Cooper v. Brazelton

• Decision Date: 07 March 1905
• Docket Number: 1,358.
• Citation: 135 F. 476
• Parties: COOPER v. BRAZELTON et al.
• Court: U.S. Court of Appeals — Fifth Circuit

135 F. 476

COOPER v. BRAZELTON et al.

No. 1,358.

United States Court of Appeals, Fifth Circuit.

March 7, 1905

Le Roy A. Smith and Drew Pruit, for appellant.

John B Scarborough, for appellees.

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

MEEK District Judge.

Lawrence Cooper, receiver of the Southern Building & Loan Association filed suit against J. S. Brazelton and his wife, Laura P Brazelton, in the United States Circuit Court for the Western District of Texas, and asked a decree for certain indebtedness alleged to be due him as such receiver, and evidenced by a certain bond; and to establish and foreclose two certain mechanics' liens alleged to exist upon the homestead of the defendants, and given to secure an original indebtedness, now represented by the bond; also to establish and foreclose a lien upon certain shares of stock of the Southern Building & Loan Association, given as collateral security for the payment of the bond. The defendants answered, and, without setting forth their allegations and defenses in extenso, they may be summarized as follows: (1) By way of special answer a plea of res adjudicata was interposed; (2) payment was alleged; (3) that the contract of indebtedness was affected with usury; (4) that one of the mechanics' liens sought to be established and foreclosed on their homestead was invalid. The facts and the contentions of the respective parties will be stated in the course of the opinion.

The appellees' plea of res adjudicata interposed as an answer to appellant's cause of action stands at the threshold of the case, and should be first considered. The former adjudication relied upon by the appellees was the result of a suit instituted by them, as plaintiffs in the district court of McLennan county, Tex., against several defendants, one of the number being the Southern Association. The judgment in that case decreed the indebtedness represented by the bond which is the basis of this action to be fully paid and discharged. It also canceled, annulled, and avoided the liens sought by appellant's bill to be foreclosed. The Southern Association was a foreign corporation, organized under the laws and domiciled in the state of Alabama. Jurisdiction is alleged to have been acquired and exercised in this suit by virtue of the service of citation upon it by serving one W. W. Seely as its agent. The judgment recites that the Southern Association 'had been duly and legally cited' in the action. No appearance or answer was made by the association, and judgment was taken against it by default.

The jurisdiction of the district court of McLennan county to render this judgment depended upon whether or not Seely was the agent of the association at the time of service, and the fact of his agency is controverted. W. W. Seely was the proprietor and president of the Waco State Bank. The Southern Association had a membership at Waco; that is, parties resided there who were shareholders in and borrowers from the association. At the instance and for the benefit of these the Waco State Bank received and remitted to the association at Huntsville, Ala., dues and other collections made from them. Whoever happened to be at the collection window in the bank received the money and receipted for the amount in a passbook held by the member. No authority had been given by the association to Seely or the bank to make these collections and remittances, nor had instructions been given as to the handling of them. The work seems to have been performed simply in the course of a general banking business. But even this course of business had ceased prior to the time of the institution of this suit in the state court. The affairs and property of the association had theretofore been placed in the hands of appellant as receiver, and the association was not transacting any business of any character. Its officers and agents had been enjoined from representing it, or taking any action whatsoever with relation to its affairs. We do not believe, under these circumstances, service on the association by service on Seely as its agent could be considered effective and valid service, sufficient to support the jurisdiction the district court assumed and exercised in this case.

In the course of the opinion in Cooper v. Newell, 173 U.S. 555, 19 Sup.Ct. 506, 43 L.Ed. 808, Chief Justice Fuller says:

'In Thompson v. Whitman, 18 Wall. 457, 21 L.Ed. 897, a leading case in this court, it was ruled that 'neither the constitutional provision that full faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state, nor the act of Congress passed in pursuance thereof, prevents an inquiry into the jurisdiction of the court by which a judgment offered in evidence was rendered'; that 'the record of a judgment rendered in another state may be contradicted as to the facts necessary to give the court jurisdiction; and, if it be shown that such facts did not exist, the record will be a nullity, notwithstanding it may recite that they did exist'; and that 'want of jurisdiction may be shown either as to the subject-matter of the person, or, in proceedings in rem, as to the thing.''

