H. W. Williams & Co. v. Bell

DUNKLIN, J. W. E. Vermillion was engaged in business in the town of Alvord, and his store was designated as the Alvord Pharmacy. On July 2, 1924, he executed to H. W. Williams & Co., of Fort Worth, a chattel mortgage upon certain fixtures in his store to secure the payment of 18 certain promissory notes, bearing date June 26,1924, each in the principal sum of $66.11, except the one last maturing, which was for $66.13. Those notes aggregated $1,190, and one of them fell due on each succeeding month following June 25,1924. The mortgage contained this provision: “Now, if I pay, or cause to be paid, said indebtedness at or before its maturity, then this obligation is to be null and void; but in ease said notes are not paid at their maturity, or when all of'part of said property is moved from where it is now located, or when it is legally seized, then, or any time thereafter, the holder thereof is hereby fully authorized to seize and take possession of all of said above-described property, or any part thereof, wherever the same may be found (hereby binding me to surrender up the same), and to sell, convey, and deliver the said property, or cause the same' to be done, at either public or private sale, with or without notice, at such place and on such terms as they may deem best, and the proceeds of such sale shall be applied, after deducting all costs, expenses, and attorney’s fees, to the payment of said notes; the surplus, if any, shall be paid to me, or, at the election of the holder of said notes, shall be paid on any other liability or liabilities, whether as principal or otherwise, of mine in the hands of the holder of said notes, and if the proceeds of said sale shall not be sufficient to pay said notes I agree to be and remain liable for any deficiency.” Prior to the execution of the notes, Vermillion had purchased goods used in his business from H. W. Williams & Co., and the notes given covered the amounts due for such purchases. That mortgage was duly recorded in the chattel mortgage records of Wise county, in which Vermillion resided and transacted business. After the execution of that mortgage, H. W. Williams & Oo. continued to sell goods on open account to Vermillion, and on September 29, 1925, there was due on said account the sum of $1,181.64. On the last-named date Vermillion executed a second chattel mortgage on the same fixtures that were covered' by the mortgage theretofore given to I-I. W. Williams & Co. to the Cook Paint & Varnish Company, to secure the payment of a promissory note of even date with the mortgage, for the sum of $713.62. On December 28, 1925, Vermillion executed an assignment of all his property for the benefit of his creditors, in which O. I-I. Bell, Jr., was named as trustee, and he was given power to sell the property and apply the proceeds thereof to the payment of the debts owing by Vermillion. Bell, as such-trustee, instituted this suit in the nature of an interpleader, and made H. W. Williams & Co. and Cook Paint & Varnish Company defendants. In that pleading it was alleged that the fixtures covered by the two mortgages, which came into his hands as trustee, had been by him sold in accordance with the authority and directions contained in the deed of assignment, and he had realized therefrom the sum of $1,288.62. Against that amount he charged as a credit in his favor the sum of $209.55 as expenses for executing the trust, thus leaving in his hands a balance of $1,074.07, which he tendered into court, with the prayer that the same be awarded to the defendants as their interests might be determined by the court; both the chattel mortgages referred to above being referred to in the plaintiff’s pleading. Both of the defendants filed pleadings, each alleging the chattel mortgage in its favor, and each claiming superiority of its mortgage over that of the other defendant. Upon the trial of the case, which was before the court without a jury, it was agreed by all parties that the suit was properly instituted by the [747] plaintiff, and. that he was entitled to the credit claimed by him as expenses for executing the trust, and that the sum of $1,074.07, which the plaintiff tendered into court, was the full amount with which he was chargeable as such trustee. This left the controversy between the two defendants over the $1,074.07 deposited in court, instead of the specific property covered by the two chattel mortgages. On the date of the trial there was a balance of $366.40 due H. W. Williams & Co. on the notes secured by the first mortgage; said notes bearing interest at the rate of 8 per cent, per annum. From that balance the court deducted all costs incurred in the suit, including an attorney’s fee of $125 in favor of plaintiff, for filing and prosecuting the in-terpleader, all of which was ordered to be paid out of the deposit