Finkel Outdoor Products, Inc. v. Bell

• Decision Date: 08 March 1965
• Citation: 205 Va. 927,140 S.E.2d 695
• Parties: FINKEL OUTDOOR PRODUCTS, INC., et al. v. S. J. BELL et al.
• Court: Virginia Supreme Court

Page 695

140 S.E.2d 695

205 Va. 927

FINKEL OUTDOOR PRODUCTS, INC., et al. v. S. J. BELL et al.

Supreme Court of Appeals of Virginia.

March 8, 1965.

Dillard C. Laughlin, C. Wynne Tolbert, Arlington (Jesse, Phillips, Kendrick & Gearhart, Tolbert, Lewis & Fitzgerald, Arlington, on brief), for appellants.

Albert H. Grenadier, Alexandria (Bendheim, Fagelson, Bragg & Grenadier, Alexandria, on brief), for appellees, Hawaiian Freestone, Inc., Henry Garfinkle, Herbert Zelenko, Daniel Lawrence and Albert P. Dicker.

Before EGGLESTON, C. J., and SPRATLEY, BUCHANAN, SNEAD, I'ANSON and CARRICO, JJ.

BUCHANAN, Justice.

On August 10, 1962, Finkel Outdoor Products, Inc., (Finkel), and Coastal Electronics & Sound Company, Inc., (Coastal), suing for themselves and all other lien creditors of Freestone Holding Company, Inc., (Freestone), filed their bill in equity against S. J. Bell and others. The bill alleged that on December 10, 1958, Finkel obtained a judgment against Freestone for $3,841.50, which was duly docketed in Prince William county on December 22, 1958; and that prior to March 24, 1959, Coastal obtained a judgment against Freestone for $4,804.65, which was duly docketed in said county on March 24, 1959; and that others, named as defendants, had obtained judgments against Freestone in the sums and at the dates stated in the bill, and which had been duly docketed in said county.

The bill further alleged that Freestone owned a tract of land in Prince William county containing 506 acres, described in the bill, which was subject to a deed of trust and also to the judgments of Finkel and Coastal and the other judgment creditors named in the bill; and that after said liens had attached the said tract of land owned by Freestone had been conveyed to defendants Hawaiian Freestone, Inc., Henry Garfinkle, Herbert Zelenko, David Lawrence and Albert P. Dicker.

The bill prayed that an accounting be had to determine the liens on the land and their priority, and that the land be sold and the proceeds applied to the liens.

To this bill the defendants Hawaiian Freestone, Inc., Garfinkle, Zelenko, Lawrence and Dicker filed a plea of laches, a demurrer and a motion to dismiss. The latter averred that by a valid decree entered in Chancery Cause No. 1624 of S. J. Bell Construction Co. v. Freestone and others, the court confirmed the sale of the Freestone tract of land to 1025 15th Street Corporation and directed its special commissioner to convey the same to the purchaser free and clear of all liens, and that these defendants purchased the same from said grantee and are the bona fide owners thereof; and that although the complainants Finkel and Coastal had notice and an opportunity to be heard concerning the sale, they did not appear and should be now estopped to deny the title of these defendants.

By decree entered October 25, 1963, from which this appeal was taken, and which recited that the entire record in the consolidated Chancery Causes Nos. 1624, 1601 and 1607 was received in evidence, the demurrer and plea of laches of defendants Hawaiian Freestone and others were sustained and their motion to dismiss was granted 'as to all defendants.'

Chancery Cause No. 1601 was instituted by Eugene W. Zimmerman against Freestone by bill filed January 17, 1958, to enforce a mechanic's lien for $35,270.87 recorded on October 14, 1957, in which suit William P. Gelberg, Inc., filed a petition to enforce his mechanic's lien for $3,919, which had been duly recorded.

Chancery Suit No. 1607 was instituted by Bernard H. Putziger, Inc., by bill filed February 17, 1958, to enforce its mechanic's lien for $48,648.08, duly recorded.

By decree dated December 16, 1959, these two causes were consolidated with Chancery Cause No. 1624, which was a suit brought April 28, 1958, by S. J. Bell Construction Co., Inc., against Freestone to enforce its mechanic's lien for $203,142.10, which had been duly recorded against the property of Freestone. The decree states that the three causes are consolidated with one anothers so that they may proceed before the commissioner in chancery to whom they have been referred as one consolidated case.

By decree entered also on December 16, 1959, in No. 1624, that cause was referred to a commissioner in chancery with direction to report the real estate owned by Freestone; what amount of the real estate was necessary to the enjoyment of the improvements which were subject to the mechanic's liens; the delinquent taxes and other liens on said real estate; whether a sale should be ordered to satisfy the mechanic's liens and the amount that should be sold; whether all parties interested were before the court, and other matters deemed pertinent.

The commissioner, so far as the record shows, took no action and he filed no report.

On September 8, 1961, a decree was entered in No. 1624 which recited that 'all of the parties hereto' have effected a compromise settlement and that it is the desire of all of the parties to said suits and other parties in interest to sell and dispose of the real estate and improvements thereon, subject to certain notes secured by first and second deeds of trust; that an offer to buy the Freestone property for $138,337.87 and assume the deeds of trust had been made by 1025 15th Street Corporation, which the parties have requested the court to approve; that the court finds from testimony taken that the value of the land and improvements does not exceed the sum of the taxes, the valid mechanic's lien claims and the balance due under the deeds of trust, and that the offer of purcase should be accepted.

It was accordingly decreed that said property be sold for the sum offered, subject to the deeds of trust, and a special commissioner was appointed to convey the property and improvements to the purchaser 'free and clear of the claims of any and all creditors, judgment or otherwise,' and also of any claim or interest of Freestone, 'all of which interests, except those under the aforesaid first and second deeds of trust, are hereby extinguished;' and the special commissioner was directed to disburse the purchase money as set out in the decree.

The special commissioner reported that he disbursed the purchase money to the payment of costs, taxes and to the four holders of the mechanic's liens, as directed by said decree. His report was confirmed by decree of January 8, 1962, which states that it is final. The special commissioner, at the request of the purchaser, made the deed to Hawaiian Freestone, Inc., Garfinkle, Zelenko, Lawrence and Dicker, according to a copy printed in appellants' reply brief.

The appellants contend that the trial court erred in decreeing that the property be conveyed free and clear of their judgment liens and that their judgment liens be extinguished. We agree with that contention.

These judgment lien creditors were not made parties, were not served with process and never became parties to the consolidated suits. The only parties to those proceedings were the four mechanic's lien creditors, the deed of trust creditors and Freestone.

There is in the record an affidavit by one Robert W. Sherwin that he was Chairman of the Creditors' Committee of Freestone and that on August 21, 1961, he mailed to the creditors of Freestone (without further identification) a copy of the notice attached to the affidavit. The copy is title 'NOTICE TO PARTIES IN ABOVE CAPTIONED CASES [being the four mechanic's lien cases] AND TO ANY OTHER PARTIES IN...