Warren Central R. v. Texas Creosoting Co.

62 S.W.2d 691, 1933 Tex. App. LEXIS 1047
CourtCourt of Appeals of Texas
DecidedJune 29, 1933
DocketNo. 2416
StatusPublished

This text of 62 S.W.2d 691 (Warren Central R. v. Texas Creosoting Co.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Warren Central R. v. Texas Creosoting Co., 62 S.W.2d 691, 1933 Tex. App. LEXIS 1047 (Tex. Ct. App. 1933).

Opinion

WALKER, Chief Justice.

On January 14, 1931, appellee, Texas Oreo-soting Company, a corporation, and appellant, Warren Central Railroad Company, a corporation, duly chartered under the laws of the state of Texas, hereinafter referred to as appellant railroad company, entered into a written contract whereby appellee agreed to sell, and appellant railroad company agreed to buy, certain railroad material, fully described in the contract as to character of material, place and time of delivery, and terms and conditions of payment. This material was to be used, and in fact was used, by appellant railroad company in the construction of its line of railroad, hereinafter referred to, in process of construction when the contract was made. The delivery of material tinder the contract was completed by appellee and accepted by appellant railroad company during the first days of May, 1931. In the written contract it was stated that appellant railroad company was a corporation with its domicile in Harris county, Tex., and that the delivery of the material could be made at appellant’s creosoting plants or at Katy, one of the terminal points on appellant railroad company’s line of railroad. In order to fix in its favor the materialman’s lien, created 'by the provisions of article 5452, R. S. 1925, appellee filed its written contract under which the material was furnished with the county clerk of Harris county on May 25, 1931, who, on May 28, 1931, duly recorded the same, together with the following notice, which was attached to the contract:

“The State of Texas, County of Orange.
“In order to perfect its lien upon the hereinafter described property, Texas Creosoting Company herewith files its contract, which is hereto attached marked Exhibit ‘A’ and here referred to and made a part hereof.
“The improvements and the tract of land upon which same are located, all of which the undersigned is informed, are owned by ‘Warren Central Railroad Company’, are described as follows:
“ ‘Warren Central Railroad.’
“The material mentioned in such contract was furnished to Warren Central Railroad Company in the construction of a railroad.
“Texas Creosoting Company
“By A. H. Gardes, Controller.
“Materialman.”

[693]*693In liquidation of the purchase price of the material furnished as above stated, appellant executed to appellee two promissory notes; one dated February 16,1931, due ninety days after date, for the sum of $20,194.01, the other dated May 1, 1931, due the 18th of June, 1931, for the sum of $4,336.02, both notes stipulating for interest at 6 per cent, per an-num from date, and the usual 10 per cent, attorney’s fees. These notes were endorsed by appellants Howard Kenyon, J. E. Edmund-son, J. E. Brown, G. M. Jackson, and M. S. Lehrer. These appellants will be hereinafter referred to as indorser appellants. These notes were not paid, and in adjustment thereof appellant railroad company and the in-dorser appellants executed a series of new notes, dated the 22d day of July, 1931, covering all the indebtedness due appellee for the material furnished. These notes were executed by appellant railroad company as principal, and indorsed by indorser appellants, as were the original notes. Contemporaneously with the execution of these notes, appellant railroad company executed to ap-pellee a contract lien against all its railroad property to secure their payment, but in doing so made no effort to comply with the Stock and Bond Law of the state of Texas, with special reference to article 6526 et seq., R. S. 1925. This contract contained the following material provisions:

“Party of the second part agrees and binds itself to receive and accept upon delivery hereof, of this contract and signing and execution of same in lieu of and extension and in place of the notes hereinbefore referred to, the following described promissory notes of party of the first part, to wit.”
“As well as acceptance of party of the first part by party of the second part of the five notes heretofore referred to, and the extension of the obligation evidenced thereby.”
“ * ⅜ * it ⅛ farther understood and agreed by and between the parties hereto that the contract lien herein given by the Party of the First Part to Party of the Second Part shall in no wise be in derogation to the statutory rights of the Party of the Second Part to secure itself for the payments remaining due for the materials delivered and sold to Party of the First Part, as hereinabove recited, that is to say, this contract lien shall not be in derogation of any statutory liens, if any, of which Party of the Second Part may take advantage, to further secure itself.”'

And in explanation of this contract A. H. Gardes, appellee’s controller, testified as follows:

“Q. State whether or not the material called for in this contract has already been furnished, and if it in fact was the basis of these notes. A. Yes.
“Q. Was the note paid when due? A. No.
“Mr. Reid: Answer this, then: Ho you know whether or not the debt evidenced by this contract and made the basis of these notes has ever been paid? A. The debt has not been paid.”

On cross-examination under interrogation by Mr. Bryan he testified as follows:

“Q. You gave the first series of notes back ? A. Yes.
“Q. They were cancelled and you took the new notes in evidence of your claim. A. We took them in evidence of the indebtedness.”

On the execution of the second series of notes, the first series was surrendered to appellant railroad company. On July 6, 1931, appellee was pressing appellant railroad company for payment of the above-described indebtedness, with interest and attorney’s fees, which was then due, and upon which it had the right to sue. Appellant Howard Kenyon Dredging Company, a corporation, knew of this indebtedness and that appellee was demanding its payment. Appellant railroad company at that time was heavily indebted to appellant 'Howard Kenyon Dredging Company, and that company was endeavoring to assist appellant railroad company to finance its obligations by borrowing money to discharge or greatly reduce its indebtedness. Appellant Howard Kenyon Dredging Company was aware that, if suit was instituted by appellee, appellant railroad company could be financed only with the greatest difficulty. Accordingly, on the 6th day of July, 1931, an agreement was entered into by and between appellee and appellant Howard Kenyon Dredging Company to the effect that, if ap-pellee would not institute suit against appellant railroad company until after July 26, A. D. 1931, appellant Howard Kenyon Dredging Company would subordinate all its rights, claims, demands, and liens which it then held, or might thereafter become entitled to, to the debts and liens then held by appellee against appellant railroad company, and that the debts and liens of appellee should be paid in full before appellant Howard Kenyon Dredging Company would have any rights, claims, or demands against the assets of appellant railroad company. On the 22d day of July, A. D. 1931, the agreement, as summarized, was reduced to writing and duly executed 'by both parties thereto.

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Bluebook (online)
62 S.W.2d 691, 1933 Tex. App. LEXIS 1047, Counsel Stack Legal Research, https://law.counselstack.com/opinion/warren-central-r-v-texas-creosoting-co-texapp-1933.