Lawrence Lumber Co v. Lyon , 93 Miss. 859 ( 1908 )

Whitfield, C. J.,

delivered the opinion of the court.

These two appeals have been presented together, and will be by us so eonsidéred. The facts in the case are as follows: A. J. Lyon & Co., of Meridian, Mississippi, filed their bill in the chancery court of Newton county, state of. Mississippi, against the Lawrence Lumber Company, the Crescent Lumber Com-, pany, and Geo. B. Neville, trustee, praying for and obtaining the appointment of D. L. Eagland as receiver of the property and effects of the said Lawrence Lumber Company. The appellants, Lawrence Lumber Company, Crescent Lumber Company, and Geo. B. Neville, trustee, made a motion before the chancellor in vacation to vacate the appointment of said receiver, which was heard by the chancellor in vacation upon oral testimony, and a decree rendered overruling the motion of appellants to vacate the appointment .of said receiver, from which decree appellants have proscuted this appeal.

The undisputed facts disclosed by the record and the testimony are as follows:

The Crescent Lumber Company was. and is a partnership composed solely of C. E. Myers, and was and is engaged in the lumber brokerage business in the city of Meridian. C. E. Myers, the sole member of said Crescent Lumber Company, prior to November 26, 1906, was a stockholder in the Lake Lumber Company, a corporation, which said corporation was then the owner of two sawmill plants, one of which was situated near Lawrence, in Newton county, Mississippi. The said Lake Lumber Company, prior to November 26, 1906, sold to O. E. Myers, for the consideration of $10,109.37, its said sawmill plant near Lawrence, in Newton county, state of Mississippi, and the said C. E: Myers paid the said Lake Lumber Company therefor in cash and the cancellation and .satisfaction of the debt of the Lake Lumber Company to the said C. E. Myers. Thereupon the said C. E. Myers sold to Allen Myers, his father, the same sawmill plant and appurtenances for the same consideration that he had paid the said Lake Lumber Company for it, and took the note of the said Allen Myers for the entire purchase price of said sawmill plant and appurtenances, to-wit, for the sum of $10,409.37, of date November 26, 1906, due and pay.able on demand. Thereupon the said Allen Myers sold a half interest in the said sawmill plant and appurtenances to one James O. Standiford, and the said James C. Standifoid. and Allen Myers formed a partnership under the firm name of Law renee Lumber Company for the operation of said sawmill property. The articles of partnership of the Lawrence Lumber Company are dated November 26, 1906. James C. Standiford, on the date the partnership articles were signed, executed and delivered to the said Allen Myers his two promissory notes for the sum of $2,154.73 and $2,154.74, respectively, dated November 26, 1906, and due in one and two years, respectively, after date, with interest at the rate of eight percentum per annum after date, aggregating the total sum of $4,309.47, for the balance of the purchase price of an undivided one-half interest in the sawmill plant purchased by the said Allen Myers of the said C. E, Myers as hereinbefore set forth, and secured the payment of said notes by a trust deed of date November 26, 1906, in favor of the said Allen Myers, on an undivided one-half interest in the said sawmill plant and appurtenances. Upon the execution of said notes and trust deed, they were delivered to the said C. E. Myers on the date of their execution as collateral security, to the said C. E. Myers for the debt of the said Allen Myers to the said C. E. Myers for the purchase price of said property. This deed of trust was filed for record on the 28th day of November, 1906, and duly recorded in the office of the clerk of the chancery court of Newton county. The acknovdedgment of the deed of trust was deficient, however, in that the name of the grantor in the deed of trust was omitted therefrom, and in that the mayor of the town of Lake, before whom the acknowledgment was taken, did not properly indicate his official character.

