Case One of Two
243 Ky. 317
Court of Appeals of Kentucky.
Feb. 16, 1932.
Rehearing Denied May 3, 1932.
ACTION: Reversed.

Appeal from Circuit Court, Knox County.
Suit by Rapp Lumber Company against Noah Smith, in which defendant filed a counterclaim.
From the judgment in favor of defendant and others, plaintiff appeals.

This case involves a judgment rendered against the appellant in favor of a number of persons who were not parties to the suit, but who are made parties to the appeal.

The Rapp Lumber Company filed the suit against Noah Smith, alleging that it was the owner of a large lot of lumber purchased from and sawed by Lewis & McKinney and partly paid for; that Smith had been appointed receiver of Lewis & McKinney in a creditors' suit in which attachments had been levied on their property; that he had been ordered to take charge of and dispose of their property in accordance with the orders of the court; that he was not authorized to take control and possession of this lumber or any property of the plaintiff; and that no attachment had been levied on this lumber. Nevertheless, it was charged, Smith had taken about a carload of it and was threatening to take possession of and sell the balance for the benefit of the creditors of Lewis & McKinney. The only relief sought was an injunction against Smith.

After a hearing, a temporary injunction was granted and the appellant proceeded to dispose of all of the lumber. The case slept on the docket for about eighteen months when an answer and counterclaim were filed in which Smith denied the material averments of the petition except as to his appointment as receiver. He then set up a claim to this property, charging that attachments had been levied upon it, and that the creditors had laborers' and materialmen's liens on it; that he was proceeding under orders of the court to take possession of the property and convert it into money for the satisfaction of the debts of Lewis & McKinney when enjoined by the court. He asserted that the liens of the creditors were prior and superior to plaintiff's claim of ownership. He prayed, "in the capacity of a receiver and for the benefit of the creditors," that the petition be dismissed, and that plaintiff be compelled to pay into court a sufficiency of the proceeds of the lumber to satisfy the creditors as shown by judgment entered in the other actions, but which judgment was not stated in detail or filed in this suit.

Issue was joined on this pleading, and it was further affirmatively alleged in an amended reply that the laborers who had sawed the lumber and who were claiming a lien on the property had been paid.

Over the objection of plaintiff, the court, sua sponte, impaneled a jury who heard evidence relating to the claims of the creditors of Lewis & McKinney and received instructions to the effect that they should decide whether or not the laborers had been paid for their services, and, if it found that they had not been so paid, it should find for the defendants such sum as the jury might believe remained unpaid at the time an attachment was levied on the lumber. The verdict was: "We, the jury, find for the defendants." In the judgment the court recites that the case had been heard by the jury and the court jointly and he accepted the verdict as advisory and that he would follow the verdict. Thereupon it was adjudged that the appellant had appropriated to its own use the lumber and logs attached and covered by laborers' liens with notice and knowledge thereof, and that it must account to them for the unpaid portions of their respective claims, which were set out in detail in the judgment, and the parties were all awarded executions against the appellant. The attachments in the suit of the creditors against Lewis & McKinney were sustained in this judgment.

It is insisted by the appellant that the judgment is void because these creditors were not parties to the suit and there was no pleading supporting it. The decision of the case depends upon the authority of the receiver, who, though sued as an individual in the caption, responded as receiver, and the case proceeded accordingly.

Treating the motion for a new trial which specifically raised the point as sufficient under the rule that an appeal cannot be had from a void judgment until a motion shall be made to set it aside, the appellants had the right to appeal.

Wherefore the judgment is reversed.

Ky.App. 1932.
48 S.W.2d 17, 243 Ky. 317

Case Two of Two
258 Ky. 548
Court of Appeals of Kentucky.
March 22, 1935.
ACTION: Affirmed in part, and reversed in part, with directions.

Appeal from Circuit Court, Knox County.
Suit by the Rapp Lumber Company against Noah Smith, in which S. H. Hammons and others filed a petition to be made parties and which they made an answer, counterclaim, and cross-petition.
From an unsatisfactory judgment, plaintiff appeals.

CREAL, Commissioner.
This is the second appeal of this case, and by reference to the opinion on the former appeal which will be found in 243 Ky. 317, 48 S.W.(2d) 17, we are saved the necessity of further detailing the facts appearing therein, except in so far as may be necessary in disposing of the questions presented by this appeal.

