Bridgeport Electric & Ice Co. v. Meader

• Decision Date: 10 December 1895
• Citation: 72 F. 115
• Parties: BRIDGEPORT ELECTRIC & ICE CO. v. MEADER.
• Court: U.S. Court of Appeals — Fifth Circuit

72 F. 115

BRIDGEPORT ELECTRIC & ICE CO. v. MEADER.

United States Court of Appeals, Fifth Circuit.

December 10, 1895

W. D Shelby and Wm. L. Martin, for appellant.

Milton Humes and J. H. Sheffey, for appellee.

Before PARDEE and McCORMICK, Circuit Judges, and SPEER, District Judge.

SPEER District Judge.

This is a suit in equity, in which the following facts are alleged A. L. Soulard was a promoter of the Bridgeport Electric & Ice Company. On May 7, 1891, he entered into a contract with the plaintiff for the purchase of a machine for the manufacture of ice. It was stipulated in writing that the Bridgeport Electric & Ice company should pay the plaintiff the sum of $23,000 for the machine, as follows: $5,750 on its delivery at Bridgeport, Ala.; $5,750 when it had withstood a 15 days' test, producing 30,000 pounds of good merchantable ice per day. For the balance the purchaser agreed to give negotiable notes, with interest at 6 per cent. per annum from date of delivery, -- one for $5,850, payable in 4 months, and one for $5,850, payable in 8 months. It was expressly stipulated that these notes should be secured by mortgage on the machine, buildings, and real estate on which they were to be erected, or by personal indorsements satisfactory to the plaintiff. The machine was delivered in May or June, 1891 and was accepted by the defendant on April 26, 1892. Thereafter, in September, 1891, the Bridgeport Electric & Ice Company was organized. The capital stock of the defendant consisted of 301 shares at $100 per share. On October 10, 1891, the directors of the company, who held a majority of the stock, ratified the contract of May 7, 1891, made by Soulard, the promoter, and attempted to provide for its payment as follows: They executed and delivered five promissory notes of $2,190 each, bearing interest at the rate of 6 per cent. per annum, payable to the Blymer Ice Machine Company, A. B. Meader, trustee, in 3, 5, 7, 9, and 11 months. These were to be secured by delivery to the trustee of bonds, of the par value of $13,500, of an issue of 6 per cent. bonds of the defendant of the face value of $25,000. These bonds were to be secured by a mortgage upon the entire property of the defendant at Bridgeport, Ala. It was intended to place the bonds with Meader, trustee, for payment of the notes. In the event, however, that the bonds should not be issued on or before November 15, 1892, it was proposed to issue to Blymer Ice Machine Company, A. B. Meader, trustee, a mortgage upon the building containing the ice machinery, the land upon which it stood, and the plant, machinery, and fixtures, as originally agreed by Soulard, -- this to secure the payment of said last-mentioned notes. It resulted that the bonds were not issued, nor was personal security satisfactory to the plaintiff given, as contemplated by the contract of May 7, 1891. On the contrary, the Bridgeport Electric & Ice Company became insolvent. This insolvency was conceded on March 18, 1892. The plaintiff claims that he was entitled by the agreements hereinbefore set forth, to a mortgage or lien on the real estate and personal property of the defendant situated in the town of Bridgeport, Ala., known as the 'Bridgeport Electric & Ice Company Plant'; and the prayers of his bill are that the defendant be required to execute to him a first mortgage upon the plant as of the date when the balance of purchase price of the ice-making machine became due, and that plaintiff be decreed to have a lien of first dignity, and prior to all others, for said balance with interest thereon, and that the plant and real estate be sold under the order and decree of the court in satisfaction of the same. The plaintiff filed his bill on January 27, 1893. A subpoena thereon was issued the 30th day of January, 1893, and two days previously, i.e. the 28th day of January, 1893, an order of injunction was granted in the circuit court of the United States for the Northern district of Alabama by the Honorable John Bruce, Judge. The order granting the injunction is as follows:

'Application for writ of injunction, as prayed for in the foregoing bill, upon the averments contained in the bill, which are sworn to, being made this day to me at chambers, in vacation, at Montgomery, Ala. Upon consideration, it is ordered that the 10th day of April, 1893, be set for hearing of said motion at Huntsville, Ala., of which the defendants shall have 30 days' notice, to be issued by the clerk of said court, and served by the marshal thereof upon the defendant. It is further ordered that, pending the hearing of said application, and until the same is disposed of, the defendant be, and it is hereby, restrained from making or executing any mortgage or incumbrance upon this property, or doing anything prejudicial to the rights of the complainant, as set up and averred in said bill. Let copy of this order be served on the defendant.'

On January 28, 1893, the plaintiff brought an action at law in the circuit court of the United States for the Northern district of Alabama for the amount due on the original contract, and on April 29, 1893, judgment was confessed by the defendant. When the judgment was rendered the plaintiff tendered the notes, executed on October 10, 1891, to the defendant, as he had formally offered to do in the bill hereinbefore described. These notes were accepted by the defendant. On March 18, 1893, nearly two months after the bill in the circuit court of the United States was filed, and after the decree for injunction above set forth had been granted, the Bridgeport Land & Improvement Company, alleging itself to be a creditor, filed a proceeding in the state chancery court of Jackson county, Ala., against the defendant, the Bridgeport Electric & Ice Company. This proceeding sought the appointment of a receiver to take charge of the properties of the ice company, and a receiver was appointed. It appeared that the officials and directors of the Bridgeport Land & Improvement Company were, to a large extent, identical with those who were the officials of the Bridgeport Electric & Ice Company, and that in the dual capacities, and personally, they had notice of the pendency of the suit in the circuit court of the United States, and of the injunction granted therein. Meader, trustee, the plaintiff, some months after the bill now before us was filed in the circuit court, made application to the state chancery court for leave to enforce his judgment, obtained at law on April 29, 1893, hereinbefore mentioned. The state chancery court granted him leave. Subsequently he caused the property in dispute to be sold under execution, in pursuance of said permission, and himself became the purchaser. Thereafter the supreme court of Alabama issued an order of mandamus vacating and annulling the order of the state chancery court which had authorized this sale. The proceedings at law in the circuit court, as well as in the state chancery court, were brought to the attention of the circuit court in equity by a supplemental bill.

The answer of the defendant, admitting the purchase of the ice- -making machine at the price and on the terms alleged in the bill, and the balance that was due thereon, denied that the plaintiff was entitled to the mortgage or other lien he sought to enforce. Further, the answer states that the Bridgeport Electric & Ice Company was organized for the purpose of running an electric lighting plant, and, as well, an ice-making machine; that the machinery for the electric plant was furnished by the Thomson-Houston Electric Company, and was purchased on the 24th of February, 1892, for $14,886, no part of which had ever been paid; that this purchase was evidenced by a written contract; that sundry services rendered by the Thomson-Houston Electric Company had increased the defendant's indebtedness to them to $20,000; that the defendant stipulated and agreed to deliver to the electric company $8,000 in first-mortgage 6 per cent. bonds to be made payable in 10 years, to be secured by a mortgage on the property; and that the Thomson-Houston Electric Company had a lien on the property and franchises for its debt coordinate with that of the plaintiff. The answer further alleged that the bonds proposed were intended to be in lieu of the statutory mechanic's lien afforded by the laws of Alabama; that the Thomson-Houston Electric Company waived its right to enforce such lien on the faith of this agreement; that the plaintiff agreed to all this, and agreed to take $12,500 of such bonds as collateral security...