Hughes v. Edisto Cypress Shingle Co.

The opinion of the Court was delivered by

Mr. Justice Pope.

The first stated action had for its object the setting aside of certain mortgages upon the plant and other property of the Bdisto Cypress Shingle Company, to the end that plaintiffs and defendants, who had recovered judgment against said company, might have said plant and other property sold to satisfy the executions issued upon said judgments. The second action alleged the insolvency of said company, the invalidity of the mortgages executed by said company, and sought the winding up of said insolvent company, &c., and the appointment of a receiver. The history of these matters seems to be as follows: In the year 1892 (14th day of December) a charter was issued to the Edisto Cypress Shingle Company, by the secretary of state for the State of South Carolina, under the provisions of the act of General Assembly of this State, entitled “An act to provide for the formation of certain corporations under general laws” — 19 Stat. at Barge, 540; Rev. Stat., 1514-1533 — and the acts amendatory thereof. The capital stock was fixed at $10,000, in shares of $100 each. The shareholders were, A. N. Webb, sixty-nine shares; C. B. Mansfield, one share; Winfield Scott, ten shares; Irving Scott, ten shares, and Frederick McLaughlin, ten shares. The object of the corporation, as fixed by its charter, was: “To establish and operate steam, saw and lumber mills; to manufacture and sell shingles, and all other kinds of limn her; to operate and establish tram roads, and boats and other water craft, in connection with a general lumber and timber business, and propel the same by steam or other power; to buy and sell timber and timber lands, and other kinds of real estate; to conduct a general mercantile business in connection with its timber and lumber business; to operate roads for the purposes of said business, and condemn lands for right of way therefor under existing laws.” Its place of business was Edisto, near the Edisto River, in Barnwell County, in this State. The debts owing by the corporation on the 14th day of September, 1894, when the two actions were commenced, were wages to the operatives, a debt of more than $1,700 to the Bailey-Eebby Company, also a- debt of more than $1,700 to Willis J. Perkins, operating under the name of Perkins & Co. The debts to the Bailey-Eebby Company and Willis J. Perkins, as Perkins & Co., were for machinery and mill supplies. Both of them begun their sales of machinery, and mill supplies about 9th February, 1893, and endeavored to secure themselves by taking purchase money mortgages of the property so sold by them, respectively, to the Edisto Cypress Shingle Company. Judge Witherspoon appointed C. B. Free, Esq., as receiver to hold the property — all parties acquiescing. His order fixed the debt of the Bailey-Eebby Company at $1,500, and held its mortgage good, and also ordered a fee of $100 to be paid to Messrs. Mordecai & Gadsden as its attorneys. The master for Barnwell County took the testimony on all the issues of fact.

The cause on the pleadings and testimony came on to be heard before Judge Buchanan in open court at Barnwell, S. C. By his decree he held the Bailey-Lebby mortgage paid in full, and declared the Perkins mortgage to be invalid. Several months after his decree had been filed, and after he had finished his judicial labors on the Second Circuit, of which Barnwell is a part, he modified his decree by restoring the Bailey-Eebby mortgage for $1,500 and Mor-decai & Gadsden’s fee of $100, as provided for in Judge Witherspoon’s decree. From this attempt to modify his decree and from the decree itself appeals were taken. Het the decree and the several grounds of appeal be reported.

1 It is now my duty to pass upon these appeals. First, I will consider the appeal of the Bailey-Hebby Company; second, the grounds of appeal presented by the plaintiffs; third, the grounds of appeal presented by Willis J. Perkins, trading as Perkins & Co. The grounds of appeal presented by the Bailey-Hebby Company, except those relating to fixtures, may be disposed of without enumerating the specific grounds of appeal presented by it. Unquestionably the order passed by Judge Witherspoon on the 30th October, 1894, wherein he adjudged that the Bailey-Hebby Company held two valid mortgages, and that the debt secured by the said two mortgages was $1,500, and that counsel fee of their attorneys, Mordecai & Gadsden, was $100, and two such amounts should be pa d out of the property'not included in the Willis J. Perkins mortgage, was and is binding upon every party to this action, except Willis J. Perkins; and, so far as the latter is concerned, it binds him in so far as the property embraced in said two mortgages of Bailey-Hebby Company is not set out in the Perkins mortgage, for the simple reason that W. J. Perkins, when offered an opportunity to canvass the said mortgages, was not able to show any matter which would in the least trench upon the conclusion reached by Judge Witherspoon.

