J.H. Lane & Co. v. Maple Cotton Mill

• Decision Date: 02 February 1916
• Docket Number: 1362-1364.
• Citation: 232 F. 421
• Parties: J. H. LANE & CO. et al. v. MAPLE COTTON MILL et al. SAME v. HAMER COTTON MILLS et al. TALLMAN v. DILLON COTTON MILLS et al.
• Court: U.S. Court of Appeals — Fourth Circuit

232 F. 421

J. H. LANE & CO. et al. v. MAPLE COTTON MILL et al. SAME v. HAMER COTTON MILLS et al. TALLMAN v. DILLON COTTON MILLS et al.

Nos. 1362-1364.

United States Court of Appeals, Fourth Circuit.

February 2, 1916

Frederic R. Kellogg, of New York City (Huger, Wilbur & Guerard and Wm C. Miller, all of Charleston, S.C., and William H. Fain Kellogg, Emey & Cuthell, and Earle L. Beatty, all of New York City, on the brief), for appellants.

H. J Haynsworth, of Greenville, S.C. (Haynsworth & Haynsworth, of Greenville, S.C., and Gibson & Muller, of Dillon, S.C., on the brief), for appellees.

Before PRITCHARD, KNAPP, and WOODS, Circuit Judges.

WOODS Circuit Judge.

In the opinion heretofore filed in this cause a full statement was made of the legal issues and the facts out of which they arose. It is sufficient to say here that the appeal is from a decree of the District Court refusing to set aside, at the instance of J. H. Lane & Co. and John M. Tallman, minority stockholders, sales of the Dillon Cotton Mills, Maple Cotton Mill, and the Hamer Cotton Mills, made in pursuance of resolutions of the stockholders of the several corporations.

This court affirmed the decree holding that the District Judge had decided correctly all the questions referred to in his opinion. As to one of the points made in argument here, this court said:

'It was argued in this court that the sale was invalid because the property was bid off by the trustees and their attorney at a sale made by themselves. The objection would, to say the least, be of most serious import had it been made before the District Court and error assigned in the court's finding on it, Michoud et al. v. Girod et al., 45 U.S. (4 How.) 503 (11 L.Ed. 1076); Scottish-American Mtg. Co. v. Clowney, 70 S.C. 229 (49 S.E. 569, 3 Ann.Cas. 437); McCallum v. Grier, 86 S.C. 162 (68 S.E. 466, 138 Am.St.Rep. 1037). But the sale was treated by the District Judge as having been made to the Dillon Mills on behalf of the majority stockholders, and his opinion gives no intimation that objection was made on the ground that a trustee could not bid off property at his own sale. A point not presented to the court below and passed on cannot be considered by this court. Missouri Pacific Railway Co. v. Fitzgerald, 160 U.S. 575 (16 Sup.Ct. 389, 40 L.Ed. 536); Pine River Logging Co. v. United States, 186 U.S. 279 (22 Sup.Ct. 920, 46 L.Ed. 1164).'

A petition for rehearing on this point was filed on the ground that while the record did not show it, yet it was a fact that the point referred to had been made and fully argued in the District Court, and that it was understood by the court and the counsel that it had been passed on and decided by the District Court adversely to the appellants. An order was then made requiring the appellees to show cause--

'why the record in these causes on appeal from the District Court of the United States for the Eastern District of South Carolina, at Charleston should not be amended so as to show that the District Court considered the point as to whether the sale was made invalid by reason of the fact that the property was bid off by the trustees or their attorneys at the sale made by them.'

By the petition and the return the court was convinced that the point referred to had been made and argued before the District Court, and was considered by all parties to have been passed on by the District Court adversely to the appellants. The court being unwilling under these circumstances, that the appellants should lose the benefit of a point of importance through mere inadvertence, considered that the record should be treated as properly amended. The assignments of error though very general in their form thus became responsive to the finding of the District Court on this point and drew in question the legality of the successful bids of the trustees and their attorney. Consequently reargument of the point was ordered.

In the course of the dissolution proceeding, sales of the plants of the Maple Cotton Mill, Hamer Cotton Mills, and the Dillon Cotton Mills were made by the directors as trustees under the authority conferred by the following state statute:

'Upon the dissolution in any manner of any corporation, the directors shall be trustees thereof, with full power to settle the affairs, collect the outstanding debts, sell and convey the property and divide the moneys and other property among the stockholders after paying its debts, as far as such moneys and property shall enable them; they shall have power to meet and act under the bylaws of the corporation and under regulations to be made by a majority of said trustees, to prescribe the terms and conditions of the sale of such property, and may sell all or any part for cash, or partly on credit, or take mortgages and bonds for part of the purchase price for all or any part of said property.'

The statute thus made the directors trustees, and their trust was to all the stockholders-- the minority as well as the majority. The Maple Mill plant was bid off by Wm. Hamer for $155,000, the Hamer Mill plant by W. T. Bethea for $190,000 and the Dillon Mill plant by Mr. H. J. Haynsworth for $50,000. Hamer and Bethea were directors and statutory trustees making the sale. Mr. Haynsworth was attorney for the trustees and for the new corporation to which the bids were afterwards assigned. The bids were all below the value of the property. We are convinced that no actual fraud was intended, and that all the parties were endeavoring to promote the interests of those concerned. Yet in...