Court Opinion

ID: 8809517
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:58:25.532283+00
Date Added: 2024-06-11T17:04:13.779658
License: Public Domain

WOODS, Circuit Judge
(dissenting). Having a strong conviction that the deed of trust given by the bankrupts, Bickley & Cox, copartners doing business as Sulphur Springs Lumber Company, to Hagan, trustee, waa invalid under the bankrupt statute, I am constrained to dissent on that point. On April 10, 1914, Hagan, trustee, sold to Sulphur Springs Lumber Company the merchantable timber on the tract of land described in the contract. The purchase money, represented by a' fixed price per thousand feet as the lumber was manufactured, was to be paid on each thousand feet as it was sold. If the purchaser failed to pay as the lumber was sold or disposed of, it was to have the persons to whom it sold to pay the purchase money to a bank, and out of such payments the bank was to first pay the amounts due Hagan, trustee. The lumber was fio be manufactured and stacked upon the ground of Hagan, trustee, and lumber of sufficient value was to be kept there to pay any arrears due to Hagan. A lien was retained on all the manufactured lumber sufficient to cover any amount which might become due to Hagan. The purchaser, Sulphur Springs Lumber Company, failed to pay for much of the lumber as it was shipped, and failed to have the purchasers from it turn over the purchase money to the bank as agreed. Thereupoñ Hagan, trustee, forbade the further shipments until settlement should be made for the amounts due, and threatened to take proceedings to enforce his lien and have a receiver appointed. To relieve its embarrassment, the Sulphur Springs Lumber Company gave to Hagan, trustee, the deed of trust here involved to secure all arrears under the contract and such sums as might thereafter become due. Within four months thereafter the Sulphur Springs Lumber Company was thrown into bankruptcy. The District Court held that Hagan had notice of its impending insolvency when the deed of trust was taken, and that, therefore, it was invalid as a preference under the Bankruptcy Act.
The majority of this court, while agreeing that the deed of trust was taken by Hagan with notice of the insolvency of the debtors, nevertheless holds that there was a present valuable consideration for the deed of trust, and that therefore it constituted a valid lien upon the property which it covered. This present consideration, as stated *721by the majority, was the giving up by Hagan, trustee, of the right to seize the lumber then in the yard, and the giving to the debtor additional time in which to make payment. No case has been cited, and I think none can be found, in which the mere extension of an antecedent debt has been held to be such a present consideration as to make a preference valid. The statement that Hagan, trustee, surrendered his right to seize the lumber then on the yard is based entirely upon his oral testimony to the effect that he agreed to allow the Sulphur Springs Lumber Company to ship the lumber without making the payments in accordance with the original contract of sale. This statement of his agreement is in square contradiction of the following provision of the deed of trust:
“It is further expressly agreed and understood, that this deed of trust shall in no way affect the rights of the said Charles I’. Hagan, trustee, under said contract of April 10, 1914, and the provisions contained therein, and the lien given thereby upon the manufactured lumber, nor is it intended in any way to modify the provisions of said contract, but only to give additional security to tho said Hagan for said debt, and all the provisions and obligations contained in said contract and the rights of said Hagan thereunder shall remain the same as if this contract had not. been entered into, nor shall the execution of notos for any stumpago duo at any time, and time extended for payment, affect the rights of said Hagan or be treated as a novation of said debt for stumpago, nor the right to enforce payment if said contract is violated by failure to keep sufficient lumber on hand to secure said Hagan as provided in said contract or for any other cause.”
It is true that a consideration in additibn to that expressed in a deed may be proved by parol. . That, however, is not the question, nor the difficulty which confronts the creditor. Had nothing more appeared than that a trust deed of land was taken expressing merely that it was taken as additional security, and the creditor had testified that as an additional consideration he had agreed in writing to release the lumber held under his previous contract, there would be no legal difficulty in holding the parol evidence sufficient to prove an agreement to release the lumber. But here the parol evidence is completely destroyed by the express terms of the deed of trust itself. The parol testimony is that the debtor, in consideration of the trust deed, was released from the obligation to keep sufficient lumber on hand to pay the debt. The trust deed expressly stipulated that it should not have that effect, that it should be only an additional security, that the original contract should remain in full force, that the rights of the creditor to enforce it should remain as if the trust deed had not been executed, and that the failure to keep sufficient lumber on hand to secure the creditor would he a violation of it. To allow the creditor, after disaster comes, to destroy the effect of a clear and express provision of the contract by merely testifying that the real contract was exactly the contrary of that explicitly expressed in the writing, is, in effect, to erase from the deed of trust one of its stipulations in favor of the creditor and to substitute in its stead the creditor’s parol evidence of what he agreed to.
The fact that the creditor afterwards chose to waive his rights under either or both the written contracts could not relate back, and give either of them an effect contrary to its terms. I think the decree of the District Court should be affirmed.