Atherton v. Beaman

• Decision Date: 01 January 1919
• Citation: 256 F. 871
• Parties: ATHERTON et al. v. BEAMAN.
• Court: U.S. District Court — District of Massachusetts

256 F. 871

ATHERTON et al. v. BEAMAN.

United States District Court, D. Massachusetts.

January 1, 1919

Foster & Turner, of Boston, Mass., for Nathaniel P. Beaman.

Swift Friedman & Atherton, of Boston, Mass., for trustees.

MORTON District Judge.

This is a bill in equity, brought by the trustees in bankruptcy of the Parsons Manufacturing Company to obtain certain lumber in the possession or custody of the Eastern Storage Company. Beaman, the defendant, claimed a large part of the lumber on the ground that it had been pledged to him by the bankrupt as security for a loan of $10,000, and he had taken action to prevent the delivery of any of it by the storage company to the trustees. The bill seeks an injunction against such action by him. The storage company makes no claim to the lumber, except for its proper storage charges, which all parties are willing should be paid. The case was referred to Referee Olmstead as special master to state the facts. The questions now before the court arise on exceptions to his report, and on a motion for a decree made by the defendant. Pending the case, by agreement of parties, the lumber has been sold, the proceeds to stand like the original property.

The material facts, which for the most part are not seriously in controversy, are as follows: About 2 1/2 years before the petition in bankruptcy, against the Parsons Manufacturing Company was filed, Beaman, who owned practically all of its stock, sold out his holdings. One of the buyers, Gerrish, who had previously been associated with Beaman in the company continued as its treasurer. In connection with this transaction, Beaman loaned the company $10,000. This loan was secured in the following manner: The Parsons Manufacturing Company habitually carried on storage with the Eastern Storage Company large amounts of lumber. This lumber came to the storage company by rail. Each carload was piled by itself, and the pile was marked with the carload number and the initial 'P.M. Co.' The Parsons Manufacturing Company gave Beaman the order on the Eastern Storage Company which is stated in full in the referee's report, and which was accepted by the storage company as therein stated. In further protection of the security, the agreement of September 4, 1914, which also appears in full in the referee's report, was entered into between the parties.

Briefly stated, the Parsons Manufacturing Company directed the storage company to hold at all times 50 carloads of its lumber to the order of Beaman, and agreed to keep that amount of lumber in the storage company's possession subject to his order, and the storage company accepted the order. The Parsons Manufacturing Company reserved the right to use any carload of lumber thereby covered by substituting another equally valuable one for it. No specific carloads or piles of lumber were appropriated to this pledge by the storage company until November, 1916, shortly before the failure. At the time when this arrangement was entered into, the learned referee finds-- and, though his finding is attacked by the trustees, I see no sufficient reason to doubt the correctness of it-- that the Parsons Manufacturing Company was doing a prosperous business and was entirely solvent. The fact that Gerrish and his associates, who were familiar with the company's affairs, paid $20,000 for its capital stock, is nearly conclusive evidence on these points. In November, 1916, it was undoubtedly insolvent.

Following the Beaman transaction above described, the Parsons Company continued to do business as before with the storage company, shipping in and taking out comparatively large quantities of lumber, and keeping at all times a considerable stock with the storage company. From time to time it pledged certain specified carloads of lumber in the possession of the storage company to various banks for loans. In such instances the storage company was notified, was given a list of the carloads affected by the pledge, and agreed to hold them for the account of the pledgee. Beaman does not attack those transactions, and no question arises as to them.

In November, 1916, the manager of the storage company called the attention of the Parsons Company to the fact that there was not enough of its lumber with the storage company to fill the pledge orders which had been given to various banks and Mr Beaman, which had been accepted by the storage company. At that time the Parsons Manufacturing Company had a cargo of water-borne lumber on the wharf of the Hall Lumber Company, and it at once arranged with the storage company that this lumber should be put at the latter's order to make up the deficiency. The wharfingers were duly notified, and the effect of what was done was to bring the lumber on the wharf into the control and constructive possession of the storage company. Aside from the wharf lumber, there were several carloads of lumber in the possession of the Storage Company pledged to nobody,...