West Center Apartments Ltd. v. Keyes

• Decision Date: 30 May 1979
• Docket Number: No. 51167,51167
• Citation: 371 So.2d 854
• Parties: WEST CENTER APARTMENTS LIMITED, and First National Bank of Jackson v. Earl KEYES.
• Court: Mississippi Supreme Court

Page 854

371 So.2d 854

WEST CENTER APARTMENTS LIMITED, and First National Bank of Jackson v. Earl KEYES.

No. 51167.

Supreme Court of Mississippi.

May 30, 1979.

Watkins & Eager, William F. Goodman, Jr., Michael W. Ulmer, Arlin C. Ruthven, Thompson, Alexander & Crews, Thomas R. Crews, Jackson, for appellant.

McDavid, Edmonson, Bennett, Lotterhos & Sulser, Richard T. Bennett, Craig M. Geno, Earl Keyes, Jackson, for appellee.

Before ROBERTSON, P. J., and SUGG and LEE, JJ.

LEE, Justice, for the Court:

Earl Keyes filed suit in the Chancery Court of the First Judicial District of Hinds County, Mississippi, Honorable J. C. Stennett, presiding, against Windsor Park Limited Partnership (subsequently West Center Apartments, Ltd.) (Windsor), First National Bank of Jackson, Mississippi, ^B, Kinder Care Learning Centers, Inc., and approximately two hundred ninety (290) individual tenants of the apartment complex, seeking attorney's fees in the sum of twenty-nine thousand three hundred seventy-eight dollars twenty cents ($29,378.20). The chancellor entered a decree for said amount, together with pre-judgment interest on same, and, in addition, held that Keyes was entitled to collect the judgment from an escrow account in the amount of thirty thousand dollars ($30,000) established by First National Bank. Windsor and FNB appeal from that judgment.

Without detailing the many ramifications and business dealings involved, briefly, the facts are that Windsor Park Apartments, consisting of two hundred seventy-nine (279) residential apartments located on a seventeen-acre lot in Jackson, was owned by Windsor Park, Inc., a Mississippi corporation. That corporation was wholly owned by National Building Corporation (NBC), a Tennessee corporation, whose president was Henry Sender. Appellee is an attorney in Jackson and represented the apartment project. His representation began in about November, 1972, and from that time until, or just prior to, December, 1975, he performed considerable legal services for Windsor Park, Inc., and later for Windsor Park Limited Partnership, which subsequently purchased all the assets of Windsor Park, Inc.

Windsor Park, Inc. ran into substantial financial difficulties and in December, 1974, Windsor Park Limited Partnership was formed for the purpose of bringing in new investors to the project, the two general partners being National Building Corporation and Barnmiss Properties, Inc. Windsor Park Limited Partnership entered into an agreement with Windsor Park, Inc. for the purchase of, and it did purchase, all of the assets of Windsor Park, Inc., the purchase price being "an amount equal to the actual costs directly incurred in the construction of the apartment complex," and the sale was subject to the outstanding mortgages, which amounted to approximately four and one-half million dollars. ($4,500,000). The partnership continued to use the same bank account in FNB as that used by the corporation. In December, 1975, appellee submitted to Windsor Park Limited Partnership his bill for legal services rendered as follows:

                Incorporating Windsor Park, Inc.   $   350.00
                Closing the $2,975,000 loan and
                   other services - 1% of loan      29,750.00
                Filing fee and expenses                278.20
                                                  -----------
                            Subtotal                30,378.20
                Less credit for concrete from
                   the project used by Keyes       - 4,500.00
                                                  -----------
                             Total                 $25,878.20
                

The bill was not paid and in August, 1976, appellee wrote Mr. Sender and stated that it was necessary, because of the statute of limitations, to have the claim reduced to writing, and he enclosed a promissory note in the above amount which he requested Sender to sign on behalf of the limited partnership and NBC. Appellee received no response to that letter. However, Danny R. Poland, Financial Vice President and Treasurer of NBC, wrote him that the note would not be signed on behalf of the limited partnership but offered to sign same on behalf of Windsor Park, Inc. Upon receipt of that letter, appellee filed suit.

The appellants assign ten (10) errors in the trial below, but the questions presented by the assignments of error will be discussed in different forms.

I.

Did the limited partnership assume Windsor Park, Inc.'s liability to Keyes for attorney's fees?

