Conley v. Easley

68 S.E.2d 23, 136 W. Va. 645, 1951 W. Va. LEXIS 47

• Court: West Virginia Supreme Court
• Decided: December 11, 1951
• Docket: 10384
• Status: Published

Opinions

Fox, President:

On the first day of July, 1943, Martha Brown Conley, in her own right and as widow and executrix of her husband, George Thomas Conley, deceased, and Ella Saltón, in her own right and as administratrix of her husband, R. A. Saltón, deceased, Russel A. Saltón, Jr. and Virginia Saltón Yost, and John W. Yost, her husband, as lessors, entered into a lease agreement with Dr. George W. Eas-ley, leasing to said Easley what is known as the Williamson Memorial Hospital, located in the City of Williamson, West Virginia, for a term of three years, at a monthly rental of $3,400.00. The lease was extended, under the terms thereof, for three years, and made to end on the 30th of June, 1949. Paragraph 12 of the lease, out of which grows this litigation, reads as follows:

“The Lessee covenants and agrees that if the Lessors, or the Williamson Memorial Hospital, late a corporation, or its Trustee if it be dissolved, shall so desire, then that he, the Lessee, will undertake to collect any accounts and bills receivable, due unto the corporation as of July 1, 1943, on the following terms and conditions:

“ (a) The accounts and demands to be assigned without warranty and without recourse in law or in equity to the Lessee.

“ (b) The Lessee will make demand for, and receive from the debtors, such funds as they may be induced to pay, on account of the accounts and bills receivable.

“(c) The Lessee will keep a separate account of the funds so received, and shall be permitted to appropriate and use such funds, for himself.

“ (d) The Lessee will pay off and discharge the accounts for merchandise or labor, due or owing by the corporation on July 1, 1943, and keep an account thereof.

“ (e) At the expiration of the Lease, original or as extended, the Lessee will, in turn, assign unto the Lessors, or their nominee, any bills or accounts receivable which may be owing unto him, in an amount not less than the amount of the bills and accounts receivable, hereby assigned or to be assigned unto him, as hereinbefore recited. The writing of assignment shall be without warranty as to the validity of the demands, and without recourse either in law or in equity as to the assign- or; in which event the assignees of the Lessee shall assume the payment of such amounts as the said Lessee shall be owing on account of labor and supplies, but the amount so assumed by the Lessors shall not exceed the amount paid out by the Lessee, as provided in paragraph (d).”

The following facts, in relation to the accounts and other matters mentioned in the paragraph quoted above, are admitted. One: At the beginning of the said lease, the accounts which Dr. Easley was permitted to collect and use amounted to the sum of $114,714.85, of which Easley collected the sum of $15,489.94; Second: The aggregate of bills owing by the hospital, all of which Easley was required to pay under the provisions of Paragraph 12, was $5,050.59, leaving a balance which Dr. Easley was entitled to use as his own of $10,439.35; Three: The amount of uncollected accounts of those assigned to Dr. Easley, at the beginning of his lease, was, on June 30, 1949, the date when he surrendered the same, $99,224.91; Fourth: The amount of additional uncollected accounts which accumulated during the six years Dr. Easley operated said hospital, under his lease, was $124,204.83; and Five: The amount of the bills which the hospital owed ■to various persons, on June 30, 1949, was $7,061.43.

The matter in dispute, and it is a legitimate matter of controversy coming within the declaratory judgment act hereinafter mentioned, is the respective rights of the lessors and the lessee under the lease of July 1, 1943, to the uncollected accounts existing on June 30, 1949, the date when Easley surrendered the hospital to his lessors. The contention of- the lessors is that the accounts in their entirety belonged to them; the contention of the lessee, Easley, is that he is entitled to said accounts. As between these parties, there does not seem to be any middle ground, neither party yielding to the other on account of any equities involved by reason of the nature of the accounts, their collectability or otherwise.

This is a declaratory judgment proceeding under the provisions of Chapter 26, Acts of the Legislature, 1941, and, as stated above, the controversy is one which comes within the act. The facts as narrated above are set up in what is termed a bill of complaint in which the lessors in the lease of July 1, 1943, and Woodrow W. Scott and Russel A. Saltón, Jr. are made plaintiffs, the latter by reason of their being the present lessees of the hospital, and being interested in the accounts involved, and Dr. George W. Easley, defendant. Defendant filed his answer and crossbill in which he sets up his claim to the said accounts. The case was heard upon the bill and the answer and crossbill, and on October 27, 1950, the court rendered a written opinion in the case which is made a part of the record, and entered the following judgment:

“IT IS, THEREFORE, ADJUDGED, ORDERED AND DECREED:

“1. That the accounts receivable owing to the Williamson Memorial Hospital as of June 30, 1949, which accounts are of. the total sum of $223,-429.94 according to the audit made by T. R. Joseph and filed as an exhibit with the defendant’s answer, belong to and are the property of the defendant, Dr. George W. Easley.

