M.A. Furbush & Son Mach. Co. v. Liberty Woolen Mills

• Decision Date: 27 August 1896
• Citation: 81 F. 425
• Parties: M. A. FURBUSH & SON MACH. CO. et al. v. LIBERTY WOOLEN MILLS et al.
• Court: U.S. Court of Appeals — Fourth Circuit

81 F. 425

M. A. FURBUSH & SON MACH. CO. et al. v. LIBERTY WOOLEN MILLS et al.

United States Circuit Court, W.D. Virginia.

August 27, 1896

S. V Southall, for complainants.

M. P Burks, for defendants.

PAUL District Judge.

The Liberty Woolen Mills, a company incorporated under the laws of the state of Virginia, and a citizen of the state of Virginia, and having its principal office at Bedford City (formerly Liberty), within the Western district of Virginia purchased of M. A. Furbush & Son, citizens of Philadelphia in the state of Pennsylvania, certain machinery, fixtures, and supplies, for which the said company was indebted to said M. A. Furbush & Son in the sum of $14,813.77, as of the-- day of June, 1884. To secure the payment of this debt, the company executed a deed of trust on all the said machinery, fixtures, and supplies which it had purchased of M. A. Furbush & Son in which deed it was provided that the title to the said machinery, etc., should remain in said M. A. Furbush & Son until all the purchase price thereof, interest, and insurance premiums had been fully paid. Appended to the deed is a list of the machinery, etc., referred to. This deed of trust was duly recorded in accordance with the registry laws of Virginia, and bears date the 25th day of June, 1884. On the 1st day of June, 1885, the company executed coupon bonds to the amount of $10,000; and to secure the payment of the same, and of the coupons thereto attached, executed a mortgage on all its property, including its real estate situate in the town of Liberty (now Bedford City), the same being a lot of land containing 123 acres, together with the mill building, engine house, and all other improvements thereon, and machinery, tools, implements, furniture, and fixtures therein situated, acquired and to be acquired; also all personal property of said company of every kind and description, particularly all material for the product of said mills, whether raw wool or wool in the course of being manufactured, and all manufactured goods now in stock or hereafter produced. S. Griffin and M. P. Burks were made trustees in this deed, and the same was duly recorded, in accordance with the registry laws of Virginia, on June 11, 1885. Of the $10,000 of coupon bonds so executed and secured, $4,400 were issued to and taken by, and are now held by, the First National Bank of Bedford City, and the residue, to wit, $5,600 were hypothecated by the company with the People's National Bank of Lynchburg, to secure a loan. On April 4, 1889, the debt of the company to M. A. Furbush & Son had been reduced to $11,059.52, of which $9,878.99 was principal. On April 11, 1889, the stockholders of the company sold all the property, real and personal (the finished goods and office furniture excepted), to W. H. McGhee, T. D. Berry, S. M. Bolling, S. Griffin, and J. L. Campbell, for the sum of $17,000; these purchasers buying with notice of the debt, amounting to $11,059.52, due to M. A. Furbush & Son, and the lien on the machinery, etc., for its security, and of the $10,000 coupon bond mortgage on the entire property of the company; but it was agreed that, 'of course, the purchasers have the privilege of using the purchase money, as far as it will go, in settling said mortgages. ' On the next day, to wit, on April 12, 1889, after the said purchase, an agreement was entered into between the said five purchasers and M. A. Furbush & Son, by which it was agreed that the $5,600 of the company's coupon bonds which had been hypothecated with the People's National Bank of Lynchburg, and which were then in the possession of the said bank as collateral for a loan of $--, should be redeemed by the said five purchasers and turned over to M. A. Furbush & Son, and that M. A. Furbush & Son should receive said bonds, and credit the amount of the same, as of the day acquired, as a cash payment upon the debt due them. This was done as agreed, and the debt due M. A. Furbush & Son was thereby diminished by the amount of the said coupon bonds, leaving the amount of said debt, secured as aforesaid, $5,459.52. It was further agreed that the said five purchasers aforesaid should execute their four bonds payable to the company, for an amount equal to the residue of said debt due M. A. Furbush & Son, said bonds to be each in an equal amount, and payable, with interest, in four annual installments, and that said four bonds should be assigned by the company to M. A. Furbush & Son as collateral and additional security for the balance of their said debt left due after crediting the said $5,600 of the company's coupon bonds as a cash payment upon said debt. This was not done, however, but in lieu of it the said five purchasers, in an addendum to said agreement, guarantied to M. A. Furbush & Son the payment (as installed) of the said balance of the debt due them by the company. On the 1st day of August following (1889) the said five purchasers turned over their purchase of the entire property and franchises of the Liberty Woolen Mills to the Liberty Woolen Manufacturing Company, a corporation organized under the laws of the state of Virginia, and the deed, recorded August 7, 1889, was made directly from the Liberty Woolen Mills to the Liberty Woolen Manufacturing Company, the said five purchasers joining in said deed. On the 1st day of January, 1884, M. A. Furbush, C. A. Furbush, Charles H. Knowlton, and John Cromie associated themselves into a company, under the laws of the state of New Jersey, designated as M. A. Furbush & Son Machine Company; and it is stated in the bill, and proven by the deposition of Edwin C. Grice, the said agreement of April 12, 1889, between M. A. Furbush & Son, and the said five purchasers of the property of the Liberty Woolen Mills, was made by said firm of M. A. Furbush & Son in trust for and for the sole and exclusive benefit of the said corporation, the M. A. Furbush & Son Machine Company, and that said corporation is also the owner and holder of the said $5,600 of the coupon bonds of the said Liberty Woolen Mills which were redeemed from the People's National Bank of Lynchburg by the said five purchasers, and turned over to M. A. Furbush & Son. The defendants file exceptions to the master's report on three distinct grounds, which the court will consider in the order in which they are presented.

1. All of the defendants except because the debt of the complainants for $4,201.97 is stated as the second lien on all of the property, whereas, in fact, it is a specific lien only on such of the property as was sold by complainants M. A. Furbush & Son to the Liberty Woolen Mills, and is not a lien on any of the real estate or other property of the defendants, or any of them. The complainants have a specific lien for said sum of $4,201.97 on the machinery, fixtures, and supplies sold by M. A. Furbush & Son to the Liberty Woolen Mills, as shown by the mortgage of June 25, 1884, but they have no lien for said sum on any other property of the defendants. This exception will be sustained.

2. The Liberty Perpetual Building & Loan Company, a creditor of the Liberty Woolen Manufacturing Company excepts 'because the commissioner has failed to state its debt proven in this cause as a lien on the property sought to be subjected in the bill. It should be stated as the lien next after the taxes on all the real and personal estate in the bill and proceedings mentioned. ' It further excepts 'because the $5,600 of bonds held by the complainant is stated as part of the $10,000 mortgage in the bill and proceedings mentioned. These bonds, if liens at all, are subsequent to the lien of this company. The bonds were acquired by the complainants long after the passage of the Code of 1887, which gave the complainants full knowledge of the right of the laborers to claim liens on the property superior and paramount to deeds of trust, mortgages, etc. In any view that...