Carroll v. Cash Mills

• Citation: 118 S.E. 290,125 S.C. 332
• Decision Date: 12 April 1923
• Docket Number: 11189.
• Parties: CARROLL ET AL. v. CASH MILLS ET AL. IN RE SACO-LOWELL SHOPS ET AL.
• Court: United States State Supreme Court of South Carolina

118 S.E. 290

125 S.C. 332

CARROLL ET AL. v. CASH MILLS ET AL.

IN RE SACO-LOWELL SHOPS ET AL.

No. 11189.

Supreme Court of South Carolina

April 12, 1923

Order Revoking Stay of Remittitur, July 5, 1923.

Appeal from Common Pleas Circuit Court of Cherokee County; John S Wilson, Judge.

Action for the appointment of a receiver, etc., by J. A. Carroll and others against the Cash Mills and others. In the matter of the claims of the Saco-Lowell Shops, the Mason Machine Works, the Barber-Colman Company, Chas. L O'Neill & Co., A. C. Walker, and Bean Bros. From the referee's report, confirmed, as modified, by the circuit court, the first three claimants named above appeal. Reversed and remanded.

Gary C.J., and Fraser, J., dissenting.

D. W. Robinson, of Columbia, Martin & Blythe, and W. G. Sirrine, all of Greenville, for appellants.

L. W. Perrin and Lyles, Daniel & Drummond, all of Spartanburg, for respondents.

Butler & Hall, of Gaffney, for receivers.

Dobson & Vassey, of Gaffney, for Cash Mills.

COTHRAN J.

Action instituted in the court of common pleas for Cherokee county on January 3, 1921, by certain stockholders of Cash Mills, a corporation, against the corporation and its directors, alleging its insolvency and praying for the appointment of a receiver and the liquidation of its affairs.

An order was passed by the Hon. Edward McIver, circuit judge, dated January 4, 1921, and filed January 5, 1921, in the office of the clerk of court, appointing W. C. Hamrick temporary receiver. On February 21, 1921, the temporary receivership was made permanent, by order of the circuit judge.

By a subsequent order dated July 6, 1921, special referees were appointed to take testimony and report upon claims presented against the corporation, their respective amounts and priorities if any. In accordance with said order, notice was published calling in creditors, and references upon the claims presented were held.

The appeal involves the questions of the validity of certain claims and the priorities claimed by others, with particular reference to the claims of Saco-Lowell Shops, Mason Machine Works, and Barber-Colman Company, which will be designated and referred to as "machinery claims," and of Charles L. O'Neill & Co., A. C. Walker, and Bean Brothers, "cotton claims."

The special referees reported September 30, 1921, in favor of the validity of the cotton claims as follows:

Chas. L. O'Neill & Co .. $47,201 55

A. C. Walker ............ 12,295 00

Bean Bros................ 83,430 00

--and in favor of the validity, but against the priority of the machinery claims, which were:

Saco"Lowell Shops ...... $30,815 31

Mason Machine Works ..... 59,217 19

Barber"Colman Company .... 4,000 00

--placing them all, machinery claims and cotton claims, upon the same plane of general unsecured creditors.

The matter came up before Hon. John S. Wilson, circuit judge upon exceptions by the holders of the machinery claims to the report of the referees, on November 7, 1921; the case was argued and decision reserved. On November 10, 1921, Judge Wilson passed an order and decree, directing a sale of the property of the corporation by the receiver, on salesday in January, 1922, upon certain terms stated, and reserving for further consideration the issues made by the exceptions to the report of the referees. That order further provided that the property be sold free and discharged from all liens and incumbrances of creditors, which should be transferred to the proceeds of sale, held subject to the further orders of the court. On November 26, 1921, Judge Wilson filed a decree in which he held: (1) That the claim of J. H. Curry, contractor, to whom the sum of $6,000 was due on contract, could not be allowed as a lien upon the property, upon the ground that he had failed to comply with the statute relating to mechanics' liens. (In passing we observe that there is nothing in the "case" referring to this claim, and no exceptions involving this portion of the decree; it therefore passes out of consideration.) (2) That all exceptions to the report of the referees be overruled, except the exception filed by the receiver, and that it be sustained, as having been adjudicated by the order of sale made November 10, 1921. (There is no reference to this exception in the "case," and it too passes out of consideration.) (3) That the report of the referees, including the supplemental report, be confirmed and made the judgment of the court. (There is no statement in the "case" of a supplemental report, and it passes out of consideration.)