2 The only serious trouble Bailey-Hebby Company has is in showing that their debt of $1,500 has not been either wholly or partially paid by the shingles which, under Judge Witherspoon’s order, were ordered to be sold by C. B. Free, as receiver, and the proceeds arising from such sale applied to the debt of $1,500 adjudged to be due to the Bailey-Hebby Company. The very terms of that order ought to have made the Bailey-Hebby Company very careful in seeing that the proceeds arising from the sale of these shingles should be scrupulously applied to the payment of their mortgage. Here is the'language referred to: “It is further ordered, that C. B. Free, receiver, do forthwith proceed to sell the shingles, 1,300,000, more- or less, covered by said mortgages (Bailey-Rebby), upon best terms possible, with the consent and approval of the Bailey-Lebby Company, and have the drafts in settlement for the payment of said shingles, together with the bills of lading in shipment thereof, made payable to the order of Bailey-Rebby Company, who are hereby authorized and empowered to apply the proceeds of said shingles, pro tanto, to the payment of the said sum of $1,500 so found to be due; and that if, within a reasonable time, said shingles cannot be so disposed of at private sale, that then the said C. B. Free, receiver, with the consent of the said the Bailey-Rebby Company, is hereby authorized and empowered to sell and dispose of the remainder of said shingles upon the best terms possible, the gross proceeds thereof to be paid to the said the Bailey-Rebby Company forthwith.” This order, being a consent order, may be regarded in the nature of a contract between the parties who made it, and, as we have previously seen, all the parties to the two actions, except Willis J. Perkins, were parties consenting thereto. C. B. Free and the Bailey-Rebby Company sold shingles from 30th October, 1894, to April, 1895, for the sum of $1,185.46, and personal property (pair of mules, $100, one pair of oxen, $25, and one ox for $12.50,) for $137.50 — aggregating the sum of $1,322.96. By the return known as No. 65, out of this sum was paid: Telegrams, $1.50; amount paid A. McFail, watchman, $60; insurance, $107.50; C. B. Free, $7.50; 2d January, 1895, paid A. McFail, $62; 2d January, 1895, paid W. R. May, $50; February 2, paid A. McFail, $54.25; February 21, taxes, $46; February 26, paid C. B. Free, $71.50; March 2, paid A. McFail, $49; April 3, paid A. McFail, $54.25; May 4, paid A. McFail, $30; June 4, paid A. McFail, $30 — aggregating $699.45, less $6.64 received for shingles February 26, 1895, makes $692.81. I cannot agree that this is a proper expense account. While I might be willing to assent to the expenses of handling these shingles, by way of labor in putting on board of cars, and expenses of transportation, I cannot recognize payment to W. R. May, insurance, taxes, and watchman fees as proper disbursements out of this fund, nor, indeed, any of these payments out of this particular fund. This corporation, the Bailey-Hebby Company, are entitled to be reimbursed these amounts when the sale is made of property not covered by their two mortgages, as well as that of Willis J. Perkins; but they must now be required to give credit on their debt of $1,500 of the sum of $1,329.60, which last amount is obtained by adding the $6.64 received from the Augusta Humber Company for shingles in February, 1895, to the $1,322.96. The fee of Mordecai & Gadsden should be paid, but not out of any property or money coming to Willis J. Perkins on his debt and mortgage.