“2. That the defendant, Dr. George W. Easley, shall account to the plaintiffs in the sum of $10,-439.35, payable out of the monies collected out of the accounts receivable as of June 30, 1949, and further that the defendant, Dr. George W.' Easley, shall account to the plaintiffs in the sum of $7,-061.43, which is likewise to be paid out of the said accounts receivable or those collected by the plaintiffs; making a total sum of $17,500.78 to be accounted for by the defendant to the plaintiffs, payable out of the said accounts receivable owing to the Williamson Memorial Hospital as of June 30, 1949. Any balance collected on said accounts receivable, after payment of said sum of $17,500.78 to the plaintiffs, shall be paid to the defendant, Dr. George W. Easley, and the balance of the accounts receivable, as of June 30, 1949, not collected, shall be turned over and delivered to Dr. George W. Easley as and for his own property. And that after the plaintiffs shall have collected the total sum of $17,500.78 out of said accounts receivable, they shall then turn over to the defendant all the remaining unpaid accounts receivable as of June 30, 1949.”

On March 19, 1941, at the instance of the plaintiffs, we granted this appeal.

The majority of the Court is of the opinion that there is no sound basis for the decision of the trial court. That decision completely ignores the express’ provision of Paragraph 12 of the lease in respect to accounts, and is based upon what the chancellor believed to be the equities of the situation. Not having before us the information as to the amount of the accounts which have been collected since June 30, 1949, by the present lessees, or the other plaintiffs, we are in no position to deal with the equities of the case, even if we were permitted to do so. We think, however that we are not permitted to depart from the terms of the agreement between the parties, and should, so far as possible to do so, enter a decree within the frame work of the written agreement the parties made, and in so doing we must deal with the accounts which were the subject of that agreement.

At this point, the Court is unable to agree upon a solution of the case. Two members of the Court would affirm the judgment of the trial court, and two would reverse the trial court, and remand the case with directions to enter a decree sustaining the contention of the plaintiffs in toto. The position of the writer of this opinion is to reverse the decree of the trial court, and remand the cause with directions to enter a decree based upon the principles which I will endeavor to state.

It seems to me that the whole controversy may be equitably determined, within the terms of the agreement, by disposing of two questions: First, what accounts should we take into consideration; and, second, whether the reference contained in Subsection (e) of Paragraph 12 of the lease agreement was intended as a limitation on the amount of the accounts which the lessee should return to the lessors when he surrendered his lease. In my opinion, the $99,224.91 accounts remaining uncollected from those turned over to Easley, on July 1, 1943, should no longer be considered, and they should remain the property of Easley. I think we would be justified in taking this course, because they are barred by the statute of limitations, and the passage of time, and the small amount collected during the period of six years indicates that they have no value. Certainly it was not contemplated in the agreement that Easley could turn over an equivalent amount of accounts by using these worthless accounts to make up the total of the sum required to be assigned to the lessors at the termination of his lease. There is nothing in the agreement that prevents us from eliminating from any present consideration the accounts aggregating $99,224.91 which are treated as of no value. I -think the situation before us warrants us in so doing. Therefore, I think what we are dealing with is the $124,-204.83 of accounts which were accumulated under Dr. Eas-ley’s administration of the hospital. Some of these accounts may be barred by the statute of limitations; others may be collectible; but they are of the same general character of accounts as those received by Easley in 1943, when he took charge of the hospital.

We then come to the important question in the case as to what accounts were to be turned over by Easley to his lessors on the termination of his lease. I have been impressed with the ingenuity of counsel in avoiding a discussion of the entire first sentence of section (e) of Paragraph 12 of the lease. This reads:

“At the expiration of the Lease, original or as extended, the Lessee will, in turn, assign unto the Lessors, or their nominee, any bills or accounts receivable which may be owing unto him, in an amount not less than the amount of the hills and accounts receivable, hereby assigned or to be assigned unto him, as hereinbefore'recited. * * *” (Emphasis ours.)