in court, and the balance remaining of the $366.40 was ordered to be paid out of the deposit. The amount of the deposit in court was thus reduced to $707.67, which the court ordered to be paid over to the Cook Paint & Varnish Company. The unpaid balance of $134.77 of the Cook Paint & Varnish Company’s claim and the amount of $1,248.60 due H. W. Williams & Co. on their open account were both established as unsecured claims of equal standing against Varmillion, with a decree that the trustee pay the same out of the general funds realized by him from the administration of the estate. It thus appears that the court held that the mortgage of H. W. Williams & Co. for the notes therein described was superior to the mortgage of the Cook Paint & Varnish Company, and the correctness of this portion of the judgment is not challenged by the Cook Paint & Varnish Company. It also appears that the court held that the mortgage in favor of H. W. Williams & Co. did not cover the open account incurred by Vermillion with that company. H. W. Williams & Co. has prosecuted this appeal. We ha,ve reached the conclusion that the court erred in holding that the chattel mortgage in favor of H. W. Williams & Co. was not sufficient to secure its open account, noted above. It is well settled that a valid mortgage can be given to secure the future advances, and that the same will be effective, not only against the mortgagor, but as against subsequent purchasers and lienholders with notice thereof. Freiberg v. Magale, 70 Tex. 116, 7 S. W. 684; Bullard v. Stewart, 46 Tex. Civ. App. 49, 102 S. W. 174; Groos v. Chittim (Tex. Civ. App.) 100 S. W. 1006. It is also the rule that, in order to cover such future advances, it is not necessary that the mortgage show the amount of such indebtedness, or to definitely fix the time within which the same shall accrue. Brunson v. Dawson State Bank (Tex. Civ. App.) 175 S. W. 438. It is insisted by appellee that the mortgage did not create a lien for future advances by reason of the stipulation in the provision quoted above, to the effect that the mortgage should become void if the notes therein secured were paid at maturity. But the evidence showed that that contingency never happened. The further provision in the mortgage was that, if the notes were not paid at maturity, then the property covered by the mortgage should be sold to satisfy the notes, and in that event any surplus remaining after payment of the notes and expenses of executing the trust would at the election of the holder of the note be applied upon any other indebtedness owing by the mortgagor to the holder of the notes. That contingency did happen, and, according to the strict letter of the instrument, a lien was thus given upon such surplus for the open account of H. W. Williams & Co. Furthermore, aside from that question, it is clear from the language of the mortgage that the parties thereto intended that, the same should constitute a lien for future advances, and that of itself wás sufficient to constitute a valid mortgage between the parties and subsequent purchasers and lienholders with notice thereof. Willis v. Sanger, 15 Tex. Civ. App. 655, 40 S. W. 229; Groos v. Chittim (Tex. Civ. App.) 100 S. W. 1006, and authorities there cited. At all events, as between the parties, that would constitute an equitable mortgage, enforceable against the mortgagor and against all parties having notice thereof. 41 Corpus Juris, pp. 300, 303, and 305; Waterman v. Silberberg, 67 Tex. 100, 2 S. W. 578; San Antonio Nat. Bank v. Blocker, 77 Tex. 73, 13 S. W. 961. The case of Coleman National Bank v. Cathey (Tex. Civ. App.) 185 S. W. 661, involved a mortgage to secure a $1,000 note, and provided for the sale of the property to satisfy the note if not paid at maturity. That mortgage contained this further provision; “The surplus, if any, shall be paid to me, or, at the election of the holder of said note, shall be paid on any other liability or liabilities, whether as principal or otherwise, of mine in the hands of the holder of said note.” It was held that the mortgage was sufficient to cover other indebtedness incurred after the execution of the mortgage. ' The only distinguishing feature between that case and the present suit is that in that case the mortgage did not provide that it would become null and void upon the payment of the note secured. However, we do not believe that would make any material difference, since it clearly appears from the mortgage now under consideration that it was the intention of the parties that the surplus in the hands of the trustee should be applied to the satisfaction of the future advances, as well as to the satisfaction of the notes therein secured. Several authorities cited by appellee, which [748] announce the general rule that a mortgage cannot be extended to coyer indebtedness not designated by its