Elk Creek Lumber Co. v. Hamby

• Decision Date: 08 June 1936
• Docket Number: No. 4013.,4013.
• Citation: 84 F.2d 144
• Parties: ELK CREEK LUMBER CO. v. HAMBY et al.
• Court: U.S. Court of Appeals — Fourth Circuit

84 F.2d 144 (1936)

ELK CREEK LUMBER CO. v. HAMBY et al.

No. 4013.

Circuit Court of Appeals, Fourth Circuit.

June 8, 1936.

Mark Squires and W. H. Strickland, both of Lenoir, N. C. (C. G. Gilreath, of Wilkesboro, N. C., on the brief), for appellant.

Eugene Trivette, of Boone, N. C. (A. H. Casey, of North Wilkesboro, N. C., and Trivette & Holshouser, of Boone, N. C., on the brief), for appellees.

Before PARKER, NORTHCOTT, and SOPER, Circuit Judges.

PARKER, Circuit Judge.

This is an appeal in a suit instituted to foreclose the equities in a contract for the sale of land and timber, and to enjoin interference with plaintiff's possession of lumber claimed under the provisions of that contract. Certain persons claiming the lumber by reason of laborers' liens and sales under execution made for the enforcement of same were made parties defendant in the suit; and from a decree in their behalf plaintiff has appealed.

Plaintiff is a lumber company owning a tract of timber land in Wilkes county, N. C., which on March 17, 1934, it contracted in writing to sell to one Hill Hamby for the sum of $7,500; $300 of this amount was to be paid in cash and the remainder in installments, deferred payments to be evidenced by promissory notes and to bear interest. It was provided that so long as the purchaser should not be in default under the contract, he should have the right to cut any timber on the land, but should pay on the amount due under the contract a specified rate upon the timber so cut before removing from the land any of the lumber which had been sawed from it. Title to lumber cut was to remain in the lumber company until paid for under the above provision, and it was provided that all payments received from the sale thereof should be applied on the balance remaining due on the purchase price under the contract. It was provided that upon default by the purchaser, (a) all payments made by him should be retained until default had been remedied, (b) all lumber and other products cut by the purchaser might be sold by plaintiff and the amount realized therefrom applied on the amount due under the contract, and (c) plaintiff might cancel the contract, and thereupon the purchaser would have no further interest in the premises. The contract was not recorded until October 26, 1934.

The purchaser entered into possession under this contract and began cutting the timber into lumber. He made the initial cash payment and paid a part of the first installment of $1,000 which fell due in June 1934, but was unable to pay the remainder, and thereupon it was agreed between him and the agent of plaintiff that he should sell the crossties to be cut from the land and use the proceeds for the cost of operations, and that the agent of plaintiff should sell the lumber and apply the proceeds thereof on the amount due under the contract. In October, 1934, plaintiff's agent stopped the operations of the purchaser under this agreement for the reason that he was already in default and the price of crossties had declined to such an extent that it was apparent that he would not be able to proceed further. At that time there was a considerable quantity of lumber on the premises which plaintiff claimed under the provisions of the contract of sale as security for the amount due thereunder; and it is this lumber which is in controversy in the appeal before us. Shortly after plaintiff caused the purchaser to suspend operations, it commenced a suit against him, and in the complaint filed therein exercised the right of cancellation given by the contract.

The lumber which was in the possession of the purchaser at the time that operations under the contract were suspended had been manufactured under contracts between him, on the one hand, and the defendants Watson and McNeill, D. F. Sheppard, and Coy Eller, on the other. By the terms of these contracts Watson and McNeill were to fell timber at $1 per thousand feet, Sheppard was to do the logging and sawing at $6 per thousand, and Coy Eller was to take the lumber from the saw and hack it, at from $1 to $1.50 per thousand. These defendants claimed liens on the lumber in possession of the purchaser for the amounts due them under their respective contracts; and Sheppard filed notice of lien in the office of the clerk of the superior court of Wilkes county, and the others with one Rufus Church, a justice of the peace of that county. Sheppard's notice and claim of lien was filed October 31, 1934, and asked $1,134.81 for logging and sawing between April 20, 1934, and October 13, 1934. Watson and McNeill filed their notice and claim on November 1, 1934, and asked $197.30 for labor performed between March 23, 1934, and October 13, 1934. Coy Eller filed his notice and claim November 3, 1934, and asked $158.41 for labor performed between July 10, 1934, and October 20, 1934. None of these notices and claims of lien stated the number of days labor performed or the price per day; and none of them showed what part of the claim was for the thirty days' labor last performed. Actions were instituted and judgments were obtained against the purchaser Hamby on the notices and claims thus filed, but plaintiff was not made a party to these actions. Executions were issued on the judgments obtained; and the lumber on which the liens were asserted was sold under these executions to the lien claimants. The question on this appeal is whether these execution sales conveyed to the lien claimants title to the lumber good against the claim of plaintiff under its contract. We do not think that it did.

We agree with the learned judge below that the reservation of title to lumber cut under the contract until the amount due thereunder should be paid created what was in effect a chattel mortgage on such lumber in favor of the plaintiff, and that under the North Carolina registration law, this mortgage, until it was registered, was voidable as against the claims of creditors and purchasers. John Hetherington & Sons v. Rudisill (C.C.A.4th) 28 F.(2d) 713, 62 A.L.R. 377; Harris v. S. A. L. Ry. Co., 190 N.C. 480, 130 S.E. 319, 49 A.L.R. 1452; Brem v. Lockhart, 93 N.C. 191. But, as pointed out by Judge Conner, the author of the registration law, creditors within the meaning of that statute are creditors who have perfected some lien upon the property, by seizure under legal process or otherwise. National Bank of Goldsboro v. Hill (D.C.) 226 F. 102, 115. And, as the executions under which the lumber was sold were not issued until after the registration of the contract retaining a lien upon it, the defendants can ground no rights upon the levy and sale under these executions. Their right to take precedence over the rights of plaintiff under its recorded contract is dependent, therefore, upon the validity of the laborers' liens which they...