Briefly stated, the facts necessary to an understanding of the questions involved are, as we understand the record, that some time prior to 1926, Sam R. Sells purchased a large tract of land, or the timber thereon, from the Black heirs, and by some sort of contract or arrangement, the firm of Lewis & McKinney acquired the soft woods and Sells retained the oak and other hardwoods. Lewis & McKinney placed a mill or mills upon the lands and proceeded to cut and manufacture the timber into lumber. They entered into a contract with the firm of Hammons & Calebs to also cut and saw the timber into lumber, and under this arrangement Hammons & Calebs set a sawmill on the tract in March, 1927, and cut and sawed timber until some time in the following February. Prior, however, to the time they ceased operations, they filed a manufacturer's or laborer's lien in the county court clerk's office of Knox county against Lewis & McKinney; and certain laborers who had assisted in the cutting and hauling of logs and lumber asserted laborer's liens.

Hammons & Calebs and various laborers instituted separate actions against Lewis & McKinney seeking judgment for the amount alleged to be due them and asking for the enforcement of their liens. These actions were consolidated, and an attachment which issued was levied upon certain lumber at the mill yards of Hammons & Calebs and at the railroad station at Four Mile, and Noah Smith was appointed receiver to take charge and dispose of the lumber. He had loaded some of the lumber at Four Mile on cars preparatory to shipping and selling it, when the Rapp Lumber Company instituted this action, alleging that it was the owner of approximately 325,000 feet of the lumber stacked at Four Mile which it had purchased under contract with Lewis & McKinney and that this lumber had been marked in its name and that it had paid a large part of the purchase price therefor. As pointed out in the former opinion, a temporary injunction was granted and the Rapp Lumber Company proceeded to ship and dispose of considerable portions of the lumber, but some for which they could not find a market burned at the railroad yards and the Rapp Lumber Company collected a little over $4,000 insurance thereon.

Some months thereafter the receiver set up a claim to the lumber disposed of by the Rapp Lumber Company and to that which had been destroyed by fire and asserted that the liens of laborers were prior and superior to the Rapp Lumber Company's claim of ownership. The judgment rendered in favor of the lien creditors was reversed by the former opinion on the ground that the receiver sued as an individual could not counterclaim to litigate disputed lien claims between the creditors of the estate and the Rapp Lumber Company, and that judgment on the counterclaim in favor of creditors not before the court was void.

On a return of the case, S. H. Hammons, a member of the firm of Hammons & Calebs, for himself and all other persons holding claims against Lewis & McKinney, filed a petition to be made a party and which he made an answer, counterclaim, and cross-petition in which he attempted to assert the lien claims; and McKinney Burnett and a number of other parties filed a petition to be made parties to the action and asked that it be treated as their answer, counterclaim, and cross-petition and attempted to set up their lien claims. Demurrers were interposed to these pleadings which were overruled, and the issues were completed by a reply controverting the allegations thereof.

After hearing evidence, it was adjudged that Hammons & Calebs recover of the Rapp Lumber Company the sum of $2,972.17 with interest from June, 1928, until paid, subject to a credit of $498 with interest from October 21, 1929; and that the other defendants and interpleaders recover the sum of $1,394.02 with interest from June 1, 1927, and the further sum of $175 with interest from June 1, 1927, subject to a credit in the sum of $1,142.27 paid by the receiver on October 21, 1929. It was further recited in the judgment that it appeared that the plaintiff, the Rapp Lumber Company, had paid taxes, costs, and penalties in the sum of $429.75 on lumber involved in the suit, and it was adjudged that it take credit against the money adjudged to be paid out of the proceedings realized from the sale of the lumber for that sum with interest to be prorated against the original sum adjudged to Hammons & Calebs and the other creditors of Lewis & McKinney so that each would share proportionately the taxes, costs, and penalties. The attachment was sustained and the sheriff directed to sell the property attached by him or enough to satisfy the unpaid portion of the judgment. It was further adjudged that the cost of the case after return from the Court of Appeals be paid, one-third by the Rapp Lumber Company, one-third by Hammons & Calebs, and one-third by the other interpleaders. The Rapp Lumber Company is prosecuting this appeal.

Considerable evidence relates to what occurred on the hearing of the motion to dissolved the injunction, but the only order we find in the record is one enjoining the receiver from selling or attempting to sell and dispose of 325,000 feet of lumber claimed by appellant. A number of witnesses for appellee testified that at the hearing, counsel for appellant asked the court to take the lumber out of the hands of the receiver and to permit appellant to dispose of it and account for the proceeds; that counsel agreed that the lumber so taken would be burdened with the liens of appellees; however, there is evidence for appellant to the contrary. There is no order of the court with reference to this matter, but it is alleged, and there is proof conducing to show, that appellant not only took charge of the lumber which bore its stamp or mark but also took charge of other lumber belonging to Lewis & McKinney and collected the proceeds for a part sold and the insurance for that which burned in the railroad yards.

