168 F. 465 (4th Cir. 1909), 780, Canton Roll & Machine Co. v. Rolling Mill Co. of America

Docket Nº:780, 762, 781.
Citation:168 F. 465
Party Name:CANTON ROLL & MACHINE CO. et al. v. ROLLING MILL CO. OF AMERICA et al. STURGISS et al. v. CORBIN et al. FARMERS' DEPOSIT NAT. BANK OF PITTSBURGH, PA., et al. v. LOGAN et al.
Case Date:January 12, 1909
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit
 
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Page 465

168 F. 465 (4th Cir. 1909)

CANTON ROLL & MACHINE CO. et al.

v.

ROLLING MILL CO. OF AMERICA et al. STURGISS et al.

v.

CORBIN et al. FARMERS' DEPOSIT NAT. BANK OF PITTSBURGH, PA., et al.

v.

LOGAN et al.

Nos. 780, 762, 781.

United States Court of Appeals, Fourth Circuit.

January 12, 1909

Page 466

The three above-entitled causes were, by consent of parties, heard together in this court, as they all relate to the same subject-matter, that is to say, the property and estate of the Morgantown Tin Plate Company, bankrupt, and involve the questions of how and to whom the same shall be distributed. The last-named cause, No. 781, is an appeal from a decree of the United States District Court entered on the 23d day of August, 1907, in the bankruptcy cause proper, decreeing payment to one Frank J. Logan of the sum of $100,000, with interest at 6 per cent. per annum from the 1st day of January, 1903, being in full of 200 first mortgage bonds of the par value of $500 each of the bankrupt, claimed to be owned by said Logan. The second cause, No. 762, is a petition asking for the supervision and revision by this court, in matter of law, of the decree entered in the bankruptcy cause in favor of Frank J. Logan; and the first-named cause, No. 780, is an appeal from a decree of the United States Circuit Court in equity, entered on the 23d day of August, 1907, dismissing complainant's bill.

In the equity cause, the complainant, the Canton Roll & Machine Company, sought to enforce a certain mechanic's lien against the Rolling Mill Company of America, and the bankrupt, the Morgantown Tin Plate Company (successor to the Rolling Mill Company of America), for an indebtedness of $14,889.98, with interest from the 23d day of March, 1904; and the same was instituted upon the theory that the assets of the Rolling Mill Company of America had been collusively absorbed by the owners and officers of the Morgantown Tin Plate Company, in derogation of the rights of the creditors of the Rolling Mill Company of America, and that said Morgantown Tin Plate Company had incumbered its own property, and the property and estate acquired by it from the Rolling Mill Company of America, by a mortgage for $150,000, and that $100,000 of the bonds (being the same bonds referred to in the bankruptcy decree appealed from) had been hypothecated for a debt of $21,500, and subsequently, upon sale of the collateral, that the bonds had been acquired by some unknown person in the interest of certain officers and directors of the Morgantown Tin Plate Company, all of which was charged to be in fraud of the rights of the complainant and other creditors alike of the Rolling Mill Company of America and said Morgantown Tin Plate Company.

Although this suit in equity was filed on the 20th day of June, 1904, some two months or more after the adjudication in bankruptcy of the Morgantown Tin Plate Company, the contests over the indebtedness of the Morgantown Tin Plate Company, especially as to the debt due the Canton Rolling Mill Company, the plaintiff in the equity suit, and the amount due by reason of the sale of the hypothecated bonds as aforesaid, seems, without objection, to have been litigated in the equity cause, in which the bankrupt's trustee interposed, and joined particularly in the contest respecting the ownership of the bonds, and the right of the holder of the same to recover more than the amount for

Page 467

which they were hypothecated. At a later date, the Farmers' Deposit National Bank of Pittsburgh, Pa., and George C. Sturgiss intervened in the same cause, by petition, also attacking the validity of the sale of the bonds so deposited as collateral, and asked to be allowed to set up certain claims held by the bank as assignee of said Sturgiss, including that of the Canton Roll & Machine Company, the complainant aforesaid. The contest was an unusually bitter one, as appears alike from the proceedings in bankruptcy, and the equity case aforesaid, and resulted in the Circuit Court entering the decree appealed from, which is as follows:

