Smith v. Arkadelphia Milling Company
| Citation | 220 S.W. 49,143 Ark. 214 |
| Decision Date | 05 April 1920 |
| Docket Number | 305 |
| Parties | SMITH v. ARKADELPHIA MILLING COMPANY |
| Court | Supreme Court of Arkansas |
Appeal from Montgomery Chancery Court; J. P. Henderson, Chancellor affirmed.
Decree affirmed.
John H Crawford and Dwight H. Crawford, for appellant.
1. The description as to the location of the property in the so-called equitable mortgage is void for uncertainty and it does not attempt to convey after-acquired property. 108 Ark 162; 71 S.W. 797.
2. The Milling Company by virtue of its several stave contracts had no lien upon the staves by Brown to Smith which it can enforce against Smith. Kirby's Digest, § 5396. The mortgage was neither acknowledged nor recorded. 43 Ark. 464; 96 Id. 503; 97 Id. 398; 118 Id 192; Kirby's Dig. § 510; 132 Ark. 166. See also 27 Cyc. 984; 19 R. C. L. p. 274, § 44; 9 Ark. 112; 22 Id. 136.
3. Chancery court should not appoint receivers to take charge of and sell property on which no lien existed and which was not the subject of litigation. 68 Neb. 222; 63 L. R. A. 791-798; 44 N.E. 585-589; 203 L. R. A. 1916 B. 1182; 49 Ark. 117-121; 23 R. C. L. p. 13, § 7. The sale was void as to Smith; he had purchased the staves and was in possession.
4. It was error to enter a final decree before the. receivers made their final report. Kirby's Digest, § 6352; 15 Ark. 557, 609; 47 Id. 532.
5. The assets in the hands of the court should have been marshalled.
6. The appellee is liable to Smith for the value of the staves from the time converted with interest. 72 Ark. 471.
Joseph S. Utley, of counsel for appellant.
Appellant has no lien against Smith and the Montgomery Chancery Court had no jurisdiction to decide the merits of the controversy, etc.
McMillan & McMillan, for appellee.
1. The sale was fraudulent and void. Kirby's Dig. § 3658.
2. The findings of the chancellor are not clearly against the preponderance of the evidence, and this court will not disturb them. 132 Ark. 173-179; 1 Crawford's Digest, 307-310. Brown's attempted sale was fraudulent and void, and Smith had knowledge sufficient to put him on notice or at least on inquiry. The appellee had an equitable lien on the staves superior to any of Smith who had actual notice at least of facts to put him on inquiry. 106 Ark. 82; 61 Id. 129; 37 Id. 511.
3. The agreement is not a mortgage. 3 Pom. Eq. § 12129, p. 230; 39 Ark. 439; 60 Id. 595; 2 Summ. 486; 8 Allen, 536; 78 S.W. 340; 91 Ark. 273; 97 Id. 536. Equitable liens need not be recorded. 60 Ark. 595; 1 S.Ct. 537.
4. According to the evidence the staves were trust property. 113 Ark. 36; 122 Id. 366.
Appellee, Arkadelphia Milling Company, is a corporation engaged in the stave business at Arkadelphia, and in the year 1915 began buying staves from W. W. Brown, who was manufacturing staves in Montgomery County, Arkansas. Brown became indebted to appellee in a large sum of money, and in the year 1916 a contract was entered into between Brown and appellee whereby the former agreed to manufacture and deliver 500,000 or more white oak staves at specified prices. It was stipulated in the contract that the appellee should make advances to Brown and that all indebtedness of Brown to appellee should constitute a lien in appellee's favor on all stock on the mill yard or yards of Brown. Brown also executed a mortgage to appellee on certain real estate to secure payment of his indebtedness to the latter. The parties proceeded under this contract, and Brown became more heavily indebted to appellee, and in August, 1917, appellee declined to make further advances to Brown for the operation of his stave mill in Montgomery County. The mill was shut down at that time and was not operated thereafter.
