IDECO DIVISION OF DRESSER INDUS., INC. v. Chance Drilling Co.

• Decision Date: 16 July 1968
• Docket Number: Civ. A. No. 63-H-620.
• Parties: IDECO DIVISION OF DRESSER INDUSTRIES, INC., Plaintiff, v. CHANCE DRILLING COMPANY, Inc., et al., Small Business Administration, Impleaded Defendants, Defendants.
• Court: U.S. District Court — Southern District of Texas

309 F. Supp. 305

IDECO DIVISION OF DRESSER INDUSTRIES, INC., Plaintiff, v. CHANCE DRILLING COMPANY, Inc., et al., Small Business Administration, Impleaded Defendants, Defendants.

Civ. A. No. 63-H-620.

United States District Court, S. D. Texas, Houston Division.

July 16, 1968.

Baker, Botts, Shepherd & Coates, J. Daffan Caldwell, Houston, Tex., for plaintiff.

Morton L. Susman, U. S. Atty., William B. Butler, Asst. U. S. Atty., for Small Business Administration, defendant.

Butler, Binion, Rice, Cook & Knapp, John L. McConn, Jr., Houston, Tex., for Bank of Texas, defendant.

Minter & Graham, Sam S. Minter, Houston, Tex., for Ellen Picton Chance, defendant.

MEMORANDUM AND ORDER.

HANNAY, District Judge.

Plaintiff moves for a rehearing on its Motion for Summary Judgment. The Motion for Rehearing contains verified proof that the defendant Chance Drilling Co. is insolvent and has committed acts of bankruptcy within the meaning of 11 U.S.C.A. § 21(a) (3). The United States now accepts this proof as conclusive of the only material fact issue heretofore unresolved in the case and enters its cross-motion for summary judgment. The case is ripe for disposition by summary judgment.

The dispute centers around a deposit in the registry of the Court which had been awarded to defendant Chance under an arbitration agreement and which, ancillary to the principal suit, was the subject of an interpleader action whereby the United States, representing the Small Business Administration, hereafter S.B.A., and other parties were brought into the case.

The principal suit by Plaintiff, which is here under federal removal jurisdiction, is on sworn accounts and for foreclosure of a state statutory lien (Amount: $14,477.35) and arises out of labor and materials furnished in the making of emergency repairs on a Chance drilling rig. The statutory lien claimed by Plaintiff purports to be upon an oil, gas and mineral lease owned by Defendants Gulf Coast Leaseholds, Inc., (for whom Chance was drilling at the time material herein), Texas Consolidated Petroleum Corporation, and Alfred C. Glassell, Jr. These latter Defendants, in response to the suit for foreclosure, filed the interpleader action pursuant to which they tendered a sum of $16,869.45 in the registry of the Court, disclaimed all interest in the sum, and brought in as claimants to the fund: 1) The Plaintiff, 2) The S.B.A. of the U.S., 3) The Bank of Texas, and 4) Ellen Picton Chance. Removal of the case to federal jurisdiction was at the instance of the United States, and the deposited sum was thereupon transferred to the registry of this Court.

The United States additionally crossclaims against defendant Chance Drilling Co., Inc., its President R. L. Chance Sr., and his wife Ellen Picton Chance, for all sums owing to the S.B.A. and the Bank of Texas in connection with a loan made by and under an assignment from the Bank of Texas. It is not alleged or claimed that the security held by the government specifically relates to the property against which the Plaintiff asserts a specific lien. On Motion of the United States, its other action against defendant Chance Drilling Co. for certain withholding and excise taxes, penalties, and interest, has heretofore been dismissed without prejudice.

I.

Undisputed Facts Concerning the Insolvency of Chance in Relation to the Competing Claims of Plaintiff and the United States.

1. R. L. Chance Sr., by uncontroverted affidavit subscribed to on July 1, 1966, avows as President of Chance Drilling Co. that it was insolvent from December 25, 1960, until the abovementioned date "* * * as its liabilities exceeded its assets and it was unable to meet its obligations when they became due". This factor standing alone does not suffice to bring into play Section 191 of Title 31 U.S.C.A. and activate the priorities it confers upon the United States. United States v. Oklahoma, 261 U.S. 253, 260, 43 S.Ct. 295, 67 L.Ed. 638.

2. There is also of record, however, the uncontroverted affidavit of Mr. Gerald F. Ryan, then Regional Counsel for the Small Business Administration in Houston, Texas, that he had located in the judgment records in the office of the County Clerk of Harris County, Texas some "* * * eight judgments against Chance Drilling Co., Inc., dating from December 19, 1962 to October 30, 1964. (Emphasis added throughout.) None of the judgments which I examined on record have been released or discharged, as reflected by the records of the County Clerk, Office of Harris County, Texas." Apart from the uncontroverted nature of the affidavits, it has support in three certified copies of Abstract of Judgments against Chance dated between November 27, 1962 and February 7, 1963. That any of these judgments should be allowed to stand unsatisfied and unliquidated for a period of thirty days constitutes an act of bankruptcy within the meaning of the federal bankruptcy act, see Title 11, U.S.C.A. Section 21(a) (3) and under the circumstances of this case. For the requisites here to the existence of a judgment lien under Texas law see: Articles 5447, 5448, 5449, and 5450 Vernon's Ann.Texas Civil Statutes. See also: 34 Tex.Jur.2d, Judgment Liens, Section 564-572, pages 675-690.