The amount of the bills and accounts which Easley took over was $114,714.85, as afterwards determined by an accounting, recognized as correct by all parties. Clearly, the underscored portion of the quotation above refers to, and, in my opinion, limits the amount of the accounts which Easley was required to assign. What the parties had in mind was to place the owners of the property in the same position as they were in when the lease was made in July, 1943. To show that this is true, the same section provides:

“* * * in which event [referring to the same amount of accounts] the assignees of the Lessee shall assume the payment of such amounts as the said Lessee shall be owing on account of labor and suppliés, but the amount so assumed by the Lessors shall not exceed the amount paid out by the Lessee, as provided in paragraph (d).”

As a matter of fact, the accounts which were due from the hospital to various persons at the time Easley surrendered his lease was $7,061.43; therefore, if Easley be required to turn over from the accounts accumulated during his administration of the hospital the sum of $114,-714.85, the hospital would only have been required, under the terms of the lease, to pay the bills accruing under Easley’s administration to the amount of $5,050.59, leaving Easley to pay the difference between that amount and the total amount of said bills. That solution of the matter would leave the parties in exactly the same position as they were in in July, 1943, save and except a question which we have no way of determining, and that is the comparative value of the accounts which were turned over to Easley, and the value of those to be assigned to the lessors, or their nominee, at the end of his administration under the lease agreement. That element of the case renders the contract difficult to enforce in any equitable way, and if this Court should feel itself free to define an equitable basis for the settlement of the accounts, the case would have to be further developed by an ascertainment of the relative value of the accounts which had accumulated to the date when Easley took over the hospital in 1943, and those which accumulated düring the six years of his administration.

If we are to decide this case on the record as now presented, it seems to me that we must give recognition to the provision of Subsection (e) of Paragraph 12 of the lease, which, in plain language, requires the lessee, at the expiration of his lease, to assign to the lessors, or their nominee, any bills or accounts which may be owing to him in an amount not less than the bills and accounts which had been assigned to him at the time he entered on his lease in 1943, which was the sum of $114,714.85. My disagreement with the two members of the Court, who would hold that all of thesé accounts which had been accumulated by Easley, as well as those which had been assigned to him when he took over the lease in 1943, now belong to the plaintiffs, is that I think it was plainly intended to require only that Easley should assign accounts to the amount of those which had been assigned to him. I am not willing to go further than to place the present owners, and present lessees, in the same position in which Easley stood when he took over the lease in 1943, and I think this was the plain intention of those who entered into the lease. If that had not been intended, there was no occasion whatever for the use of the language “in an amount not less than the amount of the bills and accounts receivable, hereby assigned or to be assigned unto him, as hereinbefore recited.” If it had been intended that Easley should assign all these accounts, the provisions of Subsection (e) should have ended at the point where the language immediately above quoted began. In other words, the provision would have simply been: “At the expiration of the Lease, original or as extended, the Lessee will, in turn, assign unto the Lessors, or their nominee, any bills or accounts receivable which may be owing unto him, * * If that language had been used, this controversy could not have arisen. The language immediately following was added and it must have been added for some purpose, and this purpose must have been to limit the amount of the accounts which Easley was to assign.-

The question may be asked, how are we to make a division of accounts, as between the plaintiffs and the defendant, constituting the difference between the total of the accounts, accruing under the terms of Easley’s lease, $124,204.83,' and the sum of $114,714.85, the aggregate of the accounts turned over to' Easley in 1943, that difference being $9,489.98. Someone may inquire as to what accounts should be turned over to Easley. My solution of this case on this point would be to require Easley to turn over all of these accounts to the plaintiffs, on the condition that there be paid to him, from collections thereof, the sum of $9,489.98. I would require that upon the assignment of these accounts by Easley, the plaintiffs pay, on account of the bills of the hospital existing at the conclusion of Easley’s administration thereof, the sum of $5,050.59, which would, of course, leave Easley the burden of paying the balance between that sum and the aggregate of the said bills which was $7,061.43. I agree, of course, that there should not be a separation of the accounts, but it is not necessary that any such method be employed. Certainly a court of equity in determining an intricate matter of this character may make a money decree of the nature I have suggested.

In the situation presented by the inability of the majority of the Court to agree upon any final solution of the matters in controversy, but a majority of the Court being of the opinion to reverse the decree of the Circuit Court of Mingo County, the same is reversed, and the case remanded for further development and consideration by that court.

Reversed and remanded.