Bryan v. Welch, 1136.

• Decision Date: 07 January 1935
• Docket Number: No. 1136.,1136.
• Citation: 74 F.2d 964
• Parties: BRYAN v. WELCH et al.
• Court: U.S. Court of Appeals — Tenth Circuit

74 F.2d 964 (1935)

BRYAN v. WELCH et al.

No. 1136.

Circuit Court of Appeals, Tenth Circuit.

January 7, 1935.

G. C. Spillers, of Tulsa, Okl., and W. E. Utterback, of Durant, Okl. (Wm. B. Blair, C. R. Nixon, and L. J. Bicking, all of Tulsa, Okl., on the brief), for appellants.

Tom D. McKeown, of Washington, D. C., Wm. P. Thompson, of Oklahoma City, Okl., and Francis Stewart, of Muskogee, Okl. (C. E. Hall, of Oklahoma City, Okl., and D. H. Linebaugh, of Muskogee, Okl., on the brief), for appellees Welch and others.

Leslie H. Norris, of Oklahoma City, Okl., for appellees Horn and others.

Before LEWIS and PHILLIPS, Circuit Judges.

PHILLIPS, Circuit Judge.

This matter was before this court on an appeal from five orders made in a proceeding in bankruptcy. One of these orders overruled a motion to dismiss a petition in bankruptcy filed under section 77 B of the Bankruptcy Act (11 USCA § 207) by Vesta Welch and five other holders of certificates for class A preferred beneficial interests or shares in the Imperial Royalties Company, a common law trust, and one appointed a temporary trustee.

In our opinion filed September 8, 1934, 72 F.(2d) 618, 620, we held that the petition was jurisdictionally defective in that it failed to allege facts showing the petitioners were creditors of the Royalties Company, and failed to allege the insolvency of the Royalties Company, and said:

"After the District Judge made the orders of which complaint is made by appellants, he continued the whole controversy for final hearing and disposition to September 18th. We must assume that the proceeding will be dismissed at that time unless by the intervention of creditors and appropriate allegations by them the two vital defects will be cured. On failure therein application may be made for our mandate."

On September 10, 1934, Agee and other holders of certificates for class A preferred shares in the Royalties Company filed an amended petition of intervention. They allege that under their certificates and the declaration of trust they are entitled to annual dividends out of the receipts of the Royalties Company, that due to the failure of the Royalties Company to declare and pay such dividends it is indebted to them in amounts exceeding in the aggregate $24,642.82, and that they hold no securities therefor.

They further set out a brief description of the assets, liabilities, capital stock, and financial condition of the Royalties Company, and allege that it is either insolvent or unable to meet its debts as they mature.

They further allege the pendency of a prior equity receivership in the district court of Tulsa county, Oklahoma.

On September 18, 1934, they filed an amendment to their petition to which they attached a copy of the amended declaration of trust of the Royalties Company executed December 1, 1930,¹ and in which they allege that their certificates are substantially in the form of the certificates set forth in such amended declaration of trust.

On September 17, 1934, Brinstad and others filed an amended petition of intervention in which they allege they are the owners of certificates for class A preferred shares of the Royalties Company; "that before and at the time of the purchase of said shares * * * the trustees of said trust, * * * issued certain other documents and papers explaining and interpreting said amended declaration of trust. * * * That in said papers and declarations said debtor, through its authorized trustees, promised and agreed that the dividends and distributions on said class A preferred beneficial interests aforesaid to the extent of twelve per cent (12%) were guaranteed, and that same would be paid monthly; * * * that * * * the amended declaration of trust made May 27, 1927," provides "that the class A preferred shares should be entitled to dividends out of the receipts of the trust, at the rate of $1.80 per share per annum." And under it "each owner of class A preferred shares became entitled to the sum of $1.80 per share per year, out of the receipts of said trust. * * * That said distributions due and payable to these creditors for the months of January, February, March, April, May, June, July, August, September, October, November, and December, 1932, at the rate of $1.80 per share are past due and unpaid, although the receipts of said debtor prior to said period of time were more than sufficient, over current expenses, to pay the amounts due these petitioners upon their said shares. * * * That in addition thereto, there have accrued to these creditors other dividends declared by the trustees of said trust, and due them under their certificates of trust and the declaration and amended declaration of trust hereinabove referred to, for the years 1929, 1930, and 1931, in amounts exceeding $1.80 per share per annum, which amounts likewise remain unpaid, and for which said creditors have a just and proper claim, both at law and in equity, against said debtor."

