J.T. Fargason Co. v. Furst

• Decision Date: 05 February 1923
• Docket Number: 6105.,6104
• Parties: J. T. FARGASON CO. v. FURST. FURST v. J. T. FARGASON CO.
• Court: U.S. Court of Appeals — Eighth Circuit

287 F. 306

J. T. FARGASON CO. v. FURST.

FURST v. J. T. FARGASON CO.

Nos. 6104, 6105.

United States Court of Appeals, Eighth Circuit.

February 5, 1923

B. J Semmes, of Memphis, Tenn., for plaintiff.

James R. McDowell, of Memphis, Tenn., and John M. Moore, W. B Smith, J. Merrick Moore, and H. M. Trieber, all of Little Rock, Ark., for defendant.

Before LEWIS, Circuit Judge, and BOOTH and FARIS, District Judges.

FARIS District Judge.

These are cross-appeals, taken in the same cause, which for brevity and convenience were considered together and will be disposed of in a single opinion. The facts are fairly simple and practically undisputed as to salient points, with one exception, subsequently adverted to herein. For the sake of brevity, appellee-appellant H. A. Furst will hereinafter be referred to as Furst, and appellee-appellant J. T Fargason Company will be called Fargason Co.

Furst, being the owner of the Turnage Place, a farm situated in Mississippi county, Ark., rented this farm for the crop year of 1920 to W. W. Driver and W. S. McAdams, at an agreed rental of $6,000, for the cultivation thereon of cotton. This rent became due about November 1, 1920. The Fargason Co. was engaged in business in 1920 in Memphis, in the state of Tennessee, as a cotton factor, and had been so engaged prior thereto for many years. In March, 1920, Driver and McAdams borrowed $6,000 from the Fargason Co., to be used in making the crop. Later on, and in July, 1920, a further sum of $2,500 was borrowed. These loans were evidenced by notes of Driver and McAdams, and were secured by a mortgage on the growing crop of cotton, which mortgage was duly recorded in the county of Mississippi, whereat Driver and McAdams resided and the crop was being grown. This mortgage is not set out in haec verba in the record, but some reference to its terms appears in the testimony of the witnesses, and a brief statement of its contents is found in the record, wherein it is said that it--

'contained an agreement to ship all the cotton grown on the Turnage place in 1920 to Fargason Co., for sale as commission merchants, the net pounds (proceeds?) thereof to be applied to the indebtedness therein secured. It also recited that the said crop was to be grown on land rented from H. A. Furst. Besides the crop, there were also eight mules and a lot of farm implements conveyed in said mortgage.'

Eighty-nine bales of cotton, being the same mentioned by Furst in his petition, which were grown in 1920 on the Turnage place by Driver and McAdams, were shipped by boat from Mississippi county, Ark., to Fargason Co., and by it received and sold, and the net proceeds thereof applied by the latter on its mortgage. No part of the $6,000 due Furst as rent has been paid. He sues to have his lien for rent established under the statutes of Arkansas, and for the value of the 89 bales of cotton alleged to have been unlawfully converted by Fargason Co. to its own use.

The case was begun on the equity side of the chancery court of Crittenden county, Ark., and removed thence to the federal court for the Eastern district of Arkansas, where it was tried as a suit in equity, and judgment rendered for Furst for $3,000 and interest, from which judgment both parties, as already said, have appealed.

The judgment below represented the amount of a draft for $3,000, drawn about November 24, 1920, but bearing date of December 3, 1920, by Driver and McAdams on Fargason Co., in favor of Furst, in part payment of the rent due Furst. This draft was first presented to Fargason Co., by a local bank, through which, it is assumed, Furst endeavored initially to collect it. Payment being refused, Furst presented the draft in person about December 5, 1920, to Fargason Co. What then took place is the matter of keen contradiction, heretofore mentioned. Furst says that Fargason Co. told him 'there wasn't enough cotton to pay the draft-- I asked him when there would be, and he said, 'I don't know, maybe eight or ten days.' ' About ten days later, Furst again went to Fargason Co., and was told again that 'there wasn't enough cotton sold.' Again a third time, taking with him a list of the 79 bales, which had then been received by Fargason Co., he went and demanded payment, and was made to 'believe there wasn't enough cotton sold to pay the draft. ' Later, and about February 10 or 15, 1921, he was told by Fargason Co. that it would not pay the draft, because Driver and McAdams owed it money.

