Forrey v. Strange , 158 La. 941 ( 1925 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] On January 19, 1919, defendant and three associates sold to the Globe Oil Company a certain oil lease for $300,000; of which $60,000 was paid cash, and the balance secured by mortgage on said lease. On the same day the Peerless Oil Company sold to said Globe Oil Company another oil lease for $450,000; of which $90,000 was paid cash, and the balance secured by mortgage on said lease.

It appears also that defendant and his associates were the principal stockholders of the Peerless Oil Company; that the sale of both leases was negotiated as a single transaction for $750,000, of which $150,000 was to be paid cash, and the balance on terms, the stockholders of the Peerless Company approving the division by which the company received 60 per cent., and defendant and his associates 40 per cent. thereof. But mention is made of all this simply to show that defendant and his associates had an interest in both mortgages when defendant purchased at the foreclosure sale hereinafter mentioned.

I. The Globe Oil Company thereupon went into possession of and operated said leases, purchasing for that purpose, on open account, from the Continental Supply Company, some $40,481.34 of "machinery, oil well supplies, tools, wares, and merchandise"; upon which certain partial payments were made, reducing the amount due on February 1, 1920, to a balance of $21,339.71.

Meanwhile, on February 15, 1919, the Globe Oil Company had granted a second mortgage on these (and other) leases to secure certain bonds aggregating $2,000,000; in which mortgage (and deed of trust) plaintiffs Frank M. Forrey and the Fort Dearborn Trust Savings Bank of Chicago have been constituted trustees for the bondholders.

II. In May, 1920, there was still owing to defendant and associates a balance on their mortgage of $80,000, with interest at 6 per cent. from January 19, 1919, and attorneys' fees at 2 1/2 per cent.; and to the Peerless Oil Company a balance of $120,000, with like interest and attorneys' fees. And said amounts being then past due, both creditors took out executory process (foreclosure proceedings), each against the lease on which it held a mortgage.

Both leases were advertised for sale (and were sold) on the same day, to wit, July 3, 1920. On which day, with interest, attorneys' fees and costs, the claim of defendant and associates amounted to $90,313.03, and that of the Peerless Oil Company to $136,690.30. And on that day the claim of the Continental Supply Company amounted, with legal interest from February 1, 1920, to $21,824.71; for which amount said company claimed a vendor's lien and privilege upon such machinery, supplies, and tools furnished by it to the Globe Oil Company, as might be found upon the seized premises and capable of identification.

III. Both leases had been ordered sold without appraisement, the benefit thereof having been specially waived in both mortgages. But defendant was desirous of protecting both mortgages, in both of which he had an interest as aforesaid. It was his intention, therefore, to bid at the sale up to the full amount of said mortgages, with interest, etc., but to bid no more; and he made that intention known to whoever appeared to take sufficient interest in the affairs of the Globe Oil Company (then in bankruptcy), and of its bondholders, to make any inquiries on the subject. The evidence does not show that plaintiffs made any such inquiries, either in their capacity of trustees for the bondholders or otherwise. IV. But the Continental Supply Company, in order to protect its vendor's privilege, was about to demand an appraisement and separate sale of the property on which it claimed such privilege.

Whereupon counsel representing plaintiffs in the foreclosure proceedings (who also represented this defendant in the purchase he made at the foreclosure sale) investigated the claim of the Continental Supply Company, and having been satisfied that the claim was due, and that the property sold by the Supply Company to the Globe Company could be identified, entered into a written engagement with the attorney for the Supply Company, whereby it was agreed:

"* * * That, in order to save costs and expenses the aforesaid property sold by the Continental Supply Company (to the Globe Oil Company) be this day sold under the foreclosure proceedings without being separately appraised and separately sold; but that $21,339.71 of the sales price of said property in the foreclosure proceedings be set aside as the proportionate part paid for the property shown in the list hereto annexed and made part hereof, and on which the Continental Supply Company has its vendor's lien and privilege; and it is agreed that its vendor's lien may be recognized and enforced against the said sum of $21,339.71, plus interest from February 1, 1920, the same as if the said property had been separately appraised and sold for the said sum of $21,339.71, plus interest from February 1, 1920 (i.e., $21,824.71). The admissions herein are made upon the assumption that no third party has any adverse interest."

V. Accordingly, when the leases were cried out for sale, counsel who bid for this defendant increased his intended bids by the full amount of the Supply Company's claim; adding 40 per cent. thereof, or $8,731.90, to his bid on the Strange lease, and 60 per cent. thereof, or $13,092.81, to his bid on the Peerless lease. Hence the Strange lease was adjudicated to defendant for $99,044.90; which bid, according to the procès verbal and return of the sheriff, "included $8,731.90 bid for the property sold bythe Continental Supply Company, located on the said lease, and onwhich said company claims a vendor's lien and privilege"; and thePeerless lease was adjudicated to defendant for $149,783.11; which bid, according to the procès verbal and return of the sheriff, included $13,092.81 bid for the property sold by theContinental Supply Company, and located on said lease, and onwhich said company claims a vendor's lien and privilege."

The full amount of the Supply Company's claim, $21,824.71, was thereupon paid by the sheriff to its attorney ($8,731.90 plus $13,092.81), and the balance of said purchase price, less the costs, was paid to the attorney for the plaintiffs in the foreclosure, being the amount of their claim with interest and attorneys' fees according to the bid originally intended by defendant (to wit, $89,380 on the Strange mortgage, and $134,170 on the Peerless mortgage).

