Powers v. Johnson

• Decision Date: 02 June 1934
• Docket Number: No. 9868,9869.,9868
• Citation: 71 F.2d 48
• Parties: POWERS et al. v. JOHNSON (BLOCKER, Intervener). POWERS v. JOHNSON et al.
• Court: U.S. Court of Appeals — Eighth Circuit

71 F.2d 48 (1934)

POWERS et al. v. JOHNSON (BLOCKER, Intervener).

POWERS v. JOHNSON et al.

Nos. 9868, 9869.

Circuit Court of Appeals, Eighth Circuit.

April 24, 1934.

Rehearing Denied June 2, 1934.

Will Steel and T. B. Vance, both of Texarkana, Ark., for appellants.

James D. Head, of Texarkana, Ark. (Ben E. Carter, of Texarkana, Ark., on the brief), for appellees.

Before STONE and WOODROUGH, Circuit Judges, and OTIS, District Judge.

WOODROUGH, Circuit Judge.

Statement of the Case.

There are two appeals presenting the same issues and consolidated for hearing, one to reverse an order in bankruptcy hereafter referred to as the order of August 1, 1933, and the other to reverse an order in bankruptcy hereafter referred to as the order of August 11, 1933. The record discloses that the property here in controversy is an ice plant in Texarkana, Ark., consisting of certain real estate, machinery, and equipment. A. C. Powers owned this plant, and on August 7, 1931, he agreed to sell it to George E. Wells for a consideration of $12,500 in cash and $12,500 par value preferred stock of the Interstate Service Corporation. Both the cash and the stock were to be put up with the State National Bank of Texarkana as trustee, and it was agreed that, when the title was approved, that bank should pay off a mortgage which it held against the property and certain accounts and taxes and turn the balance of the cash over to Powers together with the preferred stock.

There is no controversy but that the money part of the consideration was paid and applied as per the agreement. Certain stock was also put up with the bank for delivery to Powers.

Powers executed a deed conveying the property to Wells under date of August 10, 1931. This deed recited receipt of the full consideration, and was delivered to George E. Wells on or about August 10, 1931. The deed does not recite the retention of any vendor's lien, but does recite that the full consideration had been paid. This deed was recorded on February 20, 1932.

Wells organized the Powers Ice Company, an Arkansas corporation, and conveyed this property to it by warranty deed dated February 29, 1932, and recorded March 12, 1932.

The Powers Ice Company on September 1, 1931, conveyed the property to Will Steel as trustee to secure $15,000 in notes payable to J. D. Head. This deed of trust was recorded on January 7, 1932. The Southwest Public Service Corporation filed a claim in the bankruptcy court alleging that it was the owner of the notes secured by said deed of trust, and said claim was allowed as a secured claim on March 28, 1933.

As above stated, certain stock was delivered to the State National Bank to be turned over to Powers as a part of the consideration for his conveyance of this property to Wells. For reasons not here material this stock was not delivered, and on September 22, 1932, Powers filed a replevin suit in the circuit court of Miller county, Ark., against the State National Bank to recover $12,500 of 7 per cent. preferred stock of the Interstate Service Corporation. The complaint alleged that this stock was the property of Powers by virtue of this contract of sale of said ice plant, and that the same was being unlawfully detained by the bank, and plaintiff sought to recover said stock or its value and damages for the unlawful detention thereof. On October 11, 1932, the bank answered in the replevin suit and alleged that it was a mere stakeholder and that it was on that day filing a bill of interpleader in the chancery court of Miller county, Ark., against all the persons interested in said stock, and asked that said replevin suit be transferred to the chancery court. On the same day the bank did file its interpleader against Powers, Wells, and the Powers Ice Company setting up the contract of sale and alleging that the property involved had been transferred to the Powers Ice Company and that, in accordance with directions given to it at the time the stock was deposited, it had tendered $10,000 of the stock to Powers, who had refused to take it. The bank asked that Powers, the ice company, and Wells be compelled to litigate any controversy between them with reference to the stock and that it be permitted to deliver the stock into court and be discharged.

On October 18, 1932, Wells and the ice company filed their answer, in which, among other things, they sought certain relief and damages against A. C. Powers.