'This cause having come on for final hearing and decision at the May term of this court, and having been duly argued and submitted by counsel, and this court having carefully considered all the pleadings, evidence, and exhibits heretofore taken and filed herein, and orders and decrees heretofore made, together with the briefs of counsel for the respective parties, and having on the 2d day of August, 1907, rendered and filed its opinion in writing upon the controversies submitted to it, which is now incorporated in and made part of this decree, this court doth now declare, order, adjudge, and decree that the bill of the plaintiff in the above-entitled action and of the interveners therein, to wit, the Farmers' Deposit National Bank and George C. Sturgiss, is insufficient in law and must be and is hereby dismissed upon the merits, and that the defendants in this action and each of them, to wit, Rolling Mill Company of America, Morgantown Tin Plate Company, Hector M. Hitchings, Melvin J. Palliser, W. J. Logan, Jacob Meurer, Dick S. Ramsey, and Andrew Meurer, recover of the plaintiff and the petitioners in this action their costs in that behalf sustained, to be taxed by the clerk of this court; and it is further ordered, adjudged, and decreed that a duly authenticated copy of this judgment and decree be remitted by the clerk of this court to the clerk of the United States District Court for the Northern District of West Virginia for the appropriate consideration and action of that court.

'And all the pleadings, proceedings, depositions, exhibits and evidence, and orders in this cause are hereby remitted to the aforesaid District Court for the consideration and appropriate action of the District Judge in the decision of a petition now pending in said court for the payment over to Frank J. Logan out of the funds received from a sale in bankruptcy of the assets and property of Morgantown Tin Plate Company of the sum of $100, and interest. ' (Entered 23d August, 1907.)

On the same day of the entry of this decree in the Circuit Court, the decree appealed from was entered in the bankruptcy cause, in favor of Frank J. Logan, the alleged holder of the 200 bonds of $500 each as aforesaid, pursuant to his petition in such bankruptcy proceedings filed on the 24th day of September, 1906, in which he claimed to own said bonds, and which decree in favor of Logan for the face value of the bonds and interest was based upon the above decree entered by the Circuit Court, together with the pleadings, exhibits, and testimony taken in said cause, as contemplated by the order of the Circuit Court dismissing the cause as hereinbefore recited. The decision of the lower court is found in 155 F. 321, to which reference is made for a full statement of the facts in these causes.

B. M. Ambler and A. Leo Weil (C. M. Thorp, on the brief), for appellants.

Hector M. Hitchings, for appellees.

Before PRITCHARD, Circuit Judge, and WADDILL and McDOWELL, District judges.

WADDILL, District Judge (after stating the facts as above).

A number of assignments of error are presented for the consideration of the court, but they may be reduced substantially to three propositions: (1) The correctness of the order of the court dismissing the bill as to the complainant, the Canton Roll & Machine Company. (2) In dismissing the bill and awarding costs in favor of the defendants

Page 468

named in the decree against the complainant; and subsequently, upon the decree of the Circuit Court, and the pleadings and testimony taken therein, ordering in the bankruptcy cause the payment to Frank J. Logan of $100,000, with interest and costs.

(3) In dismissing the petition of the Farmers' Deposit National Bank and George C. Sturgiss in said Circuit Court.

We will consider the questions presented in the order named, and remark in passing that in the view we take of the cause, assuming that the decree of dismissal by the Circuit Court should have been entered at all, it should have been without prejudice to the several parties to seek relief in some other appropriate action if the same could not be afforded them in the equity cause.

1. While the point as to the validity of complainant's mechanic's lien which was subsequently assigned to Sturgiss is admittedly a nice one, we find ourselves, after the most careful consideration that we have been able to give to the question, unable to agree with the trial court as to the invalidity of the lien. The seventh and thirteenth paragraphs of the bill read:

'Among other contracts so made, said Rolling Mill Company of America entered into a written contract with your orator on December 5, 1901, for the purchase from your orator of six hot tin mills, complete, six stands of cold mills, complete, and certain other machinery and appliances, for which the said Rolling Mill Company of America agreed to pay your orator the sum of $35,000; a copy of said contract being hereto attached, marked 'Exhibit A.' Your orator has fully performed said contract by furnishing said mills, rolls, and machinery in accordance therewith, said machinery and materials having been furnished for and about the construction of said mill and manufactory, and the buildings, appurtenances, and fixtures therewith connected, and said rolls, machinery, and material thereby became, and have since been, and now are a part of said tin plate plant and property. The said Rolling Mill Company of America has paid or caused to be paid to your orator a portion of the said contract price for said machinery and materials, but has failed to pay the remainder thereof, to wit, the sum of $14,889.98, which amount, with interest thereon from March 23, 1904, is due and payable to your orator on...

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