Mclaughlin Mill Supply Company v. Laundry Service, Inc.

• Decision Date: 17 February 1933
• Docket Number: 14,355
• Citation: 184 N.E. 429,95 Ind.App. 693
• Parties: MCLAUGHLIN MILL SUPPLY COMPANY ET AL. v. LAUNDRY SERVICE, INC., ET AL
• Court: Indiana Appellate Court

184 N.E. 429

95 Ind.App. 693

MCLAUGHLIN MILL SUPPLY COMPANY ET AL. v. LAUNDRY SERVICE, INC., ET AL

No. 14,355

Court of Appeals of Indiana

February 17, 1933

From Lake Superior Court; Clyde Cleveland, Judge.

Action by North State Publishing Company against Laundry Service Incorporated, upon promissory notes and for a receiver, in which McLaughlin Mill Supply Company and others intervened and filed cross-complaints. From the judgment appointing a receiver and determining priority of claims, McLaughlin Mill Supply Company and others appealed.

Reversed.

J. B Walters, William J. Whinery, John F. Cody and Ibach, Gavit Stinson & Cody, for appellants.

Tinkham & Galvin, for appellees.

OPINION

BRIDWELL, J.

On March 30, 1932, this court rendered an opinion in this cause, which is reported in the 180 N.E. 483. A petition for rehearing was filed and the court, upon further consideration, has reached the conclusion that a rehearing be granted.

This action was instituted by the North State Publishing Company against the Laundry Service, Inc., the plaintiff in the action, by its complaint seeking to recover a judgment on four promissory notes executed to it by the defendant, and to have a receiver appointed to "manage, conduct and continue" the business of the defendant, said defendant being engaged in the business of operating a large modern laundry in the city of Hammond, Indiana. An answer of general denial was filed to this complaint, and on December 2, 1929, the court appointed one Charles L. Surprise as receiver "to take over, operate, maintain and continue the business . . . until further order." The receiver named qualified as such on the day of his appointment.

Following the appointment and qualifying of the receiver numerous creditors of the Laundry Service, Inc., among whom were the appellants herein, filed their several intervening petitions to be made parties, and it was so ordered. Each of the appellants filed a cross-complaint to recover an amount alleged to be due for labor, material, or both, furnished to the Laundry Service, Inc., for use in the erection and construction of a building on certain real estate owned by said corporation and to foreclose a mechanic's lien against said property, making parties defendant thereto the Laundry Service, Inc., Charles L. Surprise, receiver for Laundry Service, Inc., and the various creditors of Laundry Service, Inc., who held or claimed any lien against said property, including as party defendants the First Trust and Savings Bank, which held a $ 25,000 mortgage against the property, and the First Trust and Savings Bank, as trustee, the holder of a $ 7,500 mortgage.

After the issues were closed on the complaint and the several cross-complaints filed the cause was submitted to the court for trial and judgment. The court made a general finding determining and finding the amount due each of the parties asserting any claim against the Laundry Service, Inc.; the existence and right of foreclosure of claimed liens; the status of each lien in regard to its priority in connection with all other liens asserted and found to be valid liens, and, in addition, further found that the real estate involved and the improvements thereon were in the possession of Charles L. Surprise, as receiver for the Laundry Service, Inc., acting under the appointment of the court in this cause, and that said property should be sold by said receiver under the order and direction of the court, subject to the lien of the First Trust & Savings Bank, Trustee, the proceeds of the sale to be distributed by the receiver under the order and direction of the court in the payment of costs and in the payment of the liens found to exist, except the lien of said First Trust and Savings Bank, Trustee, "in the following order of priority, to-wit: (1) To the payment of the costs and accruing costs herein. (2) To the payment of the amount found due the cross-complainants, Crane Company, a corporation; Electric Service Engineering Company, a corporation; McLaughlin Mill Supply Company, a corporation, and Rufus Danner on the liens of said several cross-complainants as hereinabove found, and the amount found due the defendant, First Trust & Savings Bank of Hammond, Indiana, a corporation, on the construction mortgage as hereinbefore found, together with interest at the rate of six per cent per annum as specified in said mortgage and together with the interest on the liens of said cross-complainants at the rate of six per cent per annum from this date, and if the proceeds of said sale shall not be sufficient to pay said claims in full then such payment shall be prorated in the proportion that the amount of each claim bears to the total amount of such claims. (3) To the payment of all unsecured creditors of said defendant, Laundry Service, Incorporated."