From this decree, the holders of machinery claims have appealed to this court, upon exceptions which fully raise the questions herein decided. The receiver did not appeal from any portion of the decree.

We will proceed to the consideration and determination of the questions presented in reference to the several claims, taking up in order the machinery claims, Saco-Lowell Shops, Mason Machine Works, and Barber-Colman Company, and the cotton claims, Chas. L. O'Neill & Co., A. C. Walker, and Bean Bros.

Machinery Claims.

1. Saco-Lowell Shops. This company claims priority over the general creditors to the extent of $30,815.31, that being the balance claimed to be due them under the following circumstances: A written contract was entered into by and between this company and the corporation, and provided for the furnishing of certain machinery to the mill, aggregating $46,506.10. The contract is dated at Charlotte, N. C., September 15, 1919, and at Gaffney, S. C., September 19, 1919; accepted at Boston, Mass., by the company on September 29, 1919. It provides for "delivery f. o. b. cars shop spring of 1920"; terms of payment, one-third net cash 30 days from average date of invoices, balance covered by two equal 6 months' notes, dated average date of invoices. Machinery under the contract was delivered at various times, beginning the latter part of May, 1920, and continuing until January 7, 1921. The company in compliance with the contract, furnished mechanics to erect and install the machinery, who were thus engaged practically up to January 1, 1921. The last machinery was shipped January 7, 1921; it did not require skilled mechanics to adjust.

The contract contained the following provisions relating to reservation of title, and to the right to remove the machinery in the event of nonpayment:

"The title to the machinery delivered under this contract shall not pass from the Saco- Lowell Shops (hereinafter called the company), until all payments hereunder (including checks, drafts, deferred payments, and notes and renewals thereof, if any) shall have been fully made in cash. Until such full cash settlement is made, the purchaser agrees to keep the machinery in repair and fully insured for the benefit of the company as interests may appear.

In case of breach of this contract, it is understood that the company or its agents may enter peaceably and remove the articles from the custody of the purchaser, wherever they may be, and that the purchaser herewith agrees to do all acts necessary to perfect and assure such retention of title in the company as above contemplated."

The contract was duly recorded, both in the real estate book, and in the chattel mortgage book, in the office of the Register of Mesne Conveyances of Cherokee county, where the mill was located, on January 4, 1921, the day the order appointing a receiver was signed, and the day before it was filed in the clerk's office.

The account was closed by certain payments and the execution of two notes for the balance, both dated July 19, 1920, and each for $15,011 due 6 months after date. The amount due the company as of the date of the report of the referees was conceded to be $30,815.31. It is not clear to the Court how this figure is arrived at; but the notes being in evidence any error may be corrected.

The contest is really between the holders of the machinery claims and the holders of the cotton claims; the receiver is only interested in behalf of such creditors as are not parties to this action, it being immaterial to the stockholders how the issue may turn. The point of attrition between the holders of the machinery claims and the holders of the cotton claims is this:

The Saco-Lowell people contend that they are the holders of what is practically (and which will be considered) a chattel mortgage upon the machinery installed by them, and which, although not recorded within the 10 days required by section 3740, vol. 1, Code of Laws, A. D. 1912, is valid against the cotton claims, the holders of which are not subsequent creditors of the corporation.

The holders of the cotton claims contend (in which contention the receiver joins) that they are subsequent creditors, and as such entitled to protection under such section.

A decision of this issue is therefore of prime importance.

It appears that, while the contract was made in September, 1919, it contemplated deliveries in the "spring of 1920," and that the first deliveries were made in the latter part of May, 1920. It is clear that the lien of Saco-Lowell Shops was not consummated until such delivery and attached as each delivery was thereafter made. The claim of Charles L. O'Neill & Co. (cotton claim) for $47,201.55 arose out of a contract for the purchase of 600 bales of cotton, dated March 8, 1920; the claim of A. C. Walker for $12,295, out of a contract for the purchase of 150 bales of cotton, dated March 20, 1920; and the claim of Bean Bros. for $83,430, dated March 12, 1920. None of them could therefore have contracted with the mill upon the faith and credit of machinery subsequently installed, which is the foundation of the statute.

Both Section 3542, which is general and...