On the basis of the facts appearing of record, the provisions of Title 31, U.S.C.A. Section 191 became operative only upon the commission of Defendant's first act of bankruptcy in law, to wit, the expiration of thirty days after the rendition and due recordation of the civil judgment against it of November 27, 1962. See: United States v. Belkin, 6 Cir., 358 F.2d 378, at 381-382, for the proposition that in order for the United States to assert its priority under 31 U.S.C.A. § 191 there must be a determination of the debtor's insolvency on the basis of at least one of the express requirements set out on the face of the statute. Accord: United States v. Oklahoma, supra, cited with approval in United States v. Texas, 314 U.S. 480, 486, 62 S.Ct. 350, 86 L.Ed. 356; See also: Field v. United States, 9 Pet. 182, 200, 34 U.S. 182, 200, 9 L.Ed. 94.

3. The question now presented is what were Plaintiff's established lien rights at the time of Chance's legal and statutory insolvency within the meaning of 31 U.S.C.A. § 191?

Plaintiff's Exhibit "A" to its Motion for Summary Judgment reflects that on July 6, 1962 it filed its affidavit with the Court Clerk of Gonzales County, Texas asserting its claim of lien for the furnishing of material, labor, and supplies to Chance Drilling Co. The lien was asserted under Articles 5473, 5474, 5476, and 5476a, 5476b and 5476c of the Texas Civil Statutes and the dates of performance in respect to the said services and supplies ranged between December 28, 1961 and January 8, 1962.

"Art. 5473. Contractor's lien

"Any person, corporation, firm, association, partnership, artisan, materialman, laborer or mechanic who shall, under contract, expressed or implied, with the owner of any land, mine or quarry, or the owner of any gas, oil or mineral leasehold interest in land, or the owner of any gas pipeline or oil pipeline, or the owner of any oil or gas pipeline right-of-way, or with the trustee, agent or receiver of any such owner, perform labor, furnish or haul materials, machinery or supplies used in digging, drilling, torpedoing, operating, completing, maintaining or repairing any such oil or gas well, water well, mine or quarry, or oil or gas pipeline, shall have a lien on the whole of such land or leasehold interest therein, or oil pipeline, or gas pipeline, including the right-of-way for same, or lease for oil and gas purposes, the buildings and appurtenances, and upon the materials, machinery and supplies so furnished or hauled, and upon all other materials, machinery and supplies owned by such owner and used in digging, drilling, torpedoing, operating, completing, maintaining or repairing any such oil or gas well, water well, mine or quarry or oil or gas pipeline, and upon said oil well, gas well, water well, oil or gas pipeline, mine or quarry for which the same are furnished or hauled, and upon all of the other oil wells, gas wells, buildings and appurtenances, including pipeline, leasehold interests, and land used in operating for oil, gas and other minerals, upon such leasehold or land or pipeline and right-of-way therefor, for which said materials, machinery or supplies were furnished or hauled or labor performed. Provided, that if labor, supplies, machinery or materials are furnished to or hauled for a leaseholder, the lien hereby created shall not attach to the underlying fee title to the land. Acts 1917, p. 28; Acts 1929, 41st Leg., p. 477, ch. 223, § 1; Acts 1957, 55th Leg., p. 482, ch. 231, § 1."

"Art. 5474. Sub-contractor's lien

"Any person, corporation, firm, association, partnership or materialman who shall furnish or haul such machinery, material or supplies to a contractor or subcontractor, or any person who shall perform such labor under a subcontract with a contractor, or who as an artisan or day laborer in the employ of such contractor or subcontractor shall perform any such labor, shall have a lien upon all such property or interest described in the preceding article, including right-of-way, for which said material and supplies were furnished or hauled and labor performed, in the same manner and to the same extent as the original contractor, for the amount due him for material furnished or for such hauling or labor performed. Acts 1917, p. 28; Acts 1929, 41st Leg., p. 477, ch. 223, § 2."

"Art. 5476. Proceedings to enforce lien

"Liens herein created shall be enforced within the same time and in the same manner as provided in the preceding Chapter. * * *"

"Art. 5476a. Securing lien; contents of affidavit

"Every original contractor, journeyman, day laborer, or other person, within six (6) months after the indebtedness accrues, shall file in the office of the County Clerk of the county where the property is situated, to be recorded in a book

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