Lockhart v. Moore

• Decision Date: 28 February 1942
• Citation: 159 S.W.2d 438,25 Tenn.App. 456
• Parties: LOCKHART v. MOORE et al.
• Court: Tennessee Court of Appeals

159 S.W.2d 438

25 Tenn.App. 456

LOCKHART v. MOORE et al.

Court of Appeals of Tennessee, Middle Section.

February 28, 1942

Certiorari Denied by Supreme Court December 23, 1941.

Appeal from Chancery Court, Grundy County; T. L. Stewart Chancellor.

Suit by May B. Lockhart against Charles C. Moore and others to cancel a deed executed by a corporation of which the plaintiff was the sole stockholder, conveying away all of the corporation's property, wherein the named defendant filed a crossbill. From an adverse decree the complaint appeals.

Decree affirmed and cause remanded for further proceedings.

Joseph Higgins, of Nashville, for appellant Mrs. Lockhart.

Jeff D Fults, of Tracy City, and Charles C. Moore, of Chattanooga for appellee Chas. C. Moore.

CROWNOVER Presiding Judge.

The original bill in this cause was filed by Mrs. May B. Lockhart against Charles C. Moore, the Hamilton National Bank, the New York Syndicate Corporation, the Freemont Coal Company, Thomas M. Lockhart (her husband), and W. C. Abernathy, trustee.

Mrs. Lockhart was formerly the owner of about 2,300 acres of coal lands in Grundy County, Tennessee, which she sold to the Juliana Coal Company for a net consideration of $83,000, for which it executed its notes secured by a deed of trust. She then organized the New York Syndicate Corporation, a Florida corporation, having all the capital stock issued to herself, and she transferred said notes to it. The Juliana Coal Company later became insolvent and was adjudicated a bankrupt. It then owned $68,000 of the said notes. In the bankruptcy proceedings the Syndicate Corporation bid in the lands and some of the mining equipment. It was necessary for the Syndicate Corporation to have some money (about $4,500) with which to pay taxes, costs, and the amount bid on the mining equipment, therefore it issued $60,000 of first mortgage notes or bonds which it pledged to Charles C. Moore for a loan of $6,000. Moore borrowed $6,000 from the Hamilton National Bank, of Chattanooga, executing his own note and attaching the bonds as collateral. He paid over to the Syndicate Corporation $5,000 of said amount and paid to himself $1,000 on his attorney's fee. The Syndicate Corporation applied the $5,000 to the payment of taxes, costs, machinery, etc., and the trustee in bankruptcy executed a deed conveying the coal lands and fixtures to the Syndicate Corporation. Afterward the Syndicate Corporation conveyed the lands and equipment, subject to the mortgage, to the Freemont Coal Company, a Tennessee corporation that had been organized in order that the mines might be operated by Thomas M. Lockhart. The consideration for the sale was the issuance of stock of the Freemont Coal Company to Mrs. Lockhart and Thomas M. Lockhart, trustee. Afterward, in 1932, Mrs. Lockhart, Thomas M. Lockhart, the Freemont Coal Company and Charles C. Moore entered into a contract in which it was agreed, among other things, that the Freemont Coal Company would pay a $5,000 attorney's fee to Charles C. Moore that the Syndicate Corporation owed him in connection with the said bankruptcy proceedings, and that the bonds would be pledged to secure the same subject to the $6,000 note payable to the Hamilton National Bank.

The complainant Mrs. Lockhart asked the court, in said bill, to set aside and cancel the deed executed by the New York Syndicate Corporation conveying all its coal lands and property to the Freemont Coal Company, on the ground that said deed was executed by Thomas M. Lockhart, president, which action had not been authorized by a vote of the stockholders, and to declare invalid a contract entered into between herself, Thomas M. Lockhart, the Freemont Coal Company and Charles C. Moore to pay said Moore an attorney's fee of $5,000 and to pledge said bonds of the Syndicate Corporation that had been assumed by the Freemont Coal Company to secure the same, on the ground that she, the principal stockholder of the Freemont Coal Company, did not read the contract and did not understand the agreement.

A number of other allegations were made in the bill, but the foregoing are the only ones raised on appeal to this court.

Mrs. Lockhart asked for an injunction to restrain the foreclosure of the mortgage securing the bonds and for attachment of certain mining equipment alleged to have been removed by Charles C. Moore, attachment of the bonds, etc.

