Fidelity & Columbia Trust Co. v. Grommes & Ullrich

• Decision Date: 19 December 1919
• Parties: FIDELITY & COLUMBIA TRUST CO. v. GROMMES & ULLRICH. PAXTON ET AL. v. HOFFMAN DISTILLING CO. ET AL.
• Court: Kentucky Court of Appeals

216 S.W. 1078

186 Ky. 345

FIDELITY & COLUMBIA TRUST CO. v. GROMMES & ULLRICH.

PAXTON ET AL. v. HOFFMAN DISTILLING CO. ET AL.

Court of Appeals of Kentucky.

December 19, 1919

Appeal from Circuit Court, Anderson County.

Action by the Fidelity & Columbia Trust Company against the Hoffman Distilling Company and others for foreclosure of a deed of trust. Claim of Grommes & Ullrich against certain funds covered by the deed of trust, was allowed, and the Trust Company appeals. Motion of J. R. Paxton, receiver of the distilling company, and J. R. Feland, his attorney, for allowance of counsel fees, was overruled, and they appeal. Cause remanded on appeal of the Trust Company for findings and judgment reversed on appeal of Paxton and Feland.

Benjamin H. Sachs and M. A., D. A. & J. G. Sachs, all of Louisville for appellant Fidelity & Columbia Trust Co.

J. R. Feland, of Lawrenceburg, for appellants Paxton and Feland.

Keith L. Bullitt, of Seattle, Wash., and Bruce & Bullitt, of Louisville, for appellees Grommes & Ullrich.

HURT J.

Reversed upon the appeal of Paxton and Feland, and remanding appeal of Fidelity & Columbia Trust Company against Grommes & Ullrich to the trial court for further original adjudications. The above two appeals have been heard and determined together.

The appeal of the Fidelity & Columbia Trust Company against Grommes & Ullrich will be first considered. Hoffman Distilling Company, was a corporation engaged in the general business of a distiller. It owned and operated a plant for distilling whisky and warehouse purposes, which consisted of several acres of land, upon which was situated a distillery, the warehouses, and the things usually appurtenant to the conduct of the business of a distiller. On June 21, 1904, it executed and delivered five bonds, for the aggregate sum of $7,500, to the Fidelity & Columbia Trust Company, as a trustee for whoever might thereafter become the owner of the bonds, and, to secure the payment of the principal and interest which might accrue on the bonds, it on the same day executed a deed of trust or mortgage to the trustee, which embraced the grounds upon which the distillery was situated, and by its terms was made to cover, not only the grounds and distillery proper, with its appurtenances designed for use in connection with the making and handling of whisky, but also the "rents and profits" of the plant. Provisions were in the deed of mortgage which authorized the trustee, in certain contingencies, to take possession of the plant, or apply for the appointment of a receiver for it, and to collect and receive the "tolls, incomes, issues, profits, and earnings" of it, for the purposes of the trust and other provisions not necessary to be adverted to. This deed was lodged for record in the office of the clerk of the county court on June 25, 1904, and recorded on July 2, 1904.

On the 9th day of February, 1912, the appellant Fidelity & Columbia Trust Company, being the holder of the bonds, instituted this action against the distilling company for a judgment upon the bonds, and the enforcement of the provisions of the trust deed, and the lien which it had upon the property embraced in the deed, and asked for the appointment of a receiver for the property and business. A receiver was appointed on the 12th day of March, 1912, and took possession of the property and entered upon his duties. A great many other parties, who had subsequent liens upon the property, or had interests therein, were made parties to the action, among them the appellees, Grommes & Ullrich. The latter was a party to a contract with the distilling company, by which they became the purchasers of the entire whisky output of the distillery. Upon the entry of the whisky into bond, warehouse receipts were delivered to Grommes & Ullrich by the distilling company for the whisky. Each receipt was made to represent the ownership of 5 barrels of whisky, and Grommes & Ullrich received receipts for all the whisky which was made and placed in the warehouses, from the making of the contract between them and the distilling company on the 25th day of July, 1903, until the autumn of the year 1911, when the distillery ceased to operate, and they also seem to have been the owners of whisky in the warehouses at the time this contract was entered into. The storage, or the sum to be paid by Grommes & Ullrich to the distilling company for keeping the whisky in the warehouses, was five cents per barrel per month.

The contract between Grommes & Ullrich and the distilling company, which was executed on the 25th day of July, 1903, was put in writing, and provided that the storage to be paid by Grommes & Ullrich for the whisky then owned by them in the warehouses, or thereafter to be made and put into the warehouses, under the contract, was to be five cents per barrel per month, but that they should have the "storage" free on all whisky entered therein for one year from the date of its entry. It was further provided, that the distilling company should guarantee that the loss of whisky by shrinkage and evaporation "upon each and every barrel so manufactured and entered into bond" should not exceed by more than one gallon the allowance for shrinkage and evaporation by the act of Congress of March 3, 1899 (Act March 3, 1899, c. 435, 30 Stat. 1349 [U. S. Comp. St. §§ 6052, 6053]). An amendment of this contract was made and entered into on the 24th day of May, 1904, and on July 24, 1904, it was further amended, to the effect that on all whisky thereafter made under the contract, Grommes & Ullrich should be entitled to two years' "free storage."

The warehouse receipts, which were prepared under the directions of Grommes & Ullrich, for the whisky, contained a provision to the effect that:

"If this receipt is returned to us for regauge and ascertainment of loss before the expiration of seven years from the date of original entry into bond as required in act of Congress of March 3, 1899, and the payment of all charges due at that time, we guarantee the loss by shrinkage and evaporation up to that time on each barrel covered by this warehouse receipt shall not exceed one gallon over and above the allowance for shrinkage provided for in said act"

--and further:

"No allowance for loss, occurring after the goods have been seven years in warehouses, will be made."

Grommes & Ullrich contended that they were not entitled to pay any "storage" for two years after the entry into bond of the whisky, and that they were entitled to have the "outage" as a whole, due them, set off against the "storage" as a whole, due to the...