When the first of the notes given by the said James C. Standiford to the said Allen Myers fell due on November 26, 1907, said James C. Standiford paid the interest on the two notes secured by said deed of trust, and executed a renewal note for the entire indebtedness due by him in the sum of $4,395.66? dated November 26, 1907, and due three months after date, thereby obtaining an extension of three months’ time on the first note due and secured by the aforesaid deed of trust, which authorized the trustee to foreclose for the whole debt upon the failure to pay at maturity any one of said notes. Shortly thereafter it was discovered that there were errors in the acknowledgment of the deed of trust from James C. Standiford to Allen Myers, and the said James C. Standiford thereupon executed and delivered a new deed of trust to the said Allen Myers, securing his renewal of the note aforesaid. This deed of trust was duly filed for record and recorded in the office of the clerk of the chancery court of Newton county, state of Mississippi, on the 14th day of January, 1908. In order to save a multiplicity of conveyances and the cost of 'recording same, it was agreed and understood between the parties that the said Lake Lumber Company, in whom the title to the said sawmill and appurtenances was originally vested, should convey the same direct to the newly formed partnership of the Lawrence Lumber Company, composed of James C. Standiford and Allen Myers, and this was done by deed of date November 26, 1906. At the time of the formation of the partnership of the Lawrence Lumber Company, Allen Myers was in the employ of the Lake Lumber Company, at Forest, Mississippi, and not in a position to give his interest in the partnership aforesaid his personal attention, and he executed a power of attorney to his son C. E. Myers. It was contemplated that F. B. Standiford, the son of Jas. C. Standiford, should have active charge and control of the sawmill plant and operations at Lawrence, Mississippi, and his father, James C. Standiford, executed and delivered to him, of date November 26, 1906, a power of attorney. On the 26th of November, 1906, the newly formed partnership of the Lawrence Lumber Company, composed of Jas. O. Standiford and Allen Myers, entered into a contract with tbe Crescent Lumber Company, composed of O. E. Myers, for the sale of tbe entire output of tbe sawmill of tbe said Lawrence Lumber Company, which said contract was executed on behalf of tbe Lawrence Lumber Company by Jas. C. Standiford.

Tbe articles of copartnership, the note of Allen Myers to O. E. Myers for tbe purchase price of tbe sawmill property and plant, tbe notes and trust deed of Jas. C. Standiford to Allen Myers for tbe purchase price of tbe half interest in tbe said sawmill plant and appurtenances, and tbe deed of trust securing tbe same, and tbe powers of attorney from Allen Myers to C. E. Myers, and from J as. C. Standiford, and tbe contract between Lawrence Lumber Company and Crescent Lumber Company, were all executed at tbe same time and place, to-wit, T^ake, Mississippi, on the 26th day of November, 1906; Allen Myers, C. E. Myers, Jas. C. Standiford, and E. B. Standiford all being present, tbe various matters culminating in these instruments having been previously gone over and negotiated among tbe various parties and O. E. Myers having been requested by them to have tbe papers prepared, and having bad tbe papers prepared at the instance of all the parties concerned. Tbe said Jas. O. Standiford and bis son, E. B. Standiford, resided at tbe sawmill plant, and tbe same was operated by tbe said E. B. Standiford, bis father being present and working about-the mill, until December, 1907, when by mutual written agreement between tbe partners of tbe Lawrence Lumber Company it was agreed that E. B.. Standiford should withdraw from tbe management of the business of tbe Lawrence Lumber Company, and that tbe said Allen Myers should assume tbe management thereof from and after that date. The said Allen Myers took charge of tbe said sawmill plant on December 1, 1907, and continued thereafter in tbe management thereof; tbe said James O. Standiford also continuing to live at the sawmill plant and to work as theretofore in and about tbe mill, and to assist tbe said Allen. Myers in tbe conduct of tbe affairs of the-business.

On the 2d day of January, 1908, tbe said Allen Myers executed and delivered to O. E. Myers, with tbe knowledge andi consent of tbe said James O. Standiford, a deed of trust on bis. interest in tbe entire property and effects of tbe Lawrence Luna-her Company to secure tbe said note of Allen Myers to tbe said. C. E. Myers for $10,409.37, tbe original purchase price of the-property of tbe said Lawrence Lumber Company, which said; deed of trust was filed for record and recorded on tbe 4th day of January, 1908, in tbe office of tbe clerk of tbe chancery court of Newton county, state of Mississippi. As previously stated herein, tbe said indebtedness of $10,409.37 for tbe purchase; price of said sawmill plant and property, acquired as hereinbefore detailed by tbe Lawrence Lumber Company, was further secured to tbe said C. E. Myers by tbe assignment and delivery to him as collateral security therefor of tbe notes and deeds of trust of tbe said Jas. C. Standiford to tbe said Allen Myers for the balance of tbe purchase price of tbe interest of tbe said James C. Standiford in the said sawmill plant and property.