18 Am.Jur.2d Corporations § 19, at 568 (1965) states:

"A corporation organized to take over the business of a partnership or of an individual may assume the liability of the partnership or the individual and thereupon become liable to the partnership creditors. The assumption may, according to some authorities, be either express, or implied from the circumstances, and proved by any competent evidence which will establish it."

The purchase agreement between Windsor Park, Inc. and the limited partnership provided:

"(8) Purchase price.

The purchase price for the premises shall be an amount equal to the actual costs directly incurred in the construction of the apartment complex on the premises as of the closing date as certified to the partnership by seller and as audited by the firm of Craft Bros., Eastman, Patent, Harold and Wheby."

Mr. Sender, president of NBC and Windsor Park, Inc., testified that he approved appellee's bill for services. We are of the opinion that, at least, there was an implied assumption by the limited partnership of Windsor Park, Inc.'s liability for appellee's fee.

II.

Was the sale of Windsor Park, Inc.'s assets to the limited partnership a bona fide sale?

In Mayes v. Thompson, 128 Miss. 561, 91 So. 275 (1922), elements for a bona fide sale were expressed as follows:

"The bona fide purchase for value rule had its origin in equity and is:

'that a purchaser in good faith for a valuable consideration and without notice of the prior adverse claims is protected against certain suits brought by the holders of such claims. The essential elements which constitute a Bona fide purchase are therefore three a valuable consideration, the absence of notice, and the presence of good faith.' " 128 Miss. at 573, 91 So. at 276.

The record reflects that the limited partnership had knowledge of the fact that Keyes had not received payment for his services. In Vicksburg & Yazoo City Telephone v. Citizens' Telephone, 79 Miss. 341, 30 So. 725 (1901), the complainant sought to subject the property of Citizens' Telephone Company, which had been conveyed to Cumberland Telephone Company, to damages suffered by the complainant for breach of contract by Citizens' Telephone Company. The bill of complaint charged that all property of every kind which had belonged to the Citizens' Telephone Company, except its corporate franchises, had been transferred to the Cumberland Telephone Company and that the Citizens' Telephone Company had gone out of existence "And where there has been neither a consolidation nor a merger, but a mere sale by one corporation of its property to another, that sale, if permitted by the constitution and the laws as not being against public policy or otherwise illegal, and if made for a valuable consideration in good faith, will pass the property of the selling corporation to the purchasing corporation free from claims of mere simple contract creditors. In every such case the same rule obtains as obtains in the case of a sale by an individual to another individual. . . . It would be necessary in such case that the complainant should state in his bill that there was fraud, or that the transfer was not made for a valuable consideration, Or that the defendant was not a bona fide purchaser. . . . The property here has not passed into the hands of a Bona fide purchaser from the consolidated company, and is therefore chargeable in equity with the debt (if any shall be established) here asserted. . . . The Citizens' Telephone Company could not give away its property to the prejudice of the complainant; and an attempted sale by it of this property to the Cumberland Telephone Company, the latter not being a Bona fide purchaser, cannot avail to defeat the equitable rights of the complainant asserted in this bill, the property being still in the possession of the Cumberland Telephone Company, not sold to a Bona fide purchaser from it." (Emphasis added) 79 Miss. at 353-354, 30 So. at 727-728.

and was defunct and that such was the purpose of the transfer. The Court said:

In Mississippi Cottonseed Products Co. v. Planters' Mfg. Co., 159 Miss. 153, 132 So. 96 (1930), the Court stated:

"In the Meridian Light & Railway Co. v. Josie Catar, 103 Miss. 616, 60 So. 657, it was held (in the first syllabus): 'Neither law nor equity will permit one corporation to take all the property of another, deprive it of the means of paying its debts, enable it to dissolve its corporate existence, and place itself practically beyond the reach of creditors, without assuming its liabilities.' It was further held that persons who acquire the property of the old corporations other than at a foreclosure sale are not purchasers for value without notice.

In Mahaffey Co. et al. v. Russell & Butler, 100 Miss. 122, 54 So. 807, 945, it was held: 'A corporation cannot, to the prejudice of its creditors, give away its assets to another corporation, nor can one corporation defeat the creditors of another by the purchase of its assets even for value, unless such purchase is bona fide; but in either case a purchasing corporation is only liable for the debts of the selling corporation to the extent of the value of the assets actually received.' " 159 Miss. at 165, 132 So. at 99.

After transfer of assets to the limited partnership an account was maintained in...