Clark v. B. B. Richards Lumber Co.

• Decision Date: 19 May 1897
• Citation: 71 N.W. 389,68 Minn. 282
• Parties: CLARK v B. B. RICHARDS LUMBER CO. ET AL.
• Court: Minnesota Supreme Court

68 Minn. 282

71 N.W. 389

CLARKvB. B. RICHARDS LUMBER CO. ET AL.¹

Supreme Court of Minnesota.

May 19, 1897.

(Syllabus by the Court.)

1. A written instrument for the sale of standing timber, to be severed and carried away from the land and manufactured into lumber by the vendee, in which it was provided that the title to the timber and its manufactured products should remain in the vendor until the entire purchase price was paid, and for a release from time to time of the vendor's claim upon blocks of not less than 1,000,000 feet of the lumber, upon the payment of an agreed price per 1,000 feet, held to be either a conditional sale contract or a chattel mortgage to take effect as the timber was severed from the land, and that in either case it should have been filed in the proper office.

2. Such instrument was not filed until two months before the vendee made an assignment in insolvency. Held, that the assignee could not avoid the contract solely on the ground that he represented creditors whose debts were contracted intervening the making and filing of it, but if the instrument was withheld from record pursuant to an agreement of the parties thereto, in order that the credit of the vendee might not be impaired, it would be a fraud as to creditors of the vendee who became such relying upon his apparent absolute ownership of the property in his possession, and as to such creditors the vendor would be estopped, and they would be entitled to have his claim upon the property subordinated to their equity to have their respective debts first paid out of the property. Held, further, that the assignee can enforce such equity.

3. Held, that the trial court erred in refusing to find upon issues herein as to such alleged agreement.

Appeal from district court, St. Louis county; S. H. Moer, Judge.

Mitchell, J., dissenting.

Action by Melvin J. Clark against the B. B. Richards Lumber Company and others. Judgment for plaintiff. From an order refusing a new trial, the Duluth Trust Company, assignee, appeals. Reversed.

Cotton, Dibell & Reynolds, for appellant.

Cash, Williams & Chester, for respondent.

START, C. J.

On November 2, 1894, the plaintiff and the defendant lumber company executed the contract which is made a part of the complaint herein, whereby the plaintiff agreed to sell, and the lumber company to buy, all of the pine timber standing on certain lands owned by the plaintiff in the county of Carlton, Minn., for the sum of $265,000. The lumber company paid the purchase price by cash, $250, and the balance, $264,750, by its eight promissory notes, with annual interest at 6 per cent., due at different times,-the first on or before December 1, 1894, and the last on or before December 1, 1898. The right to enter upon the lands and cut and remove the timber at any time within 10 years was given to the lumber company by the contract, but it also contained the following conditions and restrictions: “Said party of the second part further agrees that it will keep the logs and timber which it shall cut and remove from the lands aforesaid separate from all other logs or timber, and that it will keep the lumber and shingles which it shall manufacture therefrom marked C. L. P., and piled separate and apart from all other lumber and shingles, in such manner that the same may be readily identified, until the purchase price for the timber shall be fully paid, or until permission in writing shall be given by party of the first part to sell and dispose of the same. It is further agreed that the party of the second part shall at any time have the right to pay for any lot or lots of the lumber to be manufactured from the timber, in blocks of one million feet or upwards, of mill-run lumber, mill culls out, at the rate of five dollars per thousand feet in the year 1895, and thereafter at six dollars per thousand feet, and upon making such payment the title to the lumber so paid for shall pass unto and vest in the party of the second part. *** It is further mutually agreed and understood by and between the parties of the first and second parts hereto that the title to the said pine timber, and any and all lumber, shingles, or other products that may be manufactured therefrom, shall be and remain in the party of the first part until the entire purchase price therefor shall be paid, as hereinbefore provided.” This contract was filed in the office of the city clerk of Duluth, the place of the lumber company's sawmill and principal office, on September 24, 1896, and not before. The lumber company made default in its payments under this contract, and on November 17, 1896, it made an assignment, under the insolvency laws of the state, for the benefit of its creditors, to the defendant trust company, at which time it had in its possession a large quantity of lumber manufactured from logs cut pursuant to the contract. Thereafter the plaintiff brought this action to have it determined that he was the owner of the remaining pine timber upon the lands described in the contract, and that he was the owner of all of the lumber in possession of the defendants manufactured from the logs cut from his land pursuant to the contract, and to have the contract annulled. The defendant trust company, among other defenses, alleged, substantially, the following: “That at the time of the execution of the contract, and as a part of the same transaction, it was mutually agreed between the parties thereto that the provisions thereof reserving title in the vendor should not be made public, and that the contract should not be filed or recorded, in order not to injure or interfere with the business of the lumber company. *** That the lumber company, with the knowledge of plaintiff, cut the timber, and manufactured it into lumber, and sold the same, as the owner thereof, as if free from any claim or lien in favor of plaintiff, and as its regular course of business, from the time the contract was executed to September 24, 1896. That the insolvent at all times during its operations under the contract was in exclusive and undisputed possession of the product of the timber at its yards in Duluth, in all respects as the apparent owner thereof, as if free from incumbrance or claim of any kind. That no part of the logs or lumber manufactured from the timber was ever set apart, separated, marked, or designated as in the contract provided, or otherwise, and that insolvent controlled and dealt with the same in all respects as its own property, all of which facts plaintiff at all times knew.” That the present existing creditors of the lumber company, to the amount of $40,000, gave credit to it without any notice of plaintiff's claim of title, and in reliance upon the apparent absolute ownership of the lumber company of the lumber so in its possession, and in the belief that it was such owner. These allegations were put in issue by the reply. The trust company, on the trial, and at the close of the evidence, submitted to the court findings in its favor on these issues, which the court refused on the ground that they were immaterial, and the defendant excepted to the ruling as to each finding. The trial court made findings in favor of the plaintiff, and ordered judgment accordingly, and the trust company appealed from an order denying its motion for a new trial.

The defendant assigns 72 alleged errors, but the only ones which we find it necessary to discuss are those relating to the refusal of the trial court to find upon the issues to which we have referred. The evidence as to them was not such as to require the court to find thereon as requested in favor of the defendant; hence, if the trial court had simply declined to find as requested, it would have been necessary for the defendant, in order to base error on the court's refusal to find as to the issues, to have specially requested the court to find thereon one way or the other. But the court having refused to find on the issues in favor of the defendant on the sole ground that they were immaterial, its counsel was not bound longer to contend with the court and request it to pass upon issues it had decided to be immaterial. The trial court made no findings whatever as to these issues. The question then is, were these issues immaterial? The answer involves a consideration of three minor questions: (a) The construction of the contract. (b) The effect on the rights of the plaintiff of the alleged agreement to conceal the terms of the contract from the public, as against creditors of the lumber company trusting it, relying upon its apparent ownership of the lumber and its possession. (c) If such creditors have any rights in the premises, can they be enforced in this action by the assignee?

1. Is the contract in question such a one as is required to be filed by the provisions of Gen. St. 1894, §§ 4129, 4148, relating to the filing of chattel mortgages and conditional sale contracts? This contract is dual in its character. It first provides for the sale of all of the standing pine timber on the land of the vendor described in the contract, with the right to enter, cut, and carry it away within a time limited, for a stated price, payable in cash, $250, and the balance in accordance with the terms of eight promissory notes. This much of the contract relates to the sale of an interest in real estate. Pine Co. v. Tozer, 56 Minn. 288, 57 N. W. 796. But the contract assumes that, after the timber is severed from the land and goes into the possession of the vendee, it will become personal property, and the parties to the...