Other findings as to the sale of property not covered by any lien and the distribution of the proceeds thereof were made, but as no question is raised as to their correctness these need not be considered.

Judgment was thereafter rendered in favor of each of the parties found to have a claim against the Laundry Service, Inc., for the several respective amounts found to be due from such corporation, and as a part of such judgment it was decreed that the real estate owned by said Laundry Service, Inc., and against which the several liens were asserted, "together with all the improvements thereon and all machinery, tools and equipment and all rights, choses in action, bills receivable, accounts receivable, and all other property of every kind and nature owned by said Laundry Service, Incorporated, be sold by the receiver herein, Charles L. Surprise, under proper order of this court as to time and terms of sale and without relief from valuation and appraisement laws, subject, however, to the mortgage lien of the defendant, First Trust & Savings Bank, Trustee, as herein adjudged and decreed, and that the proceeds of the sale of all such property shall be applied, first, to the payment of the costs and accruing costs and charges of this action; that the proceeds of the sale of all such property as is covered by the liens of the claimants herein shall be applied, after the payment of the costs and charges aforesaid, as follows: First Trust & Savings Bank; McLaughlin Mill Supply Company, a corporation; Crane Company, a corporation; Electric Service Engineering Company, a corporation, and Rufus Danner; and if the proceeds of said sale be insufficient to pay all of said claims in full that such proceeds be applied thereon pro rata; that the proceeds of the sale of such property as is not covered by the liens of the claimants aforesaid, after the payment of the costs and charges aforesaid, shall be applied to the payment of all creditors, both secured and unsecured, pro rata; that if there be a surplus from the proceeds of the sale of the property covered by the liens of the claimants herein after their payment in full, then such proceeds shall be applied to the unsecured creditors of said defendant, Laundry Service, Incorporated, and if there be any surplus after the payment of all such claims the same shall be held by the said receiver subject to the further order of this court."

Each of the appellants filed a separate motion to modify the judgment, and each filed a separate motion for a new trial. The motions so filed were each overruled and each appellant excepted to each of the rulings on his or its separate motions. This appeal was then perfected, each appellant assigning as error the adverse ruling on his or its respective motions.

In each of the separate motions for a new trial the causes assigned therefor are as follows: (1) The decision of the court is not sustained by sufficient evidence; (2) the decision of the court is contrary to law.

The controversy presented by the record on appeal is as to the priority of the various liens found to exist against the real estate owned by the Laundry Service, Inc., and the improvements thereon. No question is made as to the correctness of the amount of any judgment rendered in the cause in favor of any person who secured a judgment therein, nor of his or its right to recover a judgment against the original defendant.

The evidence discloses the following material facts necessary for consideration in determining the questions of priority between lien holders: The Laundry Service, Inc., purchased from one Carl Kaufman the real estate involved in this proceeding for the sum of $ 12,500. Of this amount $ 5,000 was to be paid in cash, and the balance of the purchase price to be evidenced by two promissory notes, one for $ 2,500 payable on or before two years after date, the other for $ 5,000 payable on or before three years after date, each note to bear 6% interest payable semi-annually, and said notes to be secured by a second mortgage. On May 20, 1929, the vendor, Carl Kaufman, received from the Laundry Service Inc., the sum of $ 5,000 to apply on said purchase price, and executed to said corporation the following written instrument: "Hammond, Indiana, May 20, 1929. Received of Thomas A. Cunningham for Laundry Service, Inc., the sum of Five Thousand Dollars ($ 5,000) to apply on the purchase price of Twelve Thousand Five Hundred Dollars ($ 12,500) for the purchase of Lots Seven (7) and Eight (8) in Kaufman's Industrial Addition to Hammond, Indiana. The balance of the purchase price to be paid as follows: $ 2,500 on or before two (2) years after date; $ 5,000 to be paid on or before three (3) years after date, bearing 6% interest payable semi-annually, evidenced by two (2) notes of the above amounts, secured by a second mortgage. . . ." On August 1, 1929, the Laundry Service, Inc., executed to the First Trust and Savings...