First National Bank of Clarksville v. Scranton Coal Co.

• Decision Date: 10 December 1928
• Docket Number: 48
• Citation: 12 S.W.2d 6,178 Ark. 643
• Parties: FIRST NATIONAL BANK OF CLARKSVILLE v. SCRANTON COAL COMPANY
• Court: Arkansas Supreme Court

12 S.W.2d 6

178 Ark. 643

FIRST NATIONAL BANK OF CLARKSVILLE v. SCRANTON COAL COMPANY

No. 48

Supreme Court of Arkansas

December 10, 1928

Appeal from Logan Chancery Court, Northern District; John E Chambers, Chancellor; affirmed.

Decree affirmed.

Evans & Evans, for appellant.

I S. Simmons and Cochran & Arnett, for appellee.

OPINION

MEHAFFY, J.

On the 6th day of January, 1927, the First National Bank of Clarksvilie filed suit in the chancery court of Logan County Arkansas, against the defendant, Scranton Coal Company, to foreclose a second mortgage upon the property of the coal company and to obtain an order appointing a receiver to take charge of the coal company's property, covered by the bank's mortgage. The American Bank & Trust Company of Paris, Arkansas, held first mortgage on the property.

The appellant alleged that the coal company was indebted to it, and that said indebtedness was secured by a mortgage, a copy of which was attached to the complaint; that said mortgage of appellant was subject to a prior mortgage securing the sum of $ 3,200 to the American Bank & Trust Company of Paris, Arkansas. It asked that the American Bank & Trust Company be made a party and required to appear and answer. Appellant also stated in its complaint that the defendant coal company was indebted to various parties in considerable sums, all of which was due and payable, and that numerous creditors of defendant were impatient and demanding settlements, and would commence litigation unless a receiver was appointed. That the payroll for labor, due the 31st of December, was unpaid; that certain laborers had already begun suits for the amounts due them and attached certain property, and that other laborers would sue, and that the defendant would be greatly harassed, its operations obstructed, and its property dissipated in cost and expenses unless a receiver was appointed. It stated that the coal company was not insolvent; that its assets greatly exceeded its liabilities, and, with proper management of its affairs, it could be so handled as to enable it to pay fully all its obligations and preserve and protect its property. It alleged that it sued on its own behalf and for the benefit of all creditors of defendant, and asked, upon a final hearing, that it have judgment against the defendant for the amount due it and a foreclosure of its mortgage and sale of the property to pay said indebtedness. The complaint was verified by the president of the bank. The notes and mortgages were filed as exhibits to plaintiff's complaint.

On the same day that the suit was filed, the Scranton Coal Company entered its appearance, and consented to the appointment of a receiver, and the chancellor on the same day appointed a receiver, as prayed for in plaintiff's complaint.

The American Bank & Trust Company filed answer, intervention and cross-complaint, setting forth the indebtedness of the Scranton Coal Company to it, and filed with its answer the note and mortgage, and asked judgment and foreclosure, and that the property be sold.

Numerous other interventions of creditors of the Scranton Coal Company were filed. The receiver then filed a petition, showing that the company owed sums approximating $ 25,000, including payroll due laborers, and that there were no funds immediately available, and stated that it would be to the interest of all parties to sell the property, after giving the usual notice, and asked for an order of sale of said property.

The receiver also filed a statement showing a number of cars of coal of the total value of $ 11,518.94, showing also that a number of the cars had been assigned to the First National Bank, and that, when the cars were sold, the proceeds should be applied to the payment of moneys advanced by the plaintiff. The itemized statement filed by the receiver of the assets and property of the coal company showed an estimated value of $ 89,450, and to this there was added the stationery, supplies and office fixtures, the value of which was estimated at $ 500, making a total of the estimated value of the property of $ 89,955. It is alleged that the statement of the estimated value does not include 19 cars of coal, amounting to $ 11,518.94, which had been assigned to the appellant bank.

The property was ordered sold, as prayed for by the receiver, and was sold to R. D. Dunlap, as trustee, for $ 5,500, this being the only bid. R. D. Dunlap was president of the appellant bank.

Thereafter the receiver filed his report, and exceptions were filed to said report, were heard by the court and overruled, and the report of the receiver was approved by the court.

The court found the amount of indebtedness due the appellant and interveners, and held that the laborers intervening were entitled to a first lien on the property. The cost of the receivership amounted to approximately $ 8,000, as shown by the receiver's report. The court decreed that this should be paid by the First National Bank of Clarksville, the appellant herein.

As far as necessary to do so, attention will be called to the facts in the opinion, and it is unnecessary to set them out further here.

It is contended by the appellant that it should not be required to pay the costs and expenses of receivership, and it quotes § 1838 of Crawford & Moses' Digest in support of that contention. That section reads as follows: "When a suit is brought in the name of one person to the use of another, the person to whose use the suit is brought shall be liable for the payment of all costs which the plaintiff may be adjudged to pay." And it is contended that the suit in the instant case was commenced by the First National Bank, who held a second mortgage, and sought to foreclose, subject to the prior rights of the American Bank & Trust Company and all other claimants whose rights upon intervention might be made to appear as prior to the rights of the First National Bank. Appellant states that the suit was brought not only in the interest of the bank, but in the interest and for the use of all creditors and claimants who might desire to intervene, and all other claimants did intervene.

It may be said in answer to this contention that the suit was not brought by appellant in its name to the use of another. The suit was brought by appellant for its own use, to collect its own debts, and the section of the Digest above quoted has no application to a suit of this kind.

Appellant argues that the question of costs seems not to have been considered, the court taking the view that the liability of the bank for the excess costs had been conceded. But it says this attitude on the part of the counsel was due solely to the fact that the counsel who represented the bank in the last stages of the receivership had the impression that the counsel had not contested this feature.

The appellant correctly argues that giving costs in equity is within the discretion of the chancellor, and cites Mt. Nebo Anthracite Co. v. Martin, 86 Ark. 608, 111 S.W. 1002, 112 S.W. 802, and Lackey v. Waterworks, 80 Ark. 108, 96 S.W. 622. Many other cases decided by this court might be cited. There is, however, no dispute about this proposition of law. A court of equity may, in proper cases, apportion the costs, although in law cases the losing party must pay the costs.

Attention is next called by appellant to the rule as stated in 34 Cyc. 366. It quotes from this at length, but the latter part of the quotation is as follows:

"So the general rule that such expenses are to be taken out of the fund or property in the receiver's hands, is held not to contemplate that they shall be taxed as costs or charged against the party at whose instance the receiver was appointed, merely because he was ultimately unsuccessful on the merits of his suit, and when the validity or propriety of the appointment itself is not attacked."

Appellant also calls attention to the case of Ferguson v. Dent, 46 F. 88; Farmers' Loan Co. v. Pacific Railroad Co., 31 Ore. 237, 48 P. 706, 38 L. R. A. 424, 63 Am. St. Rep. 822, and cases cited there. Also Atlantic Trust Co. v. Chapman, 208 U.S. 360, 28 S.Ct. 406, 52 L.Ed. 528. And appellant cites and quotes from other cases relied on to support its contention.

The court in its decree stated: "As to the cost of the...