Erom tbe inception of tbe life of the Lawrence Lumber Company, in accordance witb tbe contract between tbe Lawrence Lumber Company and tbe Crescent Lumber Company, of date-November 26, 1906, herein above mentioned, tbe said Lawrence-Lumber Company sold its entire output of lumber to tbe Crescent Lumber Company, and the Crescent Lumber Company, in view of tbe said contract for tbe purchase of tbe entire output of said Tjawrenee Lumber Company, made cash advances to the-said Lawrence Lumber Company on tbe lumber contemplated in tbe contract of November 26, 1906, which said advances were used by tbe said Lawrence Lumber Company in the conduct and operation of its plant, and in the payment of its outstanding; and current bills and expenses, and in feeding and maintaining; its stock, and in discharging its weekly pay rolls for labor. On tbe 2d of January, 1908, tbe date on which the said Allen Myers, executed a deed of trust on Ms interest in the property of tbe Lawrence Lumber Company to tbe said C. E. Myers, tbe said Lawrence Lumber Company executed and delivered to C. E. Myers a deed of trust, securing tbe said Crescent Lumber Company for all sums then due or thereafter to become due to tbe said Crescent Lumber Company by tbe said Lawrence Lumber Company for tbe advances theretofore made and thereafter to be made to tbe said Lawrence Lumber Company by tbe said Crescent Lumber Company on tbe said lumber contemplated by tbe contract of November 26th, and all sums that were tiren due or might thereafter become due tbe said Crescent Lumber Company by tbe said Lawrence Lumber Company, arising out of any dealings and transactions whatsoever theretofore bad <or thereafter to be bad between tbe said Lawrence Lumber Company and tbe Crescent Lumber Company, during tbe life of tbe contract of November 26, 1906. This deed of trust was duly filed for record and recorded in tbe office of tbe clerk of tbe chancery court of Newton county on tbe 4th day of January, 1908, and covered all lumber and saw logs then in the yard of the said Lawrence Lumber Company and owned by the said Lawrence Lumber Company, and all lumber and logs owned by and in possession of said Lawrence Lumber Company and situated at or near tbe railroad depots at Lake and Lawrence, Mississippi, and also all lumber, of whatever kind and description, that tbe said Lawrence Lumber Company might thereafter manufacture at their then sawmill in Newton county, state of Mississippi, out of any and all timber owned by the said Lawrence Lumber Company and situated in the counties of Newton and Scott, state of Mississippi.

Tbe said Jas. C. Standiford died on or about tbe 28th day of May, 1908, at the plant of tbe said Lawrence Lumber Company, having continuously up to tbe time of his death lived at tbe said sawmill from the beginning of tbe partnership operations. Allen Myers, tbe surviving partner, was, of course, in possession of and entitled to tbe possession of the effects of tbe said'Lawrence Lumber Company as the surviving partner upon the death of the said Jas. C. Standiford. No administrator of the'estate of Jas., C. Standiford was appointed by the chancery court of Newton county, state of-Mississippi, nor were any letters of-administration applied for by anyone. The Lawrence Lumber Company was indebted unto the Crescent Lumber Company-in the sum of $8,809.49, as appears from the statement of the account of Lawrence Lumber Company with Orescent Lumber Company, which said balance of account was secured by the deed of trust of the Lawrence Lumber Company of date January 2, 1908, to the Crescent Lumber Company, covering the lumber and saw logs of the Lawrence Lumber Company. An inspection of this account which is absolutely undisputed, discloses that during the continuation of the partnership operations of the Lawrence Lumber Company, C. E. Myers doing business as the Crescent Lumber Company, made advances to the said Lawrence I/umber Company in the total sum of about $26,000. Jas. C. Standiford has not paid and did not pay anything but the first year’s interest on. his indebtedness for the balance of the purchase price of his interest in the business, and Allen Myers has not paid C. E. Myers anything on the note of $10,409.37 for the purchase price of the said property of the Lawrence Lumber Company. These debts being all due, and being largely in excess of the value of the property covered by the deeds of trust securing same, and the partnership having been dissolved by the death of James C. Standiford, and the parties having failed to pay their several indebtednesses, and the said Crescent Lumber Company having called upon the said Allen' Myers for payment, and not having received payment, requested the said Geo. B. Neville, trustee in the aforesaid deeds •of trust, to foreclose same, and said Geo. B. Neville, trustee, thereupon took possession of the property covered by the said deeds of trust on June 6, 1908, and on June 8, 1908, advertised the same for sale under said deeds of trust on the 2d and 3d •days of July, 1908. The notices of sale were inserted in a newspaper published in Newton county, state of Mississippi, and were posted as required by the deeds of trust and by the-statute of the state of Mississippi.

