Parker Square State Bank v. Triangle Supply Co., 3768

• Decision Date: 25 January 1963
• Docket Number: No. 3768,3768
• Citation: 364 S.W.2d 418
• Parties: PARKER SQUARE STATE BANK et al., Appellants, v. TRIANGLE SUPPLY COMPANY et al., Appellees.
• Court: Texas Court of Appeals

Page 418

364 S.W.2d 418

PARKER SQUARE STATE BANK et al., Appellants, v. TRIANGLE SUPPLY COMPANY et al., Appellees.

No. 3768.

Court of Civil Appeals of Texas, Eastland.

Jan. 25, 1963.

Rehearing Denied Feb. 15, 1963.

Lee Humphrey, W. H. Sanders, Ernest Robertson, Wichita Falls, for appellants.

Ross H. Scott, Dallas, Jack Bryant, Raleigh Brown, Abilene, Robert E. Bowers, Breckenridge, Mike Lee, Abilene, Ronald Stephens, Graham, Kenneth J. Wise, Wichita Falls, Gary Cole, Jr., Asst. U. S. Atty., Ft. Worth, H. G. Andrews, Jr., stamford, Byron Scarborough, Ft. Worth, for appellees.

GRISSOM, Chief Justice.

Wise and Steadham Drilling Company drilled many oil wells for Fletcher Oil & Gas Drilling Corporation. As each well was completed Wise and Steadham presented to Fletcher an invoice and it approved the account and agreed that it should be assigned to a designated assignee. Although payment was due upon completion of each well, Fletcher ordinarily paid its accounts thirty to sixty days after an invoice was so presented and approved. In the meantime, to carry on their business, Wise and Steadham assigned the accounts to secure loans.

On March 15, 1961, Fletcher owed Wise and Steadham and their assignees $164,690.99, evidenced by thirteen invoices which had been approved by Fletcher upon completion of thirteen wells by Wise and Steadham. On or before March 15th, all of said invoices and the accounts evidenced thereby had been assigned for a valuable consideration to Parker Square State Bank, City National Bank in Wichita Falls or Time Equipment and Supply Company. Said assignees and Triangle Supply Company, Carter Engine and Equipment Company, L. H. Strand and Kelley Supply Company, as garnishing creditors, United States of America, as a tax lien creditor, Trucker and Stephens Bulldozers, Inc., as a mechanic's and materialman's lien and judgment creditor, and others, as general creditors, claimed the money owed by Fletcher to Wise and Steadham or their assignees. Fletcher paid into court $54,624.77, and impleaded all of said parties for the purpose of having the court determine their respective rights to said funds. The District Court granted priority of right to receive such funds to said subsequent lien creditors in preference to Parker Square, City National and Time Equipment as to the assignments which had not been filed for record. In other words, the court held that the lien creditors who fixed their liens after said assignments had been delivered had a right to said funds over the assignees because notice of the assignments had not been filed for record. Parker Square State Bank, City National Bank and Time Equipment and Supply Company have appealed.

The principal question presented is whether the lien creditors who acquired liens after delivery of valid written assignment of the accounts, acquired rights to the funds superior to that of the assignees because the assignees had not filed notice of their assignments. This question must be determined by an interpretation of Article 260-1, Vernon's Ann.Civ.St., which provides in Section 2 that assignments of accounts may be protected by execution and delivery of written assignments and by filing notice thereof. Section 6 provides that

'Whenever any person * * *shall in good faith take a protected assignment of any account * * * all creditors of, and all subsequent assignees, purchasers, and transferees of or from the assignor shall be conclusively deemed to have received notice of such assignment, dating from the time of the filing for record of the notice of assignment hereinabove provided; and after such filing for record, no purchaser from the assignor, no creditor of any kind of the assignor, and no prior or subsequent assignee or transferee of the assignor, holding an assignment not protected, or holding as assignment under a notice of assignment subsequently filed for record, shall in any event have, or be deemed to have acquired, any right in the account * * * so assigned or in the proceeds thereof, or in any obligation substituted therefor, superior to the rights therein of the assignee named in such prior protected assignment.'

In Section I an 'account' or 'account receivable' is defined so as to exclude therefrom the right to payment of money secured by a chattel mortgage or any other instrument which may be filed for record and the assignment of rights subject to special statutory provisions of the State of Federal Government relative to the rights of creditors or successive assignees.