They further allege that the Royalties Company is either insolvent or unable to meet its debts as they mature, and the pendency of a prior equity receivership in the district court of Tulsa county, Oklahoma. They attach as exhibits to their petition a copy of the amended petition in the state court and the order appointing the receiver. The petition in the state court alleged as grounds for the removal of the trustees and the appointment of a receiver, fraud, gross mismanagement, and waste and dissipation of the trust estate by the trustees, and that the Royalties Company was either insolvent or in imminent danger of becoming insolvent.

The order adjudged and decreed that Bryan be appointed receiver of the Royalties Company and of all its property, real, personal, and mixed of every kind whatsoever, with full power to demand, sue for, collect, receive and take into his possession and preserve its goods, property, assets and choses in action, to take possession of its books and records, and to prosecute and defend all claims for or against it.

On September 18, 1934, Welch and the other original petitioners filed an amended petition in which they allege that they are the holders of certificates of class A preferred beneficial interests or shares in the Royalties Company; that under the certificates and the amended declaration of trust they are entitled to receive annually out of the receipts of the trust $1.80 upon all class A preferred shares held by them.

That the income of the Royalties Company for 1932, after deducting administrative and operating costs, was $453,462.20, and that such amount "was available for dividends. * * * That the owners of class A beneficial interests thereupon became entitled to receive, absolutely, their pro rata part of these receipts, with interest at the legal rate upon said amounts from said date. That each of said amounts is past due since said date, wholly unpaid, and was unpaid at the date of the filing of the petition in bankruptcy herein, and each of the petitioners herein named became a creditor of said Trust to the extent of said amounts herein last above referred to; that the aggregate of said debts is more than $1,000.00.

"That in addition thereto, there have accrued to these creditors other dividends declared by the trustees of said trust, and due them under their certificates of trust and the Declaration and Amended Declaration of Trust hereinabove referred to, for the years 1930, 1931, and 1933, in amounts exceeding $1.80 per share per annum, which amounts likewise remain unpaid, and for which said creditors have a just and proper claim, both at law and in equity against said debtor. * * *

"That said debtor corporation is either insolvent or unable to meet its debts as they mature."

They further allege substantially the same facts with respect to the state court receivership as are alleged in the amended petition of intervention of Agee and others.

On September 18, 1934, Manley and others filed an amended petition in intervention in which they allege "that the intervenors herein are creditors of the debtor * * * and have provable claims against said debtor * * * which amount in the aggregate in excess of the value of securities * * * held by them, * * * to over one thousand dollars. The nature of the claims which each of your petitioners have against the debtor * * * arises out of the fact that each of your intervenors have advanced divers and various sums to the said debtor * * * in consideration of certain guaranties and agreements whereby your said petitioners were delivered certain evidence of beneficial ownership in the assets of the said corporation in the form of certificates of preferred shares in the form of the blank heretofore attached to the original and amended petitions in this case which guaranteed to your petitioners one dollar and eighty cents ($1.80) per share per annum out of the assets of said trust properties which has never been paid, and there is now due them and unpaid over one thousand dollars upon said written guarantee. * * *"

They also adopt the allegations of the amended petition of the original petitioners.

The Royalties Company, Hamerick and other owners of more than 25% of the outstanding stock of the Royalties Company by motions challenged the sufficiency of such amended petition and petitions in intervention on the ground among others that they affirmatively show that the original petitioners and interveners are not creditors of the Royalties Company, and fail to allege either the pendency of a prior equity receivership or bankruptcy proceedings, or an act of bankruptcy within four months.

On September 18, 1934, E. S. and John E. Horn, Minteer, and Campbell filed a petition in intervention herein in which they allege that they are the creditors of the Royalties Company; "that the nature of the claims which each of these intervening petitioners have against said debtor trust arises out of the fact that each of these intervening petitioners have heretofore...