Brown was living in Womble, and the stave yard was located about fifteen miles in the country out from Womble, and F. V. Cass, a former employee of Brown, was left in charge of the plant and stave yard. There were about 90,000 staves stacked on the yard. Each of the parties, that is to say appellee and Brown, claimed Cass as his agent or representative in holding possession of the mill. It is unnecessary to a decision of the case to determine whether Cass held possession of the mill and staves on the yard as a representative of appellee or of Brown.
Appellee commenced this action in the Montgomery Chancery Court against Brown on February 23, 1918, to foreclose its mortgage on the real estate, and subsequently obtained an order from the chancellor appointing a receiver to take charge of the staves remaining on the mill yard of Brown in Montgomery County and to restrain Brown from attempting to sell or remove any of the staves. The receivers appointed by the court took charge of all of the staves remaining on the yard and vicinity, but a considerable portion thereof had been removed from the yard by appellant T. J. Smith and sold. Smith claims that he purchased 60,000 of the staves from Brown and paid him for them before the institution of this action, and he filed an intervention in this case disputing appellee's right to claim the staves under its contract or to claim a lien on the staves.
Appellant had removed a portion of the staves before the appointment of the receiver and sold the same, receiving therefor the sum of $ 697.50. He had also shipped a car load of the staves to Arkadelphia and the same were taken possession of by appellee. Appellant brought replevin suit in the circuit court of Clark County to recover possession of this car load of staves. That action was removed to the chancery court of Clark County on motion of appellee. Appellee answered the intervention plea of appellant in the present action and made its answer a cross-complaint, alleging that the sale of staves by Brown to appellant was fictitious and fraudulent and made for the purpose of cheating and defrauding appellee and interfering with it in the collection of its debt against Brown. The prayer of the cross-complaint was for recovery from Smith of the sum of $ 697.50, the price of the staves sold by him; that appellant be restrained from prosecuting the suit in the Clark Chancery Court, and that the rights of the parties in the car load of staves involved in that action be adjudicated in this action, and that appellant recover nothing, either on his intervention plea in this action or on his complaint in the Clark Chancery Court. The cause was heard on testimony introduced in open court and decree was rendered dismissing appellant's intervention and giving appellee the relief prayed for. The intervener, Smith, alone has appealed.
We deem it unnecessary to determine the question debated by counsel, whether or not appellee had an equitable lien under its contract with Brown for the manufacture of staves, for we are of the opinion that, according to the preponderance of the evidence, the charge of fraud and collusion in the sale of staves by Brown to Smith is fully sustained, and that appellee is entitled to have the conveyance set aside as a fraud on its rights as a creditor of Brown, who, according to the undisputed evidence, is insolvent.
A very brief narrative of the testimony will disclose the character of the fraud attempted to be perpetrated by Brown and Smith on appellee.
Smith was not engaged in the stave business, and never had been so engaged. He was a farmer in Faulkner County and went to Womble, Montgomery County, in search of farm lands to purchase. He fell in there with Brown, who was running a hotel at Womble, and Brown took him out to look at land. This was in January, 1918, and on the 5th day of that month they drove out to Brown's stave mill, which had, as before stated, been shut down since the preceding August, and, according to their testimony, on this trip Brown suggested to appellant the purchase of staves. They stopped at the mill plant and took dinner there that day with Cass, and began negotiations for the sale of 60,000 of the staves. When they got back to Womble the trade was closed that night at the hotel, and appellant gave Brown a check on his bank at Conway for the sum of $ 200 initial payment on the price of the staves, the check being marked so as to show that it was given for "timber." Payments were made thereafter by appellant to Brown from time to time on the purchase price. Very soon thereafter Brown began, with his employees, to haul the staves off of the yard and dump them in piles along the road. This was done evidently for the purpose of getting them off the stave yards so that appellee could not claim them. Appellant purchased the hotel property from Brown and moved to Womble for the purpose of operating the...
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Rush v. Smith
...170 Ark. 445, 280 S.W. 380 (1926). The recited consideration was decidedly less than the value of the stock. Smith v. Arkadelphia Milling Co., 143 Ark. 214, 220 S.W. 49 (1920). Paul Rush in effect retained possession of the stock, for we have no doubt that the bank would have cooperated in ......