Dilley v. Jasper Lumber Co.

• Decision Date: 02 December 1908
• Citation: 114 S.W. 878
• Parties: DILLEY v. JASPER LUMBER CO.
• Court: Texas Court of Appeals

114 S.W. 878

DILLEY v. JASPER LUMBER CO.

Court of Civil Appeals of Texas.

December 2, 1908.

Rehearing Denied January 6, 1909.

Error from District Court, Jefferson County; W. H. Pope, Judge.

Suit by C. S. Basham against the Jasper Lumber Company, in which a receiver was appointed, and George E. Dilley intervened to compel the allowance of certain claims. Judgment ordering the allowance and payment of various claims, and intervener brings error. Affirmed.

Campbell & McMeans and A. D. Lipscomb, for plaintiff in error. A. R. Masterson, for defendant in error.

NEILL, J.

In the suit of C. S. Basham against the Jasper Lumber Company, brought in the district court of Jefferson county on November 27, 1905, W. C. McLelland was on the day it was instituted appointed receiver of the company, which is a Texas corporation, to take possession of its property and operate a sawmill belonging to it pending the litigation. The receiver qualified under his appointment, filed an inventory of the lumber company's property, in which it was valued at $54,482.23, and applied to and obtained an order of the court to issue receiver's certificates, not exceeding $3,000, for the purpose of obtaining funds to operate the mill, the certificates to bear interest from date at the rate of 10 per cent. per annum. The certificates were issued in compliance with the order for $2,500, and were owned and held by H. Masterson when the case was finally tried. The operation of the mill having proved financially unsuccessful, on March 5, 1906, the receiver, on his application, obtained an order of the court to sell the property of the company for not less than $35,000. Subsequently, on April 21, 1906, the order was modified by authorizing him to sell for not less than $15,000; and afterwards, on May 31, 1906, it was again modified by authorizing him to sell the property without restriction; he being directed to sell certain specific articles separate from the bulk of the property. In the meantime George E. Dilley intervened in the original suit, claiming the lumber company was due him $893.20 secured by a first mortgage lien upon specific property, and his claim was allowed and his lien established by the master in chancery, who had theretofore been appointed in the case to hear and pass upon claims of indebtedness against the company. The property upon which Dilley's lien was established was of that which was ordered sold separately. On June 5, 1906, the receiver, under the modified order of sale above mentioned, sold the bulk of the property of the company to one A. P. Laughlin for the sum of $2,132.15 cash, which sale he reported to the court the 8th of that month. His report shows that he sold property inventoried at $36,000 for $500. Lumber, inventoried at $1,200, was sold at a separate sale for $375, a locomotive inventoried at $2,280 at $1,200, and the property covered by Dilley's lien sold for $800. On June 13, 1906, this report of sale was approved by the court, and the money received was ordered to be distributed by the receiver in accordance with orders of the court. On June 20, 1906, George E. Dilley filed his application, in which is recited the approval of his claim by the master in chancery for $850, the establishment of his lien on specific property, the report of its sale by the receiver for $800, and the approval of the sale for an order requiring the receiver to pay him on his claim the money received for the sale of the property upon which his lien existed. Afterwards, on July 6, 1906, he presented his motion to the court to set aside the sale of the property made on June 5th by the receiver to Laughlin, and to remove W. C. McLelland from the receivership and appoint a bona fide receiver in the case, with instructions to bring suit against McLelland on his bond as a receiver, and to make a fair sale of the property of defendant company.

In this motion it is alleged that on June 5, 1906, a void sale of the property of the defendant company was made by the receiver, and that the sale was void for the reasons:

(1) That the appointment of W. C. McLelland as receiver was void, in that the application for the receivership was made in pursuance of an understanding between H. D. Applegate, president of the Jasper Lumber Company, the plaintiff, the receiver, and others that they would use the process of the court and its machinery to obtain title to the property of defendant company for their benefit to the injury of its creditors.

(2) That McLelland at the time of making the sale was in collusion with the purchaser at such sale, with the defendant company and its officers, for the purpose of promoting the interest of the purchaser, to the injury of the creditors, and in pursuance of an understanding between the receiver and Laughlin, by which the title to the property was disparaged, so that it all (subject to a lien of J. Frank Keith of $10,500) brought at the sale only $2,875, although the same was of the probable value, subject to said lien, of $44,000.

(3) That the sale by the order of April 21, 1906, was to be made at Jasper, in Jasper county, on June 5th, at a price not less than $15,000, it being understood that it would be subject to the lien of Keith, and duly advertised; that it was advertised to take place, as ordered, on the day last mentioned at a price not less than $15,000; that afterwards, on May 31, 1906, without notice to the interested parties, the receiver obtained an order from the court modifying the order of sale so as to remove any limit as to price and permit him to receive any bids, howsoever low; that the order so modifying the order of April 21st was void because no notice whatever of the application therefor was given to the interested parties, and no notice to sell under the order as modified was given.

(4) The shockingly low price received, as emphasized by the facts that of the $2,875 received for the whole of the property $800 thereof was paid for the property covered by his (Dilley's) lien, which property was of the probable value of $1,200; that $1,200 of the price was paid for a locomotive engine, which was of the probable value of $2,000; that $375 of said sum was paid for 115,000 feet of lumber, estimated at the value of $3,000; that the great bulk of the property of the defendant, of the probable value of $35,000, was sold for the sum of $500.

The motion also charges that the receiver had filed a report showing that he had collected funds of the Jasper Lumber Company amounting to the sum of $14,700, which, in the report, he claims to have disbursed; that about $3,000 of the amount so collected was paid by him on claims against the company which had never been...