Counsel for appellant raise a number of questions as to the sufficiency of the pleadings filed by appellees and assert that they are not good either as an intervening petition, answer, counterclaim, or cross-petition. Some of these objections seem to be supertechnical, and on the whole we regard the pleadings sufficient to meet the purposes for which they were filed. It is further asserted by counsel for appellant that the allegation in its amended reply that all the claims asserted by appellees had been fully paid and satisfied is undenied and in such circumstances the court was not authorized to enter a judgment for appellees, and this presents a question requiring more serious consideration.

In the amended reply it is specifically alleged that Hammons & Calebs had been paid in full for all the lumber which had been cut, manufactured, or sawed by them prior to the institution of this action, and this stands undenied. The reply denies that at the hearing on the motion to discharge the temporary restraining order, attorneys for appellant agreed that whatever rights appellant had were inferior to the claims of any and all persons who manufactured the timber into lumber or that appellant would take the lumber and dispose of it as the receiver was doing or would account therefor; but alleged that, on the contrary, it was the contention of appellant on that hearing that Hammons & Calebs and all other persons who labored in any way in cutting the logs or in manufacturing or sawing them into lumber had been fully and completely paid for all their labor. So it will be seen that the reply did not specifically allege that the interveners other than Hammons & Calebs had been paid, but only that this contention was made at the hearing.

Counsel for appellees contend that the allegation that Hammons & Calebs claim had been paid was traversed by the receiver and that a denial by one defendant inures to the benefit of all. But the former opinion concerning the receiver's right to plead for the persons claiming liens disposes of that contention adversely to appellees. Apart from any question concerning the undenied allegation that Hammons & Calebs had been paid in full for all timber cut and sawed by them, a careful review of the record leads to the conclusion that the judgment in their favor does not find sufficient support in evidence.

The evidence concerning the state of accounts between Lewis & McKinney and Hammons & Calebs is in such utter confusion and conflict as to render it impossible to determine with any degree of certainty the balance due the latter firm. This confusion is due partly at least to poor systems of book-keeping and to the further fact that such records, checks, etc., as had been kept by the parties had been filed or left in court on some former trial and could not be found. Notwithstanding this conflict in evidence, we are not prepared to say that the chancellor's finding respecting the amount due should be disturbed, but an entirely different situation exists when we come to consider the evidence as to the quantity, if any, of the lumber in controversy that had been cut and sawed by Hammons & Calebs. The evidence for appellant is to the effect that Hammons & Calebs had been paid in full up to and including July, and this is admitted by Mr. Calebs. Appellant's evidence further shows that there were very substantial payments made for lumber sawed in August and September. Mr. Hammons stated that they sawed approximately 400,000 feet, and it clearly appears that the greater portion of this was sawed previous to September. Mr. Hammons stated, when asked what became of the lumber at the mill at the time the attachment issued and after the firm completed the work for the receiver, that it was moved out by the Rapp Lumber Company and Noah Smith, the receiver, and something like 100,000 feet sold by the latter before it was taken out of his hands. The evidence of James Gibbons, who was appointed by the sheriff to make an inventory and appraisement of the timber, introduced the inventory and appraisement in the evidence. It appears that there was an attempt to make separate items of lumber sawed by Hammons & Calebs, but this is not made clear except as to an item of 14,250 feet of oak. R. T. Lewis testified positively that Hammons & Calebs' judgment was for no part of the lumber purchased by the Rapp Lumber Company, and that they had not cut or sawed any of the lumber sold to the Rapp Lumber Company for which they had not received pay. Hammons & Calebs, of course, had no lien or claim on any of the lumber not sawed by them. They have utterly failed to establish how much, if any, of the lumber involved in this controversy was sawed by them, and for which they had not been paid, and in such circumstances the chancellor erred in adjudging them an attachment or other lien against the lumber or proceeds of lumber that went into the hands of appellant. It is apparent that it would not be difficult to show with reasonable certainty how much of the lumber in controversy was sawed by Hammons & Calebs and how much came from other mills, and this should be done.

A different question is presented respecting the claims of the other appellees, since they are not confined to lumber sawed by Hammons & Calebs, but had a lien on any lumber sawed by or for Lewis & McKinney where they labored in cutting, hauling, or sawing same. Mr. Lewis recognized the merit of their claims, since he testified that he was interested in seeing that they were paid and assisted them in preparing their statements and perfecting their liens. The judgment allowing these claims is amply supported by the evidence.

Wherefore the judgment in favor of appellees other than Hammons & Calebs is affirmed, and the judgment in favor of Hammons & Calebs is reversed for proceedings consistent with this opinion.

Ky.App. 1935.
80 S.W.2d 599, 258 Ky. 548

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