terms, such as 41 Corpus Juris, pp. 556, 557, 563, Hall v. Read, 28 Tex. Civ. App. 18, 66 S. W. 809, City of Abilene v. Sayles (Tex. Com. App.) 295 S. W. 578, and San Antonio National Bank v. Blocker, 77 Tex. 73, 13 S. W. 961, furnish no aid to the appellee in the present suit, in view of the specific terms of the mortgage in favor of H. W. Williams & Co. The authorities so cited by appellee are invoked with special reference to the testimony of B. H. Lawrence, vice president of H. W. Williams & Co., to the effect that at the time the mortgage in favor of that company was executed it was understood between the parties thereto that the same would cover future advances made by that company to Vermillion. The point is made by appellee that such understanding between the parties would not' affect' appel-lee’s right, since the same was not brought to appellee’s notice. It does not appear that appellee objected to that testimony. However, the mortgage, without the aid of that testimony, was sufficient of itself to establish the right of appellant to claim the lien upon the property to cover its open account. Upon the trial it was agreed by counsel for both parties that the open account of H. W. Williams & Co. had accrued at the time of the execution of the mortgage in favor of the Cook Paint & Varnish Company. The amounts which the trial court found to be due the respective defendants were agreed to by the parties. The parties also agreed to the amount with which the trustee was chargeable, together with the amount of the fees that should , be allowed to his counsel for filing the suit and expenses for executing the trust. It was also proved beyond controversy that, at the time the Cook Paint & Varnish Company took their mortgage, that company, through its representative, A. T. Seymour, had both actual and constructive notice of the prior mortgage in favor of H. W. Williams & Co. Indeed, the mortgage in favor of the Cook Paint & Varnish Company expressly recites that there was then outstanding said prior mortgage. For the reasons noted, and upon the undisputed facts recited above, the judgment of the trial court .is reversed, and the judgment is here rendered as of date September 14, 1927, when the case was tried in the court below, as follows: The sum of $1,074.07, deposited by O. H. BS11, trustee, in court, is the full amount with which he is chargeable for the property covered by the mortgages in question, and, having so deposited the same subject to the orders of court, he is discharged from any future liability by reason of his administration of the said property. Out of said deposit the clerk of the' trial court is ordered to pay over to Samuels & Brown, attorneys of record for said trustee, the sum of $125, which is a reasonable fee for representing the trustee in this suit Out of the balance of said sum so deposited the clerk of the trial court will pay all the court costs incurred in the present suit, both in the trial court and in this court. The amount due to H. W. Williams & Co. on September 14, 1927, on the notes secured by the mortgage in its favor, is the sum of $336.40, and the amount due- the same company on open account is $1,248.60. The amount due on the note in favor of Cook Paint & Varnish Company is the sum of $842.44, the note bearing interest at the rate of 8 per cent, per annum. All of said items of indebtedness are hereby decreed to be valid debts against the property belonging to W. E. Vermillion, to- be administered by O. II. Bell, trustee, under the trust deed executed to him and referred to above. The balance of the funds on deposit in the trial court, after payment of the attorney’s fee to Samuels & Brown, and the court costs as noted above, shall be by the clerk of the trial court paid over to H. W. Williams & Co. in the following order, to wit: To the satisfaction of the unpaid balance of the notes in favor of said company, and the remainder to be applied as a credit upon the balance due on said open account as a claim, superior to the claim of Cook Paint & Varnish Company. The remaining unpaid balance of the open account of H. W. Williams & Co. and the entire claim of Cook Paint & Varnish Company áre established as just claims against the property in the hands of said trustee, other than property covered by said mortgages, and the same are to be discharged by him as unsecured claims in the due course of the administration of the property of said W. E. Vermillion in accordance with the terms and stipulations of the trust deed executed by the latter in favor of the former. The unpaid balance of the open account of H. W. Williams & Co. shall draw interest at the rate of 6 per cent, per annum from and after September 14, Í927, and the amount due the Cook Paint & Varnish Company, already noted, shall bear interest from said date at the rate of 8 per cent, per annum.