Commercial Elec. Supply Co. v. Curtis

• Decision Date: 07 April 1923
• Docket Number: 6081.
• Citation: 288 F. 657
• Parties: COMMERCIAL ELECTRICAL SUPPLY CO. v. CURTIS et al.
• Court: U.S. Court of Appeals — Eighth Circuit

288 F. 657

COMMERCIAL ELECTRICAL SUPPLY CO. v. CURTIS et al.

No. 6081.

United States Court of Appeals, Eighth Circuit.

April 7, 1923

Rehearing Denied June 14, 1923.

James B. McDonough, of Ft. Smith, Ark. (Marion C. Early, of St Louis, Mo., on the brief), for appellant.

Vincent M. Miles, of Ft. Smith, Ark. (Thomas B. Pryor, of Ft. Smith Ark., on the brief), for appellees.

Before SANBORN and KENYON, Circuit Judges, and SYMES, District Judge.

SANBORN Circuit Judge.

This is an appeal from an order of dismissal of an amended petition in intervention of a creditor claimant, which was filed after the final decree of foreclosure in a suit in equity had been rendered. That suit was commenced by John J. Murphy, an unsecured creditor, on May 14, 1920, when he filed a bill in equity against the Commonwealth Public Service Company, a corporation, hereafter the defendant, for the appointment of a receiver of its business and property on account of its insolvency, the administration thereof, the hearing and adjudication of all claims against it and its property, their amounts, and their respective ranks. The defendant admitted the averments of the complaint, and on May 15, 1920, W. L Curtis was appointed receiver of its property and business.

There were two recorded mortgages of April 1, 1918, upon this property to Ft. Dearborn Trust & Savings Bank and Frank M. Forrey, trustees for the holders of bonds and notes issued under and secured thereby, and the principal of these bonds and notes was $990,000. On January 6, 1921, the trustees filed their intervening complaint in the suit wherein they alleged that these mortgages constituted the first and paramount liens upon all the property of the defendant and that they were due, and they prayed for the sale of the property, the application of the proceeds to the payment of the debts due the holders of the mortgage bonds and mortgage notes, and the foreclosure of all other claims against the property.

The defendant, when the receiver was appointed, was indebted to the claimant, the Commercial Supply Company, a corporation, on an open account for goods sold to it in 1919 and 1920 to the amount of about $49,000. By its amended intervening petition which the court below dismissed the claimant is asking to maintain and enforce an equitable lien upon the property of the defendant and its proceeds superior to the liens of the bonds and notes secured by the mortgages. The basis of its claim to this superior lien alleged in its amended petition is that the claimant sold and delivered the goods for which the defendant is indebted to it between June, 1919, and May 14, 1920, that during that time the defendant was indebted to W. G. Souders & Co., hereafter Souders & Co., in about $300,000, and was financially embarrassed, that Souders & Co. knew and the claimant did not fully know this financial embarrassment, that Souders & Co. owned some of the mortgage bonds, were buying more, and represented all the other holders of the mortgage bonds and mortgage notes, that Souders & Co. were in actual control of and were managing the affairs and business of the defendant, that they represented to and promised the defendant that its claim for payment of the goods it was delivering would be paid in preference to the mortgage bonds and mortgage notes, and by this representation and promise secured the delivery of these goods which were added to and became a part of the property of the defendant, that in all that Souders & Co. promised and represented they were authorized to and acted for all the holders of the mortgage bonds and mortgage notes and the trustees in the mortgages and the latter subsequently ratified their representations, promises and acts. The claimant insists that by these representations, promises, and acts the bondholders and noteholders were estopped from enforcing their mortgage liens against the defendant's property until after its claim was fully paid out of the proceeds of that property.

Counsel for the trustees and for the holders of the mortgage bonds and mortgage notes severely criticize the allegations of the amended petition and forcibly contend that they do not state facts which would constitute an estoppel of their clients even if they were in a complaint in an original suit by the complainant against them to enforce its averred estoppel and to maintain its alleged equitable lien. But, as in the opinion of the court the sufficiency of those averments in a complaint, or answer in an original suit, is not decisive of the correctness of the order to dismiss the amended petition, a discussion of that question is omitted.

Conceding that, if the amended intervening petition were a complaint or an answer by the complainant in an original suit between it and the trustees, or the holders of the mortgage notes or mortgage bonds, the alleged estoppel and claim for a paramount lien would be sufficiently pleaded, we turn to the question: Was there, notwithstanding this concession, any mistake of fact or error of law by the court below which rendered its dismissal of the amended petition unjust or inequitable?

It is the general rule that one who voluntarily intervenes in a suit in equity thereby becomes a party to the suit, is in the same situation, bound by the same orders and decrees, and subject to the same estoppels, as though he had been a party from the commencement thereof. Frank v. Wedderin, 68 F. 818, 822, 823, 16 C.C.A. 1; Swift v. Black Panther Oil & Gas Co. (8th C.C.A.) 244 F. 20, 28, 29, 156 C.C.A 448; Bowdoin College v. Merritt (C.C.) 59 F. 6, 8; Jack & Toner v. D.M. & Fort Dodge Ry. Co., 49 Iowa 627, 629; 2 Foster, Federal Practice, p. 1313, Sec. 259d. The final decree of foreclosure and sale of the defendant's property, which adjudged the two mortgages of April 1, 1919, to be the first and paramount liens upon it, that it should be sold to pay the bonds and notes secured thereby, and that the claims of all other parties claiming through or under the defendant should be forever foreclosed, was...