Thereupon A. J. Lyon & Co., one of the creditors of the-Lawrence Lumber Company, having a claim in open account, for a balance- of $429.43, for articles sold the said Lawrence Lumber Company between May 3 and August 13, 1907, began a suit in tire chancery court of Newton county, state of Mississippi, on the 25th day of June, 1908, against the Lawrence Lumber-Company, Crescent Lumber Company, and Geo. B. Neville, trustee, entered into bond asv required by the statutes for the appointment of a receiver without notice, and procured the appointment of D. L. Bagland receiver by decree of date June-26, 1908, without notice to appellants, and the said D. L. Bag-land entered into bond as such receiver and immediately took charge of all the property and effects of the Lawrence Lumber Company; the said decree appointing the receiver directing him to take charge of all the property covered by the deeds of trust,, sales under which had been advertised by the said Geo. B. Neville, trustee, and which said property was then in the possession of the said Geo. B. Neville, trastee, and authorized the said receiver to sell all of said property at public or private sale. There was ample time before any sale of the property under the deeds of trust would have occurred within which appellee- could have-given appellants- the statutory five days’ notice of an application for the appointment of a receiver, even after such time as appellee’s counsel first discovered the fact of the death of James C. Standiford. The bill of complaint nowhere alleges the insolvency of the Ijawrence Lumber company, nor the insolvency at any time of either of the members of the said Lawrence Lumber Company, and does not allege the insolvency of the Crescent Lumber Company; nor is there any allegation of the inadequacy of other remedies to appellee; nor is it charged that James C. Standiford, or Allen Myers, or the Lawrence Lumber Coinpany was insolvent at the time of the execution of the deeds of trust of J ames C. Standiford and Allen Myers covering their interest in the partnership assets of the Lawrence Lumber Company. The bill, further, does not charge fraud against any of the appellants in any particular whatever, and does not deny the validity of any of the debts secured by any of the deeds of trust which the said George B. Neville., trustee, was seeking to foreclose. It simply sets up the fact of the advertisement of the sajd property for sale under said deeds of trust, and the existence of the said deeds of trust, and the death of James C. Standiford, and the fact that there was no administration upon the estate of James C. Standiford, and that the surviving partner had not given bond for the administration of the partnership estate, and that the surviving partner -was “sitting supinely by” and permitting to‘be done “things contrary to law,” and that the trustee in the two deeds of trust from James O. Standiford and Allen Myers was about to sell partnership property for the sat-, isfaction' of the individual debts of the partners composing the Lawrence Lumber Company. There is no specific charge in the bill of any invalidity in the deed of trust from the Lawrence Lumber Company to the Crescent Lumber Company, covering the lumber, securing the balance that might be due the Crescent Lumber Company by reason of advances made under the contract of November 26, 1906.