Charles C. Moore filed an answer denying most of the allegations of the bill and alleging that Mrs. Lockhart understood and approved all said transactions, and pleaded estoppel. He filed a cross-bill and alleged that he had paid the note to the Hamilton National Bank and was entitled to be subrogated to its rights, and that he was entitled to an attorney's fee of $5,000 to be credited with $1,186.60 for mining equipment purchased by him from said Freemont Coal Company, and that the Freemont Coal Company was insolvent. He asked that his cross-bill be filed as a general creditors' bill and for an injunction to restrain the Lockharts from removing coal, etc. He also asked for a receiver and prayed that the property be sold in satisfaction of said indebtedness.

The Chancellor decreed that the complainant Mrs. Lockhart's bill be dismissed, and that the cross-complainant Charles C. Moore recover the amount of the note paid by him to the Hamilton National Bank, together with the interest and costs of the cause, and that he also recover $5,000 as attorney's fee for services rendered, and that the deed of trust securing the collateral held by the bank as security for said note to the rights of which the cross-complainant was subrogated be foreclosed to satisfy this decree, but the judgment for said bank note be credited with $1,186.60, the value of the mining equipment purchased by cross-complainant Moore. Decree was accordingly entered against the Freemont Coal Company in favor of Moore for $4,099.40 and $6,675.00, making a total of $10,774.40, which amount was declared to be a lien upon said lands and the lands were ordered sold to satisfy the decree.

The complainant Mrs. Lockhart excepted to said decree and appealed to this court and has assigned errors, which are, in substance, as follows:

(1) The Chancellor erred in holding that the deed executed by the New York Syndicate Corporation conveying all the corporate property to the Freemont Coal Company was valid.

(2) The Chancellor erred in holding that the contract of July 14, 1932 (in which the bonds were pledged to secure the payment of the $6,000 note and the $5,000 attorney's fee), was valid.

(3) The attorney's fee is excessive.

(4) The Chancellor erred in taxing the complainant with the costs.

None of the other defendants appealed or assigned errors.

The appellant Mrs. Lockhart in her brief states the following:

"Mrs. Lockhart was advised by her counsel that she should not undertake to defeat reimbursement to him for the amounts advanced by the bank and which he had subsequently taken up, and to concede the correctness of the Chancellor's decree awarding a recovery of some $3800.00 and interest on the first obligation, but this must not be construed as any admission or concession that cross complainant should have a decree for the $5000.00 provided for in the contract of July 14, 1932."

The essential facts, as disclosed by the record, are as follows:

May B. (Mrs. Thomas M.) Lockhart owned, at the time of her marriage in 1908, coal lands near Freemont, in Grundy County, Tennessee.

Thomas M. Lockhart executed a quitclaim deed, on September 16, 1908, conveying to Mrs. May B. Lockhart any interest he might have in said lands by reason of their marriage.

Mrs. Lockhart afterward acquired other lands, and in 1927 owned seven tracts of land, containing about 2,300 acres, in Grundy County.

She sold these lands to the Juliana Coal Company, on May 30, 1927. The consideration was $100,000. After paying off certain liens, the coal company executed its lien notes, payable to Mrs. Lockhart, for $83,000, payable at the rate of $500 a month for a number of years and a larger amount afterward, which were secured by a deed of trust.

Before entering into this contract Mrs. Lockhart consulted Mr. Charles C. Moore, and he represented her at the time of the transaction.

Mrs. Lockhart organized in Florida, on December 2, 1927, a corporation named the New York Syndicate Corporation and transferred the notes to it. She owned all the stock of the corporation, and it appears that it was organized solely for the purpose of holding these notes, as she did not want them in her name because she feared a law suit by a real estate agent for commissions. Charles C. Moore had no connection with the organization of this corporation.

It does not appear from the record that any minutes were kept by the New York Snydicate Corporation after the transfer of the notes to it.

Mr. Moore collected some of these notes as attorney for Mrs. Lockhart.

The Juliana Coal Company paid about $15,000 and then ceased to pay any more on the notes.

Mrs. Lockhart sent the rest of the notes, $68,000 to Moore for foreclosure. He started proceedings, but before the sale was held the Juliana Coal Company filed a petition in bankruptcy and enjoined the sale.

Moore and Thomas M. Lockhart filed in the bankruptcy proceeding a claim of the New York Syndicate Corporation. There was some controversy in the bankruptcy proceedings about the equipment the Juliana Coal Company had placed on the property.

At the sale of the land and mining fixtures the New York Syndicate Corporation through Thomas M. Lockhart became the purchaser. The trustee in bankruptcy executed a deed on February 21, 1931, conveying the lands and fixtures to the New York Syndicate Corporation.

It was...