Johnston v. Luling Manuf'G Co.

• Decision Date: 31 January 1894
• Citation: 24 S.W. 996
• Parties: JOHNSTON v. LULING MANUF'G CO. et al., (HEIDENHEIMER, Intervener.)
• Court: Texas Court of Appeals

24 S.W. 996

JOHNSTON v. LULING MANUF'G CO. et al., (HEIDENHEIMER, Intervener.)

Court of Civil Appeals of Texas.

January 31, 1894.

Appeal from district court, Caldwell county; H. Teichmueller, Judge.

Two actions to foreclose a trust deed in the nature of a mortgage,—one by W. R. Johnston against the Luling Manufacturing Company, and one by the same plaintiff against the same defendant, joined with J. H. Munster. After S. Heidenheimer intervened, claiming a prior right to the property, the cases were consolidated, and tried together. There was judgment for intervener, and plaintiff appeals. Reversed.

Fly & McNeal and Nix, Storey & Storey, for appellant. Moore & Duncan and M. R. Stringfellow, for appellees.

COLLARD, J.

The appellant, W. R. Johnston, on the 12th day of April, 1886, brought suit No. 2,234 against the Luling Manufacturing Company, a corporation under the laws of this state, located at Luling, Tex., on two promissory notes of the company, of date January 14, 1886, — one for $2,275, due 30 days after date, bearing 12 per cent. interest per annum from January 1, 1884; the other for $1,999.66, due 60 days after date, with 12 per cent. interest per annum from date, and attorney's fees of 10 per cent. on both notes, — and on an account against the company for $904.72 for advances made to the company to enable it to manufacture certain cotton seed into oil, cake, etc. On the same day plaintiff sued the company and J. H. Munster (suit No. 2,235) on the company's note for $4,500 to W. R. Johnston & Co., dated September 7, 1885, due in 90 days, bearing 12 per cent. interest per annum from date, and for 10 per cent. attorney's fees. The firm of W. R. Johnston & Co., composed of W. R. Johnston and C. B. Collins, was dissolved, and plaintiff became the owner of the note. On the 14th day of January, 1886, the Luling Manufacturing Company executed to plaintiff a mortgage or deed of trust, to secure all the claims sued on, on personal property described in the petitions as "all the cotton seed of the Luling Manufacturing Company in its seed house in Luling, Caldwell county, Texas, said house adjoining and attached to the oil mill of defendant, and estimated to be about sixteen hundred tons of cotton seed, and on the product arising from the manufacturing of said seed;" a part of which, at the time the suits were brought, had been manufactured (and was on hand) into cotton-seed oil, cake, meal, lint, and hulls. For the purpose of enabling the company to manufacture the seed into oil, etc., W. R. Johnston agreed to advance to the company funds, not exceeding $3,000, which advances were made to the amount of the account sued on in suit No. 2,234, the mortgage securing the payment of the same, as well as the notes. Plaintiff sued out writs of sequestration in both suits, and levied on the cotton seed, oil, cake, meal, etc., in the hands of the defendant, estimated by the sheriff to be of the value of $3,700, which defendant replevied with I. Heidenheimer and S. Heidenheimer as sureties. Defendant answered, but afterwards withdrew its answers. On the 27th of September, 1886, S. Heidenheimer intervened in both cases, by leave of the court, claiming that he was the owner of the property levied on. The petition for intervention gives a history of intervener's transactions with the company briefly as follows: The company was largely indebted, and through its president, Henry Munster, opened negotiations with the intervener, S. Heidenheimer, for a loan of $20,000, which resulted in the loan of that amount by him to Munster, the company to execute to Munster its deed of trust to secure same upon its property, its income and profits, stock on hand, and such as it would subsequently receive, which deed of trust and its notes to Munster for the amount of the loan were to be transferred to intervener. Pursuant to this, the company, by a resolution passed by its board of directors, in 1883, executed and delivered on the 8th day of September, 1883, its notes and deed of trust to secure the $20,000 then advanced to Munster by intervener, Munster executing his two notes to intervener for $10,000 each, due in 12 and 24 months, with 10 per cent. interest from date, transferring the notes of the company and the deed of trust to intervener. The deed of trust covered fractional block No. 37 in Luling, east of block No. 38, its cotton-seed oil mill thereon, its presses and other machinery thereto belonging, its tools, etc., one sixty horse power engine, "all cotton-seed oil, oil cake, cotton seed on hand or to be on hand; one two-story gin house, with three gin stands; one other sixty-five horse power engine; also all assets, franchises, stock on hand at any time since September 8, 1883, earnings and income of said corporation since said 8th day of September, 1883," — which included the property upon which plaintiff seeks to foreclose his lien. The deed of trust is alleged to have been duly deposited and filed as required by law, and placed upon record in records of Caldwell county in Book A. The property mortgaged to intervener is alleged to be of insufficient value to pay intervener's debt. Intervener alleged that plaintiff's mortgage was illegal and void because executed without authority of the board of directors of the company, and was fraudulent. After the levy of plaintiff's writs of sequestration and the replevy by defendant, to secure intervener as security on the replevy bond the company hypothecated its subsequent incomes and products of its mill and gins, and placed the same in the hands of the intervener. Intervener sued on his notes in Galveston county, Tex., where they were payable, and recovered judgment thereon for $25,666.66 against defendant, and foreclosed his mortgage, bought in the property, all of it, including the property seized by plaintiff, at $15,000, leaving a large balance due on his judgment. All this was done after plaintiff's suits were brought, the sale to intervener being made on September 7, 1886. The intervener, claiming to be the absolute owner of the property levied on by plaintiff, asks judgment for the same; but, in case the court should conclude that the title is not in him, for judgment for his debt against Munster and the company, foreclosure of his lien, etc.