3 Now I will proceed to notice the grounds of appeal presented by the plaintiffs. I agree with the plaintiffs that his Honor, Judge Buchanan, erred in his attempt to modify his decree, filed .in February, 1896, by his modification filed 4th April, 1896. He was not either the presiding or the resident Judge of that Circuit in April, 1896, and he had no right to attempt to interfere with his decree, even if he knew he was guilty of error therein. There is another tribunal, under the Constitution and laws of this State, for the correction of errors in judgments and decrees of the Circuit Courts. Of course, the motive of the Circuit Judge was lofty; he wished to correct an error into which he had most innocently fallen. I have already held that the $1,500 debt held by Bailey-Hebby Company must be reduced as hereinbefore indicated. I do not hold that the mortgages of the Bailey-Hebby Company have been fully paid, but only partially paid. I do hold that the parties plaintiff and defendant, except Willis J. Perkins, are bound by the decretal order of Judge Wither-spoon, dated 30th October, 1894, for they consented to the same. And, as to all of these parties, such decree of Judge Witherspoon fastens upon the property of the corporation, except that belonging- to Willis J. Perkins, the payment to Mordecai & Gadsden their fee of $100, and for the same reason, these parties consented thereto.

4 Lastly, it is my duty to pass upon the exceptions presented by Willis J. Perldns, trading as Perkins & Co. Such of these grounds as refer to the attempt by Judge Buchanan to modify his decree, after he had left the Second Circuit, and returned to his duty as resident Judge of the Third Circuit, have been practically disposed of under the first and second divisions of this opinion. The remainder bears upon the alleged errors of Judge Buchanan in his decree, wherein he held that the paper presented by Willis J. Perkins was not entitled to be treated as a valid mortgage, both intrinsically and extrinsically; intrinsically, because the paper was made up of two parts not connected with each other and not signed by each of the parties thereto as a mortgage; and extrinsically, because, first, the Edisto Cypress Shingle Company had no power to execute a mortgage, save under the terms of the act of 1886, hitherto quoted by its title, as regulating the powers of corporations formed under the general laws of this State; second, because the property covered by such mortgages had become fixtures, and were not the subject matter of a mortgage of personal property or chattel mortgage. I will examine the intrinsic defects of this alleged mortgage. This corporation, the Edisto Cypress Shingle Company, was formed on the 14th day of December, 1892. On the 7th day of February, 1893, it entered into a contract with Willis J. Perkins, as Perkins & Co., through his salesman, S. S. Ingram, for furnishing the engines, shingle machines, shafting, pulleys, etc., as set out in the Judge’s decree. Willis J. Perkins’ manufactory was located at Grand Rapids, in the State of Michigan, and he was represented in his transaction with this Edisto Cypress Shingle Company by his salesman, the said S. S. Ingram. That part of the instrument called a mortgage, which contained the terms and conditions intended to control the rights of the seller and purchaser, was made up of a partly printed and partly written paper, in which, among other things, the seller stipulated that title to the property so sold should remain in him until the purchase money should be paid; and the other, which was typewritten, contained a specific enumeration of the prices of machinery desired by the Edisto Cypress Shingle Company. At the top of that part which was partly printed and partly written, the date “23d February, 1893,” appeared, and upon the typewritten part the date was “7th February, 1893;” the date of affidavit of witnesses to signature was “7th February, 1893.” The whole of the instrument was placed on record on the 28th March, 1893, in the office of register of mesne conveyance for Barnwell County. The president and general manager of the Fdisto Cypress Shingle Co. acted toward the property as if it were covered by the whole instrument. This appellant raises the preliminary question that Judge Buchanan should not have entertained this question, because all the parties to the suit had consented before the master that the instrument “chattel mortgage given by Edisto Cypress Shingle Co. to the Perkins Company was by consent introduced in evidence and marked Exhibit X.” Such is the language found in the case at folio 249; there was no other evidence offered by either side as to this instrument. It does seem to me that all parties having consented that this instrument should be in evidence as a chattel mortgage, they cannot now attack the instrument as to its mode of execution; for by consenting that it be admitted in evidence, they thereby virtually stipulated that the introduction of testimony as to its execution would not be required. It is too late now for them to interpose objections that such instrument was composed of two parts, and that the Fdisto Cypress Shingle Company only executed one part and did not execute the other. If there was no testimony in the cause showing that the Edisto Cypress Shingle Co. only signed one part and did not sign the second part of an instrument, which was by consent received in evidence as proved, I am unable to see how the Circuit Judge could make his finding of fact on this branch of the cause. Such being my conclusion, it is unnecessary for me to linger over the exceptions pointing out this alleged error in the Circuit Judge in such finding. This, too, will dispose of the motion of Willis J. Perkins to suspend the appeal until he could apply to the Circuit Court for a new trial upon after-discovered evidence. This ruling disposes of the third, fourth, thirteenth, and fifteenth grounds of appeal, and they are sustained.

