Fee-Crayton Hardwood Co. v. Richardson-Warren Co.

• Decision Date: 08 February 1927
• Docket Number: No. 210.,210.
• Citation: 18 F.2d 617
• Parties: FEE-CRAYTON HARDWOOD CO. v. RICHARDSON-WARREN CO. et al.
• Court: U.S. District Court — Western District of Louisiana

18 F.2d 617 (1927)

FEE-CRAYTON HARDWOOD CO. v. RICHARDSON-WARREN CO. et al.

No. 210.

District Court, W. D. Louisiana, Monroe Division.

February 8, 1927.

John M. Munholland, of Monroe, La., for complainant.

McHenry, Montgomery, Lamkin & Lamkin, of Monroe, La., for respondents.

DAWKINS, District Judge.

This cause originated with a bill of complaint by Fee-Crayton Hardwood Company, filed October 10, 1924, claiming an equitable lien upon lumber on the mill yard of the respondent, Richardson-Warren Company, Inc., coupled with a writ of sequestration. A former partnership bearing the same name and the individual members thereof were made parties defendant. Subsequently, on November 22d, two receivers were, without contest, appointed; the first, J. F. Wynn, being directed to market the lumber upon the yards, and the second, J. A. Hemler, to take charge of the sawmill and other property. On the same day, November 22, 1924, complainant filed an amended bill, claiming a chattel mortgage upon all of the sawmill property. Under orders regularly entered, Wynn proceeded to market the lumber, and Hemler, on June 30, 1925, sold the mill, machinery, and appurtenances for cash. On May 25, 1925, five days before the sale, Mrs. Mary L. Millsaps intervened, claiming a lessor's lien and privilege upon all the property, lumber, mill, etc., under a lease made with one W. B. Warren in the latter part of 1923, to cover a period of five years, and embracing the land upon which the mill plant and lumber were situated. Other claims were presented, and, the two receivers having filed their final accounts, the entire matter was referred to a special master, whose report was filed in this court September 27, 1926. Certain objections and exceptions have been made thereto which will be considered in regular order.

The master reports that the only claims pressed before him, or upon which evidence was offered, were: (1) That of Elizabeth Ellis for the death of her husband, alleged to have been killed in the course of his employment by the receiver, J. F. Wynn; (2) that of Mrs. Mary L. Millsaps for rent on the mill site; and (3) the claim of complainant, Fee-Crayton Hardwood Company, and its assignee. the American-Southern Trust Company.

The master recommends that the claim of Elizabeth Ellis be rejected, for want of sufficient proof to sustain it; that Mrs. Millsaps be paid the full amount of her claim, less certain credits, with recognition of her privilege and pledge as lessor upon the lumber, mill, etc., but subordinate to the claim of complainant upon a note for $1,166, representing a part of the purchase price of the mill property, but that the claim of complainants to an equitable lien upon the lumber be denied; that the said vendor's lien and a subsequent chattel mortgage upon the mill property be sustained, subject to the prior claim for rent; that the proceeds of the mill, machinery, etc., other than the lumber, after payment of the vendor's lien of $1,166, be applied, together with a sufficient amount arising from sale of the lumber, to pay the rent claim of Mrs. Millsaps; and that the balance, if any, of funds from sale of the mill and machinery be attributed to the chattel mortgage of complainant. Otherwise the master recommended that the claim of complainant be recognized as an ordinary debt of the corporation.

On October 4, 1926, the lessor moved to confirm the report of the master and that she be paid the amount of her rent. At the same time there was filed by the Richland Parish State Bank, and some 30-odd other individuals, firms, and corporations, a joint appearance, styled "Intervention and Opposition to the Report of the Special Master," in which they alleged themselves to be creditors and that "on the ____ day of ____, 1926," the Richardson-Warren Company, Inc., was adjudged a bankrupt. They prayed that the recommendation of the special master be amended and supplemented, so as to specifically enumerate what property the chattel mortgage (of complainant) is to be recognized upon and what proceeds are to be paid out in satisfaction thereof, and further that it be shown what costs are to be borne by the two receivers and what property said costs are to be satisfied from, that all funds be turned over to the bankrupt court, to be distributed according to the rank and privilege of all creditors as finally proven therein, and that the referee be given full power to proceed in said bankruptcy. These claimants did not appear before the master, but had previously joined in a rule, along with numerous other creditors, filed on January 16, 1925, to have the receivers dismissed, a new one appointed, and to have the latter authorized to operate the plant as a going concern.

