Alf Bennett Lumber Co. v. Walnut Lake Cypress Co.

• Decision Date: 11 November 1912
• Citation: 151 S.W. 275
• Parties: ALF BENNETT LUMBER CO. v. WALNUT LAKE CYPRESS CO.
• Court: Arkansas Supreme Court

151 S.W. 275

ALF BENNETT LUMBER CO. v. WALNUT LAKE CYPRESS CO.

Supreme Court of Arkansas.

November 11, 1912.

Appeal from Jefferson Chancery Court; Jno. M. Elliott, Chancellor.

Action by the Alf Bennett Lumber Company against Walnut Lake Cypress Company. Judgment for defendant, and plaintiff appeals. Reversed and rendered.

Appellee, Walnut Lake Cypress Company, was a corporation organized under the laws of the state of Arkansas on February 16, 1907. Its stockholders were E. P. Ladd, C. S. Bacon, W. B. Craft, and R. E. Schulze. Mr. Ladd was president, and Mr. Craft was secretary and treasurer and was in the active management of the business. It does not appear that the other two stockholders took any active part in the business. The corporation was organized for the purpose of owning and operating a sawmill for the manufacture of cypress lumber. The company owned about 25,000,000 feet of cypress lumber situated near Walnut Lake, Ark., and the mill was built and operated at that point. The sawmill had not been built at the time of the incorporation of the company, and it did not commence to operate until May, 1908. In the fall of 1907 the company, being pressed for money to finish the erection of the mill, opened negotiations for a loan with the appellant, Alf Bennett Lumber Company, located at St. Louis, Mo. The latter company was engaged in the business of selling the output of various lumber mills. Alf Bennett was the president of the company, and Mr. Ladd, president of the Walnut Lake Company, had known him for several years. Ladd gave Craft a letter of introduction to Bennett. Craft then went to St. Louis and asked Bennett for a loan of a sum of money, which it was afterwards agreed to be $15,000. The indebtedness was to be evidenced by short-time notes which were to be extended from time to time until the Walnut Lake Company began to sell its output. As an inducement to the Alf Bennett Company to make this loan, Craft proposed that the two companies should enter into a contract by which the Bennett Company should have the entire charge of selling the output of the Walnut Lake Company. Such a contract was finally agreed upon. It was dated October 16, 1907, and is as follows: "This agreement, made and entered into on the 16th day of October, 1907, between the Walnut Lake Cypress Company, a corporation organized and doing business under the laws of the state of Arkansas, party of the first part, and the Alf Bennett Lumber Company, a corporation organized and doing business under the laws of the state of Missouri, party of the second part, witnesseth: Whereas, the party of the first part is operating a sawmill for the manufacture of cypress, oak and gum lumber and lath at Walnut Lake, Arkansas; and, whereas, it is deemed mutually advantageous for the party of the second part to be the exclusive sales agent for the party of the first part for its entire cypress, oak and gum manufactured products aforesaid, for the period of time hereinafter set out in this contract, and upon the terms and conditions set out; now, therefore, to that end it is agreed between the parties hereto as follows: First. The party of the first part agrees that, during the life of this contract, the party of the second part shall be its exclusive sales agent for the sale and marketing of the entire cypress, oak and gum manufactured products of its sawmill and plant as aforesaid. Second. As such sales agent, the party of the second part shall fix the selling price of said manufactured products, subject to the approval of the party of the first part, and shall pay the party of the first part the same price that they obtain for such products. Third. In the event that the party of the first part receives orders for any of its cypress, gum and oak lumber products direct from proposed purchasers or through any sources other than the party of the second part, such orders shall be filled upon the direction and order of the party of the second part. Fourth. All shipments shall be made and billed and invoiced to the persons and as directed by the parties of the second part. Fifth. The party of the second part agrees to guarantee the payment of the net amount (after deducting commissions of the party of the second part) upon all shipments sold and delivered through orders secured by the party of the second part, within fifteen (15) days from the date of invoice or invoices for such shipments. Sixth. In the event that upon shipments paid for the party of the second part the purchaser shall make deductions on account of the grade of the lumber shipped, or because of damage in transit, the party of the second part shall be credited by the party of the first part with the amount of such deductions, and adjustments shall be made between the party making such deductions and the party of the first part. Seventh. The party of the second part for its services shall be entitled to, and may retain out of any settlements made with the party of the first part, a commission of 5 per cent. upon the net amount of invoices for all shipments, after deducting freight, in addition to the regular 2 per cent. discount for cash. Eighth. In view of the fact that settlements between the parties hereto on account of shipments will often be made on estimated freight charges, it is agreed that monthly corrections and adjustments of the accounts of the parties hereto shall be made on or before the 10th day of each calendar month throughout the year. Ninth. This contract shall be and remain in force and effect as long as the party of the first part is operating their plant at that point, and until all the timber they now own and shall in future purchase shall have been cut into lumber. Tenth. It is further agreed that the party of the first part shall have the right to inspect all orders on the books of the party of the second part whenever they may desire, and the party of the second part obligates itself at all times to secure the highest market price, which it is their ability to obtain. Eleventh. It is understood that any local sales of lumber by the party of the first part in less than car load lots shall be exempt from the commission of the party of the second part."