5 The next ground of appeal is that relating to so much of his Honor’s decree as holds that the machinery furnished by Perkins to the Edisto Cypress Shingle Co. has become fixtures, and this having taken place with the knowledge and assistance of Perkins, any lien on said machinery through his alleged chattel mortgage is destroyed. Reduced to its last analysis, it is contended that this machinery is now a part of the real estate of John May, who owns the fee in the lands upon which the mill of the Edisto Cypress Shingle Company is located, and being so, no chattel’ mortgage can have a lien thereon. It is a fact that such owner of the fee in this land is not a party to this action. In Ex parte Dickinson, as assignee, in re Sheldon v. Blauvelt, 29 S. C., 453, Dickinson was the assignee of the owner of the land upon which the cotton gins and portable engine and saw mill were located, and, therefore, the owner of the fee, was before the Court; but while the Circuit Judge, Hon. W. H. Wallace, did discuss the law on this subject of fixtures, yet the Supreme Court distinctly declined to pass upon these matters, for the reason that they had reached a conclusion which rendered it unnecessary for them to do so. This case is referred to as an authority by the Circuit Judge in his decree. While it-is not an authority, still it serves to illustrate the law very admirably. I am not informed to what uses the owner of the fee, May, put this land while he retained control of it; he did lease it for ninety years to the Edisto Cypress Shingle Co., and as their charter was placed upon record, he may be assumed to have known, at the time of the lease, that his lands would be devoted, while in the hands of his lessee, to the location of their mills for the manufacture of cypress shingles. But, as before remarked, May is not before this Court. Here we have only as parties to these two actions the creditors of this insolvent corporation, the Bdisto Cypress Shingle Co., and it is their rights I must consider. As was remarked by the Circuit t Judge, in Ex parte Dickinson, in re Sheldon v. Blauvelt, supra, “There is a preliminary question as to the nature of some of the property attached — that is, the cotton gin and the engine and saw mill. Are they fixtures, and, therefore, a part of the realty, or are they personal property? The weight of the testimony indicates that the cotton gin was attached by the bands to the gin house, and in such case it has been held in several cases that a cotton gin is a fixture.” See Fairis v. Walker, 1 Bail., 540; Nimmons v. Moye, 1 Rice Dig., 317; McKenna v. Hammond, 3 Hill, 331. Although the precise question has not been decided in this State, I think it equally clear that the portable engine and saw mill are not fixtures. A cotton gin is a fixture, because it is not only attached to the soil, but is, when in a permanent gin house, obviously intended to be permanent, and is necessary for the convenient use of a cotton plantation. Where a structure is placed upon land, not to promote the convenient use of the land, but to be used for some temporary purpose, external to the land, and the land is used only as a foundation, because some foundation is necessary for the business, then the structure and its belongings are not fixtures. The testimony in this case is to the effect that the portable engine and saw mill, although in some degree attached to the soil, were used for the promotion of the business of sawing logs into lumber, and had no relation to the convenient use of the plantation as such. The engine and saw mill, therefore, in my opinion, are personal property. In the case at bar there is testimony that the boiler is encased in brick; that the wheels are adjusted to shafting which is turned by belts, and that these are fastened to the mill house. I should hold from the terms employed in the chattel mortgage of Perkins, that he had knowledge that the machinery ordered from him and covered by his mortgage was to be placed in a mill house. After this has been admitted, I cannot see how the conclusion of the Circuit Judge can be sustained. He holds that all this machinery furnished by Willis J. Perkins became fixtures and was a part of the real estate of May, the owner in fee. Then, if this be so, of what concern is it to these judgment creditors — how can their judgments operate so that such creditors have any lien upon May’s real estate? It is evident that this difficulty did not present itself to the mind of the Circuit Judge, for in this very decree he has “Ordered, &c., that Free, as receiver, do sell all and singular the property of the Edisto Cypress Shingle Co. on sales-day in April, 1896, * * * And that upon the purchaser complying with his bid, that said receiver do execute unto the.purchaser good and sufficient title to said property.” It should be asked what property is this to be so sold, and to which the receiver is to execute to the purchaser thereof a good and sufficient title? If all this machinery has become a part of Mr. May’s land, how can the receiver sell Mr. May’s land? If, on the other hand, the plant of the Edisto Cypress Shingle Co. on the land leased from Mr. May for the term of ninety years is but a leasehold estate, and as such is but personal property, and, therefore, may be sold, what is there to prevent such a separation of such property, to the end that the lien of W. J. Perkins under his mortgage, on such separate property as is embraced in his mortgage, may be preserved? I can see no difficulty in regard to it.