VI. Plaintiffs, as trustee for the bondholders, whose bonds (as we have said) were secured by the second mortgage on the two oil leases aforesaid, bring this strictly "hypothecary action, properly speaking," by which, "If the hypothecated property be neither in the possession of the debtor nor of his heirs, but in that of a third person, the creditor has his action against that person, in order to compel him either to give up the property or pay the amount for which it stands hypothecated." Code of Practice, art. 68.

Their claim is that defendant's bids must be held to be, in contemplation of law, simply a flat bid of $99,044.93 for theStrange lease, and a flat bid of $149,783.11 for the Peerless lease; that the Continental Supply Company had no vendor's lien or privilege for the balance due it on open account; and if it ever had one, then same was lost by failing to demand a separate appraisement and separate sale of the property on which it claimed such privilege, and allowing same to be sold confusedly with other property; that accordingly, the excess of $8,731.90 on the Strange lease and of $13,092.81 on the Peerless lease, which he bid above the amount of the first mortgage claim thereon, inured to the benefit of the holders of the second mortgage aforesaid, and should have been retained by defendant (or paid over to plaintiffs) to be applied on said second mortgage.

On the other hand, defendant contends that the plaintiffs are estopped in the premises for having consented to the sale and distribution of proceeds as made; that the property sold by the Continental Supply Company to the Globe Oil Company was never subject to plaintiffs' mortgage; that his bids were, in fact and in law, $90,313.03 for the Strange lease and $136,690.30 for thePeerless lease, and $21,824.71 ($8,731.90 plus $13,092.81), for the movable property thereon, in which plaintiffs had no interest.

VII. We think the bid at sheriff's sale must be taken as a flat bid for the leases and whatever went with them. The defendant in the executory proceeding was the owner of the leases and of all the property in the leased premises; and no one but the owner of that property could consent to a sale thereof otherwise than in accordance with the writ held by the sheriff. That writ called for the sale of the leases themselves, and whatever was bid at the sale was bid for what the sheriff was authorized and directed to sell. Neither the sheriff nor the bidder had any right to change or alter in any way the terms of the writ, which was the only authority under which the sheriff could proceed. In Doucet v. Fenelon, 120 La. 18, 44 So. 908, this court held:

"The writ or commission directed by the court to the sheriff to sell certain property constitutes for him his sole guide. He has no authority to deviate from its terms. * * *" (Syllabus No. 3) — citing Landreaux v. Foley, 13 La. Ann. 116; Danniel v. Klein, 47 La. Ann. 928, 17 So. 466; Ford's Heirs v. Mills, 46 La. Ann. 338, 14 So. 845.

See, also, Succession of Bright, 38 La. Ann. 141.

VIII. The Continental Supply Company had no vendor's lien upon all the movable property on the leased premises. Its claim was for a balance due on a running account. The law allows no vendor's lien for a general balance upon all the property sold and delivered and charged for in said account. The law is, that the vendor's lien extends only to the very thing for which the price has not been paid, and only to the extent of the unpaid price thereof; also, only if the thing still remains in the possession of the purchaser. R.C.C. 3227 to 3231.

Manifestly, payments on open account must be imputed to the price of the things first sold, unless specially agreed otherwise. R.C.C. 2163 to 2166. Hence the Continental Supply Company had been paid the price of the articles first sold, and had no vendor's lien on such property for the unpaid price of the things afterwards sold; nor had it any vendor's lien for the unpaid price of such things as had been disposed of.

IX. Moreover, whatever vendor's lien the Continental Supply Company may have had for the unpaid price of such articles as still remained in the possession of the vendee, it lost by allowing same to be sold confusedly with the other things sold without demanding at least a separate appraisement thereof. R.C.C. 3228; see Legendre v. McCall's Estate, 136 La. 947, 68 So. 86, and authorities there cited. X. On the other hand, plaintiffs here had a mortgage under Act 232 of 1910, p. 393, on all such machinery and appurtenances as were destined to the development and operation of the oil leases (Choate Oil Corporation v. Glassell, 153 La. 715, 96 So. 543), and at this time it is impossible to separate such things from the rest of the things standing on the leased premises at the time of the seizure and sale. XI. We find nothing in the evidence to show that these plaintiffs acquiesced in the manner in which the proceeds of sale were distributed by the sheriff. It is quite true that certain individual bondholders, and representatives of individual bondholders, of the Globe Oil Company, knew and acquiesced in what defendant and the sheriff purposed to do. But the evidence satisfies us that these were not representatives of the trustees, who alone were authorized to represent all the bondholders. They were mere volunteers, and acted entirely without any authority whatsoever from the trustees, plaintiffs here. The estoppel pleaded is therefore not well founded. XII. It is well-settled jurisprudence in this state that it is the duty of a purchaser at a sheriff's sale to pay to the sheriff only the amount called for by the writ, and to retain in his own hands the amount of his bid in excess thereof to be applied to the payment of junior mortgages; and if he fails to do so, but pays same to the sheriff, he constitutes the latter his own agent for that purpose; and an application by the sheriff of such surplus to the payment of other claims cannot prejudice the junior mortgagees, who may proceed against the property by the hypothecary action aforesaid. Code of Practice, 707, 708, 709; Pepper v. Dunlap, 16 La. 163; Merchants' Bank v. Peters, 2 Rob. 214; Scott v. Featherston, 5 La. Ann. 306; Quertier v. Succession of Hille, 18 La. Ann. 65; Johnson v. Duncan, 24 La. Ann. 381; Bacas v. Hernandez, 31 La. Ann. 86; Robinson v. Cosner,136 La. 595, 67 So. 468.

We see no error in the judgment below.

Decree. The judgment appealed from is therefore affirmed.