October 9, 1926, exceptions to the report of the special master were filed by complainant, the details of which will be discussed hereafter. On October 18, 1926, exceptions and objections by John W. Martin et al. to the report of the special master were also filed. This was a joint motion of 100 persons, in which they likewise set up the fact that the Richardson-Warren Company, Inc., had been adjudged a bankrupt; that the master had recommended that the chattel mortgage of complainant be satisfied out of the proceeds of property of the corporation, "but fails to find that there was quite a lot of property of the Richardson-Warren Company, Inc., sold by the two receivers appointed in this case, on which there was no chattel mortgage resting"; that said report further "fails to find that there was one item of approximately 500,000 feet of lumber, a special account of which was kept by the receiver, there was no chattel mortgage resting against the same and further that no advance of money had been made on this item by the Fee-Crayton Hardwood Company," and that the said master further fails to find that the above petitioners are creditors of the defendant Richardson-Warren Company, Inc., with a lien for labor, and that their claims are entitled to be paid by preference and priority over all other creditors out of the proceeds of the sale of lumber which was sold by the receiver, J. F. Wynn.

There was also filed on November 18, 1926, an appearance by the "defendant in the above-entitled cause," in which it prayed that it "be allowed exceptions on the following findings of facts and conclusions of law of M. C. Redmond, special master." In substance, the exception alleges that the chattel mortgage of complainant did not sufficiently describe the property mortgaged to identify it, and should therefore be rejected. Defendant further urged a "general exception to the report of the master, in that it is against the law, against the facts, and against the weight of evidence."

I think it proper to first dispose of the issue raised by the two sets of creditors above referred to, that the respondent corporation, Richardson-Warren Co., Inc., had been adjudged bankrupt and its effect upon this proceeding. After the receivers had been in charge for more than a year of the property of the corporation, and the same had been reduced to money, the latter was adjudged a voluntary bankrupt. An effort was then made to have the receivers turn over these funds to the bankrupt court, but this was denied, for the reason the court was of the view that, since more than four months had elapsed from the taking charge by the receivers of the property under alleged liens and privileges, its jurisdiction in equity could not be divested; that it could proceed to determine and pay such claims of creditors as were supported by liens and privileges upon the property, and, if anything remained thereafter, the same could be turned over to the bankrupt court for distribution among the general creditors. In the meantime, the proceedings in bankruptcy were stayed until this could be done. No attempt was made to have the ruling reviewed by the appellate court. I am still, therefore, of the view that this court should proceed in the manner indicated, and that the suggestion of intervening bankruptcy made in the appearance of the creditors cannot affect this course. High on Receivers (4th Ed.) § 51 et seq.; Foster's Federal Practice (6th Ed.) § 52.

With respect to the claim of Elizabeth Ellis for the death of her husband, authority was granted by the court to her to sue the receiver. It was contemplated this would be done by an action at law. However, she chose to present her claim before the master, thereby waiving the jury and consenting to have it passed upon in this manner. High on Receivers (4th Ed.) § 254b, p. 299. The master found that she failed to support her claim with sufficient proof. An examination of the evidence leads me to concur in that finding.

With respect to the claims of John H. Martin and others, alleging liens upon the lumber, etc., for labor, they do not appear to have been asserted before the master, as was directed in the order of reference, and no evidence has been offered in support thereof. In so far as I have been able to find in the record, their exception to the report of the master is the first time these claims have been made. It was their duty to file and support their claims with proof before the master, and, having failed to do so, the same cannot be set up in this form as a ground for refusing to confirm the report which failed to recognize them. Full opportunity having been afforded, and no suggestion appearing even in their present pleading that the matter be sent back to the master for further proof, the exceptions will be overruled.

Taking up the case of complainants, they rely for the support of their claim to an equitable lien on the lumber upon the following facts:

On the 5th day of January, 1924, Fee-Crayton Hardwood Company entered into a written contract with Richardson-Warren Company, a commercial partnership, which was then operating a sawmill property at Crew Lake in Richland parish. That contract reads as follows:

"This contract and...