67 Again, it is suggested that there was no power in the officers to execute a mortgage on property sold to this corporation, because the act of 1886 required that when a bonded indebtedness to be secured by a mortgage was contemplated by the corporation, that notice thereof had to be given by a publication of such purpose, and that a meeting of the directors was an essential prerequisite to the exercise of such a power by this corporation; and it is contended in the cause at bar that there has been no compliance with either of these prerequisites. In the first place, I do not admit that the bonded indebtedness referred to in sections 29, 30, 31, and 32, of the act of 1886, can be said to include the purchase money of the plant, or any part thereof, plainly necessary to the execution of the charter purpose. But waiving this matter altogether, the parties to these actions are in a court of equity, where it has been made to appear that before Willis J. Perkins would part with his property to this corporation, he required that its officers should execute to him a lien thereon by way of chattel mortgage, and that notice thereof was spread upon the records of the office of the register of mesne conveyance for Barnwell County; and to the extent of the property so parted with by Perkins, he has an equity superior as to that particular property over these subsequent creditors with notice, and it was error for the Circuit Judge to hold otherwise. The language of section 26 of this act of 1886, provides that “every private corporation, as such, has the power * * * 4. To hold, purchase, lease, mortgage, or otherwise dispose and convey such real and personal estate as is limited by its charter; and, if not so limited, such an amount as the business of the corporation requires * * *” Such are my views hurriedly presented on these questions.

8 Now, as to the $25 ordered to be paid a stenographer for assisting in the preparation of the Circuit decree, of course, it will not stand. The Circuit Judge was without power to make this application of the funds of this corporation.

9 Nor did the Circuit Judge have the power to exact a bond of $2,000 of each litigant who might wish to appeal from the order of the sale as made by the Circuit Judge in his decree. There is an entire absence of statutory authority for the exercise of any such power by the Circuit Judge, and there is no warrant therefor in the common law. The property of litigants is and should be most jealously guarded by the courts of the country, and in no case should be taken away from them without due process of law. To allow any Judge, either of the Supreme Court or of the Circuit Court, to hire with funds of the litigant a person to do his writing, would be an innovation upon our customs as well as our laws. It cannot be permitted.

I think and hold that our judgment should be: it is the judgment of this Court, thatthe modified decree of his Honor, Judge Buchanan, dated the 3d of April, 1896, be annulled; and it is the judgment of this Court, that the decree in the two actions be modified as herein required, and that the cause be remanded to the Circuit Court, to formulate such orders as may be necessary to carry out the views herein announced. But it is my duty to announce, by reason of the views of Chief Justice Mclver, which are concurred in by Justices Gary and Jones, that the judgment of this Court is, that the foregoing views and conclusions as announced in my opinion stand as the judgment of this Court, except that the Bailey-Lebby Company shall not be required to credit on their mortgage debt the gross amount of the sales of the shingles and other property covered by its mortgage, but only the balance thereof, after deducting the expenses properly incurred in handling and taking care of such property, in which should be included amounts paid watchmen, and insurance while waiting an opportunity to sell, and also the expenses of loading the same for transportation, but not amounts paid on the lease or for taxes, except so much thereof as were properly chargeable on the property sold, and that the cause be remanded to the Circuit Court, with directions to enforce therein the views herein announced.