Graysonia-Nashville Lumber Co. v. Goldman

• Decision Date: 01 September 1919
• Docket Number: 5298.
• Parties: GRAYSONIA-NASHVILLE LUMBER CO. v. GOLDMAN.
• Court: U.S. Court of Appeals — Eighth Circuit

260 F. 600

GRAYSONIA-NASHVILLE LUMBER CO. v. GOLDMAN.

No. 5298.

United States Court of Appeals, Eighth Circuit.

September 1, 1919

George T. Priest, of St. Louis, Mo. (Boyle & Priest, of St. Louis Mo., on the brief), for appellant.

George B. Rose, of Little Rock, Ark. (W. E. Hemingway, D. H Cantrell, and J. F. Loughborough, all of Little Rock, Ark on the brief), for appellee.

Before SANBORN, CARLAND, and STONE, Circuit Judges.

SANBORN Circuit Judge.

On March 12, 1917, a decree of foreclosure was rendered of the mortgage of January 1, 1908, made by the Nashville Lumber Company, the owner of about 40,000 acres of timber land in the state of Arkansas, to Alvin D. Goldman, as trustee for the bondholders, and for the sale thereof to pay the sum of $471,945.30, adjudged to be a lien thereon, due to the holders of the bonds of the Memphis, Paris & Gulf Railroad Company under that mortgage. In this suit and decree Alvin D Goldman, the trustee, was the plaintiff. The mortgagor, the Nashville Company, the Graysonia Lumber Company, a corporation, to which the Nashville Company on May 10, 1911, conveyed the mortgaged land subject to the mortgage, James H. Allen, with whom on February 15, 1915, the Graysonia Company had made a contract to sell the timber on the mortgaged land for a stumpage of $3 per 1,000 feet, and the Allen Lumber & Box Company, a corporation, to which Allen had assigned the contract, were defendants. Pursuant to the decree, the master had advertised the property described in the decree for sale, to be made on July 10, 1917, when the Graysonia Company appealed from the decree to this court, and on July 2, 1917, stayed proceedings under the decree by means of a supersedeas bond in the sum of $15,000, signed by the Graysonia Company and the AEtna Casualty & Surety Company. Upon consideration of the questions presented by the appeal, this court affirmed the decree below. 247 F. 423, 159 C.C.A. 477. Thereupon the master again advertised the sale, and on April 29, 1918, he sold the property to Lewelling & Price-Williams Company for $250,000, and that sale was subsequently confirmed.

On April 24, 1918, the plaintiff filed a motion in the District Court for a judgment on the supersedeas bond. On May 13, 1918, the Graysonia Company filed a petition in that court for an order that the funds paid into the registry of the court by the Allen Company during the pendency of the suit, pursuant to an order of the court made on October 24, 1916, be paid over to it. On July 15, 1918, after due notice and hearing, the court below decreed that the petition of the Graysonia Company for the funds in the registry of the court be denied, and that those funds be applied first to the payment of costs and allowances in the foreclosure suit, and that the remainder be paid to the plaintiff or his solicitor and credited upon the plaintiff's decree. It also ordered that the Graysonia Company be forever restrained from taking up or removing any steel or iron rails from any of the tram roads on any of the lands described in the complaint. It found that the plaintiff sustained damages by reason of the supersedeas to the extent of the expenses of the master in advertising the sale a second time, $500,50; to the extent of the taxes on the property paid in 1918 for the year 1917, $4,020.21; and to the extent of the interest that would have been received by it during the stay at 6 per cent. per annum on the $250,000 for which the lands were sold, but which was not earned or received by the plaintiff on account of the postponement of the sale from July 10, 1917, to April 29, 1918, in the sum of $12,040, amounting all together to $16,560.71. It therefore adjudged that the complainant recover of the Graysonia Company and the AEtna Casualty & Surety Company $.15,000, the amount of the penalty of their bond and interest thereon from the date of that decree. These decrees of July 15, 1918, are now challenged by this appeal of the Graysonia Company.

The first and the most important question presented is the just and equitable disposition of the funds paid into the registry of the court by the Allen Lumber & Box Company during the pendency of the foreclosure suit. Those funds accumulated under and pursuant to an order of the court below, made on October 24, 1916, to the effect that the Allen Company, which had contracted with the Graysonia Company to purchase all the merchantable timber on the mortgaged lands and to pay $3 per 1,000 feet stumpage therefor, and also to pay certain rentals in addition, and which was in possession of the mortgaged property, cutting and removing the timber therefrom under this contract, was restrained from paying the agreed price of the timber, as it should be cut, to the Graysonia Company, was directed to deposit it in the registry of the court, there to be held until the final decree herein, was made the custodian of the court, and commanded to hold all timber that should be cut from said lands and all lumber manufactured therefrom for the court, and was restrained from shipping any of it until it should have first paid into the registry of the court the agreed price of the sale of this timber, $3 per 1,000 feet. That order, also, until the further order of the court, restrained the Allen Company from paying to the defendants, or either of them, the rentals specified in its contract, and directed it to pay such rentals also into the registry of the court. Under this order the Allen Company paid into the registry of the court $36,968.13, and out of this fund the court paid the Lesser-Goldman Company for the taxes on the property $2,506.58, and it paid to the plaintiff as trustee, to reimburse him for the payment of the taxes for the year 1917, $4,020.21, leaving in the registry $30,441.34 on May 21, 1918, which the court directed to be applied, first, to the payment of the costs and allowances in the foreclosure suit, and then to the payment of the unpaid balance of the $471,495.30 remaining after the application thereto of the $250,000 realized from the sale.

The record fully convinces that the $36,968.13 paid into the registry consisted principally of the purchase price of the timber which the Allen Company cut and removed from the land between October 24, 1916, and May 21, 1918, and of some relatively small amounts of rentals which the Allen Company agreed to pay by its contract with the Graysonia Company. The record, however, has been searched in vain to discover what the amount of these rentals was. At the time when the order of October 24, 1916, was made, and at the time when the decree of July 15, 1918, here challenged, was made, these facts were established by the record. The complainant had a paramount lien to secure the payment of more than $450,000, superior to the title and claim of the Graysonia Company on the 40,000 acres of mortgaged land and the timber standing thereon. That security was inadequate to pay that debt. The Nashville Company, which made the mortgage to the plaintiff, and the Graysonia Company, which took the title to the land and timber subject to the mortgage, were insolvent. Default had been made in material terms and conditions of the mortgage, so that by its express provisions the plaintiff was authorized to protect and enforce his rights thereunder by a suit or suits in equity, and among these rights was the right expressly granted to him by the mortgage to take possession of the mortgaged property and operate it himself, and to have a receiver appointed to take possession of and operate it.

In this situation the plaintiff gave due notice in the foreclosure suit of an application to the court for a receiver of the mortgaged property, of the proceeds of the timber the Allen Company was removing, and of the rentals it was...