D. B. Fargason, testifying for Fargason Co., says that he told Furst, when the latter presented the draft of November 24th, that 'we could not pay the draft; that McAdams had not shipped us enough cotton to cover his account. I told him that, if McAdams shipped us enough to cover the account and over, we would pay the draft. I never at any time stated to him that we would pay the draft or stand for the rent in any way. ' In this statement the witness is in all substantial respects corroborated by D. B. Fargason, Jr. After all this transpired, and on March 2, 1921, Furst was given another draft, drawn on Fargason Co., by Driver and McAdams, for $3,000, the balance due on rent. Payment on this, it is everywhere conceded, was refused unequivocally and promptly.

Upon this testimony, and from inferences drawn from the subsequent acts of the parties, the court below found that Fargason Co. declined to pay the first draft on the sole ground that it had not sold sufficient cotton to pay the amount thereof, but led Furst to believe that it would pay it, when enough cotton of the tenants had been sold to cover the draft, and as a matter of law concluded that this was so far a promise to pay as that, when Furst, relying thereon to the extent that he took no steps to enforce his lien as a landlord under the statutes of Arkansas, then open to him, was entitled to recover the amount of that draft. The Fargason Co. appeals, for that the trial court erred in permitting Furst to recover such sum of $3,000, or any sum, while Furst appeals because he failed to recover the full amount of his claim for rent.

It is insisted, but not very strenuously, by Furst, that his landlord's lien (which will hereinafter be more specifically mentioned), as such, given by the Arkansas statute, followed the cotton and bound it, even after it reached Tennessee. This contention cannot be upheld. This lien arose solely perforce a statute local to Arkansas-- not, of course, local, in the sense that no other state has it-- but in the sense that a lien is not given by the common law, or by the law merchant, but comes into existence only when a statute creating it is enacted. The rule is general that a statute of a state has no extraterritorial effect, and that it operates only within the boundaries of the state which enacts it. Wilkinson v. Leland, 2 Pet. 627, 7 L.Ed. 542; McCool v. Smith, 1 Black, 459, 17 L.Ed. 218. Of course, this general rule is merely of value here by analogy. But the ruled cases and the textwriters seem to agree that a landlord's lien created by a state statute has no extraterritorial force. Millsaps v. Tate, 75 Miss. 150, 21 South.

663; 24 Cyc. 1259; 16 R.C.L. 989; 19 Am. & Eng.Encyc.of Law, 24; Underhill, Landlord & Tenant, 1446; Jones on Liens, 103; Marsh v. Ellsworth, 37 Ala. 85. We think the learned trial court was correct in holding that the landlord's lien statute of Arkansas was inoperative in the state of Tennessee.

Fargason Co. contends that liability to pay the draft drawn on it by Driver and McAdams could accrue only by reason of an acceptance thereof by Fargason Co., and that since the Negotiable Instruments Law then in force in the state of Tennessee required acceptances to be in writing (Shannon's Code 1917, Sec. 3516a), and since confessedly there was no acceptance in writing, there can be no liability on this draft in favor of Furst. This draft, which is not in the record, seems to have been a sight draft, postdated as of December 3, 1920. It was due then, when presented. No written acceptance was then necessary, for payment would have constituted acceptance. But if, as it seems, it had already been actually dishonored by presentation by a bank and a refusal to pay, it could nevertheless, after dishonor, have been the subject of a qualified acceptance upon condition; that is, qualified as to time of payment, as in eight or ten days, and conditioned upon the receipt in the meantime of enough cotton to pay it. See Shannon's Code, Negotiable Instruments Law. But such an acceptance, in order to bind Fargason Co., would, it seems, have to be in writing. Shannon's Code, Sec. 3516a, supra. So much is said in order to accentuate the notion that the figure cut in this suit by the draft is wholly incidental.

Clearly then this contention of Fargason Co. might be so far correct as to be decisive of the point, if the action were one upon the draft. But it is not such a suit. It is a suit to establish a lien, and thereupon to charge Fargason Co., as a junior lienor, for the conversion of property on which a prior and senior lien existed. The liability was fixed upon Fargason Co. by the trial...