Pineville Steam Laundry v. Phillips

• Decision Date: 22 May 1934
• Citation: 254 Ky. 391
• Parties: Pineville Steam Laundry v. Phillips.
• Court: United States State Supreme Court — District of Kentucky

254 Ky. 391

Pineville Steam Laundry v. Phillips.

Court of Appeals of Kentucky.

Decided May 22, 1934.

1. Judgment. — Order in receivership suit against corporation, where by corporation's notes held by payees were assigned and mortgage executed to assignee, held res judicata of corporation's defense, interposed in assignee's suit upon notes, that notes were executed without authority of corporation.

2. Judgment. — Question of fact which has been litigated, or could have been litigated, in suit pending in court of competent jurisdiction, cannot thereafter be relitigated by same parties or their privies.

3. Judgment. — As respects res judicata, one is in privity with party to litigation when he has succeeded to some estate or interest involved in controversy.

4. Judgment. — As respects res judicata, derivative right of succession of interest creates privity of estate and binds as well as inures to benefit of one who acquires it.

5. Judgment. — Between assignor and assignee there is privity in estate and in contract.

6. Mortgages. — In suit upon notes and to foreclose mortgage, where court directed sale by commissioner, judgment authorizing issuance of execution upon plaintiff's order held proper, where import of judgment was that execution should attach to property of defendant other than that adjudged to be sold by commissioner (Ky. Stats., secs. 1650, 1663).

7. Statutes. — Statutes relating to sales under executions must be read in connection with other statutes providing remedies and prescribing methods for judicial sale of land for satisfaction of liens (Ky. Stats., secs. 14a-1, 1012, 1650, 1663, 1681, 1692, 2362; Civil Code of Practice, secs. 692, 694, 696, 697, 699).

8. Execution. — Execution creates a lien and sale thereunder is to satisfy that lien and none other (Ky. Stats., secs. 1650, 1663, 1681, 1692).

9. Mortgages. — In suit upon notes and to foreclose mortgage, where court directed sale by commissioner and also authorized issuance of execution upon plaintiff's order, and plaintiff had execution issued, sale to plaintiff of property at sheriff's sale held void (Ky. Stats., secs. 1650, 1663, 1681, 1692, 1709).

Appeal from Bell Circuit Court.

JAMES H. JEFFRIES and CLEON K. CALVERT for appellant.

W.L. HAMMOND and N.R. PATTERSON for appellee.

OPINION OF THE COURT BY STANLEY, COMMISSIONER.

Affirming in part and reversing in part.

The appellee, John L. Phillips, sued the appellant, a corporation, to recover the net sum of $6,368.60 with interest, on three notes which had been assigned to him by the payees named therein, and for the enforcement of a mortgage. The case was submitted on the pleadings and exhibits and judgment was rendered for the plaintiff.

We give a summary of the material facts disclosed: The corporation's stock was owned by G.C. May and T. F. Gibson. If there was any corporate organization, it was a very loose one. The company had become indebted to two banks and its stockholders likewise owed a considerable amount, to secure which their stock had been pledged as collateral. Mrs. W.R. Wood was the general manager of the business. Two of the notes involved were signed by May as vice president, and one by Mrs. Wood as general manager. All were renewals of other notes and that which was signed by Mrs. Wood and here questioned was a renewal of a note which had been duly executed for the company by one or the other of its principal officers. It is alleged that May and Gibson had lost interest in the business, apparently because of its and their financial distress. At any rate, in October, 1930, the banks, R.E. Lawson an individual creditor of Gibson, Gibson himself, and his trustee in bankruptcy, filed suit against the laundry company setting up the situation, charging that its assets were being depreciated and its income diverted, that Gibson and May were insolvent, and asking for the appointment of a receiver. On December 26, 1930, the parties to that suit, as well as May individually, entered into a written agreement that a committee of three should be named to take charge of the business and apply the earnings to the liquidation of the debts. By this writing the committee was authorized to sell the laundry company's assets. An order was entered in the case reciting the terms of that agreement, the appointment of the committee, and that it had been made to appear that they could borrow enough money to liquidate the debts by pledging and putting the company's property in lien. The court authorized the committee to mortgage the property to the plaintiff in this suit, John L. Phillips, to secure him in a loan of $7,671, and the case was ordered stricken from the docket.

Pursuant to that authority of the court, on March 13, 1931, the committee executed a mortgage on the property to Phillips. Instead of executing new evidences of the obligations, the three notes were on the same day assigned without recourse to Phillips who had paid the holders of them.

In this suit on those notes and to enforce that mortgage, the Pineville Steam Laundry set up the defenses that there was no consideration, as the debts were the personal obligations of May and Gibson, and that the notes and the mortgage were ultra vires because not made by authority of its board of directors. As to the note for $1,600 signed by Mrs. Wood, it was charged that she was only a clerical employee and was without authority to execute the company's note. A counterclaim for $1,300, which had been paid on that $1,600 note after it came into the ownership of Phillips, was asserted upon the ground of fraud and mistake. The plaintiff traversed the allegations of the answer and counterclaim and pleaded the proceedings and the order of the court in the first suit as res judicata and in bar. He also pleaded an estoppel of the company to deny Mrs. Wood's authority because the note was a renewal of one originally made by the company for a loan and she had made the note with the knowledge and authority of the corporation, and also because it had ratified her acts by carrying the debt on its books as a liability and by making payments thereof aggregating $1,300. Another ground of estoppel was the solicitation, representations, and inducements of the company's officers to get the plaintiff to pay off and take over the notes. The trial court sustained both the pleas of res judicata and estoppel and rendered judgment for the plaintiff.

There is no doubt that the order in the first suit is an effectual bar to the defenses interposed in this suit. The company was a party to that first suit and had an opportunity to offer the same defenses set up in this one. It not only made no defense therein, but acknowledged the validity of these notes and consented to the order empowering the committee to carry out that to which it had previously agreed. The defense here was nothing more than an attempt to retry issues which could have been tried in the former action. No question of fact which has been once litigated or...