Plaintiff answered, demurring to intervener's petition, and specially excepting to the same upon several grounds, one of which is that it shows on its face that intervener's remedy is by claim under the statute; another that it fails to show that his chattel mortgage was properly filed and docketed as required by law. He denied the allegations of intervener's petition, declaring that the directors and stockholders knew of his (plaintiff's) claim and mortgage, — that it was for advances to the company, to enable it to continue its business, the same being executed by the president and general manager, Munster, and the secretary, — and had acquiesced in and ratified the same; pleading estoppel, declaring that the board of directors had passed a resolution ratifying his claims and mortgage, and confirming the same on the 18th day of February, 1886; that, in order to defraud plaintiff, Munster purposely procured the minutes of the meeting of the board of directors to be so entered as to omit the resolution recognizing and confirming plaintiff's claim and mortgage; that intervener and Munster, the president of the company, had conspired together to defraud plaintiff; that intervener's alleged indebtedness and trust deed have long since been satisfied, paid off, and discharged, before the judgment in the Galveston county district court; that there was an agreement between intervener and the company in September, 1883, by which it was to ship to the former its manufactured products, which he was to receive, and sell at best price, charging 2½ per cent. commissions, and apply the balance to the payment of his $20,000 debt, (which contract they are notified to produce at the trial;) that, pursuant to such agreement, defendant had shipped to intervener, up to April 1, 1884, oil, cake, and meal, 204 tons of cake and meal, 15,420 gallons of oil, linters of the value of $10,183, and during the season of 1884-85 the same character of its products, amounting to $22,148, and from August, 1885, to ____ day of July, 1886, other such products of the value of $45,000, an itemized account of which is filed with the supplemental petition; that intervener received and sold the same, the proceeds largely exceeding the amount due upon the mortgage, and that thereby his mortgage claim for $20,000 was fully paid off and discharged; that his judgment was fraudulent, and was the result of a fraudulent conspiracy between him and Munster, the president of the company, all since plaintiff's suits were instituted; that the company, by its board of directors, has passed a resolution repudiating the action of intervener and Munster, admitting it to be a fraud, — that is, taking the property of the company and agreeing to the fraudulent judgment; that, prior to plaintiff's deed of trust, intervener, by his agent, Heflin, endeavored to induce plaintiff to advance money to the company, as it was a home institution, disclaiming any mortgage on the company's cotton seed, was fully apprised of the advances made by plaintiff, and his deed of trust, making no objection thereto, and failing to notify plaintiff of the claim of intervener, permitting him to make advances under the terms of his deed of trust; that on the 18th day of February, 1886, not claiming a mortgage on the cotton seed, intervener procured a deed of trust as additional security for his debt, with notice of plaintiff's deed of trust thereon, and specially agreed to take the same subject to plaintiff's rights, whereby he is estopped; that intervener paid out of the proceeds of products of the mill, on several drafts in favor of plaintiff, $1,875, from February 12 to March 18, 1886; that plaintiff,...