It is also a well-settled rule that the question of jurisdiction is open to inquiry when the judgment of a court of the state comes under consideration in a court of the United States sitting in the same state. Cooper v. Newell, 173 U.S. 555, 19 Sup.Ct. 506, 43 L.Ed. 808; Goldey v. Morning News, 156 U.S. 518, 15 Sup.Ct. 559, 39 L.Ed. 517; Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565. It is shown to our satisfaction that jurisdiction was not vested in the district court of McLennan county, Tex., to render this judgment against the Southern Association, and its action will therefore be considered as a nullity.

In February, 1896, J.

S. Brazelton subscribed for 24 shares, of the par value of $50 each, of the capital stock of the Southern Association, for which a certificate was issued to him. These shares were to be paid for in monthly installments of 35 cents per share. Subsequently, in March, 1896, he and his wife made written application to the association to purchase and carry for them certain outstanding indebtedness against their homestead, and represented such indebtedness to be secured by mechanics' liens. The association advanced $1,000 for this purpose, and purchased such outstanding indebtedness and the liens securing same. In consideration of the advance of $1,000 and the renewal of the indebtedness, the appellees gave their bond to the association in terms and figures as follows:

'$1,000.00.

Waco, Texas, March 28, 1896.

'Eight years after date we promise to pay to the Southern Building and Loan Association, a corporation organized under the laws of the State of Alabama, the sum of one thousand ($1,000.00) dollars, with interest thereon, at the rate of ten per cent per annum, from date, payable monthly, in advance, on the first day of each month; and in event default is made in the payment of this obligation when the same becomes payable, and it is placed in the hands of an attorney for collection, then an additional amount of ten per cent on the principal and interest of this obligation shall be added to same as attorney's fees; and we transfer and assign as collateral security certificate No. 12,359 in said association, issued to us for 24 shares.

'And it is hereby stipulated and agreed that in the event we fail to pay said interest on said indebtedness, or the instalments on said shares for a period of three months, then the said entire indebtedness shall become due and payable, and said shares shall become forfeited to said association, under its by-laws.

'It is expressly understood that this obligation is given as a renewal of certain indebtedness owing by us to said association, and secured by two mechanic's liens on certain real estate described in the deed of trust executed as collateral hereto.

'Witness our hands this the 28th day of March, 1896.

'J. S. Brazelton. 'Laura P. Brazelton.'

In accordance with its provisions, the shares of stock were transferred and assigned to the association as collateral for the payment of the bond. Subsequent to his purchase from it of the shares of stock and the making of this bond, Brazelton paid to the Southern Association the sum of $1,304.45. This amount was applied by the association to payments of stock dues and to payments of interest and premium charges on the advance of $1,000 made for him. Appellees contend that they are entitled to credit on their bond of the amount paid by Brazelton on his stock subscription; that Brazelton did not desire to become a bona fide shareholder in the association and was compelled to subscribe for shares in order to secure a part of the loan or advance made on his behalf. This contention cannot be upheld. The subscription for the stock by Brazelton and the subsequent loan or advance of money in his behalf were two separate and independent transactions, and he cannot be heard to deny the validity or effectiveness of legal contracts entered into by him. It is neither alleged nor attempted to be shown that any fraud was perpetrated upon him, or that he is non compos mentis, and therefore must be held to a performance of his contracts. Andrus v. People's Loan & Savings Association, 94 F. 575, 36 C.C.A. 336; Manship v. New South Building & Association (C.C.) 110 F. 854; Association v. Abbott, 85 Tex. 224, 20 S.W. 118. Only in event the subscription for shares of stock by Brazelton and the loan or advance to him and his wife were considered as one transaction, resulting in the amounts paid in stock subscriptions being applied as payments on the advance or loan, could the transaction be held...