On November 22, 1932, which was less than four months prior to the date when the Powers Ice Company was adjudicated a bankrupt (said date being March 18, 1933), Powers filed his separate answer to the interplea of the bank in which he denied most of its allegations, and on the same day filed an answer to the cross-complaint of Wells and the ice company, and also on the same day, to wit, November 22, 1932, which was less than four months prior to the bankruptcy, Powers filed a cross-complaint against George E. Wells, Inc., George E. Wells, Interstate Service Corporation of Delaware, Charles M. Conway, Powers Ice Company, J. D. Head, and Will Steel; the said Head and the said Steel being the parties payee and trustee, respectively, under the deed of trust above referred to and under which the Southwest Public Service Corporation alleged in the bankruptcy court it was entitled to a secured claim, which claim was allowed by the referee. In this cross-complaint Powers alleged that the 7 per cent. preferred stock of the Interstate Service Corporation, which was to be a part of the consideration for his conveyance of the ice plant property to Wells, was falsely and fraudulently represented by said Wells and others to Powers to be of the par value of $12,500, and that it was worth face value and would yield 7 per cent. per annum and that it was then paying dividends; that he relied on said representations and conveyed his property and that said representations were untrue and known to be untrue. He alleged that the cash consideration was paid; he alleged that the stock which was to be paid to him was of no value whatever. The relief asked for by him was that he have judgment against the Interstate Service Corporation, Charles M. Conway, George E. Wells, Inc., J. D. Head and Will Steel for the sum of $12,500, together with 6 per cent. interest from August 7, 1931, and that the same be declared a vendor's lien against the property in his favor prior and superior to any claim by reason of the deed of trust to Will Steel as trustee for J. D. Head. (The chancery court subsequently dismissed for want of equity the cross-complaint in so far as it affected James D. Head and Will Steel.) Powers asked in the alternative that, if it should be found that he was not entitled to a vendor's lien, he have judgment for $12,500 as damages for deceit in the sale of said stock.

The cross-complaint of Powers was answered by Wells, Conway, Powers Ice Company, Head, and Steel. The allegations of the cross-complaint were denied, and it was alleged that, after Powers had conveyed the property to Wells and Wells had conveyed it to the Powers Ice Company, the Powers Ice Company borrowed $15,000 on the property from the Southwest Public Service Corporation, and that the deed of trust to secure said loan was executed to Will Steel as trustee for Head and the notes were executed to Head and by him indorsed and transferred to the Southwest Public Service Corporation. All the allegations as to false representations were denied.

On November 23, 1932, which was also within four months prior to bankruptcy, there was filed a lis pendens notice, purporting to give notice of Powers' cross-complaint.

This interpleader suit came on for trial in the chancery court of Miller county on January 7, 1933. The bank then tendered into court the stock certificates in its possession, and it was then discovered that they were not for stock in the amount of $12,500 par value, but were for 125 shares of no par value $7 series preferred stock. The chancery court on January 7, 1933, entered its decree. This decree recited a hearing on the pleadings and oral testimony. The court found that the failure to deliver par value stock constituted a material breach of the contract and that Powers was entitled to judgment against Wells and the Powers Ice Company for $12,500 less $409.88, and "that said judgment should be declared an equitable vendor's lien against the ice plant property prior in right and equity to any claim of interest of George E. Wells, Powers Ice Company or the Interstate Service Corporation thereto." The decree ordered that Powers have and recover of and from Wells and the ice company the sum of $12,090.12, with interest, and that said judgment be an equitable vendor's lien against the property, and that, in the event the judgment be not paid within ninety days from and after January 7, 1933, the property be condemned to be sold, and appointed C. M. Blocker as commissioner in chancery to make the sale. Powers' cross-complaint against Conway, Head, George E. Wells, Inc., and Steel was dismissed for want of equity, as was also the complaint against the Interstate Service Corporation.

On March 18, 1933, the Powers Ice Company was duly adjudicated a bankrupt. On the same day the referee appointed David B. Johnson as receiver, and Johnson thereupon took over from the Powers Ice Company the actual physical possession of the property involved in the controversy. He found Ted Miller, local manager of the Powers Ice Company, in possession of the property, and took it over from him. He posted notices showing that the property was in the possession of the bankruptcy court. There were no notices showing that any one else claimed to be in the possession of the property. Miller testified that he was the manager for the Powers Ice Company and as such had been in the actual possession of the property from August 8, 1931, until March 18, 1933, and that during this time no one had made any claim on him for the...