After the appointment of a receiver, the appellants made a motion to vacate the appointment of the receiver, and each appellant made a separate answer to the bill of complaint, setting up the history of the transactions of the Lawrence Lumber Company, James C. Standiford, Allen Myers, and O. E. Myers, which culminated in the various instruments set forth in the record, and in the deeds of trust that were being foreclosed, which said history we have hereinbefore recited in detail. The answers denied the legal conclusions of the bill of complaint as applied to the facts hereinbefore detailed, and denied that it was incompetent and invalid under those facts for the said trustee to foreclose the. said deeds of trust, and denied the material allegations of the bill of complaint as to tbe alleged invalidity of tbe deeds of trust of James O. Standiford and Allen Myers on tbeir individual interests in the property and effects of the Lawrence Lumber Company, and set up that tbe said O. E. Myers was entitled to a vendor’s lien for the unpaid purchase price of said property thereon, as well as entitled to bave tbe same foreclosed for tbe satisfaction of bis debt; and tbe defendant Allen Myers, tbe surviving partner, denied tbe charge that be was “sitting supinely by” and permitting “things to be done contrary to law,” and denied that be was required by any law whatever to enter into any sort of bond until tbe qualification and appointment of an administrator and tbe demand of such administrator upon him to exercise bis election to give bond and himself administor tbe assets of tbe partnership.

Tbe reporter will set out, in addition to tbe statement of facts which we bave just above detailed, tbe contract of November 26, 1906, made between these parties, and tbe three trust deeds hereinbefore referred to.

On this statement of tbe case the appellee has striven earnestly to uphold tbe appointment of this receiver, without notice, lie insists that tbe two trust deeds made by tbe two partners, Allen Myers and James O. Standiford, are , void, under tbe principles announced in Bank v. Durfey, 72 Miss. 971, 18 South. 456, and other authorities cited by him. In tbe Dufrey case, tbe partnership was wholly insolvent, and the facts were otherwise clearly different from those shown by this record, and the case is not applicable.

Learned counsel for appellee next insists that tbe trust deed made by tbe Lawrence Lumber Company to O. E. Myers is void on its face, within tbe principles announced in Acme Lumber Co. v. Hoyt, 71 Miss. 106, 14 South. 464, Harmon v. Hoskins, 56 Miss. 142, and other decisions of like nature cited. The Acme Lumber Co. case is altogether different from this case on its facts. There was a provision in tbe instrument involved in that case that the grantors should be permitted to continue business, in the usual course for five years from the date of the instrument, and this the record in that case showed was done, so as to prevent creditors from reaching the property of the company to satisfy their debts, and- the trust deed was made with that purpose and intent, and there were suits then pending against the company. Nothing of that sort is averred or proven here, and the instrument is wholly different in its provisions from the instrument in the Acme Lumber Co. case. There is no reservation in this trust deed giving the Lawrence Lumber Company a power to continue business for five years in the face of suits brought for debts, and what is of controlling importance is that this instrument is given to secure the purchase money of the plant and property covered by the instrument. The money advanced from time to time by C. E. Myers, some $26,000, as well as the purchase money which he had originally paid the Lake Lumber Company, created the very lumber payment which the trust deed was given to secure.. In other words, the Lawrence Lumber Company trust deed was a mere security to O. E. Myers to reimburse him for money which he laid out to create the very property the trust deed covered. Nothing of this sort appeared in the Acme Lumber Co. case. The bill avers no fraud, directly or indirectly. It does-not charge that either of the partners was insolvent, nor that the Lawrence Lumber Company was insolvent. In short, there is not in the bill .any of the allegations essential to have warranted the appointment of this receiver in this summary and severe fashion without notice.

This court has repeatedly condemned the improvident appointment of receivers without notice in cases where such appointment was no more warranted than it was here on the showing made. The same principles have been over and over announced in other states. See the collation of authorities in the brief of learned counsel for appellant. The trust deed to the Lawrence Lumber Company, securing advances made by the Crescent Lumber Company, was a trust deed by a partnership, on partnership assets, to secure an undisputed partnership debt, the balance of which, when this litigation was instituted, exceeded $8,800. We do not deem it necessary to say more. The appointment was manifestly unwarranted, and the decree refusing to vacate the receivership is reversed, and the receiver is hereby discharged.

In respect to the other appeal from the decree of the court in refusing to modify the order appointing the receiver and giving him possession of all the property, it is to be said that it is also ■erroneous, and is hereby reversed, and the receiver hereby directed to at once deliver all the property in his possession to 'George B. Neville, the trustee in the three deeds of trust aforesaid.

Decreed accordingly.

Reversed.