After the contract had been entered into, the Bennett Company proceeded to lend the Walnut Lake Company the sum of $15,000, as had been verbally agreed upon. The loan was made during the winter of 1907 and 1908. As the notes became due they were renewed from time to time, and the accruing interest was by agreement between the parties entered on the books of the Bennett Company as an open account charged against the Walnut Lake Company. The Walnut Lake Company commenced cutting lumber in May, 1908, and the Bennett Company, as its agent, began to sell the output under the terms of the contract. The testimony shows that it requires from three to four months for lumber to become sufficiently dry to ship, and that none of the stock of the Walnut Lake Company was in condition to ship until about the middle of July. On October 26, 1908, Mr. Craft wrote to the Bennett Company and canceled the contract between the two companies. The letter stated that the Bennett Company had failed to make sales according to the contract and to advise truthfully in regard thereto, and that for these and many other violations of the contract the Walnut Lake Company canceled the contract and refused to permit the Bennett Company to make any further sales of lumber for it.

On October 28, 1908, a meeting of the stockholders of the Walnut Lake Company was held, and a resolution to dissolve the corporation was adopted. On October 30, 1908, a petition was filed in the chancery court praying for the appointment of a receiver to take charge of the assets of the company. This was done in pursuance of section 958, Kirby's Digest, which provides that, when any corporation has surrendered its charter, the chancery court shall have jurisdiction to pay its debts and to distribute its assets among the stockholders according to their several interests. A receiver was duly appointed and subsequently filed a report showing assets amounting to $229,388.55 and liabilities in the sum of $87,866.67. On December 5, 1908, the Alf Bennett Company filed an intervention in the nature of a claim for damages in the sum of $32,000, which it is alleged it would have earned under the contract had it been permitted to have carried it out. In its intervention it alleged that it had complied with its part of the contract and that the notification of the abrogation of the contract, the surrender of the charter, and the appointment of a receiver were in pursuance of a conspiracy entered into by the stockholders of the Walnut Lake Company for the purpose of evading the obligations of the contract between that company and the Bennett Company. On January 20, 1909, the court ordered the receiver to sell the assets of the Walnut Lake Company at public sale. This was done on February 28th following, and the entire property was bought in by Mr. Craft for $115,000. Craft gave bond to secure the deferred payments, with Mr. Bacon and Mr. Ladd as his sureties. Mr. Craft in purchasing the assets of the receiver acted for himself, for Mr. Ladd, Mr. Schulze, and Mr. Gutherie. Mr. Bacon had already sold his interest to Mr. Ladd. Immediately after the sale, the mill and all the assets were turned over to the new company, which had been organized with the same stockholders, except Mr. Bacon, who had sold his interest to Mr. Ladd, and Mr. Gutherie, who had subscribed for $5,000 stock in the new company. The new company, called "the E. P. Ladd Cypress Company," took up the indebtedness of the Walnut Lake Company and proceeded to operate the sawmill. It operated it for the next three years, and during the time cut about 18,000,000 feet of lumber.

The testimony in the case is very voluminous; and, that the opinion may not be too long, the remaining facts in the case will be stated...