Prior to the enactment of Article 260-1, the law in Texas was, as to the rights of assignees, that the first in point of time had the superior right. This seems to have been the majority view in the United States. Some states, notably Pennsylvania and California, adopted the English rule that the first assignee to give notice to the debtor had the prior right. Under the common law in Texas, if the contract was in existence at the time of the assignment, no creditor of the assignor could acquire rights therein superior to that of a prior assignee, regardless of notice to the debtor. Hess & Skinner Engineering Company v. Turney, 110 Tex. 148, 216 S.W. 621, 623, 25 Tex. Law Rev. 607. Unless there has been a failure to comply with a recording statute enacted for the protection of creditors, generally, an assignee takes priority over a subsequent lien creditor of the assignor who had no lien at the time the assignment was made. 6 C.J.S. Assignments Sec. 92, p. 1149. In 1855, the Texas Supreme Court held that Texas had no law either requiring or authorizing recording of assignments and that in the absence of such a statute the recording of an assignment did not give notice of its existence. 1 Burnham v. Chandler, Trustee, 15 Texas 441, 443. In 1943, the United States Supreme Court in Corn Exchange National Bank v. Klauder, Trustee, 318 U.S. 434, 63 S.Ct. 679, 87 L.Ed. 884, 144 A.L.R. 1189, held (in a Pennsylvania case, in which state, as between assignees, the law gave priority to the assignee who first gave notice of the assignment to the debtor,) that assignments of accounts which, by reason of failure to give notice of the assignment to the debtor, were, by local law, inferior to the rights of a subsequent assignee who gave notice, were preferences and inoperative against the assignors' trustee in bankruptcy. It held that the amended bankruptcy act provided a new test for the purpose of striking down secret liens and included a failure to record which could be asserted by a bona fide purchaser or a lien creditor of the transferor against the transferee.

It has been said that as a result of that decision thirty-five states have enacted statutes for the protection of assignees and lien creditors against the trustee in bankruptcy, who then apparently had the rights of a bona fide purchaser or lien creditor. Some statutes clearly provided that an assignee's failure to record notice of his assignment enabled a creditor to establish superior rights by garnishing the account, 'and that is the critical test adopted in the Bankruptcy Act.' 53 A.L.R.2d 1392, note. In a note in 246 F.2d at page 810, it is stated that the Bankruptcy Act was amended in 1950 to remove the threat that an assignment might be vulnerable to a claim by a trustee--as a preferential transfer merely because a subsequent assignee could attack it and that such amendment restored assignments to their pre-section 60 status in respect to a claim by a trustee in bankruptcy. The California Statute expressly provides that no assignment shall be valid against creditors or subsequent assignees without notice unless the assignment is recorded. With reference to that statute the court in Costello v. Bank, 246 F.2d 807, 811, said: 'Actual notice to the obligor, which hitherto sufficed, was no longer enough. The statute also revised existing law as it related to creditors of the assignor. It placed such creditors in the same position vis-a-vis the first assignee as successor assignees in respect to priority of rights. This was more than Klauder compelled for it had long been the law in California that a non-notifying assignee was entitled to priority over creditors of the assignor. Thus, the 1943 statute required the assignee to file the assignment to perfect his rights as against both subsequent assignees and creditors of the assignor.'

In Keeran v. Salley, Tex.Civ.App., 244 S.W.2d 663, 666, (Writ Ref.), Keeran, a construction contractor, assigned to the Alice Bank a debt it expected Sun Oil Company to owe him by virtue of a contract not then in existence. Keeran employed Salley to do work in performing a contract Keeran later obtained from Sun. Notice of the assignment to the bank was filed for record. Thereafter, Salley sued Keeran for his debt and served a writ of garnishment on Sun. The right of the garnishing creditor to the money owned by Sun to Keeran was held superior to that of the prior assignee. The reason was stated by Judge Norvell as follows:

'The filing of the notice of assignment of July 14, 1949, does not give the bank a prior right to the fund impounded by the writ of garnishment for the reason that the statute, Article 260-1, relating to assignment of accounts, defines the word 'account' or 'account receivable' as meaning, 'an existing or future right to the payment of money presently due, or to become due under an existing contract: * * *.' The contract which gave rise to the 'account' here involved was obviously not in contemplation when the notice was executed.'

It must be implied from this decision that it was believed that Article 260-1 had changed the rule that an assignee has priority over creditors who had no lien at the time the assignment was made, but that, because the assignment did not come within the definition in ...