Smead & Powell v. D. W. Chandler & Co.

• Decision Date: 06 June 1903
• Citation: 76 S.W. 1066
• Parties: SMEAD & POWELL et al. v. D. W. CHANDLER & CO.
• Court: Arkansas Supreme Court

76 S.W. 1066

SMEAD & POWELL et al. v. D. W. CHANDLER & CO.

Supreme Court of Arkansas.

June 6, 1903.

Appeal from Circuit Court, Columbia County; Chas. W. Smith, Judge.

Garnishment proceedings by D. W. Chandler & Co. against the J. F. Crawford Lumber Company and John G. Wepfer, receiver of the Creel Lumber Company, and others, as garnishees. From a judgment for the plaintiff, the garnishees appeal. Affirmed.

Smead & Powell, for appellants. J. M. Barker and Gaughan & Sifford, for appellees.

BATTLE, J.

The subject-matter of this litigation is a fund in court. It is claimed by D. W. Chandler & Co. under a writ of garnishment and by Frank E. Gates, as trustee, under a deed of trust.

The Creel Lumber Company was a corporation organized under the laws of Missouri, and operated a sawmill at Milner, in the county of Columbia, in this state. The J. F. Crawford Lumber Company was also a Missouri corporation, and was principally engaged in selling the output of the mill at Milner, for which it was to receive 65 cents per thousand feet.

On the 1st day of July, 1897, in the state of Missouri, the J. F. Crawford Lumber Company, by a deed of trust, conveyed to Frank E. Gates, as trustee, all of its property, both real and personal, including an account owed it by the Creel Lumber Company, for the purpose of securing certain creditors named therein. Among these creditors was George P. Gates, of Missouri, to whom it was indebted in a large amount. The deed of trust was delivered to the trustee in the evening of the day of its execution, accepted by him, and by him on the following day filed for record in the county of the home office of the company, and by him afterwards filed in the various counties of the state of Missouri where the real estate of the company was situated. On July 17th it was filed in the recorder's office of Columbia county, Ark.

After the execution and delivery of the deed of trust to Frank E. Gates, as trustee, the said J. F. Crawford Lumber Company, on the 2d day of July, 1897, in the state of Missouri, by deed of assignment, conveyed all of its property to William E. Hill, assignee, for the benefit of all its creditors.

A short time prior to the 1st day of July, 1897, the J. F. Crawford Lumber Company placed in the hands of Smead & Powell, attorneys at Camden, Ark., for collection, the account against the Creel Lumber Company, in the sum of $25,297.03. And on July 2, 1897, said attorneys filed a bill in chancery in the Columbia circuit court, asking that a receiver be appointed to take charge of the assets of the Creel Lumber Company. The prayer was granted, and John G. Wepfer was duly appointed receiver by the court. This case remained on the docket, as originally commenced, in the name of the J. F. Crawford Lumber Company, though both Smead & Powell and John G. Wepfer, as receiver of the Creel Lumber Company, were notified by Frank F. Gates immediately after the deed of trust was executed to him, as trustee, by the J. F. Crawford Lumber Company, that he held said indebtedness as such trustee, and it was so understood by Smead & Powell.

Three days after the appointment of John G. Wepfer as receiver of Creel Lumber Company, on the 5th day of July, 1897, D. W. Chandler & Co. commenced an action against the J. F. Crawford Lumber Company in the Columbia circuit court for the sum of $2,338,34, and on the 9th day of said month a summons was issued therein. The indebtedness upon which this action was brought was in the nature of acceptances by the Creel Lumber Company, indorsed by the J. F. Crawford Lumber Company. This claim was also filed by the receiver of the Creel Lumber Company, and was credited with its pro rata of the proceeds arising from the sale of the Creel Lumber Company property by the receiver, under order of the court. The balance due after this credit reduced the amount to $1,496.27, for which the plaintiffs obtained judgment against the J. F. Crawford Lumber Company.

At the institution of the action of D. W. Chandler & Co. against the J. F. Crawford Lumber Company, the plaintiff caused an order of attachment to issue, which was returned without being served. A writ of garnishment was at the same time issued, and was served on the 16th of July, 1897, upon John G. Wepfer, as receiver, and Smead & Powell, as attorneys for the J. F. Crawford Lumber Company.

