Whitlock v. Auburn Lumber Co.

• Decision Date: 03 October 1907
• Citation: 58 S.E. 909,145 N.C. 120
• Parties: WHITLOCK v. AUBURN LUMBER CO.
• Court: North Carolina Supreme Court

58 S.E. 909

145 N.C. 120

WHITLOCK v. AUBURN LUMBER CO.

Supreme Court of North Carolina

October 3, 1907

Appeal from Superior Court, New Hanover County; Long, Judge.

Action by Charles M. Whitlock, as a creditor of the Auburn Lumber Company, for the purpose of winding up its affairs, on an allegation of insolvency. Cameron F. MacRae was appointed receiver in the proceeding, and, from a judgment refusing to allow a certain credit on notes of the Auburn Lumber Company MacRae, as receiver, appeals. Affirmed.

The Acme Machine Works sold to the Auburn Lumber Company certain machinery and personal property for $2,770, of which sum $1,000 was paid in cash and the balance of the purchase money was secured by two notes, due, respectively, February 23 and April 24, 1903. On these notes payments were made, which reduced the balance due on December 15, 1906, including interest, to $973.36. In the contract of sale it was stipulated that if the Auburn Lumber Company should fail to pay the notes, or either of them, at maturity, the entire debt should become due, and the Acme Machine Works might take possession of the property, but, if the notes were paid at maturity, then the title, which until the payment should remain in the Acme Machine Works, should vest in the Auburn Lumber Company. The notes contained an absolute promise to pay the amount of money therein specified, with a stipulation, as follows: "For the retention of title until payment of the amount due on the notes, together with all reasonable attorney's fees for collecting and necessary expense incurred, if not paid at maturity, at which time the said machinery shall be at the disposal of the Acme Machine Works, or order, and for the deficit we hold ourselves equally responsible until paid in full." All the property was to be delivered to the lumber company on the cars at Goldsboro, N. C., at the same time, and the Acme Machine Works did so deliver all of it, except a dry kiln which it offered to deliver with the other property, but was requested by the Auburn Lumber Company not to deliver the kiln until called for by the lumber company, and it was accordingly held by the Acme Machine Works, at the special request of the lumber company, until the summer of 1903, when it was burned without negligence or fault of the Acme Machine Works. Its value was $750. The purchase notes above described were indorsed for value to the bank of Wayne before their maturity and without notice of any infirmity in them, except such, if any at all, as appears on the face of the notes. This action was brought, under the statute, by the plaintiff (Whitlock), as a creditor of the lumber company, for the purpose of winding up its affairs, upon an allegation of insolvency, and for the further purpose of having its assets applied to the payment of its debts. Cameron F. MacRae was appointed receiver in said proceeding. The Acme Machine Works, after the indorsement of the notes to the Bank of Wayne, assigned all of its assets to I. F. Dortch for the payment of its debts. The Bank of Wayne and Mr. Dortch thereupon filed a petition in this case, setting forth the facts and praying judgment for the amount of the balance due on the said purchase notes by the lumber company to the bank as assignee of the Acme Machine Works. The receiver, Mr MacRae, petitioned the court to be allowed to sell all of the property of the lumber company free of incumbrances, and asked that the lien of the Bank of Wayne for its alleged claim be transferred to the general fund in court (or the proceeds of the sale), the latter to be held subject thereto as the dry kiln would have been if it had not been sold. The court so ordered. Mr. J. O. Carr was appointed referee to pass upon the validity of the claim and lien of the Bank of Wayne. He reported substantially the above stated facts, and found, as a conclusion of law, that the bank had a lien for the balance of the notes held by it on the dry kiln and consequently on the fund in court. The court, upon exceptions by the receiver, confirmed the report, and gave judgment for the amount due on the notes, and the receiver appealed.

Where, on a sale of machinery, title to remain in vendor until paid for, vendee executed notes for the price, it was liable thereon, though the machinery was subsequently destroyed by fire.

Meares & Ruark, for appellant.

Aycock & Daniels, for appellees.

WALKER J.

It cannot be well denied that, under the prior decisions of this court, the transaction between the Acme Machine Works and the Auburn Lumber Company constitutes a conditional sale of the property described in their contract. The agreement was that the former should sell, and the latter should buy, the machinery and other property, to be delivered at once for the stipulated price. A part of the purchase money was paid in cash, and for the remainder the lumber company executed its notes, by which it absolutely and unconditionally promised to pay the sums therein specified. All of the property named would have been delivered immediately to the lumber company but for the request that the dry kiln be retained by the Acme Company until the lumber company should be ready to receive it. The receiver of the latter company contends, upon the facts found by the referee, that he is entitled to a credit of $750, which was the value of the dry kiln, upon the notes given for the purchase money of the property bought by the lumber company from the Acme Company, and which are now owned and held by the Bank of Wayne.

We do not perceive upon what ground, legal or equitable, any such claim can be successfully maintained. The lumber company has made an absolute promise to pay a certain sum of money, the consideration of which was the purchase of the property described in the contract. Why, then, should it not be compelled to perform its promise? It is a mistake to suppose that its liability depends upon whether the title did or did not pass unconditionally to it from the Acme Company. Its obligation arises out of the fact that it has promised to pay the money upon a sufficient consideration, and the said obligation is in no way affected by the state of the title to the property, as between the parties; that is, whether vested conditionally or unconditionally. The case is not distinguishable from that of Tufts v. Griffin, 107 N.C. 47, 12 S.E. 68, 10 L. R. A. 526, 22 Am. St. Rep. 863, in which is stated by Judge Shepherd, in his usually clear and vigorous style, the principle governing such cases. Quot-from Burnley v. Tufts, 66 Miss. 49, 5 So. 627 14 Am. St. Rep. 540 (in which will be found an able and well-considered opinion adopted by this court as a clear exposition of the law which obtains with us), he says: "'The transaction was something more than an executory conditional sale. The seller had done all he was to do, except to receive the purchase price. The purchaser had received all that he was to receive as the consideration of his promise to pay. The inquiry is not whether, if he had foreseen the contingency which has occurred, he would have provided against it, nor whether he might have made a more prudent contract, but it is whether, by the contract, he has made his promise absolute or conditional. The contract was a lawful one, and, as we have said, imposed upon the buyer an absolute obligation to pay. To relieve him from this obligation, the court must make a new agreement for the parties, instead of enforcing the one made, which it cannot do.' As is said in the foregoing extract, the vendor has done all that he was required to do, and the transaction amounted to a conditional sale, to be defeated upon the nonperformance of the condition. The vendee had an interest in the property which he could convey, and which was attachable by his creditors, and which would be ripened into an absolute title by the performance of the condition"-citing 1 Wharton on Contracts, 617; Vincent v. Cornell, 13...