to it would be to deprive it of a security it had a right by agreement of all the parties concerned to look to for payment for the goods furnished, and would be to confer upon appellants a right they by their contract had expressly waived in favor of any one who, as appellee did, might furnish to the mill company means with which to pay its current operating expenses. In the case cited above, the claim Powell sought to enforce was for certain moneys alleged to have been advanced by him to pay the expenses of himself and others appointed by the state of Alabama as commissioners to locate "swamp lands" appropriated to that state by an act of Congress. It was the duty of the commissioners to select and determine such "swamp lands," to make a report of their work to the Governor, and to procure patents from the United States in the name of the state for the benefit of the state. The compensation to be received by the commissioners was 20 per cent. of the amount realized by the subsequent sale of these lands, whenever disposed of by the state. The expenses to be incurred by the commissioners in locating the lands were to be borne equally by them. The money due the commissioners on their contract had been collected and was in the custody of their attorney, but subject to the control of the chancery court, from which the appeal had been prosecuted. It was alleged that Powell was to advance certain moneys deemed necessary to the execution of the joint enterprise, for which he was to be reimbursed out of the fund of twenty per cent., when collected from the state. The court said: "It is manifest that such an agreement, resting on contract made between the parties, would, if proved, constitute a lien or charge upon the fund in question, which would be in the nature of an equitable mortgage. All that is required to this end is that the intention of the parties, as deducible from the contract, be clear in its purpose to pledge the fund as a security for the debt created. Accordingly, an agreement that a debt shall be paid out of the proceeds of certain property, or that the property shall be bound for the debt, has been usually construed to create an Equitable mortgage." The term "equitable lien" has been characterized as "intensely undefined." 19 A. E. Ency. Law (2d Ed.) 12. "Broadly stated," said a writer on the subject, "every written contract which shows an intention to charge some particular property, therein described or identified, with a debt or obligation, creates an equitable lien upon such property. An equitable lien is also created by a written agreement to convey or transfer property as security for a debt or obligation. Such contracts will create a lien on personal property though only verbal." 19 A. E. Ency. Law (2d Ed.) 13, 14. "The doctrine may be stated, in its most general terms," says Mr. Pomeroy (3 Pom. Eq. § 1235), "that every express agreement in writing, whereby the contracting party sufficiently indicates an intention to make some particular property, real or personal, or fund, therein described or identified, a security for a debt or other obligation, or whereby the party promises to convey or assign or transfer the property as security, creates an equitable lien upon the property so indicated, which is enforceable against the property in the hands, not only of the original contractor, but of his heirs, administrators, executors, voluntary assigns, and purchasers or incumbrancers with notice. Under like circumstances, a merely verbal agreement may create a similar lien upon personal property." "In courts of equity the term `lien,"' said the court in Fallon v. Worthington,
The amount of appellee's account was $3,519.77. To this the court added interest thereon from January 1, 1910, to the date of *1139 the judgment, making a total of $3,667.37, which he directed should be paid to appellee out of the funds in the hands of the receiver, before any part of same should be applied to the payment of appellants' claims. So far as the judgment is for interest on the account, we think it is erroneous.
The general rule, as declared by the Supreme Court of the United States in Thomas v. Western Car Co.,
If the agreement recited by the court should be construed as an admission by them that appellee was entitled to recover interest on the account, it should not, we think, be construed as an admission that such interest was a charge on the funds held by the receiver entitled to priority of payment over their own claims. Appellee further insists, on authority of Bank v. Campbell,
Appellee in its brief suggests that, if we should reach the conclusion that it was not entitled to recover the interest allowed, the cause need not therefore be reversed. We agreed it need not be. The judgment will be so reformed as to adjudge a recovery in favor of appellee for the sum of only $3,519.77, the amount of its account; and, as so reformed, it will be affirmed. The costs of this appeal will be adjudged against the appellee.
The motion for a rehearing, therefore, is granted. The judgment of the court below in appellee's favor will be further reformed so as to adjudge a recovery in appellee's favor on account of the notes for the sum of $7,057.08, instead of for the sum of $7,828.48, and, as so further reformed, it will be affirmed.
Rehearing
On Motion for Rehearing.
The judgment in appellee’s favor on account of the notes sued on was for the sum of $7,828.48. In the motion attention is called to the fact that $771.40 of that sum represented interest which accrued on the principal of the notes after the appointment of the receiver. The correctness of the judgment in this particular was challenged by a proper assignment, which was overlooked by us when the afipeal was first considered. There is nothing in the record suggesting a reason why the general rule announced by the Supreme Court in Thomas v. Western Car Co., 149 U. S. 116, 13 Sup. Ct. 824, 37 L. Ed. 663, as applicable in such cases, should not be applied here.
The motion for a rehearing, therefore, is granted. The judgment of the court below in appellee’s favor will be further reformed so as to adjudge a recovery in appellee’s fav- or on account of the notes for the sum of $7,057.08, instead of for the sum of $7,828.48, and, as so further reformed, it will be affirmed.