In the suit of the J. F. Crawford Lumber Company against the Creel Lumber Company a decree was rendered in favor of the plaintiff and intervening creditors, and a distribution of the proceeds of the sale of the property of the defendant was ordered by the court to be made by the receiver. A judgment was rendered in favor of the plaintiff for $23,000, and a distributive share of about $7,000 was awarded thereon, and paid to Smead & Powell, by agreement, to hold subject to the order of the court in the action of D. W. Chandler & Co. against the J. F. Crawford Lumber Company.

Afterwards Smead & Powell, garnishees in the action of D. W. Chandler & Co. against J. F. Crawford Lumber Company, answered, and alleged that they held no funds of the defendant, and that the moneys held by them were the property of Frank E. Gates, as trustee, and were so held by them. Gates, as such trustee, filed his complaint, and claimed the funds in the hands of the garnishees, Smead & Powell, by virtue of the deed of trust executed to him as before stated.

The deed of trust and assignment executed by the J. F. Crawford Lumber Company, the statutes and reports of the opinions of the Supreme Court of the state of Missouri upon the subject of mortgages and assignments for the benefit of creditors, an agreed statement of facts, and depositions of witnesses were read as evidence in the trial to the court, sitting as a jury; and the foregoing facts appeared, and it was shown that the trustee, Gates, converted the assets in his hands, except property of the value of $2,000, into money, and paid about 35 per cent. of the indebtedness secured by the deed of trust, leaving in his hands about $1,200 in money to pay costs, expenses, and fees, and the $7,000 paid on the judgment against the Creel Lumber Company, and that the balance of such indebtedness still due is about $37,000.

The court sustained the attachment, rendered judgment in favor of plaintiffs for the $1,496.27, and ordered Smead & Powell to pay the same, if the judgment shall not be reversed by this court; and the garnishees, Smead & Powell, and Gates, as trustee, appealed.

By the laws of what state are the rights of the parties in the case determined?

Every state has jurisdiction over all property, personal and real, within its territorial limits, and, within the bounds of legislation, may regulate and control it in such manner as to it may seem fit or expedient. It may provide how far the laws of a foreign state in which a contract or transfer or mortgage of property has been made shall govern in the enforcement of such contract, transfer, or mortgage by its courts, or that its own laws shall be the only rule observed in such cases. But when it has not done so the general rule is "that the nature, the obligation, and the interpretation of personal contracts and contracts concerning movable property are governed, in such a state, by the laws of the place where they are made, unless the parties at the time of making them have some other law in view." Liverpool Steam Co. v. Phenix Ins. Co., 129 U. S. 458, 9 Sup. Ct. 478, 32 L. Ed. 788. Such law governs, in such cases, not because it has any extraterritorial force, but by permission, upon a principle of justice and comity. But this rule has its exceptions. There are five instances in which the state of the forum will not enforce the foreign law: "(1) Where the enforcement of the foreign law would contravene some established and important policy of the state of the forum; (2) where the enforcement of such foreign law would involve injustice and injury to the people of the forum; (3) where such enforcement would contravene the canons of morality established by civilized society; (4) where the foreign law is penal in its nature; and (5) where the question relates to real property." Minor on Conflict of Laws, §§ 5, 13.

It follows, then, that where the owner undertakes, in one state, according to its laws, to mortgage personal property in another state, and the mortgagee attempts to enforce the mortgage in the actual situs of the property against third parties domiciled there, the laws of which situs conflict with the lex loci contractus, the law of the forum will govern. The reason of this rule is, the state of the forum, as before stated, has the right to regulate the transfer of property in its bounds for the purpose of protecting its citizens, and to enforce the laws enacted for that purpose, in such cases. As a general rule, no injustice can be done to the parties by requiring them to conform to such laws. On the contrary, citizens of the situs of the property might be greatly injured if it was not made their duty to do so. They have no just cause of complaint. In sending their property into a state, they impliedly submit to the regulations concerning its transfer in force there, although a different rule of transfer prevails in the jurisdiction where they reside. The observance of comity towards other states, to the unjust injury of citizens of the forum, cannot be reasonably expected or required. What we have said in this connection applies only when the actual situs of the property and the forum are the same. Green v. Van Buskirk, 7 Wall. 139, 19 L. Ed. 109; Hervey v. R. I. Locomotive Works, 93 U. S. 664, 23 L. Ed. 1003; Warner v. Jaffray, 96 N. Y. 248, 48 Am. Rep. 616; Denny v. Faulkner, 22 Kan. 89, 98, Minor on Conflict of Laws, § 14.

"There is usually no difficulty in ascertaining the actual situs of tangible chattels, whenever it becomes necessary to discriminate between the actual and legal situs thereof." "But with respect to...